PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Liquid Cash
Trust. The report covers the first half of the trust's fiscal year, which is the
six-month period from April 1, 1997 through September 30, 1997. It begins with
the portfolio manager's investment review of the economy and its impact on the
overnight markets. Following the investment review are the trust's portfolio
holdings and the financial statements.
Liquid Cash Trust offers a quality, convenient approach to overnight investing
for most depository institutions. At the close of the reporting period, the
portfolio was invested exclusively in repurchase agreements fully collateralized
by U.S. government and/or agency obligations.*
Dividends paid to shareholders during the six-month reporting period totaled
$0.03 per share. At the end of the reporting period, net assets totaled
approximately $376 million.
Thank you for selecting this quality fund for your overnight investment needs.
As always, we welcome your questions or comments.
Sincerely,
[Graphic]
Glen R. Johnson
President
November 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 trust is not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
Liquid Cash Trust is a short-term money market fund which pursues stability of
principal and current income, and is utilized by depository institutions as an
overnight liquid investment alternative for overall asset management programs.
The trust is rated Aaa by Moody's Investors Service* and its investments are
restricted to federal funds sold ("fed funds") and repurchase agreements
("repo"). The trust's Aaa rating limits its fed funds and repo counterparties to
only the highest credit rated dealer firms and banks, and requires proper
diversification daily.
The trust is managed to have a very short average maturity of 1 to 7 days, and
invests primarily in repo and fed funds on an overnight basis. The trust may
also invest in term repo maturing in up to three months. Although the spread
between repo backed by government agency-sponsored mortgage-backed securities
and fed funds remains quite narrow, this repo continued to be the preferred
investment relative to fed funds in most cases over the period due to its
collateralized nature.
After raising the fed funds target rate by 25 basis points to 5.5% in late
March, the Federal Reserve Board (the "Fed") kept monetary policy unchanged over
the entire semi-annual reporting period. The economy remained robust over the
reporting period, posting a rate of growth of 3.6% for the second quarter of
1997 and continued at this above-trend pace in the third. At the same time,
however, inflationary pressures remained quite benign over the reporting period
in spite of the impressive performance of the economy and what was generally
thought to be tight labor market conditions. Short-term interest rates rose in
anticipation of the tightening by the Fed in late March, and remained relatively
high as market participants sought to ascertain whether another move was soon to
follow. As inflationary pressures remained mild, however, fears of a near-term
tightening by the Fed gradually receded, and all but vanished by late June and
remained that way through the end of the reporting period. With one preemptive
tightening under their belt, Fed officials now appear to be debating, both
publicly and privately, whether or not the conditions at hand--strong growth yet
little to no price inflation--would indicate that the non-inflationary potential
of the economy is actually greater than previously thought. Growth of 2.00% to
2.50% has generally been embraced as this non-inflationary potential. As the Fed
continues to analyze the situation, they are likely to stand pat in the near
term.
As the Fed remained on hold during this reporting period, the trust's yield was
driven more by technical conditions in the fed funds and repo markets. The trust
continued to maximize performance through ongoing relative value analysis, as we
evaluated the spread relationship between the fed funds and repo markets for the
more attractive investment. The trust's management will continue to seek to
provide the highest possible rate in an overnight investment vehicle for
depository institutions consistent with high credit quality and investment
convenience.
* Money market funds and bond funds rated Aaa by Moody's are judged to be of an
investment quality similar to Aaa-rated fixed income obligations, that is, they
are judged to be of the best quality. Ratings are subject to change, and do not
remove market risks.
PORTFOLIO OF INVESTMENTS
LIQUID CASH TRUST
SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)REPURCHASE AGREEMENTS--100.6%
$ 15,000,000 Aubrey G. Lanston and Company, Inc., 6.05%, dated 9/30/1997, due 10/1/1997 $ 15,000,000
15,000,000 Bank of Tokyo-Mitsubishi Ltd., 6.07%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Barclays de Zoete Wedd Securities, Inc., 6.07%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Bear, Stearns and Co., 6.30%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 CIBC Wood Gundy Securities Corp., 6.05%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 6.05%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 First Chicago Capital Markets, Inc., 6.05%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 First Union Capital Markets, 6.05%, dated 9/30/1997, due 10/1/1997 15,000,000
80,000,000 Fuji Government Securities, Inc., 6.30%, dated 9/30/1997, due 10/1/1997 80,000,000
15,000,000 Goldman Sachs Group, LP, 6.375%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Greenwich Capital Markets, Inc., 6.375%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 HSBC Securities, Inc., 6.375%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Lehman Brothers, Inc., 6.25%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Morgan Stanley Group, Inc., 6.375%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 PaineWebber Group, Inc., 6.25%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Sanwa-BGK Securities Co., LP, 6.05%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Smith Barney, Inc., 6.375%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 Societe Generale Securities Corp., 6.10%, dated 9/30/1997, due 10/1/1997 15,000,000
14,000,000 Swiss Bank Capital Markets, 6.07%, dated 9/30/1997, due 10/1/1997 14,000,000
15,000,000 Toronto Dominion Securities (USA) Inc., 6.375%, dated 9/30/1997, due 10/1/1997 15,000,000
15,000,000 UBS Securities, Inc., 6.05%, dated 9/30/1997, due 10/1/1997 15,000,000
TOTAL REPURCHASE AGREEMENTS 379,000,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $ 379,000,000
</TABLE>
(a) 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.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($376,685,636) at September 30, 1997.
The following acronym is used throughout this portfolio:
LP --Limited Partnership
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
LIQUID CASH TRUST
SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements, at amortized cost and value $ 379,000,000
Income receivable 65,377
Total assets 379,065,377
LIABILITIES:
Income distribution payable $ 1,745,360
Payable to Bank 607,150
Accrued expenses 27,231
Total liabilities 2,379,741
NET ASSETS for 376,685,636 shares outstanding $ 376,685,636
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$376,685,636 / 376,685,636 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
LIQUID CASH TRUST
SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 12,081,682
EXPENSES:
Investment advisory fee $ 864,175
Administrative personnel and services fee 163,113
Custodian fees 16,780
Transfer and dividend disbursing agent fees and expenses 12,596
Directors'/Trustees' fees 9,064
Auditing fees 6,588
Legal fees 4,026
Portfolio accounting fees 46,623
Share registration costs 10,596
Printing and postage 5,575
Insurance premiums 3,293
Taxes 733
Miscellaneous 5,879
Total expenses 1,149,041
Waiver of investment advisory fee (814,647)
Net expenses 334,394
Net investment income $ 11,747,288
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
LIQUID CASH TRUST
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
SEPTEMBER 30, YEAR ENDED
1997 MARCH 31, 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 11,747,288 $ 25,871,252
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (11,747,288) (25,871,252)
SHARE TRANSACTIONS--
Proceeds from sale of shares 2,101,694,761 5,971,788,908
Net asset value of shares issued to shareholders in payment of 7,419,079 17,450,892
distributions declared
Cost of shares redeemed (2,221,791,552) (6,095,347,685)
Change in net assets resulting from share transactions (112,677,712) (106,107,885)
Change in net assets (112,677,712) (106,107,885)
NET ASSETS:
Beginning of period 489,363,348 595,471,233
End of period $ 376,685,636 $ 489,363,348
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
SEPTEMBER 30, YEAR ENDED MARCH 31,
1997 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 0.06 0.05 0.03 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.06) (0.05) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.75% 5.35% 5.84% 4.88% 3.09% 3.35%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.15%* 0.15% 0.16% 0.16% 0.16% 0.15%
Net investment income 5.44%* 5.27% 5.72% 4.64% 3.05% 3.33%
Expense waiver/reimbursement (b) 0.38%* 0.39% 0.38% 0.39% 0.39% 0.35%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $376,686 $489,363 $595,471 $313,679 $464,941 $611,124
</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.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
LIQUID CASH TRUST
SEPTEMBER 30, 1997 (UNAUDITED)
ORGANIZATION
Liquid 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 investment objective of the Trust is stability of principal and 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.
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
September 30, 1997, capital paid-in aggregated $376,685,636.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1997 MARCH 31,1997
<S> <C> <C>
Shares sold 2,101,694,761 5,971,788,908
Shares issued to shareholders in payment of distributions declared 7,419,079 17,450,892
Shares redeemed (2,221,791,552) (6,095,347,685)
Net change resulting from share transactions (112,677,712) (106,107,885)
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Research Corp., 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 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 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. For the period
ended September 30, 1997, the Trust did not incur a shareholder services fee.
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
J. Crilley Kelly
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. 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]
LIQUID CASH TRUST
SEMI-ANNUAL REPORT TO SHAREHOLDERS
SEPTEMBER 30, 1997
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 536319106
8110112 (11/97)
[Graphic]
