PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Federated
Master Trust, which covers the six-month period from December 1, 1996, through
May 31, 1997. The report contains commentary by the portfolio manager, followed
by a complete list of the trust's investments on the last day of the reporting
period, and the financial statements.
This money market mutual fund pursues competitive daily income -- along with
daily liquidity and stability of principal* -- through a diversified portfolio
primarily composed of commercial paper, variable rate instruments, repurchase
agreements, and certificates of deposit.
Dividends paid to shareholders during the reporting period totaled $0.03 per
share. At the end of the reporting period, the trust's net assets stood at $591
million.
Thank you for selecting Federated Master Trust as a daily cash investment. As
always, we welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
July 15, 1997
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no assurance that they will be able to do so. An investment
in the fund is neither insured nor guaranteed by the U.S. government.
INVESTMENT REVIEW
Federated Master Trust invests in money market instruments maturing in twelve
months or less. The average maturity of these securities, computed on a dollar
weighted basis, is restricted to 90 days or less. Portfolio securities must be
rated in the highest short-term rating category by one or more of the nationally
recognized statistical rating organizations or be of comparable quality to
securities having such ratings. Typical security types include, but are not
limited to, commercial paper, certificates of deposit, time deposits, variable
rate instruments and repurchase agreements.
From December 1996, through the first quarter of 1997, nearly all economic
statistics confirmed that economic growth continued. Private sector job gains
along with some acceleration in wage gains supported both hefty retail sales and
an uptick in the saving rate. Consumer confidence continued upward to 127.1%
while the manufacturing sector held its own as evidenced by the capacity
utilization rate of 82.7%. In the months of April and May, however, consumers
seemed to have briefly stepped to the sidelines despite the unemployment rate
reaching a 20-year low of 4.8%.
Although economic growth kept pace, inflation remained benign. Overall the
consumer price index rose just 1.6% during the reporting period while the
producer price index actually declined 2.2% on an annualized basis. Energy
prices actually declined during the reporting period, while news on the wage
inflation front was also positive. The employment cost index during the first
quarter rose just 0.8%.
Thirty-day commercial paper traded at 5.37% on December 1, 1996, then rose as
high as 5.63% during December due to year-end pressures, and declined back to
the 5.30% area until the Federal Reserve Board (the "Fed") raised rates on March
25, 1997. Since that time, 30-day commercial paper has been trading in a 5.55% -
5.60% range.
The Fed raised the federal funds target rate on March 25, 1997, from 5.25% to
5.50% in order to prevent a rise in inflation. The increase was largely
anticipated and had been reflected prior to the actual increase.
The target average maturity range for the trust remained in the 35-45 day target
range for the entire reporting period, reflecting a neutral position regarding
Fed policy. In structuring the trust, there was continued emphasis placed on
positioning 30-35% of the trust's assets in variable rate demand notes and
accomplishing a modest barbell structure.
During the six months ended May 31, 1997, the net assets of the trust decreased
from $626.8 to $591.2 million while the seven-day net yield increased from 5.04%
to 5.20%.* The effective average maturity of the trust on May 31, 1997, was 62
days.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary.
FEDERATED MASTER TRUST
PORTFOLIO OF INVESTMENTS
MAY 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
ASSET-BACKED SECURITIES -- 5.0%
FINANCE - AUTOMOTIVE -- 4.1%
$ 4,073,708 Chase Manhattan Auto Owner Trust 1997-A, 5.545%, 4/10/1998 $
4,073,708
20,000,000 WFS Financial Owner Trust 1997-A, 5.630%, 3/20/1998
20,000,000
Total
24,073,708
FINANCE - EQUIPMENT -- 0.9%
5,458,107 Capita Equipment Receivables Trust 1996-1, 5.587%, 10/15/1997
5,458,107
TOTAL ASSET-BACKED SECURITIES
29,531,815
CERTIFICATE OF DEPOSIT -- 9.5%
BANKING -- 9.5%
32,000,000 Bayerische Vereinsbank AG, Munich, 5.530%, 7/10/1997
32,000,337
5,000,000 Republic National Bank of New York, 6.100%, 1/15/1998
5,001,231
19,000,000 Societe Generale, Paris, 6.125% - 6.150%, 5/12/1998 - 5/29/1998
18,999,272
TOTAL CERTIFICATE OF DEPOSIT
56,000,840
COMMERCIAL PAPER -- 41.2%
BANKING -- 14.7%
13,000,000 Abbey National N.A. Corp., (Guaranteed by Abbey National Bank PLC,
London), 5.413% - 5.446%, 8/12/1997 - 8/21/1997
12,858,428
15,000,000 Bank of Nova Scotia, Toronto, 5.709%, 8/26/1997
14,798,258
25,000,000 Canadian Imperial Holdings, Inc., (Guaranteed by Canadian Imperial
Bank of Commerce, Toronto), 5.435% - 5.655%, 7/14/1997 - 8/27/1997
24,741,349
18,000,000 Royal Bank of Canada, Montreal, 5.518%, 7/23/1997
17,860,380
11,000,000 Societe Generale North America, Inc., (Guaranteed by Societe
Generale, Paris), 5.494% - 6.150%, 6/16/1997 - 7/14/1997
10,954,260
6,000,000 Toronto Dominion Holdings (USA), Inc., (Guaranteed by Toronto-
Dominion Bank), 5.816%, 10/6/1997
5,880,408
Total
87,093,083
</TABLE>
FEDERATED MASTER TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMERCIAL PAPER -- CONTINUED
BROKERAGE -- 2.5%
$15,000,000 Merrill Lynch & Co., Inc., 5.591%, 7/7/1997 $
14,916,750
FINANCE - COMMERCIAL -- 14.7%
27,500,000 Asset Securitization Cooperative Corp., 5.502% - 5.721%,
6/24/1997 - 9/5/1997
27,347,445
21,000,000 Beta Finance, Inc., 5.413% - 5.727%, 8/7/1997 - 9/15/1997
20,739,414
17,240,000 Falcon Asset Securitization Corp., 5.413% - 5.426%, 6/12/1997 -
17,090,274
8/19/1997
17,000,000 General Electric Capital Corp., 5.804% - 5.846%, 9/22/1997 -
16,678,912
11/24/1997
5,000,000 PREFCO-Preferred Receivables Funding Co., 5.428%, 6/10/1997
4,993,313
Total
86,849,358
FINANCE - RETAIL -- 3.4%
10,000,000 Associates Corp. of North America, 5.628%, 6/2/1997
9,998,438
10,000,000 New Center Asset Trust, A1+/P1 Series, 5.465%, 8/4/1997
9,905,422
Total
19,903,860
INSURANCE -- 3.4%
20,000,000 American General Corp., 5.683%, 6/2/1997
19,996,844
OIL & OIL FINANCE -- 2.5% 15,000,000 Koch Industries, Inc.,
5.613%, 6/2/1997
14,997,663
TOTAL COMMERCIAL PAPER
243,757,558
CORPORATE NOTES -- 3.7%
BROKERAGE -- 2.5%
15,000,000 Goldman Sachs Group, LP, 5.850%, 7/28/1997
15,000,000
FINANCE - COMMERCIAL -- 1.2%
7,000,000 Beta Finance, Inc., 6.270%, 4/16/1998
7,000,000
TOTAL CORPORATE NOTES
22,000,000
</TABLE>
FEDERATED MASTER TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)NOTES - VARIABLE -- 26.2%
BANKING -- 13.2%
$ 15,000,000 Bank One, Columbus, N.A., 5.610%, 6/3/1997 $
14,998,816
6,000,000 Bank One, Milwaukee, WI N.A., 5.600%, 6/3/1997
5,998,449
1,405,000 Continental Commercial Properties, (Huntington National Bank,
Columbus, OH LOC), 5.750%, 6/5/1997
1,405,000
685,000 Dave White Chevrolet, Inc., Series 1996, (Huntington National Bank,
Columbus, OH LOC), 5.750%, 6/5/1997
685,000
25,000,000 Liquid Asset Backed Securities Trust, Series 1996-3, (Westdeutsche
Landesbank Girozentrale Swap Agreement), 5.708%, 6/16/1997
25,000,000
24,816,312 Rabobank Optional Redemption Trust, Series 1997-101, 5.852%,
6/16/1997
24,816,312
3,500,000 SMM Trust, Series 1996-L, (Morgan Guaranty Trust Co., New York Swap
Agreement), 5.738%, 6/16/1997
3,500,000
1,565,000 White Brothers Properties, Series 1996, (Huntington National Bank,
Columbus, OH LOC), 5.750%, 6/5/1997
1,565,000
Total
77,968,577
ELECTRICAL EQUIPMENT -- 4.3%
25,750,498 Northwest Airlines, Inc., (Guaranteed by General Electric Co.),
5.734%,
6/9/1997
25,750,498
FINANCE - RETAIL -- 4.6%
27,000,000 Carco Auto Loan Master Trust 1993-2, (Series 1993-2 Class A1),
5.705%,
6/16/1997
27,000,000
INSURANCE -- 4.1%
24,000,000 (b)Peoples Security Life Insurance, 5.990%, 6/1/1997
24,000,000
TOTAL NOTES - VARIABLE
154,719,075
</TABLE>
FEDERATED MASTER TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS -- 14.4%
$ 15,400,000 Bear, Stearns and Co., 5.55%, dated 5/30/1997, due 6/2/1997 $
15,400,000
20,000,000 Chase Government Securities, Inc., 5.600%, dated 5/30/1997,
due 6/2/1997
20,000,000
10,000,000 Fuji Government Securities, Inc., 5.57%, dated 5/30/1997, due
10,000,000
6/2/1997
10,000,000 PaineWebber Group, Inc., 5.57%, dated 5/30/1997, due 6/2/1997
10,000,000
20,000,000 Prudential Securities, Inc., 5.59%, dated 5/30/1997, due 6/2/1997
20,000,000
10,000,000 Swiss Bank Capital Markets, 5.53%, dated 5/30/1997, due 6/2/1997
10,000,000
TOTAL REPURCHASE AGREEMENTS
85,400,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(D) $
591,409,288
</TABLE>
(a) Current rate and next reset date shown.
(b) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At May 31, 1997, these securities amounted to
$24,000,000 which represents 4% of net assets.
(c) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($591,233,407) at May 31, 1997.
The following acronyms are used throughout this portfolio:
LOC -- Letter of Credit
LP -- Limited Partnership
PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 85,400,000
Investments in securities 506,009,288
Total investments in securities, at amortized cost and value $
591,409,288
Cash
192,527
Income receivable
2,206,889
Receivable for shares sold
3,713
Total assets
593,812,417
LIABILITIES:
Income distribution payable 2,502,121
Accrued expenses 76,889
Total liabilities
2,579,010
NET ASSETS for 591,233,407 shares outstanding $
591,233,407
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$591,233,407 / 591,233,407 shares outstanding
$1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $
17,351,123
EXPENSES:
Investment advisory fee $ 1,252,567
Administrative personnel and services fee 236,422
Custodian fees 55,372
Transfer and dividend disbursing agent fees and expenses 20,472
Directors'/Trustees' fees 11,266
Auditing fees 8,008
Legal fees 3,360
Portfolio accounting fees 51,842
Shareholder services fee 782,854
Share registration costs 11,284
Printing and postage 8,375
Insurance premiums 3,914
Taxes 15,202
Miscellaneous 2,630
Total expenses 2,463,568
Waivers --
Waiver of investment advisory fee $ (401,660)
Waiver of shareholder services fee (626,283)
Total waivers (1,027,943)
Net expenses
1,435,625
Net investment income $
15,915,498
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) NOVEMBER 30,
MAY 31, 1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 15,915,498 $ 35,339,237
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (15,915,498) (35,339,237)
SHARE TRANSACTIONS --
Proceeds from sale of shares 1,282,306,986 2,907,437,242
Net asset value of shares issued to shareholders
in payment of distributions declared 3,288,127 8,736,617
Cost of shares redeemed (1,321,126,091) (3,018,553,749)
Change in net assets resulting from share
transactions (35,530,978) (102,379,890)
Change in net assets (35,530,978) (102,379,890)
NET ASSETS:
Beginning of period 626,764,385 729,144,275
End of period $ 591,233,407 $ 626,764,385
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED NOVEMBER 30,
MAY 31,1997 1996 1995 1994 1993 1992 1991
1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00 $1.00
INCOME FROM
INVESTMENT
OPERATIONS
Net
investment
income 0.03 0.05 0.06 0.04 0.03 0.04 0.06
0.08 0.09 0.07
LESS DISTRIBUTIONS
Distributions
from net
investment
income (0.03) (0.05) (0.06) (0.04) (0.03) (0.04) (0.06)
(0.08) (0.09) (0.07)
NET ASSET
VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.55% 5.18% 5.73% 3.78% 2.91% 3.76% 6.22%
8.16% 9.21% 7.33%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.46%* 0.45% 0.46% 0.46% 0.46% 0.46% 0.46%
0.45% 0.45% 0.45%
Net
investment
income 5.08%* 5.04% 5.59% 3.72% 2.88% 3.73% 6.13%
7.87% 8.83% 7.03%
SUPPLEMENTAL DATA
Net assets,
end of
period (000
omitted) $591,233 $626,764 $729,144 $773,260 $868,828 $1,058,671 $1,302,565 $1,495,299
$2,109,661 $2,391,625
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
FEDERATED MASTER TRUST
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997 (UNAUDITED)
1. ORGANIZATION
Federated Master Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), open-end management investment company. The
investment objective of the Trust is current income consistent with stability of
principal.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- The Trust uses the amortized cost method to value its
portfolio securities in accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS -- It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System, or to have segregated within the custodian bank's
vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Trust to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Trust's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Trust could receive less
than the repurchase price on the sale of collateral securities.
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 Trust'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 Trust may engage in
when-issued or delayed delivery transactions. The Trust 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 Trustees. The Trust 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.
Additional information on each restricted security held at May 31, 1997 is as
follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Peoples Security Life Insurance,
5.990%, 6/1/1997 5/25/1989 - 1/6/1994 24,000,000
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). At May
31, 1997, capital paid-in aggregated $591,233,407.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED NOVEMBER 30,
MAY 31, 1997 1996
<S> <C> <C>
Shares sold 1,282,306,986 2,907,437,242
Shares issued to shareholders in payment of distributions declared 3,288,127 8,736,617
Shares redeemed (1,321,126,091) (3,018,553,749)
Net change resulting from share transactions (35,530,978) (102,379,890)
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Research, the Trust's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.40% of the Trust's average daily net assets. The Adviser will waive,
to the extent of its advisory fee, the amount, if any, by which the aggregate
normal operating expenses of the Trust, including the gross investment advisory
fee but excluding interest, taxes, brokerage commissions, expenses of
registering and qualifying the Trust and its shares under Federal and state
laws, expenses of withholding taxes, and extraordinary expenses for such fiscal
year or portion thereof exceed 0.45% of the average daily net assets of the
Trust for such period. This does not include reimbursement of the Trust of any
expenses incurred by shareholders who use the transfer agent's subaccounting
facilities.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Trust 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 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 ("FSS"), the Trust will pay FSS up to 0.25%
of average daily net assets of the Trust for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS 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, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Trust. 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 Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL -- Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
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, Treasurer, and Secretary
Richard B. Fisher
Vice President
Anthony R. Bosch
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 risk, including possible
loss of principal. Although money market funds seek to maintain a stable net
asset value of $1.00 per share, there is no assurance that they will be able to
do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the trust's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
FEDERATED MASTER TRUST
SEMI-ANNUAL REPORT TO SHAREHOLDERS
MAY 31, 1997
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Cusip 314214107
8070106 (7/97)
[Graphic]
