UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION
 

WASHINGTON. D.C. 20549
 

,VISION OF
 

INVESTMENT MANAGEMENT 

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Mr. Stephen A. Keen ;10": -;~ "


Coiporate Counsel :,::;ii.tt:", 11 Hy 7-/ J -yS.., ..",,,.,,.::_.:,: :..,.". ,~ 

Federated Reseach Coip. .'.,::,~,l~t,1f~-~"-~-~-- ., 7~..~,.."~:l"'"!Ot..;;":-,I"""':'/"~ 

Federated Investrs Tower 

Pittsburgh, PA 15222-3779 

Re: Calorna Municipal Cash Trust 

Dear Mr. Keen:
 

Your letter of July 7, 1995 requests our assurance that we would not recommend that 

the Commission tae any enforcement action under section 17(a) of the Investment Company 

Act of 1940 ("1940 Act") and the rules thereunder if Caliorna Municipal Cash Trust
 

("Fund"), and its investment adviser, Federated Management ("Federated") effect the


transaction summaried below and more fully described in the letter. 

The Fund is a money market fund that seeks to maintain a stable net asset value per 

share of $1.00, and uses the amortized cost method of valuation as permitted by rule 2a-7 

under the 1940 Act. The Fund holds tax and revenue anticipation notes issued by Orage 

County, Californa in the pricipal amount of $4 milon (approxiately 4.2 % of net assets) 

that mature on August 10, 1995 ("Securities"). The Securities pay interest at a rate equal to

70 % of one-month LIBOR. As a result of the Orage County bankptcy filg on 

December 6, 1994, the Fund was unable to obtain reliable market quotes for these 

Securities, and it determined the fai values of the Securities to be less than their amortized 

cost values.
 

In December 1994, PNC Bank, N.A., upon application of Federated Investors (the 

parent of Federated), issued an irevocable standby letter of credit ("LOC") on behalf of the 

Fund in the amount of $4 milon to guarntee the payment of pricipal when due on the
 

Securities. Under terms authoried by the Fund's board of trustees, the Fund could draw on 

the LOC upon certifcation that it has not received full payment of pricipal on the 

Securities on their final maturity date (August 10, 1995). The LOC, by its terms, expires 

on August 31, 1995. The Fund continues to hold the Securities, and values them based on 

the LOC. 

The Fund has been inormed that Orage County, in al lieliood, wil not make the
 

scheduled pricipal payment due on the Securities on August 10, 1995. Rather, Orage

County has proposed, the Banptcy Court has approved, and holders of cert short-term 

notes issued by Orange County have agree to, a mandatory amendment, substitution or 

extension of the Securities ("Amendment") that wil, among other thigs, extend the 

maturity date of the Securities to June 30, 1996 and contain cert other terms ("Amended 

Securities"). The interest rate on the Amended Securities wil be equal to 70% of onemonth LIOR, plus 0.95 %. A portion of the interest on the Amended Securities wil be 

payable monthly, and a portion of the interest wil be accrued and paid to the Fund at a later 
Mr. Stephen A. Keen 

Page 2
 

date. You state in your letter of July 7 that Orage County wil not make any 

representations or warties as to the ta-exempt status of interest payable on the Amended
 

Securities. 

As a result of these developments, you state that Federated has offered to purchase 

the Securities from the Fund (together with all clais or causes of action that the Fund may 

have in respect of the Securities) at their amortized cost values (the pricipal amounts of the 

Securities plus accrued interest) to protect the Fund agaist the risk that interest and other 

payments on the Amended Securities may become subject to federal and Calorna income 

taxes as a result of the Amendment ("Purchase Offer"). 

"A 

You represent that the executive committee of the board of trustees of the Fund 

unaniously determined that it is in the best interests of the Fund to accept the Purchase 

Offer. Ths determination was based, in par, on an evaluation of the advantages and
 

disadvantages associated with holding the Amended Securities. 

On the basis of the facts and representations in your letter, we wil not recommend 

enforcement action under section l7(a) of the 1940 Act and the rules thereunder if the 

Purchase Offer is effected. You should note that any different facts or representations might 

require a different conclusion. Moreover, this response expresses the Division's position on 

enforcement action only and does not express any legal conclusions on the issues presented. 

Sincerely, /l 2 JL

Robert E. Plaze
 

Assistant Director 
1i'il~ 

FÈDERATED ~ RESEARCH CORP
 

FEDERATED INVESTORS TOWER 

PITTSBURGH. P A 15222-3779 

412-288.1900 

July 7, 1995 

". 

Mr. Robert E. Plaze 

Assistant Director 

Office of Disclosure and Investment 

Adviser Regulation 

Division of Investment Management 

U.S. Securities and Exchange Commission 

450 Fifth Street, N.W. 

Mail Stop 10-6
 

Washington, D.C. 20549
 

Re: California Municipal Cash Trust 

Dear Mr. Plaze: 

We are writing on behalf of Federated Management ("Federated"), the 

investment adviser to California Municipal Cash Trust (the "Fund"). We seek 

assurance from the staff of the Division of Investment Management ("Division") that it 

wil not recommend enforcement action to the Commission under Section 17(a) of the 

Investment Company Act of 1940 ("1940 Act"), or the rules thereunder, if the Fund and 

Federated enter into the transaction described below. 

The Fund is a portfolio of Federated Municipal Trust ("Trust"), which is registered with the Commission under the 1940 Act as an open-end management investment 

company. The Fund, a money market fund, seeks to maintain a stable net asset value 

per share of $1.00, and uses the amortized cost method of valuation in valuing its portfolio securities. The Fund's investment objective is to provide current income which is 

exempt from federal income tax and California personal income taxes. As of July 6, 

1995, approximately 4.2% of the Fund's net assets consisted of certain debt securities 

("Securities") fully described below. The current market value of the Securities is less

than their amortized cost value (i.e., par value plus accrued interest). The Securities are 

Orange County, California 1994-95 Tax and Revenue Anticipation Notes Series B, 

CUSIP No. 684201EN2, due August 10, 1995, in the principal amount of $4 milion. The 

principal amount of the Securities is secured by an irrevocable letter of credit from PNC 

Bank, N.A. 

A wholly owned subsidiary of FEDEAATED INVSTORS 
Mr. Robert E. Plaze 

Securities and Exchange Commission 

July 7, 1995 

Page 2
 

In an Offering Circular dated June 27, 1995, Orange County made an offer to 

extend the maturity of its short-term debt obligations (including the Securities) to 

June 30, 1996. In consideration of this extension, Orange County has offered various

concessions, includig the continued accrual of interest on the Securities augmented by 

an additional payment equal to 0.95% of the principal amount of the Securities. 

However, Orange County wil make no representations or warranties (or provide any 

legal opinons) as to the tax-exempt status of such interest or payment. 

On July 7, 1995, Federated offered to purchase the Securities from the Fund 

(together wi'th all claims or causes of action that the Fund may have in respect of the

Securities) at their amortized cost value (the principal amounts of the securities plus 

accrued interest) to protect the Fund against the risk that interest and other payments 

on the Securities may become subject to federal and California income taxes as a result 

of the extension of their maturity. The Executive Committee of the Board of Trustees of 

the Fund met on July 7, 1995 and consider the advantages and disadvantages of 

continuing to hold the Securities, as well as Federated's offer, and unanimously 

determied to accept the offer. 

Federated is an "affiiated person" of the Fund under Section 2(a)(3) of the 1940
 

Act because it is the Fund's investment adviser. The proposed transaction falls within 

Section 17(a)(2) of the 1940 Act, which makes it unlawful for any affilated person of a 

registered investment company acting as principal to knowingly purchase any security 

or other property from the investment company. 

The Fund and Federated believe that it would be in the best interests of the 

Fund's shareholders if Federated purchases the Securities from the Fund at their amortized cost value. On behalf of the Fund and Federated, we hereby request that the 

Division staff give its assurance that it wil not recommend that the Commission take 

enforcement action against the Fund or Federated under Section 17(a) if Federated purchases the Securities from the Fund as described above. 

If you have any questions or other communications concerning this matter, 

please call the undersigned at (412) 288-7496. Our telecopier number is (412) 288-8141. 

Very ~ruly yours,

Æ-~ 

Stephen Keen 

Corporate Counsel 

cc: J. Christopher Donahue
 

Wiliam D. Dawson
 

John W. McGonigle