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, 1997 through
May 31, 1998. 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 trust pursues competitive daily income, along with
daily liquidity and stability of principal,* through a diversified portfolio of
money market securities. At the end of the period, the portfolio was diversified
among commercial paper (33.2%), repurchase agreements (30.0%), variable rate
instruments (23.1%), short-term notes (6.8%), and certificates of deposit
(6.2%).
Dividends paid to shareholders during the period totaled $0.03 per share. At the
end of the period, the trust's net assets stood at $514.2 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, 1998
* 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 not insured or 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.
Growth during the six-month reporting period continued at an above-average pace.
Specifically, fourth quarter 1997 GDP registered 3.9% while first quarter 1998
climbed up to 4.8%. Despite the high growth, though, inflation remained subdued
by all measures. The consumer price index rose just 1.0% on an annualized basis
for the six months ended May 31, 1998. For the same time period, the producer
price index actually declined 0.8%, due mostly to a decline in energy prices,
while the employment cost index grew at an annualized 3.3% pace during the last
quarter of 1997 and into the first quarter of 1998.
Thirty-day commercial paper started the period at 5.60% on December 1, 1997, and
then rose as high as 5.98% on December 29, 1997, reflecting year-end technical
pressures. Rates fell back off again in January of 1998, with 30-day commercial
paper settling in at the 5.50% federal funds target rate and ended the period at
5.55%.
The money market yield curve flattened throughout the time period. One-month
commercial paper rates declined five basis points while six-month rates declined
14 basis points reflecting the concern in the market about the Asian contagion
and its overall effect on U.S. growth.
The target average maturity range for Federated Master Trust remained in the 35-
to 45-day target range for the entire reporting period, reflecting a neutral
position regarding Federal Reserve Board policy. In structuring the trust, there
is continued emphasis placed on positioning 20-25% of the trust's assets in
variable rate demand notes and accomplishing a modest barbell structure.
During the six months ended May 31, 1998, the net assets of Federated Master
Trust increased from $494.3 to $514.2 million while the seven-day net yield
decreased from 5.28% to 5.19%.* The effective average maturity of the trust on
May 31 was 45 days.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the fund's current earnings.
PORTFOLIO OF INVESTMENTS
FEDERATED MASTER TRUST
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM NOTES--6.8%
BANKING--1.0%
$ 5,000,000 Abbey National Treasury Services, PLC, 6.050%, 6/8/1998 $ 4,999,924
BROKERAGE--2.9%
15,000,000 Goldman Sachs & Co., 5.600%, 7/27/1998 15,000,000
FINANCE - AUTOMOTIVE--0.6%
3,290,010 Ford Credit Auto Owner Trust 1997-B, Class A-1, 5.748%, 3,290,010
10/15/1998
FINANCE - COMMERCIAL--1.0%
5,000,000 Beta Finance, Inc., 5.790%, 4/8/1999 4,999,574
INSURANCE--1.3%
6,508,361 ContiMortgage Home Equity Loan Trust 1998-1, Class A-1 6,508,361
(Guaranteed by FSA), 5.647%, 3/15/1999
TOTAL SHORT-TERM NOTES 34,797,869
CERTIFICATE OF DEPOSIT--6.2%
BANKING--6.2%
15,000,000 Bankers Trust Co., New York, 5.645% - 5.910%, 10/13/1998 14,997,569
5,000,000 Canadian Imperial Bank of Commerce, Toronto, 5.950%, 4,999,430
8/27/1998
10,000,000 Morgan Guaranty Trust Co., New York, 5.900%, 8/6/1998 9,999,464
2,000,000 Societe Generale, Paris, 5.920%, 8/6/1998 1,999,827
TOTAL CERTIFICATE OF DEPOSIT 31,996,290
(A)COMMERCIAL PAPER--33.2%
BANKING--10.2%
16,000,000 Aspen Funding Corp., (Guaranteed by Deutsche Bank, AG), 15,551,621
5.580% - 5.601%, 6/4/1998 - 12/18/1998
2,000,000 Cregem North America, Inc., (Guaranteed by Credit Communal de 1,950,806
Belgique, Brussles), 5.656%, 11/9/1998
25,049,000 Gotham Funding Corp., 5.618% - 5.629%, 6/8/1998 - 6/18/1998 25,003,769
10,000,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska 9,749,900
Handelsbanken, Stockholm), 5.645%, 11/12/1998
Total 52,256,096
BROKERAGE--4.8%
5,000,000 Credit Suisse First Boston, Inc., 5.600%, 8/20/1998 4,938,667
20,000,000 Merrill Lynch & Co., Inc., 5.586%, 6/15/1998 19,957,144
Total 24,895,811
</TABLE>
FEDERATED MASTER TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMERCIAL PAPER--CONTINUED
FINANCE - COMMERCIAL--11.7%
$ 5,000,000 Beta Finance, Inc., 5.599%, 8/21/1998 $ 4,937,900
26,000,000 General Electric Capital Corp., 5.591% - 5.865%, 6/1/1998 - 25,808,834
8/28/1998
5,000,000 Greenwich Funding Corp., 5.598%, 8/27/1998 4,933,300
3,612,000 Receivables Capital Corp., 5.559%, 6/23/1998 3,599,793
21,000,000 Sheffield Receivables Corp., 5.567% - 5.595%, 6/1/1998 - 20,887,559
8/21/1998
Total 60,167,386
FINANCE - RETAIL--6.1%
21,950,000 CommoLoCo, (Guaranteed by American General Finance Corp.),
21,463,240 5.624% - 5.677%, 10/20/1998 - 10/27/1998
10,000,000 New Center Asset Trust, A1+/P1 Series, 5.575%, 7/29/1998 9,911,550
Total 31,374,790
INSURANCE--0.4%
2,000,000 CXC, Inc., 5.589%, 8/10/1998 1,978,533
TOTAL COMMERCIAL PAPER 170,672,616
LOAN PARTICIPATION--0.7%
FINANCE - EQUIPMENT--0.7%
3,474,201 Pitney Bowes Credit Corp., 5.684%, 6/10/1998 3,469,289
(B)NOTES - VARIABLE--23.1%
BANKING--8.6%
665,000 Dave White Chevrolet, Inc., Series 1996, (Huntington National 665,000
Bank, Columbus, OH LOC), 5.660%, 6/4/1998
25,000,000 (c)Liquid Asset Backed Securities Trust, Series 1996-3, 25,000,000
(Westdeutsche Landesbank Girozentrale Swap Agreement),
5.676%, 6/15/1998
16,981,705 (c)Rabobank Optional Redemption Trust, Series 1997-101, 16,981,705
5.688%, 5/30/1998
1,525,000 White Brothers Properties, Series 1996, (Huntington National 1,525,000
Bank, Columbus, OH LOC), 5.660%, 6/4/1998
Total 44,171,705
ELECTRICAL EQUIPMENT--3.0%
15,689,074 Northwest Airlines, Inc., (Guaranteed by General Electric 15,689,074
Co.), 5.642%, 6/1/1998
FINANCE - RETAIL--3.9%
20,000,000 Carco Auto Loan Master Trust 1993-2, (Series 1993-2 Class 20,000,000
A1), 5.580%, 6/15/1998
</TABLE>
FEDERATED MASTER TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)NOTES - VARIABLE--CONTINUED
INSURANCE--7.6%
$ 14,925,082 (c)Liquid Asset Backed Securities Trust, Series 1997-3 Senior $ 14,925,082
Notes, (Guaranteed by AMBAC), 5.718%, 6/27/1998
24,000,000 Peoples Security Life Insurance Company, 5.840%, 6/1/1998 24,000,000
TOTAL 38,925,082
TOTAL NOTES - VARIABLE 118,785,861
(D)REPURCHASE AGREEMENTS--30.0%
25,000,000 ABN AMRO Chicago Corp., 5.650%, dated 5/29/1998, due
6/1/1998 25,000,000 28,200,000 Bear, Stearns and Co., 5.650%, dated
5/29/1998, due 6/1/1998 28,200,000
8,000,000 Fuji Government Securities, Inc., 5.570%, dated 5/29/1998, 8,000,000
due 6/1/1998
3,200,000 Goldman Sachs Group, LP, 5.750%, dated 5/29/1998, due 3,200,000
6/1/1998
25,000,000 HSBC Securities, Inc., 5.650%, dated 5/29/1998, due 6/1/1998 25,000,000
8,000,000 PaineWebber Group, Inc., 5.570%, dated 5/29/1998, due 8,000,000
6/1/1998
25,000,000 Salomon Brothers, Inc., 5.650%, dated 5/29/1998, due 6/1/1998 25,000,000
10,100,000 Societe Generale Securities Corp., 5.570%, dated 5/29/1998, 10,100,000
due 6/1/1998
21,856,000 UBS Securities, Inc., 5.570%, dated 5/29/1998, due 6/1/1998 21,856,000
TOTAL REPURCHASE AGREEMENTS 154,356,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $ 514,077,925
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for the
discount issues, or the coupon for interest bearing issues.
(b) Floating rate note with current rate and next reset date shown.
(c) Denotes a restricted security which is subject to restrictions on resale
under federal securities laws. At May 31, 1998, these securities amounted to
$56,906,787 which represents 11.1% of net assets.
(d) 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.
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($514,184,194) at May 31, 1998.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation
FSA --Financial Security Assurance
LOC --Letter of Credit
LP --Limited Partnership
PLC --Public Limited Company
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MASTER TRUST
MAY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 154,356,000
Investments in securities 359,721,925
Total investments in securities, at amortized cost and value $ 514,077,925
Income receivable 2,962,568
Prepaid expenses 35,148
Total assets 517,075,641
LIABILITIES:
Payable to Bank 532,771
Income distribution payable 2,251,474
Accrued expenses 107,202
Total liabilities 2,891,447
Net Assets for 514,184,194 shares outstanding $ 514,184,194
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
$514,184,194 / 514,184,194 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MASTER TRUST
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 14,637,223
EXPENSES:
Investment advisory fee $ 1,021,183
Administrative personnel and services fee 192,493
Custodian fees 25,530
Transfer and dividend disbursing agent fees and expenses 39,571
Directors'/Trustees' fees 6,188
Auditing fees 8,008
Legal fees 3,822
Portfolio accounting fees 48,506
Shareholder services fee 638,239
Share registration costs 15,106
Printing and postage 6,734
Insurance premiums 6,838
Taxes 11,284
Miscellaneous 5,824
Total expenses 2,029,326
Waivers --
Waiver of investment advisory fee $ (343,513)
Waiver of shareholder services fee (510,592)
Total waivers (854,105)
Net expenses 1,175,221
Net investment income $ 13,462,002
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MASTER TRUST
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 13,462,002 $ 30,087,046
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (13,462,002) (30,087,046)
SHARE TRANSACTIONS--
Proceeds from sale of shares 1,224,260,620 2,432,924,857
Net asset value of shares issued to shareholders in payment 2,955,909 7,298,023
of distributions declared
Cost of shares redeemed (1,207,431,497) (2,572,588,103)
Change in net assets resulting from share transactions 19,785,032 (132,365,223)
Change in net assets 19,785,032 (132,365,223)
NET ASSETS:
Beginning of period 494,399,162 626,764,385
End of period $ 514,184,194 $ 494,399,162
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
FEDERATED MASTER TRUST
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
MAY 31, YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05 0.06 0.04 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.06) (0.04) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.65% 5.27% 5.18% 5.73% 3.78% 2.91%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45%* 0.45% 0.45% 0.46% 0.46% 0.46%
Net investment income 5.27%* 5.16% 5.04% 5.59% 3.72% 2.88%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $514,184 $494,399 $626,764 $729,144 $773,260 $868,828
</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)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MASTER TRUST
MAY 31, 1998 (UNAUDITED)
ORGANIZATION
Federated Master Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The investment objective of the Trust is current income consistent with
stability of principal.
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, 1998 is as
follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Liquid Asset Backed Securities Trust, 8/15/1996 $25,000,000
Series 1996-3
Liquid Asset Backed Securities Trust, 6/27/1997 14,925,082
Series 1997-3
Rabobank Optional Redemption Trust, 4/17/1997 16,981,705
Series 1997-101
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 May
31, 1998, capital paid-in aggregated $514,184,194.
Transactions in shares were as follows:
<TABLE>
Six Months
Ended Year Ended
May 31, November 30,
1998 1997
<S> <C> <C>
Shares sold 1,224,260,620 2,432,924,857
Shares issued to shareholders in payment of 2,955,909 7,298,023
distributions declared
Shares redeemed (1,207,431,497) (2,572,588,103)
Net change resulting from share transactions 19,785,032 (132,365,223)
</TABLE>
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 Trust's aggregate annual operating
expenses exceed 0.45% of average daily net assets of the Trust.
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, 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 ("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.
YEAR 2000
Similar to other financial organizations, the Trust could be adversely affected
if the computer systems used by the Trust's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Trust'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 Trust'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 Trust.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
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.
[Graphic]
Federated Master Trust
SEMI-ANNUAL REPORT TO SHAREHOLDERS MAY 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314214107
8070106 (7/98)
[Graphic]
