-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IvtSqjgc1ySBSZnvYrqY5xbG7G3rBLb/TjwHy0l21mJFd/cB97OBaDxhUNRf7/wO auDlo7FnIzsuZzFf5iNBuQ== 0000855108-99-000010.txt : 19991223 0000855108-99-000010.hdr.sgml : 19991223 ACCESSION NUMBER: 0000855108-99-000010 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 19991222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERATED MUNICIPAL TRUST CENTRAL INDEX KEY: 0000855108 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251723019 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-05911 FILM NUMBER: 99778659 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 BUSINESS PHONE: 8003417400 MAIL ADDRESS: STREET 1: FEDERATED INVESTORS TOWER CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 N-30D 1 ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Alabama Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. The fund is a convenient way to keep your ready cash pursuing double tax-free income-free from federal regular income tax and Alabama income tax- through a portfolio concentrated in high-quality, short-term Alabama municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share. The fund's net assets totaled $239 million at the end of the reporting period. Thank you for relying on Alabama Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the reporting period was approximately 53 days. In 1999, the fund's average maturity declined to as low as 25 days by June before we were able to take advantage of fixed-rate note opportunities in July that increased it to 55 days by the end of July. Asset inflows in August and September caused the maturity to again move downward as the percentage of fixed-rate note fell in the portfolio. At the end of the reporting period, the average maturity stood at 31 days. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range was targeted taking into account Federal Reserve monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first half of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.5% 1 ALABAMA-98.7% $ 5,000,000 Alabama HFA, Multifamily Revenue Bonds (Series 1997) Weekly VRDNs (YW Housing Partners, Ltd. Project)/(Amsouth Bank N.A., Birmingham LOC) $ 5,000,000 9,590,000 Alabama HFA, Variable Rate Certificates (Series 1997J) Weekly VRDNs (GNMA COL)/(Bank of America, N.A. LIQ) 9,590,000 1,100,000 Alabama State IDA, Weekly VRDNs (Sunshine Homes, Inc.)/(Amsouth Bank N.A., Birmingham LOC) 1,100,000 4,755,000 Alabama State IDA, IDRB (Series 1994) Weekly VRDNs (Decatur Aluminum Corp.)/(Firstar Bank, N.A., Cincinnati LOC) 4,755,000 3,150,000 Alabama State IDA, IDRB (Series 1996) Weekly VRDNs (IMI Cash Valve Project)/(Regions Bank, Alabama LOC) 3,150,000 3,350,000 Alabama State IDA, IRBs Weekly VRDNs (Kappler USA, Inc. Project)/(SouthTrust Bank of Alabama, Birmingham LOC) 3,350,000 3,435,000 Alabama State IDA, Revenue Bonds Weekly VRDNs (Southern Bag Corporation, Ltd.)/(SouthTrust Bank of Alabama, Birmingham LOC) 3,435,000 14,765,000 Alabama State Public School & College Authority, (PT-1195), 3.90% TOBs (Merrill Lynch Capital Services, Inc. LIQ), Optional Tender 10/26/2000 14,765,000 1,500,000 Alabama State, 6.00% Bonds, 3/1/2000 1,514,294 4,355,000 Alabama State, Series A 5.50% Bonds, 10/1/2000 4,422,814 2,000,000 Anniston, AL, IDB, (Series 1989-A) Weekly VRDNs (Union Foundry Co.)/(Amsouth Bank, Birmingham LOC) 2,000,000 3,650,000 Arab, AL IDB, (Series 1989) Weekly VRDNs (SCI Manufacturing, Inc.)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 3,650,000 1,100,000 Arab, AL IDB, Revenue Refunding Bonds (Series 1989) Weekly VRDNs (SCI Manufacturing, Inc.)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 1,100,000 1,475,000 Ashland, AL IDB, (Series 1996) Weekly VRDNs (Tru- Wood Cabinets)/(Regions Bank, Alabama LOC) 1,475,000 3,000,000 Auburn, AL IDB, (Series 1999) Weekly VRDNs (Donaldson Company, Inc.)/(Bank of America, N.A. LOC) 3,000,000 2,000,000 Birmingham, AL IDA Weekly VRDNs (Altec Industries, Inc.)/(Wachovia Bank of NC, N.A. LOC) 2,000,000 6,000,000 Birmingham, AL IDA, (Series 1997) Weekly VRDNs (Millcraft, AL, Inc.)/(Regions Bank, Alabama LOC) 6,000,000 2,825,000 Birmingham, AL IDA, IDRBs (Series 1997) Weekly VRDNs (J. J. & W, IV, Ltd.)/(Svenska Handelsbanken, Stockholm LOC) 2,825,000 7,010,000 Birmingham, AL IDA, IDRBs (Series 1999) Weekly VRDNs (Glasforms, Inc.)/(Comerica Bank - California LOC) 7,010,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 ALABAMA-CONTINUED $ 4,745,000 Birmingham, AL IDA, Revenue Bonds (Series 1989) Weekly VRDNs (O'Neal Steel, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) $ 4,745,000 2,165,000 Birmingham, AL IDA, Revenue Bonds (Series 1996) Weekly VRDNs (American FireLog Corp.)/(Comerica Bank LOC) 2,165,000 4,440,000 Birmingham, AL IDA, Revenue Refunding Bonds Weekly VRDNs (S.P. Hotel Co.)/(Amsouth Bank N.A., Birmingham LOC) 4,440,000 400,000 Calhoun County, AL Economic Development Council Weekly VRDNs (Food Ingredients Tech. Co.)/(Bank of America, N.A. LOC) 400,000 2,770,000 Calhoun County, AL Economic Development Council, Variable/Fixed Rate IDRBs Weekly VRDNs (Fabarc Steel Co.)/(Regions Bank, Alabama LOC) 2,770,000 1,200,000 Cullman, AL IDB, IRBs (Series 1992) Weekly VRDNs (Pressac Holdings PLC)/(Bank One, Michigan LOC) 1,200,000 800,000 Cullman, AL IDB, Series 1989 Weekly VRDNs (Pressac, Inc.)/(Bank One, Michigan LOC) 800,000 2,685,000 Cullman, AL IDB, Variable/ Fixed Rate IDRB Weekly VRDNs (National Bedding Co.)/(Bank of America, N.A. LOC) 2,685,000 3,000,000 Decatur, AL IDB, Revenue Refunding Bonds (Series 1993) Weekly VRDNs (Allied-Signal, Inc.) 3,000,000 1,400,000 Dothan, AL IDB, Adjustable/Fixed Rate IRBs (Series 1997) Weekly VRDNs (Henderson Steel Erectors)/(Regions Bank, Alabama LOC) 1,400,000 1,120,000 Fort Payne, AL IDB, IDRB Weekly VRDNs (Ovalstrapping, Inc.)/(U.S. Bank, N.A., Minneapolis LOC) 1,120,000 7,400,000 Gadsen, AL IDB, IDRBs (Series 1997) Weekly VRDNs (Chicago Steel, (Alabama), L.L.C.)/(Marshall & Ilsley Bank, Milwaukee LOC) 7,400,000 4,875,000 Geneva County, AL IDB, Adjustable Fixed Rate IDRBs (Series 1996) Weekly VRDNs (Brooks AG Co., Inc.)/(Regions Bank, Alabama LOC) 4,875,000 4,000,000 Guntersville, AL IDB, (Series 1995) Weekly VRDNs (Hercules Rubber Co. Project)/(SouthTrust Bank of Alabama, Birmingham LOC) 4,000,000 2,735,000 Hamilton, AL IDB, Variable/Fixed Rate IDRBs Weekly VRDNs (Tennessee River, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 2,735,000 8,000,000 Hoover, AL Board of Education, Warrant Anticipation Notes (Series 1999A), 3.80% BANs, 8/1/2000 8,000,000 2,180,000 Hoover, AL IDB Weekly VRDNs (Bud's Best Cookies, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 2,180,000 1,170,000 Huntsville Madison County, AL Airport Authority, 4.30% Bonds (MBIA INS), 7/1/2000 1,172,600 2,250,000 Huntsville, AL IDB Weekly VRDNs (Giles & Kendall, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 2,250,000 125,000 Huntsville, AL IDB Weekly VRDNs (Parkway Project (Huntsville, AL))/(Regions Bank, Alabama LOC) 125,000 1,185,000 Huntsville, AL, Warrants (Series A), 3.10% Bonds, 11/1/1999 1,185,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 ALABAMA-CONTINUED $ 2,290,000 Huntsville, AL, Warrants (Series B), 3.10% Bonds, 11/1/1999 $ 2,290,000 930,000 Huntsville, AL, Warrants (Series D), 3.10% Bonds, 11/1/1999 930,000 1,000,000 Jefferson County, AL, Warrants (Series 1999) Weekly VRDNs (Bayerische Landesbank Girozentrale LOC) 1,000,000 1,500,000 Jefferson County, AL, GO Warrants (Series 1996) Weekly VRDNs (Bayerische Landesbank Girozentrale LOC) 1,500,000 2,800,000 Lowndes County, AL IDB, (Series 1996) Weekly VRDNs (Warren Oil Company Project)/(First Union National Bank, Charlotte, NC LOC) 2,800,000 270,000 Marshall County, AL, Special Obligation School Refunding Warrant (Series 1994) Weekly VRDNs (Marshall County, AL Board of Education)/(Regions Bank, Alabama LOC) 270,000 2,360,000 Mobile, AL Downtown Redevelopment Authority, (Series 1992) Weekly VRDNs (Mitchell Project)/(SunTrust Bank, Atlanta LOC) 2,360,000 2,500,000 Mobile, AL IDA Weekly VRDNs (McRae's Industries, Inc.)/(Bank of America, N.A. LOC) 2,500,000 2,000,000 Mobile, AL IDB Weekly VRDNs (American Aero Crane)/(National Bank of Canada, Montreal LOC) 2,000,000 3,000,000 Mobile, AL IDB, (1994 Series A), 3.95% TOBs (International Paper Co.), Optional Tender 12/1/1999 3,000,000 1,500,000 Mobile, AL IDB, PCR (Series 1993B) Weekly VRDNs (Alabama Power Co.) 1,500,000 3,000,000 Montgomery - Wynlakes Governmental Utility Services Corp., Bonds (Series 1995-A) Weekly VRDNs (Vaughn Road, L.L.C., Project)/(Amsouth Bank N.A., Birmingham LOC) 3,000,000 2,305,000 Montgomery, AL IDB, (Series 1990-A) Weekly VRDNs (Industrial Partners)/(Wachovia Bank of NC, N.A. LOC) 2,305,000 6,000,000 Montgomery, AL IDB, IDRBs (Series 1996) Weekly VRDNs (CSC Fabrication, Inc. Project)/(Chase Bank of Texas LOC) 6,000,000 3,650,000 Montgomery, AL IDB, IDRBs (Series 1996A) Weekly VRDNs (Jobs Co., L.L.C. Project)/(Columbus Bank and Trust Co., GA LOC) 3,650,000 7,000,000 Perry County, AL IDB, Revenue Bonds (Series 1998) Weekly VRDNs (Alabama Catfish Feedmill, L.L.C.)/(Regions Bank, Alabama LOC) 7,000,000 2,785,000 Phoenix City, AL, (Series 1998) Weekly VRDNs (Kudzu, L.L.C.)/(SunTrust Bank, Atlanta LOC) 2,785,000 3,100,000 Piedmont, AL IDB Weekly VRDNs (Bostrom Seating, Inc.)/(Chase Manhattan Bank (USA) N.A., Wilmington LOC) 3,100,000 760,000 Piedmont, AL IDB Weekly VRDNs (Industrial Partners)/(Wachovia Bank of NC, N.A. LOC) 760,000 4,415,000 Prattville, AL IDB, IDR Bonds Weekly VRDNs (Kuhnash Properties/Arkay Plastics Project)/(PNC Bank, N.A. LOC) 4,415,000 2,250,000 Scottsboro, AL IDB, (Series 1994) Weekly VRDNs (Maples Industries, Inc.)/(Amsouth Bank N.A., Birmingham LOC) 2,250,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 ALABAMA-CONTINUED $ 750,000 Scottsboro, AL IDB, IDRB (Series 1991) Weekly VRDNs (Maples Industries, Inc.)/(Amsouth Bank N.A., Birmingham LOC) $ 750,000 5,000,000 Selma, AL IDB, Annual Tender PCR Refunding Bonds (1993 Series B), 4.30% TOBs (International Paper Co.), Optional Tender 7/15/2000 5,000,000 1,560,000 Shelby County, AL Board of Education Warrants, 4.375% Bonds, Series B, (AMBAC INS), 2/1/2000 1,564,469 2,500,000 Shelby County, AL EDA Weekly VRDNs (Saginaw Pipe of Illinois, Inc.)/(Regions Bank, Alabama LOC) 2,500,000 7,575,000 St. Clair County, AL IDB, (Series 1993) Weekly VRDNs (Ebsco Industries, Inc.)/(National Australia Bank, Ltd., Melbourne LOC) 7,575,000 4,100,000 Sumter County, AL IDA, IRBs (Series 1995A) Weekly VRDNs (Fulghum Fibres Project (AL))/(Regions Bank, Alabama LOC) 4,100,000 900,000 Sumter County, AL IDA, IRBs (Series 1995B) Weekly VRDNs (Canal Chip Project)/(Regions Bank, Alabama LOC) 900,000 2,470,000 Tallassee, AL IDB, (Series 1998) Weekly VRDNs (Milstead Farm Group, Inc.)/(Regions Bank, Alabama LOC) 2,470,000 2,500,000 Troy, AL IDB, (Series 1997A) Weekly VRDNs (Hudson Cos.)/(Amsouth Bank N.A., Birmingham LOC) 2,500,000 3,000,000 Troy, AL IDB, IRBs (Series 1996A) Weekly VRDNs (Hudson Sauces & Dressings, Inc.)/(Amsouth Bank N.A., Birmingham LOC) 3,000,000 55,000 Tuscaloosa County, AL Port Authority, (Series 1989A) Weekly VRDNs (Capstone Hotel Ltd.)/(SouthTrust Bank of Alabama, Birmingham LOC) 55,000 2,000,000 Tuskegee, AL IDB, IDRB (Series 1995) Weekly VRDNs (Concrete Company (The)/(Columbus Bank and Trust Co., GA LOC) 2,000,000 4,295,000 Vincent, AL IDB, Weekly VRDNs (Headquarters Partnership Project)/(National Australia Bank, Ltd., Melbourne LOC) 4,295,000 1,910,000 Vincent, AL IDB, (Series 1993) Weekly VRDNs (Ebsco Industries, Inc.)/(National Australia Bank, Ltd., Melbourne LOC) 1,910,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 ALABAMA-CONTINUED $ 3,060,000 Wetumpka, AL IDB, (Series 1997) Weekly VRDNs (US Fabtec L.L.C.)/(Bank of Tokyo-Mitsubishi Ltd. LOC) $ 3,060,000 TOTAL 235,884,177 PUERTO RICO-0.8% 2,000,000 Puerto Rico Industrial, Medical & Environmental PCA, (Series 1983A), 2.90% TOBs (Merck & Co., Inc.), Optional Tender 12/1/1999 2,000,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 2 $ 237,884,177
Securities that are subject to alternative minimum tax represent 70.5% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1, or MIG-2 by Moody's Investors Service, F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Percentage Based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER 96.64% 3.36%
2 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($239,000,750) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation BANs -Bond Anticipation Notes COL -Collateralized EDA -Economic Development Authority GNMA -Government National Mortgage Association GO -General Obligation HFA -Housing Finance Authority IDA -Industrial Development Authority IDB -Industrial Development Bond IDR -Industrial Development Revenue IDRB -Industrial Development Revenue Bond INS -Insured IRB's -Industrial Revenue Bonds LIQ -Liquidity Agreement LOC - -Letter of Credit MBIA -Municipal Bond Investors Assurance PCA -Pollution Control Authority PCR -Pollution Control Revenue TOBs -Tender Option Bonds VRDNs - -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 237,884,177 Cash 363,764 Income receivable 1,130,606 TOTAL ASSETS 239,378,547 LIABILITIES: Payable for shares redeemed $ 2,718 Income distribution payable 291,459 Accrued expenses 83,620 TOTAL LIABILITIES 377,797 Net assets for 239,000,750 shares outstanding $ 239,000,750 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: $239,000,750 / 239,000,750 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 7,361,031 EXPENSES: Investment advisory fee $ 1,050,119 Administrative personnel and services fee 158,358 Custodian fees 9,909 Transfer and dividend disbursing agent fees and expenses 56,891 Directors'/Trustees' fees 1,941 Auditing fees 12,534 Legal fees 9,460 Portfolio accounting fees 48,851 Shareholder services fee 525,060 Share registration costs 26,224 Printing and postage 14,397 Insurance premiums 14,115 Miscellaneous 2,942 TOTAL EXPENSES 1,930,801 WAIVERS: Waiver of investment advisory fee $ (745,427) Waiver of shareholder services fee (21,002) TOTAL WAIVERS (766,429) Net expenses 1,164,372 Net investment income 6,196,659
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 6,196,659 $ 6,019,791 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income (6,196,659) (6,019,791) SHARE TRANSACTIONS: Proceeds from sale of shares 605,959,818 436,920,174 Net asset value of shares issued to shareholders in payment of distributions declared 3,430,339 3,252,776 Cost of shares redeemed (560,214,016) (473,995,552) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 49,176,141 (33,822,602) Change in net assets 49,176,141 (33,822,602) NET ASSETS: Beginning of period 189,824,609 223,647,211 End of period $ 239,000,750 $ 189,824,609
See Notes which are an integral part of the Financial Statements Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.04 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.98% 3.24% 3.26% 3.22% 3.66% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.91% 0.92% 0.91% 0.92% 0.92% Net investment income 2 2.59% 2.82% 2.85% 2.81% 3.15% Expenses (after waivers) 0.55% 0.55% 0.55% 0.55% 0.48% Net investment income (after waivers) 2.95% 3.19% 3.21% 3.18% 3.59% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $239,001 $189,825 $223,647 $233,720 $209,490
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Alabama Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is to provide current income exempt from federal regular income tax and the income tax imposed by the State of Alabama consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees (the "Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). At October 31, 1999, capital paid-in aggregated $239,000,750. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 Shares sold 605,959,818 436,920,174 Shares issued to shareholders in payment of distributions declared 3,430,339 3,252,776 Shares redeemed (560,214,016) (473,995,552) NET CHANGE RESULTING FROM SHARE TRANSACTIONS 49,176,141 (33,822,602)
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $448,880,508 and $373,040,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 77.19% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 15.6% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITOR (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements; or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF ALABAMA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Alabama Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Alabama Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President EDWARD C. GONZALES Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Alabama Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Alabama Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229790 G01120-02 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Arizona Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. The fund is a convenient way to keep your ready cash pursuing double tax-free income--free from federal regular income tax and Arizona income tax-- through a portfolio concentrated in high-quality, short-term Arizona municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double-tax-free dividends totaling $0.03 per share. The fund's net assets totaled $33.9 million at the end of the reporting period. Thank you for relying on Arizona Municipal Cash Trust to help your ready cash earn income every day. As always, we'll continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Michael Sirianni, Jr., Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the reporting period was approximately 55 days. The fund remained in a 45- to 50-day average maturity range over the reporting period and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range was targeted, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first half of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS-- 99.2% 1 ARIZONA--94.2% $ 750,000 Apache County, AZ IDA (Series 1983A) Weekly VRDNs (Tucson Electric Power Co.)/(Toronto- Dominion Bank LOC) $ 750,000 1,500,000 Chandler, AZ IDA (Series 1999A) Weekly VRDNs (South Bay Circuits, Inc.)/(Comerica Bank, California LOC) 1,500,000 500,000 Cochise County, AZ Pollution Control Corp. (Pooled Series 1994A) 3.65% TOBs (Arizona Electric Power Cooperative, Inc. Project)/(National Rural Utilities Cooperative Finance Corp. GTD) Optional Tender 3/1/2000 500,000 1,250,000 Coconino County, AZ Pollution Control Corp. (Series 1998) Daily VRDNs (Arizona Public Service Co.)/(KBC Bank N.V. LOC) 1,250,000 1,500,000 Eloy, AZ IDA (Series 1996) Weekly VRDNs (The Marley Cooling Tower Co.)/(First Union National Bank, Charlotte, N.C. LOC) 1,500,000 3,121,000 Flagstaff, AZ (Series 1999) Weekly VRDNs (Joy Cone Co.)/(Mellon Bank N.A., Pittsburgh LOC) 3,121,000 1,300,000 Maricopa County, AZ Pollution Control Corp. (Series 1984) Weekly VRDNs (El Paso Electric Co.)/(Barclays Bank PLC, London LOC) 1,300,000 1,000,000 Maricopa County, AZ School District No. 28, Kyrene Elementary, Second Series Bonds (FGIC INS) 7/1/2000 976,409 3,740,000 Maricopa County, AZ, IDA (Series 1984) Weekly VRDNs (Gannett Co., Inc.) 3,740,000 1,400,000 Maricopa County, AZ, IDA (Series 1999) Weekly VRDNs (Redman Homes, Inc.)/(PNC Bank, N.A. LOC) 1,400,000 750,000 Maricopa County, AZ, IDA, 3.85% CP (Citizens Utilities Co.), Mandatory Tender 12/17/1999 750,000 750,000 Maricopa County, AZ, IDA, 3.85% CP (Citizens Utilities Co.), Mandatory Tender 12/17/1999 750,000 1,370,000 Mesa, AZ Municipal Development Corp. (Series 1985) 3.60% CP (Westdeutsche Landesbank Girozentrale LOC) Mandatory Tender 2/10/2000 1,370,000 1,000,000 Mesa, AZ, 5.35% Bonds (FGIC INS), 7/1/2000 1,011,831 1,200,000 Phoenix, AZ IDA (Series 1997) Weekly VRDNs (Interface Data Systems, Inc.)/(Bank One, Arizona N.A. LOC) 1,200,000 1,300,000 Phoenix, AZ IDA (Series 1998) Weekly VRDNs (Standard Printing Company, Inc.)/(Bank One, Arizona N.A. LOC) 1,300,000 2,390,000 2 Pima County, AZ IDA, Single Family Mortgage (PA-159) 3.60% TOBs (GNMA COL)/(Merrill Lynch Capital Services, Inc. LIQ) 2/10/2000 2,390,000 1,250,000 Pinal County, AZ IDA, PCR Bonds Daily VRDNs (Magma Copper Co.)/(National Westminster Bank, PLC, London LOC) 1,250,000 400,000 Prescott Valley, AZ, 3.50% Bonds (MBIA INS), 1/1/2000 400,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS-- continued 1 ARIZONA--CONTINUED $ 1,110,000 Scottsdale, AZ IDA Weekly VRDNs (Scottsdale (Memorial Hospitals))/(AMBAC INS)/(Credit Local de France LIQ) $ 1,110,000 1,000,000 Tempe, AZ IDA (Series 1992) 3.75% TOBs (Safeway, Inc.)/(Bankers Trust Co., New York LOC), Mandatory Tender 4/17/2000 1,000,000 1,000,000 Tolleson, AZ Municipal Finance Corp., Revenue Refunding Bonds (Series of 1998) Weekly VRDNs (Citizens Utilities Co.) 1,000,000 1,400,000 Yavapai, AZ IDA (Series 1997B) Weekly VRDNs (Yavapai Regional Medical Center)/(FSA INS)/(Credit Local de France LIQ) 1,400,000 1,000,000 Yuma County, AZ Airport Authority, Inc. (Series 1997A) Weekly VRDNs (Bank One, Arizona N.A. LOC) 1,000,000 TOTAL 31,969,240 PUERTO RICO--5.0% 1,106,219 Commonwealth of Puerto Rico Municipal Revenues Collection Center, 1997A LeaseTOPS Trust Weekly VRDNs (ABN AMRO Bank N.V., Amsterdam LIQ)/(State Street Bank and Trust Co. LOC) 1,106,219 575,000 Puerto Rico Telephone Authority (Series M) 4.50% Bonds (MBIA INS), 1/1/2000 576,343 TOTAL 1,682,562 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 33,651,802
Securities that are subject to alternative minimum tax represent 49.5% of the portfolio as calculated based on total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER 100% 0.00%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $2,390,000 which represents 7.0% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($33,933,321) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC --American Municipal Bond Assurance Corporation COL --Collateralized CP - --Commercial Paper FGIC --Financial Guaranty Insurance Company FSA --Financial Security Assurance GNMA --Government National Mortgage Association GTD - --Guaranteed IDA --Industrial Development Authority INS --Insured LIQ - --Liquidity Agreement LOC --Letter of Credit MBIA --Municipal Bond Investors Assurance PCR --Pollution Control Revenue TOBs --Tender Option Bonds VRDNs - --Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 33,651,802 Cash 149,111 Income receivable 179,597 Receivable for shares sold 27,396 TOTAL ASSETS 34,007,906 LIABILITIES: Payable for shares redeemed $ 20,000 Income distribution payable 41,295 Accrued expenses 13,290 TOTAL LIABILITIES 74,585 Net assets for 33,933,321 shares outstanding $ 33,933,321 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: $33,933,321 / 33,933,321 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 1,043,629 EXPENSES: Investment advisory fee $ 157,652 Administrative personnel and services fee 125,000 Custodian fees 2,172 Transfer and dividend disbursing agent fees and expenses 24,387 Directors'/Trustees' fees 438 Auditing fees 8,183 Legal fees 1,536 Portfolio accounting fees 43,638 Shareholder services fee 78,826 Share registration costs 25,151 Printing and postage 9,945 Insurance premiums 3,013 Miscellaneous 924 TOTAL EXPENSES 480,865 WAIVER AND REIMBURSEMENT: Waiver of investment advisory fee $ (157,652) Reimbursement of other operating expenses (139,034) TOTAL WAIVERS AND REIMBURSEMENTS (296,686) Net expenses 184,179 Net investment income $ 859,450
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR PERIOD ENDED ENDED OCTOBER 31, OCTOBER 31, 1999 1998 1 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 859,450 $ 155,579 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income (859,450) (155,579) SHARE TRANSACTIONS: Proceeds from sale of shares 59,795,359 46,101,572 Net asset value of shares issued to shareholders in payment of distributions declared 402,943 98,402 Cost of shares redeemed (60,992,727) (11,472,228) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (794,425) 34,727,746 Change in net assets (794,425) 34,727,746 NET ASSETS: Beginning of period 34,727,746 -- End of period $ 33,933,321 $ 34,727,746
1 Reflects operations for the period from June 10, 1998 (date of initial public investment) to October 31, 1998. See Notes which are an integral part of the Financial Statements Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR PERIOD ENDED ENDED OCTOBER 31, OCTOBER 31, 1999 1998 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.01 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.01) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 TOTAL RETURN 2 2.76% 1.28 % RATIOS TO AVERAGE NET ASSETS: Expenses 3 1.53% 2.53% 4 Net investment income 3 1.78% 1.03% 4 Expenses(after waivers and reimbursements) 0.58% 0.32% 4 Net investment income(after waivers and reimbursements) 2.73% 3.24% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $33,933 $34,728
1 Reflects operations for the period from June 10, 1998 (date of initial public investment) to October 31, 1998. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived and reimbursed. If such voluntary waivers and reimbursements had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Arizona Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the fund is current income exempt from federal regular income tax and Arizona income taxes consistent with stability of principal and liquidity. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees (the "Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Investment Company Act of 1940. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). At October 31, 1999, capital paid-in aggregated $33,933,321. Transactions in shares were as follows:
YEAR PERIOD ENDED ENDED OCTOBER 31, OCTOBER 31, 1999 1998 1 Shares sold 59,795,359 46,101,572 Shares issued to shareholders in payment of distributions declared 402,943 98,402 Shares redeemed (60,992,727) (11,472,228) NET CHANGE RESULTING FROM SHARE TRANSACTIONS (794,425) 34,727,746
1 Reflects operations for the period from June 10, 1998 (date of initial public investment) to October 31, 1998. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and/or reimbursement at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Trust shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $65,829,000 and $71,449,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 72.9% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 10.4% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Items 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF ARIZONA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Arizona Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and the financial highlights for the period June 10, 1998 to October 31, 1998 were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Arizona Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Arizona Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Arizona Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229626 G02372-05 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of California Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares and Institutional Service Shares. The fund is a convenient way to keep your ready cash pursuing double tax-free income - free from federal regular income tax and California personal income tax - - through a portfolio concentrated in high-quality, short-term California municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share for both Institutional Shares and Institutional Service Shares. The fund's net assets totaled $557.2 million at the end of the reporting period. Thank you for relying on California Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Michael Sirianni, Jr., Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three interest rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the two highest federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level of the decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? At the beginning of the reporting period, the fund's average maturity was approximately 55 days. The fund remained in a 45- to 50-day average maturity range over the reporting period, and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. After an average maturity range was targeted, we attempted to maximize performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first and second quarters of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.5% 1 CALIFORNIA-86.1% $ 9,000,000 ABAG Finance Authority for Non-Profit Corporations Weekly VRDNs (Lucile Salter Packard Children's Hospital at Stanford)/(AMBAC INS)/(Bayerische Landesbank Girozentrale LIQ) $ 9,000,000 5,420,000 ABAG Finance Authority for Non-Profit Corporations (Series 1998) Weekly VRDNs (The Harker School Foundation)/(U.S. Bank, N.A., Minneapolis LOC) 5,420,000 4,000,000 ABAG Finance Authority for Non-Profit Corporations (Series 1999) Weekly VRDNs (Marin Academy)/(Allied Irish Banks PLC LOC) 4,000,000 15,705,000 ABN AMRO MuniTOPS Certificates Trust (California Non-AMT) (Series 1998-10) Weekly VRDNs (San Diego, CA Water Utility Fund)/(FGIC INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) 15,705,000 6,500,000 ABN AMRO MuniTOPS Certificates Trust (California Non-AMT) (Series 1998-17) Weekly VRDNs (Sacramento County, CA Airport System)/(FGIC INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) 6,500,000 12,000,000 2 ABN AMRO MuniTOPS Certificates Trust (California Non-AMT) (Series 1998-25) 3.2% TOBs (Los Angeles, CA Wastewater System)/(FGIC INS)/(ABN AMRO Bank N.V., Amsterdam LIQ), Optional Tender 3/1/2000 12,000,000 6,500,000 ABN AMRO MuniTOPS Certificates Trust (California Non-AMT) (Series 1999-7) Weekly VRDNs (Los Angeles, CA Unified School District)/(MBIA INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) 6,500,000 4,356,000 2 ABN AMRO MuniTOPS Certificates Trust (California Non-AMT) (Series 1999-8) 3.5% TOBs (Contra Costa, CA Water District)/(FGIC INS)/(ABN AMRO Bank N.V., Amsterdam LIQ), Mandatory Tender 4/26/2000 4,356,000 5,000,000 California Educational Facilities Authority, Floater Certificates (Series 1998-147) Weekly VRDNs (University of Southern California)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 5,000,000 1,335,000 2 California HFA, Home Mortgage (Series 1989F) 3.4% TOBs (Citibank N.A., New York LIQ), Optional Tender 2/1/2000 1,335,000 3,135,000 California HFA, Variable Rate Certificates (Series 1998E) Weekly VRDNs (Bank of America, N.A. LIQ) 3,135,000 11,750,000 California PCFA, (Series 1996 E) Daily VRDNs (Pacific Gas & Electric Co.)/(Morgan Guaranty Trust Co., New York LOC) 11,750,000 9,400,000 California PCFA, PCR (Series D) Daily VRDNs (Southern California Edison Co.) 9,400,000 5,200,000 California PCFA, Series A Daily VRDNs (Southern California Edison Co.) 5,200,000 2,500,000 California State Department of Water Resources, PA-562R Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 2,500,000 6,000,000 California State, Floater Certificates (Series 1998- 55) Weekly VRDNs (FGIC INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 6,000,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 CALIFORNIA-CONTINUED $ 5,000,000 California State, GO Tax Exempt Notes, 3.3% CP (Bayerische Landesbank Girozentrale, Commerzbank AG, Frankfurt, Credit Agricole Indosuez, Credit Local de France, Landesbank Hessen- Thueringen, Frankfurt, Morgan Guaranty Trust Co., New York, State Street Bank and Trust Co., Toronto- Dominion Bank and Westdeutsche Landesbank Girozentrale LIQs) Mandatory Tender 11/8/1999 $ 5,000,000 10,000,000 California State, GO Tax Exempt Notes, 3.4% CP (Bayerische Landesbank Girozentrale, Commerzbank AG, Frankfurt, Credit Agricole Indosuez, Credit Local de France, Landesbank Hessen- Thueringen, Frankfurt, Morgan Guaranty Trust Co., New York, State Street Bank and Trust Co., Toronto- Dominion Bank and Westdeutsche Landesbank Girozentrale LIQs) Mandatory Tender 12/1/1999 10,000,000 10,000,000 California State, GO Tax Exempt Notes, 3.4% CP (Bayerische Landesbank Girozentrale, Commerzbank AG, Frankfurt, Credit Agricole Indosuez, Credit Local de France, Landesbank Hessen- Thueringen, Frankfurt, Morgan Guaranty Trust Co., New York, State Street Bank and Trust Co., Toronto- Dominion Bank and Westdeutsche Landesbank Girozentrale LIQs) Mandatory Tender 11/19/1999 10,000,000 7,860,000 California State, Tender Option Certificates (Series 1998A) Weekly VRDNs (MBIA INS)/(Bank One, N.A. LIQ) 7,860,000 10,000,000 California State, Trust Receipts (Series 1999 FR/RI-A39) Weekly VRDNs (Bank of New York, New York LIQ) 10,000,000 2,800,000 California Statewide Communities Development Authority, (Series A) Weekly VRDNs (Barton Memorial Hospital)/(Banque Nationale de Paris LOC) 2,800,000 4,715,000 California Statewide Communities Development Authority, MERLOT's (Series 1999E) Weekly VRDNs (Sutter Health)/(FSA INS)/(First Union National Bank, Charlotte, NC LIQ) 4,715,000 4,000,000 Clipper Tax-Exempt Trust (California Non-AMT) (Series 1996 Issue A) Weekly VRDNs (California Rural Home Mortgage Finance Authority)/(MBIA INS)/(State Street Bank and Trust Co. LIQ) 4,000,000 19,900,000 2 Clipper Tax-Exempt Trust (California Non-AMT) (Series A) 3.6% TOBs (California HFA)/(MBIA INS)/(State Street Bank and Trust Co. LIQ) Optional Tender 2/24/2000 19,900,000 1,120,000 Dry Creek, CA Joint Elementary School District, 4.1% TRANs, 10/1/2000 1,124,720 3,300,000 East Bay Municipal Utility District, CA, 3.2% CP (Westdeutsche Landesbank Girozentrale LIQ) Mandatory Tender 11/10/1999 3,300,000 4,900,000 East Bay Municipal Utility District, CA, 3.4% CP (Westdeutsche Landesbank Girozentrale LIQ) Mandatory Tender 3/15/2000 4,900,000 6,200,000 East Bay Municipal Utility District, CA, 3.5% CP (Westdeutsche Landesbank Girozentrale LIQ) Mandatory Tender 1/25/2000 6,200,000 7,100,000 Glendale, CA (Series 1984A) Monthly VRDNs (Reliance Development Co., Inc.)/(Barclays Bank PLC, London LOC) 7,100,000 500,000 Golden West Schools, CA Financing Authority (Series A) 4.7% Bonds (MBIA INS), 2/1/2000 501,830 27,380,000 Grand Terrace, CA Community Redevelopment Agency, Trust Receipts (Series 1999 FR/RI-C1) Weekly VRDNs (Mt. Vernon Villas)/(Bank of America, N.A. SWP) 27,380,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 CALIFORNIA-CONTINUED $ 5,000,000 Long Beach, CA, 4.5% TRANs, 10/20/2000 $ 5,051,403 10,000,000 Los Angeles County, CA Metropolitan Transportation Authority, Municipal Securities Trust Receipts (Series 1998- CMC2) Weekly VRDNs (AMBAC INS)/(Chase Manhattan Corp. LIQ) 10,000,000 10,200,000 Los Angeles County, CA (Series A) 4.0% TRANs, 6/30/2000 10,244,364 1,800,000 Los Angeles, CA Department of Water & Power, Trust Receipts (Series 1998 FR/RI-18) Weekly VRDNs (FGIC INS)/(Bank of New York, New York LIQ) 1,800,000 34,500,000 Los Angeles, CA Unified School District (Series FR/RI-A19) Weekly VRDNs (Bank of New York, New York LIQ) 34,500,000 2,600,000 Los Angeles, CA Unified School District, Floater Certificates (Series 1998- 60) Weekly VRDNs (FGIC INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 2,600,000 15,700,000 Monterey Peninsula, CA Water Management District Weekly VRDNs (Wastewater Reclaimation)/(Bank of America, N.A. LOC) 15,700,000 6,000,000 Oceanside, CA Community Development Commission (Series 1985) Weekly VRDNs (Shadow Way Apartments)/(Bank One, Arizona N.A. LOC) 6,000,000 11,900,000 Orange County, CA Housing Authority (Issue 1998 I) Weekly VRDNs (Oasis Martinique)/(Federal National Mortgage Association LOC) 11,900,000 7,800,000 Orange County, CA IDA (Series 1991A) Weekly VRDNs (Casden Lakes LP)/(Federal Home Loan Mortgage Corp. LOC) 7,800,000 8,860,000 Oxnard Harbor District, CA (Series 1995 II) PT-105 Weekly VRDNs (Asset Guaranty INS)/(Merrill Lynch Capital Services, Inc. LIQ) 8,860,000 36,474,339 PBCC LeaseTOPS Trust (California Non-AMT) (Series 1998-1) Weekly VRDNs (AMBAC INS)/(Pitney Bowes Credit Corp. LIQ) 36,474,339 8,787,966 2 PBCC LeaseTOPS Trust (California Non-AMT) (Series 1999-1) 3.8% TOBs (AMBAC INS)/(Pitney Bowes Credit Corp. LIQ), Optional Tender 7/12/2000 8,787,966 920,000 Pasadena, CA Unified School District (Election of 1997, Series B) 6.0% Bonds (FGIC INS), 7/1/2000 935,475 1,000,000 Placer County, CA Office of Education, 4.1% TRANs, 10/1/2000 1,004,214 4,000,000 Ravenswood, CA City School District, 4.0% TRANs, 7/6/2000 4,013,073 9,000,000 Regents of University of California (Series A) 3.2% CP, Mandatory Tender 11/16/1999 9,000,000 2,000,000 Regents of University of California (Series A) 3.5% CP, Mandatory Tender 1/24/2000 2,000,000 2,000,000 Riverside County, CA Public Financing Authority, 3.6% Bonds (Reassessment-Rancho Village)/(AMBAC INS), 9/2/2000 2,000,000 3,455,000 Riverside, CA, Municipal Securities Trust Receipts (Series 1998-CMC5) Weekly VRDNs (AMBAC INS)/(Chase Manhattan Corp. LIQ) 3,455,000 1,000,000 Roseville, CA City School District, 4.1% TRANs, 10/1/2000 1,004,214 2,680,000 Roseville, CA Joint Union High School District, 4.1% TRANs, 10/1/2000 2,691,294 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 CALIFORNIA-CONTINUED $ 800,000 Roseville, CA, Hospital Facilities Authority (Series 1989A) Weekly VRDNs (Toronto-Dominion Bank LOC) $ 800,000 5,000,000 Sacramento, CA (Series 1985B) Weekly VRDNs (Woodbridge - 301 LLC)/(Bank One, Arizona N.A. LOC) 5,000,000 2,940,000 San Francisco, CA Redevelopment Finance Agency (PT-125) Weekly VRDNs (Northridge Cooperative Homes)/(MBIA INS)/(Merrill Lynch Capital Services, Inc. LIQ) 2,940,000 16,500,000 San Francisco, CA Redevelopment Finance Agency (Series B1) Weekly VRDNs (Fillmore Center)/(Credit Suisse First Boston LOC) 16,500,000 3,680,000 San Francisco, CA Redevelopment Finance Agency, CDC Municipal Products, Inc. (Series 1997T) Weekly VRDNs (Northridge Cooperative Homes)/(MBIA INS)/(CDC Municipal Products, Inc. LIQ) 3,680,000 15,000,000 Southern California Metropolitan Water District, CA, Commercial Paper Notes (Series B) 3.4% CP (Westdeutsche Landesbank Girozentrale LIQ), Mandatory Tender 12/1/1999 15,000,000 5,000,000 Southern California Metropolitan Water District, CA, PUTTERs (Series 116) Weekly VRDNs (Morgan Guaranty Trust Co., New York LIQ) 5,000,000 12,295,000 Stanislaus County, CA Office of Education, 4.0% TRANs, 8/1/2000 12,340,297 230,000 Stockton, CA, (Series 1993) Weekly VRDNs (La Quinta Inns, Inc.)/(Bank of America, N.A. LOC) 230,000 TOTAL 479,894,189 PUERTO RICO-13.4% 4,091,320 Commonwealth of Puerto Rico Municipal Revenues Collection Center, 1997A LeaseTOPS Trust Weekly VRDNs (ABN AMRO Bank N.V., Amsterdam LIQ)/(State Street Bank and Trust Co. LOC) 4,091,320 15,000,000 Commonwealth of Puerto Rico (Series 1992A) PT-140 Weekly VRDNs (FSA INS)/(Commerzbank AG, Frankfurt LIQ) 15,000,000 16,750,000 Commonwealth of Puerto Rico, Floating Rate Trust Receipts (Series 1997) Weekly VRDNs (Commerzbank AG, Frankfurt LIQ)/(Commerzbank AG, Frankfurt LOC) 16,750,000 3,790,000 Commonwealth of Puerto Rico, Municipal Securities Trust Receipts (Series 1998-CMC4) Weekly VRDNs (MBIA INS)/(Chase Manhattan Corp. LIQ) 3,790,000 4,935,000 2 Puerto Rico Commonwealth Infrastructure Financing Authority, Floater Certificates (Series 1998- 86) 3.2% TOBs (AMBAC INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ), Optional Tender 1/20/2000 4,935,000 4,072,000 Puerto Rico Government Development Bank (GDB) 3.3% CP, Mandatory Tender 11/10/1999 4,072,000 3,550,000 Puerto Rico Government Development Bank (GDB) 3.4% CP, Mandatory Tender 2/1/2000 3,550,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PUERTO RICO-CONTINUED $ 10,000,000 Puerto Rico Government Development Bank (GDB) 3.4% CP, Mandatory Tender 2/8/2000 $ 10,000,000 6,000,000 Puerto Rico Government Development Bank (GDB) 3.5% CP, Mandatory Tender 12/14/1999 6,000,000 2,600,000 Puerto Rico Government Development Bank (GDB) 3.5% CP, Mandatory Tender 2/1/2000 2,600,000 1,115,000 Puerto Rico Industrial, Medical & Environmental PCA (1983 Series A) 2.9% TOBs (Merck & Co., Inc.), Optional Tender 12/1/1999 1,115,000 2,665,000 2 Puerto Rico Public Finance Corp., PA-579, 3.5% TOBs (AMBAC INS)/(Merrill Lynch Capital Services, Inc. LIQ), Optional Tender 1/27/2000 2,665,000 TOTAL 74,568,320 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 554,462,509
1 The Fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The Fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Percentage Based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER 100.00% 0.00%
2 Denotes a restricted security which is subject to restrictions on resale under Federal Securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $53,978,966 which represents 9.7% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($557,183,944) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation AMT -Alternative Minimum Tax CP -Commercial Paper FGIC -Financial Guaranty Insurance Company FSA - -Financial Security Assurance GO -General Obligation HFA -Housing Finance Authority INS -Insured LIQ -Liquidity Agreement LLC -Limited Liability Corporation LOC -Letter of Credit LP -Limited Partnership MBIA -Municipal Bond Investors Assurance PCA -Pollution Control Authority PCR -Pollution Control Revenue PCFA -Pollution Control Finance Authority PLC -Public Limited Company TOBs -Tender Option Bonds TRANs -Tax and Revenue Anticipation Notes VRDNs - -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 554,462,509 Cash 606,677 Income receivable 2,771,915 Receivable for shares sold 53,467 TOTAL ASSETS 557,894,568 LIABILITIES: Payable for shares redeemed $ 78,624 Income distribution payable 468,102 Accrued expenses 163,898 TOTAL LIABILITIES 710,624 Net assets for 557,183,944 shares outstanding $ 557,183,944 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SERVICE SHARES: $482,813,498 / 482,813,498 shares outstanding $1.00 INSTITUTIONAL SHARES: $74,370,446 / 74,370,446 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 15,867,328 EXPENSES: Investment advisory fee $ 2,488,373 Administrative personnel and services fee 375,247 Custodian fees 29,429 Transfer and dividend disbursing agent fees and expenses 105,049 Directors'/Trustees' fees 3,372 Auditing fees 12,667 Legal fees 85,029 Portfolio accounting fees 91,016 Shareholder services fee- Institutional Service Shares 1,086,577 Shareholder services fee- Institutional Shares 157,608 Share registration costs 74,049 Printing and postage 18,655 Insurance premiums 31,550 Miscellaneous 5,500 TOTAL EXPENSES 4,564,121 WAIVERS: Waiver of investment advisory fee $ (2,053,851) Waiver of shareholder services fee-Institutional Shares (157,608) TOTAL WAIVERS (2,211,459) Net expenses 2,352,662 Net investment income $ 13,514,666
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 13,514,666 $ 10,607,951 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Service Shares (11,666,323) (9,261,806) Institutional Shares (1,848,343) (1,346,145) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (13,514,666) (10,607,951) SHARE TRANSACTIONS: Proceeds from sale of shares 2,051,500,217 1,401,854,420 Net asset value of shares issued to shareholders in payment of distributions declared 8,375,448 5,742,314 Cost of shares redeemed (1,907,468,103) (1,279,540,519) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 152,407,562 128,056,215 Change in net assets 152,407,562 128,056,215 NET ASSETS: Beginning of period 404,776,382 276,720,167 End of period $ 557,183,944 $ 404,776,382
See Notes which are an integral part of the Financial Statements Financial Highlights - Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.02 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.02) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 2.97% 3.31% 3.44% 2.24% RATIOS TO AVERAGE NET ASSETS: Expenses 3 0.91% 0.92% 0.95% 1.10% 4 Net investment income 3 2.27% 2.58% 2.71% 2.43% 4 Expenses (after waivers) 0.25% 0.25% 0.21% 0.20% 4 Net investment income (after waivers) 2.93% 3.25% 3.45% 3.33% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $74,370 $41,574 $41,956 $20,089
1 Reflects operations for the period from March 4, 1996 (date of initial public investment) to October 31, 1996. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Financial Highlights - Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 Net realized loss on investment - - - - (0.01) TOTAL FROM INVESTMENT OPERATIONS 0.03 0.03 0.03 0.03 0.02 CAPITAL CONTRIBUTIONS - - - - 0.01 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.71% 3.05% 3.19% 3.22% 3.37% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.91% 0.93% 0.95% 1.11% 1.09% Net investment income 2 2.27% 2.56% 2.64% 2.55% 2.83% Expenses (after waivers) 0.50% 0.50% 0.46% 0.49% 0.59% Net investment income (after waivers) 2.68% 2.99% 3.13% 3.17% 3.33% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $482,813 $363,202 $234,764 $132,159 $96,534
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of California Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Service Shares and Institutional Shares. The investment objective of the Fund is current income exempt from federal income tax and the personal income taxes imposed by the State of California consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees (the "Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 338,179,396 117,311,375 Shares issued to shareholders in Payment of distributions declared 38,331 11,638 Shares redeemed (305,421,476) (117,704,612) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS 32,796,251 (381,599) YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 1,713,320,821 1,284,543,045 Shares issued to shareholders in payment of distributions declared 8,337,117 5,730,676 Shares redeemed (1,602,046,627) (1,161,835,907) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS 119,611,311 128,437,814 NET CHANGE RESULTING FROM SHARE TRANSACTIONS 152,407,562 128,056,215
At October 31, 1999, capital paid-in aggregated $557,183,944. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $688,210,390 and $572,609,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 57.9% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 13.9% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Board of Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998, contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF CALIFORNIA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the California Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the California Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President EDWARD C. GONZALES Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT California Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated California Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229766 Cusip 314229675 G00655-01 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Connecticut Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. The fund is a convenient way to keep your ready cash pursuing double tax-free income - free from federal regular income tax and Connecticut dividend and interest income tax- through a portfolio concentrated in high-quality, short-term Connecticut municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share. The fund's net assets reached $279.1 million at the end of the reporting period. Thank you for relying on Connecticut Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Michael Sirianni, Jr., Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999, with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the period was approximately 63 days. The Trust remained in a 50 to 60-day average maturity range over the reporting period, and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once a average maturity range is targeted, the portfolio maximizes performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as treasury securities. This portfolio structure continues to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first half of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 102.2% 1 CONNECTICUT-89.8% $ 2,713,000 Bethel, CT, 4.00% BANs, 7/7/2000 $ 2,723,708 5,000,000 Bridgeport, CT, 3.95% BANs, 1/18/2000 5,000,000 9,175,000 Connecticut Development Authority Health Care Revenue Weekly VRDNs (Corporation for Independent Living)/(Chase Manhattan Bank N.A., New York LOC) 9,175,000 2,565,000 Connecticut Development Authority Health Care Revenue, (Series 1999) Weekly VRDNs (Corporation for Independent Living)/(Credit Local de France LOC) 2,565,000 1,680,000 Connecticut Development Authority Weekly VRDNs (Banta Associates)/(HSBC Bank USA LOC) 1,680,000 878,800 Connecticut Development Authority Weekly VRDNs (RSA Corp.)/(Barclays Bank PLC, London LOC) 878,800 10,500,000 Connecticut Development Authority, (Series 1996A) Weekly VRDNs (Connecticut Light & Power Co.)/(AMBAC INS)/(Societe Generale, Paris LIQ) 10,500,000 2,355,000 Connecticut Development Authority, (Series 1997) Weekly VRDNs (Porcelen Ltd., CT LLC)/(Firstar Bank, N.A., Cincinnati LOC) 2,355,000 5,700,000 Connecticut Development Authority, (Series 1997A) Weekly VRDNs (Bradley Airport Hotel Project)/(KBC Bank N.V. LOC) 5,700,000 1,485,000 Connecticut Development Authority, (Series 1999) Weekly VRDNs (Pierce Memorial Baptist Home, Inc.)/(Lasalle National Bank, Chicago LOC) 1,485,000 3,500,000 Connecticut Development Authority, (Series 1999), 3.55% CP (New England Power Co.), Mandatory Tender 11/9/1999 3,500,000 26,594,000 Connecticut Development Authority, Trust Receipts (Series 1998 C-6) Reg D Weekly VRDNs (Exeter Energy)/(Bank of America, N.A. SWP) 26,594,000 13,495,000 2 Connecticut State Airport, Trust Receipts (Series 1997A), 3.50% TOBs (Bradley International Airport)/(FGIC INS)/(National Westminster Bank, PLC, London LIQ), Optional Tender 11/1/1999 13,495,000 4,845,000 2 Connecticut State Clean Water Fund, (Series 1999) Floats PA-547R, TOBs (Merrill Lynch Capital Services, Inc. LIQ) 7/15/2012 4,845,000 1,400,000 Connecticut State HEFA, (1999 Series U-1) Weekly VRDNs (Yale University) 1,400,000 3,200,000 Connecticut State HEFA, (1999 Series U-2) Weekly VRDNs (Yale University) 3,200,000 8,400,000 Connecticut State HEFA, (Series 1999B), 3.65% TOBs (Ascension Health Credit Group), Mandatory Tender 1/26/2000 8,400,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 CONNECTICUT-CONTINUED $ 3,000,000 Connecticut State HEFA, (Series A) Weekly VRDNs (Forman School Issue)/(National Westminster Bank, PLC, London LOC) $ 3,000,000 18,000,000 Connecticut State HEFA, (Series B) Weekly VRDNs (Edgehill)/(Paribas, Paris LOC) 18,000,000 1,715,000 Connecticut State HEFA, (Series C) Weekly VRDNs (Charlotte Hungerfield Hospital)/(Bank of Boston, Connecticut LOC) 1,715,000 2,500,000 Connecticut State HEFA, (Series J) Weekly VRDNs (Hospital of Saint Raphael)/(KBC Bank N.V. LOC) 2,500,000 1,900,000 Connecticut State HEFA, (Series K) Weekly VRDNs (Hospital of Saint Raphael)/(KBC Bank N.V. LOC) 1,900,000 1,000,000 Connecticut State HEFA, Revenue Bonds (Series A) Weekly VRDNs (Pomfret School Issue)/(Credit Local de France LOC) 1,000,000 1,000,000 Connecticut State HEFA, (Series A) Weekly VRDNs (Sharon Hospital)/(BankBoston, N.A. LOC) 1,000,000 6,575,000 Connecticut State HEFA, (Series S) 3.60% CP (Yale University), Mandatory Tender 2/15/2000 6,575,000 3,865,000 Connecticut State HFA, (Series 1996) P-Floats PT- 81 Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 3,865,000 1,075,000 Connecticut State HFA, (Series 1990C), 3.60% CP (Morgan Guaranty Trust Co., New York LIQ), Mandatory Tender 11/8/1999 1,075,000 7,325,000 Connecticut State HFA, (Series 1990C), 3.65% CP (Morgan Guaranty Trust Co., New York LIQ), Mandatory Tender 3/10/2000 7,325,000 3,245,000 Connecticut State HFA, (Series 1990D), 3.55% CP (Morgan Guaranty Trust Co., New York LIQ), Mandatory Tender 12/1/1999 3,245,000 7,315,000 Connecticut State HFA, (Series A) Weekly VRDNs (Elm Haven Rental Limited Partnership I)/(Fleet National Bank, Springfield, MA LOC) 7,315,000 11,570,000 Connecticut State HFA, (Series 1997) P-Floats PT- 1003 Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 11,570,000 9,745,000 2 Connecticut State HFA, Variable Rate Certificates (Series 1998S), 3.70% TOBs (Bank of America, N.A. LIQ), Optional Tender 8/17/2000 9,745,000 2,300,000 Connecticut State Resource Recovery Authority, (Series A) 5.60% Bonds (Connecticut State GTD), 11/15/1999 2,302,198 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 CONNECTICUT-CONTINUED $ 4,325,000 Connecticut State Special Assessment Unemployment Compensation Advance Fund, (Series A) 5.50% Bonds (AMBAC INS), 11/15/2000 $ 4,396,689 2,000,000 Connecticut State Transportation Infrastructure Authority, (Series 1990) Weekly VRDNs (Commerzbank AG, Frankfurt LOC) 2,000,000 2,000,000 Connecticut State Transportation Infrastructure Authority, (Series 1995A) 5.10% Bonds (FGIC INS), 6/1/2000 2,020,940 2,125,000 Connecticut State Transportation Infrastructure Authority, Floater Certificates (Series 1998-52) Weekly VRDNs (FSA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 2,125,000 8,400,000 Connecticut State, Special Assessment Second Injury Fund, 3.60% CP (Caisse Nationale De Credit Agricole, Paris and Credit Communal de Belgique, Brussles LIQs), Mandatory Tender 1/26/2000 8,400,000 10,000,000 Connecticut State, Special Assessment Unemployment Compensation Advance Fund, Revenue Bonds (Series 1993C), 3.38% TOBs (FGIC INS)/(FGIC Securities Purchase, Inc. LIQ), Optional Tender 7/1/2000 10,000,000 8,100,000 Coventry, CT, 3.25% BANs, 12/14/1999 8,103,244 3,650,000 East Hartford, CT, 3.10% BANs, 1/20/2000 3,651,548 3,900,000 Hartford, CT Redevelopment Authority Weekly VRDNs (Underwood Towers)/(FSA INS)/(Societe Generale, Paris LIQ) 3,900,000 2,300,000 New Britain, CT, (Series 1999) Weekly VRDNs (AMBAC INS)/(Bank of Nova Scotia, Toronto LIQ) 2,300,000 1,400,000 New Haven, CT Weekly VRDNs (Starter Sportswear)/(Fleet Bank N.A. LOC) 1,400,000 4,000,000 New Haven, CT, 4.00% BANs, 7/12/2000 4,010,642 2,050,000 New Haven, CT, UT GO, 5.00% Bonds (FGIC INS), 2/15/2000 2,062,226 2,870,000 Plymouth, CT, 4.25% BANs, 10/18/2000 2,883,291 1,800,000 Shelton, CT Housing Authority, (Series 1998) Weekly VRDNs (Crosby Commons)/(First Union National Bank, Charlotte, NC LOC) 1,800,000 5,850,000 Somers, CT, 3.60% BANs, 7/14/2000 5,859,889 TOTAL 250,542,175 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PUERTO RICO-12.4% $ 14,178,789 Commonwealth of Puerto Rico Municipal Revenues Collection Center, (Series 1997A) LeaseTOPS Trust Weekly VRDNs (ABN AMRO Bank N.V., Amsterdam LIQ)/(State Street Bank and Trust Co. LOC) $ 14,178,790 7,500,000 Commonwealth of Puerto Rico, Municipal Securities Trust Receipts, (Series 1998-CMC4) Weekly VRDNs (MBIA INS)/(Chase Manhattan Corp. LIQ) 7,500,000 5,000,000 2 Puerto Rico Commonwealth Infrastructure Financing Authority, Floater Certificates (Series 1999- 86), TOBs (AMBAC INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ), Optional Tender 1/20/2000 5,000,000 8,000,000 Puerto Rico Government Development Bank (GDB), 3.30% CP, Mandatory Tender 11/10/1999 8,000,000 TOTAL 34,678,790 TOTAL SHORT-TERM MUNICIPALS 285,220,965 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 285,220,965
Securities that are subject to alternative minimum tax represent 27.9% of the portfolio as calculated based upon total portfolio market value. 1 The Fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. 2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amount to $33,085,000, which represents 11.9% of net assets. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Percentage Based on Total Market Value
FIRST TIER SECOND TIER 98.25% 1.75%
3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($279,134,626) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation BANs -Bond Anticipation Notes CP -Commercial Paper FGIC -Financial Guaranty Insurance Company FSA - -Financial Security Assurance GO -General Obligation GTD -Guaranteed HEFA - -Health and Education Facilities Authority HFA -Housing Finance Authority INS - -Insured LIQ -Liquidity Agreement LLC -Limited Liability Corporation LOC -Letter of Credit MBIA -Municipal Bond Investors Assurance PLC -Public Limited Company TOBs -Tender Option Bonds UT -Unlimited Tax VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 285,220,965 Cash 500,494 Income receivable 2,252,743 Receivable for shares sold 3,617 Prepaid expenses 6,865 TOTAL ASSETS 287,984,684 LIABILITIES: Payable for investments purchased $ 8,400,000 Payable for shares redeemed 8,387 Income distribution payable 379,593 Accrued expenses 62,078 TOTAL LIABILITIES 8,850,058 Net assets for 279,134,626 shares outstanding $ 279,134,626 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE $279,134,626 / 279,134,626 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 10,273,558 EXPENSES: Investment advisory fee $ 1,600,781 Administrative personnel and services fee 241,398 Custodian fees 18,429 Transfer and dividend disbursing agent fees and expenses 88,892 Directors'/Trustees' fees 3,690 Auditing fees 12,064 Legal fees 8,946 Portfolio accounting fees 66,225 Shareholder services fee 800,391 Share registration costs 9,479 Printing and postage 16,035 Insurance premiums 26,408 Miscellaneous 4,793 TOTAL EXPENSES 2,897,531 WAIVERS: Waiver of investment advisory fee $ (610,335) Waiver of shareholder services fee (352,172) TOTAL WAIVERS (962,507) Net expenses 1,935,024 Net investment income $ 8,338,534
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 8,338,534 $ 9,525,808 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income (8,338,534) (9,525,808) SHARE TRANSACTIONS: Proceeds from sale of shares 936,586,293 1,057,554,443 Net asset value of shares issued to shareholders in payment of distributions declared 2,685,053 3,189,470 Cost of shares redeemed (999,703,365) (992,493,610) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (60,432,019) 68,250,303 Change in net assets (60,432,019) 68,250,303 NET ASSETS: Beginning of period 339,566,645 271,316,342 End of period $ 279,134,626 $ 339,566,645
See Notes which are an integral part of the Financial Statements Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.64% 2.98% 3.01% 3.02% 3.31% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.90% 0.89% 0.91% 0.92% 0.90% Net investment income 2 2.30% 2.64% 2.66% 2.65% 2.96% Expenses (after waivers) 0.60% 0.60% 0.60% 0.60% 0.60% Net investment income (after waivers) 2.60% 2.93% 2.97% 2.97% 3.26% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $279,135 $339,567 $271,316 $227,089 $184,718
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Connecticut Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is current income exempt from federal regular income tax and Connecticut dividend and interest income tax consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees (the "Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). At October 31, 1999, capital paid-in aggregated $279,134,626. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 Shares sold 936,586,293 1,057,554,443 Shares issued to shareholders in payment of distributions declared 2,685,053 3,189,470 Shares redeemed (999,703,365) (992,493,610) NET CHANGE RESULTING FROM SHARE TRANSACTIONS (60,432,019) 68,250,303
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $407,599,762 and $464,450,000 respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 51.2% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 9.9% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304 (a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in the paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF CONNECTICUT MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Connecticut Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 29, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian and brokers or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Connecticut Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Connecticut Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Connecticut Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229105 G00825-01 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Florida Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares and Cash II Shares. The fund is a convenient way to keep your cash pursuing double tax-free income-free from federal regular income tax and Florida intangibles tax- through a portfolio concentrated in high-quality, short-term Florida municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends of $0.03 per share for Institutional Shares and $0.02 per share for Cash II Shares. The fund's net assets totaled $353.8 million at the end of the reporting period. Thank you for relying on Florida Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the reporting period was approximately 42 days. At the end of 1998, the fund's average maturity declined to as low as 19 days in late December as assets in the fund more than quadrupled from the start of the period. Outflows in January and February moved the maturity to over 40 days in February, and it remained mostly in a 35-45 day range over the remainder of the reporting period. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range was targeted taking into account Federal Reserve monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first half of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.6% 1 ALABAMA-0.8% $ 3,000,000 Hoover, AL Board of Education, (Series 1999A), 3.80% BANs, 8/1/2000 $ 3,000,000 ARKANSAS-0.5% 1,700,000 Hope, AR, Solid Waste Disposal Revenue Bonds (Series 1994), 4.15% CP (Temple-Inland Forest Products Corp.)/(Temple- Inland, Inc. GTD), Mandatory Tender 11/10/1999 1,700,000 FLORIDA-81.9% 5,000,000 2 ABN AMRO MuniTOPS Certificates Trust (Florida Non-AMT) (Series 1998-8) Weekly VRDNs (Dade County, FL Water & Sewer System)/(FGIC INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) 5,000,000 8,000,000 2 ABN AMRO MuniTOPS Certificates Trust (Florida Non-AMT) (Series 1999-11), 3.85% TOBs (Tampa Bay Water Utility System, FL)/(FGIC INS)/(ABN AMRO Bank N.V., Amsterdam LIQ), Optional Tender 3/8/2000 8,000,000 1,400,000 Alachua County, FL Health Facilities Authority, Health Facilities Revenue Bonds (Series 1996B) Weekly VRDNs (Shands Teaching Hospital and Clinics, Inc.)/ (MBIA INS)/(SunTrust Bank, Central Florida LIQ) 1,400,000 4,000,000 Alachua County, FL IDRBs (Series 1997) Weekly VRDNs (Florida Rock Industries, Inc.)/(Bank of America, N.A. LOC) 4,000,000 1,130,000 Broward County, FL IDRB (Series 1993) Weekly VRDNs (American Whirlpool Products Corp. Project)/(Bank of America, N.A. LOC) 1,130,000 1,000,000 Broward County, FL IDRBs (Series 1997) Weekly VRDNs (Fast Real Estate Partners Ltd.)/(SunTrust Bank, Central Florida LOC) 1,000,000 4,000,000 Clay County, FL HFA, Variable Rate Certificates (Series 1999O) Weekly VRDNs (GNMA COL)/(Bank of America, N.A. LIQ) 4,000,000 6,510,000 Clipper, FL Tax-Exempt Trust, (Series 1996-3B) Class A Certificates of Participation, Weekly VRDNs (Escambia County, FL HFA)/(State Street Bank and Trust Co. LOC) 6,510,000 1,870,000 Coral Springs, FL (Series 1996) Weekly VRDNs (Royal Plastics Group Ltd.)/ (SunTrust Bank, Atlanta LOC) 1,870,000 3,620,000 Dade County, FL IDA Weekly VRDNs (Futernick Associates, Inc.)/(First Union National Bank, Charlotte, N.C. LOC) 3,620,000 1,300,000 Dade County, FL IDA, (Series 1985D) Weekly VRDNs (Dolphins Stadium)/ (Societe Generale, Paris LOC) 1,300,000 1,200,000 Dade County, FL IDA, (Series 1993) Daily VRDNs, Exempt Facilities Revenue Refunding Bonds (Florida Power & Light Co.) 1,200,000 2,000,000 Dade County, FL IDA, IDRBs (Series 1996A) Weekly VRDNs (U.S. Holdings, Inc.)/(First Union National Bank, Charlotte, N.C. LOC) 2,000,000 8,300,000 Dade County, FL Water & Sewer System Weekly VRDNs (FGIC INS)/ (Commerzbank AG, Frankfurt LIQ) 8,300,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 FLORIDA-CONTINUED $ 840,000 Dade County, FL Airport Revenue Bonds (Series A) Weekly VRDNs (Morgan Guaranty Trust Co., New York LOC) $ 840,000 5,925,000 Escambia County, FL HFA, PT 1017 Weekly VRDNs (GNMA COL)/(Merrill Lynch Capital Services, Inc. LIQ) 5,925,000 5,000,000 2 Escambia County, FL HFA, PT-121(GNMA COL)/(Banco Santander Central Hispano, S.A. LIQ) 5,000,000 4,000,000 Escambia County, FL HFA, Variable Rate Certificates, (Series 1997D) Weekly VRDNs (GNMA COL)/(Bank of America, N.A. LIQ) 4,000,000 50,000 Eustis Health Facilities Authority, FL (Series 1985) Weekly VRDNs (Waterman Medical Center)/(SunTrust Bank, Central Florida LOC) 50,000 4,525,000 Florida HFA, Homeowner Mortgage Revenue Bonds, PT-88 (Series 1996-3) Weekly VRDNs (Banco Santander Central Hispano, S.A. LIQ) 4,525,000 6,570,000 Florida HFA, Multifamily Housing Revenue Bonds (1995 Series M) Weekly VRDNs (Bainbridge Club Apartments Project)/(PNC Bank, N.A. LOC) 6,570,000 4,415,000 Florida HFA, Trust Receipts, (Series 1998-12) FRN Weekly VRDNs (MBIA INS)/(Bank of New York, New York LIQ) 4,415,000 5,645,000 Florida Housing Finance Corp., MERLOTS (Series 1998 B) Weekly VRDNs (MBIA INS)/(First Union National Bank, Charlotte, N.C. LIQ) 5,645,000 8,100,000 Gainesville, FL Utilities Systems, (Series C), 3.80% CP (Bank of America, N.A. and SunTrust Bank, Atlanta LIQs), Mandatory Tender 1/27/2000 8,100,000 4,100,000 Greater Orlando FL Aviation Authority, Adjustable Rate (Series 1997), 3.35% TOBs (Signature Flight Support Corp.)/(Bayerische Landesbank Girozentrale LOC), Optional Tender 12/1/1999 4,100,000 14,135,000 Highlands County, FL Health Facilities, Variable Rate Demand Revenue Bonds (Series 1996A) Weekly VRDNs (Adventist Health System)/(SunTrust Bank, Central Florida LOC) 14,135,000 5,995,000 2 Hillsborough County, FL HFA, PT-259, 3.05% TOBs (GNMA COL)/(Commerzbank AG, Frankfurt LIQ), Optional Tender 1/13/2000 5,995,000 4,500,000 Hillsborough County, FL IDA Weekly VRDNs (Ringhager Equipment Co.)/ (SunTrust Bank, Atlanta LOC) 4,500,000 1,305,000 Hillsborough County, FL IDA, IDRBs (Series 1996) Weekly VRDNs (VIGO Importing Company Project)/(Bank of America, N.A. LOC) 1,305,000 895,000 Hillsborough County, FL IDA, Variable Rate Demand IRDBs (Series 1996) Weekly VRDNs (Trident Yacht Building Partnership Project)/(First Union National Bank, Charlotte, N.C. LOC) 895,000 3,900,000 Hillsborough County, FL IDA, Variable Rate IDRBs (Series 1998) Weekly VRDNs (SIFCO Industries, Inc.)/(National City Bank, Ohio LOC) 3,900,000 4,080,000 Indian River County, FL IDRBs (Series 1997) Weekly VRDNs (Ocean Spray Cranberries, Inc.)/(Wachovia Bank of NC, N.A. LOC) 4,080,000 28,100,000 Jacksonville, FL Electric Authority, (Series E), 3.65% CP (Landesbank Hessen-Thueringen, Frankfurt LIQ), Mandatory Tender 12/9/1999 28,100,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 FLORIDA-CONTINUED $ 6,650,000 Jacksonville, FL Electric Authority, (Series C-1), 3.65% CP (Morgan Guaranty Trust Co., New York LIQ), Mandatory Tender 1/10/2000 $ 6,650,000 5,500,000 Jacksonville, FL IDA, (Series 1996) Weekly VRDNs (Portion PAC, Inc.)/ (Heinz (H.J.) Co. GTD) 5,500,000 400,000 Jacksonville, FL Weekly VRDNs (Metal Sales)/(National City Bank, Kentucky LOC) 400,000 2,375,000 Lee County, FL HFA, (Series 1999A-3), 3.15% BANs, 11/15/1999 2,375,000 3,200,000 Lee County, FL IDA, IDRB (Series 1994) Weekly VRDNs (Baader North America Corp.)/(Deutsche Bank AG LOC) 3,200,000 1,500,000 Lynn Haven, FL (Series 1998A) Weekly VRDNs (Merrick Industries, Inc.)/(Bank One, Ohio, N.A. LOC) 1,500,000 1,300,000 Manatee County, FL HFA, Weekly Adjustable/Fixed Rate Multifamily Housing Revenue Refunding Bonds (1990 Series A) Weekly VRDNs (Harbour Pointe)/ (HSBC Bank USA LOC) 1,300,000 5,400,000 Manatee County, FL (Series 1998A) Project B Weekly VRDNs (CFI Manufacturing, Inc. Project)/(Huntington National Bank, Columbus, OH LOC) 5,400,000 2,700,000 Manatee County, FL Variable/Fixed Rate IDRBs (Series 1998) Weekly VRDNs (Mader Electric, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 2,700,000 2,400,000 Martin County, FL IDA, Tender Industrial Revenue Bonds (Series 1986) Weekly VRDNs (Tampa Farm Service, Inc. Project)/(SunTrust Bank, Central Florida LOC) 2,400,000 3,900,000 Martin County, FL, (Series 1994) Daily VRDNs (Florida Power & Light Co.) 3,900,000 1,800,000 Okeechobee County, FL (Series 1992) Weekly VRDNs (Morgan Guaranty Trust Co., New York LOC) 1,800,000 3,750,000 Orange County, FL HFA, (Series 1999 A-3), 3.40% TOBs, Mandatory Tender 6/1/2000 3,750,000 5,000,000 Orange County, FL HFA, (Series 1997A) Weekly VRDNs (Regal Pointe Apartments Project)/(Bank of America, N.A. LOC) 5,000,000 5,000,000 Orange County, FL HFA, (Series 1998 D) Weekly VRDNs (Falcon Trace Apartments)/(Amsouth Bank N.A., Birmingham LOC) 5,000,000 2,200,000 Orange County, FL HFA, Variable Rate Certificates (Series 1997D) Weekly VRDNs (GNMA COL)/(Bank of America, N.A. LIQ) 2,200,000 13,400,000 Osceola County, FL HFA, Multifamily Housing Revenue Bonds (Series 1998A) Weekly VRDNs (Arrow Ridge Apartments)/(Amsouth Bank N.A., Birmingham LOC) 13,400,000 2,895,000 Palm Beach County, FL (Series 1985) Daily VRDNs (AMBAC INS)/(First Union National Bank, Charlotte, NC LIQ) 2,895,000 1,000,000 Pasco County, FL Solid Waste Authority, 5.25% Bonds (AMBAC INS), 4/1/2000 1,008,084 255,000 Pinellas County Industry Council, FL Weekly VRDNs (Loulourgas Properties)/ (First Union National Bank, Charlotte, NC LOC) 255,000 3,500,000 Pinellas County Industry Council, FL IDRB (Series 1994) Weekly VRDNs (Genca Corporation Project)/(PNC Bank, N.A. LOC) 3,500,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 FLORIDA-CONTINUED $ 2,258,000 Pinellas County Industry Council, FL IDRB (Series 1995) Weekly VRDNs (ATR International Inc., Project)/(First Union National Bank, Charlotte, N.C. LOC) $ 2,258,000 5,700,000 Pinellas County, FL Health Facility Authority Daily VRDNs (Chase Manhattan Bank N.A., New York LOC) 5,700,000 395,000 Pinellas County, FL Health Facility Authority, SFM Revenue Bonds Floats (Series PA-92) Weekly VRDNs (GNMA COL)/(Merrill Lynch Capital Services, Inc. LIQ) 395,000 7,950,000 Putnam County, FL Development Authority, PCR Bonds (Series 1984 H) Weekly VRDNs (Seminole Electric Cooperative, Inc. (National Rural Utilities Cooperative Finance Corp. LOC) 7,950,000 1,500,000 St. Lucie County, FL PCR Daily VRDNs (Florida Power & Light Co.) 1,500,000 1,000,000 Sumter County, FL IDA Weekly VRDNs (Great Southern Wood Preserving Co.)/(SouthTrust Bank of Alabama, Birmingham LOC) 1,000,000 16,990,000 Sunshine State Governmental Finance Commission, FL 3.75% CP (AMBAC INS)/(Toronto- Dominion Bank and UBS AG LIQs), Mandatory Tender 1/21/2000 16,990,000 7,880,000 Sunshine State Governmental Finance Commission, FL 3.80% CP (AMBAC INS)/(Toronto- Dominion Bank and UBS AG LIQs), Mandatory Tender 1/18/2000 7,880,000 3,300,000 Tamarac, FL IDRB (Series 1995) Weekly VRDNs (Arch Aluminum & Glass Co., Inc. Project)/(Mellon Bank N.A., Pittsburgh LOC) 3,300,000 3,400,000 Tampa, FL Occupational License Tax Bonds (Series 1996A) Weekly VRDNs (FGIC INS)/(FGIC Securities Purchase, Inc. LIQ) 3,400,000 1,425,000 Volusia County, FL IDA Weekly VRDNs (Crane Cams)/(Deutsche Bank AG LOC) 1,425,000 2,500,000 Wakulla County, FL IDRB Weekly VRDNs (Winco Utilities, Inc. Project)/(Bank of America, N.A. LOC) 2,500,000 TOTAL 289,841,084 GEORGIA-3.6% 775,000 Crisp County, GA Development Authority, (Series B), 4.35% TOBs (Masonite Corp.)/(Internat ional Paper Co. GTD), Optional Tender 9/1/2000 775,000 5,000,000 Glynn County, GA 3.61% TANs, 12/31/1999 5,000,884 6,900,000 Rockdale County, GA 3.48% TANs, 12/31/1999 6,900,874 TOTAL 12,676,758 INDIANA-1.4% 5,000,000 Huntington County, IN Community School Corp., Tax Anticipation Warrants, 3.35% Bonds, 12/31/1999 5,001,598 MULTI STATE-7.4% 26,000,000 Charter Mac Floater Certificates Trust I, (First Tranche) Weekly VRDNs (MBIA INS)/(Bayerische Landesbank Girozentrale, Commerzbank AG, Frankfurt and Credit Communal de Belgique, Brussles LIQs) 26,000,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW HAMPSHIRE-0.5% $ 1,741,000 Dover, NH, 4.10% BANs, 12/28/1999 $ 1,742,067 TEXAS-0.3% 1,000,000 Angelina and Neches River Authority, Texas, Solid Waste Disposal Revenue Bonds (Series 1993), 4.40% CP (Temple-Eastex, Inc.)/(Temple-Inland, Inc. GTD), Mandatory Tender 12/8/1999 1,000,000 WISCONSIN-3.2% 4,800,000 Chippewa Falls WI, Unified School District, 4.25% TRANs, 9/29/2000 4,812,996 3,500,000 Lodi, WI School District, 4.20% TRANs, 10/30/2000 3,510,707 3,100,000 Neenah, WI Joint School District, 4.02% TRANs, 8/30/2000 3,101,733 TOTAL 11,425,436 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 352,386,943
Securities that are subject to alternative minimum tax represent 48.7% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, F-1+, F-1 and F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value
FIRST TIER SECOND TIER 99.01% 0.99%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $23,995,000, which represents 6.8% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($353,767,060) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation AMT -Alternative Minimum Tax BANs -Bond Anticipation Notes COL -Collateralized CP -Commercial Paper FGIC - -Financial Guaranty Insurance Company FRN -Floating Rate Note GNMA -Government National Mortgage Association GTD -Guaranteed HFA -Housing Finance Authority IDA - -Industrial Development Authority IDRBs -Industrial Development Revenue Bond INS - -Insured LIQ -Liquidity Agreement LOC -Letter of Credit MBIA -Municipal Bond Investors Assurance MERLOTS -Municipal Exempt Receipts - Liquidity Optional Tender Series PAC - -Planned Amortization Class PCR -Pollution Control Revenue SFM -Single Family Mortgage TANs -Tax Anticipation Notes TOBs -Tender Option Bonds TRANs -Tax and Revenue Anticipation Notes VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 352,386,943 Cash 587,694 Income receivable 1,378,625 Receivable for shares sold 42,667 TOTAL ASSETS 354,395,929 LIABILITIES: Payable for shares redeemed $ 39,891 Income distribution payable 465,250 Accrued expenses 123,728 TOTAL LIABILITIES 628,869 Net assets for 353,767,060 shares outstanding $ 353,767,060 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SHARES: $136,841,321 / 136,841,321 shares outstanding $1.00 CASH II SHARES: $216,925,739 / 216,925,739 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 9,396,929 EXPENSES: Investment advisory fee $ 1,118,018 Administrative personnel and services fee 210,746 Custodian fees 18,971 Transfer and dividend disbursing agent fees and expenses 158,819 Directors'/Trustees' fees 2,257 Auditing fees 12,975 Legal fees 13,086 Portfolio accounting fees 67,159 Distribution services fee- Cash II Shares 307,114 Shareholder services fee- Institutional Shares 391,648 Shareholder services fee- Cash II Shares 307,114 Share registration costs 32,966 Printing and postage 19,149 Insurance premiums 34,058 Miscellaneous 8,706 TOTAL EXPENSES 2,702,786 WAIVERS: Waiver of investment advisory fee $ (566,594) Waiver of distribution services fee-Cash II Shares (61,423) Waiver of shareholder services fee-Institutional Shares (93,995) TOTAL WAIVERS (722,012) Net expenses 1,980,774 Net investment income $ 7,416,155
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 7,416,155 $ 15,157,508 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Shares (4,318,011) (11,792,073) Cash II Shares (3,098,144) (3,365,435) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (7,416,155) (15,157,508) SHARE TRANSACTIONS: Proceeds from sale of shares 1,426,334,652 2,197,187,196 Net asset value of shares issued to shareholders in payment of distributions declared 1,899,046 7,838,269 Cost of shares redeemed (1,303,499,628) (2,518,608,888) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 124,734,070 (313,583,423) Change in net assets 124,734,070 (313,583,423) NET ASSETS: Beginning of period 229,032,990 542,616,413 End of period $ 353,767,060 $ 229,032,990
See Notes which are an integral part of the Financial Statements Financial Highlights-Cash II Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.02 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.02) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 2.53% 2.83% 2.94% 2.80% RATIOS TO AVERAGE NET ASSETS: Expenses 3 1.10% 1.04% 1.04% 1.09% 4 Net investment income 3 2.28% 2.64% 2.64% 2.64% 4 Expenses (after waivers) 0.86% 0.85% 0.80% 0.65% 4 Net investment income (after waivers) 2.52% 2.83% 2.88% 3.07% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $216,926 $71,839 $62,756 $31,824
1 Reflects operations for the period from November 27, 1995 (date of initial public investment) to October 31, 1996. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.04 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.79% 3.09% 3.20% 3.20% 3.60% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.85% 0.77% 0.79% 0.83% 0.87% Net investment income 2 2.49% 2.77% 2.90% 2.83% 3.16% Expenses (after waivers) 0.58% 0.58% 0.54% 0.49% 0.45% Net investment income (after waivers) 2.76% 2.96% 3.15% 3.17% 3.58% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $136,841 $157,194 $479,860 $500,993 $153,347
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would gave been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Florida Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Shares and Cash II Shares. The investment objective of the Fund is to provide current income exempt from federal regular income tax consistent with stability of principal and liquidity and to maintain an investment portfolio that will cause its shares to be exempt from the Florida intangibles tax. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees ("Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Investment Company Act of 1940. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $353,767,060. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 669,367,832 1,551,253,164 Shares issued to shareholders in payment of distributions declared 1,698,610 7,690,503 Shares redeemed (691,418,704) (1,881,610,584) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS (20,352,262) (322,666,917) YEAR ENDED OCTOBER 31 1999 1998 CASH II SHARES: Shares sold 756,966,820 645,934,032 Shares issued to shareholders in payment of distributions declared 200,436 147,766 Shares redeemed (612,080,924) (636,998,304) NET CHANGE RESULTING FROM CASH II SHARE TRANSACTIONS 145,086,332 9,083,494 NET CHANGE RESULTING FROM SHARE TRANSACTIONS 124,734,070 (313,583,423)
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and/or reimbursement at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. DISTRIBUTION SERVICES FEE The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Institutional Shares and Class II Shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE SHARE CLASS DAILY NET ASSETS OF CLASS Institutional Shares 0.25% Class II Shares 0.25%
The distributor may voluntarily choose to waive any portion of its fee. The distributor can modify or terminate this voluntary waiver at any time at its sole discretion. For the fiscal year ended October 31, 1999, the fund's Institutional Shares did not incur a distribution service fee. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $1,068,010,000 and $1,123,788,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 85.9% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 5.2% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITOR (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304 (a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in the paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF FLORIDA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Florida Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998, and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Florida Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Florida Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Florida Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229758 Cusip 314229683 G00827-01 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Georgia Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. The fund is a convenient way to put your ready cash pursuing double tax-free income-free from federal regular income tax and Georgia income tax- through a portfolio concentrated in high-quality, short-term Georgia municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share. The fund's net assets totaled $267.1 million at the end of the reporting period. Thank you for relying on Georgia Municipal Cash Trust to help your ready cash pursue tax-free income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. INVESTMENT REVIEW An interview with the fund's portfolio manager, Jeff A. Kozemchak, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November. Each time the Fed voted to raise the federal funds target rate by a quarter point, bringing the federal funds target rate to 5.50%. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the reporting period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to 4.00% in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from an expanding economy. This fact, coupled with lower borrowing costs from low long-term rates, has reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the reporting period was approximately 51 days. In 1999, the fund's average maturity declined to as low as 34 days in July before we were able to take advantage of fixed-rate note opportunities in August that increased it to 49 days. Cash inflows in October decreased the allocation of the portfolio to fixed-rate notes and the maturity subsequently declined to end the reporting period at 35 days. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. After an average maturity range was targeted, taking into account Fed monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipal securities to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first half of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.3% 1 GEORGIA-99.3% $ 4,500,000 Athens-Clarke County, GA, IDA, (Series 1988), 3.85% CP (Rhone Merieux, Inc. Project)/(Societe Generale, Paris LOC), Mandatory Tender 2/17/2000 $ 4,500,000 1,400,000 Athens-Clarke County, GA, IDA, (Series 1997) Weekly VRDNs (Armagh Capital Resource, LLC)/(Wachovia Bank of NC, N.A. LOC) 1,400,000 1,500,000 Atlanta, GA, Urban Residential Finance Authority, Multifamily Housing Revenue Bonds (Series 1995) Weekly VRDNs (West End Housing Development Project)/(First Union National Bank, Charlotte, NC LOC) 1,500,000 3,730,000 Brunswick, GA, Housing Authority, (Series S93) Weekly VRDNs (Island Square Apartments)/(Columbus Bank and Trust Co., GA LOC) 3,730,000 3,000,000 Burke County, GA, Development Authority, PCRB's (Series 1998A), 3.50% CP (Oglethorpe Power Corp. Vogtle Project)/(AMBAC INS)/(Rabobank Nederland, Utrecht LIQ), Mandatory Tender 1/25/2000 3,000,000 2,860,000 Cedartown, GA, Development Authorithy, (Series 1998) Weekly VRDNs (Rome Plow Co.)/(SunTrust Bank, Miami LOC) 2,860,000 1,075,000 Cherokee County, GA, Development Authority, IDRB Weekly VRDNs (Morrison Products, GA)/(KeyBank, N.A. LOC) 1,075,000 9,500,000 Clayton County, GA, Development Authority, (Series 1994) Weekly VRDNs (Lear Seating Corp.)/(Chase Manhattan Bank N.A., New York LOC) 9,500,000 550,000 Clayton County, GA, Housing Authority, Revenue Refunding Bonds (Series 1992) Weekly VRDNs (Oxford Townhomes)/(Amsouth Bank N.A., Birmingham LOC) 550,000 1,305,000 Cobb County, GA, IDA Weekly VRDNs (Atlanta RDC Co.)/(First Union National Bank, Charlotte, NC LOC) 1,305,000 8,000,000 Cobb County, GA, IDA, (Series 1997) Weekly VRDNs (Wyndham Gardens)/(Bankers Trust Co., New York LOC) 8,000,000 1,400,000 Cobb County, GA, IDA, IDRB (Series 1995) Weekly VRDNs (Consolidated Engineering Company, Inc. Project)/(Bank of America, N.A. LOC) 1,400,000 770,000 Columbia County, GA, Development Authority, (Series 1991) Weekly VRDNs (Augusta Sportswear, Inc.)/(Wachovia Bank of NC, N.A. LOC) 770,000 2,100,000 Columbus, GA, Housing Authority Weekly VRDNs (Ralston Towers)/(Columbus Bank and Trust Co., GA LOC) 2,100,000 3,000,000 Coweta County, GA, IDA, (Series 1995) Weekly VRDNs (Lanelco L.L.C. Project)/(Bank One, Michigan LOC) 3,000,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 GEORGIA-CONTINUED $ 3,925,000 Coweta County, GA, Residential Care Facilities for the Elderly, First Lien Revenue Bonds (Series 1996B) Weekly VRDNs (Wesley Woods of Newman- Peachtree City, Inc. Project)/(Paribas, Paris LOC) $ 3,925,000 6,000,000 Crisp County, GA, Development Authority, (Series B), 4.35% TOBs (Masonite Corp.)/(International Paper Co. GTD), Optional Tender 9/1/2000 6,000,000 9,000,000 Crisp County, GA, Solid Waste Management Authority, (Series 1998) Weekly VRDNs (FSA INS)/(First Union National Bank, Charlotte, NC LIQ) 9,000,000 1,250,000 De Kalb County, GA, Development Authority Weekly VRDNs (Rock-Tenn Company, Inc. Project)/(SunTrust Bank, Atlanta LOC) 1,250,000 1,165,000 De Kalb County, GA, Development Authority, (Series 1992) Weekly VRDNs (House of Cheatham, Inc. Project)/(Bank of America, N.A. LOC) 1,165,000 600,000 De Kalb County, GA, Development Authority, (Series 1993) Weekly VRDNs (Pet, Inc.)/(PNC Bank, N.A. LOC) 600,000 2,000,000 De Kalb County, GA, Development Authority, (Series 1995) Weekly VRDNs (Rock-Tenn Converting Co.)/(SunTrust Bank, Atlanta LOC) 2,000,000 1,180,000 De Kalb County, GA, Development Authority, (Series 1996) Weekly VRDNs (DeKalb Steel, Inc.)/(SouthTrust Bank of Georgia, Atlanta LOC) 1,180,000 4,000,000 De Kalb County, GA, Multifamily Housing Authority, Multifamily Housing Revenue Bonds (Series 1996) Weekly VRDNs (Bryton Hill Apartments)/(PNC Bank, N.A. LOC) 4,000,000 4,000,000 De Kalb County, GA, Water & Sewer, 7.00% Bonds (United States Treasury PRF), 10/1/2000 (@102) 4,182,389 1,000,000 De Kalb County, GA, Water & Sewer, 7.00% Bonds (United States Treasury PRF), 10/1/2000 (@102) 1,047,316 5,000,000 Doughery County, GA, School System, 3.62% TANs, 12/30/1999 5,002,897 2,700,000 Douglas County, GA, Development Authority, (Series 1997) Weekly VRDNs (Austral Insulated Products, Inc.)/(Regions Bank, Alabama LOC) 2,700,000 740,000 Douglas County, GA, Development Authority, (Series 1997) Weekly VRDNs (Paul B. Goble)/(Wachovia Bank of NC, N.A. LOC) 740,000 5,585,000 Douglas County, GA, Development Authority, (Series 1998A) Weekly VRDNs (Heritage Bag)/(Wachovia Bank of NC, N.A. LOC) 5,585,000 2,000,000 Douglas County, GA, School District, 4.75% Bonds, 1/1/2000 2,005,057 5,000,000 Forsythe County, GA, Development Authority, IDRB (Series 1995) Weekly VRDNs (American BOA, Inc. Project)/(Dresdner Bank AG, Frankfurt LOC) 5,000,000 9,240,000 Franklin County, GA, Industrial Building Authority, (Series 1995) Weekly VRDNs (Bosal Industries, Inc.)/(Bank of New York, New York LOC) 9,240,000 4,500,000 Fulton County, GA, Housing Authority, (Series 1999) Weekly VRDNs (Walton Falls Apartments)/(Wachovia Bank of NC, N.A. LOC) 4,500,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 GEORGIA-CONTINUED $ 5,000,000 Fulton County, GA, Housing Authority, Multifamily Housing Revenue Refunding Bonds (Series 1994) Weekly VRDNs (Spring Creek Crossing Project)/(Wachovia Bank of NC, N.A. LOC) $ 5,000,000 2,200,000 Fulton County, GA, IDA Weekly VRDNs (Automatic Data Processing, Inc.) 2,200,000 2,550,000 Fulton County, GA, IDA Weekly VRDNs (C.K.S. Packaging, Inc.)/(SouthTrust Bank of Georgia, Atlanta LOC) 2,550,000 1,700,000 Fulton County, GA, IDA, (Series 1997) Weekly VRDNs (In-Store Media Corp.)/(SunTrust Bank, Atlanta LOC) 1,700,000 2,800,000 Gainesville, GA, Redevelopment Authority, Downtown Developments, Ltd. (Series 1987) Weekly VRDNs (Downtown Developments, Ltd.)/(Regions Bank, Alabama LOC) 2,800,000 2,460,000 Gainesville, GA, Redevelopment Authority, IDRB (Series 1986) Weekly VRDNs (Hotel of Gainesville Associates Project)/(Regions Bank, Alabama LOC) 2,460,000 5,000,000 Georgia Municipal Electric Authority, Series A, 5.50% Bonds (AMBAC INS), 1/1/2000 5,019,767 5,675,000 Georgia Municipal Electric Authority, Series Z, 4.50% Bonds, 1/1/2000 5,686,007 1,700,000 Georgia Port Authority, (Series 1996A) Weekly VRDNs (Colonel's Island Terminal)/(SunTrust Bank, Atlanta LOC) 1,700,000 4,900,000 Georgia State, PUTTERS (Series 128) Weekly VRDNs (J.P. Morgan & Co., Inc. LIQ) 4,900,000 1,500,000 Georgia State, UT GO, 5.75% Bonds, 7/1/2000 1,520,346 2,970,000 Gwinnett County, GA, IDA, (Series 1996) Weekly VRDNs (Sidel, Inc. Project)/(Bank of America, N.A. LOC) 2,970,000 630,000 Gwinnett County, GA, IDA, (Series 1997) Weekly VRDNs (Virgil R. Williams, Jr.)/(Wachovia Bank of NC, N.A. LOC) 630,000 2,200,000 Gwinnett County, GA, IDA, (Series 1998) Weekly VRDNs (Pace Manufacturing, Inc.)/(Amsouth Bank N.A., Birmingham LOC) 2,200,000 5,000,000 2 Gwinnett County, GA, Water and Sewer Authority, (PT- 1169), 3.62% TOBs (Gwinnett County, GA)/(Merrill Lynch Capital Services, Inc. LIQ), Optional Tender 7/20/2000 5,000,000 7,000,000 Gwinnett County, GA, Water and Sewer Authority, Floater Certificates (Series 1998-70) Weekly VRDNs (Gwinnett County, GA)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 7,000,000 1,500,000 Hart County, GA, IDA, Revenue Bonds (Series 1996) Weekly VRDNs (Rock- Tenn Converting Co. Project)/(SunTrust Bank, Atlanta LOC) 1,500,000 6,750,000 Jackson County, GA, IDA, (Series 1996) Weekly VRDNs (Buhler Quality Yarns Corp. Project)/(UBS AG LOC) 6,750,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 GEORGIA-CONTINUED $ 1,150,000 Jackson County, GA, IDA, (Series 1997) Weekly VRDNs (Mullett Co.)/(Wachovia Bank of NC, N.A. LOC) $ 1,150,000 1,100,000 Jefferson, GA, Development Authority, (Series 1997) Weekly VRDNs (Ringwood Containers, L.P.)/(Wachovia Bank of NC, N.A. LOC) 1,100,000 3,110,000 La Grange, GA, Multifamily Housing Authority, Revenue Bonds, 4.25% TOBs (Lee's Crossing Project Phase II)/(Columbus Bank and Trust Co., GA LOC), Optional Tender 11/1/1999 3,110,000 2,930,000 La Grange, GA, Multifamily Housing Authority, Revenue Bonds, 4.25% TOBs (Lee's Crossing Project Phase I)/(Columbus Bank and Trust Co., GA LOC), Optional Tender 11/1/1999 2,930,000 3,630,000 LaGrange, GA, Housing Authority, Multifamily Refunding Revenue Bonds (Series 1997) Weekly VRDNs (Greenwood Park)/(Columbus Bank and Trust Co., GA LOC) 3,630,000 3,465,000 LaGrange, GA, Housing Authority, Multifamily Refunding Revenue Bonds (Series 1997) Weekly VRDNs (Meadow Terrace)/(Columbus Bank and Trust Co., GA LOC) 3,465,000 140,000 Macon-Bibb County, GA, Industrial Authority, IDRB (Series 1990) Weekly VRDNs (Diamond Plastics Corp. Project)/(Bank of America, N.A. LOC) 140,000 4,470,000 Marietta, GA, Housing Authority, Multifamily Housing Revenue Bonds (Series 1995) Weekly VRDNs (Chalet Apartments Project)/(General Electric Capital Corp. LOC) 4,470,000 2,085,000 McDuffie County, GA, Development Authority Weekly VRDNs (Thomson Plastics)/(SouthTrust Bank of Alabama, Birmingham LOC) 2,085,000 2,000,000 McDuffie County, GA, Development Authority, (Series 1998), 4.60% CP (Temple-Inland Forest Products Corp.)/(Temple- Inland, Inc. GTD), Mandatory Tender 1/19/2000 2,000,000 565,000 Milledgeville & Baldwin County, GA, Development Authority, (Series 1997) Weekly VRDNs (Oconee Area Properties, Inc.)/(Wachovia Bank of NC, N.A. LOC) 565,000 4,500,000 Rabun County, GA, Development Authority, (Series 1999) Weekly VRDNs (Rabun Gap-Nacoochee, Inc.)/(SunTrust Bank, Atlanta LOC) 4,500,000 2,500,000 Richmond County, GA, Development Authority, (Series 1999) Weekly VRDNs (Rock-Tenn Converting Co.)/(SunTrust Bank, Atlanta LOC) 2,500,000 9,000,000 Richmond County, GA, Development Authority, Solid Waste Disposal Revenue Bonds, (Series 1995) Weekly VRDNs (Federal Paper Board Co., Inc.)/(Wachovia Bank of NC, N.A. LOC) 9,000,000 2,800,000 Rockdale County, GA, Development Authority, (Series 1995) Weekly VRDNs (Great Southern Wood Preserving Co.)/(SunTrust Bank, Central Florida LOC) 2,800,000 4,000,000 Rockdale County, GA, Water & Sewer, Capital Outlay Notes, 3.75% BANs, 12/15/1999 4,001,414 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 GEORGIA-CONTINUED $ 4,000,000 Rome, GA, 3.25% TANs, 12/31/1999 $ 4,000,510 11,250,000 Savannah, GA, EDA, (Series 1995A) Weekly VRDNs (Home Depot, Inc.) 11,250,000 6,000,000 Screven County, GA, IDA, (Series 1995) Weekly VRDNs (Sylvania Yarn Systems, Inc. Project)/(SunTrust Bank, Atlanta LOC) 6,000,000 3,350,000 Stephens County, GA, Development Authorithy, (Series 1999) Weekly VRDNs (Toccoa Packaging, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 3,350,000 5,000,000 Summerville, GA, Development Authority, (Series 1997) Weekly VRDNs (Image Industries, Inc.)/(First Union National Bank, Charlotte, NC LOC) 5,000,000 3,450,000 Upson County, GA, 3.63% TANs, 12/31/1999 3,450,821 1,000,000 Wayne County, GA, IDA, Revenue Bonds, (Series 1995) Weekly VRDNs (Harsco Corp.)/(Bank of America, N.A. LOC) 1,000,000 3,335,000 Whitfield County, GA, Development Authority Weekly VRDNs (Franklin Industries Inc., Project)/(Bank of America, N.A. LOC) 3,335,000 1,645,000 Whitfield County, GA, Development Authority, (Series 1996) Weekly VRDNs (AMC International, Inc. Project)/(SouthTrust Bank of Alabama, Birmingham LOC) 1,645,000 3,500,000 Whitfield County, GA, School System, 3.60% TANs, 12/31/1999 3,501,965 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 265,378,489
Securities that are subject to alternative minimum tax represent 64.7% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1, or MIG-2 by Moody's Investors Service, F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Percentage Based on Total Market Value (Unaudited) FIRST TIER SECOND TIER 94.84% 5.16% 2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Directors. At October 31, 1999, these securities amounted to $5,000,000 which represents 1.9% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($267,132,329) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation BANs -Bond Anticipation Notes CP -Commercial Paper EDA -Economic Development Authority FSA -Financial Security Assurance GO -General Obligation GTD -Guaranteed IDA -Industrial Development Authority IDRB -Industrial Development Revenue Bond INS -Insured LIQ - -Liquidity Agreement LOC -Letter of Credit PCRB -Pollution Control Revenue Bonds PRF -Prerefunded TANs -Tax Anticipation Notes TOBs -Tender Option Bonds UT - -Unlimited Tax VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 265,378,489 Cash 534,616 Income receivable 1,622,462 Deferred organizational costs 3,657 Other assets 5,700 TOTAL ASSETS 267,544,924 LIABILITIES: Payable for shares redeemed $ 31,901 Income distribution payable 298,170 Accrued expenses 82,524 TOTAL LIABILITIES 412,595 Net assets for 267,132,329 shares outstanding $ 267,132,329 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: $267,132,329 / 267,132,329 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 7,796,901 EXPENSES: Investment advisory fee $ 1,149,248 Administrative personnel and services fee 173,307 Custodian fees 5,517 Transfer and dividend disbursing agent fees and expenses 42,291 Directors'/Trustees' fees 1,488 Auditing fees 12,210 Legal fees 9,327 Portfolio accounting fees 54,575 Shareholder services fee 574,624 Share registration costs 33,094 Printing and postage 11,752 Insurance premiums 17,716 Miscellaneous 6,041 TOTAL EXPENSES 2,091,190 WAIVERS: Waiver of investment advisory fee $ (828,457) Waiver of shareholder services fee (137,910) TOTAL WAIVERS (966,367) Net expenses 1,124,823 Net investment income $ 6,672,078
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 6,672,078 $ 5,625,121 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income (6,672,078) (5,625,121) SHARE TRANSACTIONS: Proceeds from sale of shares 720,843,748 632,771,755 Net asset value of shares issued to shareholders in payment of distributions declared 3,573,586 3,758,781 Cost of shares redeemed (625,382,790) (590,290,954) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 99,034,544 46,239,582 Change in net assets 99,034,544 46,239,582 NET ASSETS: Beginning of period 168,097,785 121,858,203 End of period $ 267,132,329 $ 168,097,785
See Notes which are an integral part of the Financial Statements Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.01 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.01) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 2.94% 3.33% 3.38% 3.37% 0.73% RATIOS TO AVERAGE NET ASSETS: Expenses 3 0.91% 0.93% 0.92% 0.98% 1.00% 4 Net investment income 3 2.48% 2.84% 2.90% 2.79% 3.06% 4 Expenses (after waivers) 0.49% 0.49% 0.49% 0.46% 0.25% 4 Net investment income (after waivers) 2.90% 3.28% 3.33% 3.31% 3.81% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $ 267,132 $ 168,098 $ 121,858 $ 122,940 $ 111,278
1 Reflects operations for the period from August 22, 1995 (date of initial public investment) to October 31, 1995. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Cash Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Georgia Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is current income exempt from federal regular income tax and the income tax imposed by the State of Georgia consistent with stability of principal and liquidity. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees. The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). At October 31, 1999, capital paid-in aggregated $267,132,329. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 Shares sold 720,843,748 632,771,755 Shares issued to shareholders in payment of distributions declared 3,573,586 3,758,781 Shares redeemed (625,382,790) (590,290,954) NET CHANGE RESULTING FROM SHARE TRANSACTIONS 99,034,544 46,239,582
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. ORGANIZATIONAL EXPENSES Organizational expenses of $13,648 were borne initially by Adviser. The Fund has reimbursed the Adviser for these expenses. These expenses have been deferred and are being amortized during the five-year period following the Fund's effective date. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $469,585,000 and $377,685,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 72.6% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 11.5% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and Administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years, and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF GEORGIA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Georgia Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trusts' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Georgia Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses, and other information. [Graphic] Federated World-Class Investment Manager Georgia Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS ANNUAL REPORT OCTOBER 31, 1999 [Graphic] Federated Georgia Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229691 G01478-02 (12/99) [Graphic] President's Message Dear Shareholder: I am pleased to present your Annual Report to Shareholders of Massachusetts Municipal Cash Trust--Boston 1784 Funds/SM/ Shares, which covers the 12-month reporting period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the Fund's portfolio manager, followed by a complete listing of the Fund's holdings and its financial statements. The Fund is a convenient way to keep your ready cash pursuing double tax-free income--free from federal regular income tax and Massachusetts state income tax- - -through a portfolio concentrated in high-quality, short-term Massachusetts municipal securities.* At the end of the reporting period, the Fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the Fund also brings you the added benefits of daily liquidity and stability of principal.** During the reporting period, the Fund paid double tax-free dividends totaling $0.03 per share for Boston 1784 Funds/SM/ Shares. The Fund's total net assets reached $611.1 million at the end of the reporting period. Thank you for relying on Massachusetts Municipal Cash Trust to help your ready cash earn income every day. As always, we'll continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, /s/ Glen R Johnson Glen R. Johnson President December 15, 1999 *Income may be subject to the federal alternative minimum tax. **An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. Investment Review An interview with the Fund's portfolio manager, Mary Jo Ochson, CFA, Senior Vice President, Federated Investment Management Company. Q. What are your comments on the economy and the interest rate environment during the Fund's reporting period? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly in Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part, inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the Fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. Q. What were your strategies for the Fund during the reporting period? At the beginning of the reporting period, the Fund's average maturity was approximately 55 days. The Fund remained in a 45- to 50-day average maturity range over the reporting period, and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. After an average maturity range was targeted, we attempted to maximize performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as U.S. Treasury securities. This portfolio structure continues to provide a competitive yield over time. Q. What is your outlook going forward? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first and second quarters of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the Fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Financial Highlights-- Boston 1784 Funds Shares (For a share outstanding throughout each period)
Year Ended October 31, - ------------------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ------------------------------------------------------------------------------------------------------------------------------- Income from Investment Operations: - ------------------------------------------------------------------------------------------------------------------------------- Net investment income 0.03 0.03 0.03 0.03 0.03 - ------------------------------------------------------------------------------------------------------------------------------- Less Distributions: - ------------------------------------------------------------------------------------------------------------------------------- Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) - ------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 - ------------------------------------------------------------------------------------------------------------------------------- Total Return (1) 2.70% 3.03% 3.07% 3.05% 3.30% - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- Ratios to Average Net Assets: - ------------------------------------------------------------------------------------------------------------------------------- Expenses (2) 0.91% 0.93% 0.96% 1.00% 1.05% - ------------------------------------------------------------------------------------------------------------------------------- Net investment income (2) 2.32% 2.61% 2.64% 2.59% 2.80% - ------------------------------------------------------------------------------------------------------------------------------- Expenses (after waivers) 0.56% 0.57% 0.57% 0.58% 0.60% - ------------------------------------------------------------------------------------------------------------------------------- Net investment income (after waivers) 2.67% 2.97% 3.03% 3.01% 3.25% - ------------------------------------------------------------------------------------------------------------------------------- Supplemental Data: - ------------------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000 omitted) $199,860 $162,557 $73,837 $54,667 $46,580 - -------------------------------------------------------------------------------------------------------------------------------
(1) Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. (2) During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. (See Notes which are an integral part of the Financial Statements) Massachusetts Municipal Cash Trust Portfolio of Investments October 31, 1999
Principal - ----------------------------------------------------------------------------------------------------------------------- Amount Value - ----------------------------------------------------------------------------------------------------------------------- (1) Short-Term Municipals--99.5% - ----------------------------------------------------------------------------------------------------------------------- Massachusetts--98.2% - ---------------------------------------------------------------------------------------------------------- $ 23,166,000 ABN AMRO MuniTOPS Certificates Trust (Massachusetts Non-AMT) (Series $ 23,166,000 1998-12) Weekly VRDNs (Massachusetts Water Resources Authority)/(MBIA INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) - ---------------------------------------------------------------------------------------------------------- 3,089,067 Carlisle, MA, 4.00% BANs, 7/3/2000 3,099,062 - ---------------------------------------------------------------------------------------------------------- 14,940,000 Clipper Tax-Exempt Certificates Trust (Massachusetts Non-AMT) 14,940,000 (Series 1999-1) Weekly VRDNs (Massachusetts State HFA)/ (MBIA INS)/(State Street Bank and Trust Co. LIQ) - ---------------------------------------------------------------------------------------------------------- 46,213,470 Clipper Tax-Exempt Trust (Series A) Weekly VRDNs (Massachusetts 46,213,470 State Lottery Commission)/(AMBAC INS)/ (State Street Bank and Trust Co. LIQ) - ---------------------------------------------------------------------------------------------------------- 3,000,000 Commonwealth of Massachusetts, Weekly VRDNs (AMBAC INS)/(Citibank 3,000,000 NA, New York LIQ) - ---------------------------------------------------------------------------------------------------------- 15,200,000 Commonwealth of Massachusetts (Series 1997 B) Weekly VRDNs 15,200,000 (Landesbank Hessen-Thueringen, Frankfurt LIQ) - ---------------------------------------------------------------------------------------------------------- 1,245,000 Commonwealth of Massachusetts, Floater Certificates (Series 1,245,000 1998-132) Weekly VRDNs (FSA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) - ---------------------------------------------------------------------------------------------------------- 4,600,000 Commonwealth of Massachusetts Trust Receipts (FR/RI-A36) Weekly 4,600,000 VRDNs (MBIA INS)/(Bayerische Hypotheken-und Vereinsbank AG LIQ) - ---------------------------------------------------------------------------------------------------------- 4,181,000 Danvers, Massachusetts, 4.00% BANs, 7/13/2000 4,195,920 - ---------------------------------------------------------------------------------------------------------- 3,000,000 Dighton-Rehobeth, MA Regional School District, 3.53% BANs, 7/6/2000 3,002,548 - ---------------------------------------------------------------------------------------------------------- 9,800,000 Freetown-Lakeville, MA Regional School District, 4.10% BANs, 9,823,557 9/28/2000 - ---------------------------------------------------------------------------------------------------------- 4,000,000 Gardner, MA, 3.36% BANs, 12/15/1999 4,000,377 - ---------------------------------------------------------------------------------------------------------- 5,000,000 Gardner, MA, 3.75% BANs, 12/15/1999 5,002,937 - ---------------------------------------------------------------------------------------------------------- 10,000,000 Holden, MA, 4.25% BANs, 3/15/2000 10,019,960 - ---------------------------------------------------------------------------------------------------------- 10,500,000 Holliston, MA, 4.00% BANs, 12/15/1999 10,509,450 - ---------------------------------------------------------------------------------------------------------- 8,000,000 Marshfield, MA, 3.75% BANs, 11/2/1999 8,000,048 - ---------------------------------------------------------------------------------------------------------- 6,885,000 Massachusetts Bay Transit Authority (Series 1999) Weekly VRDNs 6,885,000 (Commerzbank AG, Frankfurt LIQ) - ---------------------------------------------------------------------------------------------------------- 7,200,000 Massachusetts Bay Transit Authority (Series A) 3.50% BANs, 2/25/2000 7,201,260 - ---------------------------------------------------------------------------------------------------------- 11,000,000 Massachusetts Bay Transit Authority (Series D) 3.60% CP (Commerzbank 11,000,000 AG, Frankfurt and Morgan Guaranty Trust Co., New York LIQs), Mandatory Tender 12/1/1999 - ---------------------------------------------------------------------------------------------------------- 34,000,000 Massachusetts Bay Transit Authority (Series 1999 FR/RI-A36) Weekly 34,000,000 VRDNs (Bank of New York, New York LIQ) - ---------------------------------------------------------------------------------------------------------- 24,750,000 Massachusetts Bay Transit Authority BOCM Municipal Trust Certificate 24,750,000 MTC #34, Weekly VRDNs (FGIC INS)/(Bank One Capital Holdings Corp. LIQ) - ---------------------------------------------------------------------------------------------------------- 3,000,000 Massachusetts Development Finance Agency (Series 1998A) Weekly VRDNs 3,000,000 (Shady Hill School)/(State Street Bank and Trust Co. LOC) - ---------------------------------------------------------------------------------------------------------- 2,400,000 Massachusetts HEFA, Weekly VRDNs (Harvard University) 2,400,000 - ---------------------------------------------------------------------------------------------------------- 1,750,000 Massachusetts HEFA (Series 1999) Weekly VRDNs (CIL Realty of 1,750,000 Massachusetts)/(Credit Local de France LOC) - ---------------------------------------------------------------------------------------------------------- 15,400,000 Massachusetts HEFA (Series A) Weekly VRDNs (Brigham & Women's 15,400,000 Hospital)/(Landesbank Hessen-Thueringen, Frankfurt LOC) - ---------------------------------------------------------------------------------------------------------- 1,800,000 Massachusetts HEFA (Series B) Weekly VRDNs (Clark University)/(Fleet 1,800,000 Bank N.A. LOC) - ---------------------------------------------------------------------------------------------------------- 4,525,000 Massachusetts HEFA (Series B) Weekly VRDNs (Endicott 4,525,000 College)/(BankBoston, N.A. LOC) - ---------------------------------------------------------------------------------------------------------- 12,545,000 Massachusetts HEFA (Series B) Weekly VRDNs (Hallmark Health 12,545,000 System)/(FSA INS)/(Fleet National Bank, Springfield, MA LIQ) - ---------------------------------------------------------------------------------------------------------- 10,000,000 Massachusetts HEFA (Series F) Weekly VRDNs (Children's Hospital of 10,000,000 Boston)/(Landesbank Hessen-Thueringen, Frankfurt LIQ) - ---------------------------------------------------------------------------------------------------------- 9,420,000 Massachusetts HEFA (Series I) Weekly VRDNs (Harvard University) 9,420,000 - ---------------------------------------------------------------------------------------------------------- 7,000,000 Massachusetts HEFA, 3.50% CP (Harvard University) Mandatory Tender 7,000,000 11/1/1999 - ---------------------------------------------------------------------------------------------------------- 2,450,000 Massachusetts HEFA, Floater Certificates (Series 1998-80) Weekly 2,450,000 VRDNs (Stonehill College)/(MBIA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) - ---------------------------------------------------------------------------------------------------------- 1,800,000 Massachusetts IFA (Series 1992) Weekly VRDNs (Holyoke Water Power 1,800,000 Co.)/(Canadian Imperial Bank of Commerce LOC) - ---------------------------------------------------------------------------------------------------------- 10,000,000 Massachusetts IFA (Series 1992B) 3.40% CP (New England Power Co.) 10,000,000 Mandatory Tender 11/17/1999 - ---------------------------------------------------------------------------------------------------------- 10,000,000 Massachusetts IFA (Series 1992B) 3.70% CP (New England Power Co.) 10,000,000 Mandatory Tender 2/28/2000 - ---------------------------------------------------------------------------------------------------------- 6,000,000 Massachusetts IFA (Series 1992B) 3.70% CP (New England Power Co.) 6,000,000 Mandatory Tender 2/29/2000 - ---------------------------------------------------------------------------------------------------------- 5,900,000 Massachusetts IFA (Series 1994) Weekly VRDNs (Nova Realty 5,900,000 Trust)/(Fleet National Bank, Springfield, MA LOC) - ---------------------------------------------------------------------------------------------------------- 5,925,000 Massachusetts IFA (Series 1995) Weekly VRDNs (Goddard House)/(Fleet 5,925,000 Bank N.A. LOC) - ---------------------------------------------------------------------------------------------------------- 7,200,000 Massachusetts IFA (Series 1995) Weekly VRDNs (Whitehead Institute 7,200,000 for Biomedical Research) - ---------------------------------------------------------------------------------------------------------- 6,919,000 Massachusetts IFA (Series 1996) Weekly VRDNs (Newbury 6,919,000 College)/(BankBoston, N.A. LOC) - ---------------------------------------------------------------------------------------------------------- 2,500,000 Massachusetts IFA (Series 1997) Weekly VRDNs (Massachusetts Society 2,500,000 for the Prevention of Cruelty to Animals)/(Fleet National Bank, Springfield, MA LOC) - ---------------------------------------------------------------------------------------------------------- 5,885,000 Massachusetts IFA (Series 1997) Weekly VRDNs (Mount Ida 5,885,000 College)/(Credit Local de France LOC) - ---------------------------------------------------------------------------------------------------------- 5,965,000 Massachusetts IFA (Series 1998A) Weekly VRDNs (JHC Assisted Living 5,965,000 Corp.)/(Fleet National Bank, Springfield, MA LOC) - ---------------------------------------------------------------------------------------------------------- 1,225,000 Massachusetts IFA (Series A) Weekly VRDNs (Hockomock YMCA)/(Bank of 1,225,000 Nova Scotia, Toronto LOC) - ---------------------------------------------------------------------------------------------------------- 9,740,000 Massachusetts IFA (Series B) Weekly VRDNs (Williston North Hampton 9,740,000 School)/(Fleet National Bank, Springfield, MA LOC) - ---------------------------------------------------------------------------------------------------------- 14,000,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System 14,000,000 Revenue Bonds (Series 1994 C) Weekly VRDNs (Canadian Imperial Bank of Commerce LOC) - ---------------------------------------------------------------------------------------------------------- 9,290,000 (2)Massachusetts State HFA, PT-162, 3.25% TOBs (MBIA INS)/ (Banque 9,290,000 Nationale de Paris LIQ), Optional Tender 2/10/2000 - ---------------------------------------------------------------------------------------------------------- 3,255,000 Massachusetts State (Series 1999 SG 126) Weekly VRDNs (Societe 3,255,000 Generale, Paris LIQ) - ---------------------------------------------------------------------------------------------------------- 27,545,000 Massachusetts Turnpike Authority, Variable Rate Certificates (Series 27,545,000 1997N) Weekly VRDNs (MBIA INS)/(Bank of America, N.A. LIQ) - ---------------------------------------------------------------------------------------------------------- 4,090,000 (2)Massachusetts Water Pollution Abatement Trust Pool (PT-1185) 4,090,000 3.80% TOBs (Merrill Lynch Capital Services, Inc. LIQ) Optional Tender 9/7/2000 - ---------------------------------------------------------------------------------------------------------- 10,000,000 Massachusetts Water Resources Authority (Series 1994) 3.50% CP 10,000,000 (Morgan Guaranty Trust Co., New York LOC) Mandatory Tender 1/20/2000 - ---------------------------------------------------------------------------------------------------------- 4,200,000 Massachusetts Water Resources Authority (Series 1994) 3.60% CP 4,200,000 (Morgan Guaranty Trust Co., New York LOC) Mandatory Tender 1/27/2000 - ---------------------------------------------------------------------------------------------------------- 5,500,000 Massachusetts Water Resources Authority (Series 1999B) Weekly VRDNs 5,500,000 (Landesbank Hessen-Thueringen, Frankfurt LOC) - ---------------------------------------------------------------------------------------------------------- 2,110,000 Massachusetts Water Resources Authority (Series A) Bonds (United 2,168,408 States Treasury PRF) 7.625%, 4/1/2000 (@102) - ---------------------------------------------------------------------------------------------------------- 4,403,100 Maynard, MA, 4.25% BANs, 9/29/2000 4,418,526 - ---------------------------------------------------------------------------------------------------------- 1,940,000 Medway, MA, 3.32% BANs, 3/14/2000 1,940,477 - ---------------------------------------------------------------------------------------------------------- 15,000,000 Middleborough, MA, 4.00% BANs, 12/29/1999 15,016,050 - ---------------------------------------------------------------------------------------------------------- 14,662,345 Middleborough, MA, 4.05% BANs, 12/29/1999 14,672,653 - ---------------------------------------------------------------------------------------------------------- 5,025,000 New England Educational Loan Marketing Corp., Series H, Bonds, 4.75% 5,031,130 12/1/1999 - ---------------------------------------------------------------------------------------------------------- 2,426,250 Newbury, MA, 4.00% BANs, 8/11/2000 2,432,611 - ---------------------------------------------------------------------------------------------------------- 3,350,000 Norwood, MA, 4.00% BANs, 8/16/2000 3,358,910 - ---------------------------------------------------------------------------------------------------------- 8,000,000 Pittsfield, MA, 4.25% BANs, 9/15/2000 8,031,970 - ---------------------------------------------------------------------------------------------------------- 2,651,000 Randolph, MA, 4.00% BANs, 6/16/2000 2,654,996 - ---------------------------------------------------------------------------------------------------------- 3,500,000 Richmond, MA, 3.75% BANs, 6/1/2000 3,507,496 - ---------------------------------------------------------------------------------------------------------- 5,270,000 South Hadley, MA, 4.15% BANs, 8/11/2000 5,287,763 - ---------------------------------------------------------------------------------------------------------- 6,250,000 Springfield, MA , 4.25% BANs (Fleet National Bank, Springfield, MA 6,263,365 LOC) 3/2/2000 - ---------------------------------------------------------------------------------------------------------- 9,300,000 Sterling, MA, 3.75% BANs, 2/25/2000 9,307,192 - ---------------------------------------------------------------------------------------------------------- 2,141,500 Stoughton, MA, 3.20% BANs, 12/16/1999 2,141,865 - ---------------------------------------------------------------------------------------------------------- 1,424,000 Stow, MA, 3.50% BANs, 2/15/2000 1,425,199 - ---------------------------------------------------------------------------------------------------------- 1,993,818 Stow, MA, 3.50% BANs, 2/4/2000 1,995,827 - ---------------------------------------------------------------------------------------------------------- 7,000,000 Topsfield, MA, 4.25% BANs, 9/22/2000 7,034,261 - ---------------------------------------------------------------------------------------------------------- 3,000,000 Westfield, MA, 4.00% BANs, 2/1/2000 3,003,302 - ---------------------------------------------------------------------------------------------------------- 11,000,000 Westford, MA, 3.50% BANs, 4/14/2000 11,016,807 - ---------------------------------------------------------------------------------------------------------- 6,120,000 Weymouth, MA Housing Authority, PT 1062, Weekly VRDNs (Queen Ann 6,120,000 Apartments)/(Merrill Lynch Capital Services, Inc. LIQ)/(Merrill Lynch Capital Services, Inc. LOC) - ---------------------------------------------------------------------------------------------------------- 3,300,000 Weymouth, MA, 3.50% BANs, 4/12/2000 3,304,980 - ---------------------------------------------------------------------------------------------------------- 2,733,000 Yarmouth, MA, 3.50% BANs, 11/19/1999 2,733,330 - ---------------------------------------------------------------------------------------------------------- Total 599,950,707 - ---------------------------------------------------------------------------------------------------------- Puerto Rico--1.3% - ---------------------------------------------------------------------------------------------------------- 8,000,000 Commonwealth of Puerto Rico, Floating Rate Trust Receipts (Series 8,000,000 1997) Weekly VRDNs (Commerzbank AG, Frankfurt LIQ)/ (Commerzbank AG, Frankfurt LOC) - ---------------------------------------------------------------------------------------------------------- Total Investments (at amortized cost)(3) $ 607,950,707 - ----------------------------------------------------------------------------------------------------------
(1) The Fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The Fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: TIER RATING BASED ON TOTAL MARKET VALUE (UNAUDITED) First Tier Second Tier 100% 0% (2) Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the Fund's Board of Trustees. At October 31, 1999, these securities amounted to $13,380,000, which represents 2.2% of net assets. (3) Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($611,151,273) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC--American Municipal Bond Assurance Corporation AMT--Alternative Minimum Tax BANs--Bond Anticipation Notes CP--Commercial Paper FGIC--Financial Guaranty Insurance Company FSA--Financial Security Assurance HEFA--Health and Education Facilities Authority HFA--Housing Finance Authority IFA--Industrial Finance Authority INS--Insured LIQ(s)--Liquidity Agreement(s) LOC--Letter of Credit MBIA--Municipal Bond Investors Assurance PRF--Prerefunded TOBs--Tender Option Bonds Assets: Total investments in securities, at amortized cost and value $ 607,950,707 - -------------------------------------------------------------------------------------------------------------- Cash 224,818 - -------------------------------------------------------------------------------------------------------------- Income receivable 3,683,267 - -------------------------------------------------------------------------------------------------------------- Receivable for shares sold 25,372 - -------------------------------------------------------------------------------------------------------------- Prepaid expenses 64,519 - -------------------------------------------------------------------------------------------------------------- Total Assets 611,948,683 - -------------------------------------------------------------------------------------------------------------- Liabilities: - -------------------------------------------------------------------------------------------------------------- Payable for shares redeemed $ 56,198 - -------------------------------------------------------------------------------------------------------------- Income distribution payable 690,364 - -------------------------------------------------------------------------------------------------------------- Payable for transfer and dividend disbursing agent fees and expenses 17,992 - -------------------------------------------------------------------------------------------------------------- Accrued expenses 32,856 - -------------------------------------------------------------------------------------------------------------- Total Liabilities 797,410 - -------------------------------------------------------------------------------------------------------------- Net Assets for 611,151,273 shares outstanding $ 611,151,273 - -------------------------------------------------------------------------------------------------------------- Net Asset Value, Offering Price and Redemption Proceeds Per Share: - -------------------------------------------------------------------------------------------------------------- Institutional Service Shares: - -------------------------------------------------------------------------------------------------------------- $411,291,550 / 411,291,550 shares outstanding $ 1.00 - -------------------------------------------------------------------------------------------------------------- Boston 1784 Funds Shares: - -------------------------------------------------------------------------------------------------------------- $199,859,723 / 199,859,723 shares outstanding $ 1.00 - --------------------------------------------------------------------------------------------------------------
(See Notes which are an integral part of the Financial Statements) Massachusetts Municipal Cash Trust Statement of Operations Year Ended October 31, 1999
Investment Income: - ---------------------------------------------------------------------------------------------------------------------------------- Interest $16,698,245 - ---------------------------------------------------------------------------------------------------------------------------------- Expenses: - ---------------------------------------------------------------------------------------------------------------------------------- Investment advisory fee $ 2,574,407 - ---------------------------------------------------------------------------------------------------------------------------------- Administrative personnel and services fee 388,221 - ---------------------------------------------------------------------------------------------------------------------------------- Custodian fees 27,162 - ---------------------------------------------------------------------------------------------------------------------------------- Transfer and dividend disbursing agent fees and expenses 104,820 - ---------------------------------------------------------------------------------------------------------------------------------- Directors'/Trustees' fees 3,894 - ---------------------------------------------------------------------------------------------------------------------------------- Auditing fees 12,669 - ---------------------------------------------------------------------------------------------------------------------------------- Legal fees 6,676 - ---------------------------------------------------------------------------------------------------------------------------------- Portfolio accounting fees 117,376 - ---------------------------------------------------------------------------------------------------------------------------------- Shareholder services fee--Institutional Service Shares 813,784 - ---------------------------------------------------------------------------------------------------------------------------------- Shareholder services fee--Boston 1784 Funds Shares 473,469 - ---------------------------------------------------------------------------------------------------------------------------------- Share registration costs 10,315 - ---------------------------------------------------------------------------------------------------------------------------------- Printing and postage 29,332 - ---------------------------------------------------------------------------------------------------------------------------------- Insurance premiums 25,814 - ---------------------------------------------------------------------------------------------------------------------------------- Miscellaneous 2,542 - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses 4,590,481 - ---------------------------------------------------------------------------------------------------------------------------------- Waivers-- - ---------------------------------------------------------------------------------------------------------------------------------- Waiver of investment advisory fee $(493,904) - ---------------------------------------------------------------------------------------------------------------------------------- Waiver of shareholder services fee--Institutional - ---------------------------------------------------------------------------------------------------------------------------------- Service Shares (790,809) - ---------------------------------------------------------------------------------------------------------------------------------- Waiver of shareholder services fee--Boston 1784 - ---------------------------------------------------------------------------------------------------------------------------------- Funds Shares (473,469) - ---------------------------------------------------------------------------------------------------------------------------------- Total waivers (1,758,182) - ---------------------------------------------------------------------------------------------------------------------------------- Net expenses 2,832,299 - ---------------------------------------------------------------------------------------------------------------------------------- Net investment income $13,865,946 - ----------------------------------------------------------------------------------------------------------------------------------
(See Notes which are an integral part of the Financial Statements) Massachusetts Municipal Cash Trust Statement of Changes in Net Assets
Year Ended October 31, - --------------------------------------------------------------------------------------------------------------- 1999 1998 - --------------------------------------------------------------------------------------------------------------- Increase (Decrease) in Net Assets: - --------------------------------------------------------------------------------------------------------------- Operations-- - --------------------------------------------------------------------------------------------------------------- Net investment income $ 13,865,946 $ 10,788,205 - --------------------------------------------------------------------------------------------------------------- Distributions to Shareholders-- - --------------------------------------------------------------------------------------------------------------- Distributions from net investment income - --------------------------------------------------------------------------------------------------------------- Institutional Service Shares (8,784,162) (6,723,838) - --------------------------------------------------------------------------------------------------------------- Boston 1784 Funds Shares (5,081,784) (4,064,367) - --------------------------------------------------------------------------------------------------------------- CHANGE IN NET ASSETS RESULTING FROM - --------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS (13,865,946) (10,788,205) - --------------------------------------------------------------------------------------------------------------- Share Transactions-- - --------------------------------------------------------------------------------------------------------------- Proceeds from sale of shares 1,530,820,679 1,191,190,660 - --------------------------------------------------------------------------------------------------------------- Net asset value of shares issued to shareholders in payment of - --------------------------------------------------------------------------------------------------------------- distributions declared 8,213,858 5,640,601 - --------------------------------------------------------------------------------------------------------------- Cost of shares redeemed (1,346,826,355) (993,594,809) - --------------------------------------------------------------------------------------------------------------- Change in net assets resulting from 192,208,182 203,236,452 share transactions - --------------------------------------------------------------------------------------------------------------- Change in net assets 192,208,182 203,236,452 - --------------------------------------------------------------------------------------------------------------- Net Assets: - --------------------------------------------------------------------------------------------------------------- Beginning of period 418,943,091 215,706,639 - --------------------------------------------------------------------------------------------------------------- End of period $ 611,151,273 $ 418,943,091 - ---------------------------------------------------------------------------------------------------------------
(See Notes which are an integral part of the Financial Statements) Massachusetts Municipal Cash Trust Notes to Financial Statements October 31, 1999 Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Massachusetts Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Service Shares and Boston 1784 Funds Shares. The investment objective of the Fund is to provide current income exempt from federal regular income tax and Massachusetts state income tax consistent with stability of principal. (2) Significant Accounting Policies The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. Investment Valuations The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. Investment Income, Expenses and Distributions Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend date. Federal Taxes It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary. When-Issued and Delayed Delivery Transactions The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Restricted Securities Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees ("Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. Other Investment transactions are accounted for on the trade date. (3) Shares of Beneficial Interest The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $611,151,273. Transactions in shares were as follows:
Year Ended October 31, - ---------------------------------------------------------------------------------------------------- 1999 1998 - ---------------------------------------------------------------------------------------------------- Institutional Service Shares: Shares Shares - ---------------------------------------------------------------------------------------------------- Shares sold 1,280,366,882 943,828,322 - ---------------------------------------------------------------------------------------------------- Shares issued to shareholders in payment of distributions declared 3,158,407 1,573,009 - ---------------------------------------------------------------------------------------------------- Shares redeemed (1,128,619,379) (830,885,045) - ---------------------------------------------------------------------------------------------------- Net Change Resulting From Institutional Service Share Transactions 154,905,910 114,516,286 - ----------------------------------------------------------------------------------------------------
Year Ended October 31, - ---------------------------------------------------------------------------------------------------- 1999 1998 - ---------------------------------------------------------------------------------------------------- Boston 1784 Funds Shares: Shares Shares - ---------------------------------------------------------------------------------------------------- Shares sold 250,453,797 247,362,338 - ---------------------------------------------------------------------------------------------------- Shares issued to shareholders in payment of distributions declared 5,055,451 4,067,592 - ---------------------------------------------------------------------------------------------------- Shares redeemed (218,206,976) (162,709,764) - ---------------------------------------------------------------------------------------------------- Net Change Resulting from Boston 1784 Funds Share Transactions 37,302,272 88,720,166 - ---------------------------------------------------------------------------------------------------- Net Change Resulting from Share Transactions 192,208,182 203,236,452 - ----------------------------------------------------------------------------------------------------
(4) Investment Advisory Fee and Other Transactions with Affiliates Investment Advisory Fee Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. Administrative Fee Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. Shareholder Services Fee Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Institutional Service Shares for the period. Under the terms of a Shareholder Services Agreement with BankBoston, N.A., the Fund will pay BankBoston, N.A. up to 0.25% of average daily net assets of Boston 1784 Funds Shares for the period. These fees are used to finance certain services for shareholders and to maintain shareholder accounts. FSSC and BankBoston, N.A. may voluntarily choose to waive any portion of their fees. FSSC and BankBoston, N.A. can modify or terminate these voluntary waivers at any time at their sole discretion. Transfer and Dividend Disbursing Agent Fees and Expenses FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. Portfolio Accounting Fees FServ maintains the Fund's accounting records, for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. Interfund Transactions During the year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $714,240,341 and $677,099,000, respectively. General Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. (5) Concentration of Credit Risk Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 48.7% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 13.5% of total investments. (6) Year 2000 (Unaudited) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. (7) Change of Independent Auditors (Unaudited) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF MASSACHUSETTS MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Massachusetts Municipal Cash Trust (one of the portfolios constituting Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Massachusetts Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts December 16, 1999 Trustees John F. Donahue Thomas G. Bigley John T. Conroy, Jr. John F. Cunningham Lawrence D. Ellis, M.D. Peter E. Madden Charles F. Mansfield, Jr. John E. Murray, Jr., J.D., S.J.D. Marjorie P. Smuts John S. Walsh Officers John F. Donahue Chairman Glen R. Johnson President J. Christopher Donahue Executive Vice President Edward C. Gonzales Executive Vice President John W. McGonigle Executive Vice President and Secretary Richard B. Fisher Vice President Richard J. Thomas Treasurer Leslie K. Ross Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. Annual Report Money Market Funds . Boston 1784 Tax-Free Money Market Fund . Boston 1784 U.S. Treasury Money Market Fund . Boston 1784 Institutional U.S. Treasury Money Market Fund . Boston 1784 Prime Money Market Fund . Boston 1784 Institutional Prime Money Market Fund . Massachusetts Municipal Cash Trust-Boston 1784 Funds Shares Bond Funds . Boston 1784 Short-Term Income Fund . Boston 1784 Income Fund . Boston 1784 U.S. Government Medium-Term Income Fund Tax-Exempt Income Funds . Boston 1784 Tax-Exempt Medium-Term Income Fund . Boston 1784 Connecticut Tax-Exempt Income Fund . Boston 1784 Florida Tax-Exempt Income Fund . Boston 1784 Massachusetts Tax-Exempt Income Fund . Boston 1784 Rhode Island Tax-Exempt Income Fund Stock Funds . Boston 1784 Asset Allocation Fund . Boston 1784 Growth and Income Fund . Boston 1784 Growth Fund . Boston 1784 International Equity Fund For more complete information about other Boston 1784 Funds, please call 1-800- BKB-1784 for a prospectus, which you should read carefully before investing. Boston 1784 Funds/S/M P.O. Box 8524 Boston, MA 02266-8524 1-800-BKB-1784 www.boston1784funds.com Federated Securities Corp. is the distributor for this Fund. Cusip 314229832 (Federated use only) G00191-03 (12/99) MF-0192 (12/99) Massachusetts Municipal Cash Trust [Boston funds logo] Boston 1784 Funds Shares Annual Report to Shareholders October 31, 1999 ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Massachusetts Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial Highlights tables are provided for the fund's Institutional Service Shares and Boston 1784 Funds Shares. The fund is a convenient way to keep your ready cash pursuing double tax-free income-free from federal regular income tax and Massachusetts state income tax-through a portfolio concentrated in high-quality, short-term Massachusetts municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share for both Institutional Service Shares and Boston 1784 Funds Shares. The fund's total net assets reached $611.2 million at the end of the reporting period. Thank you for relying on Massachusetts Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Mary Jo Ochson, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? At the beginning of the reporting period, the fund's average maturity was approximately 55 days. The fund remained in a 45- to 50-day average maturity range over the reporting period, and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. After an average maturity range was targeted, we attempted to maximize performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first and second quarters of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.5% 1 MASSACHUSETTS-98.2% $ 23,166,000 ABN AMRO MuniTOPS Certificates Trust (Massachusetts Non-AMT) (Series 1998-12) Weekly VRDNs (Massachusetts Water Resources Authority)/(MBIA INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) $ 23,166,000 3,089,067 Carlisle, MA, 4.00% BANs, 7/3/2000 3,099,062 14,940,000 Clipper Tax-Exempt Certificates Trust (Massachusetts Non-AMT) (Series 1999-1) Weekly VRDNs (Massachusetts State HFA)/(MBIA INS)/(State Street Bank and Trust Co. LIQ) 14,940,000 46,213,470 Clipper Tax-Exempt Trust (Series A) Weekly VRDNs (Massachusetts State Lottery Commission)/(AMBAC INS)/(State Street Bank and Trust Co. LIQ) 46,213,470 3,000,000 Commonwealth of Massachusetts, Weekly VRDNs (AMBAC INS)/(Citibank N.A., New York LIQ) 3,000,000 15,200,000 Commonwealth of Massachusetts (Series 1997 B) Weekly VRDNs (Landesbank Hessen- Thueringen, Frankfurt LIQ) 15,200,000 1,245,000 Commonwealth of Massachusetts, Floater Certificates (Series 1998- 132) Weekly VRDNs (FSA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 1,245,000 4,600,000 Commonwealth of Massachusetts Trust Receipts (FR/RI-A36) Weekly VRDNs (MBIA INS)/(Bayerische Hypotheken-und Vereinsbank AG LIQ) 4,600,000 4,181,000 Danvers, Massachusetts, 4.00% BANs, 7/13/2000 4,195,920 3,000,000 Dighton-Rehobeth, MA Regional School District, 3.53% BANs, 7/6/2000 3,002,548 9,800,000 Freetown-Lakeville, MA Regional School District, 4.10% BANs, 9/28/2000 9,823,557 4,000,000 Gardner, MA, 3.36% BANs, 12/15/1999 4,000,377 5,000,000 Gardner, MA, 3.75% BANs, 12/15/1999 5,002,937 10,000,000 Holden, MA, 4.25% BANs, 3/15/2000 10,019,960 10,500,000 Holliston, MA, 4.00% BANs, 12/15/1999 10,509,450 8,000,000 Marshfield, MA, 3.75% BANs, 11/2/1999 8,000,048 6,885,000 Massachusetts Bay Transit Authority (Series 1999) Weekly VRDNs (Commerzbank AG, Frankfurt LIQ) 6,885,000 7,200,000 Massachusetts Bay Transit Authority (Series A) 3.50% BANs, 2/25/2000 7,201,260 11,000,000 Massachusetts Bay Transit Authority (Series D) 3.60% CP (Commerzbank AG, Frankfurt and Morgan Guaranty Trust Co., New York LIQs), Mandatory Tender 12/1/1999 11,000,000 34,000,000 Massachusetts Bay Transit Authority (Series 1999 FR/RI-A36) Weekly VRDNs (Bank of New York, New York LIQ) 34,000,000 24,750,000 Massachusetts Bay Transit Authority BOCM Municipal Trust Certificate MTC #34, Weekly VRDNs (FGIC INS)/(Bank One Capital Holdings Corp. LIQ) 24,750,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MASSACHUSETTS-CONTINUED $ 3,000,000 Massachusetts Development Finance Agency (Series 1998A) Weekly VRDNs (Shady Hill School)/(State Street Bank and Trust Co. LOC) $ 3,000,000 2,400,000 Massachusetts HEFA, Weekly VRDNs (Harvard University) 2,400,000 1,750,000 Massachusetts HEFA (Series 1999) Weekly VRDNs (CIL Realty of Massachusetts)/(Credit Local de France LOC) 1,750,000 15,400,000 Massachusetts HEFA (Series A) Weekly VRDNs (Brigham & Women's Hospital)/(Landesbank Hessen-Thueringen, Frankfurt LOC) 15,400,000 1,800,000 Massachusetts HEFA (Series B) Weekly VRDNs (Clark University)/ (Fleet Bank N.A. LOC) 1,800,000 4,525,000 Massachusetts HEFA (Series B) Weekly VRDNs (Endicott College)/ (BankBoston, N.A. LOC) 4,525,000 12,545,000 Massachusetts HEFA (Series B) Weekly VRDNs (Hallmark Health System)/ (FSA INS)/(Fleet National Bank, Springfield, MA LIQ) 12,545,000 10,000,000 Massachusetts HEFA (Series F) Weekly VRDNs (Children's Hospital of Boston)/(Landesbank Hessen-Thueringen, Frankfurt LIQ) 10,000,000 9,420,000 Massachusetts HEFA (Series I) Weekly VRDNs (Harvard University) 9,420,000 7,000,000 Massachusetts HEFA, 3.50% CP (Harvard University) Mandatory Tender 11/1/1999 7,000,000 2,450,000 Massachusetts HEFA, Floater Certificates (Series 1998-80) Weekly VRDNs (Stonehill College)/(MBIA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 2,450,000 1,800,000 Massachusetts IFA (Series 1992) Weekly VRDNs (Holyoke Water Power Co.)/(Canadian Imperial Bank of Commerce LOC) 1,800,000 10,000,000 Massachusetts IFA (Series 1992B) 3.40% CP (New England Power Co.) Mandatory Tender 11/17/1999 10,000,000 10,000,000 Massachusetts IFA (Series 1992B) 3.70% CP (New England Power Co.) Mandatory Tender 2/28/2000 10,000,000 6,000,000 Massachusetts IFA (Series 1992B) 3.70% CP (New England Power Co.) Mandatory Tender 2/29/2000 6,000,000 5,900,000 Massachusetts IFA (Series 1994) Weekly VRDNs (Nova Realty Trust)/(Fleet National Bank, Springfield, MA LOC) 5,900,000 5,925,000 Massachusetts IFA (Series 1995) Weekly VRDNs (Goddard House)/ (Fleet Bank N.A. LOC) 5,925,000 7,200,000 Massachusetts IFA (Series 1995) Weekly VRDNs (Whitehead Institute for Biomedical Research) 7,200,000 6,919,000 Massachusetts IFA (Series 1996) Weekly VRDNs (Newbury College)/ (BankBoston, N.A. LOC) 6,919,000 2,500,000 Massachusetts IFA (Series 1997) Weekly VRDNs (Massachusetts Society for the Prevention of Cruelty to Animals)/(Fleet National Bank, Springfield, MA LOC) 2,500,000 5,885,000 Massachusetts IFA (Series 1997) Weekly VRDNs (Mount Ida College)/(Credit Local de France LOC) 5,885,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MASSACHUSETTS-CONTINUED $ 5,965,000 Massachusetts IFA (Series 1998A) Weekly VRDNs (JHC Assisted Living Corp.)/(Fleet National Bank, Springfield, MA LOC) $ 5,965,000 1,225,000 Massachusetts IFA (Series A) Weekly VRDNs (Hockomock YMCA)/(Bank of Nova Scotia, Toronto LOC) 1,225,000 9,740,000 Massachusetts IFA (Series B) Weekly VRDNs (Williston North Hampton School)/(Fleet National Bank, Springfield, MA LOC) 9,740,000 14,000,000 Massachusetts Municipal Wholesale Electric Co., Power Supply System Revenue Bonds (Series 1994 C) Weekly VRDNs (Canadian Imperial Bank of Commerce LOC) 14,000,000 9,290,000 2 Massachusetts State HFA, PT-162, 3.25% TOBs (MBIA INS)/(Banque Nationale de Paris LIQ), Optional Tender 2/10/2000 9,290,000 3,255,000 Massachusetts State (Series 1999 SG 126) Weekly VRDNs (Societe Generale, Paris LIQ) 3,255,000 27,545,000 Massachusetts Turnpike Authority, Variable Rate Certificates (Series 1997N) Weekly VRDNs (MBIA INS)/(Bank of America, N.A. LIQ) 27,545,000 4,090,000 2 Massachusetts Water Pollution Abatement Trust Pool (PT-1185) 3.80% TOBs (Merrill Lynch Capital Services, Inc. LIQ) Optional Tender 9/7/2000 4,090,000 10,000,000 Massachusetts Water Resources Authority (Series 1994) 3.50% CP (Morgan Guaranty Trust Co., New York LOC) Mandatory Tender 1/20/2000 10,000,000 4,200,000 Massachusetts Water Resources Authority (Series 1994) 3.60% CP (Morgan Guaranty Trust Co., New York LOC) Mandatory Tender 1/27/2000 4,200,000 5,500,000 Massachusetts Water Resources Authority (Series 1999B) Weekly VRDNs (Landesbank Hessen- Thueringen, Frankfurt LOC) 5,500,000 2,110,000 Massachusetts Water Resources Authority (Series A) Bonds (United States Treasury PRF) 7.625%, 4/1/2000 (@102) 2,168,408 4,403,100 Maynard, MA, 4.25% BANs, 9/29/2000 4,418,526 1,940,000 Medway, MA, 3.32% BANs, 3/14/2000 1,940,477 15,000,000 Middleborough, MA, 4.00% BANs, 12/29/1999 15,016,050 14,662,345 Middleborough, MA, 4.05% BANs, 12/29/1999 14,672,653 5,025,000 New England Educational Loan Marketing Corp., Series H, Bonds, 4.75% 12/1/1999 5,031,130 2,426,250 Newbury, MA, 4.00% BANs, 8/11/2000 2,432,611 3,350,000 Norwood, MA, 4.00% BANs, 8/16/2000 3,358,910 8,000,000 Pittsfield, MA, 4.25% BANs, 9/15/2000 8,031,970 2,651,000 Randolph, MA, 4.00% BANs, 6/16/2000 2,654,996 3,500,000 Richmond, MA, 3.75% BANs, 6/1/2000 3,507,496 5,270,000 South Hadley, MA, 4.15% BANs, 8/11/2000 5,287,763 6,250,000 Springfield, MA, 4.25% BANs (Fleet National Bank, Springfield, MA LOC) 3/2/2000 6,263,365 9,300,000 Sterling, MA, 3.75% BANs, 2/25/2000 9,307,192 2,141,500 Stoughton, MA, 3.20% BANs, 12/16/1999 2,141,865 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MASSACHUSETTS-CONTINUED $ 1,424,000 Stow, MA, 3.50% BANs, 2/15/2000 $ 1,425,199 1,993,818 Stow, MA, 3.50% BANs, 2/4/2000 1,995,827 7,000,000 Topsfield, MA, 4.25% BANs, 9/22/2000 7,034,261 3,000,000 Westfield, MA, 4.00% BANs, 2/1/2000 3,003,302 11,000,000 Westford, MA, 3.50% BANs, 4/14/2000 11,016,807 6,120,000 Weymouth, MA Housing Authority, PT 1062, Weekly VRDNs (Queen Ann Apartments)/(Merrill Lynch Capital Services, Inc. LIQ)/(Merrill Lynch Capital Services, Inc. LOC) 6,120,000 3,300,000 Weymouth, MA, 3.50% BANs, 4/12/2000 3,304,980 2,733,000 Yarmouth, MA, 3.50% BANs, 11/19/1999 2,733,330 TOTAL 599,950,707 PUERTO RICO-1.3% 8,000,000 Commonwealth of Puerto Rico, Floating Rate Trust Receipts (Series 1997) Weekly VRDNs (Commerzbank AG, Frankfurt LIQ)/(Commerzbank AG, Frankfurt LOC) 8,000,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 607,950,707
1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER 100% 0%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $13,380,000, which represents 2.2% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($611,151,273) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation AMT -Alternative Minimum Tax BANs -Bond Anticipation Notes CP -Commercial Paper FGIC -Financial Guaranty Insurance Company FSA -Financial Security Assurance HEFA -Health and Education Facilities Authority HFA -Housing Finance Authority IFA -Industrial Finance Authority INS -Insured LIQ(s) -Liquidity Agreement(s) LOC -Letter of Credit MBIA - -Municipal Bond Investors Assurance PRF -Prerefunded TOBs -Tender Option Bonds VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 607,950,707 Cash 224,818 Income receivable 3,683,267 Receivable for shares sold 25,372 Prepaid expenses 64,519 TOTAL ASSETS 611,948,683 LIABILITIES: Payable for shares redeemed $ 56,198 Income distribution payable 690,364 Payable for transfer and dividend disbursing agent fees and expenses 17,992 Accrued expenses 32,856 TOTAL LIABILITIES 797,410 Net assets for 611,151,273 shares outstanding $ 611,151,273 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SERVICE SHARES: $411,291,550 / 411,291,550 shares outstanding $1.00 BOSTON 1784 FUNDS SHARES: $199,859,723 / 199,859,723 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 16,698,245 EXPENSES: Investment advisory fee $ 2,574,407 Administrative personnel and services fee 388,221 Custodian fees 27,162 Transfer and dividend disbursing agent fees and expenses 104,820 Directors'/Trustees' fees 3,894 Auditing fees 12,669 Legal fees 6,676 Portfolio accounting fees 117,376 Shareholder services fee - Institutional Service Shares 813,784 Shareholder services fee - Boston 1784 Funds Shares 473,469 Share registration costs 10,315 Printing and postage 29,332 Insurance premiums 25,814 Miscellaneous 2,542 TOTAL EXPENSES 4,590,481 WAIVERS: Waiver of investment advisory fee $ (493,904) Waiver of shareholder services fee - Institutional Service Shares (790,809) Waiver of shareholder services fee - Boston 1784 Funds Shares (473,469) TOTAL WAIVERS (1,758,182) Net expenses 2,832,299 Net investment income $ 13,865,946
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 13,865,946 $ 10,788,205 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Service Shares (8,784,162) (6,723,838) Boston 1784 Funds Shares (5,081,784) (4,064,367) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (13,865,946) (10,788,205) SHARE TRANSACTIONS: Proceeds from sale of shares 1,530,820,679 1,191,190,660 Net asset value of shares issued to shareholders in payment of distributions declared 8,213,858 5,640,601 Cost of shares redeemed (1,346,826,355) (993,594,809) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 192,208,182 203,236,452 Change in net assets 192,208,182 203,236,452 NET ASSETS: Beginning of period 418,943,091 215,706,639 End of period $ 611,151,273 $ 418,943,091
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN 1 2.71% 3.04% 3.09% 3.07% 3.34% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.90% 0.91% 0.95% 0.97% 1.00% Net investment income 2 2.35% 2.62% 2.65% 2.60% 2.85% Expenses (after waivers) 0.56% 0.55% 0.55% 0.55% 0.55% Net investment income (after waivers) 2.69% 2.98% 3.05% 3.02% 3.30% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $411,292 $256,386 $141,869 $119,739 $99,628
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Financial Highlights-Boston 1784 Funds Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 TOTAL RETURN 1 2.70% 3.03% 3.07% 3.05% 3.30% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.91% 0.93% 0.96% 1.00% 1.05% Net investment income 2 2.32% 2.61% 2.64% 2.59% 2.80% Expenses (after waivers) 0.56% 0.57% 0.57% 0.58% 0.60% Net investment income (after waivers) 2.67% 2.97% 3.03% 3.01% 3.25% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $199,860 $162,557 $73,837 $54,667 $46,580
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Massachusetts Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Service Shares and Boston 1784 Funds Shares. The investment objective of the Fund is to provide current income exempt from federal regular income tax and Massachusetts state income tax consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees ("Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $611,151,273. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 1,280,366,882 943,828,322 Shares issued to shareholders in payment of distributions declared 3,158,407 1,573,009 Shares redeemed (1,128,619,379) (830,885,045) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS 154,905,910 114,516,286 YEAR ENDED OCTOBER 31 1999 1998 BOSTON 1784 FUNDS SHARES: Shares sold 250,453,797 247,362,338 Shares issued to shareholders in payment of distributions declared 5,055,451 4,067,592 Shares redeemed (218,206,976) (162,709,764) NET CHANGE RESULTING FROM BOSTON 1784 FUNDS SHARE TRANSACTIONS 37,302,272 88,720,166 NET CHANGE RESULTING FROM SHARE TRANSACTIONS 192,208,182 203,236,452
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Institutional Service Shares for the period. Under the terms of a Shareholder Services Agreement with BankBoston, N.A., the Fund will pay BankBoston, N.A., up to 0.25% of average daily net assets of the Boston 1784 Funds Shares for the period. These fees are used to finance certain services for shareholders and to maintain shareholder accounts. FSSC and BankBoston, N.A. may voluntarily choose to waive any portion of their fees. FSSC and BankBoston, N.A. can modify or terminate these voluntary waivers at any time at their sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $714,240,341 and $677,099,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 48.7% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 13.5% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF MASSACHUSETTS MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Massachusetts Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Massachusetts Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President EDWARD C. GONZALES Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Massachusetts Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Massachusetts Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229303 Cusip 314229832 G00191-04 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Maryland Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. The fund is a convenient way to put your ready cash to work pursuing double tax-free income - free from federal regular income tax and Maryland personal income tax - through a portfolio concentrated in high-quality, short-term Maryland municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends of $0.03 per share. The fund's net assets reached $46.7 million at the end of the reporting period. Thank you for relying on Maryland Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Michael Sirianni, Jr., Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? At the beginning of the reporting period, the fund's average maturity was approximately 47 days. The fund remained in a 45- to 50-day average maturity range over the reporting period, and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. After an average maturity range was targeted, we attempted to maximize performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first and second quarters of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.1% 1 MARYLAND-99.1% $ 2,000,000 Anne Arundel County, MD, EDRB (Series 1988) 3.80% CP (Baltimore Gas & Electric Co.), Mandatory Tender 2/11/2000 $ 2,000,000 2,075,000 Baltimore County, MD IDA (Series 1994A) Weekly VRDNs (Pitts Realty Limited Partnership)/(PNC Bank, Delaware LOC) 2,075,000 2,100,000 Baltimore County, MD Port Facility Monthly VRDNs (Occidental Petroleum Corp.)/(Morgan Guaranty Trust Co., New York LOC) 2,100,000 1,450,000 Baltimore County, MD, Revenue Bonds (1994 Issue) Weekly VRDNs (Direct Marketing Associates, Inc. Facility)/(Allfirst LOC) 1,450,000 1,000,000 Baltimore, MD PCR Weekly VRDNs (SCM Plants, Inc.)/(Barclays Bank PLC, London LOC) 1,000,000 500,000 Baltimore, MD Wastewater (Series A) 6.50% Bonds (United States Treasury PRF), 7/1/2000 508,901 2,000,000 Baltimore, MD Water Utility (Series A) 6.50% Bonds (United States Treasury PRF), 7/1/2000 2,034,399 1,000,000 Carroll County, MD, Variable Rate Economic Development Refunding Revenue Bonds (Series 1995B) Weekly VRDNs (Evapco, Inc. Project)/(Bank of America, N.A. LOC) 1,000,000 1,000,000 Frederick County, MD (Series 1997E) Weekly VRDNs (Buckinghams Choice, Inc.)/(LaSalle National Bank, Chicago LOC) 1,000,000 2,170,000 Harford County, MD, EDRB (Series 1996) Weekly VRDNs (Citrus and Allied Essences Ltd.)/(Allfirst LOC) 2,170,000 1,750,000 Maryland EDC, Tax Exempt Adjustable Mode IDRBs (Series 1998) Weekly VRDNs (Morrison Health Care, Inc.)/(Wachovia Bank of NC, N.A. LOC) 1,750,000 840,000 Maryland EDC, Variable Rate Demand/Fixed Rate Refunding Revenue Bonds (1997 Issue) Weekly VRDNs (Jenkins Memorial Nursing Home, Inc. Facility)/(Allfirst LOC) 840,000 1,000,000 Maryland Health & Higher Educational Facilities Authority, 6.75% Bonds (Francis Scott Key Medical Center)/(United States Treasury PRF), 7/1/2000 1,042,167 4,375,000 Maryland Industrial Development Financing Authority, Special Facility Airport Revenue Bonds (Series 1999) 3.35% TOBs (Signature Flight Support Corp.)/(Bayerische Landesbank Girozentrale LOC), Optional Tender 12/1/1999 4,375,000 1,920,000 Maryland State Community Development Administration, (Series 1990A) Weekly VRDNs (College Estates)/(Allfirst LOC) 1,920,000 1,950,000 Maryland State Community Development Administration, (Series 1990B) Weekly VRDNs (Cherry Hill Apartment Ltd.)/(Bank of America, N.A. LOC) 1,950,000 1,800,000 Maryland State Energy Financing Administration, Annual Tender Solid Waste Disposal Revenue Refunding Bonds, 4.35% TOBs (Nevamar Corp.)/(International Paper Co. GTD), Optional Tender 9/1/2000 1,800,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MARYLAND-CONTINUED $ 2,125,000 Maryland State Energy Financing Administration, Limited Obligation Variable Rate Demand Revenue Bonds (Series 1996) Weekly VRDNs (Keywell LLC)/(Bank of America, N.A. LOC) $ 2,125,000 1,740,000 Maryland State IDFA, (1994 Issue) Weekly VRDNs (Baltimore International Culinary College Foundation, Inc.)/(Crestar Bank of Virginia, Richmond LOC) 1,740,000 1,000,000 Maryland State IDFA, EDRBs (Series 1996) Weekly VRDNs (Townsend Culinary, Inc.)/(SunTrust Bank, Atlanta LOC) 1,000,000 3,300,000 Maryland State IDFA, Economic Development Revenue Refunding Bonds (Series 1994) Weekly VRDNs (Johnson Controls, Inc.) 3,300,000 1,000,000 Maryland State IDFA, Limited Obligation EDRBs (Series 1994) Weekly VRDNs (Rock-Tenn Converting Co.)/(SunTrust Bank, Atlanta LOC) 1,000,000 1,170,000 Montgomery County, MD Weekly VRDNs (Information Systems and Networks Corp.)/(PNC Bank, N.A. LOC) 1,170,000 1,345,000 Prince George's County, MD, Equipment Acquisition Program, 3.50% Bonds (MBIA INS) 11/1/1999 1,345,000 2,500,000 Queen Annes County, MD EDR (Series 1994) 3.35% TOBs (Safeway, Inc.)/(Bankers Trust Co., New York LOC) Mandatory Tender 12/1/1999 2,500,000 1,000,000 Washington Suburban Sanitation District, MD, 6.90% Bonds (United States Treasury PRF) 6/1/2000 1,040,241 1,000,000 Washington Suburban Sanitation District, MD, 6.90% Bonds (United States Treasury PRF) 6/1/2000 1,040,060 1,000,000 Wicomico County, MD, EDRB (Series 1994) Weekly VRDNs (Field Container Co. LP)/(Northern Trust Co., Chicago, IL LOC) 1,000,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 2 $ 46,275,768
Securities that are subject to alternative minimum tax represent 57.9% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG1-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Percentage Based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER 96.1% 3.9%
2 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($46,707,257) at October 31, 1999. The following acronyms are used throughout this portfolio: CP -Commercial Paper EDC -Economic Development Commission EDR -Economic Development Revenue EDRB(s) -Economic Development Revenue Bond(s) GTD - -Guaranteed IDA -Industrial Development Authority IDRBs -Industrial Development Revenue Bonds IDFA -Industrial Development Finance Authority INS -Insured LOC - -Letter of Credit MBIA -Municipal Bond Investors Assurance PCR -Pollution Control Revenue PRF -Prerefunded TOBs -Tender Option Bonds VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 46,275,768 Cash 113,864 Income receivable 360,932 Receivable for shares sold 74 TOTAL ASSETS 46,750,638 LIABILITIES: Payable for shares redeemed $ 2,401 Income distribution payable 15,053 Accrued expenses 25,927 TOTAL LIABILITIES 43,381 Net assets for 46,707,257 shares outstanding $ 46,707,257 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: $46,707,257 / 46,707,257 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 1,996,040 EXPENSES: Investment advisory fee $ 296,658 Administrative personnel and services fee 125,000 Custodian fees 3,232 Transfer and dividend disbursing agent fees and expenses 35,777 Directors'/Trustees' fees 1,885 Auditing fees 12,236 Legal fees 5,136 Portfolio accounting fees 40,171 Shareholder services fee 148,329 Share registration costs 19,435 Printing and postage 10,976 Insurance premiums 5,360 Miscellaneous 7,519 TOTAL EXPENSES 711,714 WAIVERS: Waiver of investment advisory fee $ (287,632) Waiver of shareholder services fee (5,933) TOTAL WAIVERS (293,565) Net expenses 418,149 Net investment income $ 1,577,891
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 1,577,891 $ 1,724,927 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income (1,577,891) (1,724,927) SHARE TRANSACTIONS: Proceeds from sale of shares 192,137,306 162,453,813 Net asset value of shares issued to shareholders in payment of distributions declared 1,216,922 1,432,310 Cost of shares redeemed (212,783,291) (143,324,566) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (19,429,063) 20,561,557 Change in net assets (19,429,063) 20,561,557 NET ASSETS: Beginning of period 66,136,320 45,574,763 End of period $ 46,707,257 $ 66,136,320
See Notes which are an integral part of the Financial Statements Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.69% 3.05% 3.10% 3.11% 3.36% RATIOS TO AVERAGE NET ASSETS: Expenses 2 1.20% 1.21% 1.32% 1.30% 1.15% Net investment income 2 2.16% 2.49% 2.42% 2.44% 2.80% Expenses (after waivers and reimbursements) 0.70% 0.70% 0.69% 0.65% 0.65% Net investment income (after waivers and reimbursements) 2.66% 3.00% 3.05% 3.09% 3.30% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $46,707 $66,136 $45,575 $54,286 $51,400
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Maryland Municipal Cash Trust (the "Fund"), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is current income exempt from federal regular income tax and the personal income taxes imposed by the State of Maryland and Maryland municipalities consistent with stability of principal and liquidity. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Board of Trustees (the "Trustees") to issue an unlimited number of full and fractional shares of beneficial interest (without par value). At October 31, 1999, capital paid-in aggregated $46,707,257. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 Shares sold 192,137,306 162,453,813 Shares issued to shareholders in payment of distributions declared 1,216,922 1,432,310 Shares redeemed (212,783,291) (143,324,566) NET CHANGE RESULTING FROM SHARE TRANSACTIONS (19,429,063) 20,561,557
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Trust shares for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $162,495,000 and $184,301,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 76.3% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 13.8% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Items 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF MARYLAND MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Maryland Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Maryland Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President EDWARD C. GONZALES Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Maryland Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Maryland Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229774 G01175-02 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Michigan Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares and Institutional Service Shares. The fund is a convenient way to put your ready cash to work pursuing double tax-free income-free from federal regular income tax and Michigan personal income tax-through a portfolio concentrated in high-quality, short-term Michigan municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share to shareholders of the fund's Institutional Shares and Institutional Service Shares. The fund's net assets totaled $201.5 million at the end of the reporting period. Thank you for relying on Michigan Municipal Cash Trust to help your ready cash pursue tax-free income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Mary Jo Ochson, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November. Each time the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the reporting period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 3.50% range in April due to traditional tax season selling pressures. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long- term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? At the beginning of the reporting period, the fund's average maturity was approximately 46 days. The fund remained in a 45- to 50-day average maturity target range over the reporting period, and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. After an average maturity range was targeted, we attempted to maximize performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipal securities to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are tight and productivity gains are narrowing, will likely remain on hold until the first quarter of the new year. Additionally, it is positioned for the next move to be a tightening. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.3% 1 MICHIGAN-98.3% $ 800,000 ABN AMRO MuniTOPS Certificates Trust (Michigan Non-AMT) (Series 1998-11) Weekly VRDNs (DeWitt, MI Public Schools)/(FSA INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) $ 800,000 4,000,000 ABN AMRO MuniTOPS Certificates Trust (Michigan Non-AMT) (Series 1998-13) Weekly VRDNs (Michigan State Trunk Line)/(MBIA INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) 4,000,000 1,085,000 Ann Arbor, MI Public School District, 7.00% Bonds (Michigan State GTD), 5/1/2000 1,105,275 3,600,000 Auburn Hills, MI EDC, Limited Obligation Multi- Option Revenue Bonds (Series 1995) Weekly VRDNs (Suburban Tool, Inc.)/(Huntington National Bank, Columbus, OH LOC) 3,600,000 1,000,000 Brighton, MI Area School District, 3.50% Bonds (FSA INS) 5/1/2000 1,001,691 5,700,000 Bruce Township, MI Hospital Finance Authority, Adjustable Rate Tender Securities (Series 1988B) 3.15% TOBs (Sisters of Charity Health Care System)/(MBIA INS)/(Morgan Guaranty Trust Co., New York LIQ), Optional Tender 11/1/1999 5,700,000 3,800,000 Cornell, MI EDC, Industrial Development Revenue Refunding Bonds (Series 1990) 3.55% CP (Mead-Escanaba Paper Co. Project)/(Credit Suisse First Boston LOC) Mandatory Tender 2/14/2000 3,800,000 1,200,000 Dearborn, MI EDC (Series 1990) Weekly VRDNs (Exhibit Productions, Inc. Project)/(Comerica Bank LOC) 1,200,000 5,000,000 Detroit, MI City School District (Series 1999) 4.00% TANs (Michigan State GTD) 6/1/2000 5,022,543 2,850,000 Detroit MI (Series A) 8.70% Bonds (United States Treasury PRF), 4/1/2000 (@102) 2,970,245 1,500,000 Grand Rapids, MI EDC, Economic Development Revenue Refunding Bonds (Series 1991-A) Weekly VRDNs (Amway Hotel Corp.)/(Michigan National Bank, Farmington Hills LOC) 1,500,000 3,000,000 Grand Rapids, MI IDR (Series 1999) Weekly VRDNs (Kent Quality Foods, Inc.)/(Firstar Bank, Milwaukee LOC) 3,000,000 1,500,000 Michigan Higher Education Facilities Authority (Series 1999) Daily VRDNs (Concordia College, Ann Arbor MI)/(Allied Irish Banks PLC LOC) 1,500,000 3,400,000 Michigan Higher Education Student Loan Authority (Series XII-D) Weekly VRDNs (AMBAC INS)/(KBC Bancassurance Holding LIQ) 3,400,000 1,400,000 Michigan Higher Education Student Loan Authority, Refunding Revenue Bonds (Series X11-B) Weekly VRDNs (AMBAC INS)/ (KBC Bancassurance Holding LIQ) 1,400,000 3,100,000 Michigan Job Development Authority, Limited Obligation Revenue Bonds Weekly VRDNs (Andersons Project)/(Credit Lyonnais, Paris LOC) 3,100,000 2,420,000 Michigan State Building Authority (Series 1) 3.90% CP (Canadian Imperial Bank of Commerce LOC) Mandatory Tender 1/12/2000 2,420,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MICHIGAN-CONTINUED $ 5,000,000 Michigan State Hospital Finance Authority, MERLOTS (Series X) Weekly VRDNs (Detroit Medical Center Obligated Group)/(AMBAC INS)/(First Union National Bank, Charlotte, NC LIQ) $ 5,000,000 4,950,000 2 Michigan State Hospital Finance Authority (Series 1993A) PT-169, 3.25% TOBs (St. John Hospital, MI)/(AMBAC INS)/(Banco Santander SA LIQ), Optional Tender 4/6/2000 4,950,000 3,110,000 Michigan State Housing Development Authority (Series 1990N) Weekly VRDNs (FSA INS)/(CDC Municipal Products, Inc. LIQ) 3,110,000 3,835,000 Michigan State Housing Development Authority (Series 1999A) 3.20% TOBs, Mandatory Tender 6/1/2000 3,835,000 7,695,000 Michigan State Housing Development Authority, MERLOTS (Series G) Weekly VRDNs (MBIA INS)/(First Union National Bank, Charlotte, NC LIQ) 7,896,532 5,640,000 2 Michigan State Housing Development Authority, PA- 497R, 3.20% TOBs (Merrill Lynch Capital Services, Inc. LIQ) Mandatory Tender 3/9/2000 5,640,000 2,100,000 Michigan State Housing Development Authority, Revenue Bonds (Series A) 3.60% CP (Landesbank Hessen-Thueringen, Frankfurt LOC) Mandatory Tender 3/8/2000 2,100,000 6,000,000 Michigan State Housing Development Authority (Series B) 3.00% TOBs, Mandatory Tender 12/1/1999 6,000,000 2,600,000 Michigan Strategic Fund Weekly VRDNs (Ace Hi Displays, Inc.)/(Firstar Bank, Milwaukee LOC) 2,600,000 4,500,000 Michigan Strategic Fund Weekly VRDNs (DSP Technology, Inc.)/(Comerica Bank LOC) 4,500,000 5,300,000 Michigan Strategic Fund Weekly VRDNs (Tesco Engineering)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 5,300,000 5,495,000 Michigan Strategic Fund Weekly VRDNs (United Fixtures Co.)/(Bankers Trust Co., New York LOC) 5,495,000 6,835,000 Michigan Strategic Fund (Series 1991) Weekly VRDNs (AGA Gas, Inc.)/(Svenska Handelsbanken, Stockholm LOC) 6,835,000 700,000 Michigan Strategic Fund (Series 1995) Weekly VRDNs (Rood Industries, Inc. Project)/(Bank One, Michigan LOC) 700,000 2,025,000 Michigan Strategic Fund (Series 1998) Weekly VRDNs (Wolverine Printing)/(Huntington National Bank, Columbus, OH LOC) 2,025,000 5,400,000 Michigan Strategic Fund (Series 1999) Weekly VRDNs (DW Aluminum, LLC)/(KeyBank, N.A. LOC) 5,400,000 3,000,000 Michigan Strategic Fund (Series 1999) Weekly VRDNs (Fab-All Manufacturing, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 3,000,000 1,400,000 Michigan Strategic Fund, Adjustable Rate Demand IDRBs Weekly VRDNs (Bruin Land Holdings LLC)/(Huntington National Bank, Columbus, OH LOC) 1,400,000 1,530,000 Michigan Strategic Fund, Adjustable Rate Demand Notes (Series 1998) Weekly VRDNs (Wolverine Leasing)/(Huntington National Bank, Columbus, OH LOC) 1,530,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MICHIGAN-CONTINUED $ 2,500,000 Michigan Strategic Fund, Adjustable Rate Limited Obligation Revenue and Revenue Refunding Bonds (Series 1996) Weekly VRDNs (C-Tec, Inc.)/(SunTrust Bank, Atlanta LOC) $ 2,500,000 770,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1995) Weekly VRDNs (Rowe Thomas Company Project)/(Comerica Bank, Detroit, MI LOC) 770,000 1,000,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1994) Weekly VRDNs (Wilkie Metal Products, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 1,000,000 3,440,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1995) Weekly VRDNs (Bear Lake Associates Project)/(Old Kent Bank & Trust Co., Grand Rapids LOC) 3,440,000 640,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1995) Weekly VRDNs (Hercules Drawn Steel Corporation Project)/(KeyBank, N.A. LOC) 640,000 3,460,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1995) Weekly VRDNs (J.R. Automation Technologies Project)/(Old Kent Bank & Trust Co., Grand Rapids LOC) 3,460,000 850,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1995) Weekly VRDNs (RSR Project)/(Old Kent Bank & Trust Co., Grand Rapids LOC) 850,000 4,710,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1995) Weekly VRDNs (Wayne Disposal- Oakland, Inc. Project)/(Comerica Bank, Detroit, MI LOC) 4,710,000 700,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1996) Weekly VRDNs (ACI Properties, LLC Project)/ (Comerica Bank, Detroit, MI LOC) 700,000 830,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1996) Weekly VRDNs (Akemi, Inc.)/(Comerica Bank, Detroit, MI LOC) 830,000 895,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1996) Weekly VRDNs (Echo Properties, LLC Project)/(Comerica Bank, Detroit, MI LOC) 895,000 2,100,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1996) Weekly VRDNs (G & T Real Estate Investments Co., LLC)/(Bank One, Michigan LOC) 2,100,000 840,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1996) Weekly VRDNs (Inalfa-Hollandia, Inc.)/(Comerica Bank, Detroit, MI LOC) 840,000 3,000,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1996) Weekly VRDNs (RMT Woodworth, Inc.)/(Comerica Bank, Detroit, MI LOC) 3,000,000 3,350,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1997) Weekly VRDNs (Enprotech Mechanical Services, Inc.)/(Michigan National Bank, Farmington Hills LOC) 3,350,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MICHIGAN-CONTINUED $ 4,000,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds (Series 1999) Weekly VRDNs (J. G. Kern Enterprises, Inc.)/(Michigan National Bank, Farmington Hills LOC) $ 4,000,000 5,040,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds Weekly VRDNs (Hess Industries, Inc.)/(Lasalle National Bank, Chicago LOC) 5,040,000 1,610,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds, (Series 1995) Weekly VRDNs (Welch Properties Project)/(Old Kent Bank & Trust Co., Grand Rapids LOC) 1,610,000 1,600,000 Michigan Strategic Fund, Multifamily Housing Revenue Bonds (Series 1999) Weekly VRDNs (Globe Apartments)/(Federal Home Loan Bank of Indianapolis LOC) 1,600,000 1,825,000 Michigan Strategic Fund, Variable Rate Demand Limited Obligation Revenue Bonds (Series 1996) Weekly VRDNs (R.H. Wyner Associates, Inc.)/(State Street Bank and Trust Co. LOC) 1,825,000 2,425,000 Michigan Strategic Fund, Variable Rate Demand Limited Obligation Revenue Bonds (Series 1998) Weekly VRDNs (Monroe Publishing Co.)/(Comerica Bank, Detroit, MI LOC) 2,425,000 7,180,000 Monroe County, MI PCA (PT- 1018) Weekly VRDNs (Detroit Edison Co.)/(FGIC INS)/(Merrill Lynch Capital Services, Inc. LIQ) 7,180,000 2,160,000 Oakland County, MI EDC (Series 1998) Weekly VRDNs (Fox Manor, Inc.)/(Allied Irish Banks PLC LOC) 2,160,000 2,085,000 Oakland County, MI EDC (Series 1998) Weekly VRDNs (Lourdes Assisted Living, Inc.)/(Allied Irish Banks PLC LOC) 2,085,000 2,940,000 Oakland County, MI EDC, Limited Obligation Revenue Bonds (Series 1997) Weekly VRDNs (Stone Soap Company, Inc.)/(Michigan National Bank, Farmington Hills LOC) 2,940,000 1,150,000 Parchment, MI School District, State Aid Notes, 4.25% TRANs, 8/26/2000 1,154,522 1,000,000 Rochester, MI Community School District, 4.75% Bonds (Michigan State GTD), 5/1/2000 1,007,518 3,000,000 Royal Oak, MI Hospital Finance Authority, 7.75% Bonds (William Beaumont Hospital, MI)/(United States Treasury PRF) 1/1/2000 (@100) 3,022,519 10,050,000 Wayne County, MI (PT-1061) Weekly VRDNs (Detroit Metropolitan Wayne County Airport)/(MBIA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 10,050,000 TOTAL 198,020,845 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PUERTO RICO-1.0% $ 2,000,000 Puerto Rico Industrial, Medical & Environmental PCA (Series 1983A) 2.90% TOBs (Merck & Co., Inc.) Optional Tender 12/1/1999 $ 2,000,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 200,020,845
Securities that are subject to alternative minimum tax represent 66.3% of the porfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1, or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited)
FIRST TIER Second Tier 100.0% 0.0%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $10,590,000 which represents 5.3% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($201,499,937) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation AMT -Alternative Minimum Tax CP -Commercial Paper EDC -Economic Development Commission FGIC -Financial Guaranty Insurance Company FSA -Financial Security Assurance GTD -Guaranteed IDR - -Industrial Development Revenue IDRB(s) -Industrial Development Revenue Bond(s) INS -Insured LIQ -Liquidity Agreement LOC -Letter of Credit MBIA -Municipal Bond Investors Assurance MERLOTS -Municipal Exempt Receipts - Liquidity Optional Tender Series PCA -Pollution Control Authority PRF -Prerefunded TANs -Tax Anticipation Notes TOBs -Tender Option Bonds TRANs -Tax and Revenue Anticipation Notes VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 200,020,845 Cash 413,251 Income receivable 1,349,983 Receivable for shares sold 78,672 Deferred organizational costs 3,457 TOTAL ASSETS 201,866,208 LIABILITIES: Payable for shares redeemed $ 192,983 Income distribution payable 135,072 Accrued expenses 38,216 TOTAL LIABILITIES 366,271 Net assets for 201,499,937 shares outstanding $ 201,499,937 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SERVICE SHARES: $182,609,985 / 182,609,985 shares outstanding $1.00 INSTITUTIONAL SHARES: $18,889,952 / 18,889,952 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 7,308,354 EXPENSES: Investment advisory fee $ 1,085,080 Administrative personnel and services fee 162,511 Custodian fees 12,119 Transfer and dividend disbursing agent fees and expenses 132,233 Directors'/Trustees' fees 2,736 Auditing fees 12,549 Legal fees 10,786 Portfolio accounting fees 61,740 Shareholder services fee- Institutional Service Shares 497,072 Shareholder services fee- Institutional Shares 45,722 Share registration costs 27,989 Printing and postage 19,648 Insurance premiums 13,227 Miscellaneous 8,889 TOTAL EXPENSES 2,092,301 WAIVERS: Waiver of investment advisory fee $ (681,608) Waiver of shareholder services fee-Institutional Service Shares (178,945) Waiver of shareholder services fee-Institutional Shares (45,722) TOTAL WAIVERS (906,275) Net expenses 1,186,026 Net investment income $ 6,122,328
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 6,122,328 $ 5,952,588 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Service Shares (5,575,919) (5,412,823) Institutional Shares (546,409) (539,765) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (6,122,328) (5,952,588) SHARE TRANSACTIONS: Proceeds from sale of shares 789,450,916 846,148,992 Net asset value of shares issued to shareholders in payment of distributions declared 3,835,666 4,227,137 Cost of shares redeemed (796,339,575) (806,298,824) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (3,052,993) 44,077,305 Change in net assets (3,052,993) 44,077,305 NET ASSETS: Beginning of period 204,552,930 160,475,625 End of period $ 201,499,937 $ 204,552,930
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
FOR YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.02 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.02) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 3.00% 3.36% 3.43% 2.19% RATIOS TO AVERAGE NET ASSETS: Expenses 3 0.97% 0.98% 1.06% 1.26% 4 Net investment income 3 2.42% 2.73% 2.73% 2.51% 4 Expenses (after waivers and reimbursements) 0.40% 0.40% 0.40% 0.37% 4 Net investment income (after waivers) 2.99% 3.31% 3.39% 3.40% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $18,890 $19,564 $13,370 $11,614
1 Reflects operations for the period March 2, 1996 (date of initial public investment) to October 31, 1996. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.01 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.01) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 2.84% 3.20% 3.27% 3.26% 1.35% RATIOS TO AVERAGE NET ASSETS: Expenses 3 0.96% 0.98% 1.06% 1.26% 1.95% 4 Net investment income 3 2.40% 2.74% 2.71% 2.45% 2.04% 4 Expenses (after waivers) 0.56% 0.56% 0.55% 0.50% 0.32% 4 Net investment income (after waivers) 2.80% 3.16% 3.22% 3.21% 3.67% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $182,610 $184,989 $147,105 $92,275 $30,133
1 Reflects operations for the period June 20, 1995 (date of initial public investment) to October 31, 1995. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Michigan Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Service Shares and Institutional Shares. 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 the stability of principal and liquidity. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees (the "Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $201,499,937. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 94,227,271 78,879,030 Shares issued to shareholders in payment of distributions declared 35,163 34,996 Shares redeemed (94,936,306) (72,720,480) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS (673,872) 6,193,546 YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 695,223,645 767,269,962 Shares issued to shareholders in payment of distributions declared 3,800,503 4,192,141 Shares redeemed (701,403,269) (733,578,344) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS (2,379,121) 37,883,759 NET CHANGE RESULTING FROM SHARE TRANSACTIONS (3,052,993) 44,077,305
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the fund. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of their fees. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. ORGANIZATIONAL EXPENSES Organizational expenses of $18,618 were borne initially by the Adviser. The Fund has agreed to reimburse the Adviser for the organizational expenses during the five-year period following the effective date. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $411,142,761 and $421,815,001 respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 84.1% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 9.9% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and Administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITOR (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's report on the Fund's financial statements for the fiscal years ended October 31, 1997, and October 31, 1998 contained no adverse opinion or disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its report on the financial statements for such period; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund, nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF MICHIGAN MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Michigan Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trusts' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Michigan Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses, and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Michigan Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Michigan Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229725 Cusip 314229667 G01456-03 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Minnesota Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares and Cash Series Shares. The fund is a convenient way to put your ready cash pursuing double tax-free income-free from federal regular income tax and Minnesota personal income tax-through a portfolio concentrated in high-quality, short-term Minnesota municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share for Institutional Shares and $0.03 per share for Cash Series Shares. The fund's net assets totaled $535.8 million at the end of the reporting period. Thank you for relying on Minnesota Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Mary Jo Ochson, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999, with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the period was approximately 42 days. The Trust remained in a 45 to 50-day average maturity target range over the reporting period, and moved within that range according to relative value opportunities. We continue to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range is targeted, the portfolio maximizes performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as treasury securities. This portfolio structure continues to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first and second quarters of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.9% 1 MINNESOTA-99.9% $ 26,029,000 ABN AMRO MuniTOPS Certificates Trust (Minnesota Non-AMT) (Series 1998-6) Weekly VRDNs (Minneapolis/St. Paul, MN Airport Commission)/(AMBAC INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) $ 26,029,000 500,000 Anoka City, MN Solid Waste Disposal Authority, 3.65% CP (United Power Associates)/(National Rural Utilities Cooperative Finance Corp. GTD), Mandatory Tender 12/1/1999 500,000 5,100,000 Anoka City, MN Solid Waste Disposal Authority, 3.75% CP (United Power Associates)/(National Rural Utilities Cooperative Finance Corp. GTD), Mandatory Tender 2/10/2000 5,100,000 3,460,000 Apple Valley, MN, IDRB (Series 1995) Weekly VRDNs (AV Development Co. Project)/(Firstar Bank, Minnesota LOC) 3,460,000 7,225,000 Avon, MN (Series 1998) Weekly VRDNs (Vesper Corp.)/(KeyBank, N.A. LOC) 7,225,000 5,000,000 Becker, MN, PCR (Series 1993-A) 3.45% CP (Northern States Power Co.), Mandatory Tender 11/10/1999 5,000,000 9,500,000 Becker, MN, PCR (Series 1993-A) 3.47% CP (Northern States Power Co.), Mandatory Tender 1/21/2000 9,500,000 9,000,000 Becker, MN, PCR (Series 1993-A) 3.75% CP (Northern States Power Co.), Mandatory Tender 2/10/2000 9,000,000 6,700,000 Becker, MN, PCR (Series 1993-A) 3.75% CP (Northern States Power Co.), Mandatory Tender 2/9/2000 6,700,000 3,900,000 Becker, MN, PCR (Series 1993-A) 3.80% CP (Northern States Power Co.), Mandatory Tender 2/14/2000 3,900,000 14,400,000 Becker, MN, PCR (Series 1993-B) 3.60% CP (Northern States Power Co.), Mandatory Tender 1/28/2000 14,400,000 2,855,000 Blaine, MN, IDRBs (Series 1996) Weekly VRDNs (S & S of Minnesota, LLC)/(Norwest Bank Minnesota, N.A. LOC) 2,855,000 2,300,000 Bloomington, MN, IDRB (Series 1995) Weekly VRDNs (Now Technologies, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 2,300,000 1,000,000 Bloomington, MN, Multifamily Housing Weekly VRDNs (Crow/Bloomington Apartments)/(Citibank N.A., New York LOC) 1,000,000 3,600,000 Brooklyn Center, MN, Shingle Creek Tower (Series 1999) 4.79% TOBs (Bank of America, N.A.), Mandatory Tender 4/1/2000 3,600,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MINNESOTA-CONTINUED $ 9,900,000 Burnsville, MN, Variable Rate Demand Revenue Bonds (Series 1996) Weekly VRDNs (YMCA)/(Norwest Bank Minnesota, N.A. LOC) $ 9,900,000 3,080,000 Burnsville, MN, Adjustable Rate IDRB (Series 1996) Weekly VRDNs (Caire, Inc.)/(Chase Manhattan Bank N.A., New York LOC) 3,080,000 3,175,000 Byron, MN Weekly VRDNs (Schmidt Printing)/(Norwest Bank Minnesota, N.A. LOC) 3,175,000 1,170,000 Chanhassen, MN IDA (Series 1995) Weekly VRDNs (Building Management Group, LLC)/(Norwest Bank Minnesota, N.A. LOC) 1,170,000 2,990,000 Coon Rapids, MN (Series 1996) Weekly VRDNs (Medical Enterprise Associates Project)/(Norwest Bank Minnesota, N.A. LOC) 2,990,000 2,350,000 Cottage Grove, MN, IDR Refunding Bonds (Series 1995) Weekly VRDNs (Supervalu, Inc.)/(Wachovia Bank of NC, N.A. Winston-Salem, LOC) 2,350,000 3,300,000 DDSB Municipal Securities Trusts (Series 1994O) Weekly VRDNs (Richfield, MN ISD 280)/(FGIC INS)/(U.S. Bank, N.A., Minneapolis LIQ) 3,300,000 6,390,000 DDSB Municipal Securities Trusts (Series 1994T) Weekly VRDNs (Osseo, MN ISD 279)/(Minnesota State GTD)/(U.S. Bank, N.A., Minneapolis LIQ) 6,390,000 10,745,000 2 Dakota County & Washington County MN Housing & Redevelopment Authority, MERLOTS (Series J) 3.80% TOBs (United States Treasury COL)/(First Union National Bank, Charlotte, NC LIQ) Optional Tender 11/1/1999 10,745,000 6,250,000 Dakota County, MN Housing & Redevelopment Authority, (Series C) 3.20% BANs, 4/25/2000 6,250,000 3,000,000 2 Dakota County, Washington County & Anoka City, MN Housing & Redevelopment Authority, MERLOTs (Series H) 3.80% TOBs (United States Treasury COL)/(First Union National Bank, Charlotte, NC LIQ) Optional Tender 11/1/1999 3,000,000 2,600,000 Duluth, MN (Series 1985) Weekly VRDNs (Wachovia Bank of NC, N.A., LOC) 2,600,000 9,000,000 Duluth, MN, GO Tax and Aid Anticipation Certificates of Indebtedness (Series 1999) 3.10% TANs, 12/31/1999 9,001,868 785,000 Eden Prairie, MN IDA, #194 Weekly VRDNs (Richard W. Cohen)/(Norwest Bank Minnesota, N.A. LOC) 785,000 1,080,000 Eden Prairie, MN IDA (Series 1996) Weekly VRDNs (Challenge Printing, Inc. Project)/(Norwest Bank Minnesota, N.A. LOC) 1,080,000 1,310,000 Eden Prairie, MN IDA (Series 1995) Weekly VRDNs (Robert Lothenbach)/(Norwest Bank Minnesota, N.A. LOC) 1,310,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MINNESOTA-CONTINUED $ 500,000 Elk River, MN Weekly VRDNs (Tescom Corp.)/(Norwest Bank Minnesota, N.A. LOC) $ 500,000 5,000,000 Faribault, MN IDA (Series 1988) Weekly VRDNs (Jerome Foods)/(Norwest Bank Minnesota, N.A. LOC) 5,000,000 2,945,000 Farmington, MN (Series 1996) Weekly VRDNs (Lexington Standard Corporation Project)/(Norwest Bank Minnesota, N.A. LOC) 2,945,000 3,500,000 Fridley, MN ISD 14, 3.20% TRANs (Minnesota State GTD), 2/11/2000 3,500,000 5,800,000 Hennepin Co. MN (Series 1995C) Weekly VRDNs 5,800,000 6,550,000 Hennepin Co. MN (Series 1996C) Weekly VRDNs 6,550,000 10,495,000 Lehman Bros Inc. - Pooled Trust Receipts (Series 1998 FR/RI-C8) Weekly VRDNs (Riverplace Project (The Pinnacle Apartments))/(Bank of America NT and SA San Franciso SWAP) 10,495,000 5,200,000 Lino Lakes, MN, Variable Rate Demand IDRBs (Series 1997) Weekly VRDNs (Taylor Corp.)/(Norwest Bank Minnesota, N.A. LOC) 5,200,000 3,165,000 Maple Grove, MN, Variable Rate Demand IDRBs (Series 1998) Weekly VRDNs (Spancrete Midwest Co.)/(Norwest Bank Minnesota, N.A. LOC) 3,165,000 900,000 Maplewood, MN (Series 1997) Weekly VRDNs (Camada Ltd. Partnership)/(Norwest Bank Minnesota, N.A. LOC) 900,000 635,000 Minneapolis, MN IDA Weekly VRDNs (JTJ Co.)/(U.S. Bank, N.A., Minneapolis LOC) 635,000 5,000,000 Minneapolis, MN (Series 1993) Weekly VRDNs (Market Square Real Estate, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 5,000,000 8,600,000 Minneapolis, MN (Series 1999) Daily VRDNs (Bayerische Hypotheken-und Vereinsbank AG LIQ) 8,600,000 1,000,000 Minneapolis, MN, 4.50% Bonds, 3/1/2000 1,002,377 1,000,000 Minneapolis, MN, 7.00% Bonds (Lifespan Inc.- Abbott Northwestern)/(United States Treasury PRF) 12/1/1999 (@102) 1,023,039 7,000,000 Minneapolis, MN, Housing Development Revenue Refunding Bonds (Series 1988) Weekly VRDNs (SymphonyPlace)/(Citibank N.A., New York LOC) 7,000,000 800,000 Minneapolis, MN, Variable Rate Demand Commercial Development Revenue Refunding Bonds (Series 1996) Weekly VRDNs (WNB & Company)/(U.S. Bank, N.A., Minneapolis LOC) 800,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MINNESOTA-CONTINUED $ 10,165,000 Minneapolis, MN, Variable Rate Housing Revenue Bonds Weekly VRDNs (One Ten Grant Project)/(U.S. Bank, N.A., Minneapolis LOC) $ 10,165,000 2,100,000 2 Minneapolis/St. Paul MN Housing Finance Board, SFM Revenue Bonds, MERLOTs (Series D) 3.75% TOBs (GNMA COL)/(First Union National Bank, Charlotte, NC LIQ) Optional Tender 7/26/2000 2,100,000 6,000,000 2 Minneapolis/St. Paul MN Metropolitan Airports Commission (PT-1174) 3.60% TOBs (FGIC INS)/(Merrill Lynch Capital Services, Inc. LIQ) Optional Tender 2/10/2000 6,000,000 3,000,000 Minneapolis/St. Paul, MN Metropolitan Airports Commission, Floating Rate Trust Receipts (FR/RI-A33) Weekly VRDNs (FGIC INS)/(Bank of New York, New York LIQ) 3,000,000 8,000,000 Minnesota Agricultural and Economic Development Board (Series 1996) Weekly VRDNs (Evangelical Lutheran Good Samaritan Society)/(Rabobank Nederland, Utrecht LOC) 8,000,000 10,975,000 2 Minnesota Public Facilities Authority (PT- 1175) 3.75% TOBs (Merrill Lynch Capital Services, Inc. LIQ) Optional Tender 8/10/2000 10,975,000 5,000,000 Minnesota Public Facilities Authority, Morgan Stanley Floater Certificate (Series 1998- 73) Weekly VRDNs (Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 5,000,000 8,000,000 Minnesota State Commissioner of Iron Range Resources & Rehabilitation (Series 1991) Weekly VRDNs (Louisiana-Pacific Corp.)/(Wachovia Bank of NC, N.A. LOC) 8,000,000 7,495,000 Minnesota State HFA (Series 1991A) PT-235 Weekly VRDNs (Commerzbank AG, Frankfurt LIQ) 7,495,000 4,995,000 2 Minnesota State HFA (Series 1998C) PT-204, 3.30% TOBs (Bayerische Hypotheken-und Vereinsbank AG LIQ), Optional Tender 5/11/2000 4,995,000 3,380,000 Minnesota State HFA (Series 1999 F) 3.20% TOBs, Mandatory Tender 6/1/2000 3,380,000 3,800,000 Minnesota State Higher Education Coordinating Board (Series 1992A) Weekly VRDNs (U.S. Bank, N.A., Minneapolis LIQ) 3,800,000 7,000,000 Minnesota State Higher Education Coordinating Board (Series 1992B) Weekly VRDNs (U.S. Bank, N.A., Minneapolis LIQ) 7,000,000 12,700,000 Minnesota State Higher Education Coordinating Board (Series 1992C) Weekly VRDNs (U.S. Bank, N.A., Minneapolis LIQ) 12,700,000 6,500,000 Minnesota State Higher Education Coordinating Board (Series 1992 C) Weekly VRDNs (U.S. Bank, N.A., Minneapolis LIQ) 6,500,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MINNESOTA-CONTINUED $ 5,000,000 Minnesota State Higher Education Facility Authority (Series Five-C) Weekly VRDNs (University of St. Thomas)/(Allied Irish Banks PLC LOC) $ 5,000,000 5,750,000 Minnesota State Higher Education Facility Authority (Series Four-S) Weekly VRDNs (Bethel College and Seminary)/(Allied Irish Banks PLC LOC) 5,750,000 21,475,000 Minnesota State, 3.15% Bonds, 11/1/1999 21,475,000 2,615,000 Minnesota State, 7.00% Bonds (United States Treasury PRF) 8/1/2000 (@100) 2,675,853 2,000,000 Minnesota Tax and Aid Anticipation Borrowing Program (Series 1999A) 3.00% TANs (Minnesota State GTD) 2/3/2000 2,000,000 12,500,000 Minnesota Tax and Aid Anticipation Borrowing Program (Series 1999B) 2.95% TANs (Minnesota State GTD) 2/24/2000 12,500,000 870,000 Minnetonka, MN, IDRB (Series 1996) Weekly VRDNs (PGI Cos., Inc.)/(Norwest Bank Minnesota, N.A. LOC) 870,000 5,900,000 Minnetonka, MN, Multifamily Housing Revenue Refunding Bonds (Series 1995) Weekly VRDNs (Southampton Apartments Project (MN))/(National Bank of Canada, Montreal LOC) 5,900,000 1,300,000 New Brighton, MN, IDR Weekly VRDNs (Unicare Homes, Inc.)/(Paribas, Paris LOC) 1,300,000 1,000,000 New Hope, MN IDRB (Series 1994) Weekly VRDNs (Gaines and Hanson Printing Co.)/(Norwest Bank Minnesota, N.A. LOC) 1,000,000 2,850,000 New Hope, MN Weekly VRDNs (Paddock Labs)/(U.S. Bank, N.A., Minneapolis LOC) 2,850,000 6,760,000 2 Northern Municipal Power Agency, MN, Floater Certificates (Series 1998- 46) 3.50% TOBs (FSA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ), Optional Tender 2/17/2000 6,760,000 11,000,000 Oak Park Heights, MN, Elderly Housing Revenue Bonds (Series 1998B) 4.54% TOBs (Bayerische Landesbank Girozentrale) Mandatory Tender 12/1/1999 11,000,000 4,150,000 Olmsted County, MN Building Authority, Certificates of Participation Weekly VRDNs (Human Services Infrastructure)/(Toronto- Dominion Bank LOC) 4,150,000 1,140,000 Plymouth, MN Weekly VRDNs (Nuaire, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 1,140,000 3,000,000 Plymouth, MN, IDRB (Series 1994) Weekly VRDNs (Olympic Steel, Inc.)/(National City Bank, Ohio LOC) 3,000,000 1,200,000 Port Authority of Saint Paul, MN (Series 1998A) Weekly VRDNs (Bix Fruit Co.)/(Firstar Bank, Milwaukee LOC) 1,200,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MINNESOTA-CONTINUED $ 2,500,000 Port Authority of Saint Paul, MN, Variable Rate Demand IDRBs (Series 1998A) Weekly VRDNs (National Checking Co.)/(U.S. Bank, N.A., Minneapolis LOC) $ 2,500,000 670,000 Port of Austin, MN Weekly VRDNs (Mower House Color)/(Norwest Bank Minnesota, N.A. LOC) 670,000 1,000,000 Rochester, MN Health Care Facility Authority Weekly VRDNs (Mayo Foundation) 1,000,000 2,500,000 Rochester, MN Health Care Facility Authority Weekly VRDNs (Mayo Foundation) 2,500,000 3,000,000 Rochester, MN Health Care Facility Authority (Series 1998-177) Weekly VRDNs (Mayo Foundation)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 3,000,000 250,000 Rogers, MN IDA Weekly VRDNs (Metal Sales Manufacturing Corp.)/(KeyBank, N.A. LOC) 250,000 2,415,000 Rogers, MN IDA, IDRB Weekly VRDNs (DAC Development, LLC Project)/(Norwest Bank Minnesota, N.A. LOC) 2,415,000 19,450,000 Rosemount, MN, PCR (Series 1984) Weekly VRDNs (Koch Refining Co.)/(Koch Industries, Inc. GTD) 19,450,000 6,500,000 Shakopee, MN Hospital Finance Authority Weekly VRDNs (St. Francis Regional Medical Center)/(Citibank N.A., New York LOC) 6,500,000 907,500 St. Cloud, MN Housing & Redevelopment Authority, Revenue Refunding Bonds (Series 1994A) Weekly VRDNs (Coborn's, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 907,500 1,977,500 St. Cloud, MN Housing & Redevelopment Authority, Revenue Refunding Bonds (Series 1994B) Weekly VRDNs (Coborn's, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 1,977,500 9,500,000 St. Cloud, MN (Series 1997- A) Weekly VRDNs (The Saint Cloud Hospital)/(Rabobank Nederland, Utrecht LOC) 9,500,000 9,400,000 St. Louis Park, MN Health Care Facilities, Floating Rate Monthly Demand IDRBs (Series 1984) Weekly VRDNs (Unicare Homes, Inc.)/(Paribas, Paris LOC) 9,400,000 4,500,000 St. Paul, MN Housing & Redevelopment Authority Weekly VRDNs (District Cooling St Paul, Inc.)/(Credit Local de France LOC) 4,500,000 400,000 St. Paul, MN Housing & Redevelopment Authority Weekly VRDNs (United Way)/(U.S. Bank, N.A., Minneapolis LOC) 400,000 2,000,000 St. Paul, MN Housing & Redevelopment Authority (1995 Series I) Weekly VRDNs (District Cooling St Paul, Inc.)/(Credit Local de France LOC) 2,000,000 2,625,000 St. Paul, MN Housing & Redevelopment Authority, Hampden Square Apartments (Series A) 4.19% TOBs (Bayerische Landesbank Girozentrale) Mandatory Tender 7/1/2000 2,625,000 1,000,000 St. Paul, MN Port Authority (Series 1991) Weekly VRDNs (West Gate Office)/(U.S. Bank, N.A., Minneapolis LOC) 1,000,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 MINNESOTA-CONTINUED $ 16,800,000 University of Minnesota (Series 1999A) Weekly VRDNs $ 16,800,000 10,000,000 VRDC/IVRC Trust, Tax- Exempt Variable Rate Demand Certificates (Series 1997A) Weekly VRDNs (University of Minnesota)/(Citibank N.A., New York LIQ) 10,000,000 2,695,000 Victoria, MN, IDRB (Series 1996A) Weekly VRDNs (HEI, Inc. Project)/(Norwest Bank Minnesota, N.A. LOC) 2,695,000 1,140,000 Victoria, MN, IDRBs (Series 1996B) Weekly VRDNs (HEI, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 1,140,000 1,935,000 Waseca, MN ISD #829, 3.25% TANs, 3/31/2000 1,936,546 1,950,000 Wells, MN, 3.30% TOBs (Stokely, Inc.)/(First Union National Bank, Charlotte, NC LOC) Optional Tender 12/1/1999 1,950,000 835,000 White Bear, MN Weekly VRDNs (Thermoform Plastic, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 835,000 1,950,000 White Bear, MN, Variable Rate Demand Industrial Revenue Bonds Weekly VRDNs (N.A. Ternes Project)/(Firstar Bank, Minnesota LOC) 1,950,000 4,100,000 Winnebago, MN (Series 1999) Weekly VRDNs (Dixie Carbonic, Inc.)/(Bank One, Illinois, N.A. LOC) 4,100,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 535,493,683
Securities that are subject to alternative minimum tax represent 30.3% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by FITCH IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited) FIRST TIER SECOND TIER 100.0% 0.0% 2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $44,575,000 which represents 8.3% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($535,765,640) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation AMT -Alternative Minimum Tax BANs -Bond Anticipation Notes COL -Collateralized CP -Commercial Paper FGIC - -Financial Guaranty Insurance Company FSA -Financial Security Assurance GNMA - -Government National Mortgage Association GO -General Obligation GTD -Guaranteed HFA -Housing Finance Authority IDA -Industrial Development Authority IDR - -Industrial Development Revenue IDRB(s) -Industrial Development Revenue Bond(s) INS -Insured ISD -Independent School District LIQ -Liquidity Agreement LOC - -Letter of Credit MERLOTS -Municipal Exempt Receipts Liquidity Optional Tender Series PCR -Pollution Control Revenue PRF -Prerefunded SFM -Single Family Mortgage TANs -Tax Anticipation Notes TOBs -Tender Option Bonds TRANs -Tax and Revenue Anticipation Notes VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 535,493,683 Cash 118,640 Income receivable 3,372,380 Receivable for shares sold 105,382 Prepaid expenses 13,090 TOTAL ASSETS 539,103,175 LIABILITIES: Payable for investments purchased $ 2,400,000 Payable for shares redeemed 20,019 Income distribution payable 754,561 Accrued expenses 162,955 TOTAL LIABILITIES 3,337,535 Net assets for 535,765,640 shares outstanding $ 535,765,640 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SHARES: $285,540,032 / 285,540,032 shares outstanding $1.00 CASH SERIES SHARES: $250,225,608 / 250,225,608 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 18,537,539 EXPENSES: Investment advisory fee $ 2,234,444 Administrative personnel and services fee 421,193 Custodian fees 18,112 Transfer and dividend disbursing agent fees and expenses 179,115 Directors'/Trustees' fees 4,136 Auditing fees 13,000 Legal fees 10,432 Portfolio accounting fees 108,256 Distribution services fee- Cash Series Shares 1,223,139 Shareholder services fee- Institutional Shares 786,822 Shareholder services fee- Cash Series Shares 611,569 Share registration costs 2,307 Printing and postage 25,300 Insurance premiums 46,228 Miscellaneous 3,593 TOTAL EXPENSES 5,687,646 WAIVERS: Waiver of investment advisory fee $ (1,373,358) Waiver of distribution services fee-Cash Series Shares (611,569) Waiver of shareholder services fee-Institutional Shares (786,822) TOTAL WAIVERS (2,771,749) Net expenses 2,915,897 Net investment income $ 15,621,642
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDER OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 15,621,642 $ 17,164,545 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Shares (9,461,048) (10,155,213) Cash Series Shares (6,160,594) (7,009,332) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (15,621,642) (17,164,545) SHARE TRANSACTIONS: Proceeds from sale of shares 1,431,126,325 1,392,083,828 Net asset value of shares issued to shareholders in payment of distributions declared 6,502,602 7,214,822 Cost of shares redeemed (1,437,969,499) (1,292,784,856) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (340,572) 106,513,794 Change in net assets (340,572) 106,513,794 NET ASSETS: Beginning of period 536,106,212 429,592,418 End of period $ 535,765,640 $ 536,106,212
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.04 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 3.08% 3.44% 3.48% 3.49% 3.82% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.80% 0.80% 0.81% 0.81% 0.82% Net investment income 2 2.52% 2.89% 2.91% 2.92% 3.25% Expenses (after waivers) 0.30% 0.30% 0.30% 0.30% 0.30% Net investment income (after waivers) 3.02% 3.39% 3.42% 3.43% 3.77% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted ) $285,540 $328,507 $208,365 $217,443 $212,392
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Financial Highlights-Cash Series Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.57% 2.93% 2.97% 2.97% 3.41% RATIOS TO AVERAGE NET ASSETS: Expenses 2 1.30% 1.30% 1.31% 1.31% 1.32% Net investment income 2 2.02% 2.39% 2.41% 2.42% 2.75% Expenses (after waivers) 0.80% 0.80% 0.80% 0.80% 0.70% Net investment income (after waivers) 2.52% 2.89% 2.92% 2.93% 3.37% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $250,226 $207,599 $221,227 $235,614 $131,471
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Minnesota Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Shares and Cash Series Shares. The investment objective of the Fund is current income exempt from federal regular income tax and the regular personal income taxes imposed by the State of Minnesota consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees ("Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $535,765,640. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 761,059,176 743,424,803 Shares issued to shareholders in payment of distributions declared 429,923 363,132 Shares redeemed (804,456,292) (623,646,203) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS (42,967,193) 120,141,732 YEAR ENDED OCTOBER 31 1999 1998 CASH SERIES SHARES: Shares sold 670,067,149 648,659,025 Shares issued to shareholders in payment of distributions declared 6,072,679 6,851,690 Shares redeemed (633,513,207) (669,138,653) NET CHANGE RESULTING FROM CASH SERIES SHARE TRANSACTIONS 42,626,621 (13,627,938) NET CHANGE RESULTING FROM SHARE TRANSACTIONS (340,572) 106,513,794
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. DISTRIBUTION SERVICES FEE The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Cash Series Shares. The Plan provides that the Fund may incur distribution expenses up to 0.50% of the average daily net assets of the Cash Series Shares, annually, to compensate FSC. FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $825,430,000 and $798,038,390, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 43.8% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 11.6% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements, for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF MINNESOTA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Minnesota Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian and brokers or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Minnesota Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager Minnesota Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS ANNUAL REPORT OCTOBER 31, 1999 [Graphic] Federated Minnesota Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229873 Cusip 314229402 G00198-01 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of North Carolina Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. The fund is a convenient way to put your ready cash to work pursuing double tax-free income-free from federal regular income tax and North Carolina state income tax-through a portfolio concentrated in high-quality, short-term North Carolina municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends of $0.03 per share. The fund's net assets totaled $185.3 million at the end of the reporting period. Thank you for relying on North Carolina Municipal Cash Trust to help your ready cash pursue tax-free income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November. Each time the Fed voted to raise the federal funds target rate by a quarter point, bringing the federal funds target rate to 5.50%. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the reporting period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the reporting period, was approximately 34 days. The fund remained in a 35- to 45-day average maturity range over most of the reporting period, and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. After an average maturity range was targeted taking into account Federal Reserve monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first and second quarters of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS-99.5% 1 NORTH CAROLINA-98.4% $ 10,819,000 2 ABN AMRO MuniTOPS Certificates Trust (North Carolina Non-AMT) (Series 1998-23) 3.30% TOBs (Mission St. Josephs Health System)/(MBIA INS)/ (ABN AMRO Bank N.V., Amsterdam LIQ), Optional Tender 2/23/2000 $ 10,819,000 1,755,000 Alamance County, NC Industrial Facilities & PCFA (Series B) Weekly VRDNs (Culp, Inc.)/(Wachovia Bank of NC, N.A. LOC) 1,755,000 5,785,000 Alexander County, NC Industrial Facilities & PCFA (Series 1997) Weekly VRDNs (Mitchell Gold Company, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 5,785,000 1,600,000 Buncombe County, NC Industrial Facilities & PCFA (Series 1991) Weekly VRDNs (Rich Mount, Inc.)/(Bank of Tokyo- Mitsubishi Ltd. LOC) 1,600,000 615,000 Burke County, NC Industrial Facilities & PCFA Weekly VRDNs (Norwalk Furniture Corp. & Hickory Furniture)/(Branch Banking & Trust Co., Wilson LOC) 615,000 3,735,000 Catawba County, NC Industrial Facilities & PCFA (Series 1998) Weekly VRDNs (Centro, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 3,735,000 2,865,000 Cleveland County, NC Industrial Facilities and PCFA, IDRB (Series 1990) Weekly VRDNs (MetalsAmerica, Inc. Project)/(BankBoston, N.A. LOC) 2,865,000 1,250,000 Cleveland County, NC Industrial Facilities and PCFA, PCR Bonds (Series 1995) Weekly VRDNs (Grover Industries, Inc. Project)/(Bank of America, N.A. LOC) 1,250,000 1,000,000 Durham, NC, 7.10% Bonds (United States Treasury PRF) 5/1/2000 1,035,335 5,590,000 Gaston County, NC Industrial Facilities and PCFA (Series 1997) Weekly VRDNs (Thermoform Plastic, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 5,590,000 2,360,000 Guilford County, NC Industrial Facilities & PCFA (Series 1996) Weekly VRDNs (South/Win Ltd.)/(Branch Banking & Trust Co, Wilson LOC) 2,360,000 5,000,000 Guilford County, NC Industrial Facilities & PCFA (Series 1999) Weekly VRDNs (FFNC, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 5,000,000 7,600,000 Halifax County, NC Industrial Facilities & PCFA Weekly VRDNs (Flambeau Airmold Project)/(Norwest Bank Minnesota, N.A. LOC) 7,600,000 1,000,000 Johnson County, NC Industrial Facilities & PCFA (Series 1996) Weekly VRDNs (Inolex Chemical Company Project)/(PNC Bank, N.A. LOC) 1,000,000 1,750,000 Lee County, NC Industrial Facility & PCFA (Series 1989) Weekly VRDNs (Avondale Mills, Inc.)/(SunTrust Bank, Atlanta LOC) 1,750,000 2,600,000 Martin County, NC IFA (Series 1993) Weekly VRDNs (Weyerhaeuser Co.) 2,600,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NORTH CAROLINA-CONTINUED $ 4,600,000 McDowell County, NC Industrial Facilities and PCFA (Series 1997) Weekly VRDNs (Parker Hosiery, Inc.)/(First Union National Bank, Charlotte, NC LOC) $ 4,600,000 2,400,000 Mecklenberg County, NC Industrial Facilities and PCFA (Series 1996) Weekly VRDNs (SteriGenics International Project)/(Comerica Bank LOC) 2,400,000 3,680,000 Mecklenberg County, NC Industrial Facility & PCFA (Series 1988) Weekly VRDNs (Florida Steel Corp.)/(Bank of America, N.A. LOC) 3,680,000 900,000 Mecklenburg County, NC (Series 1996) Weekly VRDNs (YMCA of Greater Charlotte)/(Wachovia Bank of NC, N.A. LOC) 900,000 3,000,000 Mecklenburg County, NC, 3.75% Bonds, 4/1/2000 3,008,475 2,520,000 New Hanover County, NC PCR Financial Authority Weekly VRDNs (Efson, Inc.)/(Branch Banking & Trust Co, Wilson LOC) 2,520,000 5,200,000 New Hanover County, NC PCR Financial Authority (Series 1984) Weekly VRDNs (American Hoist & Derrick Co. Project)/(BankBoston, N.A. LOC) 5,200,000 1,090,000 New Hanover County, NC PCR Financial Authority (Series 1990) Weekly VRDNs (Wilmington Machinery, Inc. Project)/(Branch Banking & Trust Co, Wilson LOC) 1,090,000 4,000,000 North Carolina Eastern Municipal Power Agency, 3.60% CP (Canadian Imperial Bank of Commerce LOC) Mandatory Tender 11/17/1999 4,000,000 6,665,000 North Carolina Eastern Municipal Power Agency, PT-132 Weekly VRDNs (MBIA INS)/(Merrill Lynch Capital Services, Inc. LIQ) 6,665,000 2,700,000 North Carolina Educational Facilities Finance Agency (Series 1990) Weekly VRDNs (Bowman Gray School of Medicine)/(Wachovia Bank of NC, N.A. LOC) 2,700,000 2,000,000 North Carolina Educational Facilities Finance Agency (Series 1999) Weekly VRDNs (Catawba College)/(Wachovia Bank of NC, N.A. LOC) 2,000,000 7,000,000 2 North Carolina HFA, Variable Rate Certificates (Series 1998L) 3.55% TOBs (Bank of America, N.A. LIQ) Optional Tender 6/1/2000 7,000,000 4,000,000 North Carolina Medical Care Commission (Series 1996) Weekly VRDNs (Adult CommunitiesTotal Services, Inc.)/(Lasalle National Bank, Chicago LOC) 4,000,000 3,300,000 North Carolina Medical Care Commission (Series 1996) Weekly VRDNs (North Carolina Baptist) 3,300,000 7,500,000 North Carolina Medical Care Commission (Series 1998) Weekly VRDNs (Cornelia Nixon Davis Nursing Home, Inc.)/(Wachovia Bank of NC, N.A. LOC) 7,500,000 5,700,000 North Carolina Medical Care Commission (Series 1999) Weekly VRDNs (Cross Road Rest and Retirement Center, Inc.)/(Centura Bank, Rocky Mount, NC LOC) 5,700,000 3,455,000 North Carolina Medical Care Commission (Series A) 4.25% Bonds (Pitt County Memorial Hospital) 12/1/1999 3,458,732 1,000,000 North Carolina Medical Care Commission, 7.30% Bonds (Presbyterian Hospital)/(United States Treasury PRF) 10/1/2000 (@102) 1,047,877 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NORTH CAROLINA-CONTINUED $ 2,100,000 North Carolina Medical Care Commission, Revenue Bonds (Series 1993) Weekly VRDNs (Moses H. Cone Memorial) $ 2,100,000 14,745,000 2 North Carolina Municipal Power Agency No. 1, PT-288, 3.80% TOBs (AMBAC INS)/(Landesbank Hessen- Thueringen, Frankfurt LIQ) Optional Tender 10/5/2000 14,745,000 1,000,000 North Carolina State (Series 1998A) PA-342 Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 1,000,000 4,895,000 North Carolina State, Floater Certificates (Series 1998-38) Weekly VRDNs (Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 4,895,000 3,280,000 Orange County, NC Industrial Facilities & PCFA Weekly VRDNs (Mebane Packaging Corp.)/(First Union National Bank, Charlotte, NC LOC) 3,280,000 5,000,000 Person County, NC Industrial Facilities & PCFA Daily VRDNs (Carolina Power & Light Co.)/(SunTrust Bank, Atlanta LOC) 5,000,000 1,200,000 Piedmont Triad Airport Authority, NC Weekly VRDNs (Triad International Maintenance Corp.)/(Mellon Bank N.A., Pittsburgh LOC) 1,200,000 1,000,000 Pitt County, NC (Series A) 6.20% Bonds (Pitt County Memorial Hospital)/(United States Treasury COL), 12/1/1999 1,002,571 1,200,000 Randolph County, NC IDA (Series 1990) Weekly VRDNs (Wayne Steel, Inc.)/(Bank One, Ohio, N.A. LOC) 1,200,000 4,155,000 Robeson County, NC Industrial Facilities and PCFA (Series 1999) Weekly VRDNs (Rempac Foam Corp.)/(Chase Manhattan Bank N.A., New York LOC) 4,155,000 4,210,000 Rowan County, NC Industrial Facilities PCFA (Series 1999) Weekly VRDNs (PHC, LLC)/(SouthTrust Bank of Alabama, Birmingham LOC) 4,210,000 800,000 Rutherford County, NC, Industrial Facilities PCFA Weekly VRDNs (Spring-Ford Knitting Co.)/(Branch Banking & Trust Co, Wilson LOC) 800,000 1,400,000 Sampson County, NC Industrial Facilities and PCFA (Series 1997) Weekly VRDNs (DuBose Strapping, Inc.)/(First Union National Bank, Charlotte, NC LOC) 1,400,000 1,900,000 Wake County, NC, 4.50% Bonds, 3/1/2000 1,908,273 2,360,724 Wayne County, NC PCFA Weekly VRDNs (Cooper Industries, Inc.) 2,360,724 7,100,000 Wilson County, NC PCA (Series 1994) Weekly VRDNs (Granutec, Inc.)/(Branch Banking & Trust Co, Wilson LOC) 7,100,000 TOTAL 182,485,987 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PUERTO RICO-1.1% $ 2,000,000 Puerto Rico Industrial, Medical & Environmental PCA (1983 Series A) 2.90% TOBs (Merck & Co., Inc.), Optional Tender 12/1/1999 $ 2,000,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 184,485,987
Securities that are subject to alternative minimum tax represent 46.1% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER 96.9% 3.1%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $32,564,000 which represents 17.6% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($185,347,630) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation AMT -Alternative Minimum Tax COL -Collateralized CP -Commercial Paper HFA -Housing Finance Authority IDA - -Industrial Development Authority IDRB -Industrial Development Revenue Bond IFA - -Industrial Finance Authority INS -Insured LIQ -Liquidity Agreement LOC -Letter of Credit MBIA -Municipal Bond Investors Assurance PCA -Pollution Control Authority PCR -Pollution Control Revenue PCFA -Pollution Control Finance Authority PRF -Prerefunded TOBs -Tender Option Bonds VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 184,485,987 Cash 228,451 Income receivable 933,242 Receivable for shares sold 11,985 TOTAL ASSETS 185,659,665 LIABILITIES: Payable for shares redeemed $ 115,767 Income distribution payable 136,389 Accrued expenses 59,879 TOTAL LIABILITIES 312,035 Net assets for 185,347,630 shares outstanding $ 185,347,630 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE: $185,347,630 / 185,347,630 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 6,363,487 EXPENSES: Investment advisory fee $ 946,083 Administrative personnel and services fee 142,669 Custodian fees 12,450 Transfer and dividend disbursing agent fees and expenses 53,283 Directors'/Trustees' fees 2,187 Auditing fees 12,132 Legal fees 8,868 Portfolio accounting fees 45,336 Shareholder services fee 473,042 Share registration costs 23,083 Printing and postage 14,399 Insurance premiums 14,009 Miscellaneous 4,842 TOTAL EXPENSES 1,752,383 WAIVER: Waiver of investment advisory fee (627,679) Net expenses 1,124,704 Net investment income $ 5,238,783
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 5,238,783 $ 5,603,680 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income (5,238,783) (5,603,680) SHARE TRANSACTIONS: Proceeds from sale of shares 684,100,031 1,078,743,485 Net asset value of shares issued to shareholders in payment of distributions declared 4,072,608 4,634,347 Cost of shares redeemed (714,935,712) (1,043,902,913) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (26,763,073) 39,474,919 Change in net assets (26,763,073) 39,474,919 NET ASSETS: Beginning of period 212,110,703 172,635,784 End of period $ 185,347,630 $ 212,110,703
See Notes which are an integral part of the Financial Statements Financial Highlights (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.04 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04) NET ASSET VALUE, END OF PERIOD: $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.81% 3.17% 3.24% 3.23% 3.51% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.92% 0.94% 0.99% 1.01% 0.99% Net investment income 2 2.44% 2.74% 2.79% 2.75% 3.06% Expenses (after waivers) 0.59% 0.59% 0.59% 0.59% 0.59% Net investment income (after waivers) 2.77% 3.09% 3.19% 3.17% 3.46% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $185,348 $212,111 $172,636 $137,749 $97,602
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of North Carolina Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is current income exempt from federal regular income tax and the income tax imposed by the State of North Carolina consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees (the "Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). At October 31, 1999, capital paid-in aggregated $185,347,630. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 Shares sold 684,100,031 1,078,743,485 Shares issued to shareholders in payment of distributions declared 4,072,608 4,634,347 Shares redeemed (714,935,712) (1,043,902,913) NET CHANGE RESULTING FROM SHARE TRANSACTIONS (26,763,073) 39,474,919
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser ("the Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $289,605,000 and $340,116,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 80.1% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 11.9% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Anderson LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF NORTH CAROLINA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the North Carolina Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the North Carolina Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses, and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT North Carolina Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated North Carolina Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229782 G01177-02 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of New Jersey Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares and Institutional Service Shares. The fund is a convenient way to put your ready cash to work pursuing double tax-free income-free from federal regular income tax and New Jersey personal income tax-through a portfolio concentrated in high-quality, short-term New Jersey municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share for both Institutional Shares and Institutional Service Shares. The fund's net assets totaled $170.5 million at the end of the reporting period. Thank you for relying on New Jersey Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three interest rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November. Each time the Fed voted to raise the federal funds target rate by a quarter point, bringing the target rate to 5.50%. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than half of the fund's assets, started the reporting period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year-end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the two highest federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country benefited from an expanding economy. This fact, coupled with lower borrowing costs from low long-term rates, reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level of the decade. Lack of supply and heavy demand kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the period was approximately 65 days. The Trust remained in a 45 to 65-day average maturity range over the reporting period, and moved within that range according to relative value opportunities. We continue to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range is targeted taking into account Federal Reserve monetary policy, the portfolio maximizes performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as treasury securities. This portfolio structure continues to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is probable that we will see one or possibly two interest rate increases in the first and second quarters of 2000. In the near future, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch market developments with great interest in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.7% 1 NEW JERSEY-99.7% $ 2,685,000 Atlantic Highlands, NJ, 3.63% BANs, 1/21/2000 $ 2,687,742 1,265,000 Camden County, NJ Improvement Authority (Series 1995) Weekly VRDNs (Jewish Federation of Southern Jersey, Inc.)/(National Westminster Bank, PLC, London LOC) 1,265,000 900,000 Camden County, NJ Improvement Authority (Series 1996) Weekly VRDNs (Parkview Redevelopment Housing Project)/(General Electric Capital Corp. LOC) 900,000 7,125,000 Clipper Tax-Exempt Trust (New Jersey Non-AMT) (Series 1998-6) Weekly VRDNs (New Jersey Housing & Mortgage Financing Authority)/(MBIA INS)/(State Street Bank and Trust Co. LIQ) 7,125,000 3,120,000 Clipper, NJ Tax-Exempt Trust (Series 1996-2) Weekly VRDNs (New Jersey Housing & Mortgage Financing Authority)/(MBIA INS)/(State Street Bank and Trust Co. LIQ) 3,120,000 2,185,000 Deptford Township, NJ, 4.25% BANs, 8/11/2000 2,193,984 6,830,000 Gloucester County, NJ, 4.13% BANs, 8/1/2000 6,848,456 2,900,000 Hammonton, NJ, 3.75% BANs, 1/27/2000 2,903,341 2,785,250 Hammonton, NJ, 4.00% BANs, 7/28/2000 2,789,206 4,771,442 High Bridge Borough, NJ, 4.13% BANs, 9/1/2000 4,786,281 1,150,000 Jersey City, NJ Municipal Utilities Authority (Series 1998) 4.00% Bonds (FSA INS), 12/1/1999 1,150,877 2,603,610 Lavallette Borough, NJ, 3.50% BANs, 4/28/2000 2,606,683 1,587,750 Little Egg Harbor Township, NJ, 3.75% BANs, 3/10/2000 1,590,478 1,820,000 Manchester Township, NJ, 3.50% BANs, 11/4/1999 1,820,043 4,661,000 Mercer County, NJ Improvement Authority (Series 1999) 3.60% BANs (Parking Facility)/(Mercer County, NJ GTD), 1/12/2000 4,661,000 1,500,000 Middlesex County, NJ PCFA Weekly VRDNs (FMC Gold Co.)/(Wachovia Bank of NC, N.A. Winston-Salem LOC) 1,500,000 2,500,000 New Jersey EDA Weekly VRDNs (Center-For-Aging - Applewood Estates)/(Fleet National Bank, Springfield, MA LOC) 2,500,000 2,450,000 New Jersey EDA Weekly VRDNs (Maroukian Realty, LLC)/(Commerce Bank, N.A., Cherry Hill, NJ LOC) 2,450,000 5,268,000 New Jersey EDA Weekly VRDNs (Meridan Health Care)/(Allfirst LOC) 5,268,000 2,400,000 New Jersey EDA Weekly VRDNs (U.S. Golf Association)/(PNC Bank, N.A. LOC) 2,400,000 1,460,000 New Jersey EDA (Series 1994A) 4.00% TOBs (A.F.L. Quality, Inc.)/(Fleet Bank N.A. LOC), Optional Tender 7/1/2000 1,460,000 330,000 New Jersey EDA (Series 1994B) 4.00% TOBs (Two Univac, LLC)/(Fleet Bank N.A. LOC), Optional Tender 7/1/2000 330,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW JERSEY-CONTINUED $ 4,100,000 New Jersey EDA (Series 1985) Weekly VRDNs (Seton Co.)/(First Union National Bank Charlotte, NC LOC) $ 4,100,000 280,000 New Jersey EDA (Series 1987G) Weekly VRDNs (W.Y. Urban Renewal)/(National Westminster Bank, PLC, London LOC) 280,000 2,300,000 New Jersey EDA (Series 1990) Weekly VRDNs (Genlyte Camden County)/(Bank of America, N.A. LOC) 2,300,000 910,000 New Jersey EDA (Series 1992D-1) Weekly VRDNs (Danlin Corp.)/(Banque Nationale de Paris LOC) 910,000 2,485,000 New Jersey EDA (Series 1992L) Weekly VRDNs (Kent Place School)/(Banque Nationale de Paris LOC) 2,485,000 1,710,000 New Jersey EDA (Series 1995) Weekly VRDNs (International Vitamin Corporation Project)/(National Westminster Bank, PLC, London LOC) 1,710,000 2,325,000 New Jersey EDA (Series 1997) Weekly VRDNs (Lauffer Building Associates, Ltd.)/(Credit Suisse First Boston LOC) 2,325,000 1,775,000 New Jersey EDA (Series 1997) Weekly VRDNs (Oakland Building Associates, Ltd.)/(Credit Suisse First Boston LOC) 1,775,000 1,800,000 New Jersey EDA (Series 1997) Weekly VRDNs (Oakland Industrial Associates, Ltd.)/(Credit Suisse First Boston LOC) 1,800,000 2,500,000 New Jersey EDA (Series 1997) Weekly VRDNs (Okner Parkway Associates Ltd. Partnership)/(Credit Suisse First Boston LOC) 2,500,000 3,500,000 New Jersey EDA (Series 1997) Weekly VRDNs (Phoenix Realty Partners)/(Corestates Bank N.A. Philadelphia, PA LOC) 3,500,000 1,500,000 New Jersey EDA (Series 1997) Weekly VRDNs (UJA Federation of Bergan County and North Hudson, Inc.)/(Bank of New York, New York LOC) 1,500,000 2,400,000 New Jersey EDA (Series 1997) Weekly VRDNs (Wood Hollow Associates, L.L.C.)/(Corestates Bank N.A. Philadelphia, PA LOC) 2,400,000 2,800,000 New Jersey EDA (Series 1998) Weekly VRDNs (Deutscher Realty Co. LLC)/(Chase Manhattan Bank N.A., New York LOC) 2,800,000 1,300,000 New Jersey EDA (Series 1998) Weekly VRDNs (St. James Preparatory School & St. James Social Service Corp.)/(First Union National Bank, North LOC) 1,300,000 1,975,000 New Jersey EDA (Series 1998A) Weekly VRDNs (Bayshore Health Care Center)/(KBC Bank N.V. LOC) 1,975,000 3,750,000 New Jersey EDA (Series 1999) Weekly VRDNs (Richmond Industries, Inc. and Richmond Realty, LLC)/(Commerce Bank, N.A., Cherry Hill, NJ LOC) 3,750,000 1,690,000 New Jersey EDA (Series 1999) Weekly VRDNs (VOADV Property, Inc.)/(Commerce Bank, N.A., Cherry Hill, NJ LOC) 1,690,000 1,040,000 New Jersey EDA (Series A) Weekly VRDNs (325 Midland Avenue, LLC & Wearbest Sil- Tex, Ltd.)/(Bank of New York, New York LOC) 1,040,000 250,000 New Jersey EDA (Series B) Weekly VRDNs (325 Midland Avenue, LLC & Wearbest Sil- Tex, Ltd.)/(Bank of New York, New York LOC) 250,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW JERSEY-CONTINUED $ 435,000 New Jersey EDA (Series W) Weekly VRDNs (Datatec Industries, Inc.)/(Banque Nationale de Paris LOC) $ 435,000 2,815,000 New Jersey EDA, Economic Development Bonds Weekly VRDNs (Atlantic States Cast Iron Pipe Co.)/(Amsouth Bank N.A., Birmingham LOC) 2,815,000 4,800,000 New Jersey EDA, Port Facility Revenue Bonds (Series 1983) Weekly VRDNs (Trailer Marine Transport Corp.)/(Chase Manhattan Bank N.A., New York LOC) 4,800,000 8,500,000 New Jersey EDA, Trust Receipts (Series 1998 FR/RI-34) Weekly VRDNs (New Jersey-American Water Co., Inc.)/(FGIC INS)/(Bank of New York, New York LIQ) 8,500,000 2,410,000 New Jersey Health Care Facilities Financing Authority (Series B) 5.50% Bonds (Kennedy Health System)/(MBIA INS), 7/1/2000 2,441,170 8,240,000 New Jersey Housing & Mortgage Financing Authority, CDC Municipal Products Class A Certificates (Series 1996B) Weekly VRDNs (MBIA INS)/(CDC Municipal Products, Inc. LIQ) 8,240,000 3,530,000 New Jersey State Transportation Trust Fund Agency, Floater Certificates (Series 1998- 54) Weekly VRDNs (FSA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 3,530,000 2,500,000 New Jersey State Transportation Trust Fund Agency, TOC's Trust (Series 1999-2) Weekly VRDNs (FSA INS)/(Chase Manhattan Bank N.A., New York LIQ) 2,500,000 2,500,000 New Jersey State Transportation Trust Fund Agency, Trust Receipts (Series 1996-2) Weekly VRDNs (MBIA INS)/(Bank of New York, New York LIQ) 2,500,000 1,000,000 New Jersey State Transportation Trust Fund Agency, Trust Receipts FR/RI-A37 Weekly VRDNs (AMBAC INS)/(Bayerische Hypotheken-und Vereinsbank AG LIQ) 1,000,000 2,535,000 2 New Jersey State (Series 1997L) 3.50% TOBs (CDC Municipal Products, Inc. LIQ), Optional Tender 6/8/2000 2,535,000 1,000,000 Passaic Valley, NJ Water Commission (Series 1999) Water Supply System Subordinated Project Notes, 4.50% BANs (PNC Bank, N.A. LOC), 11/14/2000 1,006,530 2,233,500 Pleasantville, NJ, 3.75% BANs, 4/29/2000 2,238,257 10,000,000 Port Authority of New York and New Jersey (Series 1991-A) Weekly VRDNs 10,000,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW JERSEY-CONTINUED $ 3,000,000 Trenton, NJ, 4.25% BANs, 10/20/2000 $ 3,012,960 3,227,500 Union Beach, NJ, 3.75% BANs, 1/20/2000 3,231,263 3,200,000 Union County, NJ Utilities Authority, Trust Receipts FR/RI-38 Weekly VRDNs (Ogden Martin Systems Of Union, Inc.)/(AMBAC INS)/(Bank of New York, New York LIQ) 3,200,000 5,200,000 Washington Borough, NJ, 3.30% BANs, 12/10/1999 5,200,535 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 169,931,806
Securities that are subject to alternative minimum tax represent 31.4% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER 92.1% 7.9%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $2,535,000 which represents 1.5% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($170,501,490) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation AMT -Alternative Minimum Tax BANs -Bond Anticipation Notes EDA -Economic Development Authority FGIC - -Financial Guaranty Insurance Company FSA -Financial Security Assurance GTD - -Guaranteed INS -Insured LIQ -Liquidity Agreement LOC -Letter of Credit MBIA - -Municipal Bond Investors Assurance PCFA -Pollution Control Finance Authority TOBs -Tender Option Bonds VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 169,931,806 Cash 479,555 Income receivable 1,525,765 Receivable for shares sold 4,551 TOTAL ASSETS 171,941,677 LIABILITIES: Payable for investments purchased $ 1,006,530 Payable for shares redeemed 25,107 Income distribution payable 383,667 Accrued expenses 24,883 TOTAL LIABILITIES 1,440,187 Net assets for 170,501,490 shares outstanding $ 170,501,490 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SHARES: $112,138,360 / 112,138,360 shares outstanding $1.00 INSTITUTIONAL SERVICE SHARES: $58,363,130 / 58,363,130 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 6,310,577 EXPENSES: Investment advisory fee $ 763,407 Administrative personnel and services fee 155,000 Custodian fees 9,196 Transfer and dividend disbursing agent fees and expenses 37,478 Directors'/Trustees' fees 1,825 Auditing fees 12,615 Legal fees 9,664 Portfolio accounting fees 57,500 Distribution services fee- Institutional Service Shares 68,463 Shareholder services fee- Institutional Shares 305,971 Shareholder services fee- Institutional Service Shares 171,158 Share registration costs 32,062 Printing and postage 22,571 Insurance premiums 12,481 Miscellaneous 2,455 TOTAL EXPENSES 1,661,846 WAIVERS: Waiver of investment advisory fee $ (155,083) Waiver of distribution services fee-Institutional Service Shares (68,463) Waiver of shareholder services fee-Institutional Shares (244,777) Waiver of shareholder services fee-Institutional Service Shares (68,463) TOTAL WAIVERS (536,786) Net expenses 1,125,060 Net investment income $ 5,185,517
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 5,185,517 $ 6,304,513 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Shares (3,366,649) (4,351,312) Institutional Service Shares (1,818,868) (1,953,201) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (5,185,517) (6,304,513) SHARE TRANSACTIONS: Proceeds from sale of shares 563,331,396 670,567,607 Net asset value of shares issued to shareholders in payment of distributions declared 1,077,052 1,275,927 Cost of shares redeemed (565,179,843) (667,515,788) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (771,395) 4,327,746 Change in net assets (771,395) 4,327,746 NET ASSETS: Beginning of period 171,272,885 166,945,139 End of period $ 170,501,490 $ 171,272,885
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.77% 3.12% 3.18% 3.17% 3.46% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.83% 0.83% 0.86% 0.92% 0.96% Net investment income 2 2.47% 2.79% 2.82% 2.76% 3.00% Expenses (after waivers) 0.55% 0.55% 0.55% 0.55% 0.55% Net investment income (after waivers) 2.75% 3.07% 3.13% 3.13% 3.41% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $112,138 $106,032 $112,407 $115,722 $86,944
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.67% 3.01% 3.08% 3.07% 3.36% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.93% 0.93% 0.96% 1.02% 1.06% Net investment income 2 2.37% 2.67% 2.77% 2.66% 2.87% Expenses (after waivers) 0.65% 0.65% 0.65% 0.65% 0.65% Net investment income (after waivers) 2.65% 2.95% 3.08% 3.03% 3.28% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $58,363 $65,240 $54,538 $28,807 $29,817
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of New Jersey Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Shares and Institutional Service Shares. The investment objective of the Fund is to provide current income which is exempt from federal regular income tax and New Jersey state income tax imposed upon non-corporate taxpayers consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees (the "Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $170,501,490. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 401,625,092 453,405,235 Shares issued to shareholders in payment of distributions declared 26,129 43,111 Shares redeemed (395,545,299) (459,822,649) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS 6,105,922 (6,374,303) YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 161,706,304 217,162,372 Shares issued to shareholders in payment of distributions declared 1,050,923 1,232,816 Shares redeemed (169,634,544) (207,693,139) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS (6,877,317) 10,702,049 NET CHANGE RESULTING FROM SHARE TRANSACTIONS (771,395) 4,327,746
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. DISTRIBUTION SERVICES FEE The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Institutional Service Shares. The Plan provides that the Fund may incur distribution expenses up to 0.10% of the average daily net assets of the Institutional Service Shares, annually, to compensate FSC. FSC may voluntarily choose to waive any portion of its fee. FSC can modify or terminate this voluntary waiver at any time at its sole discretion. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $352,651,530 and $306,799,762, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 65.2% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 13.8% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF NEW JERSEY MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the New Jersey Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian and brokers or other appropriate auditing procedures where replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the New Jersey Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT New Jersey Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated New Jersey Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229600 Cusip 314229709 G00203-01 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of New York Municipal Cash Trust, which covers the 12-month reporting period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Service Shares and Cash II Shares. The fund is a convenient way to put your ready cash pursuing double or triple-tax-free income-free from federal regular income tax, New York state income tax, and New York City local income tax-through a portfolio concentrated in high-quality, short-term New York municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development, and transportation. This double or triple-tax-free advantage means you can earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share for Institutional Service Shares and $0.03 per share for Cash II Shares. The fund's total net assets totaled $640.0 million at the end of the reporting period. Thank you for relying on New York Municipal Cash Trust to help your ready cash earn income every day. As always, we'll continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999, with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the reporting period was approximately 65 days. Despite our attempts to take advantage of the relative value of fixed-rate notes to VRDNs, an influx of assets kept the fund's average maturity in a 40-50 day range over most of the reporting period. At the end of the period, the average maturity stood at 51 days. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. After an average maturity range was targeted, taking into account Federal Reserve monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first and second quarters of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.2% 1 NEW YORK-99.0% $ 13,150,000 2 ABN AMRO Muni TOPS Certificates Trust (New York Non-AMT) Series 1999- 2, 3.30% TOBs (Metropolitan Transportation Authority, NY)/(FSA INS)/(ABN AMRO Bank N.V., Amsterdam LIQ), Optional Tender 5/10/2000 $ 13,150,000 9,195,000 Albany County Airport Authority, NY, Trust Receipts (Series 1997 FR/RI-7) Weekly VRDNs (FSA INS)/(Bank of New York, New York LIQ) 9,195,000 4,940,000 Argyle, NY Central School District, 3.35% BANs, 12/1/1999 4,940,589 4,115,000 Canandaigua, NY City School District, 3.35% BANs, 3/30/2000 4,118,273 6,120,000 Cattaraugus County, NY IDA, (Series 1999A) Weekly VRDNs (Gernatt Asphalt Products, Inc.)/(Manufacturer's & Traders Trust Co., Buffalo, NY LOC) 6,120,000 3,460,000 Cayuga County, NY IDA, (Series 1998) Weekly VRDNs (NFR Northeast, Inc.)/(KeyBank, N.A. LOC) 3,460,000 7,500,000 Chateaugay, NY Central School District, 4.25% BANs, 9/29/2000 7,522,928 3,900,000 Chautauqua County, NY IDA Weekly VRDNs (Mogen David Wine Corp.)/(Wells Fargo Bank, N.A. LOC) 3,900,000 12,850,000 Clipper Tax-Exempt Trust (New York AMT) Series 1998- 10 Weekly VRDNs (New York State Mortgage Agency)/(State Street Bank and Trust Co. LIQ) 12,850,000 2,250,000 Cobleskill-Richmondville, NY Central School District, 4.25% BANs, 6/15/2000 2,256,107 820,000 Colonie, NY IDA Weekly VRDNs (Herbert S. Ellis)/(HSBC Bank USA LOC) 820,000 600,000 Colonie, NY IDA, (Series 1988) Weekly VRDNs (Specialty Retailers, Inc.)/(HSBC Bank USA LOC) 600,000 2,800,000 Colonie, NY IDA, 3.35% TOBs (800 North Pearl Associates)/(Fleet Bank N.A. LOC), Optional Tender 12/1/1999 2,800,000 2,425,000 Columbia County, NY IDA, (Series 1998A) Weekly VRDNs (Empire Homes, LLC)/(KeyBank, N.A. LOC) 2,425,000 5,200,000 Corinth, NY IDA, Solid Waste Disposal Revenue Bonds (Series A), 3.85% TOBs (International Paper Co.), Optional Tender 3/1/2000 5,200,000 8,000,000 Dalton-Nunda, NY Central School District, 3.40% BANs, 11/24/1999 8,000,973 1,100,000 Dutchess County, NY IDA, Series 1995 Weekly VRDNs (Laerdal Medical Corp.)/(Bank of New York, New York LOC) 1,100,000 4,000,000 Elba, NY Central School District, 4.00% BANs, 7/7/2000 4,010,504 5,000,000 Erie County, NY IDA, (Series 1998) Weekly VRDNs (Alden Scientific Corp.)/(KeyBank, N.A. LOC) 5,000,000 2,025,000 Erie County, NY IDA, (Series A) Weekly VRDNs (Gemcor)/(HSBC Bank USA LOC) 2,025,000 5,000,000 Erie County, NY IDA, IDRB (Series 1994) Weekly VRDNs (Servotronics, Inc. Project)/(Fleet Bank N.A. LOC) 5,000,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW YORK-CONTINUED $ 485,000 Fulton County, NY IDA, 3.40% TOBs (Gates Mills, Inc.)/(Fleet Bank N.A. LOC), Optional Tender 12/1/1999 $ 485,000 2,000,000 Groton Central School District, NY, 3.35% BANs, 3/30/2000 2,001,189 1,300,000 Guilderland, NY IDA, (Series 1993A) Weekly VRDNs (Northeastern Industrial Park, Inc.)/(Fleet Bank N.A. LOC) 1,300,000 3,400,000 Herkimer County, NY IDA, 1994 IDRB Weekly VRDNs (Granny's Kitchen)/(Bank of New York, New York LOC) 3,400,000 2,800,000 Lansing, NY Central School District, 3.90% BANs, 8/10/2000 2,806,257 12,390,000 Long Island Power Authority, Electric System Subordinated Revenue Bonds (Series 1) Weekly VRDNs (Bayerische Landesbank Girozentrale and Westdeutsche Landesbank Girozentrale LOCs) 12,390,000 2,330,000 Long Island Power Authority, Floater Certificates (Series 1998- 66) Weekly VRDNs (MBIA INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 2,330,000 7,595,000 Long Island Power Authority, PA-513R, 3.25% TOBs (FSA INS)/(Merrill Lynch Capital Services, Inc. LIQ), Optional Tender 4/6/2000 7,595,000 1,600,000 Madison County, NY IDA, (Series 1989A) Weekly VRDNs (Madison, NY Upstate Metals)/(Fleet Bank N.A. LOC) 1,600,000 12,050,000 Madison County, NY IDA, (Series 1999A) Weekly VRDNs (Cazenovia College)/(Manufacturer's & Traders Trust Co., Buffalo, NY LOC) 12,050,000 3,400,000 Madison County, NY IDA, (Series A) Weekly VRDNs (Owl Wire and Cable)/(KeyBank, N.A. LOC) 3,400,000 19,395,000 Metropolitan Transportation Authority, NY, MERLOTS (Series 1997 C- 2) Weekly VRDNs (FGIC INS)/(First Union National Bank, Charlotte, NC LIQ) 19,395,000 3,000,000 Metropolitan Transportation Authority, NY, SSP29 (Series 1999) Weekly VRDNs (FSA INS)/(Chase Manhattan Bank N.A., New York LIQ) 3,000,000 4,265,000 Metropolitan Transportation Authority, NY, Trust Receipts (Series 1997 FR/RI-9) Weekly VRDNs (FGIC INS)/(Bank of New York, New York LIQ) 4,265,000 4,740,000 New York City Housing Development Corp., Municipal Securities Trust Receipts (Series 1996- CMC1A) Weekly VRDNs (Chase Manhattan Corp. LIQ) 4,740,000 4,735,000 New York City Housing Development Corp., Municipal Securities Trust Receipts (Series 1996- CMC1B) Weekly VRDNs (Chase Manhattan Corp. LIQ) 4,735,000 12,240,000 New York City Municipal Water Finance Authority, (PA-523) Weekly VRDNs (FGIC INS)/(Merrill Lynch Capital Services, Inc. LIQ) 12,240,000 8,000,000 New York City Municipal Water Finance Authority, Trust Receipts (Series 1997 FR/RI-6) Weekly VRDNs (MBIA INS)/(Bank of New York, New York LIQ) 8,000,000 6,300,000 2 New York City Municipal Water Finance Authority, Variable Rate Certificates (Series 1997A-1), 3.15% TOBs (MBIA INS)/(Bank of America, N.A. LIQ), Optional Tender 12/16/1999 6,300,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW YORK-CONTINUED $ 9,345,000 2 New York City Municipal Water Finance Authority, Variable Rate Certificates (Series 1997A-2), 3.15% TOBs (MBIA INS)/(Bank of America, N.A. LIQ), Optional Tender 12/16/1999 $ 9,345,000 22,223 New York City, NY IDA Weekly VRDNs (David Rosen Bakers Supply)/(Ford Motor Credit Corp. LIQ)/(Chase Manhattan Bank N.A., New York LOC) 22,223 7,035,000 New York City, NY IDA, CDC 1997H - Class A Certificates Weekly VRDNs (Japan Airlines Co.)/(FSA INS)/(CDC Municipal Products, Inc. LIQ) 7,035,000 7,990,000 New York City, NY IDA, CDC Municipal Products (Series 1998D) Weekly VRDNs (Japan Airlines Co.)/(FSA INS)/(CDC Municipal Products, Inc. LIQ) 7,990,000 3,380,000 New York City, NY IDA, CDC Municipal Products, Inc. (Series 1996H) Weekly VRDNs (Japan Airlines Co.)/(FSA INS)/(CDC Municipal Products, Inc. LIQ) 3,380,000 8,670,000 New York City, NY IDA, Class A Certificates (Series CDC-1997E) Weekly VRDNs (Japan Airlines Co.)/(FSA INS)/(CDC Municipal Products, Inc. LIQ) 8,670,000 3,005,000 New York City, NY Transitional Finance Authority, (1998 Subseries A-1) Weekly VRDNs (Commerzbank AG, Frankfurt LIQ) 3,005,000 10,000,000 New York City, NY Transitional Finance Authority, (Series 1999B) MERLOTs Weekly VRDNs (First Union National Bank, Charlotte, NC LIQ) 10,000,000 16,595,000 New York City, NY Transitional Finance Authority, PT-1047 Weekly VRDNs (Bank of America, N.A. LIQ) 16,595,000 14,300,000 New York City, NY, (PA- 156), Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ)/(Merrill Lynch Capital Services, Inc. LOC) 14,300,000 5,000,000 New York City, NY, (Series L), 5.25% Bonds, 8/1/2000 5,047,408 10,475,000 New York State Dormitory Authority, PA-60 (Series 1993) Weekly VRDNs (Rochester General Hospital)/(FHA INS)/(Merrill Lynch Capital Services, Inc. LIQ) 10,475,000 6,245,000 2 New York State Dormitory Authority, PT-128, 3.70% TOBs (Rosalind & Joseph Gurwin Jewish Geriatric Center of Long Island, Inc.)/(AMBAC INS)/(Merrill Lynch Capital Services, Inc. LIQ), Optional Tender 7/27/2000 6,245,000 5,960,000 New York State Dormitory Authority, PT-130 (Series 1997) Weekly VRDNs (United Health Services Hospitals, Inc.)/(AMBAC INS)/(Merrill Lynch Capital Services, Inc. LIQ) 5,960,000 7,780,000 2 New York State Dormitory Authority, PT-75, 3.30% TOBs (Ellis Hospital)/(MBIA INS)/(Merrill Lynch Capital Services, Inc. LIQ), Optional Tender 5/11/2000 7,780,000 5,445,000 New York State Energy Research & Development Authority, (PA-144) Weekly VRDNs (Long Island Lighting Co.)/(Merrill Lynch Capital Services, Inc. LIQ)/(Merrill Lynch Capital Services, Inc. LOC) 5,445,000 5,000,000 New York State Energy Research & Development Authority, PCR Bonds (1987 Series B) Daily VRDNs (Niagara Mohawk Power Corp.)/(Morgan Guaranty Trust Co., New York LOC) 5,000,000 4,190,000 New York State Energy Research & Development Authority, Poll Ctrl Revenue Adj Rate Bonds (1988 Series A) Daily VRDNs (Niagara Mohawk Power Corp.)/(Morgan Guaranty Trust Co., New York LOC) 4,190,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW YORK-CONTINUED $ 3,800,000 New York State Energy Research & Development Authority, Trust Receipts, Series 1998 FR/RI-9 Weekly VRDNs (Brooklyn Union Gas Co.)/(MBIA INS)/(Bank of New York, New York LIQ) $ 3,800,000 12,200,000 New York State Environmental Facilities Corp., Trust Receipts (Series 1997 FR/RI-4) Weekly VRDNs (New York City Municipal Water Finance Authority)/(Bank of New York, New York LIQ) 12,200,000 795,000 New York State Job Development Authority Weekly VRDNs (Bayerische Landesbank Girozentrale and Morgan Guaranty Trust Co., New York LOCs) 795,000 3,105,000 New York State Job Development Authority Weekly VRDNs (Bayerische Landesbank Girozentrale and Morgan Guaranty Trust Co., New York LOCs) 3,105,000 2,320,000 New York State Job Development Authority, (Series C-1) Monthly VRDNs (Bayerische Landesbank Girozentrale and Morgan Guaranty Trust Co., New York LOCs) 2,320,000 5,000,000 New York State Local Government Assistance Corp., (Series B) Weekly VRDNs (Bank of Nova Scotia, Toronto LOC) 5,000,000 6,965,000 New York State Medical Care Facilities Finance Agency, (Series 1992 B PT-100) Daily VRDNs (FHA INS)/(Merrill Lynch Capital Services, Inc. LIQ) 6,965,000 3,160,000 New York State Medical Care Facilities Finance Agency, Hospital Insured Mortgage Revenue Bonds (PT-154) Weekly VRDNs (FHA INS)/(Banco Santander SA LIQ) 3,160,000 14,495,000 New York State Mortgage Agency, (PA-422) Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 14,495,000 3,700,000 New York State Mortgage Agency, (Series PA-29) Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 3,700,000 1,455,000 New York State Mortgage Agency, Homeowner Mortgage Revenue Bonds (PA-87), Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 1,455,000 3,205,000 New York State Mortgage Agency, Homeowner Mortgage Revenue Bonds (Series PT- 15B) Weekly VRDNs (Commerzbank AG, Frankfurt LIQ) 3,205,000 8,645,000 New York State Mortgage Agency, PA-406 Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 8,645,000 5,000,000 2 New York State Mortgage Agency, PT-164, 3.25% TOBs (Banque Nationale de Paris LIQ), Optional Tender 3/9/2000 5,000,000 4,880,000 New York State Power Authority, 3.55% TOBs (Bank of America, N.A., Bank of Tokyo-Mitsubishi Ltd. and Morgan Guaranty Trust Co., New York LIQs), Optional Tender 3/1/2000 4,880,000 6,500,000 New York State Thruway Authority, (PA-172), Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ)/(Merrill Lynch Capital Services, Inc. LOC), Optional Tender 1/27/2000 6,500,000 9,555,000 2 New York State Thruway Authority, (Series E) PT- 1141, 3.25% TOBs (Merrill Lynch Capital Services, Inc. LIQ), Optional Tender 3/2/2000 9,555,000 8,400,000 New York State Urban Development Corp., Municipal SecuritiesTrust Receipts (Series 1996- CMC6) Weekly VRDNs (Chase Manhattan Corp. LIQ) 8,400,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW YORK-CONTINUED $ 4,500,000 Newfield, NY Central School District, 4.00% BANs, 7/14/2000 $ 4,512,151 9,520,000 Niagara County, NY IDA, Solid Waste Disposal Facility Revenue Bonds (Series 1994 A) Weekly VRDNs (American Ref-Fuel Co.)/(Wachovia Bank of NC, N.A. LOC) 9,520,000 1,600,000 Odessa-Montour, NY Central School District, 3.25% BANs, 11/17/1999 1,600,061 1,120,000 Onondaga County, NY IDA, (Series 1997) Weekly VRDNs (General Super Plating Co., Inc.)/(KeyBank, N.A. LOC) 1,120,000 3,500,000 Onondaga County, NY IDA, (Series 1999A) Weekly VRDNs (Christian Brothers Academy of Syracuse, NY)/(KeyBank, N.A. LOC) 3,500,000 1,725,000 Onondaga County, NY Weekly VRDNs (Grainger (W.W.), Inc.) 1,725,000 1,200,000 Ontario, NY IDA Weekly VRDNs (Hillcrest Enterprises/Buckeye Corrugated)/(National City Bank, Ohio LOC) 1,200,000 5,700,000 Oswego County, NY IDA Weekly VRDNs (Copperweld Corp.)/(Credit Lyonnais Paris LOC) 5,700,000 15,000,000 Port Authority of New York and New Jersey Weekly VRDNs 15,000,000 15,000,000 Port Authority of New York and New Jersey Weekly VRDNs 15,000,000 5,000,000 Portville, NY Central School District, 4.125% BANs, 10/20/2000 5,012,767 6,500,000 Red Hook, NY Central School District, 4.25% BANs, 10/27/2000 6,527,772 4,500,000 Riverhead, NY IDA, IDRB (Series 1998) Weekly VRDNs (Altaire Pharmaceuticals, Inc.)/(Mellon Bank N.A., Pittsburgh LOC) 4,500,000 1,000,000 Rotterdam, NY IDA, (Series 1993A) Weekly VRDNs (Rotterdam Industrial Park)/(Fleet Bank N.A. LOC) 1,000,000 2,000,000 Rotterdam-Mohonasen Central School District, NY, 4.125% RANs, 6/30/2000 2,006,444 1,425,000 Schenectady, NY IDA, IDRB (Series 1995A) Weekly VRDNs (Fortitech Holding Corporation Project)/(Fleet Bank N.A. LOC) 1,425,000 2,720,000 Southeast, NY IDA, IDRB (Series 1995) Weekly VRDNs (Dairy Conveyor Corp. Project)/(Chase Manhattan Bank N.A., New York LOC) 2,720,000 3,380,000 Southeast, NY IDA, Variable Rate IDRB 1996 Weekly VRDNs (The Rawplug Company, Inc.)/(Bank of New York, New York LOC) 3,380,000 2,500,000 St. Lawrence County, NY IDA, (Series 1998A) Weekly VRDNs (Alcoa, Inc.) 2,500,000 600,000 Suffolk County, NY IDA Weekly VRDNs (C & J Realty Corp.)/(Ford Motor Credit Corp. LIQ)/(Chase Manhattan Bank N.A., New York LOC) 600,000 750,000 Suffolk County, NY IDA Weekly VRDNs (YM-YWHA of Suffolk)/(European American Bank, New York LOC) 750,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 NEW YORK-CONTINUED $ 2,870,000 Suffolk County, NY IDA, (Series 1997B) Weekly VRDNs (Maryhaven Center of Hope)/(KeyBank, N.A. LOC) $ 2,870,000 680,000 Suffolk County, NY IDA, (Series 1998A) Weekly VRDNs (Episcopal Health Services, Inc. Civic Facility)/(Paribas, Paris LOC) 680,000 1,800,000 Suffolk County, NY IDA, 5.0375% TOBs (Grainger (W.W.), Inc.), Optional Tender 12/1/1999 1,800,000 8,000,000 Syracuse, NY IDA Syracuse Weekly VRDNs (Crouse Health Hospital Cardiology)/(Manufacturer' s & Traders Trust Co., Buffalo, NY LOC) 8,000,000 24,525,000 Triborough Bridge & Tunnel Authority, NY, Floater Certificates (Series 1998- 72) Weekly VRDNs (FGIC INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 24,525,000 4,000,000 Tupper Lake, NY Central School District, 4.00% BANs, 7/13/2000 4,010,757 4,685,000 United Nations, NY Development Corp., (PA- 155), Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ)/(Merrill Lynch Capital Services, Inc. LOC) 4,685,000 5,200,000 VRDC/IVRC Trust, (Series 1993B) Weekly VRDNs (Metropolitan Transportation Authority, NY)/(AMBAC INS)/(Citibank N.A., New York LIQ) 5,200,000 11,700,000 VRDC/IVRC Trust, (Series 1993G) Weekly VRDNs (St. Lukes Roosevelt Hospital Center)/(FHA INS)/(Chase Manhattan Bank N.A., New York LIQ) 11,700,000 7,500,000 Walden Village, NY IDA, IDRB (Series 1994) Weekly VRDNs (Spence Engineering Co.)/(First Union National Bank, Charlotte, NC LOC) 7,500,000 3,650,000 Wallkill, NY, 3.40% BANs, 4/28/2000 3,652,585 4,065,000 Warren & Washington Counties, NY IDA Weekly VRDNs (Sandy Hill Corp.)/(First Union National Bank, Charlotte, NC LOC) 4,065,000 3,800,000 Wayne County, NY IDA, (Series 1999) Weekly VRDNs (Paul T. Freund Corporation Facility)/(Chase Manhattan Bank N.A., New York LOC) 3,800,000 5,000,000 William Floyd UFSD, NY, (Series 1999), 4.00% TANs, 6/30/2000 5,013,559 6,700,000 Wyoming County, NY IDA, (Series 1999A) Weekly VRDNs (TPI Arcade, Inc.)/(Manufacturer's & Traders Trust Co., Buffalo, NY LOC) 6,700,000 TOTAL 633,692,547 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PUERTO RICO-0.2% $ 1,400,901 Commonwealth of Puerto Rico Municipal Revenues Collection Center, 1997A Lease TOPS Trust Weekly VRDNs (ABN AMRO Bank N.V., Amsterdam LIQ)/(State Street Bank and Trust Co. LOC) $ 1,400,901 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 635,093,448
Securitites that are subject to alternative minimum tax represents 30.0% of the portfolio based upon portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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 Corporation, MIG-1 or MIG-2 by Moody's Investors Service, Inc., F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited)
FIRST TIER SECOND TIER 93.0% 7.0%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid by criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $57,375,000 which represents 9.0% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($639,981,712) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation AMT -Alternative Minimum Tax BANs -Bond Anticipation Notes FGIC -Financial Guaranty Insurance Company FHA - -Federal Housing Administration FSA -Financial Security Assurance IDA - -Industrial Development Authority IDRB -Industrial Development Revenue Bond INS - -Insured LIQ -Liquidity Agreement LOCs -Letter(s) of Credit MBIA -Municipal Bond Investors Assurance MERLOTS -Municipal Exempt Receipts - Liquidity Optional Tender Series PCR -Pollution Control Revenue RANs -Revenue Anticipation Notes SA - -Support Agreement TANs -Tax Anticipation Notes TOBs -Tender Option Bonds VRDNs - -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 635,093,448 Cash 414,939 Income receivable 5,479,211 Receivable for shares sold 77,220 TOTAL ASSETS 641,064,818 LIABILITIES: Payable for shares redeemed $ 36,171 Income distribution payable 923,676 Accrued expenses 123,259 TOTAL LIABILITIES 1,083,106 Net assets for 639,981,712 shares outstanding $ 639,981,712 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SERVICE SHARES: $577,268,569 / 577,268,569 shares outstanding $1.00 CASH II SHARES: $62,713,143 / 62,713,143 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 22,092,410 EXPENSES: Investment advisory fee $ 2,640,056 Administrative personnel and services fee 497,651 Custodian fees 21,707 Transfer and dividend disbursing agent fees and expenses 136,245 Directors'/Trustees' fees 5,947 Auditing fees 12,464 Legal fees 12,782 Portfolio accounting fees 122,445 Distribution services fee- Institutional Service Shares 1,501,680 Distribution services fee- Cash II Shares 148,355 Shareholder services fee- Institutional Service Shares 1,501,680 Shareholder services fee- Cash II Shares 148,355 Share registration costs 54,071 Printing and postage 26,131 Insurance premiums 37,716 Miscellaneous 4,726 TOTAL EXPENSES 6,872,011 WAIVERS: Waiver of investment advisory fee $ (535,876) Waiver of distribution services fee-Institutional Service Shares (1,501,680) Waiver of distribution services fee-Cash II Shares (148,355) Waiver of shareholder services fee-Institutional Service Shares (961,075) TOTAL WAIVERS (3,146,986) Net expenses 3,725,025 Net investment income 18,367,385
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 18,367,385 $ 17,525,524 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Service Shares (16,781,325) (16,632,253) Cash II Shares (1,586,060) (893,271) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (18,367,385) (17,525,524) SHARE TRANSACTIONS: Proceeds from sale of shares 2,350,986,100 2,229,397,824 Net asset value of shares issued to shareholders in payment of distributions declared 8,127,626 7,306,584 Cost of shares redeemed (2,276,100,170) (2,125,311,852) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 83,013,556 111,392,556 Change in net assets 83,013,556 111,392,556 NET ASSETS: Beginning of period 556,968,156 445,575,600 End of period $ 639,981,712 $ 556,968,156
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.04 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.83% 3.19% 3.26% 3.24% 3.56% RATIOS TO AVERAGE NET ASSETS: Expenses 2 1.04% 1.05% 1.05% 1.07% 1.07% Net investment income 2 2.30% 2.62% 2.69% 2.64% 2.96% Expenses (after waivers) 0.55% 0.55% 0.53% 0.53% 0.54% Net investment income (after waivers) 2.79% 3.12% 3.21% 3.18% 3.49% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $577,269 $513,011 $424,174 $305,533 $276,149
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Financial Highlights-Cash II Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.67% 3.02% 3.07% 3.05% 3.37% RATIOS TO AVERAGE NET ASSETS: Expenses 2 1.04% 1.05% 1.05% 1.07% 1.07% Net investment income 2 2.34% 2.64% 2.67% 2.66% 2.84% Expenses (after waivers) 0.71% 0.71% 0.71% 0.71% 0.71% Net investment income (after waivers) 2.67% 2.98% 3.01% 3.02% 3.20% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $62,713 $43,957 $21,402 $25,571 $14,439
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of New York Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The investment objective of the Fund is current income exempt from federal regular income tax, personal income taxes imposed by New York State and New York municipalities consistent with stability of principal. The Fund offers two classes of shares: Institutional Service Shares and Cash II Shares. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees ("Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $639,981,712. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 2,149,483,090 2,064,643,976 Shares issued to shareholders in payment of distributions declared 6,777,794 6,586,980 Shares redeemed (2,092,003,780) (1,982,393,236) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS 64,257,104 88,837,720 YEAR ENDED OCTOBER 31 1999 1998 CASH II SHARES: Shares sold 201,503,010 164,753,848 Shares issued to shareholders in payment of distributions declared 1,349,832 719,604 Shares redeemed (184,096,390) (142,918,616) NET CHANGE RESULTING FROM CASH II SHARE TRANSACTIONS 18,756,452 22,554,836 NET CHANGE RESULTING FROM SHARE TRANSACTIONS 83,013,556 111,392,556
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. DISTRIBUTION SERVICES FEE The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1 under the Act. Under the terms of the Plan, the Fund will reimburse Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Institutional Service Shares and Cash II Shares. The Plan provides that the Fund may incur distribution expenses up to 0.25% of the average daily net assets of the Institutional Service Shares and Cash II Shares, annually, to reimburse FSC. The distributor may voluntarily choose to waive any portion of its fee. The distributor can modify or terminate this voluntary waiver at any time at its sole discretion. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the fiscal year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $862,454,000 and $698,325,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 62.6% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 9.6% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITOR (UNAUDITED) On May 19, 1999, the Fund's Trustees upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997, and October 31, 1998, contained no adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its report on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee of the Trustees, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ending October 31, 1999. During the fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund, nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF NEW YORK MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the New York Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the New York Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the trust's prospectus which contains facts concerning its objective and policies, management fees, expenses, and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT New York Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated New York Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229741 Cusip 314229733 G00207-01 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Ohio Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares, Institutional Service Shares, and Cash II Shares. The fund is a convenient way to keep your ready cash pursuing double tax-free income-free from federal regular income tax and Ohio state income tax- through a portfolio concentrated in high-quality, short-term Ohio municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends of $0.03 per share for Institutional Shares, $0.03 per share for Institutional Service Shares and $0.03 per share for Cash II Shares. The fund's net assets totaled $315.8 million at the end of the reporting period. You can count on Ohio Municipal Cash Trust to seek the best tax-free income opportunities for your cash investment needs. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the reporting period was approximately 46 days. A large redemption at the beginning of 1999 resulted in a 64 day maturity in early January, which benefited the fund due to higher fixed-rate note exposure. For the balance of the year, the maturity slowly declined to 32 days by the end of August as we declined to purchase fixed-rate notes as the Fed was tightening. In September, the fund was able to take advantage of attractive fixed-rate note opportunities and the average maturity ended the period at 49 days. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range was targeted taking into account Federal Reserve monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first half of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.5% 1 OHIO-99.5% $ 50,000 Akron, Bath & Copley, OH Joint Township Weekly VRDNs (Visiting Nurses)/(National City Bank, Ohio LOC) $ 50,000 7,465,000 Ashland County, OH Health Care Weekly VRDNs (Brethren Care, Inc.)/(FirstMerit Bank, N.A. LOC) 7,465,000 2,000,000 Banc One Capital Higher Education Tax-Exempt Income Trust, (Series 2 Certificates of Ownership) Weekly VRDNs (Bank One, Kentucky LOC) 2,000,000 5,875,000 Belmont County, OH Weekly VRDNs (Lesco, Inc.)/(PNC Bank, N.A. LOC) 5,875,000 1,400,000 Belmont County, OH, 3.52% BANs, 11/23/1999 1,400,221 4,000,000 Brookville, OH, (Series 1988) Weekly VRDNs (Green Tokai)/(Bank of Tokyo- Mitsubishi Ltd. LOC) 4,000,000 5,750,000 Clark County, OH, Multifamily Housing Revenue Bonds (Series 1997) Weekly VRDNs (Ohio Masonic Home)/(Huntington National Bank, Columbus, OH LOC) 5,750,000 1,920,000 Clermont County, OH, Variable Rate IDRB's (Series 1997) Weekly VRDNs (Buriot International, Inc.)/(KeyBank, N.A. LOC) 1,920,000 1,500,000 Clinton County, OH Hospital Authority Weekly VRDNs (Clinton Memorial Hospital)/(National City Bank, Ohio LOC) 1,500,000 1,590,000 Columbiana County, OH, Industrial Development Revenue Bonds Weekly VRDNs (C & S Land Company Project)/(Bank One, Ohio, N.A. LOC) 1,590,000 400,000 Cuyahoga County, OH IDA Weekly VRDNs (Animal Protection League (Cuyahoga County)/(KeyBank, N.A. LOC) 400,000 4,000,000 Cuyahoga County, OH IDA Weekly VRDNs (Cleveland Gear Co.)/(KeyBank, N.A. LOC) 4,000,000 1,200,000 Cuyahoga County, OH IDA Weekly VRDNs (East Park Community, Inc.)/(KeyBank, N.A. LOC) 1,200,000 135,000 Cuyahoga County, OH IDA Weekly VRDNs (Interstate Diesel Service, Inc.)/(Huntington National Bank, Columbus, OH LOC) 135,000 3,350,000 Cuyahoga County, OH IDA Weekly VRDNs (Watt Printers)/(Bank One, Ohio, N.A. LOC) 3,350,000 2,500,000 Cuyahoga County, OH IDA, (Series 1988) Weekly VRDNs (Trebmal Landerhaven)/(Firstar Bank, N.A., Cincinnati LOC) 2,500,000 2,860,000 Cuyahoga County, OH IDA, (Series 1997) Weekly VRDNs (Northstar Plastics, Inc.)/(Bank One, Ohio, N.A. LOC) 2,860,000 2,500,000 Cuyahoga County, OH IDA, (Series 1999) Weekly VRDNs (Kowalski Heat Treating Co.)/(FirstMerit Bank, N.A. LOC) 2,500,000 75,000 Cuyahoga County, OH IDA, IDRB (Series 1995) Weekly VRDNs (Avalon Precision Casting Co. Project)/(KeyBank, N.A. LOC) 75,000 1,500,000 Dayton, OH, (Series 1999), 3.40% BANs, 3/3/2000 1,500,734 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 OHIO-CONTINUED $ 1,550,000 Delaware County, OH, IDRB (Series 1995) Weekly VRDNs (Air Waves, Inc. Project)/(KeyBank, N.A. LOC) $ 1,550,000 2,300,000 Dover, OH, 3.60% BANs, 5/25/2000 2,303,754 4,850,000 Erie County, OH, Adjustable Rate Demand Health Care Facilities Bonds (Series 1996A) Weekly VRDNs (Providence Care Center)/(Fifth Third Bank of Northwestern OH LOC) 4,850,000 1,000,000 Franklin County, OH Hospital Facility Authority, (Series 1992) Weekly VRDNs (Wesley Glenn, Inc.)/(Fifth Third Bank, Cincinnati LOC) 1,000,000 1,000,000 Franklin County, OH Hospital Facility Authority, Revenue Refunding and Improvement Bonds (Series B), 7.60% Bonds (Riverside United Methodist Hospital)/(United States Treasury PRF), 5/15/2000 (@102) 1,042,501 4,500,000 Franklin County, OH IDA Weekly VRDNs (Heekin Can, Inc.)/(PNC Bank, N.A. LOC) 4,500,000 2,620,000 Franklin County, OH IDA Weekly VRDNs (Promark Electronics, Inc.)/(Bank One, Ohio, N.A. LOC) 2,620,000 2,690,000 Franklin County, OH IDA Weekly VRDNs (Unicorn Leasing Corp.)/(Fifth Third Bank, Cincinnati LOC) 2,690,000 2,950,000 Franklin County, OH IDA, (Series 1995) Weekly VRDNs (Fabcon L.L.C. Project)/(Norwest Bank Minnesota, N.A. LOC) 2,950,000 4,900,000 Franklin County, OH IDA, Adjustable Rate Demand IDRB's (Series 1996A) Weekly VRDNs (Carams, Ltd.)/(Huntington National Bank, Columbus, OH LOC) 4,900,000 1,505,000 Franklin County, OH IDA, Adjustable Rate Demand IDRB's (Series 1996B) Weekly VRDNs (Carams, Ltd.)/(Huntington National Bank, Columbus, OH LOC) 1,505,000 2,500,000 Franklin County, OH, 4.05% TOBs (Blacklick Station Apartments)/(Fifth Third Bank, Cincinnati LOC) 10/1/2000 2,500,000 1,615,000 Franklin County, OH, Adjustable Rate Demand Economic Development Revenue Refunding Bonds (Series 1996) Weekly VRDNs (CPM Investments)/(Huntington National Bank, Columbus, OH LOC) 1,615,000 1,650,000 Geauga County, OH Park District, 3.48% BANs, 12/9/1999 1,650,382 1,605,000 Genoa Village, OH, (Series 1999) Weekly VRDNs (Genoa Health Care Center)/(Fifth Third Bank of Northwestern OH LOC) 1,605,000 1,560,000 Hamilton, OH, Issues I & IV (Series 1999), 3.64% BANs, 6/9/2000 1,562,643 2,730,000 Hamilton, OH, Issues V-VI & VIII (Series 1999), 3.64% BANs, 6/9/2000 2,734,624 7,195,000 Henry County, OH, Series 1996 Automatic Feed Project Weekly VRDNs (Huntington National Bank, Columbus, OH LOC) 7,195,000 1,510,000 Hilliard, OH, Adjustable Rate IDRB's (Series 1996) Weekly VRDNs (Medex, Inc.)/(Bank One, Ohio, N.A. LOC) 1,510,000 1,600,000 Holmes County, OH IDA Weekly VRDNs (Poultry Processing)/(Rabobank Nederland, Utrecht LOC) 1,600,000 8,000,000 Huber Heights, OH, IDR Series 1999 Weekly VRDNs (Paxar Corp.)/(SunTrust Bank, Atlanta LOC) 8,000,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 OHIO-CONTINUED $ 1,015,000 Huber Heights, OH, IDRB (Series 1994) Weekly VRDNs (Lasermike, Inc. Project)/(KeyBank, N.A. LOC) $ 1,015,000 1,500,000 Kent, OH, Adjustable Rate IDRB's (Series 1994) Weekly VRDNs (Raven's Metal Products, Inc. Project)/(FirstMerit Bank, N.A. LOC) 1,500,000 2,990,000 Lake County, OH, Adjustable Rate IDRB's (Series 1996) Weekly VRDNs (Apsco Properties, LTD.)/(FirstMerit Bank, N.A. LOC) 2,990,000 2,050,000 Lorain County, OH Weekly VRDNs (Ohio Metallurgical Service, Inc.)/(FirstMerit Bank, N.A. LOC) 2,050,000 3,740,000 Lorain Port Authority, OH, (Series 1994) Weekly VRDNs (Spitzer Great Lakes Ltd., Inc.)/(Bank One, Ohio, N.A. LOC) 3,740,000 1,030,000 Lorain Port Authority, OH, Adjustable Rate Demand Port Development Refunding Revenue Bonds (Series 1996) Weekly VRDNs (Spitzer Project)/(Bank One, Ohio, N.A. LOC) 1,030,000 8,305,000 Lorain Port Authority, OH, IDRB (Series 1996) Weekly VRDNs (Brush Wellman, Inc.)/(National City Bank, Ohio LOC) 8,305,000 1,920,000 Lucas County, OH, 4.28% BANs, 10/19/2000 1,926,759 1,375,000 Lucas County, OH, Hospital Facility Improvement Revenue Bonds (Series 93) Weekly VRDNs (Lott Industries, Inc.)/(National City Bank, Ohio LOC) 1,375,000 190,000 Lucas County, OH, Hospital Improvement Revenue Weekly VRDNs (Sunshine Children's Home)/(National City Bank, Ohio LOC) 190,000 5,000,000 Mahoning County, OH IDA, (Series 1999) Weekly VRDNs (Modern Builders Supply, Inc.)/(PNC Bank, N.A. LOC) 5,000,000 5,325,000 Mahoning County, OH Multifamily HFA Weekly VRDNs (International Towers, Inc.)/(PNC Bank, N.A. LOC) 5,325,000 40,000 Mansfield, OH, IDR Weekly VRDNs (Designed Metal Products, Inc.)/(Bank One, Ohio, N.A. LOC) 40,000 1,500,000 Marion County, OH Health Care Facilities Weekly VRDNs (Marion Area Counseling Center, Inc.)/(Huntington National Bank, Columbus, OH LOC) 1,500,000 585,000 Marion County, OH Hospital Authority, (Series 1991) Weekly VRDNs (Marion County, OH Pooled Hospital Program)/(Bank One, Ohio, N.A. LOC) 585,000 3,250,000 Mayfield Village, OH IDA Weekly VRDNs (Beta Campus Co.)/(KeyBank, N.A. LOC) 3,250,000 5,000,000 Medina County, OH Weekly VRDNs (Three D Metals, Inc.)/(Bank One, Ohio, N.A. LOC) 5,000,000 2,740,000 Medina County, OH, (Series 1998) Weekly VRDNs (Michael Day Enterprises)/(KeyBank, N.A. LOC) 2,740,000 4,000,000 Medina County, OH, Solid Waste Disposal Revenue Bonds (Series 1995) Weekly VRDNs (Valley City Steel Company Project)/(KeyBank, N.A. LOC) 4,000,000 5,000,000 Montgomery County, OH Hospital Authority, Variable Rate Hospital Facilities Revenue Bonds (1985 Series B), 3.55% CP (Miami (OH) Valley Hospital)/(Northern Trust Co., Chicago, IL LOC), Mandatory Tender 1/21/2000 5,000,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 OHIO-CONTINUED $ 6,400,000 Montgomery County, OH, (Series 1998B), 3.70% CP (Miami (OH) Valley Hospital), Mandatory Tender 2/8/2000 $ 6,400,000 1,645,000 Montgomery County, OH, Adjustable Rate Economic Development Revenue Refunding Bonds (Series 1997) Weekly VRDNs (Cross Country Inns, Inc.)/(Bank One, Ohio, N.A. LOC) 1,645,000 625,000 North Olmsted, OH IDA, 3.95% TOBs (Therm- All)/(National City Bank, Ohio LOC), Optional Tender 2/1/2000 625,000 1,055,000 Ohio HFA Weekly VRDNs (Westchester Village)/(KeyBank, N.A. LOC) 1,055,000 6,620,000 Ohio HFA, 3.15% TOBs (Lincoln Park Associates)/(Bank One, Ohio, N.A. LOC), Optional Tender 11/1/1999 6,620,000 2,610,000 Ohio HFA, PT-122 Weekly VRDNs (GNMA COL)/(Banco Santander Central Hispano, S.A. LIQ) 2,610,000 4,105,000 Ohio HFA, Single Family Mortgage (Series PT-71), 3.175% TOBs (GNMA COL)/(Commerzbank AG, Frankfurt LIQ), Optional Tender 2/17/2000 4,105,000 20,000,000 2 Ohio HFA, Variable Rate Certificates (Series 1998Q), 3.68% TOBs (GNMA COL)/(Bank of America, N.A. LIQ), Optional Tender 7/20/2000 20,000,000 7,000,000 Ohio HFA, Variable Rate Certificates (Series 1999Q) Weekly VRDNs (GNMA COL)/(Bank of America, N.A. LIQ) 7,000,000 6,295,000 Ohio State Air Quality Development Authority, 4.30% TOBs (Ohio Edison Co.)/(Deutsche Bank AG LOC), Optional Tender 9/1/2000 6,315,251 1,000,000 Ohio State Building Authority, Local Jail Improvements (Series A), 7.30% Bonds (United States Treasury PRF), 4/1/2000 (@102) 1,036,318 10,000,000 Ohio State Higher Education Facility, (Series 1999) Weekly VRDNs (Higher Education Pooled Financing 1999 Program)/ (Fifth Third Bank, Cincinnati LOC) 10,000,000 3,000,000 Ohio State Water Development Authority, PCR Refunding Bonds Weekly VRDNs (General Motors Corp.) 3,000,000 3,635,000 Ohio State, Environmental Improvement Revenue Bonds (Series 1996) Weekly VRDNs (Newark Group Industries, Inc.)/(Chase Manhattan Bank N.A., New York LOC) 3,635,000 835,000 Ohio State, IDR (Series 1991) Weekly VRDNs (Standby Screw, Inc.)/(National City Bank, Ohio LOC) 835,000 1,100,000 Ohio State, IDRB (Series 1994) Weekly VRDNs (Anomatic Corp.)/(National City Bank, Ohio LOC) 1,100,000 800,000 Orrville, OH IDA Weekly VRDNs (O.S. Associates/Contours, Inc.)/(National City Bank, Ohio LOC) 800,000 3,870,000 Portage County, OH IDA, Adjustable Rate IDRB's (Series 1996) Weekly VRDNs (Barnette Project)/(National City Bank, Ohio LOC) 3,870,000 645,000 Portage County, OH IDA, Industries Revenue Bonds Weekly VRDNs (Lovejoy Industries)/(Firstar Bank, N.A., Cincinnati LOC) 645,000 1,750,000 Solon, OH, 3.60% BANs, 6/15/2000 1,753,678 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 OHIO-CONTINUED $ 320,000 Solon, OH, IDR Weekly VRDNs (Graphic Laminating)/(KeyBank, N.A. LOC) $ 320,000 1,055,000 Springfield, OH, 3.70% BANs, 6/16/2000 1,056,906 600,000 Stark County, OH IDR Weekly VRDNs (Sancap Abrasives, Inc.)/(KeyBank, N.A. LOC) 600,000 3,545,000 Stark County, OH IDR Weekly VRDNs (Shearer's Foods, Inc.)/(Bank One, Ohio, N.A. LOC) 3,545,000 1,845,000 Stark County, OH IDR, (Series 1994) Weekly VRDNs (Wilkof Morris)/(KeyBank, N.A. LOC) 1,845,000 1,150,000 Stark County, OH IDR, IDRB (Series 1996) Weekly VRDNs (Foundations Systems and Anchors, Inc. Project)/(Bank One, Ohio, N.A. LOC) 1,150,000 1,240,000 Strongsville, OH Weekly VRDNs (Monarch Engraving, Inc.)/(FirstMerit Bank, N.A. LOC) 1,240,000 1,100,000 Strongsville, OH, (Series 1), 3.98% BANs, 10/19/2000 1,101,835 1,065,000 Strongsville, OH, IDRB (Series 1994) Weekly VRDNs (Nutro Machinery Corp., Project)/(Huntington National Bank, Columbus, OH LOC) 1,065,000 2,000,000 Summit County, OH IDR Weekly VRDNs (Maison Aine Limited Partnership)/(Bank of America, N.A. LOC) 2,000,000 4,500,000 Summit County, OH IDR, (Series 1994) Weekly VRDNs (Harry London Candies, Inc.)/(KeyBank, N.A. LOC) 4,500,000 1,100,000 Summit County, OH IDR, (Series 1997) Weekly VRDNs (Baker McMillen Co.)/(National City Bank, Ohio LOC) 1,100,000 2,880,000 Summit County, OH IDR, (Series 1997) Weekly VRDNs (Malco Products, Inc.)/(Bank One, Ohio, N.A. LOC) 2,880,000 1,985,000 Summit County, OH IDR, (Series 1998B) Weekly VRDNs (Waldonia Investment)/(KeyBank, N.A. LOC) 1,985,000 915,000 Summit County, OH IDR, 3.45% TOBs (Rogers Industrial Products, Inc.)/(Bank One, Ohio, N.A. LOC), Optional Tender 11/1/1999 915,000 500,000 Summit County, OH IDR, 3.60% TOBs (Bechmer-Boyce Project)/(KeyBank, N.A. LOC), Mandatory Tender 1/15/2000 500,000 650,000 Summit County, OH IDR, 3.90% TOBs (Universal Rack)/(National City Bank, Ohio LOC), Optional Tender 3/1/2000 650,000 775,000 Summit County, OH IDR, 3.95% TOBs (Matech Machine Tool Co.)/(Bank One, Ohio, N.A. LOC), Optional Tender 2/1/2000 775,000 1,275,000 Summit County, OH IDR, Adjustable Rate IDRB's (Series 1996) Weekly VRDNs (Fomo Products, Inc.)/(FirstMerit Bank, N.A. LOC) 1,275,000 670,000 Summit County, OH IDR, Bonds (Series 1994) Weekly VRDNs (Austin Printing Co., Inc.)/(Bank One, Ohio, N.A. LOC) 670,000 2,180,000 Summit County, OH IDR, IDRB (Series 1994B) Weekly VRDNs (Harry London Candies, Inc.)/(KeyBank, N.A. LOC) 2,180,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 OHIO-CONTINUED $ 665,000 Summit County, OH IDR, IDRB (Series 1995) Weekly VRDNs (Cardtech Project (OH))/(KeyBank, N.A. LOC) $ 665,000 825,000 Summit County, OH IDR, Multi-Mode Variable Rate I Weekly VRDNs (Mastergraphics, Inc. Project)/(KeyBank, N.A. LOC) 825,000 2,130,000 Summit County, OH IDR, Variable Rate IDRB's (Series 1998A) Weekly VRDNs (Wintek Ltd.)/(FirstMerit Bank, N.A. LOC) 2,130,000 4,000,000 Toledo-Lucas County, OH Port Authority, Airport Development Revenue Bonds (Series 1996-1) Weekly VRDNs (Burlington Air Express, Inc.)/(ABN AMRO Bank N.V., Amsterdam LOC) 4,000,000 1,000,000 Toledo-Lucas County, OH Port Authority, IDA Weekly VRDNs (Medusa Corp.)/(Bayerische Hypotheken-und Vereinsbank AG LOC) 1,000,000 1,900,000 Trumbull County, OH IDA, (Series 1989) Weekly VRDNs (McDonald Steel Corp.)/(PNC Bank, N.A. LOC) 1,900,000 1,235,000 Trumbull County, OH IDA, IDR Refunding Bonds (Series 1994) Weekly VRDNs (Churchill Downs, Inc.)/(Bank One, Ohio, N.A. LOC) 1,235,000 1,445,000 Tuscarawas County, OH, Adjustable Rate IDRB's (Series 1995) Weekly VRDNs (Primary Packaging, Inc.)/(FirstMerit Bank, N.A. LOC) 1,445,000 1,925,000 Valley View, OH, 3.70% BANs, 3/16/2000 1,927,244 1,000,000 Walnut Hills, OH High School Alumni Foundation, (Series 1998) Weekly VRDNs (Fifth Third Bank, Cincinnati LOC) 1,000,000 1,580,000 Wayne County, OH, Health Care Facility Revenue Bonds (Series 1995) Weekly VRDNs (D & M Realty Project)/(Bank One, Ohio, N.A. LOC) 1,580,000 2,560,000 Williams County, OH, Multi-Mode Variable Rate IDRB's (Series 1996) Weekly VRDNs (Allied Moulded Products, Inc.)/(KeyBank, N.A. LOC) 2,560,000 980,000 Willoughby City, OH, IDR Refunding Bonds (Series 1995A) Weekly VRDNs (Pine Ridge Shopping Center Company Project)/(Firstar Bank, N.A., Cincinnati LOC) 980,000 1,035,000 Willoughby City, OH, IDR Revenue Bonds (Series 1995 B) Weekly VRDNs (Pine Ridge Shopping Center Company Project)/(Firstar Bank, N.A., Cincinnati LOC) 1,035,000 800,000 Wood County, OH Weekly VRDNs (Principle Business Enterprises)/(National City Bank, Ohio LOC) 800,000 3,500,000 Wood County, OH, (Series 1999) Weekly VRDNs (Dowa THT America, Inc.)/(Comerica Bank LOC) 3,500,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 OHIO-CONTINUED $ 1,935,000 Wood County, OH, EDRB Weekly VRDNs (Roe Inc. Project)/(Huntington National Bank, Columbus, OH LOC) $ 1,935,000 980,000 Wood County, OH, Williams Industries Service Inc, Project Weekly VRDNs (Williams Industrial Service, Inc.)/(Huntington National Bank, Columbus, OH LOC) 980,000 3,720,000 Youngstown, OH, Adjustable Rate Demand IDRB's (Series 1996A) Weekly VRDNs (Cantar/Polyair Corp./Performa Corp.)/(HSBC Bank USA LOC) 3,720,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 314,137,850
Securities that are subject to alternative minimum tax represent 67.9% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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 Corporation, MIG-1, or MIG-2 by Moody's Investors Service, F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited)
FIRST TIER Second Tier 100.00% 00.00%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid by criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $20,000,000 which represents 6.3% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($315,765,155) at October 31, 1999. The following acronyms are used throughout this portfolio: BANs -Bond Anticipation Notes COL -Collateralized CP -Commercial Paper EDRB -Economic Development Revenue Bonds GNMA -Government National Mortgage Association HFA -Housing Finance Authority IDA -Industrial Development Authority IDR -Industrial Development Revenue IDRB -Industrial Development Revenue Bond LIQ -Liquidity Agreement LOC -Letter of Credit PCR -Pollution Control Revenue PRF -Prerefunded TOBs -Tender Option Bonds VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 314,137,850 Cash 581,548 Income receivable 1,753,519 Receivable for shares sold 20,443 TOTAL ASSETS 316,493,360 LIABILITIES: Payable for shares redeemed $ 91,702 Income distribution payable 491,107 Accrued expenses 145,396 TOTAL LIABILITIES 728,205 Net assets for 315,765,155 shares outstanding $ 315,765,155 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SERVICE SHARES: $90,294,574 / 90,294,574 shares outstanding $1.00 CASH II SHARES: $117,596,224 / 117,596,224 shares outstanding $1.00 INSTITUTIONAL SHARES: $107,874,357 / 107,874,357 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 12,446,758 EXPENSES: Investment advisory fee $ 1,448,289 Administrative personnel and services fee 273,002 Custodian fees 17,841 Transfer and dividend disbursing agent fees and expenses 184,259 Directors'/Trustees' fees 3,700 Auditing fees 13,279 Legal fees 27,108 Portfolio accounting fees 90,439 Distribution services fee- Cash II Shares 401,851 Shareholder services fee- Institutional Service Shares 243,864 Shareholder services fee- Cash II Shares 334,876 Shareholder services fee- Institutional Shares 324,999 Share registration costs 54,966 Printing and postage 28,855 Insurance premiums 23,757 Miscellaneous 3,640 TOTAL EXPENSES 3,474,725 WAIVERS: Waiver of investment advisory fee $ (813,537) Waiver of distribution services fee-Cash II Shares (66,975) Waiver of shareholder services fee-Institutional Service Shares (48,773) Waiver of shareholder services fee-Institutional Shares (324,999) TOTAL WAIVERS (1,254,284) Net expenses 2,220,441 Net investment income 10,226,317
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 10,226,317 $ 13,532,686 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Service Shares (2,810,726) (2,641,476) Cash II Shares (3,395,888) (8,076,502) Institutional Shares (4,019,703) (2,814,708) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (10,226,317) (13,532,686) SHARE TRANSACTIONS: Proceeds from sale of shares 1,437,132,752 2,158,852,726 Net asset value of shares issued to shareholders in payment of distributions declared 3,824,029 8,564,300 Cost of shares redeemed (1,694,429,001) (1,979,838,390) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (253,472,220) 187,578,636 Change in net assets (253,472,220) 187,578,636 NET ASSETS: Beginning of period 569,237,375 381,658,739 End of period $ 315,765,155 $ 569,237,375
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.04 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.90% 3.22% 3.29% 3.27% 3.61% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.85% 0.85% 0.85% 0.88% 0.86% Net investment income 2 2.60% 2.89% 2.97% 2.92% 3.27% Expenses (after waivers) 0.57% 0.57% 0.57% 0.57% 0.57% Net investment income (after waivers) 2.88% 3.17% 3.25% 3.23% 3.56% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $90,294 $94,896 $80,619 $59,721 $72,931
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Financial Highlights-Cash II Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.59% 2.91% 2.98% 2.96% 3.30% RATIOS TO AVERAGE NET ASSETS: Expenses 2 1.15% 1.15% 1.15% 1.18% 1.16% Net investment income 2 2.26% 2.58% 2.66% 2.61% 2.96% Expenses (after waivers) 0.87% 0.87% 0.87% 0.87% 0.87% Net investment income (after waivers) 2.54% 2.86% 2.94% 2.92% 3.25% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $117,596 $342,946 $245,329 $206,149 $188,234
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.02 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.02) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 3.10% 3.43% 3.49% 2.22% RATIOS TO AVERAGE NET ASSETS: Expenses 3 0.86% 0.86% 0.85% 0.88% 4 Net investment income 3 2.60% 2.91% 2.92% 2.87% 4 Expenses (after waivers) 0.38% 0.38% 0.37% 0.37% 4 Net investment income (after waivers) 3.08% 3.39% 3.40% 3.38% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $107,874 $131,395 $55,710 $72,680
1 Reflects operations for the period from March 5, 1996 (date of initial public investment) to October 31, 1996. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Ohio Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers three classes of shares: Institutional Service Shares, Cash II Shares, and Institutional Shares.The investment objective of the Fund is current income exempt from federal regular income tax and the personal income taxes imposed by the State of Ohio and Ohio municipalities consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provisions for federal tax are necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees ("Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $315,765,155. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 253,460,934 311,583,533 Shares issued to shareholders in payment of distributions declared 667,036 576,992 Shares redeemed (258,729,340) (297,884,069) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS (4,601,370) 14,276,456 YEAR ENDED OCTOBER 31 1999 1998 CASH II SHARES: Shares sold 450,064,259 1,005,297,220 Shares issued to shareholders in payment of distributions declared 2,990,343 7,890,344 Shares redeemed (678,404,876) (915,569,899) NET CHANGE RESULTING FROM CASH II SHARE TRANSACTIONS (225,350,274) 97,617,665 YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 733,607,559 841,971,973 Shares issued to shareholders in payment of distributions declared 166,650 96,964 Shares redeemed (757,294,785) (766,384,422) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS (23,520,576) 75,684,515 NET CHARGE RESULTING FROM SHARE TRANSACTIONS (253,472,220) 187,578,636
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. DISTRIBUTION SERVICES FEE The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Trust's Class II Shares. The Plan provides that the Fund may incur distribution expenses up to 0.30% of the average daily net assets of Cash II Shares, annually, to compensate FSC. The distributor may voluntarily choose to waive any portion of its fee. The distributor can modify or terminate this voluntary waiver at any time at its sole discretion. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSS is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the period ended October 31, 1999, the Trust engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $662,545,000 and $840,943,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 86.0% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 14.4% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITOR (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304 (a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements; or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in the paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF OHIO MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Ohio Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Ohio Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured 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 mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Ohio Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Ohio Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229659 Cusip 314229840 Cusip 314229857 G00829-01 ((12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Pennsylvania Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares, Institutional Service Shares and Cash Series Shares. The fund is a convenient way to keep your ready cash pursuing double tax-free income-free from federal regular income tax and Pennsylvania state income tax-through a portfolio concentrated in high-quality, short-term Pennsylvania municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends of $0.03 per share for Institutional Shares, $0.03 per share for Institutional Service Shares and $0.02 per share for Cash Series Shares. The fund's net assets totaled $431.7 million at the end of the reporting period. You can count on Pennsylvania Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than 50% of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season selling pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the highest two federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country have benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, have reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level in the last decade. Lack of supply and heavy demand have kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the period was approximately 41 days. Opportunities in the fixed-rate note market in December pushed the average maturity to the 60-70 day range in the beginning of 1999. However, for the balance of the year, the fund was in a 45-60 day range, moving within that band according to relative value opportunities. At the end of the reporting period, the average maturity stood at 51 days. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range was targeted, taking into account Fed monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are tight and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is likely that we will see one and possibly two interest rate increases in the first half of 2000. In the near term, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch, with great interest, market developments in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.5% 1 PENNSYLVANIA-99.5% $ 3,500,000 Adams County, PA IDA (Series 1999C) Weekly VRDNs (Martin Limestone, Inc.)/(Allfirst LOC) $ 3,500,000 7,000,000 Adams County, PA IDA (Series 1999A) Weekly VRDNs (Valley Quarries, Inc.)/(Allfirst LOC) 7,000,000 2,500,000 Adams County, PA IDA (Series 1999B) Weekly VRDNs (Valley Quarries, Inc.)/(Allfirst LOC) 2,500,000 2,605,000 Allegheny County, PA HDA, Health Center Revenue Refunding Bonds (Series 1999A) Weekly VRDNs (Riverside Nursing Centers, Inc.)/(Bank One, Ohio, N.A. LOC) 2,605,000 5,000,000 Allegheny County, PA HDA, Variable Rate Demand Hospital Revenue Bonds (Series 1998B) 3.15% TOBs (South Hills Health System)/(PNC Bank, N.A. LOC) Mandatory Tender 3/31/2000 5,000,000 2,000,000 Allegheny County, PA IDA, Variable Rate Demand Revenue Bonds (Series 1997B) Weekly VRDNs (Jewish Community Center)/(National City, Pennsylvania LOC) 2,000,000 1,050,000 Berks County, PA IDA Weekly VRDNs (ADC Quaker Maid Meats)/(First Union National Bank, Charlotte, NC LOC) 1,050,000 240,000 Berks County, PA IDA Weekly VRDNs (Beacon Container)/(First Union National Bank, Charlotte, NC LOC) 240,000 1,300,000 Berks County, PA IDA (Series 1988) Weekly VRDNs (Arrow Electronics, Inc.)/(First Union National Bank, Charlotte, NC LOC) 1,300,000 5,600,000 Berks County, PA IDA (Series 1998) Weekly VRDNs (Stabler Co., Inc.)/(Dauphin Deposit Bank and Trust LOC) 5,600,000 3,155,000 Berks County, PA IDA, Manufacturing Facilities Revenue Bonds (Series 1996) Weekly VRDNs (Ram Industries, Inc.)/(First Union National Bank, Charlotte, NC LOC) 3,155,000 1,440,000 Berks County, PA IDA, Manufacturing Facilities Revenue Bonds (Series 1995) Weekly VRDNs (Grafika Commercial Printing, Inc.)/(First Union National Bank, Charlotte, NC LOC) 1,440,000 120,000 Berks County, PA IDA, Revenue Bonds (Series 1995A/Subseries A) Weekly VRDNs (First Union National Bank, Charlotte, NC LOC) 120,000 775,000 Berks County, PA IDA, Revenue Bonds (Series 1995A/Subseries B) Weekly VRDNs (First Union National Bank, Charlotte, NC LOC) 775,000 1,300,000 Boyertown, PA Area School District (Series 1999/00) 3.75% TRANs, 6/30/2000 1,301,241 1,665,000 Boyertown, PA Area School District, 3.30% Bonds (FSA INS) 2/1/2000 1,665,142 1,300,000 Brandywine Heights, PA Area School District (Series 1999/00) 3.75% TANs, 6/30/2000 1,300,826 1,855,000 Bucks County, PA IDA Weekly VRDNs (Double H Plastics, Inc.)/(First Union National Bank, Charlotte, NC LOC) 1,855,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PENNSYLVANIA-CONTINUED $ 2,410,000 Bucks County, PA IDA Weekly VRDNs (Pennsylvania Associates)/(First Union National Bank, Charlotte, NC LOC) $ 2,410,000 2,575,000 Bucks County, PA IDA (Series 1991) Weekly VRDNs (Cabot Medical Corp.)/(First Union National Bank, Charlotte, NC LOC) 2,575,000 2,805,000 Bucks County, PA IDA, Variable Rate Demand/Fixed Rate Revenue Bonds (Series 1997) Weekly VRDNs (Boekel Industries, Inc.)/(First Union National Bank, Charlotte, NC LOC) 2,805,000 1,200,000 Butler County, PA IDA (Series 1996A) Weekly VRDNs (Armco, Inc.)/(Chase Manhattan Bank N.A., New York LOC) 1,200,000 6,185,000 Butler County, PA IDA (Series 1996A) 2.95% TOBs (Lutheran Welfare)/(PNC Bank, N.A. LOC) Mandatory Tender 11/1/1999 6,185,000 1,965,000 Butler County, PA IDA (Series 1998) Weekly VRDNs (Allegheny Metalworking Corp.)/(National City, Pennsylvania LOC) 1,965,000 1,500,000 Butler County, PA IDA (Series 1998B) 2.95% TOBs (Lutheran Welfare)/(PNC Bank, N.A. LOC) Mandatory Tender 11/1/1999 1,500,000 2,205,000 Butler County, PA IDA, IDRB (Series 1994) Weekly VRDNs (Lue-Rich Holding Company, Inc. Project)/(ABN AMRO Bank N.V., Amsterdam LOC) 2,205,000 2,170,000 Butler County, PA IDA, IDRBs (Series 1997) Weekly VRDNs (Wise Business Forms, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 2,170,000 1,100,000 Carbon County, PA IDA Weekly VRDNs (Summit Management & Utilities, Inc.)/(PNC Bank, N.A. LOC) 1,100,000 5,000,000 Carbon County, PA IDA, Resource Recovery Bonds (Series B) 3.50% CP (Panther Creek)/(National Westminster Bank, PLC, London LOC) Mandatory Tender 11/10/1999 5,000,000 6,000,000 2 Carbon County, PA IDA, Solid Waste Disposal Revenue Bonds, 3.50% RANs (Horsehead Resource Development, Inc.)/(Chase Manhattan Bank N.A., New York LOC), 12/3/1999 6,000,000 2,935,000 Chartiers Valley, PA Industrial & Commercial Development Authority, Nursing Home Revenue Refunding Bonds (Series 1997A) Weekly VRDNs (Woodhaven Convalescent Center)/(Bank One, Ohio, N.A. LOC) 2,935,000 7,300,000 Clearfield County, PA IDA Weekly VRDNs (Penn Traffic Co.)/(Fleet Bank N.A. LOC) 7,300,000 4,500,000 Clinton County, PA IDA, Solid Waste Disposal Revenue Bonds (Series 1992A) 3.95% TOBs (International Paper Co.) Optional Tender 1/15/2000 4,500,000 5,000,000 Clinton County, PA, IDA Weekly VRDNs (Armstrong World Industries, Inc.)/(Mellon Bank N.A., Pittsburgh LOC) 5,000,000 3,000,000 Coatsville, PA School District (Series 1999/00) 4.00% TRANs, 6/30/2000 3,007,650 1,770,000 Commonwealth of Pennsylvania (Series A) 7.00% Bonds (United States Treasury PRF) 5/1/2000 (@101.5) 1,828,790 1,210,000 Commonwealth of Pennsylvania (First Series) 5.00% Bonds (AMBAC INS) 3/15/2000 1,218,367 3,985,000 Commonwealth of Pennsylvania, Floater Certificate 1998-53 Weekly VRDNs (FGIC INS)/(Morgan Stanley, Dean Witter Municipal Funding, Inc. LIQ) 3,985,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PENNSYLVANIA-CONTINUED $ 1,000,000 Cumberland County, PA IDA, Industrial Development Bonds (Series 1994) Weekly VRDNs (Lane Enterprises, Inc. Project)/(First Union National Bank, Charlotte, NC LOC) $ 1,000,000 6,900,000 Cumberland County, PA Municipal Authority (Series 1994) 3.23% TOBs (United Methodist Homes for the Aging)/(PNC Bank, N.A. LOC) Mandatory Tender 6/1/2000 6,900,000 2,445,000 Cumberland County, PA Municipal Authority (Series 1996A) 2.95% TOBs (Dickinson College)/(Mellon Bank N.A., Pittsburgh LOC) Mandatory Tender 11/1/1999 2,445,000 4,750,000 Cumberland County, PA Municipal Authority, Variable Rate Revenue Bonds (Series 1996 B) 2.95% TOBs (Dickinson College)/(Mellon Bank N.A., Pittsburgh LOC) Mandatory Tender 11/1/1999 4,750,000 5,000,000 Dallastown Area School District, PA, GO Bonds (Series 1998) Weekly VRDNs (FGIC INS)/(FGIC Securities Purchase, Inc. LIQ) 5,000,000 10,500,000 Dauphin County, PA General Authority, (Education and Health Loan Program (Series 1997) Weekly VRDNs (AMBAC INS) (Chase Manhattan Bank N.A., New York LIQ) 10,500,000 3,000,000 Dauphin County, PA IDA, Variable Rate EDRBs (Series 1998-B) Weekly VRDNs (Key Ingredients, Inc.)/(Mellon Bank N.A., Pittsburgh LOC) 3,000,000 4,900,000 Delaware County, PA Authority, Hospital Revenue Bonds (Series of 1996) Weekly VRDNs (Crozer-Chester Medical Center)/(KBC Bancassurance Holding LOC) 4,900,000 3,000,000 Downington Area School District, PA, 3.75% TRANs, 6/30/2000 3,004,774 5,000,000 Doylestown Hospital Authority, PA, Hospital Revenue Bonds (Series 1998C) Weekly VRDNs (Doylestown Hospital, PA)/(AMBAC INS)/(PNC Bank, N.A. LIQ) 5,000,000 1,200,000 East Hempfield Township, PA IDA (Series 1985) Weekly VRDNs (Yellow Freight System)/(Wachovia Bank of NC, N.A., Winston- Salem LOC) 1,200,000 500,000 East Hempfield Township, PA IDA (Series 1985) Weekly VRDNs (Yellow Freight System)/(Wachovia Bank of NC, N.A., Winston- Salem LOC) 500,000 2,000,000 East Hempfield Township, PA IDA (Series 1997) Weekly VRDNs (Mennonite Home)/(Dauphin Deposit Bank and Trust LOC) 2,000,000 15,000,000 Easton Area School District, PA (Series 1997) Weekly VRDNs (FGIC INS)/(FGIC Securities Purchase, Inc. LIQ) 15,000,000 2,700,000 Erie County, PA Hospital Authority Weekly VRDNs (St. Mary's Hospital Erie, PA)/(PNC Bank, N.A. LOC) 2,700,000 1,000,000 Erie County, PA Hospital Authority Weekly VRDNs (St. Vincent Health System)/(Mellon Bank N.A., Pittsburgh LOC) 1,000,000 125,000 Erie County, PA IDA (Series 1985) Weekly VRDNs (R. P-C Value, Inc.)/(PNC Bank, N.A. LOC) 125,000 4,000,000 Erie County, PA, 3.65% TRANs (PNC Bank, N.A. LOC) 12/30/1999 4,003,455 2,900,000 Franconia Township, PA IDA, IDRBs (Series 1997A) Weekly VRDNs (Asher's Chocolates)/(Mell on Bank N.A., Pittsburgh LOC) 2,900,000 1,305,000 Franklin County, PA IDA Weekly VRDNs (The Guarriello Limited Partnership)/(PNC Bank, N.A., LOC) 1,305,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PENNSYLVANIA-CONTINUED $ 2,400,000 Gettysburg Area IDA (Series 1998A) Weekly VRDNs (Hanover Lantern, Inc.)/(Allfirst LOC) $ 2,400,000 2,000,000 Greene County, PA IDA (Series 1999) Weekly VRDNs (CWS Company, Inc.)/(Huntington National Bank, Columbus, OH LOC) 2,000,000 2,500,000 Harbor Creek, PA School District (Series 1999) 3.75% BANs, 6/15/2000 2,505,960 7,500,000 Indiana County, PA IDA, PCR Bonds (Series 1997A) Weekly VRDNs (Peco Energy Co.)/(UBS AG LOC) 7,500,000 2,255,000 Jackson Township, PA IDA (Series 1999A) Weekly VRDNs (Aerial Innovations, Inc.)/(Allfir st LOC) 2,255,000 6,000,000 Lancaster County, PA Hospital Authority, Health Center Revenue Bonds (Series 1996) Weekly VRDNs (Masonic Homes) 6,000,000 3,385,000 Lancaster, PA IDA (Series 1988C) Weekly VRDNs (Henry Molded Products, Inc.)/(Dauphin Deposit Bank and Trust LOC) 3,385,000 2,195,000 Lancaster, PA IDA (Series 1998A) Weekly VRDNs (Henry Molded Products, Inc.)/(Dauphin Deposit Bank and Trust LOC) 2,195,000 1,000,000 Lehigh County, PA IDA, Variable Rate Demand Revenue Bonds (Series 1997) Weekly VRDNs (American Manufacturing Co., Inc.)/(Mellon Bank N.A., Pittsburgh LOC) 1,000,000 6,840,000 McKean County, PA IDA, EDRBs (Series 1997) Weekly VRDNs (Keystone Powdered Metal Co.)/(Mellon Bank N.A., Pittsburgh LOC) 6,840,000 3,300,000 Monroe County, PA IDA, PCR Weekly VRDNs (Cooper Industries, Inc.)(Sanwa Bank LTD., Osaka LOC) 3,300,000 4,510,000 Montgomery County, PA Higher Education and Health Authority, 7.38% Bonds (Bryn Mawr Hospital)/(United States Treasury PRF) 12/1/1999 (@102) 4,614,854 1,000,000 Montgomery County, PA IDA (Series 1984) Weekly VRDNs (Seton Co.)/(First Union National Bank, Charlotte, NC LOC) 1,000,000 1,100,000 Montgomery County, PA IDA (Series 1992) Weekly VRDNs (RJI Limited Partnership)/(First Union National Bank, Charlotte, NC LOC) 1,100,000 1,000,000 Montgomery County, PA IDA (Series A) Weekly VRDNs (Vari Corp.)/(Dauphin Depo sit Bank and Trust LOC) 1,000,000 4,250,000 Montgomery County, PA IDA (Series C) Weekly VRDNs (Vari Corp.)/(Dauphin Depo sit Bank and Trust LOC) 4,250,000 1,920,000 Montgomery County, PA IDA, EDRBs (Series 1997) Weekly VRDNs (Palmer International, Inc.)/(Mellon Bank N.A., Pittsburgh LOC) 1,920,000 4,620,000 Moon Township, PA IDA Weekly VRDNs (Airport Hotel Associates)/(National City, Pennsylvania LOC) 4,620,000 3,500,000 Norristown, PA (Series 1999) 3.35% TRANs, 12/30/1999 3,500,000 9,000,000 North Penn Health, Hospital and Education Authority, PA, Hospital Revenue Bonds (Series 1998) Weekly VRDNs (North Penn Hospital, PA)/(First Union National Bank, Charlotte, NC LOC) 9,000,000 12,850,000 Northampton County, PA IDA, 3.65% CP (Citizens Utilities Co.) Mandatory Tender 12/7/1999 12,850,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PENNSYLVANIA-CONTINUED $ 2,442,000 Northampton County, PA IDA, Variable Rate Revenue Bonds (Series 1997) Weekly VRDNs (Ultra-Poly Corp.)/(PNC Bank, N.A. LOC) $ 2,442,000 1,590,000 Northumberland County PA IDA, Revenue Bonds (Series 1995A) Weekly VRDNs (Furman Farms, Inc. Project)/(First Union National Bank, Charlotte, NC LOC) 1,590,000 1,550,000 Pennsylvania EDFA Weekly VRDNs (Cyrogenics, Inc.)/(PNC Bank, N.A. LOC) 1,550,000 2,300,000 Pennsylvania EDFA Weekly VRDNs (Industrial Scientific Corp.)/(Mellon Bank N.A., Pittsburgh LOC) 2,300,000 450,000 Pennsylvania EDFA Weekly VRDNs (ProMinent Fluid)/(PNC Bank, N.A. LOC) 450,000 375,000 Pennsylvania EDFA Weekly VRDNs (RMF Associates)/(PNC Bank, N.A. LOC) 375,000 1,175,000 Pennsylvania EDFA Weekly VRDNs (Stone and Lime Co.)/(PNC Bank, N.A. LOC) 1,175,000 1,400,000 Pennsylvania EDFA (Series 1995-D2) Weekly VRDNs (ARCO Enterprises, Inc./Ronald L. Repasky, Sr. Project)/(PNC Bank, N.A. LOC) 1,400,000 500,000 Pennsylvania EDFA (Series 1995-D9) Weekly VRDNs (North American Communications, Inc. Project)/(PNC Bank, N.A. LOC) 500,000 1,170,200 Pennsylvania EDFA (Series 1992-C) Weekly VRDNs (Leonard H. Berenfield/Berenfield Containers)/(PNC Bank, N.A. LOC) 1,170,200 2,100,000 Pennsylvania EDFA (Series 1996-E) Weekly VRDNs (Adelphoi, Inc.)/(PNC Bank, N.A. LOC) 2,100,000 4,600,000 Pennsylvania EDFA (Series 1998) 3.25% Bonds (Bayerische Landesbank Girozentrale), 12/15/1999 4,600,000 3,000,000 Pennsylvania EDFA (Series 1998-A) Weekly VRDNs (Fourth Generation Realty, LLC)/(PNC Bank, N.A. LOC) 3,000,000 2,700,000 Pennsylvania EDFA (Series B1) Weekly VRDNs (Erie Plating Co.)/(PNC Bank, N.A. LOC) 2,700,000 3,000,000 Pennsylvania EDFA, EDRBs (Series 1996-D6) Weekly VRDNs (Toyo Tanso Specialty Materials, Inc.)/(PNC Bank, N.A. LOC) 3,000,000 3,890,000 Pennsylvania EDFA, EDRBs (Series 1996-C) Weekly VRDNs (Napco, Inc. Project)/(Mellon Bank N.A., Pittsburgh LOC) 3,890,000 400,000 Pennsylvania EDFA, Revenue Bonds (Series G4) Weekly VRDNs (Metamora Products)/(PNC Bank, N.A. LOC) 400,000 225,000 Pennsylvania EDFA, Revenue Bonds Weekly VRDNs (DDI Pharmaceuticals, Inc.)/(PNC Bank, N.A. LOC) 225,000 125,000 Pennsylvania EDFA, Revenue Bonds Weekly VRDNs (RAM Forest Products)/(PNC Bank, N.A. LOC) 125,000 13,620,000 2 Pennsylvania Housing Finance Authority (Series 1997-58A) PT-149, 3.85% TOBs (Commerzbank AG, Frankfurt LIQ) Optional Tender 10/5/2000 13,620,000 14,385,000 Pennsylvania Housing Finance Authority, MERLOTS (Series K) Weekly VRDNs (First Union National Bank, Charlotte, NC LIQ) 14,385,000 1,920,000 Pennsylvania Housing Finance Authority, PT-119B (Series 1997-56B) Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ) 1,920,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PENNSYLVANIA-CONTINUED $ 890,000 Pennsylvania Housing Finance Authority, Section 8 Assisted Residential Development Refunding Bonds (Series 1992A) Weekly VRDNs (CGIC INS)/(Citibank N.A., New York LIQ) $ 890,000 12,100,000 Pennsylvania Housing Finance Authority, Variable Rate Certificates (Series 1999-65K) Weekly VRDNs (Bank of America NT and SA San Francisco) 12,100,000 1,500,000 Pennsylvania Intergovernmental Coop Authority, 5.75% Bonds (FGIC INS) 6/15/2000 1,522,613 1,255,000 Pennsylvania Intergovernmental Coop Authority, 6.00% Bonds (Philadelphia Funding Program)/(United States Treasury PRF) 6/15/2000 1,275,489 10,500,000 Pennsylvania State Higher Education Assistance Agency, Student Loan Adjustable Rate Revenue Bonds (Series 1997A) Weekly VRDNs (SLMA LOC) 10,500,000 4,500,000 Pennsylvania State Higher Education Facilities Authority (Series 1997-B7) 2.95% TOBs (Saint Francis College, PA)/(Allied Irish Banks PLC LOC) Mandatory Tender 11/1/1999 4,500,000 2,950,000 Pennsylvania State Higher Education Facilities Authority (Series 1997-B8) 2.95% TOBs (Wilkes University)/(PNC Bank, N.A. LOC) Mandatory Tender 11/1/1999 2,950,000 2,500,000 Pennsylvania State Higher Education Facilities Authority (Series 1999-D2) 3.75% TOBs (Holy Family College)/(Allied Irish Banks PLC LOC) Optional Tender 5/1/2000 2,506,035 1,400,000 Pennsylvania State Higher Education Facilities Authority (Series 1999-D3) 3.75% TOBs (Lebanon Valley College)/(Allied Irish Banks PLC LOC) Mandatory Tender 5/1/2000 1,403,380 700,000 Pennsylvania State Higher Education Facilities Authority, Revenue Bonds (Series D4) 3.75% TOBs (Marywood University)/(Allied Irish Banks PLC LOC) Mandatory Tender 5/1/2000 701,010 1,835,000 Pennsylvania State University, PT-242 Weekly VRDNs (Bayerische Hypotheken-und Vereinsbank AG LIQ) 1,835,000 4,000,000 Perkiomen Valley School District, PA, 3.75% TRANs, 6/30/2000 4,006,365 6,650,000 Philadelphia, PA IDA (Series 93) Weekly VRDNs (Sackett Development)/(Mellon Bank N.A., Pittsburgh LOC) 6,650,000 2,175,000 Philadelphia, PA IDA, Refunding Revenue Bonds (Series 1991) Weekly VRDNs (Tom James Co.)/(SunTrust Bank, Nashville LOC) 2,175,000 10,000,000 2 Philadelphia, PA IDA, Variable Rate Certificates (Series 1998P-1) 3.65% TOBs (Philadelphia Airport System)/(FGIC INS)/(Bank of America, N.A. LIQ), Optional Tender 7/20/2000 10,000,000 2,000,000 Philadelphia, PA IDA, Variable Rate Revenue Bonds (Series 1998) Weekly VRDNs (Philadelphia Academy of Music)/(First Union National Bank, Charlotte, NC LOC) 2,000,000 2,000,000 Pittsburgh, PA Urban Redevelopment Authority (Series 1999E) 3.65% Bonds, 8/15/2000 2,000,000 4,000,000 Pittsburgh, PA Urban Redevelopment Authority, Mortgage Revenue Bonds (Series 1998C) 3.20% TOBs, Mandatory Tender 12/1/1999 4,000,000 2,500,000 Red Lion, PA Area School District, 3.75% TRANs, 6/30/2000 2,504,790 1,050,000 Sayre, PA, Health Care Facilities Authority (Series A) 6.50% Bonds (Guthrie Healthcare System, PA)/(AMBAC INS) 3/1/2000 1,061,193 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 PENNSYLVANIA-CONTINUED $ 1,425,000 Schuylkill County, PA IDA, Manufacturing Facilities Revenue Bonds (Series 1995) Weekly VRDNs (Prime Packing, Inc. Project)/(First Union National Bank, Charlotte, NC LOC) $ 1,425,000 3,000,000 Venango, PA IDA, Resource Recovery Bonds (Series 1993) 3.45% CP (Scrubgrass Power Corp.)/(National Westminster Bank, PLC, London LOC) Mandatory Tender 1/28/2000 3,000,000 10,700,000 Washington County, PA IDA, Solid Waste Disposal Revenue Bonds (Series 1995) Weekly VRDNs (American Iron Oxide Co. Project)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 10,700,000 745,000 West Cornwall Township, PA Municipal Authority, Revenue Bonds (Series 1995) Weekly VRDNs (Lebanon Valley Brethern Home Project (PA)/(First Union National Bank, Charlotte, NC LOC) 745,000 3,185,000 William Penn School District, PA, 3.64% TRANs, 6/30/2000 3,185,802 2,500,000 York County, PA IDA, Limited Obligation Revenue Bonds (Series 1997) Weekly VRDNs (Metal Exchange Corp.)/(Comerica Bank LOC) 2,500,000 2,750,000 York County, PA IDA, Variable Rate Demand Limited Obligation Revenue Bonds (Series 1996) Weekly VRDNs (Metal Exchange Corp.)/(Comerica Bank, Detroit, MI LOC) 2,750,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 429,569,936
Securities that are subject to alternative minimum tax represent 54.1% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited) FIRST TIER SECOND TIER 98.9% 1.1% 2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $29,620,000, which represents 6.9% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($431,662,443) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation BANs -Bond Anticipation Notes CGIC -Capital Guaranty Insurance Corporation CP -Commercial Paper EDFA - -Economic Development Financing Authority EDRB(s) -Economic Development Revenue Bonds FGIC -Financial Guaranty Insurance Company FSA -Financial Security Assurance GO -General Obligation HDA -Hospital Development Authority IDA - -Industrial Development Authority IDRB(s) -Industrial Development Revenue Bond(s) INS -Insured LIQ -Liquidity Agreement LOC -Letter of Credit MERLOTS - -Municipal Exempt Receipts Liquidity Optional Tender Series PCR -Pollution Control Revenue PRF -Prerefunded RANs -Revenue Anticipation Notes SLMA -Student Loan Marketing Association TANs -Tax Anticipation Notes TOBs -Tender Option Bonds TRANs -Tax and Revenue Anticipation Notes VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 429,569,936 Cash 429,014 Income receivable 3,038,891 Prepaid expenses 8,393 TOTAL ASSETS 433,046,234 LIABILITIES: Payable for shares redeemed $ 619,902 Income distribution payable 700,281 Accrued expenses 63,608 TOTAL LIABILITIES 1,383,791 Net assets for 431,662,443 shares outstanding $ 431,662,443 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SHARES: $135,031,952 / 135,031,952 shares outstanding $1.00 INSTITUTIONAL SERVICE SHARES: $253,338,762 / 253,338,762 shares outstanding $1.00 CASH SERIES SHARES: $43,291,729 / 43,291,729 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 15,601,182 EXPENSES: Investment advisory fee $ 2,330,962 Administrative personnel and services fee 351,545 Custodian fees 32,400 Transfer and dividend disbursing agent fees and expenses 102,953 Directors'/Trustees' fees 4,667 Auditing fees 13,156 Legal fees 13,053 Portfolio accounting fees 113,282 Distribution services fee- Cash Series Shares 195,333 Shareholder services fee- Institutional Shares 261,097 Shareholder services fee- Institutional Service Shares 782,301 Shareholder services fee- Cash Series Shares 122,083 Share registration costs 27,068 Printing and postage 30,091 Insurance premiums 29,397 Miscellaneous 6,182 TOTAL EXPENSES 4,415,570 WAIVERS: Waiver of investment advisory fee $ (936,982) Waiver of distribution services fee-Cash Series Shares (24,417) Waiver of shareholder services fee-Institutional Shares (261,097) Waiver of shareholder services fee-Institutional Service Shares (156,460) TOTAL WAIVERS (1,378,956) Net expenses 3,036,614 Net investment income $ 12,564,568
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 12,564,568 $ 12,841,417 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Shares (3,050,817) (1,812,898) Institutional Service Shares (8,398,776) (9,813,298) Cash Series Shares (1,114,975) (1,215,221) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (12,564,568) (12,841,417) SHARE TRANSACTIONS: Proceeds from sale of shares 1,619,949,097 1,771,726,568 Net asset value of shares issued to shareholders in payment of distributions declared 3,820,422 4,355,879 Cost of shares redeemed (1,696,708,970) (1,623,039,093) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (72,939,451) 153,043,354 Change in net assets (72,939,451) 153,043,354 NET ASSETS: Beginning of period 504,601,894 351,558,540 End of period $ 431,662,443 $ 504,601,894
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.01 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.01) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 2.94% 3.36% 3.38% 3.37% 1.03% RATIOS TO AVERAGE NET ASSETS: Expenses 3 0.90% 0.91% 0.92% 0.92% 0.91% 4 Net investment income 3 2.47% 2.85% 2.88% 2.80% 3.35% 4 Expenses (after waivers) 0.45% 0.45% 0.45% 0.45% 0.45% 4 Net investment income (after waivers) 2.92% 3.31% 3.35% 3.27% 3.81% 4 SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $135,032 $64,281 $63,148 $37,076 $2,529
1 Reflects operations for the period from August 23, 1995 (date of initial public investment) to October 31, 1995. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 TOTAL RETURN 1 2.73% 3.15% 3.18% 3.16% 3.44% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.90% 0.91% 0.92% 0.92% 0.92% Net investment income 2 2.43% 2.83% 2.87% 2.85% 3.11% Expenses (after waivers) 0.65% 0.65% 0.65% 0.65% 0.65% Net investment income (after waivers) 2.68% 3.09% 3.14% 3.12% 3.38% SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $253,339 $392,381 $264,634 $221,851 $276,407
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Financial Highlights-Cash Series Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.02 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.02) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.32% 2.74% 2.77% 2.75% 3.02% RATIOS TO AVERAGE NET ASSETS: Expenses 2 1.30% 1.31% 1.32% 1.32% 1.33% Net investment income 2 2.03% 2.44% 2.45% 2.45% 2.70% Expenses (after waivers) 1.05% 1.05% 1.05% 1.05% 1.05% Net investment income (after waivers) 2.28% 2.70% 2.72% 2.72% 2.98% SUPPLEMENTAL DATA Net assets, end of period (000 omitted) $43,292 $47,940 $23,777 $19,825 $28,255
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Pennsylvania Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers three classes of shares: Institutional Shares, Institutional Service Shares and Cash Series Shares. The investment objective of the the Fund is current income exempt from federal income tax and the personal income taxes imposed by the Commonwealth of Pennsylvania consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees ("Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $431,662,443. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 590,890,826 403,352,478 Shares issued to shareholders in payment of distributions declared 1,069,331 121,832 Shares redeemed (521,209,277) (402,341,293) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS 70,750,880 1,133,017 YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 886,863,203 1,209,407,656 Shares issued to shareholders in payment of distributions declared 1,700,459 3,071,889 Shares redeemed (1,027,605,705) (1,084,732,294) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS (139,042,043) 127,747,251 YEAR ENDED OCTOBER 31 1999 1998 CASH SERIES SHARES: Shares sold 142,195,068 158,966,434 Shares issued to shareholders in payment of distributions declared 1,050,632 1,162,158 Shares redeemed (147,893,988) (135,965,506) NET CHANGE RESULTING FROM CASH SERIES SHARE TRANSACTIONS (4,648,288) 24,163,086 NET CHANGE RESULTING FROM SHARE TRANSACTIONS (72,939,451) 153,043,354
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. DISTRIBUTION SERVICES FEE The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. ("FSC"), the principal distributor, from the net assets of the Fund to finance activities intended to result in the sale of the Fund's Cash Series Shares. The Plan provides that the Fund may incur distribution expenses up to 0.40% of the average daily net assets of the Cash Series Shares, annually, to compensate FSC. The distributor may voluntarily choose to waive any portion of its fee. The distributor can modify or terminate this voluntary waiver at any time at its sole discretion. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS For the year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $765,115,114 and $695,595,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 74.8% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 9.7% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF PENNSYLVANIA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Pennsylvania Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998, and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Pennsylvania Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses, and other information. [Graphic] Federated World-Class Investment Manager Pennsylvania Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS ANNUAL REPORT OCTOBER 31, 1999 [Graphic] Federated Pennsylvania Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229881 Cusip 314229204 Cusip 314229717 G00830-01 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Tennessee Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares and Institutional Service Shares. The fund is a convenient way to keep your ready cash pursuing double tax-free income-free from federal regular income tax and Tennessee state income tax-through a portfolio concentrated in high-quality, short-term Tennessee municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share for both Institutional Shares and Institutional Service Shares. The fund's net assets totaled $57.5 million at the end of the reporting period. Thank you for relying on Tennessee Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three interest rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point, bringing the target rate to 5.50%. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than half of the fund's assets, started the period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% range in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the two highest federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country benefited from a strong economy. This fact, coupled with lower borrowing costs from low long-term rates, reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level of the decade. Lack of supply and heavy demand kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the reporting period was approximately 29 days. The fund's average maturity moved steadily upward in the first half of 1999, reaching 54 days in May as attractive fixed-rate notes opportunities were available. Over the summer months, with the Fed increasing rates, we allowed the fund's maturity to decline to end the reporting period at 31 days. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range was targeted, taking into account Federal Reserve monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is probable that we will see one and possibly two interest rate increases in the first half of 2000. In the near future, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch market developments with great interest in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 97.5% 1 TENNESSEE-97.5% $ 2,410,000 Benton County TN IDB (Series 1996) Weekly VRDNs (Jones Plastic and Engineering Corp.)/(Nation al City Bank, Kentucky LOC) $ 2,410,000 2,000,000 Chattanooga, TN IDB, Industrial Development Variable Rate Demand Revenue Bonds (Series 1997) Weekly VRDNs (JRB Company, Inc.)/(National City Bank, Ohio LOC) 2,000,000 2,000,000 Covington, TN IDB (Series 1992) Weekly VRDNs (Wallace Computer Services, Inc.)/(Wachovia Bank of NC, N.A. LOC) 2,000,000 2,660,000 Dickson County, TN IDB (Series 1996) Weekly VRDNs (Tennessee Bun Company, LLC Project)/(PNC Bank, N.A. LOC) 2,660,000 2,600,000 Franklin County, TN IDB, IDRB (Series 1997) Weekly VRDNs (Hi-Tech)/(Regions Bank, Alabama LOC) 2,600,000 1,750,000 Greenfield, TN IDB (Series 1995) Weekly VRDNs (Plastic Products Co. Project)/(Norwest Bank Minnesota, N.A. LOC) 1,750,000 4,460,000 Hamilton County, TN IDB Weekly VRDNs (Pavestone Co.)/(Bank One, Texas N.A. LOC) 4,460,000 1,500,000 Hamilton County, TN IDB (Series 1987) Weekly VRDNs (Seaboard Farms Project)/(SunTrust Bank, Atlanta LOC) 1,500,000 3,680,000 Hawkins County, TN IDB (Series 1995) Weekly VRDNs (Sekisui Ta Industries, Inc.)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 3,680,000 2,070,000 Hendersonville, TN IDB (Series 1996) Weekly VRDNs (Betty Machine Co. Project)/(First Union National Bank, Charlotte, NC LOC) 2,070,000 2,000,000 Jackson, TN IDB (Series 1999) Weekly VRDNs (Bobrick Washroom Equipment)/(First American National Bank, Nashville, TN LOC) 2,000,000 1,500,000 Jackson, TN IDB, Solid Waste Facility Bonds (Series 1995) Weekly VRDNs (Florida Steel Corp.)/(Bank of America, N.A. LOC) 1,500,000 1,800,000 Knox County, TN IDB (Series 1996) Weekly VRDNs (Health Ventures, Inc.)/(SunTrust Bank, Nashville LOC) 1,800,000 1,000,000 Maury County, TN HEFA (Series 1996E) Weekly VRDNs (Southern Healthcare Systems, Inc.)/(Bank One, Texas N.A. LOC) 1,000,000 834,000 McMinn County, TN IDB (Series 1995) Weekly VRDNs (Creative Fabrication Corp.)/(Bank One, Michigan LOC) 834,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 TENNESSEE-CONTINUED $ 3,000,000 Metropolitan Government Nashville & Davidson County, TN HEFA, Revenue Bonds (Series 1985A) 3.10% TOBs (Vanderbilt University), Optional Tender 1/15/2000 $ 3,000,000 1,860,000 Metropolitan Government Nashville & Davidson County, TN, GO UT Refunding Bonds, 4.63% Bonds, 5/15/2000 1,873,846 6,200,000 Roane, TN IDB (Series 1982) Monthly VRDNs (Fortafil Fibers, Inc. Project)/(ABN AMRO Bank N.V., Amsterdam LOC) 6,200,000 1,000,000 Sevier County, TN Public Building Authority, Local Government Improvement Bonds (Series II-G-2) Weekly VRDNs (Knoxville, TN)/(AMBAC INS)/(KBC Bank N.V. LIQ) 1,000,000 1,000,000 Sevier County, TN Public Building Authority, Local Government Public Improvement Bonds (Series II-G-3) Weekly VRDNs (Maryville, TN)/(AMBAC INS)/(KBC Bank N.V. LIQ) 1,000,000 2,600,000 Shelby County, TN Health Education & Housing Facilities Board, Multifamily Housing Revenue Bonds (Series 1988) Weekly VRDNs (Arbor Lake Project)/(PNC Bank, N.A. LOC) 2,600,000 2,000,000 Shelby County, TN (Series B) 5.10% Bonds, 3/1/2000 2,013,049 1,600,000 Sumner County, TN, Capital Outlay Note (Series 1999) 4.00% TANs, 6/26/2000 1,602,506 2,350,000 Union City, TN IDB (Series 1995) Weekly VRDNs (Kohler Co.)/(Wachovia Bank of NC, N.A. LOC) 2,350,000 2,200,000 Union County, TN IDB (Series 1995) Weekly VRDNs (Cooper Container Corporation Project)/(SunT rust Bank, Nashville LOC) 2,200,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 2 $ 56,103,401
Securities that are subject to alternative minimum tax represent 70.3% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value (Unaudited) FIRST TIER SECOND TIER 100.0% 00.0% 2 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($57,528,852) at October 31, 1999. The following acronyms are used throughout this portfolio: AMBAC -American Municipal Bond Assurance Corporation GO -General Obligation HEFA - -Health and Education Facilities Authority IDB -Industrial Development Bond IDRB - -Industrial Development Revenue Bond INS -Insured LIQ -Liquidity Agreement LOC - -Letter of Credit TANs -Tax Anticipation Notes TOBs -Tender Option Bonds UT - -Unlimited Tax VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 56,103,401 Cash 504,433 Income receivable 297,481 Receivable for shares sold 721,062 Deferred organizational costs 9,391 TOTAL ASSETS 57,635,768 LIABILITIES: Payable for shares redeemed $ 5,001 Payable for transfer and dividend disbursing agent fees and expenses 14,952 Payable for shareholder services fee 4,620 Income distribution payable 77,178 Accrued expenses 5,165 TOTAL LIABILITIES 106,916 Net assets for 57,528,852 shares outstanding $ 57,528,852 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SHARES: $34,850,177 / 34,850,177 shares outstanding $1.00 INSTITUTIONAL SERVICE SHARES: $22,678,675 / 22,678,675 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 2,275,420 EXPENSES: Investment advisory fee $ 338,749 Administrative personnel and services fee 155,000 Custodian fees 2,902 Transfer and dividend disbursing agent fees and expenses 52,612 Directors'/Trustees' fees 1,313 Auditing fees 12,624 Legal fees 8,335 Portfolio accounting fees 52,167 Shareholder services fee- Institutional Shares 101,263 Shareholder services fee- Institutional Service Shares 67,992 Share registration costs 25,927 Printing and postage 16,670 Insurance premiums 4,250 Miscellaneous 7,710 TOTAL EXPENSES 847,514 WAIVERS AND REIMBURSEMENTS: Waiver of investment advisory fee $ (338,749) Waiver of shareholder services fee-Institutional Shares (101,263) Reimbursement of other operating expenses (99,404) TOTAL WAIVERS AND REIMBURSEMENTS (539,416) Net expenses 308,098 Net investment income $ 1,967,322
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 1,967,322 $ 1,768,764 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Shares (1,221,475) (895,346) Institutional Service Shares (745,847) (873,418) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (1,967,322) (1,768,764) SHARE TRANSACTIONS: Proceeds from sale of shares 207,309,458 236,176,586 Net asset value of shares issued to shareholders in payment of distributions declared 999,919 704,085 Cost of shares redeemed (222,566,032) (212,767,088) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (14,256,655) 24,113,583 Change in net assets (14,256,655) 24,113,583 NET ASSETS: Beginning of period 71,785,507 47,671,924 End of period $ 57,528,852 $ 71,785,507
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.01 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.01) NET ASSET VALUE, END OF PERIOD $ 1.00 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 3.07% 3.42% 3.47% 1.59% RATIOS TO AVERAGE NET ASSETS: Expenses 3 1.25% 1.33% 1.46% 1.72% 4 Net investment income 3 2.11% 2.37% 2.29% 1.95% 4 Expenses (after waivers and reimbursements) 0.35% 0.35% 0.35% 0.10% 4 Net investment income (after waivers and reimbursements) 3.01% 3.35% 3.40% 3.57% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $ 34,850 $ 39,193 $ 23,048 $ 17,824
1 Reflects operations for the period from May 22, 1996 (date of initial public investment) to October 31, 1996. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived and reimbursed. If such voluntary waivers and reimbursements had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.01 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.01) NET ASSET VALUE, END OF PERIOD $ 1.00 1.00 $ 1.00 $ 1.00 TOTAL RETURN 2 2.81% 3.17% 3.21% 1.48% RATIOS TO AVERAGE NET ASSETS Expenses 3 1.25% 1.33% 1.46% 1.72% 4 Net investment income 3 2.09% 2.36% 2.27% 1.93% 4 Expenses (after waivers and reimbursements) 0.60% 0.60% 0.60% 0.39% 4 Net investment income (after waivers and reimbursements) 2.74% 3.09% 3.13% 3.26% 4 SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $ 22,679 $ 32,593 $ 24,624 $ 29,824
1 Reflects operations for the period from May 22, 1996 (date of initial public investment) to October 31, 1996. 2 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 3 During the period, certain fees were voluntarily waived and reimbursed. If such voluntary waivers and reimbursements had not occurred, the ratios would have been as indicated. 4 Computed on an annualized basis. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Tennessee Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Shares and Institutional Service Shares. The investment objective of the Fund is current income exempt from federal regular income tax and the personal income taxes imposed by the State of Tennessee consistent with stability of principal and liquidity. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal tax is necessary. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Board of Trustees (the "Trustees") to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $57,528,852. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 120,958,760 141,723,370 Shares issued to shareholders in payment of distributions declared 386,774 31,344 Shares redeemed (125,687,909) (125,610,011) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS (4,342,375) 16,144,703 YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 86,350,698 94,453,216 Shares issued to shareholders in payment of distributions declared 613,145 672,741 Shares redeemed (96,878,123) (87,157,077) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS (9,914,280) 7,968,880 NET CHANGE RESULTING FROM SHARE TRANSACTIONS (14,256,655) 24,113,583
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. The Adviser can modify or terminate this voluntary waiver and/or reimbursement at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES Fserv, through its subsidiary FSSC, serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $111,942,500 and $118,075,000, respectively. ORGANIZATIONAL EXPENSES Organizational expenses of $24,645 were borne initially by the Adviser. The Fund has reimbursed the Adviser for these expenses. These expense have been deferred and are being amortized over the five year period following the Fund's effective date. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31,1999, 84.9% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 11.2% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITORS (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon its recommendation of the Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen LLP ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF TENNESSEE MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Tennessee Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998, and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Tennessee Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses and other information. [Graphic] Federated World-Class Investment Manager Tennessee Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS ANNUAL REPORT OCTOBER 31, 1999 [Graphic] Federated Tennessee Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229634 Cusip 314229642 G01865-03 (12/99) [Graphic] ANNUAL REPORT President's Message Dear Shareholder: I am pleased to present the Annual Report to Shareholders of Virginia Municipal Cash Trust, which covers the 12-month period from November 1, 1998 through October 31, 1999. The report begins with a discussion with the fund's portfolio manager, followed by a complete listing of the fund's holdings and its financial statements. Financial highlights tables are provided for the fund's Institutional Shares and Institutional Service Shares. The fund is a convenient way to put your ready cash to work pursuing double tax-free income-free from federal regular income tax and Virginia personal income tax-through a portfolio concentrated in high-quality, short-term Virginia municipal securities. 1 At the end of the reporting period, the fund's holdings were diversified among issuers that use municipal bond financing for projects as varied as health care, housing, community development and transportation. This double tax-free advantage means you have the opportunity to earn a greater after-tax yield than you could in a comparable high-quality taxable investment. Of course, the fund also brings you the added benefits of daily liquidity and stability of principal. 2 During the reporting period, the fund paid double tax-free dividends totaling $0.03 per share for both Institutional Shares and Institutional Service Shares. The fund's net assets totaled $280.3 million at the end of the reporting period. Thank you for relying on Virginia Municipal Cash Trust to help your ready cash earn income every day. As always, we will continue to provide you with the highest level of professional service. We invite your questions or comments. Sincerely, [Graphic] Glen R. Johnson President December 15, 1999 1 Income may be subject to the federal alternative minimum tax. 2 An investment in money market funds is neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Investment Review An interview with the fund's portfolio manager, Jeff A. Kozemchak, CFA, Senior Vice President, Federated Investment Management Company. WHAT ARE YOUR COMMENTS ON THE ECONOMY AND THE INTEREST RATE ENVIRONMENT DURING THE FUND'S REPORTING PERIOD? Perhaps the biggest issues threatening the U.S. economy in the latter half of 1998 were alleviated by the second quarter of 1999. The improvements in international economies, particularly Asia, and calm foreign markets laid the foundation for the Federal Reserve Board (the "Fed") to focus on U.S. economic releases as a better indicator of the inflation picture. The Fed became increasingly concerned with inflationary pressures from tighter labor markets and rising equity wealth. For the most part inflationary forces remained tame during 1999 with increases in some commodity prices, such as oil. Nevertheless, the Fed began a series of three interest rate increases, citing tighter labor markets, shrinking productivity gains and growth in demand. The moves came in June, August and November; each time, the Fed voted to raise the federal funds target rate by a quarter point, bringing the target rate to 5.50%. In addition to economic fundamentals, short-term municipal securities were strongly influenced by technical factors over the reporting period, notably calendar year end and income tax payment season. Variable rate demand notes ("VRDNs"), which comprise more than half of the fund's assets, started the reporting period in the 3.00% range, but moved sharply higher in December to the 4.00% level as supply and demand imbalances occurred. Yields then declined in January, as investors looked to reinvest coupon payments and year-end selling pressures eased. Yields averaged slightly over 2.75% during February and March before rising to the 4.00% in April due to traditional tax season payment pressures. Over the summer months, yields remained mostly in a band between 3.00% and 3.50%, but rose sharply in September as cash outflows in the municipal markets pushed rates as high as 3.85%. VRDN yields ended the reporting period at 3.50%. Over the reporting period, VRDN yields averaged roughly 66% of taxable rates, making them attractive for investors in the two highest federal tax brackets. The overall tone of the short-term municipal market was positive. Municipalities across the country benefited from an expanding economy. This fact, coupled with lower borrowing costs from low long-term rates, reduced short-term issuance. In fact, annual municipal note issuance was at its lowest level of the decade. Lack of supply and heavy demand kept short-term municipal securities, relative to their taxable counterparts, relatively expensive. WHAT WERE YOUR STRATEGIES FOR THE FUND DURING THE REPORTING PERIOD? The fund's average maturity at the beginning of the period was approximately 36 days. The fund remained in a 35- to 45-day average maturity range over most of the reporting period, and moved within that range according to relative value opportunities. We continued to emphasize a barbelled structure for the portfolio, combining a significant position in 7-day VRDNs with purchases of longer-term securities with maturities between 6 and 12 months. Once an average maturity range was targeted, taking into account Federal Reserve monetary policy, the portfolio maximized performance through ongoing relative value analysis. Relative value analysis includes the comparison of the richness or cheapness of municipal securities to one another as well as municipals to taxable instruments, such as U.S. Treasury securities. This portfolio structure continued to provide a competitive yield over time. WHAT IS YOUR OUTLOOK GOING FORWARD? The Fed, concerned by persistent above-trend growth in an environment where labor markets are constrained and productivity gains are narrowing, will likely remain on hold until the first quarter of 2000. It is probable that we will see one and possibly two interest rate increases in the first half of 2000. In the near future, the short-term municipal market will likely reflect technical as well as fundamental factors. These supply and demand imbalances could very well present attractive investment opportunities for the fund. We will continue to watch market developments, with great interest, in order to best serve our municipal clients. Portfolio of Investments OCTOBER 31, 1999
PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- 99.5% 1 VIRGINIA-98.8% $ 5,000,000 Albemarle County, VA IDA, (Series 1999) Weekly VRDNs (Region Ten Community Services Board, Inc.)/(Wachovia Bank of NC, N.A. LOC) $ 5,000,000 2,200,000 Amelia County, VA IDA, (Series 1991) Weekly VRDNs (Chambers Waste System)/(Morgan Guaranty Trust Co., New York LOC) 2,200,000 1,200,000 Arlington County, VA Weekly VRDNs (Ballston Public Parking)/(Citibank N.A., New York LOC) 1,200,000 4,500,000 Bedford County, VA IDA, (Series 1999) Weekly VRDNs (David R. Snowman and Carol J. Snowman)/(Crestar Bank of Virginia, Richmond LOC) 4,500,000 13,500,000 Campbell County, VA IDA, Solid Waste Disposal Facilities Revenue ACES Weekly VRDNs (Georgia- Pacific Corp.)/(SunTrust Bank, Atlanta LOC) 13,500,000 7,675,000 Carroll County, VA IDA, IDRB (Series 1995) Weekly VRDNs (Kentucky Derby Hosiery Co., Inc. Project)/(Bank One, Kentucky LOC) 7,675,000 5,000,000 Charlottesville, VA IDA, 7.375% Bonds (Martha Jefferson Hospital)/(United States Treasury PRF), 10/1/2000 (@102) 5,259,613 1,415,000 Charlottesville, VA IDA, IDR Refunding Bonds, 3.35% TOBs (Safeway, Inc.)/(Bankers Trust Co., New York LOC), Mandatory Tender 12/1/1999 1,415,000 5,995,000 2 Chesapeake, VA IDA, Trust Receipts (Series 1998C-10) Reg D, Weekly VRDNs (Sumitomo Machinery Corp. of America Corp.)/(Bank of America, N.A. SWP) 5,995,000 1,450,000 Chesapeake, VA, 7.25% Bonds, 8/1/2000 1,489,523 1,900,000 Chesterfield County, VA IDA, (Series 1998) Weekly VRDNs (Lumberg, Inc.)/(Bank of America, N.A. LOC) 1,900,000 1,200,000 Chesterfield County, VA, 5.65% Bonds, 7/15/2000 1,215,591 2,000,000 Danville, VA IDA, (Series 1997) Weekly VRDNs (Diebold, Inc.)/(Bank One, Ohio, N.A. LOC) 2,000,000 5,298,975 2 Equity Trust III, (1996 Series) Weekly VRDNs (Bayerische Hypotheken-und Vereinsbank AG LOC) 5,298,975 1,100,000 Fairfax County, VA EDA, (Series 1995) Weekly VRDNs (American Society of Civil Engineers Foundation, Inc.)/(Mellon Bank N.A., Pittsburgh LOC) 1,100,000 5,000,000 2 Fairfax County, VA EDA, Trust Receipt (SeriesA-15) Reg D, 3.55% TOBs (AMBAC INS)/(National Westminster Bank, PLC, London LIQ), Optional Tender 11/1/1999 5,000,000 9,445,000 2 Fairfax County, VA IDA, (Series 1998A-35) Reg D, Weekly VRDNs (Fairfax Hospital System)/(Bayerische Hypotheken-und Vereinsbank AG LIQ)/(United States Treasury PRF) 9,445,000 5,000,000 Fairfax County, VA Water Authority, 7.25% Bonds (United States Treasury PRF), 1/1/2000 (@102) 5,132,826 10,700,000 Falls Church, VA IDA, (Series 1985), 3.40% TOBs (Kaiser Permanente), Optional Tender 11/1/1999 10,700,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 VIRGINIA-CONTINUED $ 7,113,000 Fluvanna County, VA IDA, (Series 1986) Weekly VRDNs (Thomasville Furniture Industries)/(UBS AG LOC) $ 7,113,000 5,710,000 Frederick County, VA IDA, (Series 1997) Weekly VRDNs (Jouan, Inc.)/(Wachovia Bank of NC, N.A. LOC) 5,710,000 1,875,000 Halifax County, VA IDA, (Series 1998) Weekly VRDNs (Annin & Co., Inc.)/(Chase Manhattan Bank N.A., New York LOC) 1,875,000 11,500,000 Halifax County, VA IDA, MMMs, PCR, 3.40% CP (Virginia Electric Power Co.), Mandatory Tender 11/10/1999 11,500,000 7,500,000 Halifax County, VA IDA, MMMs, PCR, 3.45% CP (Virginia Electric Power Co.), Mandatory Tender 11/9/1999 7,500,000 3,000,000 Halifax County, VA IDA, MMMs, PCR, 3.75% CP (Virginia Electric Power Co.), Mandatory Tender 2/17/2000 3,000,000 4,000,000 Hampton, VA Redevelopment & Housing Authority, (Series 1998) Weekly VRDNs (Township Apartments)/(Amsouth Bank N.A., Birmingham LOC) 4,000,000 1,500,000 Hanover County, VA IDA Weekly VRDNs (Fiber-Lam, Inc. Project)/(Bank of America, N.A. LOC) 1,500,000 1,110,000 Henry County, VA Public Service Authority, 5.50% Bonds (FGIC INS), 11/15/1999 1,111,040 5,000,000 James City County, VA IDA, IDRB (Series 1997) Weekly VRDNs (Riverside Health System-Patriots Colony) 5,000,000 6,500,000 Loudoun County, VA IDA, (Series 1998), 3.35% TOBs (Signature Flight Support Corp.)/(Bayerische Landesbank Girozentrale LOC), Optional Tender 12/1/1999 6,500,000 2,905,000 Mecklenburg County, VA IDA, IDRB Weekly VRDNs (Harden Manufacturing Corp.)/(Columbus Bank and Trust Co., GA LOC) 2,905,000 2,725,000 Mecklenburg County, VA IDA, IDRB Weekly VRDNs (Smith Land Holdings, L.L.C.)/(Columbus Bank and Trust Co., GA LOC) 2,725,000 11,000,000 Metropolitan Washington, DC Airports Authority, 3.50% CP (Bank of America, N.A. LOC), Mandatory Tender 11/19/1999 11,000,000 4,750,000 New Kent County, VA IDA, (Series 1999) Weekly VRDNs (Basic Construction Company, LLC)/(Crestar Bank of Virginia, Richmond LOC) 4,750,000 3,995,000 Newport News, VA IDA, (Series 1997) Weekly VRDNs (Iceland Seafood Corp.)/(Crestar Bank of Virginia, Richmond LOC) 3,995,000 3,825,000 Newport News, VA Redevelopment & Housing Authority, (Series 1999) Weekly VRDNs (River Park Towers)/(Bank One, Arizona N.A. LOC) 3,825,000 4,000,000 Norfolk, VA, (Series A), 5.10% Bonds, 2/1/2000 4,018,629 3,000,000 Peninsula Port Authority, Facility Revenue Refunding Bonds (Series 1992), CP (CSX Corp.)/(Bank of Nova Scotia, Toronto LOC), Mandatory Tender 11/9/1999 3,000,000 1,005,000 Pulaski County, VA IDA, (Series 1995) Weekly VRDNs (Balogh Real Estate Ltd. Partnership Mar-Bal Inc. Project)/(Bank One, Ohio, N.A. LOC) 1,005,000 895,000 Richmond, VA IDA, (Series 1997) Weekly VRDNs (PM Beef)/(U.S. Bank, N.A., Minneapolis LOC) 895,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 VIRGINIA-CONTINUED $ 6,000,000 Richmond, VA Redevelopment & Housing Authority, (Series B-1) Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Credit Suisse First Boston LOC) $ 6,000,000 6,000,000 Richmond, VA Redevelopment & Housing Authority, (Series B-2) Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische Landesbank Girozentrale INV) 6,000,000 1,500,000 Richmond, VA Redevelopment & Housing Authority, (Series B-3A) Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische Landesbank Girozentrale INV) 1,500,000 3,160,000 Richmond, VA Redevelopment & Housing Authority, (Series B-5) Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische Landesbank Girozentrale INV) 3,160,000 3,555,000 Richmond, VA Redevelopment & Housing Authority, (Series B-6) Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische Landesbank Girozentrale INV) 3,555,000 7,000,000 Richmond, VA Redevelopment & Housing Authority, (Series B-9) Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische Landesbank Girozentrale INV) 7,000,000 7,000,000 Richmond, VA Redevelopment & Housing Authority, (Series B-10) Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische Landesbank Girozentrale INV) 7,000,000 5,795,000 Richmond, VA Redevelopment & Housing Authority, Multi-Family Refunding Revenue Bonds (Series 1997) Weekly VRDNs (Newport Manor)/(Columbus Bank and Trust Co., GA LOC) 5,795,000 3,500,000 Roanoke, VA IDA, 7.50% Bonds (Roanoke Memorial Hospital Project - Carilion Health System)/(United States Treasury PRF), 7/1/2020 (@102) 3,653,064 2,610,000 South Hill, VA IDA, (Series 1997) Weekly VRDNs (International Veneer Co., Inc.)/(Bank One, Indiana, N.A. LOC) 2,610,000 4,095,000 Spotsylvania County, VA IDA, (Series 1989), 7.60% TOBs (Walter Grinders, Inc.)/(Deutsche Bank AG LOC), Optional Tender 8/31/2000 4,095,000 2,500,000 Staunton, VA IDA, (Series 1997) Weekly VRDNs (Diebold, Inc.)/(Bank One, Ohio, N.A. LOC) 2,500,000 3,500,000 Staunton, VA IDA, (Series 1999A) Weekly VRDNs (Specialty Blades, Inc.)/(Crestar Bank of Virginia, Richmond LOC) 3,500,000 2,000,000 Tazewell County, VA IDA, (Series 1993) Weekly VRDNs (Seville Properties Bluefield)/(Huntington National Bank, Columbus, OH LOC) 2,000,000 9,920,000 2 Virginia Port Authority, MERLOTS (Series 1997M) Weekly VRDNs (MBIA INS)/(First Union National Bank, Charlotte, N.C. LIQ) 9,920,000 980,000 Virginia Small Business Financing Authority Weekly VRDNs (Moses Lake Industries)/(KeyBank, N.A. LOC) 980,000 9,000,000 2 Virginia State Housing Development Authority, (Series 1999A-2) Reg D, Weekly VRDNs (MBIA INS)/(Commerzbank AG, Frankfurt LIQ) 9,000,000 3,895,000 Virginia State Public School Authority, (Series B), 4.75% Bonds, 8/1/2000 3,923,239 2,620,000 Virginia State Public School Authority, (Series B), 5.70% Bonds, 1/1/2000 2,631,361 1,000,000 Virginia State Public School Authority, 5.75% Bonds, 1/1/2000 1,004,230 1,507,000 Williamsburg, VA IDA, (Series 1988) Weekly VRDNs (Colonial Williamsburg Foundation Museum)/(Bank of America, N.A. LOC) 1,507,000 PRINCIPAL AMOUNT VALUE SHORT-TERM MUNICIPALS- continued 1 VIRGINIA-CONTINUED $ 1,575,000 Winchester, VA IDA, (Series 1995) Weekly VRDNs (Midwesco Filter Resources, Inc. Project)/(Harris Trust & Savings Bank, Chicago LOC) $ 1,575,000 5,000,000 York County, VA IDA, (Series 1985), 3.70% CP (Virginia Electric Power Co.), Mandatory Tender 2/17/2000 5,000,000 TOTAL 276,863,091 PUERTO RICO-0.7% 2,000,000 Puerto Rico Industrial, Medical & Environmental PCA, (1983 Series A), 2.90% TOBs (Merck & Co., Inc.), Optional Tender 12/1/1999 2,000,000 TOTAL INVESTMENTS (AT AMORTIZED COST) 3 $ 278,863,091
Securities that are subject to alternative minimum tax represent 67.8% of the portfolio as calculated based upon total portfolio market value. 1 The fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations ("NRSROs") or unrated securities of comparable quality. 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 Corporation, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch IBCA, Inc. are all considered rated in one of the two highest short-term rating categories. Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. At October 31, 1999, the portfolio securities were rated as follows: Tier Rating Based on Total Market Value
FIRST TIER SECOND TIER 100.00% 00.00%
2 Denotes a restricted security which is subject to restrictions on resale under federal securities laws. These securities have been deemed liquid based upon criteria approved by the fund's Board of Trustees. At October 31, 1999, these securities amounted to $44,658,975 which represents 15.9% of net assets. 3 Also represents cost for federal tax purposes. Note: The categories of investments are shown as a percentage of net assets ($280,272,039) at October 31, 1999. The following acronyms are used throughout this portfolio: ACES -Adjustable Convertible Extendable Securities AMBAC -American Municipal Bond Assurance Corporation CP -Commercial Paper EDA -Economic Development Authority FGIC -Financial Guaranty Insurance Company IDA -Industrial Development Authority IDR -Industrial Development Revenue IDRB -Industrial Development Revenue Bond INS -Insured INV -Investment Agreement LIQ -Liquidity Agreement LLC - -Limited Liability Corporation LOC -Letter of Credit MBIA -Municipal Bond Investors Assurance MERLOTS -Municipal Exempt Receipts - Liquidity Optional Tender Series MMMs -Money Market Municipals PCA -Pollution Control Authority PCR - -Pollution Control Revenue PLC -Public Limited Company PRF -Prerefunded TOBs - -Tender Option Bonds VRDNs -Variable Rate Demand Notes See Notes which are an integral part of the Financial Statements Statement of Assets and Liabilities OCTOBER 31, 1999
ASSETS: Total investments in securities, at amortized cost and value $ 278,863,091 Income receivable 2,114,945 TOTAL ASSETS 280,978,036 LIABILITIES: Payable for shares redeemed $ 323,137 Income distribution payable 206,941 Payable to Bank 168,185 Accrued expenses 7,734 TOTAL LIABILITIES 705,997 Net assets for 280,272,039 shares outstanding $ 280,272,039 NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE INSTITUTIONAL SHARES: $34,562,076 / 34,562,076 shares outstanding $1.00 INSTITUTIONAL SERVICE SHARES: $245,709,963 / 245,709,963 shares outstanding $1.00
See Notes which are an integral part of the Financial Statements Statement of Operations YEAR ENDED OCTOBER 31, 1999
INVESTMENT INCOME: Interest $ 9,720,339 EXPENSES: Investment advisory fee $ 1,157,907 Administrative personnel and services fee 218,266 Custodian fees 17,774 Transfer and dividend disbursing agent fees and expenses 149,297 Directors'/Trustees' fees 2,749 Auditing fees 12,856 Legal fees 7,669 Portfolio accounting fees 79,337 Shareholder services fee- Institutional Shares 83,622 Shareholder services fee- Institutional Service Shares 639,676 Share registration costs 25,194 Printing and postage 16,360 Insurance premiums 19,042 Miscellaneous 2,407 TOTAL EXPENSES 2,432,156 WAIVERS: Waiver of investment advisory fee $ (280,826) Waiver of shareholder services fee-Institutional Shares (83,622) Waiver of shareholder services fee-Institutional Service Shares (255,870) TOTAL WAIVERS (620,318) Net expenses 1,811,838 Net investment income $ 7,908,501
See Notes which are an integral part of the Financial Statements Statement of Changes in Net Assets
YEAR ENDED OCTOBER 31 1999 1998 INCREASE (DECREASE) IN NET ASSETS OPERATIONS: Net investment income $ 7,908,501 $ 7,956,244 DISTRIBUTIONS TO SHAREHOLDERS: Distributions from net investment income Institutional Shares (964,191) (1,199,300) Institutional Service Shares (6,944,310) (6,756,944) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (7,908,501) (7,956,244) SHARE TRANSACTIONS: Proceeds from sale of shares 1,226,749,956 1,342,458,938 Net asset value of shares issued to shareholders in payment of distributions declared 5,827,519 5,993,310 Cost of shares redeemed (1,224,012,492) (1,299,965,431) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS 8,564,983 48,486,817 Change in net assets 8,564,983 48,486,817 NET ASSETS: Beginning of period 271,707,056 223,220,239 End of period $ 280,272,039 $ 271,707,056
See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.04 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.04) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.90% 3.26% 3.31% 3.24% 3.56% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.84% 0.85% 0.85% 0.89% 0.91% Net investment income 2 2.52% 2.87% 2.90% 2.79% 3.08% Expenses (after waivers) 0.49% 0.49% 0.49% 0.49% 0.49% Net investment income (after waivers) 2.87% 3.23% 3.26% 3.19% 3.50% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $34,562 $24,559 $24,382 $26,302 $22,642
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Financial Highlights-Institutional Service Shares (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
YEAR ENDED OCTOBER 31 1999 1998 1997 1996 1995 NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.03 0.03 0.03 0.03 0.03 LESS DISTRIBUTIONS: Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.03) NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 TOTAL RETURN 1 2.75% 3.11% 3.17% 3.14% 3.46% RATIOS TO AVERAGE NET ASSETS: Expenses 2 0.84% 0.85% 0.86% 0.89% 0.91% Net investment income 2 2.51% 2.85% 2.89% 2.80% 3.06% Expenses (after waivers) 0.64% 0.64% 0.63% 0.59% 0.59% Net investment income (after waivers) 2.71% 3.06% 3.12% 3.10% 3.38% SUPPLEMENTAL DATA: Net assets, end of period (000 omitted) $245,710 $247,149 $198,838 $177,575 $127,083
1 Based on net asset value, which does not reflect the sales charge or contingent deferred sales charge, if applicable. 2 During the period, certain fees were voluntarily waived. If such voluntary waivers had not occurred, the ratios would have been as indicated. See Notes which are an integral part of the Financial Statements Notes to Financial Statements OCTOBER 31, 1999 ORGANIZATION Federated Municipal Trust (the "Trust") is registered under the Investment Company Act of 1940, as amended (the "Act") as an open-end, management investment company. The Trust consists of 17 portfolios. The financial statements included herein are only those of Virginia Municipal Cash Trust (the "Fund"). The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. The Fund offers two classes of shares: Institutional Shares and Institutional Service Shares. The investment objective of the Fund is current income exempt from federal regular income tax and the income tax imposed by the Commonwealth of Virginia consistent with stability of principal. SIGNIFICANT ACCOUNTING POLICIES The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles. INVESTMENT VALUATIONS The Fund uses the amortized cost method to value its portfolio securities in accordance with Rule 2a-7 under the Act. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS Interest income and expenses are accrued daily. Bond premium and discount, if applicable, are amortized as required by the Internal Revenue Code, as amended (the "Code"). Distributions to shareholders are recorded on the ex- dividend date. FEDERAL TAXES It is the Fund's policy to comply with the provisions of the Code applicable to regulated investment companies and to distribute to shareholders each year substantially all of their income. Accordingly, no provisions for federal tax are necessary. At October 31, 1999, the Fund, for federal tax purposes, had a capital loss carryforward, as noted below, which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT 2002 $1,190 2004 1,158
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintain security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when- issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. RESTRICTED SECURITIES Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. Many restricted securities may be resold in the secondary market in transactions exempt from registration. In some cases, the restricted securities may be resold without registration upon exercise of a demand feature. Such restricted securities may be determined to be liquid under criteria established by the Board of Trustees (the "Trustees"). The Fund will not incur any registration costs upon such resales. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. OTHER Investment transactions are accounted for on the trade date. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value) for each class of shares. At October 31, 1999, capital paid-in aggregated $280,272,039. Transactions in shares were as follows:
YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SHARES: Shares sold 94,679,273 140,689,593 Shares issued to shareholders in payment of distributions declared 76,053 292,839 Shares redeemed (84,751,755) (140,806,137) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS 10,003,571 176,295 YEAR ENDED OCTOBER 31 1999 1998 INSTITUTIONAL SERVICE SHARES: Shares sold 1,132,070,683 1,201,769,345 Shares issued to shareholders in payment of distributions declared 5,751,466 5,700,471 Shares redeemed (1,139,260,737) (1,159,159,294) NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS (1,438,588) 48,310,522 NET CHANGE RESULTING FROM SHARE TRANSACTIONS 8,564,983 48,486,817
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEE Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment advisory fee equal to 0.40% of the Fund's average daily net assets. The Adviser may voluntarily choose to waive any portion of its fee. The Adviser can modify or terminate this voluntary waiver at any time at its sole discretion. ADMINISTRATIVE FEE Federated Services Company ("FServ"), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FServ is based on the level of average aggregate daily net assets of all funds advised by subsidiaries of Federated Investors, Inc. for the period. The administrative fee received during the period of the Administrative Services Agreement shall be at least $125,000 per portfolio and $30,000 per each additional class of shares. SHAREHOLDER SERVICES FEE Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily net assets of the Fund for the period. The fee paid to FSSC is used to finance certain services for shareholders and to maintain shareholder accounts. FSSC may voluntarily choose to waive any portion of its fee. FSSC can modify or terminate this voluntary waiver at any time at its sole discretion. TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES FServ, through its subsidiary, FSSC serves as transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the size, type, and number of accounts and transactions made by shareholders. PORTFOLIO ACCOUNTING FEES FServ maintains the Fund's accounting records for which it receives a fee. The fee is based on the level of the Fund's average daily net assets for the period, plus out-of-pocket expenses. INTERFUND TRANSACTIONS During the year ended October 31, 1999, the Fund engaged in purchase and sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase and sale transactions were made at current market value pursuant to Rule 17a-7 under the Act and amounted to $571,435,000 and $535,030,000, respectively. GENERAL Certain of the Officers and Trustees of the Trust are Officers and Directors or Trustees of the above companies. CONCENTRATION OF CREDIT RISK Since the Fund invests a substantial portion of its assets in issuers located in one state, it will be more susceptible to factors adversely affecting issuers of that state than would be a comparable tax-exempt mutual fund that invests nationally. In order to reduce the credit risk associated with such factors, at October 31, 1999, 28.7% of the securities in the portfolio of investments are backed by letters of credit or bond insurance of various financial institutions and financial guaranty assurance agencies. The percentage of investments insured by or supported (backed) by a letter of credit from any one institution or agency did not exceed 6.8% of total investments. YEAR 2000 (UNAUDITED) Similar to other financial organizations, the Fund could be adversely affected if the computer systems used by the Fund's service providers do not properly process and calculate date-related information and data from and after January 1, 2000. The Fund's Adviser and administrator are taking measures that they believe are reasonably designed to address the Year 2000 issue with respect to computer systems that they use and to obtain reasonable assurances that comparable steps are being taken by each of the Fund's other service providers. At this time, however, there can be no assurance that these steps will be sufficient to avoid any adverse impact to the Fund. CHANGE OF INDEPENDENT AUDITOR (UNAUDITED) On May 19, 1999, the Fund's Trustees, upon the recommendation of its Audit Committee, requested and subsequently accepted the resignation of Arthur Andersen ("AA") as the Fund's independent auditors. AA's reports on the Fund's financial statements for the fiscal years ended October 31, 1997 and October 31, 1998 contained no adverse opinion or disclaimer of opinion nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998: (i) there were no disagreements with AA on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of AA, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements for such years; and (ii) there were no reportable events of the kind described in Item 304 (a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934, as amended. The Fund, by action of its Trustees, upon the recommendation of the Audit Committee, has engaged Ernst & Young LLP ("E&Y") as the independent auditors to audit the Fund's financial statements for the fiscal year ended October 31, 1999. During the Fund's fiscal years ended October 31, 1997 and October 31, 1998, neither the Fund nor anyone on its behalf has consulted E&Y on items which (i) concerned the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, or (ii) concerned the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) of reportable events (as described in the paragraph (a)(1)(v) of said Item 304). Report of Ernst & Young LLP, Independent Auditors TO THE BOARD OF TRUSTEES OF FEDERATED MUNICIPAL TRUST AND SHAREHOLDERS OF VIRGINIA MUNICIPAL CASH TRUST: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of the Virginia Municipal Cash Trust (one of the portfolios constituting the Federated Municipal Trust) as of October 31, 1999, and the related statement of operations, the statement of changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Trusts' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended October 31, 1998 and the financial highlights for each of the periods indicated therein for the period then ended were audited by other auditors whose report, dated December 23, 1998, expressed an unqualified opinion on that statement and those financial highlights. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Virginia Municipal Cash Trust of the Federated Municipal Trust at October 31, 1999, and the results of its operations, changes in its net assets and financial highlights for the year then ended, in conformity with generally accepted accounting principles. [Graphic] Boston, Massachusetts December 16, 1999 Trustees JOHN F. DONAHUE THOMAS G. BIGLEY JOHN T. CONROY, JR. JOHN F. CUNNINGHAM LAWRENCE D. ELLIS, M.D. PETER E. MADDEN CHARLES F. MANSFIELD, JR. JOHN E. MURRAY, JR., J.D., S.J.D. MARJORIE P. SMUTS JOHN S. WALSH Officers JOHN F. DONAHUE Chairman GLEN R. JOHNSON President J. CHRISTOPHER DONAHUE Executive Vice President JOHN W. MCGONIGLE Executive Vice President and Secretary EDWARD C. GONZALES Executive Vice President RICHARD B. FISHER Vice President RICHARD J. THOMAS Treasurer LESLIE K. ROSS Assistant Secretary Mutual funds are not bank deposits or obligations, are not guaranteed by any bank, and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. This report is authorized for distribution to prospective investors only when preceded or accompanied by the fund's prospectus which contains facts concerning its objective and policies, management fees, expenses, and other information. [Graphic] Federated World-Class Investment Manager ANNUAL REPORT Virginia Municipal Cash Trust ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1999 [Graphic] Federated Virginia Municipal Cash Trust Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 1-800-341-7400 WWW.FEDERATEDINVESTORS.COM Federated Securities Corp., Distributor Cusip 314229816 Cusip 314229824 G00133-02 (12/99) [Graphic] -----END PRIVACY-ENHANCED MESSAGE-----