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, 1998 through September 30, 1998. 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 depository institutions a quality, liquid, overnight
investment. The fund is currently rated Aaa by Moody's Investor Service.* 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.
The trust's seven-day net yield on the last day of the reporting period was
5.35%.** Dividends paid to shareholders during the six-month reporting period
totaled $0.03 per share. At the end of the period, net assets totaled $500
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, 1998
An investment in the fund is neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other government agency. Although the fund
seeks to preserve the value of your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
* Money market 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 risk.
** Performance quoted represents past performance and is not indicative of
future results. Yield will vary. Yields quoted for many market funds most
closely reflect the trust's current earnings.
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/liability management
programs. The trust is rated Aaa by Moody's and its investments have been
confined to federal funds ("fed funds") sold and repurchase agreements ("repo")
during the reporting period. 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 one to seven 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.
Early in the reporting period, economic fundamentals were still the driving
factor behind movements in short-term interest rates. With economic growth still
strong-albeit slowing from its torrid 5.50% pace of growth in the first
quarter-market participants were content with the idea that the Federal Reserve
Board (the "Fed") would remain on the sidelines. The anticipated drag on the
U.S. economy resulting from the economic crises in Asia became
apparent-particularly in the manufacturing sector-over the second quarter. This
slowdown lent comfort to investors that economic growth would not be so robust
as to ignite inflationary pressures.
By the third quarter, however, a dramatic shift in market sentiment was evident.
Uncertainty in the world economies resulted in vulnerability in our domestic
equity market, and led to a substantial flight-to-quality to U.S. Treasury
securities across the yield curve. Economic trouble spread to include Russia and
Latin America, and what had been perceived to have been a fairly modest drag on
the U.S. economies as a result of the remote Asian crisis now became an
overpowering influence on the market and expectations regarding future U.S.
growth. Although economic fundamentals still remained fairly positive in this
environment, fear dominated market sentiment over this period.
Expectations regarding the direction of the next change in monetary policy did
an abrupt about-face over the reporting period. The Fed adopted a tightening
bias in March, a reflection of their underlying concern about inflationary
pressures. By August, the Fed had removed it's tightening bias as Fed officials
perceived that the risks to the economy had become more balanced. By late
August, however, market expectations that the Fed might eventually need to ease
monetary policy to help the U.S. economy along as a result of the world economic
struggles had begun to grow. This expectation intensified throughout September,
and at the September 29 Federal Open Market Committee meeting, the Fed voted to
ease monetary policy by a modest 25 basis points. The Fed followed that move
with another 25 basis point ease on October 15-an intermeeting decision that
surprised some market participants- which brought the Fed funds target rate down
to 5.00%. The Fed also voted to cut the discount rate by the same magnitude,
from 5.00% to 4.75%.
With unchanged monetary policy for virtually all of the reporting period,
movements in the trust's yield were driven largely by technical factors in the
repo and fed funds markets. During this time, repo traded closely with rates
offered on fed funds, and remained a preferred investment because of their
collateralization. As the flight-to-quality to Treasury securities, and to a
lesser extent, U.S. Government agency securities came to dominate the
marketplace in September, repo became less attractive as an investment as
traditional securities used for collateral were in demand elsewhere. This caused
repo spreads to widen-that is, to trade below fed funds. As a result, we
increased our holdings of fed funds sold within the portfolio towards the end of
the reporting period. This trend has continued into October as well.
PORTFOLIO OF INVESTMENTS
LIQUID CASH TRUST
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
(A)REPURCHASE AGREEMENTS--96.5%
$ 20,000,000 ABN AMRO Chicago Corp., 5.720%, dated 9/30/1998, due 10/1/1998 $ 20,000,000
20,000,000 Bear, Stearns and Co., 5.750%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 CIBC Wood Gundy Securities Corp., 5.550%, dated 9/30/1998, due 10/1/1998 20,000,000
2,400,000 Deutsche Bank Government Securities, Inc., 5.550%, dated 9/30/1998,
due 10/1/1998 2,400,000 20,000,000 Donaldson, Lufkin and Jenrette Securities
Corp., 5.500%, dated 9/30/1998, due 10/1/
1998 20,000,000
20,000,000 First Union Capital Markets, 5.580%, dated 9/30/1998, due 10/1/1998 20,000,000
100,000,000 Goldman Sachs Group, LP, 5.650%, dated 9/30/1998, due 10/1/1998 100,000,000
20,000,000 Greenwich Capital Markets, Inc., 5.550%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 J.P. Morgan & Co., Inc., 5.750%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Lehman Brothers, Inc., 5.780%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Merrill Lynch, Pierce, Fenner and Smith, 5.500%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 (b)Morgan Stanley Group, Inc., 5.550%, dated 8/11/1998, due 10/13/1998 20,000,000
20,000,000 Nationsbanc Montgomery Securities, Inc., 5.800%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 PaineWebber Group, Inc., 5.700%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Paribas Corp., 5.700%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Prudential Securities, Inc., 5.700%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Societe Generale Securities, 5.600%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Toronto Dominion Securities (USA) Inc., 5.600%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Toronto Dominion Securities (USA) Inc., 5.750%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Warburg Dillon Reed LLC, 5.550%, dated 9/30/1998, due 10/1/1998 20,000,000
20,000,000 Westdeutsche Landesbank Girozentrale, 5.580%, dated 9/30/1998, due 10/1/1998 20,000,000
TOTAL REPURCHASE AGREEMENTS 482,400,000
FEDERAL FUNDS SOLD--4.0%
20,000,000 Norwest Bank Minnesota, N.A. 5.75%, dated 9/30/98, due 10/1/1998 20,000,000
TOTAL FEDERAL FUNDS SOLD 20,000,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $502,400,000
</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) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase agreement
within seven days.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($499,787,490) at September 30, 1998.
The following acronyms are used throughout this portfolio:
LLC--Limited Liability Corporation
LP --Limited Partnership
(See Notes which are an integral part of the Financial Statements) STATEMENT OF
ASSETS AND LIABILITIES
LIQUID CASH TRUST
SEPTEMBER 30, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements, at amortized cost and value $482,400,000
Investment in security, at amortized cost 20,000,000
Total Investments in securities, at amortized cost and value $502,400,000
Cash 48,552
Income receivable 232,992
Total assets 502,681,544
LIABILITIES:
Income distribution payable 2,869,426 Accrued expenses 24,628 Total liabilities
2,894,054 NET ASSETS for 499,787,490 shares outstanding $499,787,490 NET ASSET
VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE: $499,787,490 /
499,787,490 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, 1998 (UNAUDITED) <TABLE> <CAPTION> <S> <C> <C>
INVESTMENT INCOME: Interest $16,063,720 EXPENSES: Investment advisory fee $
1,135,885 Administrative personnel and services fee 214,114 Custodian fees 1,305
Transfer and dividend disbursing agent fees and expenses 19,630
Directors'/Trustees' fees 6,997 Auditing fees 6,664 Legal fees 2,548 Portfolio
accounting fees 71,766 Share registration costs 6,696 Printing and postage 1,642
Insurance premiums 326 Taxes 320 Total expenses 1,467,893 Waiver of investment
advisory fee (1,031,526) Net expenses 436,367 Net investment income $15,627,353
</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
SEPTEMBER 30,
1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 15,627,353 $ 24,153,901
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (15,627,353) (24,153,901)
SHARE TRANSACTIONS--
Proceeds from sale of shares 2,655,658,611 4,455,297,994
Net asset value of shares issued to shareholders
in payment of distributions declared 9,690,530 17,495,927
Cost of shares redeemed (2,674,356,723) (4,453,362,197)
Change in net assets resulting from share transactions (9,007,582) 19,431,724
Change in net assets (9,007,582) 19,431,724
NET ASSETS:
Beginning of period 508,795,072 489,363,348
End of period $ 499,787,490 $ 508,795,072
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
LIQUID CASH TRUST
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30,
1998 YEAR ENDED MARCH 31,
(UNAUDITED) 1998 1997 1996 1995 1994
<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 0.06 0.05 0.06 0.05 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.03 ) (0.06) (0.05) (0.06) (0.05) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.77 % 5.59% 5.35% 5.84% 4.88% 3.09%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.15%* 0.15% 0.15% 0.16% 0.16% 0.16%
Net investment income 5.50%* 5.48% 5.27% 5.72% 4.64% 3.05%
Expense waiver/reimbursement(b) 0.36%* 0.37% 0.39% 0.38% 0.39% 0.39%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $499,787 $508,795 $489,363 $595,471 $313,679 $464,941
</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, 1998 (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's use of the amortized cost method to value its portfolio securities
is 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, 1998, capital paid-in aggregated $499,787,490. Transactions in
shares were as follows: <TABLE>
SIX MONTHS
ENDED
SEPTEMBER 30,
1998 YEAR ENDED
(UNAUDITED) MARCH 31, 1998
<S> <C> <C>
Shares sold 2,655,658,611 4,455,297,994
Shares issued to shareholders in payment of distributions declared 9,690,530 17,495,927
Shares redeemed (2,674,356,723) (4,453,362,197)
Net change resulting from share transactions (9,007,582) 19,431,724
</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, 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. For the period
ended September 30, 1998, the Trust shares 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.
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 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
Nicholas J. Seitanakis
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.
Liquid Cash Trust
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
SEPTEMBER 30, 1998
[GRAPHIC]
Federated Securities Corp., Distrbiutor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 536319106
8110112 (11/98)
