-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, OieiHOWvaemHi/NO2MMu+QyaW2rLQD6kze1vY8lKcg3L1AGQocqm75vkFcBAbCiU MC/v9vON8Haj8F2TnDuxFg== 0000855108-94-000037.txt : 19941222 0000855108-94-000037.hdr.sgml : 19941222 ACCESSION NUMBER: 0000855108-94-000037 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941031 FILED AS OF DATE: 19941221 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: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-05911 FILM NUMBER: 94565556 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222 BUSINESS PHONE: 4122887496 N-30D 1 MASSACHUSETTS MUNICIPAL CASH TRUST ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1994 INSTITUTIONAL SERVICE SHARES BAYFUNDS SHARES FEDERATED MANAGEMENT - ----------------------------------- Investment Adviser FEDERATED SECURITIES CORP. - ----------------------------------- Distributor A subsidiary of FEDERATED INVESTORS 314229832 314229303 Z00045 G00507-01 (12/94) PRESIDENT'S MESSAGE - -------------------------------------------------------------------------------- Dear Shareholder: I am pleased to present the Annual Report to Shareholders for Massachusetts Municipal Cash Trust (the "Fund"), a portfolio of Federated Municipal Trust (the "Trust"), for the 12-month period ended October 31, 1994. This Report begins with an interview with portfolio manager Mary Jo Ochson about economic factors affecting the Fund, followed by the Fund's Portfolio of Investments and Financial Statements. In addition, Financial Highlights tables have been included for Institutional Service Shares and BayFunds Shares. The Fund gives Massachusetts residents two ways to pursue tax-free income as its earnings are exempt from federal regular income tax and Massachusetts personal income tax.* The Fund's portfolio is primarily comprised of high-quality, short-term Massachusetts municipal securities of more than 20 issuers that use municipal bond financing for projects as varied as housing, industrial development, education, and health care. During the Report period, the Fund paid shareholders a total of $2.7 million in dividends, or $0.02 per share. At the end of the Report period, the Fund's net assets stood at $131.9 million. No one wants to pay more taxes than are necessary. The Fund is one investment strategy that can help you lower your tax bill. As a tax sensitive Massachusetts resident, you can rely on the Fund to seek the best tax-free income opportunities for your cash--with the additional advantages of pursuing daily liquidity and stability of principal.** If you are interested in other tax-advantaged investment strategies, please contact your account representative. Sincerely, Glen R. Johnson President December 15, 1994 *Income may be subject to the federal alternative minimum tax. **No money market mutual fund can guarantee that a stable net asset value will be maintained. An investment in the Fund is neither insured nor guaranteed by the U.S. government. INVESTMENT REVIEW - -------------------------------------------------------------------------------- An Interview with the Fund's Portfolio Manager, Mary Jo Ochson Q What happened to short-term interest rates over the period covered by this Annual Report? A There was a dramatic shift in the monetary policy of the Federal Reserve Board (the "Fed") during the period ended October 31, 1994. Throughout the fourth quarter of 1993, the Fed seemed content to keep the federal funds rate (the rate banks charge each other for overnight loans) steady at 3.00%, where it had been for a year and a half. The Fed maintained short-term interest rates at these low levels in order to stimulate the economy. However, in early 1994, reports appeared to show stronger than anticipated economic growth. Real gross national product grew at a 7% annual rate in the fourth quarter of 1993 and the national unemployment rate declined to 6%. Concerned that these factors could lead to an increase in wages and prices, the Fed took steps on February 4, 1994, to fight future inflation by raising its target federal funds rate to 3.25%. Since then, the Fed has increased the federal funds rate five more times, moving the target from 3.25% to 5.50%. Q How did municipal money market yields--and the Fund's yield--react to these rate increases? A Municipal money market interest rates followed the upward movement in taxable rates, but to a slightly lesser degree, as they are more affected by supply and demand imbalances. The Fund's yields have proven to be quite responsive to the increases in money market rates. The Fund's conservative average maturities and high percentage in variable rate demand securities-- which automatically reset to current market levels--also helped to accelerate its adjustment to higher market rates. During the period ended October 31, 1994, the Fund's annualized seven-day net yield increased from 1.98% and 1.88% to 2.78% and 2.71% for Institutional Service Shares and BayFunds Shares, respectively.* For a Massachusetts investor in the highest federal and state income tax brackets, the seven-day net yield on October 31, 1994, was equivalent to taxable yields of 5.74% and 5.60% for the Institutional Service Shares and BayFunds Shares, respectively.** These numbers illustrate the Fund's attractiveness to Massachusetts investors relative to comparable taxable investment opportunities. Q What is your outlook for the markets and the Fund? A The economy continues to show surprising resilience to the Fed's attempts to bring growth under control. It is expected that the Fed will act to tighten monetary policy again in the first quarter of 1995. As a result, the Fund is expected to continue to maintain its conservative posture in * Performance quoted represents past performance and is not indicative of future results. Yield will vary. ** These numbers assume that state income taxes are fully deductible in computing federal income tax liability. - -------------------------------------------------------------------------------- the near future, while seeking to maximize performance through ongoing relative value analysis. However, changing economic and market developments are continuously monitored to serve our clients attracted to the short-term tax-exempt securities market. Q Recently, there has been a lot of concern, as well as press coverage, about the subject of derivatives. What are derivatives? A The term "derivative" has been applied to many different types of investments. In the context of money market funds, derivatives generally refer to adjustable rate securities designed for speculation on changes in interest rates. These speculative derivatives provide above-market yields when interest rates fall or remain stable, or when the yield curve is steep. They provide below-market yields, however, when interest rates rise or become more volatile, or when the yield curve flattens. All three of these conditions occurred in 1994. As a result, many of these speculative securities lost a significant part of their value, enough to threaten the $1 per share price of some money market funds. It's important to distinguish these speculative derivatives from adjustable rate securities that are indexed to money market interest rates. These indexed securities are designed to track changes in market rates, and should approximate their par value in all reasonably foreseeable market conditions. Tax-exempt money market funds like the Fund have the right to tender these securities for purchase at their par value. Money market funds have used these securities for decades, through several interest rate cycles, without jeopardizing their stable net asset values. Q Do Federated Investors' money market funds invest in the derivatives that have been in the headlines recently? A No. None of the money market funds advised by Federated Management or other Federated Investors' subsidiaries has invested in any of the types of derivatives that have been in the headlines lately. Our mutual funds only invest in adjustable rate securities that track changes in money market interest rates. With respect to speculative derivatives, we determined from the outset that the potential volatility of these securities was contrary to the intent of the rules governing the use of variable rate securities by money market funds. We also realized the potential for these securities to deviate significantly from par and threaten the $1 per share price of a money market fund. We spoke out against the use of these securities by money market funds at industry conferences throughout 1993, when the securities still offered attractive yields. Our views were vindicated when, in June 1994, the Securities and Exchange Commission sent a letter to the Investment Company Institute requiring money market funds to divest themselves of these securities in an orderly manner. This caused some investment advisers to buy these securities from their funds. - -------------------------------------------------------------------------------- Q The Commonwealth of Massachusetts endured a lengthy recession and was hit much more severely than other areas of the country. What is the current outlook for the Commonwealth? A While the New England region as a whole is slowly recovering from one of the worst recessions since the 1970's, Massachusetts has been leading the other regional states in economic recovery. The current outlook for the Commonwealth is positive and can be demonstrated on several fronts. First, there is the continuing fiscal control that has greatly improved the financial condition of the Commonwealth over the last four years. Second, the economic recovery has greatly improved the outlook in several employment sectors and has helped the Commonwealth maintain its high levels of personal wealth. Countering these positives are very high levels of debt that will burden the Commonwealth for several years to come and nagging employment concerns in the defense and health care sectors. The overall view, though, is that there will likely be continued economic improvement and fiscal stability for the foreseeable future. MASSACHUSETTS MUNICIPAL CASH TRUST PORTFOLIO OF INVESTMENTS OCTOBER 31, 1994 - --------------------------------------------------------------------------------
CREDIT RATING: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE - ------------ ---------------------------------------------------------------------- ----------- -------------- SHORT-TERM MUNICIPAL SECURITIES--99.3% - ------------------------------------------------------------------------------------ MASSACHUSETTS--98.6% ---------------------------------------------------------------------- $ 2,347,000 Andover, MA, 3.22% BANs, 11/17/94 NR $ 2,347,115 ---------------------------------------------------------------------- 3,900,000 Boston, MA, Water & Sewer Commission Weekly VRDNs (Series 1985A)/(Dai-Ichi Kangyo Bank Ltd. LOC) VMIG1 3,900,000 ---------------------------------------------------------------------- 5,000,000 Boston, MA, Water & Sewer Commission Weekly VRDNs (State Street Bank & Trust Co. LOC) VMIG1 5,000,000 ---------------------------------------------------------------------- 1,000,000 Boylestown, MA, 3.49% RANs, 12/12/94 NR 1,000,212 ---------------------------------------------------------------------- 4,950,000 (a)Clipper, MA, Tax Exempt Trust Weekly VRDNs (Series 1993-1)/(State Street Bank and Trust Co. BPA) VMIG1 4,950,000 ---------------------------------------------------------------------- 2,000,000 Commonwealth of Massachusetts Daily VRDNs (Series E)/ (ABN AMBRO Bank N.V. LOC) A-1+ 2,000,000 ---------------------------------------------------------------------- 3,500,000 Commonwealth of Massachusetts, 4.00% Bond, 1/1/95 NR(3) 3,507,148 ---------------------------------------------------------------------- 3,000,000 Commonwealth of Massachusetts GO Refunding Weekly VRDNs (Series 1993A)/(AMBAC Insured/Citibank, N.A. BPA) NR(1) 3,000,000 ---------------------------------------------------------------------- 1,970,000 Danvers, MA, 4.00% BANs, 4/10/95 NR 1,972,108 ---------------------------------------------------------------------- 3,200,000 Framingham, MA, IDA Weekly VRDNs (Perin Corp.)/(Barclays Bank PLC LOC) A-1+ 3,200,000 ---------------------------------------------------------------------- 2,000,000 Gloucester, MA, 4.33% BANs, 9/22/95 NR 2,000,499 ---------------------------------------------------------------------- 575,000 Gloucester, MA, 4.50% Bond (FSA Insured), 11/15/94 NR(1) 575,343 ---------------------------------------------------------------------- 550,000 Ludlow, MA, Weekly VRDNs (Advanced Drainage Systems, Inc.)/(FNB, Chicago LOC) P-1 550,000 ---------------------------------------------------------------------- 1,800,000 (a)Massachusetts Municipal Wholesale Electric Company VRDC Trust, Weekly VRDNs (Series 1993D)/(AMBAC Insured, Hong Kong Shanghai Banking Corp. BPA) A-1 1,800,000 ---------------------------------------------------------------------- 3,000,000 Massachusetts Bay Transit Authority, 3.75% BANs, 3/1/95 SP-1 3,005,543 ----------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL CASH TRUST - --------------------------------------------------------------------------------
CREDIT RATING: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE - ------------ ---------------------------------------------------------------------- ----------- -------------- SHORT-TERM MUNICIPAL SECURITIES--CONTINUED - ------------------------------------------------------------------------------------ MASSACHUSETTS--CONTINUED ---------------------------------------------------------------------- $ 2,000,000 (a)Massachusetts Commonwealth Weekly VRDNs (Series PA13)/(MBIA and FGIC Insured) VMIG1 $ 2,000,000 ---------------------------------------------------------------------- 1,930,000 Massachusetts HEFA Weekly VRDNs (Newbury College)/ (Barclays Bank PLC LOC) P-1 1,930,000 ---------------------------------------------------------------------- 200,000 Massachusetts HEFA Weekly VRDNs (Series A)/(Brigham & Women's Hospital)/(Sanwa Bank Ltd. LOC) P-1 200,000 ---------------------------------------------------------------------- 3,495,000 Massachusetts HEFA Weekly VRDNs (Series A)/(New England Home for Little Wanderers Issue)/(First National Bank of Boston LOC) P-1 3,495,000 ---------------------------------------------------------------------- 1,300,000 Massachusetts HEFA Weekly VRDNs (Series B)/(Clark University)/(Sanwa Bank Ltd. LOC) VMIG1 1,300,000 ---------------------------------------------------------------------- 6,000,000 Massachusetts HEFA Weekly VRDNs (Series E)/(Capital Asset Program)/(Sanwa Bank Ltd. LOC) A-1+ 6,000,000 ---------------------------------------------------------------------- 5,000,000 Massachusetts HEFA Weekly VRDNs (Series F)/(Childrens Hospital of Boston) A-1+ 5,000,000 ---------------------------------------------------------------------- 2,500,000 Massachusetts HEFA Weekly VRDNs (Series G)/(Massachusetts Institute of Technology) NR 2,500,000 ---------------------------------------------------------------------- 5,000,000 Massachusetts HEFA, 3.00% CP (Fallon Healthcare System)/(Sanwa Bank Ltd., Osaka LOC), 11/17/94 A-1+ 5,000,000 ---------------------------------------------------------------------- 5,500,000 Massachusetts HEFA, 3.15% CP (Series E)/(Tufts University), Mandatory Tender 12/20/94 A-1 5,500,000 ---------------------------------------------------------------------- 2,000,000 Massachusetts HEFA, 3.35% CP (Harvard University), Mandatory Tender 12/19/94 A-1+ 2,000,000 ---------------------------------------------------------------------- 6,000,000 Massachusetts HEFA, 3.60% CP (Harvard University), Mandatory Tender 2/14/95 A-1+ 6,000,000 ---------------------------------------------------------------------- 1,900,000 Massachusetts IFA Weekly VRDNs (Williston Northampton School)/(National Westminster Bank PLC LOC) P-1 1,900,000 ----------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL CASH TRUST - --------------------------------------------------------------------------------
CREDIT RATING: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE - ------------ ---------------------------------------------------------------------- ----------- -------------- SHORT-TERM MUNICIPAL SECURITIES--CONTINUED - ------------------------------------------------------------------------------------ MASSACHUSETTS--CONTINUED ---------------------------------------------------------------------- $ 300,000 Massachusetts IFA PCR Weekly VRDNs (Series 1992A)/ (Holyoke Water Power Co.)/(Canadian Imperial Bank of Commerce LOC) VMIG1 $ 300,000 ---------------------------------------------------------------------- 1,800,000 Massachusetts IFA PCR, 3.00% CP (Series 1993A)/(New England Power Co. Guaranty), Mandatory Tender 11/16/94 A-1 1,800,000 ---------------------------------------------------------------------- 1,000,000 Massachusetts IFA Weekly VRDNs (Berkshire School)/ (National Westminster Bank PLC LOC) VMIG1 1,000,000 ---------------------------------------------------------------------- 1,300,000 Massachusetts IFA Weekly VRDNs (Groton School)/ (National Westminster Bank PLC LOC) VMIG1 1,300,000 ---------------------------------------------------------------------- 5,600,000 Massachusetts IFA Weekly VRDNs (Kendall Square, Inc.)/ (National Westminster Bank PLC LOC) A-1+ 5,600,000 ---------------------------------------------------------------------- 4,000,000 Massachusetts IFA Weekly VRDNs (Series 1992A)/(Ogden Haverhill)/(Union Bank of Switzerland LOC) A-1+ 4,000,000 ---------------------------------------------------------------------- 2,000,000 Massachusetts IFA Weekly VRDNs (Series 1993B)/(New England Deaconess Association)/(Banque Paribas LOC) A-1 2,000,000 ---------------------------------------------------------------------- 925,000 Massachusetts IFA Weekly VRDNs (Series A)/(Hockomock YMCA)/(Westpac Banking Corp. LOC) P-1 925,000 ---------------------------------------------------------------------- 2,000,000 Massachusetts IFA, 3.15% CP (New England Power Co. Guaranty), Mandatory Tender 11/22/94 A-1 2,000,000 ---------------------------------------------------------------------- 1,500,000 Massachusetts IFA, 3.60% CP (New England Power Co. Guaranty), Mandatory Tender 1/12/95 A-1 1,500,000 ---------------------------------------------------------------------- 4,000,000 Massachusetts IFA, 3.65% CP (New England Power Co. Guaranty), Mandatory Tender 1/20/95 A-1 4,000,000 ---------------------------------------------------------------------- 4,400,000 Massachusetts IFA Daily VRDNs (Series 1994)/(Showa Women's Institute Boston, Inc.)/(Fuji Bank Ltd. LOC) VMIG1 4,400,000 ---------------------------------------------------------------------- 1,395,000 Needham, MA, 4.00% BANs, 5/26/95 NR 1,398,418 ---------------------------------------------------------------------- 3,400,000 New Bedford, MA, 4.75% BANs (Fleet National Bank LOC), 8/11/95 P-1 3,416,442 ---------------------------------------------------------------------- $ 2,330,000 North Andover, MA, 4.10% BANs, 6/29/95 NR $ 2,336,649 ----------------------------------------------------------------------
MASSACHUSETTS MUNICIPAL CASH TRUST - --------------------------------------------------------------------------------
CREDIT RATING: PRINCIPAL MOODY'S AMOUNT OR S&P* VALUE - ------------ ---------------------------------------------------------------------- ----------- -------------- SHORT-TERM MUNICIPAL SECURITIES--CONTINUED - ------------------------------------------------------------------------------------ MASSACHUSETTS--CONTINUED ---------------------------------------------------------------------- 2,335,000 Norwood, MA IDRB, 3.90% Annual TOBs (Dash Realty Trust)/(Fleet National Bank LOC), 7/1/95 SP-1 2,335,000 ---------------------------------------------------------------------- 1,000,000 Peabody, MA, 3.03% BANs, 2/17/95 NR 1,000,000 ---------------------------------------------------------------------- 4,550,000 Springfield, MA, 4.75% BANs (Fleet National Bank LOC), 8/4/95 P-1 4,564,906 ---------------------------------------------------------------------- 854,000 Springfield, MA, 4.75% Bond (MBIA Insured), 1/15/95 NR(1) 856,477 ---------------------------------------------------------------------- 2,300,000 Woods Hole, MA, Martha's Vineyard Steamship Authority, 3.25% BANs, 11/30/94 NR 2,300,781 ---------------------------------------------------------------------- 1,150,000 Yarmouth, MA, 3.50% BANs, 4/11/95 NR(3) 1,150,953 ---------------------------------------------------------------------- 239,201 Yarmouth, MA, 3.50% RANs, 4/11/95 NR(3) 239,399 ---------------------------------------------------------------------- -------------- Total $ 130,056,993 ---------------------------------------------------------------------- -------------- PUERTO RICO--0.7% ---------------------------------------------------------------------- 1,000,000 (a)Puerto Rico Public Building Authority, PA-85, Weekly VRDNs (FSA Insured/Merrill Lynch Capital Services BPA) VMIG1 1,000,000 ---------------------------------------------------------------------- -------------- TOTAL INVESTMENTS, AT AMORTIZED COST $ 131,056,993+ ---------------------------------------------------------------------- --------------
(a) Denotes a restricted security which is subject to resale under Federal Securities laws. This security has been determined to be liquid under criteria established by the Board of Trustees. Also represents cost for federal tax purposes. * See Notes to Portfolio of Investments on page 9. Current credit ratings are unaudited. Note: The categories of investments are shown as a percentage of net assets ($131,924,892) at October 31, 1994. MASSACHUSETTS MUNICIPAL CASH TRUST - -------------------------------------------------------------------------------- The following abbreviations are used in this portfolio: AMBAC-- American Municipal Bond Assurance Corporation BANs-- Bond Anticipation Notes BPA-- Bond Purchase Agreement CP-- Commercial Paper FGIC-- Financial Guaranty Insurance Company FSA-- Financial Security Assurance GO-- General Obligation HEFA-- Health and Education Facilities Authority IDA-- Industrial Development Authority IDRB-- Industrial Development Revenue Bonds IFA-- Industrial Finance Authority/Agency LOC-- Letter of Credit MBIA-- Municipal Bond Investors Assurance PCR-- Pollution Control Revenue RANs-- Revenue Anticipation Notes TOBs-- Tender Option Bonds VRDNs-- Variable Rate Demand Notes (See Notes which are an integral part of the Financial Statements) MASSACHUSETTS MUNICIPAL CASH TRUST NOTES TO PORTFOLIO OF INVESTMENTS (UNAUDITED) - -------------------------------------------------------------------------------- SHORT-TERM MUNICIPAL OBLIGATION RATINGS STANDARD & POOR'S RATINGS GROUP A S&P note rating reflects the liquidity concerns and market access risks unique to notes. 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. MOODY'S INVESTORS SERVICE, INC. Moody's short-term ratings are designated Moody's Investment Grade (MIG or VMIG (see below)). The purpose of the MIG or VMIG ratings is to provide investors with a simple system by which the relative investment qualities of short-term obligations may be evaluated. MIG1 This designation denotes best quality. There is present strong protection by established cash flows, superior liquidity support or demonstrated broad-based access to the market for refinancing. MIG2 This designation denotes high quality. Margins of protection are ample although not so large as in the preceding group. VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS STANDARD & POOR'S RATINGS GROUP S&P assigns dual ratings to all long-term debt issues that have as part of their provisions a variable rate demand feature. The first rating (long-term rating) addresses the likelihood of repayment of principal and interest when due, and the second rating (short-term rating) describes the demand characteristics. Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the long- term and the short-term ratings are provided below.) MOODY'S INVESTORS SERVICE, INC. Short-term ratings on issues with demand features are differentiated by the use of the VMIG symbol to reflect such characteristics as payment upon periodic demand rather than fixed maturity dates and payment relying on external liquidity. MASSACHUSETTS MUNICIPAL CASH TRUST - -------------------------------------------------------------------------------- In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1); the first representing an evaluation of the degree of risk associated with scheduled principal and interest payments, and the second representing an evaluation of the degree of risk associated with the demand feature. The VMIG rating can be assigned a 1 or 2 designation using the same definitions described above for the MIG rating. COMMERCIAL PAPER (CP) RATINGS STANDARD & POOR'S RATINGS GROUP A S&P commercial paper rating is a current assessment of the likelihood of timely payment of debt having an original maturity of no more than 365 days. 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. P-1 Issuers rated PRIME-1 (or related supporting institutions) have a superior capacity for repayment of short-term promissory obligations. PRIME-1 repayment capacity will normally be evidenced by the following characteristics: 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. P-2 Issuers rated PRIME-2 (or related supporting institutions) have a strong capacity for repayment of short-term promissory obligations. This will normally be evidenced by many of the characteristics cited above, but to a lesser degree. Earnings trends and coverage ratios, while sound, will be more subject to variation. Capitalization characteristics, while still appropriate, may be more affected by external conditions. Ample alternate liquidity is maintained. LONG-TERM DEBT RATINGS STANDARD & POOR'S RATINGS GROUP AAA Debt rated "AAA" has the highest rating assigned by S&P. 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 highest rated issues only in small degree. MASSACHUSETTS MUNICIPAL CASH TRUST - -------------------------------------------------------------------------------- A Debt rated "A" has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. MOODY'S INVESTORS SERVICE, INC. AAA Bonds that 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 that 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 that 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. NR indicates that both the bonds and the obligor or credit enhancer are not currently rated by S&P or Moody's with respect to short-term indebtedness. However, management considers them to be of comparable quality to securities rated A-1 or P-1. NR(1) The underlying issuer/obligor/guarantor has other outstanding debt rated "AAA" by S&P or "Aaa" by Moody's. NR(2) The underlying issuer/obligor/guarantor has other outstanding debt rated "AA" by S&P or "Aa" Moody's. NR(3) The underlying issuer/obligor/guarantor has other outstanding debt rated "A" by S&P or Moody's. MASSACHUSETTS MUNICIPAL CASH TRUST STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1994 - -------------------------------------------------------------------------------- ASSETS: - ------------------------------------------------------------------------------------------------- Investments in securities, at amortized cost and value $ 131,056,993 - ------------------------------------------------------------------------------------------------- Cash 337,639 - ------------------------------------------------------------------------------------------------- Interest receivable 751,672 - ------------------------------------------------------------------------------------------------- Receivable for Fund shares sold 976 - ------------------------------------------------------------------------------------------------- Deferred expenses 2,185 - ------------------------------------------------------------------------------------------------- -------------- Total assets 132,149,465 - ------------------------------------------------------------------------------------------------- LIABILITIES: - ------------------------------------------------------------------------------------------------- Dividends payable $ 156,425 - ------------------------------------------------------------------------------------- Accrued expenses 68,148 - ------------------------------------------------------------------------------------- ---------- Total liabilities 224,573 - ------------------------------------------------------------------------------------------------- -------------- NET ASSETS for 131,924,892 shares of beneficial interest outstanding $ 131,924,892 - ------------------------------------------------------------------------------------------------- -------------- NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share: - ------------------------------------------------------------------------------------------------- Institutional Service Shares ($90,013,385 3 90,013,385 shares of beneficial interest outstanding) $1.00 - ------------------------------------------------------------------------------------------------- -------------- BayFunds Shares ($41,911,507 3 41,911,507 shares of beneficial interest outstanding) $1.00 - ------------------------------------------------------------------------------------------------- --------------
(See Notes which are an integral part of the Financial Statements) MASSACHUSETTS MUNICIPAL CASH TRUST STATEMENT OF OPERATIONS YEAR ENDED OCTOBER 31, 1994 - -------------------------------------------------------------------------------- INVESTMENT INCOME: - ---------------------------------------------------------------------------------------------------- Interest income $ 3,451,549 - ---------------------------------------------------------------------------------------------------- EXPENSES: - ---------------------------------------------------------------------------------------------------- Investment advisory fee $ 643,293 - -------------------------------------------------------------------------------------- Administrative personnel and services 195,483 - -------------------------------------------------------------------------------------- Custodian and portfolio accounting fees 76,055 - -------------------------------------------------------------------------------------- Sub-Transfer Agent fees--BayFunds Shares 26,767 - -------------------------------------------------------------------------------------- Transfer and dividend disbursing agent fees and expenses 44,196 - -------------------------------------------------------------------------------------- Shareholder services fee--Institutional Service Shares 49,493 - -------------------------------------------------------------------------------------- Shareholder services fee--BayFunds Shares 19,343 - -------------------------------------------------------------------------------------- Fund share registration costs 35,063 - -------------------------------------------------------------------------------------- Trustees' fees 2,673 - -------------------------------------------------------------------------------------- Auditing fees 15,631 - -------------------------------------------------------------------------------------- Legal fees 8,642 - -------------------------------------------------------------------------------------- Printing and postage 43,425 - -------------------------------------------------------------------------------------- Insurance premiums 6,980 - -------------------------------------------------------------------------------------- Taxes 985 - -------------------------------------------------------------------------------------- Miscellaneous 12,070 - -------------------------------------------------------------------------------------- ------------ Total expenses 1,180,099 - -------------------------------------------------------------------------------------- Deduct--Waiver of investment advisory fee 445,711 - -------------------------------------------------------------------------------------- ------------ Net expenses 734,388 - ---------------------------------------------------------------------------------------------------- ------------ Net investment income $ 2,717,161 - ---------------------------------------------------------------------------------------------------- ------------
(See Notes which are an integral part of the Financial Statements) MASSACHUSETTS MUNICIPAL CASH TRUST STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1994 1993 INCREASE (DECREASE) IN NET ASSETS: - ------------------------------------------------------------------------------- OPERATIONS-- - ------------------------------------------------------------------------------- Net investment income $ 2,717,161 $ 1,958,060 - ------------------------------------------------------------------------------- --------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS-- - ------------------------------------------------------------------------------- Dividends to shareholders from net investment income: - ------------------------------------------------------------------------------- Institutional Service Shares (2,037,982) (1,874,757) - ------------------------------------------------------------------------------- BayFunds Shares (679,179) (83,303) - ------------------------------------------------------------------------------- --------------- --------------- Change in net assets from distributions to shareholders (2,717,161) (1,958,060) - ------------------------------------------------------------------------------- --------------- --------------- FUND SHARE (PRINCIPAL) TRANSACTIONS-- - ------------------------------------------------------------------------------- Proceeds from sale of shares 349,831,127 277,390,674 - ------------------------------------------------------------------------------- Net asset value of shares issued to shareholders in payment of dividends declared 1,275,493 451,819 - ------------------------------------------------------------------------------- Cost of shares redeemed (321,848,920) (260,744,847) - ------------------------------------------------------------------------------- --------------- --------------- Change in net assets resulting from Fund share transactions 29,257,700 17,097,646 - ------------------------------------------------------------------------------- --------------- --------------- Change in net assets 29,257,700 17,097,646 - ------------------------------------------------------------------------------- NET ASSETS: - ------------------------------------------------------------------------------- Beginning of period 102,667,192 85,569,546 - ------------------------------------------------------------------------------- --------------- --------------- End of period $ 131,924,892 $ 102,667,192 - ------------------------------------------------------------------------------- --------------- ---------------
(See Notes which are an integral part of the Financial Statements) MASSACHUSETTS MUNICIPAL CASH TRUST FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31, 1994 1993 1992 1991 1990* NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ---------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS - ---------------------------------------------------------- Net investment income 0.02 0.02 0.03 0.05 0.03 - ---------------------------------------------------------- --------- --------- --------- --------- --------- LESS DISTRIBUTIONS - ---------------------------------------------------------- Dividends to shareholders from net investment income (0.02) (0.02) (0.03) (0.05) (0.03) - ---------------------------------------------------------- --------- --------- --------- --------- --------- NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ---------------------------------------------------------- --------- --------- --------- --------- --------- TOTAL RETURN** 2.14% 1.99% 2.87% 4.63% 2.59% - ---------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS - ---------------------------------------------------------- Expenses 0.55% 0.53% 0.34% 0.30% 0.17%(b) - ---------------------------------------------------------- Net investment income 2.12% 1.97% 2.82% 4.48% 5.66%(b) - ---------------------------------------------------------- Expense waiver/reimbursement (a) 0.35% 0.43% 0.55% 0.69% 0.57%(b) - ---------------------------------------------------------- SUPPLEMENTAL DATA - ---------------------------------------------------------- Net assets, end of period (000 omitted) $90,013 $84,524 $85,570 $81,681 $63,483 - ----------------------------------------------------------
* Reflects operations for the period from May 18, 1990 (date of initial public investment) to October 31, 1990. ** Based on net asset value, which does not reflect the sales load or contingent deferred sales charge, if applicable. (a) This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. (b) Computed on an annualized basis. (See Notes which are an integral part of the Financial Statements) MASSACHUSETTS MUNICIPAL CASH TRUST FINANCIAL HIGHLIGHTS--BAYFUNDS SHARES - -------------------------------------------------------------------------------- (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31, 1994 1993* NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 - ------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS - ------------------------------------------------------------------------------------------- Net investment income 0.02 0.01 - ------------------------------------------------------------------------------------------- --------- --------- LESS DISTRIBUTIONS - ------------------------------------------------------------------------------------------- Dividends to shareholders from net investment income (0.02) (0.01) - ------------------------------------------------------------------------------------------- --------- --------- NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 - ------------------------------------------------------------------------------------------- --------- --------- TOTAL RETURN** 2.05% 1.25% - ------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS - ------------------------------------------------------------------------------------------- Expenses 0.64% 0.65%(b) - ------------------------------------------------------------------------------------------- Net investment income 2.09% 1.85%(b) - ------------------------------------------------------------------------------------------- Expense waiver/reimbursement (a) 0.35% 0.43%(b) - ------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA - ------------------------------------------------------------------------------------------- Net assets, end of period (000 omitted) $41,912 $18,143 - -------------------------------------------------------------------------------------------
* Reflects operations for the period from March 8, 1993 (date of initial public investment) to October 31, 1993. ** Based on net asset value, which does not reflect the sales load or contingent deferred sales charge, if applicable. (a) This voluntary expense decrease is reflected in both the expense and net investment income ratios shown above. (b) Computed on an annualized basis. (See Notes which are an integral part of the Financial Statements) MASSACHUSETTS MUNICIPAL CASH TRUST NOTES TO FINANCIAL STATEMENTS OCTOBER 31, 1994 - -------------------------------------------------------------------------------- (1) ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end, management investment company. The Trust consists of thirteen non-diversified portfolios. The financial statements included herein are only those of Massachusetts Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares, Institutional Service Shares and BayFunds Shares. (2) SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio securities is in accordance with Rule 2a-7 under the Act. B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend date. C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its tax-exempt income. Accordingly, no provisions for federal tax are necessary. D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. E. CONCENTRATION OF CREDIT RISK--Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable general tax-exempt mutual fund. In order to reduce the credit risk associated with such factors, at October 31, 1994, 63.2% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The value of investments insured by or MASSACHUSETTS MUNICIPAL CASH TRUST - -------------------------------------------------------------------------------- supported (backed) by a letter of credit for any one institution or agency did not exceed 9.5% of total investments. F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its shares in its first fiscal year, excluding the initial expense of registering the shares, have been deferred and are being amortized using the straight-line method not to exceed a period of five years from the Fund's commencement date. G. RESTRICTED SECURITIES--Restricted securities are securities that may be resold upon registration under Federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. Additional information on each restricted security held at October 31, 1994 is as follows:
ACQUISITION ACQUISITION SECURITY DATE COST Clipper, MA, Tax Exempt Trust Weekly Variable Rate Demand Notes 1/6/94 $ 4,950,000 Massachusetts Municipal Wholesale Electric Company VRDC Trust Weekly Variable Rate Demand Notes 6/11/93 $ 1,800,000 Massachusetts Commonwealth Weekly Variable Rate Demand Notes 7/1/93 $ 2,000,000 Puerto Rico Public Building Authority, PA-85, Weekly Variable Rate Demand Notes 9/15/94 $ 1,000,000
H. OTHER--Investment transactions are accounted for on the trade date. (3) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1994, capital paid-in aggregated $131,924,892. Transactions in Fund shares were as follows: MASSACHUSETTS MUNICIPAL CASH TRUST - --------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, INSTITUTIONAL SERVICE SHARES 1994 1993 - ---------------------------------------------------------------------------------- -------------- -------------- Shares sold 298,784,520 254,082,837 - ---------------------------------------------------------------------------------- Shares issued to shareholders in payment of dividends declared 594,441 367,572 - ---------------------------------------------------------------------------------- Shares redeemed (293,889,923) (255,495,608) - ---------------------------------------------------------------------------------- -------------- -------------- Net change resulting from Institutional Service Share transactions 5,489,038 (1,045,199) - ---------------------------------------------------------------------------------- -------------- -------------- YEAR ENDED OCTOBER 31, BAYFUNDS SHARES 1994 1993 - ---------------------------------------------------------------------------------- -------------- -------------- Shares sold 51,046,608 23,307,837 - ---------------------------------------------------------------------------------- Shares issued to shareholders in payment of dividends declared 681,051 84,247 - ---------------------------------------------------------------------------------- Shares redeemed (27,958,997) (5,249,239) - ---------------------------------------------------------------------------------- -------------- -------------- Net change resulting from BayFunds Share transactions 23,768,662 18,142,845 - ---------------------------------------------------------------------------------- -------------- -------------- Net change resulting from Fund share transactions 29,257,700 17,097,646 - ---------------------------------------------------------------------------------- -------------- --------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to .50 of 1% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive its fee and reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and reimbursement at any time at its sole discretion. ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund with administrative personnel and services. The FAS fee is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICE FEE--Under the terms of a Shareholder Services Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of 1% of average net assets for Institutional Service Shares for the period. Under the terms of a Shareholder Service Agreement with BayBank Systems, Inc., the Fund will pay BayBank Systems, Inc. up to .25 of 1% of average net assets for BayFunds Shares for the period. These fees are to obtain certain personal services for shareholders and to maintain shareholder accounts. TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company ("FServ") serves as transfer and dividend disbursing agent for the Fund. The FServ fee is based on the size, type, and number of accounts and transactions made by shareholders. MASSACHUSETTS MUNICIPAL CASH TRUST - -------------------------------------------------------------------------------- ORGANIZATIONAL EXPENSES--Organizational expenses and start-up administrative service expenses were borne initially by the Adviser. The Fund has agreed to reimburse the Adviser for the organizational expenses and start-up administrative expenses during the five year period following May 18, 1990 (date the Fund first became effective). For the year ended October 31, 1994, the Fund paid $5,984 and $12,569, respectively, pursurant to this agreement. INTERFUND TRANSACTIONS--During the year ended October 31, 1994, the Fund engaged in purchase and sale transactions with other affiliated funds at current value pursuant to Rule 17a-7 under the Act amounting to $176,700,000, and $185,755,000, respectively. Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------------------------------------- To the Shareholders and Board of Trustees of FEDERATED MUNICIPAL TRUST (Massachusetts Municipal Cash Trust): We have audited the accompanying statement of assets and liabilities of Massachusetts Municipal Cash Trust (an investment portfolio of Federated Municipal Trust, a Massachusetts business trust), including the schedule of portfolio investments, as of October 31, 1994, the related statement of operations for the year then ended, and the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 1994, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Massachusetts Municipal Cash Trust (an investment portfolio of Federated Municipal Trust) as of October 31, 1994, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Pittsburgh, Pennsylvania December 14, 1994 TRUSTEES OFFICERS - -------------------------------------------------------------------------------- John F. Donahue John F. Donahue John T. Conroy, Jr. Chairman William J. Copeland Glen R. Johnson James E. Dowd President Lawrence D. Ellis, M.D. J. Christopher Donahue Edward L. Flaherty, Jr. Vice President Glen R. Johnson Richard B. Fisher Peter E. Madden Vice President Gregor F. Meyer Edward C. Gonzales Wesley W. Posvar Vice President and Treasurer Marjorie P. Smuts John W. McGonigle Vice President and Secretary David M. Taylor Assistant Treasurer G. Andrew Bonnewell Assistant Secretary
Mutual funds are not bank deposits or obligations, are not 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 governmental agency. Investment in mutual funds involves investment risk, including possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so. This report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's prospectuses which contain facts concerning its objective and policies, management fees, expenses and other information. -----END PRIVACY-ENHANCED MESSAGE-----