MICHIGAN MUNICIPAL CASH TRUST
(A PORTFOLIO OF FEDERATED MUNICIPAL TRUST)

PROSPECTUS

   The shares of Michigan 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 current income exempt from
federal regular income tax and the personal income tax imposed by the State of
Michigan consistent with stability of principal and liquidity. The Fund invests
primarily in short-term Michigan municipal securities, including securities of
states, territories, and possessions of the United States which are not issued
by or on behalf of Michigan or its political subdivisions and financing
authorities, but which provide income exempt from the federal regular and
Michigan state income taxes. In addition, the Fund intends to qualify as an
investment substantially exempt from the Michigan 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 June 15,
1995, 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 June 15, 1995

TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES                                           1
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GENERAL INFORMATION                                                2
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INVESTMENT INFORMATION                                             2
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  Investment Objective                                             2
  Investment Policies                                              2
  Michigan Municipal Securities                                    5
  Investment Risks                                                 6
  Non-Diversification                                              6
  Investment Limitations                                           6
  Regulatory Compliance                                            7

TRUST INFORMATION                                                  7
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  Management of    Federated
    Municipal Trust                                                7
  Distribution of Shares                                           8
  Administration of the Fund                                       8
  Expenses of the Fund                                             9

NET ASSET VALUE                                                    9
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HOW TO PURCHASE SHARES                                            10
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     Special Purchase Features                                    10

HOW TO REDEEM SHARES                                              11
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     Special Redemption Features                                  12

   ACCOUNT AND SHARE INFORMATION                                  12
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  Dividends                                                       12
  Capital Gains                                                   12
  Certificates and Confirmations                                  12
  Accounts with Low Balances                                      12

SHAREHOLDER INFORMATION                                           13
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  Voting Rights                                                   13
  Massachusetts Partnership Law                                   13

TAX INFORMATION                                                   13
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  Federal Income Tax                                              13
  State and Local Taxes                                           14
     Michigan Tax Considerations                                  14

PERFORMANCE INFORMATION                                           15
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ADDRESSES                                                 Inside Back Cover
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SUMMARY OF FUND EXPENSES
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                                              SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................       None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price).................       None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
  applicable)..........................................................................................       None
Redemption Fee (as a percentage of amount redeemed, if applicable).....................................       None
Exchange Fee...........................................................................................       None

                                               ANNUAL FUND OPERATING EXPENSES
                                     (As a percentage of projected average net assets)*
Management Fee (after waiver) (1)......................................................................       0.00%
12b-1 Fee..............................................................................................       None
Total Other Expenses (after expense reimbursement).....................................................       0.48%
    Shareholder Services Fee...................................................................   0.25%
         Total Fund Operating Expenses (2).............................................................       0.48%



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(1) The estimated management fee has been reduced to reflect the anticipated
    voluntary waiver of the management fee. The adviser can terminate this
    voluntary waiver at any time at its sole discretion. The maximum management
    fee is 0.50%.

(2) The Total Fund Operating Expenses are estimated to be 1.62% absent the
    anticipated voluntary waiver of the management fee and the anticipated
    voluntary reimbursement of certain other operating expenses.

*Total Fund Operating Expenses are estimated based on average expenses expected
 to be incurred during the period ending October 31, 1995. During the course of
 this period, expenses may be more or less than the average amount shown.

    The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Trust Information" and "How To Purchase Shares." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.



EXAMPLE                                                                                          1 year     3 years
                                                                                                     
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................     $5         $15


    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,
1995.


GENERAL INFORMATION
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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 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 Michigan municipal securities. The Fund may not be a suitable
investment for retirement plans or for non-Michigan taxpayers because it invests
in municipal securities of that state. A minimum initial investment of $10,000
within a 90-day period is required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE

The investment objective of the Fund is current income exempt from federal
regular income tax and the personal income tax imposed by the State of Michigan
consistent with stability of principal and liquidity. In addition, the Fund
intends to qualify as an investment substantially exempt from the Michigan
Intangibles Personal Property Tax ("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
Michigan 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 and Michigan state income and intangibles 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 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 Michigan and its political subdivisions and financing
authorities, 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 and Michigan personal income tax ("Michigan Municipal Securities").
Examples of Michigan 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;

      .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 Michigan 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 Michigan 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 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 example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("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.

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 if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase 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 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; 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), all
having the same quality characteristics as described above.    

Although the Fund is permitted to make taxable, temporary investments, there is
no current intention to do so. However, the interest from certain Michigan
Municipal Securities is subject to the federal alternative minimum tax.

MICHIGAN MUNICIPAL SECURITIES

Michigan 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.

Michigan 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 Michigan 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 Michigan 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 Michigan Municipal Securities and participation interests, or the credit
enhancers of either, to meet their obligations for the payment of interest and
principal when due. In addition, from time to time, the supply of Michigan
Municipal Securities acceptable for purchase by the Fund could become limited.

The Fund may invest in Michigan 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
Michigan 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 Michigan 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.

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 Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.

TRUST INFORMATION
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MANAGEMENT OF    FEDERATED MUNICIPAL 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. The Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.

INVESTMENT ADVISER.  Investment decisions for the Fund are made by Federated
Management, the 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 .50 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 is a subsidiary of Federated
     Investors. All of the voting securities of Federated Investors are owned by
     a trust, the trustees of which are John F. Donahue, his wife, and son, J.
     Christopher Donahue, who is President and Trustee of Federated Investors.

     Federated Management and other subsidiaries of Federated Investors serve as
     investment advisers to a number of investment companies and private
     accounts. Certain other subsidiaries also provide administrative services
     to a number of investment companies. Total assets under management or
     administration by these and other subsidiaries of Federated Investors are
     approximately $70 billion. Federated Investors, which was founded in 1956
     as Federated Investors, Inc., develops and manages mutual funds primarily
     for the financial industry. Federated Investors' track record of
     competitive performance and its disciplined, risk averse investment
     philosophy serve approximately 3,500 client institutions nationwide.
     Through these same client institutions, individual shareholders also have
     access to this same level of investment expertise.

DISTRIBUTION OF 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.

SHAREHOLDER SERVICES PLAN.  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
provide administrative support to their customers who own shares of the Fund.
From time to time and for such periods as deemed appropriate, the amounts stated
above may be reduced voluntarily. Activities and services under these
arrangements may include, but are not limited to, providing advertising and
marketing materials to prospective shareholders, providing personal services to
shareholders, and maintaining shareholder accounts.

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, as
appropriate.

SHAREHOLDER SERVICING ARRANGEMENTS.  The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide certain services to shareholders. These
services may include, but are not limited to, distributing prospectuses and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for these
services by the distributor will be reimbursed by the adviser and not the Fund.

GLASS-STEAGALL ACT.  The Glass-Steagall Act prohibits a depository institution
(such as a commercial bank or a savings and loan association) from being an
underwriter or distributor of most securities. In the event the Glass-Steagall
Act is deemed to prohibit depository institutions from acting in the
administrative capacities described above or should Congress relax current
restrictions on depository institutions, the Trustees will consider appropriate
changes in the administrative services.

State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act, and therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES.  Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate as specified
below:





   MAXIMUM FEE         AVERAGE AGGREGATE DAILY NET ASSETS
                      
      .15 of 1%                     on the first $250 million
     .125 of 1%                      on the next $250 million
      .10 of 1%                      on the next $250 million
     .075 of 1%           on assets in excess of $750 million


The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares, if any.
Average aggregate daily net assets include those of all mutual funds advised by
affiliates 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,
Boston, MA is transfer agent for the shares of, and dividend disbursing agent
for, the Fund.

INDEPENDENT PUBLIC ACCOUNTANTS.  The independent public accountants for the Fund
are Arthur Andersen LLP, 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
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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. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange each day the New York Stock Exchange is open.


HOW TO PURCHASE SHARES
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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 as described below either through a financial institution (such as
a bank or broker/dealer). Accounts may be opened through a financial institution
(such as a bank or broker/dealer) or by wire or by check directly to the Fund,
with a minimum initial investment of $10,000 or more and additional investments
of as little as $500. (Financial institutions may impose different minimum
investment requirements on their customers).

In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account form must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.

PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION.  Investors may purchase
shares through a financial institution which has a sales agreement with the
distributor. Orders 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.

PURCHASING SHARES BY WIRE.  Shares may be purchased by wire by calling the Fund
before 1:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 3:00 p.m. (Eastern time) in
order to begin earning dividends that same day. Federal funds should be wired as
follows: State Street Bank and Trust Company, Boston, MA; Attention; EDGEWIRE;
For Credit to: Michigan 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 holidays when wire transfers are restricted.

PURCHASING SHARES BY CHECK.  Shares may be purchased by sending a check made
payable to Michigan Municipal Cash Trust to: P.O. Box 8604, Boston, MA
02266-8604. Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received) and shares begin earning dividends the next day.

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM.  A minimum of $100 can be automatically withdrawn
periodically from the shareholder's checking account at any Automated Clearing
House ("ACH") member institution and invested in Fund shares. Shareholders
should contact their financial institution and/or the Fund to participate in
this program.


HOW TO REDEEM 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.

REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION.  Shares may be redeemed by
contacting the shareholder's financial institution. Shares will be redeemed at
the net asset value next determined after Federated Services Company receives
the redemption request. According to the shareholder's instructions, redemption
proceeds can be sent to the financial institution or to the shareholder by check
or by wire. The financial institution is responsible for promptly submitting
redemption requests and providing proper written redemption instructions.
Customary fees and commissions may be charged by the financial institution for
this service.

REDEEMING SHARES BY TELEPHONE.  Redemptions in any amount may be made by calling
the Fund provided the Fund has a properly completed authorization form. These
forms can be obtained from Federated Securities Corp. Proceeds from redemption
requests received before 12:00 noon (Eastern time) will be wired the same day to
the shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividends. Proceeds from
redemption requests received after that time will include that day's dividend
but will be wired the following business day. Under limited circumstances,
arrangements may be made with the distributor for same-day payment proceeds,
without that day's dividend, for redemption requests received before 2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or through ACH
will not be wired until that method of payment has cleared.

Telephone instructions may be recorded and 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, "Redeeming Shares By Mail" should be considered. If at any time the
Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.

REDEEMING SHARES BY MAIL.  Shares may be redeemed in any amount by mailing a
written request together with properly endorsed certificates, if issued, to:
Michigan Municipal Cash Trust, P.O. Box 8604, Boston, MA 02266-8604. The written
request should state: Michigan Municipal Cash Trust; the account name as
registered with the Fund; the account number; and the number of shares to be
redeemed or the dollar amount requested. All owners of the account must sign the
request exactly as the shares are registered. Any share certificates should be
sent by registered or certified mail with the written request. 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.

Shareholders requesting 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
commercial or savings bank, trust company or savings and loan association whose
deposits are insured by an organization which is administered by the Federal
Deposit Insurance Corporation; a member of a domestic stock exchange; 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.

SPECIAL REDEMPTION FEATURES

CHECK WRITING.  Upon request, a checking account will be established to allow
shareholders to redeem their Fund shares. A fee will be charged for this
service. The check writing service allows the shareholder to receive the daily
dividend declared on the shares to be redeemed until the check is presented to
State Street Bank for payment. However, checks should never be made payable or
sent to State Street Bank or the Fund to redeem shares, and a check may not be
written to close an account. Canceled checks are sent to the shareholder each
month.

DEBIT CARD.  Upon request, a debit account will be established. This account
allows shareholders to redeem shares by using a debit card. A fee will be
charged to the account for this service.

SYSTEMATIC WITHDRAWAL PROGRAM.  If a shareholder's account has a value of at
least $10,000, a systematic withdrawal program may be established whereby
automatic redemptions are made from the account and transferred electronically
to any commercial bank, savings bank, or credit union that is an ACH member.
Shareholders may apply for participation in this program through their financial
institution or the Fund.

ACCOUNT    AND SHARE     INFORMATION
- --------------------------------------------------------------------------------

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.

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.

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.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, if an account
balance falls below $10,000 due to shareholder redemptions, the Fund may redeem
all of the remaining shares in any account, (except accounts maintained by
retirement plans) and pay the proceeds to the shareholder.


Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.

SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio, only shares of that portfolio 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.

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
Michigan. Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

MICHIGAN TAX CONSIDERATIONS

Under existing Michigan laws, distributions made by the Fund will not be subject
to Michigan personal income taxes to the extent that such distributions qualify
as exempt-interest dividends under the Internal Revenue Code, and represent (i)
interest from obligations of Michigan or any of its political subdivisions, or
(ii) income from obligations of the United States government which are exempted
from state income taxation by a law of the United States.

The portion of a shareholder's shares in the Fund representing (i) bonds or
other similar obligations of Michigan or its political subdivisions, or (ii)
obligations of the United States which are exempt from taxation by a law of the
United States, and dividends paid by the Fund representing interest payments on
securities, will be exempt from Michigan intangibles tax.

Distributions by the Fund are not subject to the Michigan Single Business Tax to
the extent that such distributions are derived from interest on obligations of
Michigan or its political subdivisions, or obligations of the United States
government that are exempt from state taxation by a law of the United States.

Certain municipalities in Michigan also impose an income tax on individuals and
corporations. However, to the extent that the dividends from the Funds are
exempt from federal regular income taxes, such dividends also will be exempt
from Michigan municipal income taxes.


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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare its
performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------

                                                                     
Michigan Municipal Cash Trust
                                                                           Federated Investors Tower
                                                                           Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Distributor
                    Federated Securities Corp.                             Federated Investors Tower
                                                                           Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
                    Federated Management                                   Federated Investors Tower
                                                                           Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Custodian
                    State Street Bank and                                  P.O. Box 8604
                    Trust Company                                          Boston, MA 02266
- ---------------------------------------------------------------------------------------------------------------------

Transfer Agent and Dividend Disbursing Agent
                    Federated Services Company                             P.O. Box 8604
                                                                           Boston, MA 02266
- ---------------------------------------------------------------------------------------------------------------------

Independent Public Accountants
                    Arthur Andersen LLP                                    2100 One PPG Place
                                                                           Pittsburgh, PA 15222
- ---------------------------------------------------------------------------------------------------------------------



MICHIGAN MUNICIPAL
CASH TRUST

PROSPECTUS

A Non-Diversified Portfolio of
Federated Municipal Trust, an Open-End
Management Investment Company

Prospectus dated June 15, 1995

[LOGO] FEDERATED SECURITIES CORP.
       -----------------------------------
       Distributor
       A subsidiary of FEDERATED INVESTORS

       FEDERATED INVESTORS TOWER
       PITTSBURGH, PENNSYLVANIA 15222-3779

          314229725
       G01212-01 (6/95)    






MICHIGAN 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 Michigan Municipal Cash Trust (the "Fund"), a
    portfolio of Federated Municipal Trust (the "Trust")  dated June
    15, 1995. This Statement is not a prospectus.  To receive a copy
    of a prospectus, write or call the Fund.
    
    FEDERATED INVESTORS TOWER
    PITTSBURGH, PA 15222-3779
    
    Statement dated June 15, 1995
   
Federated Securities Corp.
Distributor
A subsidiary of
Federated Investors


INVESTMENT POLICIES                    1
 Acceptable Investments                1
 Participation Interests               1
 Municipal Leases                      1
 When-Issued And Delayed
   Delivery Transactions               1
 Repurchase Agreements                 1
 Michigan Investment Risks             1
INVESTMENT LIMITATIONS                 2
        
BROKERAGE TRANSACTIONS                 4
FEDERATED MUNICIPAL TRUST
MANAGEMENT                             5
 Trustees Compensation                10
 Trustee Liability                    10
INVESTMENT ADVISORY SERVICES          10
 Investment Adviser                   10
 Advisory Fees                        11
   TRANSFER AGENT AND DIVIDEND
DISBURSING AGENT                   11    
SHAREHOLDER SERVICES PLAN              11
    Custodian and Portfolio
   Recordkeeper                    11    
DETERMINING NET ASSET VALUE           12
 Redemption in Kind                   12
 The Fund's Tax Status                12
PERFORMANCE INFORMATION               12
 Yield                                12
 Effective Yield                      12
 Tax-Equivalent Yield                 13
 Tax-Equivalency Table                13
 Total Return                         13
 Performance Comparisons              13
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 security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of
the security, the issuer of any demand feature applicable to the
security, or any guarantor of either the security or any demand feature.
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 these
participation interests, 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. 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, broker/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.
MICHIGAN INVESTMENT RISKS
The Michigan economy has diversified away from durable goods
manufacturing with service sector employment currently at 25.7% of total
employment. However, manufacturing and the automobile sector in
particular, still have significant influence over the State's economy.
Michigan's economy tends to fluctuate with the cyclical trends of the
manufacturing sector, which still accounts for nearly 23% of total State
employment. The state's unemployment rate is currently below the
national unemployment rate for the first time reflecting both the
diversification of the regional economy and significant improvement in
the automobile sector and related industries.
Michigan's finances were hard hit during the 1990 and 1991 fiscal
periods. Spending cuts and an improving state economy resulted in
surplus revenues of $254 million in fiscal 1992. As a result of
continuing surplus funds in fiscal years 1993 and 1994, Michigan's
budget stabilization fund reached an historically high level of $779
million at the end of fiscal 1994, with an additional increase now
projected for the year ended September 30, 1995. The State of Michigan
maintains a conservative debt position with per capita debt remaining
below the national average.
On August 19, 1993, the Governor of Michigan signed into law Act 145,
Public Acts of Michigan, 1993 ("Act 145"), a measure which would have
significantly impacted financing of primary and secondary school
operations and which has resulted in additional property tax and school
finance reform legislation. Act 145 would have exempted all property in
the State of Michigan from millage levied for local and intermediate
school districts operating purposes, other than millage levied for
community colleges, effectively July 1, 1994. In order to replace local
property tax revenues lost as a result of Act 145, the Michigan
Legislature, in December 1993, enacted several statutes which address
property tax and school finance reform. Education reform legislation not
dealing with school finance was also enacted.
The property tax and school finance reform measures included a ballot
proposal ("Proposal A") which was subject to voter approval and in fact
approved on March 15, 1994, and a statutory proposal which would have
automatically taken effect if Proposal A had not been approved. Under
Proposal A as approved, effective May 1,1994, the State sales and use
tax was increased from 4% to 6%, the State income tax was decreased from
4.6% to 4.4%, the cigarette tax was increased from $.25 to $.75 per pack
and an additional tax of 16% of the wholesale price was imposed on
certain other tobacco products. A 0.75% real estate transfer tax was
effective January 1, 1995. Beginning in 1994, a State property tax of 6
mills will be imposed on all real and personal property currently
subject to the general property tax. The ability of school districts to
levy property taxes for school operating purposes will be partially
restored. A school board will, with voter approval, be able to levy up
to the lesser of 18 mills or the number of mills levied in 1993 for
school operating purposes, on non-homestead property. Proposal A
contains additional provisions regarding the ability of local school
districts to levy taxes as well as a limit on assessment increases for
each parcel of property, beginning in 1995 to the lesser of 5% of the
rate of inflation. When property is subsequently sold, its assessed
value will revert to the current assessment level of 50% of true cash
value. Under Proposal A, much of the additional revenue generated by the
new taxes will be dedicated to the State School Aid Fund.
Proposal A contains a system of financing local school operating costs
which relies upon a foundation allowance amount which may vary by
district based upon historical spending levels. State funding will
provide each school district an amount equal to the difference between
its foundation allowance and the revenues generated by its local
property tax levy. Under Proposal A, a local school district will also
be entitled to levy supplemental property taxes to generate additional
revenues if its foundation allowance is less than its historical per
pupil expenditures. Proposal A also contains provisions which allow for
the levy of a limited number of enhancement mills on regional and local
district bases.
Proposal A shifts significant portions of the cost of local school
operations from local districts to the State and raises additional State
revenues to fund these additional State expenses. These additional
revenues will be included within the State's constitutional revenue
limitations and may impact the State's ability to raise additional
revenues in the future. The credit impact on local school districts is
that revenue growth linked closely to state economy and local
enrollment.
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.
 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    agreements 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 the
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.
 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 instruments
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.
Federated Municipal Trust Management_____________________
Officers and Trustees are listed with their addresses, present
positions with Federated Municipal Trust, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate:  July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp.; Chairman, 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.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate:  February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner
of the Funds; formerly, Senior Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate:  June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President,
John R. Wood and Associates, Inc., Realtors; President, Northgate
Village Development Corporation; Partner or Trustee in private real
estate ventures in Southwest Florida; Director, Trustee, or Managing
General Partner of the Funds; formerly, President, Naples Property
Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate:  July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and
Director, Ryan Homes, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate:  May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Director,
Blue Cross of Massachusetts, Inc.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate:  October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian
and Montefiore Hospitals; Director, Trustee, or Managing General Partner
of the Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate:  June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.

Peter E. Madden
225 Franklin Street
Boston, MA
Birthdate:  April 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director, Trustee, or Managing General 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
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate:  October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate:  December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner,
Mollica, Murray and Hogue; Director, Trustee or Managing General Partner
of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate:  September 14, 1925
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer
Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak
Management Center; 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
4905 Bayard Street
Pittsburgh, PA
Birthdate:  July 21, 1935
Trustee
Public relations/marketing consultant; Director, Trustee, or Managing
General Partner of the Funds.
_______________________________________________________________________
________________________________
Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA
Birthdate:  May 2, 1929

President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the
Funds; staff member, Federated Securities Corp. and Federated
Administrative Services.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate:  April 11, 1949

Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and Director,
Federated Research Corp.; President, Passport Research, Ltd.; Trustee,
Federated Administrative 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
Federated Investors Tower
Pittsburgh, PA
Birthdate:  May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors;
Director, Federated Research Corp.; Chairman and Director,
Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate:  October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice
President and Treasurer, Federated Advisers, Federated Management,
Federated Research, Federated Research Corp., 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
Federated Investors Tower
Pittsburgh, PA
Birthdate:  October 26, 1938
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Vice President and
Secretary, Federated Research Corp. and Passport Research, Ltd.;
Trustee, Federated Services Company; Executive Vice President,
Secretary, and Trustee, Federated Administrative Services; Secretary and
Trustee, Federated Shareholder Services; Executive Vice President and
Director, Federated Securities Corp.; Vice President and Secretary of
the Funds.

      *  This Trustee is deemed to be an "interested person" as defined
         in the Investment Company Act of 1940, as amended.
      @  Member of the Executive Committee. The Executive Committee of
         the Board of Trustees handles the responsibilities of the Board
         of Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; 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; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; New York Municipal Cash Trust; 111 Corcoran
Funds; Peachtree Funds; The Planters 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; The Virtus Funds; and World Investment
Series, Inc.
   TRUSTEES COMPENSATION

                      AGGREGATE
NAME ,              COMPENSATION
POSITION WITH            FROM                   TOTAL COMPENSATION PAID
TRUST                   TRUST#                  FROM TRUST AND FUND COMPLEX +

John F. Donahue,          $ -0-                $ -0-  for the Trust and
Chairman and Trustee                           68 other investment companies 
                                               in the Fund Complex
Thomas G. Bigley,         $ -0-                $ 20,688 for the Trust and
Trustee                                        49 other investment companies 
                                               in the Fund Complex
John T. Conroy, Jr.,      $ 4,757.00           $ 117,202 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
William J. Copeland,      $ 4,757.00           $ 117,202 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
James E. Dowd,            $ 4,757.00           $ 117,202 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
Lawrence D. Ellis, M.D.,  $ 4,308.00           $106,460 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
Edward L. Flaherty, Jr., $ 4,757.00            $117,202 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
Glen R. Johnson,          $ -0-                $ -0- for the Trust and
President and Trustee                          8 other investment companies 
                                               in the Fund Complex
Peter E. Madden,          $ 4,308.00           $ 90,563 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
Gregor F. Meyer,          $ 4,308.00           $ 106,460 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
John E. Murray, Jr.,      $ -0-                $ -0- for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
Wesley W. Posvar,         $ 4,308.00           $ 106,460 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex
Marjorie P. Smuts,        $ 4,308.00           $ 106,460 for the Trust and
Trustee                                        64 other investment companies 
                                               in the Fund Complex    
#THE AGGREGATE COMPENSATION IS PROVIDED FOR THE TRUST WHICH IS COMPRISED
OF 14 PORTFOLIOS.
+THE INFORMATION IS PROVIDED FOR THE LAST CALENDAR YEAR.

TRUSTEE LIABILITY
The Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law.  However, they are
not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties involved in the conduct of their
office.
INVESTMENT ADVISORY SERVICES
INVESTMENT ADVISER
The Fund'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 the Trust, the Fund, or any
shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or
omitted by it, except acts or omissions involving willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties imposed
upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus.
      STATE EXPENSE LIMITATIONS
      The adviser has undertaken to comply with the expense limitations
      established by certain states for investment companies whose
      shares are registered for sale in those states.  If the Fund's
      normal operating expenses (including the investment advisory fee,
      but not including brokerage commissions, interest, taxes, and
      extraordinary expenses) exceed 2-1/2% per year of the first $30
      million of average net assets, 2% per year of the next $70 million
      of average net assets, and 1-1/2% per year of the remaining
      average net assets, the adviser will reimburse the Fund for its
      expenses over the limitation.
      If the Fund's monthly projected operating expenses exceed this
      limitation, the investment advisory fee paid will be reduced by
      the amount of the excess, subject to an annual adjustment.  If the
      expense limitation is exceeded, the amount to be reimbursed by the
      adviser will be limited, in any single fiscal year, by the amount
      of the investment advisory 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 a director of Commercial
Data Services, Inc., a company which provides computer processing
services to 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.    
SHAREHOLDER SERVICES PLAN
This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided
which are necessary for the maintenance of shareholder accounts and to
encourage personal services 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:
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 balance; answering routine client
inquiries; and assisting clients in changing dividend options, account
designations, and addresses.  By adopting the Shareholder Services Plan,
the Board of Trustees expects that the Fund will benefit by:
(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 Company, Boston, MA, is custodian for the
securities and cash of the Fund.  Federated Services Company, Boston, MA
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 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 yield is calculated 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 effective yield is calculated 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.
TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Fund is calculated similarly to the
yield but is adjusted to reflect the taxable yield that the Fund would
have had to earn to equal its actual yield, assuming a 39.6% tax rate
(the maximum effective federal rate for individuals) and assuming that
income is 100% exempt.
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.
     TAXABLE YIELD EQUIVALENT FOR 1995
     STATE OF MICHIGAN

     
     COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
                19.47%     32.47%      35.47%       40.47%        44.07%
     JOINT         $1    $39,001      $94,251       $143,601       OVER
     RETURN      39,000   94,250      143,600       256,500       256,500
     
     SINGLE        $1    $23,351      $56,551       $117,951       OVER
     RETURN      23,350   56,550      117,950       256,500       256,500
   Tax-Exempt Yield     _________Taxable Yield Equivalent________________
      2.50%      3.10%      3.70%       3.87%        4.20%     4.47%
      3.00%      3.73%      4.44%       4.65%        5.04%     5.36%
      3.50%      4.35%      5.18%       5.42%        5.88%     6.26%
      4.00%      4.97%      5.92%       6.20%        6.72%     7.15%
      4.50%      5.59%      6.66%       6.97%        7.56%     8.05%
      5.00%      6.21%      7.40%       7.75%        8.40%     8.94%
      5.50%      6.83%      8.14%       8.52%        9.24%     9.83%
      6.00%      7.45%      8.88%       9.30%       10.08%     10.73%
     
     Note:  The maximum marginal tax rate for each bracket was used in
     calculating the taxable yield equivalent. Furthermore, additional
     state and local taxes paid on comparable taxable investments were
     not used to increase federal deductions. If you itemize
     deductions, your taxable yield equivalent will be lower.
     The chart above is for illustrative purposes only.  It is not an
     indicator of past or future performance of Fund shares.
     * Some portion of the Fund's income may be subject to the federal
     alternative minimum tax and state and local income taxes.
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 computed 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 offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
   O 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.
   o 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.
   o MONEY, a monthly magazine, regularly ranks money market funds in
      various categories based on the latest available seven-day
      effective yield.

































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