PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for
Government Cash Series, a portfolio of Cash Trust Series, Inc., which
covers the twelve-month period from June 1, 1996, through May 31,
1997. The report begins with a commentary by the fund's portfolio
manager, followed by a complete listing of the fund's investments on
the last day of the reporting period, and its financial statements.
Government Cash Series is a conservative way to help your ready cash
earn daily income -- while offering you the additional advantages of
daily liquidity and stability of principal.* The fund invests in some
of the safest investments available -- short-term U.S. government
obligations or repurchase agreements backed by these obligations.
Dividends paid to shareholders during the reporting period totaled
$0.04 per share. At the end of the reporting period, the fund's total
net assets stood at $530.4 million.
As always, we thank you for keeping your cash working through the
relative safety of Government Cash Series. Please contact your
investment representative if you have any questions.
Sincerely,
[Graphic]
Richard B. Fisher
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 not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
Government Cash Series is invested in direct U.S. Treasury and U.S.
government agency obligations and in repurchase agreements which have
these securities as collateral. The fund continues to invest in issues
of the Federal National Mortgage Association, Student Loan Marketing
Association, Federal Farm Credit Bank System, Federal Home Loan Bank
System, and Federal Home Loan Mortgage Corp., and maintains a small
Treasury position.
After keeping monetary policy on hold for over a year, the Federal
Reserve Board (the "Fed") voted to raise the federal funds target rate
by 0.25% on March 25, 1997, from 5.25% to 5.50%. The move was seen as
being preemptive against inflation in the face of persistent demand.
The reporting period was characterized by a fair amount of market
volatility, as sentiment regarding the need for a more restrictive
monetary policy swayed back and forth.
Amid strong economic growth well above the 2.00% to 2.50% thought to
be the non-inflationary potential in the summer of 1996, fears of an
imminent Fed tightening gripped the short-term markets. Economic
growth slowed in the third quarter of 1996 to a more manageable 2.10%.
Continued evidence of benign inflationary pressures brought comfort to
market participants, and short-term interest rates declined steadily
through November 1996 as a result. The market then traded within a
fairly narrow range for the next few months, as the overall economic
fundamentals changed little.
However, persistent above-trend economic growth in the first quarter
of 1997 -- at 5.80% -- began to weigh heavily on the market in light
of tight labor market conditions. Short-term interest rates then
started to rise in late February 1997, spurred onward by a
particularly hawkish Humphrey-Hawkins testimony by Fed Chairman Alan
Greenspan late in the month, in which he indicated that the transitory
factors preventing a rise in wages in the face of fairly robust growth
may be ending. By the time of the Fed tightening in late March 1997,
much of the move had already been priced into the financial markets.
In the following weeks, short-term interest rates traded within a
relatively narrow range as market participants debated the timing of
the next tightening. As signs of a weakening in consumer demand
finally appeared, rates declined in late April 1997 and throughout May
1997. The decline in rates offered on U.S. Treasury bills over this
reporting period, however, was exacerbated by technical factors -- in
particular, a reduction in the overall auction sizes of U.S. Treasury
bills due to larger-than-expected tax receipts at the U.S. Treasury.
Movements in the three-month U.S. Treasury bill over the reporting
period reflected both the shifting market sentiment regarding the Fed
and these technical influences. Beginning the reporting period at
5.20%, the yield on the three-month bill declined to close to 5.00% in
early December 1996, then rose to 5.40% in advance of the tightening
by the Fed in March 1997. Since that time, as the effects of reduced
supply have gripped the front end of the market, the yield on this
security has fallen to 5.00% once more. Overall, the slope of the
front end of the U.S. Treasury yield curve steepened by 27 basis
points over the reporting period, with most of that due to the decline
in yield on the three-month U.S. Treasury bill.
The fund was targeted in a 35- to 45-day average maturity range
throughout the reporting period, which mostly represents a neutral
stance for the portfolio. The average maturity of the fund varied
within that range according to relative value opportunities available
in the short-term U.S. Treasury, U.S. government agency, and
repurchase agreement markets. The fund continued to combine attractive
yields from repurchase agreements collateralized by U.S. Treasury and
government agency securities with short-term agency floating rate
notes and U.S. Treasury and agency securities with longer maturities
of six to twelve months. The fund reduced its holdings of U.S.
Treasury securities due to the expensive nature of that market, and
added to positions in fixed rate agency securities. The fund also
increased its holdings of term repurchase agreements, as these
investments offered relative value to overnight repurchase agreements.
With a friendly inflation picture and signs of a slowing in the demand
side of the economy, we would expect the Fed to remain on hold in the
near future, and the fund will likely maintain its current
positioning.
GOVERNMENT CASH SERIES
PORTFOLIO OF INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S> <C>
SHORT-TERM OBLIGATIONS -- 38.7%
$ 2,500,000 Federal Farm Credit Bank, Note -- 0.5%
5.600%, 6/3/1997 $
2,499,981
8,000,000 (a)Federal Farm Credit Bank, Discount Note -- 1.5%
5.566%, 8/15/1997
7,909,667
14,000,000 (b)Federal Farm Credit Bank, Floating Rate Note -- 2.6%
5.610%, 7/1/1997
13,990,123
11,900,000 Federal Home Loan Bank, Notes -- 2.2% 5.460% -
6.025%, 11/18/1997 - 4/15/1998
11,891,990
14,175,000 (a)Federal Home Loan Bank, Discount Notes -- 2.7%
5.434% - 5.560%, 7/7/1997 - 8/21/1997
14,067,335
11,000,000 (b)Federal Home Loan Bank, Floating Rate Notes --
2.1% 5.349% - 5.563%, 6/4/1997 - 6/20/1997
10,994,570
7,000,000 Federal Home Loan Mortgage Association, Notes --
1.3% 5.640% - 5.715%, 8/28/1997 - 3/17/1998
6,994,561
6,700,000 (a)Federal Home Loan Mortgage Association, Discount Note -- 1.2%
5.805%, 11/5/1997
6,537,248
7,600,000 Federal National Mortgage Association, Notes --
1.4% 5.790% - 6.000%, 3/25/1998 - 5/21/1998
7,587,913
56,010,000 (a)Federal National Mortgage Association, Discount
Notes -- 10.5% 5.390% - 5.877%, 6/5/1997 -
11/6/1997
55,397,375
27,500,000 (b)Federal National Mortgage Association, Floating
Rate Notes -- 5.2% 5.360% - 5.580%, 6/3/1997 -
6/16/1997
27,495,628
2,000,000 Student Loan Marketing Association, Note -- 0.4%
5.620%, 6/30/1997
1,999,433
16,500,000 (b)Student Loan Marketing Association, Floating
Rate Notes -- 3.1% 5.350% - 5.410%, 6/3/1997
16,498,220
2,000,000 (a)United States Treasury Bills -- 0.4%
5.300%, 3/5/1998
1,918,439
</TABLE>
GOVERNMENT CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S> <C>
SHORT-TERM OBLIGATIONS -- CONTINUED
UNITED STATES TREASURY NOTES -- 3.6%
$ 5,500,000 6.125%, 5/15/1998 $
5,509,372
1,600,000 7.250%, 2/15/1998
1,616,233
7,000,000 7.375%, 11/15/1997
7,055,507
5,000,000 7.875%, 1/15/1998
5,071,140
Total
19,252,252
TOTAL SHORT-TERM OBLIGATIONS
205,034,735
(C)REPURCHASE AGREEMENTS -- 61.2%
20,000,000 Bear, Stearns and Co., 5.600%, dated 5/30/1997, due 6/2/1997
20,000,000
25,000,000 CIBC Wood Gundy Securities Corp., 5.600%, dated 5/30/1997,
due 6/2/1997
25,000,000
23,000,000 (d)CS First Boston, Inc., 5.520%, dated 5/22/1997, due 7/3/1997
23,000,000
11,000,000 (d)Chase Government Securities, Inc., 5.550%, dated 5/22/1997,
due 7/3/1997
11,000,000
11,000,000 (d)Chase Government Securities, Inc., 5.620%, dated 4/3/1997,
due 7/2/1997
11,000,000
50,000,000 Fuji Government Securities, Inc., 5.600%, dated 5/30/1997, due 6/2/1997
50,000,000
14,000,000 (d)Goldman Sachs Group, LP, 5.570%, dated 4/2/1997, due 6/2/1997
14,000,000
25,000,000 Greenwich Capital Markets, Inc., 5.600%, dated 5/30/1997, due 6/2/1997
25,000,000
20,000,000 HSBC Securities, Inc., 5.620%, dated 5/30/1997, due 6/2/1997
20,000,000
15,000,000 J.P. Morgan & Co., Inc., 5.600%, dated 5/30/1997, due 6/2/1997
15,000,000
6,000,000 (d)Lehman Brothers, Inc., 5.620%, dated 4/7/1997, due 7/7/1997
6,000,000
20,000,000 (d)Merrill Lynch, Pierce, Fenner and Smith, 5.560%, dated 4/2/1997,
due 6/2/1997
20,000,000
45,000,000 PaineWebber Group, Inc., 5.600%, dated 5/30/1997, due 6/2/1997
45,000,000
</TABLE>
GOVERNMENT CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS -- CONTINUED
$ 5,700,000 Swiss Bank Capital Markets, 5.550%, dated 5/30/1997, due 6/2/1997 $
5,700,000
9,000,000 (d)UBS Securities, Inc., 5.520%, dated 5/22/1997, due 7/3/1997
9,000,000
25,000,000 UBS Securities, Inc., 5.600%, dated 5/30/1997, due 6/2/1997
25,000,000
TOTAL REPURCHASE AGREEMENTS
324,700,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $
529,734,735
</TABLE>
(a) The issue shows the rate of discount at time of purchase.
(b) Denotes variable rate securities which show current rate and next
demand date.
(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) 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.
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($530,367,058) at May 31, 1997.
The following acronym is used throughout this portfolio:
LP -- Limited Partnership
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT CASH SERIES
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 324,700,000
Investments in securities 205,034,735
Total investments in securities, at amortized cost and value $
529,734,735
Cash
196,493
Income receivable
1,963,687
Receivable for shares sold
53,374
Total assets
531,948,289
LIABILITIES:
Payable for shares redeemed 441,443
Income distribution payable 903,732
Accrued expenses 236,056
Total liabilities
1,581,231
NET ASSETS for 530,367,058 shares outstanding $
530,367,058
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$530,367,058 / 530,367,058 shares
outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT CASH SERIES
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $
30,067,846
EXPENSES:
Investment advisory fee $ 2,761,277
Administrative personnel and services fee 417,215
Custodian fees 91,612
Transfer and dividend disbursing agent fees and expenses 473,847
Directors'/Trustees' fees 9,724
Auditing fees 13,425
Legal fees 7,023
Portfolio accounting fees 98,731
Distribution services fee 552,256
Shareholder services fee 1,380,639
Share registration costs 75,122
Printing and postage 76,278
Insurance premiums 7,230
Taxes 53,613
Miscellaneous 7,229
Total expenses 6,025,221
Waiver --
Waiver of investment advisory fee (533,592)
Net expenses
5,491,629
Net investment income $
24,576,217
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT CASH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 24,576,217 $
22,925,563
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (24,576,217)
(22,925,563)
SHARE TRANSACTIONS --
Proceeds from sale of shares 3,215,216,492
3,204,189,310
Net asset value of shares issued to shareholders in payment of
distributions declared 21,740,385
18,085,135
Cost of shares redeemed (3,154,718,528)
(3,227,241,493)
Change in net assets resulting from share transactions 82,238,349
(4,967,048)
Change in net assets 82,238,349
(4,967,048)
NET ASSETS:
Beginning of period 448,128,709
453,095,757
End of period $ 530,367,058 $
448,128,709
</TABLE>
(See Notes which are an integral part of the Financial Statements)
GOVERNMENT CASH SERIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996 1995 1994 1993 1992 1991 1990(A)
<S> <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
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.04 0.05 0.04 0.02 0.03 0.04 0.07 0.06
LESS DISTRIBUTIONS
Distributions from
net investment
income (0.04) (0.05) (0.04) (0.02) (0.03) (0.04) (0.07) (0.06)
NET ASSET
VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 4.54% 4.85% 4.43% 2.45% 2.54% 4.33% 6.80% 6.53%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.99% 0.99% 0.99% 0.99% 0.99% 0.98% 0.94% 0.73%*
Net investment income 4.45% 4.75% 4.35% 2.41% 2.53% 4.25% 6.48% 7.74%*
Expense waiver/
reimbursement(c) 0.10% 0.30% 0.08% 0.09% 0.06% 0.06% 0.13% 0.32%*
SUPPLEMENTAL DATA
Net assets, end
of period
(000 omitted) $530,367 $448,129 $453,096 $401,334 $400,231 $550,675 $631,718 $493,995
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 23, 1989 (date of
initial public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) 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)
GOVERNMENT CASH SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. ORGANIZATION
Cash Trust Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended, (the "Act") as an
open-end, management investment company. The Corporation consists of
four portfolios. The financial statements included herein are only
those of Government Cash Series (the "Fund"). The financial statements
of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to
the portfolio in which shares are held. The investment objective of
the Fund is current income consistent with stability of principal and
liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS -- The Fund 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 Fund 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 Fund 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 Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers,
which are deemed by the Fund's adviser to be creditworthy pursuant
to the guidelines and/or standards reviewed or established by the
Board of Directors (the "Directors"). Risks may arise from the
potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund 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 Fund'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 Fund may engage
in when-issued or delayed delivery transactions. The Fund 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.
3. CAPITAL STOCK
At May 31, 1997, there were 12,500,000,000 shares of $0.001 par value
capital stock authorized. At May 31, 1997, capital paid in aggregated
$530,367,058. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997
1996
<S> <C> <C>
Shares sold 3,215,216,492
3,204,189,310
Shares issued to shareholders in payment of distributions declared 21,740,385
18,085,135
Shares redeemed (3,154,718,528)
(3,227,241,493)
Net change resulting from share transactions 82,238,349
(4,967,048)
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment
adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.50% of the Fund'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 Fund 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.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the
terms of the Plan, the Fund will reimburse Federated Securities
Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the
Fund's shares. The Plan provides that the Fund may incur
distribution expenses up to 0.35% of the average daily net assets of
the Fund shares, annually, to reimburse FSC.
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder
Services Agreement with Federated Shareholder Services ("FSS"), the
Fund will pay FSS up to 0.25% of average daily net assets of the
Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts.
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
Fund. 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 Fund's accounting
records for which it receives a fee. The fee is based on the level
of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
GENERAL -- Certain of the Officers and Directors of the Corporation
are Officers and Directors or Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
CASH TRUST SERIES, INC. and Shareholders of
GOVERNMENT CASH SERIES:
We have audited the accompanying statement of assets and liabilities
of Government Cash Series (one of the portfolios comprising Cash Trust
Series, Inc.) including the portfolio of investments, as of May 31,
1997, the related statements of operations for the year then ended,
the statements of changes in net assets for the years ended May 31,
1997 and 1996, and the financial highlights for the periods presented.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned as of May 31, 1997, by
correspondence with the custodian and brokers; where replies were not
received from brokers we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Government Cash Series as of May 31, 1997, the results of its
operations, the changes in its net assets and its financial highlights
for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
July 8, 1997
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
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
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
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
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 fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses and other information.
GOVERNMENT CASH SERIES
ANNUAL REPORT TO SHAREHOLDERS
MAY 31, 1997
[Graphic]
Federated Securities Corp., Distributor
Cusip 147551204
0062902 (7/97)
[Graphic]
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for
Municipal Cash Series, a portfolio of Cash Trust Series, Inc., which
covers the twelve-month period from June 1, 1996, through May 31,
1997. The report begins with a commentary by the fund's portfolio
manager, followed by a complete listing of the fund's investments on
the last day of the reporting period, and its financial statements.
Designed for tax-sensitive investors, Municipal Cash Series helps you
pursue daily tax-free income on your ready cash* -- while offering you
the additional advantages of daily liquidity and stability of
principal.** At the end of the reporting period, the fund was invested
in high-quality, short-term securities issued by municipalities across
42 states.
Tax-free dividends paid to shareholders during the reporting period
totaled $0.03 per share. At the end of the reporting period, the
fund's total net assets stood at $515.1 million.
As always, we thank you for using Municipal Cash Series as a
convenient way to pursue daily, tax-free income on your ready cash.
Please contact your investment representative if you have any
questions. We look forward to keeping you up to date on your
investment.
Sincerely,
[Graphic]
Richard B. Fisher
President
July 15, 1997
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** Money market funds seek to maintain a stable net asset value of $1.00.
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
Although it did not occur until near the end of Municipal Cash Series'
annual reporting period, the Federated Reserve Board (the "Fed")
brought about the first change in monetary policy in over a year. On
March 25, 1997, the Fed, in the face of stronger than expected demand,
voted to raise the federal funds target rate from 5.25% to 5.50%. The
move was viewed as being preemptive against the threat of future
inflationary pressures possibly brought about by tight labor market
conditions.
Until that point, movements in interest rates reflected shifting
market sentiment about the need for the Fed to move to a more
restrictive policy. The second quarter of 1996 was characterized by
much stronger than expected growth, fueled by consumer spending and
housing starts. Signs of growth began to emerge in the third quarter,
temporarily allaying market fears about inflation, but then picked up
once again through the fourth quarter of 1996 and 1997. While
inflation still appeared to be benign, the market tolerated the pace
of growth over this quarter. However, Fed Chairman Alan Greenspan's
Humphrey Hawkins testimony before Congress in late February 1997
marked a turning point for the short-term government market -- indeed
the bond and equity markets as well -- as his relatively hawkish
statements revealed fears at the Fed that the transitory factors that
had been keeping inflation under control in the face of fairly robust
growth may be coming to an end. The ensuing weeks brought continued
evidence of persistent strength, and ended in the Fed's action at the
Federal Open Market Committee in late March 1997.
For most of the reporting period, movements in short-term interest
rates bounced back and forth as sentiment regarding the need for a
more restrictive policy swayed back and forth. The yield on the
six-month U.S. Treasury bill, for example, fell from 5.50% to 5.30%
from the beginning of June 1996 through month end as fears of an
imminent tightening subsided. The next few months were characterized
by significant market volatility and debate over the sustainability of
the economy. Interest rate movements reflected the uncertainty -- the
yield on the six-month U.S. Treasury bill rose to 5.60% in early July
1996, fell to 5.30% by early August 1996, rose to 5.60% by early
September 1996, and finally, fell to 5.25% by the end of the month.
Rates then traded within a range over the fourth quarter and into
early 1997 -- with the six-month U.S. Treasury bill moving between
5.20% to 5.40% -- as the continued friendly inflation picture provided
some comfort to market participants. Finally, rates began to rise in
late February 1997, and by the time of the Fed tightening in late
March 1997, had built in much of the expectations regarding the move.
In April 1997, the financial markets continued to focus on the
likelihood of an additional tightening move later in May 1997, causing
short-term yields to rise even further. Yields on the six-month U.S.
Treasury bill rose sharply over this interim period, moving from a low
of 5.20% in mid-February 1997, to a high of 5.68% in late April 1997,
before falling back to 5.40% by the end of reporting period.
The average maturity of Municipal Cash Series at the beginning of the
reporting period was approximately 60 days. The target remained 55 to
60 days through the third and fourth quarters of 1996. As signs of
strength in the economy became more apparent, and as expectation of an
imminent Fed tightening grew in the first quarter of 1997, we lowered
the average maturity target range of the fund from between 55 and 60
days to between 40 and 45 days. By allowing the average maturity of
the portfolio to roll inward from the 55- to 60-day range to a target
range of 40 to 45 days, we were able to take advantage of higher
interest rates going forward.
Once an average maturity range is targeted, the portfolio attempts to
maximize performance through ongoing relative value analysis. Relative
value analysis includes the comparison of the richness or cheapness of
municipal securities to one another as well as municipals to taxable
instruments, such as U.S. Treasury securities. The fund's portfolio
remained barbelled in structure, which combined a significant portion
in seven-day variable rate demand notes and short maturity commercial
paper with purchases of longer term, six- to twelve-month fixed rate
notes. This portfolio structure continues to pursue a competitive
yield over time.
Naturally, the fund's average yield has remained relatively stable
over the majority of the reporting period since the Fed did not change
their federal funds target rate until the latter part of the reporting
period. The seven-day net yield for the fund on May 31, 1997, was
3.06%,* compared to 2.92% a year ago, with the increase in yield
coming at the end of the reporting period. The latest yield was the
equivalent of a 5.07% taxable yield for investors in the highest
federal tax bracket.
Although the Fed decided to hold short-term interest rates steady at
the May 1997 meeting, our expectations are that the Fed will find
reason to tighten monetary policy further in 1997. However, the
probability of a July 1997 move is looking less likely. It is also
anticipated that the overall tightening cycle will not be long in
terms of duration or severe in magnitude. The preemptive move by the
Fed should help to reduce the need for more aggressive action down the
road by preventing the build-up of inflationary pressures. We would
look to see moderately higher short-term interest rates throughout the
course of the year, but not to the extent evidenced in the last
tightening cycle in 1994. Therefore, we will likely continue in our
modestly defensive stance for the portfolio until market conditions
indicate otherwise.
* Performance quoted represents past performance and is not indicative
of future results. Yield will vary. The seven-day net yield is
calculated daily, based on the income dividends for the seven days
ending on the date of calculation and then compounded and
annualized.
MUNICIPAL CASH SERIES
PORTFOLIO OF INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- 101.8%
ALABAMA -- 0.7%
$ 385,000 Hoover, AL, IDA Weekly VRDNs (Bud's Best Cookies, Inc.)/
(SouthTrust Bank of Alabama, Birmingham LOC) $ 385,000
370,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell
Manufacturing)/
(SouthTrust Bank of Alabama, Birmingham LOC) 370,000
345,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell
Manufacturing)/
(SouthTrust Bank of Alabama, Birmingham LOC) 345,000
325,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell
Manufacturing)/
(SouthTrust Bank of Alabama, Birmingham LOC) 325,000
395,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell
Manufacturing)/
(SouthTrust Bank of Alabama, Birmingham LOC) 395,000
2,000,000 Tuscaloosa County, AL, IDA, 1995 Series A Weekly VRDNs
(Tuscaloosa
Steel Corporation)/(Bayerische Landesbank Girozentrale LOC) 2,000,000
Total 3,820,000
ARIZONA -- 0.9%
4,400,000 Eloy, AZ, IDA (Series 1996) Weekly VRDNs (The Marley Cooling
Tower Co.)/(First Union National Bank, Charlotte, NC LOC) 4,400,000
ARKANSAS -- 7.1%
9,000,000 Arkansas Development Finance Authority, (Series 1995) Weekly
VRDNs (Paco Steel & Engineering Corporation Project)/(Union
Bank
of California LOC) 9,000,000
11,000,000 Hope, AR, Solid Waste Disposal Revenue Bonds (Series 1994),
4.20%
CP (Temple-Inland Forest Products Corporation
Project)/(Temple-
Inland, Inc. GTD), Mandatory Tender 7/11/1997 11,000,000
1,000,000 Sheridan, AR, IDA (Series B) Weekly VRDNs (H.H. Robertson
Co.)/
(PNC Bank, N.A. LOC) 1,000,000
7,500,000 Siloam Springs, AR, IDRB (Series 1994) Weekly VRDNs (La-Z
Boy
Chair Co.)/(NBD Bank, MI LOC) 7,500,000
8,000,000 Springdale, AR, IDA Weekly VRDNs (Newlywed Food)/(Mellon
Bank N.A., Pittsburgh LOC) 8,000,000
Total 36,500,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
CALIFORNIA -- 0.7%
$ 1,620,000 Los Angeles County, CA Housing Authority, Single Family
Mortgage
Revenues, 4.13% - 4.15% TOBs (GNMA COL)/(Corestates Bank
N.A.,
Philadelphia, PA LIQ), Optional Tender 6/1/1997 - 9/1/1997 $ 1,620,000
2,000,000 North County, CA Schools Financing Authority, 4.75% TRANs,
7/1/1997 2,000,946
Total 3,620,946
COLORADO -- 2.6%
4,250,000 Adams County, CO, IDB (Series 1993) Weekly VRDNs (Bace
Manufacturing, Inc.)/(Citibank N.A., NY LOC) 4,250,000
2,800,000 Colorado HFA, (Series 1996) Weekly VRDNs (Neppl-Springs
Fabrication)/(Bank One, CO LOC) 2,800,000
6,475,000 Denver (City & County), CO, Airport System Subordinate
Revenue
Bonds (Series 1990E), 3.95% CP (Sanwa Bank Ltd., Osaka LOC),
Mandatory Tender 8/19/1997 6,475,000
Total 13,525,000
DISTRICT OF COLUMBIA -- 0.8%
4,000,000 District of Columbia Housing Finance Agency, (Series 1996C),
3.90%
TOBs (Trinity Funding Company INV), Mandatory Tender 4,000,000
12/1/1997
FLORIDA -- 1.3%
4,070,000 Florida HFA, Multifamily Housing Revenue Bonds (1995 Series
M)
Weekly VRDNs (Bainbridge Club Apartments Project)/(PNC Bank,
KY LOC) 4,070,000
2,400,000 Okeechobee County, FL, (Series 1992) Weekly VRDNs (Morgan
Guaranty Trust Co., NY LOC) 2,400,000
Total 6,470,000
GEORGIA -- 2.2%
1,000,000 De Kalb County, GA Development Authority Weekly VRDNs (Rock-
Tenn Company, Inc. Project)/(SunTrust Bank, Atlanta LOC) 1,000,000
1,000,000 Forsythe County, GA Development Authority, IDRB (Series
1995)
Weekly VRDNs (American BOA, Inc. Project)/(Dresdner Bank Ag,
Frankfurt LOC) 1,000,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
GEORGIA -- CONTINUED
$ 1,340,000 Franklin County, GA Industrial Building Authority (Series
1995)
Weekly VRDNs (Bosal Industries, Inc.)/(ABN AMRO Bank NV,
Amsterdam LOC) $ 1,340,000
2,240,000 Fulton County, GA, IDA (Series 1996) Weekly VRDNs
(Peachtree-
Broad Building, Ltd. Project)/(SouthTrust Bank of Georgia,
Atlanta
LOC) 2,240,000
2,260,000 Gainesville, GA Redevelopment Authority, IDRB (Series 1986)
Weekly
VRDNs (Hotel of Gainesville Associates Project)/(Regions
Bank,
AL LOC) 2,260,000
1,500,000 Hart County, GA, IDA Revenue Bonds (Series 1996) Weekly
VRDNs
(Rock-Tenn Converting Co. Project)/(SunTrust Bank, Atlanta 1,500,000
LOC)
2,000,000 Screven County, GA, IDA (Series 1995) Weekly VRDNs (Sylvania
Yarn Systems, Inc. Project)/(SunTrust Bank, Atlanta LOC) 2,000,000
Total 11,340,000
IDAHO -- 1.9%
9,545,000 (b)Idaho Housing Agency, PA-115 (1994 Series F) Weekly VRDNs
(Merrill Lynch Capital Services, Inc. LIQ) 9,545,000
ILLINOIS -- 3.9%
3,700,000 Chicago, IL, Gas Supply Revenue Bonds (1993 Series B), 3.70%
TOBs
(Peoples Gas Light & Coke Company), Optional Tender 3,700,000
12/1/1997
2,700,000 Illinois Development Finance Authority, Adjustable Rate IDRB
(Series
1996A) Weekly VRDNs (Nimlok Company)/(Bank One, Chicago LOC) 2,700,000
10,065,000 (b)Illinois Housing Development Authority, PT-82 (1994 Series
B)
Weekly VRDNs (Rabobank Nederland, Utrecht LIQ) 10,065,000
3,870,000 Morton, IL, IDRB (Series 1996) Weekly VRDNs (Morton Welding
Co.,
Inc. Project)/(Bank One, Chicago LOC) 3,870,000
Total 20,335,000
INDIANA -- 8.0%
435,000 Avilla, IN, IDRB Weekly VRDNs (Group Dekko
International)/(Bank
One, Indianapolis, IN LOC) 435,000
2,130,000 Crown Point, IN, IDA Weekly VRDNs (D & M Manufacturing)/
(National City Bank, KY LOC) 2,130,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
INDIANA -- CONTINUED
$ 2,600,000 Franklin, IN, Economic Development Revenue Refunding Bonds
(Series 1994) Weekly VRDNs (Pedcor Investments LP)/(Federal
Home
Loan Bank of Indianapolis LOC) $ 2,600,000
2,515,000 Huntingburg, IN, (Series 1994) Weekly VRDNs (DMI Furniture,
Inc.)/
(Bank One, Indianapolis, IN LOC) 2,515,000
2,545,000 Huntingburg, IN, EDRB (Series 1993) Weekly VRDNs (DMI
Furniture,
Inc.)/(Bank One, Indianapolis, IN LOC) 2,545,000
2,000,000 Indiana Development Finance Authority, (Series 1996) Weekly
VRDNs
(Meridian Group LLC Project)/(Bank One, Indianapolis, IN 2,000,000
LOC)
9,000,000 Indiana Development Finance Authority, Solid Waste Disposal
Revenue Bonds (Series 1990A), 3.50% CP (Pure Air on the
Lake, LP)/
(National Westminster Bank, PLC, London LOC), Mandatory
Tender 6/17/1997 9,000,000
700,000 Indiana Economic Development Commission, (Series 1989)
Weekly
VRDNs (O'Neal Steel, Inc.)/(SouthTrust Bank of Alabama,
Birmingham LOC) 700,000
2,690,000 Indianapolis, IN, (Series 1991) Weekly VRDNs (Cantor &
Coleman II
Project)/(Bank One, Indianapolis, IN LOC) 2,690,000
3,500,000 Lawrence, IN, (Series 1996), 4.40% TOBs (Woodward Commons
Project)/(Westdeutsche Landesbank Girozentrale INV),
Mandatory
Tender 10/1/1997 3,500,000
1,995,000 Lebanon, IN, IDA (Series 1991) Weekly VRDNs (White Castle
System)/(Bank One, Columbus, N.A. LOC) 1,995,000
5,000,000 Shelbyville, IN, (Series 1997) Weekly VRDNs (K-T
Corporation)/
(PNC Bank, N.A. LOC) 5,000,000
2,700,000 Tippecanoe County, IN, Economic Development Revenue Weekly
VRDNs (Lafayette Venetian Blind)/(PNC Bank, OH, N.A. LOC) 2,700,000
3,325,000 Westfield, IN, IDR (Series 1994) Weekly VRDNs (Standard
Locknut &
Lockwasher, Inc.)/(Bank One, Indianapolis, IN LOC) 3,325,000
Total 41,135,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
IOWA -- 1.1%
$ 3,325,000 Des Moines, IA, IDR Bonds (Series 1994) Weekly VRDNs
(Printer,
Inc.)/(Norwest Bank Minnesota, Minneapolis LOC) $ 3,325,000
2,330,000 Iowa Finance Authority, IDRB Weekly VRDNs (V-T Industries,
Inc.
Project)/(Norwest Bank Minnesota, Minneapolis LOC) 2,330,000
Total 5,655,000
KANSAS -- 0.3%
1,315,000 Kansas City, KS, (Series 00), 3.80% BANs, 10/31/1997 1,315,000
KENTUCKY -- 6.1%
110,000 Caldwell County, KY, (Series 1990) Weekly VRDNs (Thompson
Steel
Pipe)/(Corestates Bank N.A., Philadelphia, PA LOC) 110,000
3,660,000 Glasgow, KY, (Series 1994) Weekly VRDNs (Ply Tech
Corp.)/(Bank
One, KY LOC) 3,660,000
2,000,000 Henderson County, KY, (Series 1996A) Weekly VRDNs (Gibbs Die
Casting Corporation)/(Harris Trust & Savings Bank, Chicago 2,000,000
LOC)
1,200,000 Jefferson County, KY, Weekly VRDNs (Gateway Press,
Inc.)/(PNC
Bank, KY LOC) 1,200,000
1,700,000 Jefferson County, KY, IDR (Series 1991) Weekly VRDNs
(Findley
Adhesives)/(Bank One, Columbus, N.A. LOC) 1,700,000
2,000,000 Jefferson County, KY, IDR Weekly VRDNs (O'Neal Steel, Inc.)/
(SouthTrust Bank of Alabama, Birmingham LOC) 2,000,000
10,000,000 Kentucky Interlocal School Transportation Association,
(Series A),
4.05% TRANs, 6/30/1997 10,000,000
1,600,000 Kentucky Rural EDA, (Series 1990) Weekly VRDNs (Thompson
Steel
Pipe)/(NBD Bank, MI LOC) 1,600,000
6,000,000 Scottsville, KY, 4.00% TOBs (Sumitomo Electric Wiring
Systems)/
(Sumitomo Bank Ltd., Osaka LOC), Optional Tender 11/1/1997 6,000,000
3,000,000 Winchester, KY, (Series 1990) Weekly VRDNs (Walle
Corp.)/(Union
Bank of Switzerland, Zurich LOC) 3,000,000
Total 31,270,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
LOUISIANA -- 4.3%
$ 8,000,000 Lake Charles, LA Harbor & Terminal District, Revenue Bonds
(Series
1995A) Weekly VRDNs (Polycom-Huntsman, Inc.
Project)/(National
City Bank, PA LOC) $ 8,000,000
3,500,000 Louisiana HFA, Single Family Mortgage Revenue Bonds (Series
1996D-4), 4.10% TOBs (Trinity Funding Company INV),
Mandatory
Tender 9/15/1997 3,500,000
8,000,000 Louisiana HFA, Single Family Mortgage Revenue Bonds (Series
1997A-3), 3.75% TOBs (Trinity Funding Company INV),
Mandatory
Tender 3/1/1998 8,000,000
2,825,000 New Orleans, LA International Airport (Series A), 8.875%
Bonds
(United States Treasury PRF), 8/1/1997 (@102) 2,904,988
Total 22,404,988
MAINE -- 0.3%
1,400,000 Maine State, 4.40% BANs, 6/12/1997 1,400,207
MARYLAND -- 2.5%
2,450,000 Cecil County, MD, County Commissioners EDRB (Series 1988S)
Weekly VRDNs (Williams Mobile Offices, Inc.)/(First National
Bank
of Maryland, Baltimore LOC) 2,450,000
2,465,000 Maryland State Community Development Administration, (Series
1990A) Weekly VRDNs (College Estates)/(First National Bank
of
Maryland, Baltimore LOC) 2,465,000
2,800,000 Maryland State Community Development Administration, (Series
1990B) Weekly VRDNs (Cherry Hill Apartment
Ltd.)/(Nationsbank,
N.A., Charlotte LOC) 2,800,000
1,000,000 Maryland State IDFA, EDRB (Series 1996) Weekly VRDNs
(Townsend
Culinary, Inc.)/(SunTrust Bank, Atlanta LOC) 1,000,000
4,260,000 Wicomico County, MD, EDRB (Series 1994) Weekly VRDNs (Field
Container Co., LP)/(Northern Trust Co., Chicago, IL LOC) 4,260,000
Total 12,975,000
MASSACHUSETTS -- 0.5%
2,545,000 Bridgewater, MA, (Series D), 4.25% RANs, 6/30/1997 2,545,389
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
MICHIGAN -- 0.9%
$ 3,300,000 Michigan Strategic Fund Weekly VRDNs (Tesco
Engineering)/(Bank
of Tokyo-Mitsubishi Ltd. LOC) $ 3,300,000
1,215,000 Michigan Strategic Fund, (Series 1991) Weekly VRDNs (AGA
Gas,
Inc.)/(Svenska Handelsbanken, Stockholm LOC) 1,215,000
Total 4,515,000
MINNESOTA -- 4.9%
3,455,000 Coon Rapids, MN, (Series 1996) Weekly VRDNs (Medical
Enterprise
Associates Project)/(Norwest Bank Minnesota, Minneapolis 3,455,000
LOC)
11,550,000 (b)Dakota County & Washington County MN Housing &
Redevelopment Authority (Series J), 4.05% - 4.20% TOBs
(United States
Treasury COL)/(Corestates Bank N.A., Philadelphia, PA LIQ),
Optional Tender 6/1/1997 - 9/1/1997 11,550,000
700,000 Minnesota State Higher Education Coordinating Board, (Series
1992A)
Weekly VRDNs (First Bank N.A., Minneapolis LIQ) 700,000
1,650,000 New Hope, MN, (Series 1997), 5.015% TOBs (Park Acres
Apartments)/
(Bayerische Landesbank Girozentrale INV), Mandatory Tender
3/1/1998 1,650,000
850,000 Plymouth, MN, Weekly VRDNs (Nuaire, Inc.)/(Norwest Bank
Minnesota, Minneapolis LOC) 850,000
2,200,000 Robbinsdale, MN, (Series 1997), 5.015% TOBs (Bridgeway
Apartments)/(Bayerische Landesbank Girozentrale INV),
Mandatory
Tender 3/1/1998 2,200,000
1,815,000 St. Paul, MN, Port Authority Weekly VRDNs (H.M. Smyth Co.,
Inc.)/
(Norwest Bank Minnesota, Minneapolis LOC) 1,815,000
3,100,000 White Bear, MN, Weekly VRDNs (Thermoform Plastic,
Inc.)/(Norwest
Bank Minnesota, Minneapolis LOC) 3,100,000
Total 25,320,000
MISSISSIPPI -- 0.8%
1,700,000 Mississippi Business Finance Corp. Weekly VRDNs (O'Neal
Steel,
Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 1,700,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
MISSISSIPPI -- CONTINUED
$ 2,275,000 Mississippi Business Finance Corp., IDRB (Series 1994)
Weekly
VRDNs (Flexsteel Industries, Inc.)/(Norwest Bank Minnesota,
Minneapolis LOC) $ 2,275,000
Total 3,975,000
MISSOURI -- 1.5%
2,550,000 Missouri Development Finance Board, IDRB (Series 1996)
Weekly
VRDNs (LaGrange Foundry Inc. Project)/(Harris Trust &
Savings
Bank, Chicago LOC) 2,550,000
825,000 Missouri Export & Infrastructure Board Weekly VRDNs
(Ex-L-Tube,
Inc.)/(Norwest Bank Minnesota, Minneapolis LOC) 825,000
4,150,000 Moberly, MO, IDA (Series 1996) Weekly VRDNs (Everlast
Fitness
Manufacturing Corp.)/(Chase Manhattan Bank N.A., NY LOC) 4,150,000
Total 7,525,000
MONTANA -- 0.8%
4,040,000 (b)Montana State Board of Housing, (Series F), 4.00% TOBs
(FHA INS)/
(Corestates Bank N.A., Philadelphia, PA LIQ), Optional
Tender
7/1/1997 4,040,000
NEBRASKA -- 0.8%
4,000,000 Douglas County, NE, (Series 1991) Weekly VRDNs (Malhove,
Inc.)/
(Norwest Bank Minnesota, Minneapolis LOC) 4,000,000
NEVADA -- 1.4%
7,000,000 Clark County, NV, IDRB (Series 1995A) Weekly VRDNs (Nevada
Power Co.)/(Barclays Bank PLC, London LOC) 7,000,000
NEW HAMPSHIRE -- 2.2%
3,375,000 Nashua, NH, 4.50% BANs, 10/23/1997 3,384,596
6,000,000 New Hampshire Business Finance Authority, PCR Bonds (Series
A),
3.90% CP (New England Power Co.), Mandatory Tender 8/15/1997 6,000,000
2,010,000 New Hampshire State IDA, (Series 1991), 4.05% TOBs
(International
Paper Co.), Mandatory Tender 10/15/1997 2,010,000
Total 11,394,596
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
NEW JERSEY -- 2.3%
$ 3,000,000 High Bridge Borough, NJ, 4.50% BANs, 9/5/1997 $ 3,003,790
9,000,000 Trenton, NJ, 4.25% BANs, 10/8/1997 9,007,623
Total 12,011,413
NEW MEXICO -- 0.7%
3,500,000 Santa Fe, NM, Single Family Mortgage Revenue Bonds (Series
1995B),
3.70% TOBs (FGIC INV), Mandatory Tender 11/1/1997 3,500,000
NEW YORK -- 0.8%
4,000,000 New York City, NY, (Series K), 4.50% Bonds, 8/1/1997 4,003,000
NORTH CAROLINA -- 1.0%
5,200,000 Bladen County, NC Industrial Facilities & Pollution Control
Financing
Authority, (Series 1993) Weekly VRDNs (BCH Energy, LP)/(Bank
of
Tokyo-Mitsubishi Ltd. LOC) 5,200,000
OHIO -- 0.1%
60,000 Defiance County, OH, IDR Weekly VRDNs (Dietrich Industries,
Inc.)/
(PNC Bank, N.A. LOC) 60,000
400,000 (b)Ohio HFA, Trust Receipts, (Series 1996 FR/RI-5) Weekly
VRDNs
(GNMA COL)/(Bank of New York, NY LIQ) 400,000
Total 460,000
OKLAHOMA--3.7%
2,300,000 Adair County, OK, IDA, (Series B) Weekly VRDNs (Baldor
Electric
Co.)/(Wachovia Bank of NC, N.A., Winston-Salem LOC) 2,300,000
4,900,000 Oklahoma Development Finance Authority, 3.70% TOBs (Simmons
Poultry Farms)/(Rabobank Nederland, Utrecht LOC), Optional
Tender 8/1/1997 4,900,000
3,885,000 (b)Oklahoma HFA, CDC Municipal Products, Inc. Class A
Certificates
(Series 1996G) Weekly VRDNs (CDC Municipal Products, Inc. 3,885,000
LIQ)
8,000,000 (b)Tulsa County, OK, HFA, CDC Municipal Products, Inc. Class
A
Certificates (Series 1996E) Weekly VRDNs (CDC Municipal
Products, Inc. LIQ) 8,000,000
Total 19,085,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
PENNSYLVANIA -- 2.7%
$ 5,700,000 Carbon County, PA, IDA, Solid Waste Disposal Revenue Notes
(Series
1996), 3.90% RANs (Horsehead Resource Development,
Inc.)/(Chase
Manhattan Bank N.A., NY LOC), 12/3/1997 $ 5,700,000
4,450,000 Clinton County, PA, IDA, Solid Waste Disposal Revenue Bonds
(Series
1992A), 3.75% TOBs (International Paper Co.), Optional
Tender
1/15/1998 4,450,000
1,775,000 Pennsylvania EDFA Weekly VRDNs (Stone and Lime Co.)/(PNC
Bank, N.A. LOC) 1,775,000
1,000,000 Pennsylvania EDFA, (1995 Series D2) Weekly VRDNs (ARCO
Enterprises, Inc./Ronald L. Repasky, Sr. Project)/(PNC Bank,
N.A. LOC) 1,000,000
1,200,000 Pennsylvania EDFA, (1995 Series D9) Weekly VRDNs (North
American Communications, Inc. Project)/(PNC Bank, N.A. LOC) 1,200,000
Total 14,125,000
SOUTH CAROLINA -- 3.7%
7,000,000 Berkeley County, SC, (Series 1997) Weekly VRDNs (Nucor
Corporation)/(Nucor Corporation GTD) 7,000,000
4,000,000 Georgetown County, SC, Pollution Control Facilities
Adjustable Rate
Bonds (Series A), 4.00% TOBs (International Paper Co.),
Optional
Tender 9/1/1997 4,000,000
5,500,000 South Carolina Job Development Authority, (Series 1996)
Weekly
VRDNs (PVC Container Corp. Project)/(Fleet Bank. N.A. LOC) 5,500,000
2,485,000 South Carolina Job Development Authority, EDRB (Series 1994)
Weekly VRDNs (Carolina Cotton Works, Inc. Project)/(Branch
Banking & Trust Co., Wilson LOC) 2,485,000
Total 18,985,000
SOUTH DAKOTA -- 1.7%
9,000,000 South Dakota Housing Development Authority, (Series 1996E),
3.75%
TOBs, Mandatory Tender 11/13/1997 9,000,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
TENNESSEE -- 4.3%
$ 2,060,000 Benton County TN, IDB, (Series 1996) Weekly VRDNs (Jones
Plastic
and Engineering Corp.)/(National City Bank, KY LOC) $ 2,060,000
1,000,000 Dickson County, TN, IDB, (Series 1996) Weekly VRDNs
(Tennessee
Bun Company, LLC Project)/(PNC Bank, OH, N.A. LOC) 1,000,000
1,000,000 Greenfield, TN, IDB, (Series 1995) Weekly VRDNs (Plastic
Products
Company Project)/(Norwest Bank Minnesota, Minneapolis LOC) 1,000,000
1,100,000 Hawkins County, TN, IDB, (Series 1995) Weekly VRDNs (Sekisui
Ta
Industries, Inc. Project)/(Bank of Tokyo-Mitsubishi Ltd. 1,100,000
LOC)
2,000,000 Jackson, TN, IDB, Solid Waste Facility Bonds (Series 1995)
Weekly
VRDNs (Florida Steel Corp.)/(NationsBank, South LOC) 2,000,000
3,500,000 McMinn County, TN, IDB, Industrial Development Bonds (Series
1995) Weekly VRDNs (Creative Fabrication Corp.)/(NBD Bank,
MI LOC) 3,500,000
3,800,000 Oak Ridge, TN, IDB, Solid Waste Facility Bonds (Series 1996)
Weekly
VRDNs (M4 Environmental LP Project)/(SunTrust Bank, Atlanta 3,800,000
LOC)
6,700,000 Shelby County, TN, Health Education & Housing Facilities
Board,
4.05% TOBs (Methodist Health System, Inc.)/(MBIA INS)/(Sanwa
Bank Ltd, Osaka LIQ), Optional Tender 8/1/1997 6,700,000
1,000,000 Union City, TN, IDB, (Series 1995) Weekly VRDNs (Kohler
Co.)/
(Wachovia Bank of Georgia N.A., Atlanta LOC) 1,000,000
Total 22,160,000
TEXAS -- 12.9%
5,000,000 Angelina and Neches River Authority, Texas, Solid Waste
Disposal
Revenue Bonds (Series 1993), 3.85% CP (Temple-Eastex Inc.
Project)/
(Temple-Inland, Inc. GTD), Mandatory Tender 6/13/1997 5,000,000
2,000,000 Angelina and Neches River Authority, Texas, Solid Waste
Disposal
Revenue Bonds (Series 1993), 4.00% CP (Temple-Eastex Inc.
Project)/
(Temple-Inland, Inc. GTD), Mandatory Tender 7/18/1997 2,000,000
9,100,000 Angelina and Neches River Authority, Texas, Solid Waste
Disposal
Revenue Bonds (Series 1993), 4.15% CP (Temple-Eastex Inc.
Project)/
(Temple-Inland, Inc. GTD), Mandatory Tender 7/18/1997 9,100,000
3,600,000 Brazos Harbor, TX, IDC, (Series 1991) Weekly VRDNs (Rangen,
Inc.
Project)/(Norwest Bank Minnesota, Minneapolis LOC) 3,600,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
TEXAS -- CONTINUED
$ 15,400,000 Brazos River Authority, TX, (Series 1995C) Daily VRDNs
(Texas
Utilities Electric Co.)/(Swiss Bank Corp., Basle LOC) $ 15,400,000
4,200,000 Brazos River Authority, TX, (Series 1996B) Daily VRDNs
(Texas
Utilities Electric Co.)/(AMBAC INS)/(Bank of New York, NY 4,200,000
LIQ)
8,250,000 Greater TX Student Loan Corporation, 3.70% TOBs (Student
Loan
Marketing Association LOC), Mandatory Tender 3/1/1998 8,250,000
3,200,000 Gulf Coast, TX, IDA, Marine Terminal Revenue Bonds (Series
1993)
Daily VRDNs (Amoco Corp.) 3,200,000
5,000,000 San Antonio, TX, Special Facilities Airport Revenue Bonds
(Series
1995) Weekly VRDNs (Cessna Aircraft Company Project)/
(Nationsbank of Texas, N.A. LOC) 5,000,000
2,500,000 Tarrant County, TX, IDC, (Series 1997) Weekly
VRDNs (Lear Operations Corp.)/(Chase Manhattan
Bank N.A., NY LOC) 2,500,000
8,400,000 Tyler, TX, Health Facilities Development Corp., (Series
1993C), 3.80%
CP (East Texas Medical Center)/(Banque Paribas, Paris LOC),
Mandatory Tender 7/16/1997 8,400,000
Total 66,650,000
UTAH -- 0.7%
970,000 Utah State HFA, (Series A), 4.25% TOBs (Corestates Bank
N.A.,
Philadelphia, PA LIQ), Optional Tender 7/1/1997 970,000
1,510,000 Utah State HFA, (Series C-2), 4.25% TOBs (Corestates Bank
N.A.,
Philadelphia, PA LIQ), Optional Tender 7/1/1997 1,510,000
1,375,000 Utah State HFA, (Series C-3), 4.25% TOBs (Corestates Bank
N.A.,
Philadelphia, PA LIQ), Optional Tender 7/1/1997 1,375,000
Total 3,855,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
VIRGINIA -- 3.0%
$ 5,000,000 Campbell County, VA, IDA, Solid Waste Disposal Facilities
Revenue
ACES Weekly VRDNs (Georgia-Pacific Corp.)/(Industrial Bank
of
Japan Ltd., Tokyo LOC) $ 5,000,000
4,500,000 Richmond, VA, Redevelopment & Housing Authority Weekly VRDNs
(Richmond, VA Red Tobacco Row)/(Bayerische Landesbank
Girozentrale LOC) 4,500,000
5,200,000 Richmond, VA, Redevelopment & Housing Authority, (Series
B-1)
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische
Landesbank Girozentrale LOC) 5,200,000
1,000,000 Richmond, VA, Redevelopment & Housing Authority, (Series
B-5)
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische
Landesbank Girozentrale LOC) 1,000,000
Total 15,700,000
WASHINGTON -- 1.3%
6,700,000 Pierce County, WA, Economic Development Corp., (Series 1995)
Weekly VRDNs (Simpson-Tacoma Kraft Company Project)/(Bank of
America, Northwest LOC) 6,700,000
WISCONSIN -- 4.4%
2,550,000 Germantown, WI, IDA Weekly VRDNs (Zenith Sintered Products,
Inc.)/(Bank One, Milwaukee, WI N.A. LOC) 2,550,000
2,310,000 Marshfield, WI, IDR (Series 1993) Weekly VRDNs (Building
Systems,
Inc.)/(Bank One, Milwaukee, WI N.A. LOC) 2,310,000
1,560,000 Plover, WI, Weekly VRDNs (Sirco Manufacturing,
Inc.)/(Norwest
Bank Minnesota, Minneapolis LOC) 1,560,000
3,500,000 Prentice Village, WI, Limited Obligation Revenue Refunding
Bonds
(Series A) Weekly VRDNs (Biewer-Wisconsin Sawmill, Inc.
Project)/
(Michigan National Bank, Farmington Hills LOC) 3,500,000
900,000 Shell Lake, WI, Weekly VRDNs (Doboy Packaging)/(Union Bank
of
Switzerland, Zurich LOC) 900,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS -- CONTINUED
WISCONSIN -- CONTINUED
$ 1,760,000 Waukesha, WI, IDRB (Series 1995) Weekly VRDNs (Weldall
Manufacturing Inc. Project)/(Bank One, Milwaukee, WI N.A. $ 1,760,000
LOC)
5,580,000 (b)Wisconsin Housing & Economic Development Authority,
(Series B), 4.05% - 4.20% TOBs (FSA INS)/(Corestates Bank
N.A.,
Philadelphia, PA LIQ), Optional Tender 6/1/1997 - 9/1/1997 5,580,000
4,710,000 (b)Wisconsin Housing & Economic Development
Authority, PT-90 (Series 1996F) Weekly VRDNs
(Banque Nationale de Paris LIQ) 4,710,000
Total 22,870,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $ 524,330,539
</TABLE>
At May 31, 1997, 89.1% of the total investments at market value
were subject to the federal alternative minimum tax.
(a) The fund may only invest in securities rated in one of the two
highest short-term rating categories by nationally recognized
statistical rating organizations ("NRSROs") or unrated securities
of comparable quality. A NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For
example, securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's
Ratings Group, MIG-1 or MIG-2 by Moody's Investors Service, Inc.,
or F-1+, F-1, and F-2 by Fitch Investors Service, Inc. are all
considered rated in one of the two highest short-term rating
categories.
Securities rated in the highest short-term rating category (and
unrated securities of comparable quality) are identified as First
Tier securities. Securities rated in the second highest short-term
rating category (and unrated securities of comparable quality) are
identified as Second Tier securities. The fund follows applicable
regulations in determining whether a security is rated and whether
a security rated by multiple NRSROs in different rating categories
should be identified as a First or Second Tier security.
At May 31, 1997, the portfolio securities were rated as follows:
Tier Rating Percent Based on Total Market Value (unaudited)
FIRST TIER SECOND TIER
90.65% 9.35%
(b)Denotes a restricted security which is subject to restrictions on
resale under Federal Securities laws. At May 31, 1997, these
securities amounted to $57,775,000 which represents 11.2% of net
assets.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($515,059,673) at May 31, 1997.
The following acronyms are used throughout this portfolio:
ACES -- Adjustable Convertible Extendable Securities AMBAC -- American
Municipal Bond Assurance Corporation BANs -- Bond Anticipation Notes
COL -- Collateralized CP -- Commercial Paper EDA -- Economic
Development Authority EDFA -- Economic Development Financing Authority
EDRB -- Economic Development Revenue Bonds FGIC -- Financial Guaranty
Insurance Company FHA -- Federal Housing Administration FSA --
Financial Security Assurance GNMA -- Government National Mortgage
Association GTD -- Guaranty HFA -- Housing Finance Authority IDA --
Industrial Development Authority IDB -- Industrial Development Bond
IDC -- Industrial Development Corporation IDR -- Industrial
Development Revenue IDRB -- Industrial Development Revenue Bond IDFA
- -- Industrial Development Finance Authority INS -- Insured INV --
Investment Agreement LIQ -- Liquidity Agreement LOC -- Letter of
Credit MBIA -- Municipal Bond Investors Assurance PCR -- Pollution
Control Revenue PLC -- Public Limited Company PRF -- Prerefunded RANs
- -- Revenue Anticipation Notes TOBs -- Tender Option Bonds TRANs -- Tax
and Revenue Anticipation Notes VRDNs -- Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 524,330,539
Cash 502,170
Receivable for shares sold 176,862
Income receivable 4,181,848
Total assets 529,191,419
LIABILITIES:
Payable for investments purchased $ 13,269,721
Payable for shares redeemed 256,437
Income distribution payable 375,328
Accrued expenses 230,260
Total liabilities 14,131,746
NET ASSETS for 515,059,673 shares outstanding $ 515,059,673
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$515,059,673 / 515,059,673 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 20,854,297
EXPENSES:
Investment advisory fee $ 2,782,055
Administrative personnel and services fee 420,342
Custodian fees 65,767
Transfer and dividend disbursing agent fees and expenses 531,549
Directors'/Trustees' fees 7,684
Auditing fees 13,425
Legal fees 5,056
Portfolio accounting fees 101,162
Distribution services fee 556,411
Shareholder services fee 1,391,027
Share registration costs 30,778
Printing and postage 51,094
Insurance premiums 6,825
Taxes 53,892
Miscellaneous 13,883
Total expenses 6,030,950
Waiver --
Waiver of investment advisory fee $ (497,998)
Net expenses 5,532,952
Net investment income $ 15,321,345
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 15,321,345 $ 14,810,386
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (15,321,345) (14,810,386)
SHARE TRANSACTIONS --
Proceeds from sale of shares 2,221,134,502 2,133,541,489
Net asset value of shares issued to shareholders in
payment of distributions declared 14,397,804 13,828,571
Cost of shares redeemed (2,199,077,184) (2,113,929,309)
Change in net assets resulting from share transactions 36,455,122 33,440,751
Change in net assets 36,455,122 33,440,751
NET ASSETS:
Beginning of period 478,604,551 445,163,800
End of period $ 515,059,673 $ 478,604,551
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31
1997 1996 1995 1994 1993 1992 1991
1990(A)
<S> <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
INCOME FROM
INVESTMENT
OPERATIONS
Net investment 0.03 0.03 0.03 0.02 0.03 0.04 0.05 0.04
income
LESS DISTRIBUTIONS
Distributions
from net
investment income (0.03) (0.03) (0.03) (0.02) (0.03) (0.04) (0.05)
(0.04)
NET ASSET VALUE, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
END OF PERIOD
TOTAL RETURN(B) 2.80% 3.04% 2.84% 1.83% 2.11% 3.53% 5.24%
4.68%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.99% 0.99% 0.99% 0.99% 0.99% 0.98% 0.94%
0.73%*
Net investment 2.75% 2.99% 2.76% 1.81% 2.10% 3.42% 5.02%
5.76%*
income
Expense waiver/
reimbursement(c) 0.09% 0.33% 0.05% 0.06% 0.03% 0.03% 0.17%
0.45%*
SUPPLEMENTAL DATA
Net assets, end of
period
(000 omitted) $515,060 $478,605 $445,164 $574,801 $456,205 $516,814 $403,151 $195,897
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 25, 1989 (date of
initial public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) 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)
MUNICIPAL CASH SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. ORGANIZATION
Cash Trust Series, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Corporation consists of four
portfolios. The financial statements included herein are only those of
Municipal Cash Series (the "Fund"). The financial statements of the
other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to
the portfolio in which shares are held. The investment objective of
the Fund is current income exempt from federal regular income tax
consistent with stability of principal.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS -- The Fund uses the amortized cost method to
value its portfolio securities in accordance with Rule 2a-7 under
the Act.
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 Fund'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 Fund may engage
in when-issued or delayed delivery transactions. The Fund 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 Board of Directors (the
"Directors"). The Fund 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:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <S> <C>
Dakota County & Washington MN Housing
& Redevelopment Authority 3/1/1997 - 5/30/1997 $11,550,000
Montana State Board of Housing 4/1/1997 4,040,000
Idaho Housing Agency, PA-115 7/9/1996 9,545,000
Illinois Housing Development
Authority, PT-82 7/2/1996 10,065,000
Ohio HFA 1/2/1997 400,000
Oklahoma HFA 12/12/1996 3,885,000
Tulsa County, OK HFA 11/22/1996 8,000,000
Wisconsin Housing & Economic
Development Authority (Series B) 3/1/1997 - 5/30/1997 5,580,000
Wisconsin Housing & Economic
Development Authority, PT-90 12/5/1996 4,710,000
</TABLE>
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. CAPITAL STOCK
At May 31, 1997, there were 12,500,000,000 shares ($0.001 par value
per share) authorized. At May 31, 1997, capital paid in aggregated
$515,059,673.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
Shares sold 2,221,134,502 2,133,541,489
Shares issued to shareholders in payment of distributions 14,397,804 13,828,571
declared
Shares redeemed (2,199,077,184) (2,113,929,309)
Net change resulting from share transactions 36,455,122 33,440,751
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment
adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.50% of the Fund'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 Fund 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.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the
terms of the Plan, the Fund will reimburse Federated Securities
Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the
Fund's shares. The Plan provides that the Fund may incur
distribution expenses up to 0.35% of the average daily net assets of
the Fund shares, annually, to reimburse FSC.
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder
Services Agreement with Federated Shareholder Services ("FSS"), the
Fund will pay FSS up to 0.25% of average daily net assets of the
Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts.
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
Fund. 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 Fund's accounting
records for which it receives a fee. The fee is based on the level
of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
INTERFUND TRANSACTIONS -- During the period ended May 31, 1997, the
Corporation engaged in purchase and sale transactions with funds
that have a common investment adviser (or affiliated investment
advisers), common Directors/Trustees, and/or common Officers. These
purchase and sale transactions were made at current market value
pursuant to Rule 17a-7 under the Act amounting to $651,780,000 and
$693,785,000, respectively.
GENERAL -- Certain of the Officers and Directors of the Corporation
are Officers and Directors or Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
CASH TRUST SERIES, INC. and Shareholders of
MUNICIPAL CASH SERIES:
We have audited the accompanying statement of assets and liabilities
of Municipal Cash Series (one of the portfolios comprising Cash Trust
Series, Inc.) including the portfolio of investments, as of May 31,
1997, the related statements of operations for the year then ended,
the statements of changes in net assets for the years ended May 31,
1997 and 1996, and the financial highlights for the periods presented.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of May 31, 1997, by correspondence
with the custodian and brokers; where replies were not received from
brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Municipal Cash Series as of May 31, 1997, the results of its
operations, the changes in its net assets, and its financial
highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
July 8, 1997
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
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
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
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
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 fund's prospectus, which
contain facts concerning its objective and policies, management fees,
expenses and other information.
MUNICIPAL CASH
SERIES
ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1997
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Cusip 147551303
0062903 (7/97)
[Graphic]
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Prime
Cash Series, a portfolio of Cash Trust Series, Inc., which covers the
twelve-month period from June 1, 1996, through May 31, 1997. The
report begins with a commentary by the fund's portfolio manager,
followed by a complete listing of the fund's investments on the last
day of the reporting period, and its financial statements.
Prime Cash Series is a practical way to help your cash earn daily
income -- while offering you the additional advantages of daily
liquidity and stability of principal.* The fund invests in
high-quality, short-term securities. At the end of the reporting
period, the portfolio was invested primarily in commercial paper
(46.5%) and variable rate obligations (25.4%). It also held positions
in repurchase agreements (10.9%) and time deposits (8.0%), as well as
other money market securities.
Dividends paid to shareholders during the reporting period totaled
$0.05 per share. At the end of the reporting period, the fund's total
net assets surpassed the $2 billion mark.
As always, we thank you for keeping your ready cash working through
Prime Cash Series. Please contact your investment representative if
you have any questions. We look forward to keeping you up-to-date on
your investment.
Sincerely,
[Graphic]
Richard B. Fisher
President
July 15, 1997
* Money market funds seek to maintain a stable net asset value of $1.00.
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
Prime Cash Series invests in money market instruments maturing in
thirteen 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 one of the two highest
short-term rating categories 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.
After keeping monetary policy on hold for over one year, the Federal
Reserve Board (the "Fed") voted to raise the federal funds target rate
by 0.25% to 5.50% on March 25, 1997. Fed Chairman Alan Greenspan
characterized the tightening as "insurance" against future inflation.
The reporting period was characterized by a fair amount of market
volatility, as sentiment regarding the need for a more restrictive
monetary policy swayed back-and-forth. Amid strong economic growth
well above the 2.00% to 2.50% range in the summer of 1996, fears of an
imminent Fed tightening gripped the short-term markets. Economic
growth slowed in the third quarter of 1996 to a more manageable 2.10%.
Continued evidence of benign inflationary pressures brought comfort to
market participants, and short-term interest rates declined steadily
through October 1996 as a result. The market then traded within a
fairly narrow range for the next few months, with the exception of
year-end technical pressures in commercial paper rates, as the overall
economic fundamentals changed little.
However, persistent above-trend economic growth in the first quarter
of 1997 -- at 5.80% -- began to weigh heavily on the market in light
of tight labor market conditions. Short-term interest rates then
started to rise in late February 1997, spurred onward by a
particularly hawkish Humphrey-Hawkins testimony by Fed Chairman Alan
Greenspan late in the month, in which he indicated that the transitory
factors preventing a rise in wages in the face of fairly robust growth
may be ending. By the time of the Fed tightening in late March 1997,
much of the move had already been priced into the financial markets.
In the following weeks, short-term interest rates traded within a
relatively narrow range as market participants debated the timing of
the next tightening.
Thirty-day commercial paper started the reporting period at 5.30% on
June 3, 1996, and held very close to that level trading in the 5.25%
to 5.40% range until March 25, 1997, when the Fed raised the federal
funds rate. At that time, rates settled into the 5.50% to 5.55% level,
reflecting a 5.50% federal funds target rate. Commercial paper rates
have continued to hover in the same range since the federal funds rate
increase.
The money market yield curve steepened slightly throughout the
reporting period. One-month commercial paper rates rose 0.23% while
six-month rates rose 0.27%.
The target average maturity range for the fund began the reporting
period at 40 to 50 days, and was subsequently shortened to a 35- to
45-day range in July 1996, reflecting the changing economic and
monetary sentiment. In structuring the fund, there is continued
emphasis placed on positioning 30% to 35% of the fund's core assets in
variable rate demand notes and accomplishing a modest barbell
structure.
During the twelve-month period ended May 31, 1997, the total net
assets of the fund increased from $1.5 billion to more than $2.3
billion while the seven-day net yield increased from 4.42% to 4.70%.*
The effective average maturity of the fund on May 31, 1997, was 45
days.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary.
PRIME CASH SERIES
PORTFOLIO OF INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CERTIFICATE OF DEPOSIT -- 5.3%
BANKING -- 5.3%
$ 15,000,000 Australia & New Zealand Banking Group, Melbourne, 5.420%,
8/20/1997 $ 15,000,622
20,000,000 Bank of Scotland, Edinburgh, 5.480%, 6/13/1997 20,000,065
15,000,000 Bayerische Vereinsbank AG, Munich, 5.530%, 7/10/1997 15,000,158
15,000,000 MBNA America Bank, N.A., 5.750%, 8/5/1997 15,000,000
15,000,000 National Australia Bank, Ltd., Melbourne, 5.505%, 8/6/1997 15,000,134
45,000,000 Societe Generale, Paris, 5.430% - 5.590%, 8/11/1997 - 9/3/1997 45,000,626
TOTAL CERTIFICATE OF DEPOSIT 125,001,605
(A)COMMERCIAL PAPER -- 46.5%
BANKING -- 14.4%
10,000,000 ABN AMRO N.A., Finance, Inc., (Guaranteed by ABN AMRO Bank
N.V., Amsterdam), 5.921%, 10/15/1997 9,782,778
55,000,000 Abbey National N.A. Corp., (Guaranteed by Abbey National Bank
PLC, London), 5.419% - 5.869%, 6/12/1997 - 10/10/1997 54,399,870
15,000,000 Bank of Nova Scotia, Toronto, 5.604%, 7/14/1997 14,902,354
18,000,000 Canadian Imperial Holdings, Inc., (Guaranteed by Canadian Imperial
Bank of Commerce, Toronto), 5.424% - 5.435%, 8/25/1997 - 8/27/1997 17,773,060
25,000,000 Commonwealth Bank of Australia, Sydney, 5.520% - 5.540%,
7/21/1997 - 7/24/1997 24,807,391
20,000,000 Den Danske Corp., Inc., (Guaranteed by Den Danske Bank A/S),
5.858%, 11/26/1997 19,437,322
15,000,000 Lloyds Bank PLC, London, 5.857%, 10/9/1997 14,691,792
10,000,000 National Australia Funding, Inc., (Guaranteed by National Australia
Bank, Ltd., Melbourne), 5.613%, 9/16/1997 9,837,717
17,000,000 PEMEX Capital, Inc., (Swiss Bank Corp., Basle LOC), 5.449%,
8/11/1997 16,822,135
15,000,000 Royal Bank of Canada, Montreal, 5.499%, 7/14/1997 14,904,146
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMERCIAL PAPER -- CONTINUED
BANKING -- CONTINUED
$ 35,000,000 Societe Generale North America, Inc., (Guaranteed by Societe
Generale, Paris), 5.604% - 5.920%, 9/10/1997 - 11/3/1997 $ 34,370,174
80,000,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska
Handelsbanken, Stockholm), 5.530% - 5.920%, 7/23/1997 - 12/2/1997 78,497,992
15,000,000 Toronto Dominion Holdings (USA), Inc., (Guaranteed by
Toronto-Dominion Bank), 5.457%, 6/13/1997 14,973,450
15,000,000 Westpac Capital Corp., (Guaranteed by Westpac Banking Corp. Ltd.),
5.455%, 8/11/1997 14,842,912
Total 340,043,093
BROKERAGE -- 3.6%
30,000,000 Credit Suisse First Boston, 5.443% - 5.701%, 6/11/1997 - 7/2/1997 29,911,729
55,000,000 Merrill Lynch & Co., Inc., 5.699% - 5.762%, 7/2/1997 - 8/28/1997 54,409,631
Total 84,321,360
FINANCE - AUTOMOTIVE -- 3.5%
84,000,000 General Motors Acceptance Corp., 5.530% - 6.016%,
7/10/1997 - 11/10/1997 82,502,998
FINANCE - COMMERCIAL -- 19.8%
36,500,000 Alpha Finance Corp., Ltd., 5.445% - 5.816%, 6/3/1997 - 9/24/1997 36,210,024
63,000,000 Asset Securitization Cooperative Corp., 5.681% - 5.726%,
6/26/1997 - 8/18/1997 62,570,381
69,500,000 Beta Finance, Inc., 5.425% - 5.920%, 6/12/1997 - 11/10/1997 68,582,834
10,000,000 CIT Group Holdings, Inc., 5.603%, 6/2/1997 9,998,444
10,000,000 CXC, Inc., 5.680%, 8/19/1997 9,877,111
25,000,000 Corporate Asset Funding Co., Inc. (CAFCO), 5.419% - 5.682%,
6/5/1997 - 6/27/1997 24,933,400
10,000,000 FINOVA Capital Corp., 5.746%, 7/9/1997 9,940,150
40,000,000 Falcon Asset Securitization Corp., 5.424% - 5.736%,
6/5/1997 - 8/20/1997 39,782,642
22,000,000 General Electric Capital Corp., 5.442% - 5.465%, 6/6/1997 - 8/11/1997 21,886,244
101,431,000 Greenwich Funding Corp., 5.423% - 5.745%, 6/9/1997 - 8/29/1997 100,746,234
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMERCIAL PAPER -- CONTINUED
FINANCE - COMMERCIAL -- CONTINUED
$ 70,750,000 Preferred Receivables Funding Co. (PREFCO), 5.424% - 5.941%,
6/11/1997 - 11/12/1997 $ 69,786,761
14,774,000 Sheffield Receivables Corp., 5.423% - 5.475%, 6/2/1997 - 6/16/1997 14,750,790
Total 469,065,015
FINANCE - RETAIL -- 4.0%
55,000,000 Associates Corp. of North America, 5.628% - 5.733%,
6/2/1997 - 7/30/1997 54,900,328
29,000,000 New Center Asset Trust, A1+/P1 Series, 5.496% - 5.939%,
7/7/1997 - 10/24/1997 28,664,121
10,000,000 Norwest Financial, Inc., 5.752%, 7/29/1997 9,908,650
Total 93,473,099
INSURANCE -- 0.4%
10,000,000 CommoLoCo, (Guaranteed by American General Corp.), 5.964%,
10/27/1997 9,761,967
OIL & OIL FINANCE -- 0.4%
10,000,000 Chevron Transport Corp., (Guaranteed by Chevron Corp.), 5.702%,
8/14/1997 9,884,478
PHARMACEUTICALS & HEALTH CARE -- 0.4%
10,000,000 Glaxo Wellcome PLC, 5.393%, 6/3/1997 9,997,044
TOTAL COMMERCIAL PAPER 1,099,049,054
(B)NOTES - VARIABLE -- 25.4%
BANKING -- 17.2%
4,385,000 Aurora City, IL, (Series 1995), (First of America Bank - Illinois LOC),
5.938%, 6/5/1997 4,385,000
875,000 Avalon Hotel Associates, (Corestates Bank N.A., Philadelphia, PA
LOC), 5.880%, 6/5/1997 875,000
45,000,000 Bank One N.A., Columbus, OH, 5.610%, 6/3/1997 44,996,449
20,000,000 Bank One N.A., Milwaukee, WI, 5.600%, 6/3/1997 19,994,831
11,875,000 Congregate Care Corp., (Union Bank of California LOC), 5.890%,
6/4/1997 11,875,000
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)NOTES - VARIABLE -- CONTINUED
BANKING -- CONTINUED
$ 1,480,000 Denver Urban Renewal Authority, (Series 1992-B), (Banque Paribas,
Paris LOC), 5.950%, 6/5/1997 $ 1,480,000
6,100,000 Dewberry III, LP, (First National Bank of Maryland, Baltimore LOC),
5.913%, 6/5/1997 6,100,000
7,500,000 Euclid Superior Parking, (KeyBank, N.A. LOC), 5.880%, 6/6/1997 7,500,000
2,510,000 Gahanna OH, City of, Franklin Steel Company Project, (Star Bank,
N.A., Cincinnati LOC), 5.800%, 6/5/1997 2,510,000
11,135,000 HJH Associates of Alabama, Hilton Hotel, Huntsville, (SouthTrust
Bank of Alabama, Birmingham LOC), 5.800%, 6/5/1997 11,135,000
5,200,000 Kenny, Donald R. and Cheryl A., (Series 1996-C), (Star Bank, N.A.,
Cincinnati LOC), 5.800%, 6/5/1997 5,200,000
2,290,000 Lake Sherwood Senior Living Center, LLC, (Union Planters NB,
Memphis, TN LOC), 6.000%, 6/5/1997 2,290,000
51,000,000 Liquid Asset Backed Securities Trust, (Series 1996-3), (Westdeutsche
Landesbank Girozentrale Swap Agreement), 5.708%, 6/16/1997 51,000,000
45,000,000 Liquid Asset Backed Securities Trust, (Series 1997-1), (Westdeutsche
Landesbank Girozentrale Swap Agreement), 5.688%, 6/16/1997 45,000,000
4,010,000 Maryland State IDFA, (Genetic Therapy, Inc.), (First National Bank of
Maryland, Baltimore LOC), 5.830%, 6/9/1997 4,010,000
2,834,000 Maryland State IDFA, (Human Genome), (Series 1994), (First National
Bank of Maryland, Baltimore LOC), 5.830%, 6/9/1997 2,834,000
5,800,000 Maryland State IDFA, (Kelly Springfield Tire), (First National Bank of
Maryland, Baltimore LOC), 5.930%, 6/9/1997 5,800,000
18,000,000 National Funding Corp., (Series 1994-A), (American National Bank,
Chicago LOC), 5.660%, 6/5/1997 18,000,000
655,000 New Jersey EDA, (Series 1992 K-3), (Banque Nationale de Paris LOC),
5.996%, 6/9/1997 655,000
3,875,000 New Jersey EDA, (Series 1992-H), (Banque Nationale de Paris LOC),
5.871%, 6/9/1997 3,875,000
2,000,000 Pelham City, IDB, (Columbus Bank and Trust Co., GA LOC), 5.950%,
6/5/1997 2,000,000
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)NOTES - VARIABLE -- CONTINUED
BANKING -- CONTINUED
$ 5,875,000 Pelham City, IDB, (Columbus Bank and Trust Co., GA LOC), 5.950%,
6/5/1997 $ 5,875,000
5,900,000 Pennsylvania EDFA, (Series 1993-C), (Barclays Bank PLC, London
LOC), 5.800%, 6/4/1997 5,900,000
49,632,625 Rabobank Optional Redemption Trust, (Series 1997-101), 5.852%,
6/16/1997 49,632,625
30,000,000 SMM Trust, (Series 1996-B), (Morgan Guaranty Trust Co., New York
Swap Agreement), 5.738%, 6/1/1997 30,000,000
10,000,000 SMM Trust, (Series 1996-L), (Morgan Guaranty Trust Co., New York
Swap Agreement), 5.738%, 6/16/1997 10,000,000
2,200,000 Saegertown Manufacturing Corp., (PNC Bank, N.A. LOC), 5.757%,
6/9/1997 2,200,000
4,975,000 Southeast Regional Holdings, LLC, (Series 1995-A), (Columbus Bank
and Trust Co., GA LOC), 5.950%, 6/5/1997 4,975,000
5,400,000 Sun Valley, Inc., (SouthTrust Bank of Georgia, Atlanta LOC), 5.800%,
6/6/1997 5,400,000
3,670,000 Toledo Medical Building I LP, (Huntington National Bank, Columbus,
OH LOC), 6.360%, 11/1/1997 3,670,000
19,275,000 Union Development Co., (Bank of America NT and SA, San Francisco,
CA LOC), 5.770%, 6/5/1997 19,275,000
5,175,000 United Jewish Federation of Greater Pittsburgh VRDB, (Series 1995A),
(PNC Bank, N.A. LOC), 5.600%, 6/3/1997 5,175,000
6,520,000 Van Dyne Crotty Co., (Huntington National Bank, Columbus, OH
LOC), 5.750%, 6/5/1997 6,520,000
5,760,000 Woodbury Business Forms, Inc./Carribean Business Forms, (Series
1996) Taxable Revenue Bonds, (Columbus Bank and Trust Co., GA
LOC), 5.950%, 6/5/1997 5,760,000
Total 405,897,905
FINANCE - EQUIPMENT -- 0.8%
20,000,000 Comdisco, Inc., 5.933%, 8/26/1997 20,000,000
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)NOTES - VARIABLE -- CONTINUED
FINANCE - RETAIL -- 1.9%
$ 21,000,000(c)AFS Insurance Premium Receivables Trust, (Series 1994-A), 6.244%,
6/16/1997 $ 21,000,000
23,000,000 Carco Auto Loan Master Trust 1993-2, (Series 1993-2 Class A1), 5.705%,
6/16/1997 23,000,000
Total 44,000,000
INSURANCE -- 5.5%
60,000,000 General American Life Insurance Company, 5.888%, 6/23/1997 60,000,000
40,000,000(c)SunAmerica Life Insurance Company, 5.780% - 5.788%, 6/1/1997 40,000,000
30,000,000 Transamerica Occidental Life Insurance Company, 5.859%, 8/6/1997 30,000,000
Total 130,000,000
TOTAL NOTES -- VARIABLE 599,897,905
SHORT-TERM NOTES -- 4.0%
BANKING -- 1.1%
12,000,000(c)SALTS II Cayman Islands Corp., (Bankers Trust Co., New York LOC),
5.613%, 6/19/1997 12,000,000
15,000,000(c)SALTS III Cayman Island Corp., (Bankers Trust International, PLC
Swap Agreement), 5.788%, 7/23/1997 15,000,000
Total 27,000,000
BROKERAGE -- 1.5%
35,000,000 (c)Goldman Sachs Group, LP, 5.850%, 7/28/1997 35,000,000
FINANCE - AUTOMOTIVE -- 0.9%
20,368,539 Chase Manhattan Auto Owner Trust 1997-A, 5.545%, 4/10/1998 20,368,539
60,794 Olympic Automobile Receivables Trust 1996-D, 5.430%, 12/15/1997 60,794
Total 20,429,333
FINANCE - EQUIPMENT -- 0.5%
9,551,687 Capita Equipment Receivables Trust 1996-1, 5.600%, 10/15/1997 9,551,687
1,619,017 Navistar Financial 1996-B Owner Trust, 5.490%, 11/20/1997 1,619,017
Total 11,170,704
TOTAL SHORT-TERM NOTES $ 93,600,037
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
TIME DEPOSIT -- 8.0%
BANKING -- 8.0%
$65,000,000 Bank of Tokyo-Mitsubishi Ltd., 5.625% - 5.656%, 6/2/1997 $ 65,000,000
25,000,000 Chase Manhattan Bank (USA) N.A., Wilmington DE, 5.625%, 6/2/1997 25,000,000
75,000,000 Royal Bank of Canada, Montreal, 5.625%, 6/2/1997 75,000,000
25,000,000 Toronto-Dominion Bank, 5.625%, 6/2/1997 25,000,000
TOTAL TIME DEPOSIT 190,000,000
(D)REPURCHASE AGREEMENTS -- 10.9%
44,000,000 Bear, Stearns and Co., 5.550%, dated 5/30/1997, due 6/2/1997 44,000,000
30,000,000 Chase Government Securities, Inc., 5.600%, dated 5/30/1997,
due 6/2/1997 30,000,000
52,000,000 Fuji Government Securities, Inc., 5.570%, dated 5/30/1997,
due 6/2/1997 52,000,000
31,395,000 PaineWebber Group, Inc., 5.570%, dated 5/30/1997, due 6/2/1997 31,395,000
30,000,000 Prudential Securities, Inc., 5.590%, dated 5/30/1997, due 6/2/1997 30,000,000
35,000,000 Swiss Bank Capital Markets, 5.530%, dated 5/30/1997, due 6/2/1997 35,000,000
35,000,000 UBS Securities, Inc., 5.520%, dated 5/30/1997, due 6/2/1997 35,000,000
TOTAL REPURCHASE AGREEMENTS 257,395,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $ 2,364,943,601
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for
discount issues, or the coupon for interest bearing issues.
(b) 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, 1997, these
securities amounted to $102,000,000 which represents 4.3% 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
($2,363,381,880) at May 31, 1997.
The following acronyms are used throughout this portfolio:
EDA -- Economic Development Authority EDFA -- Economic Development
Financing Authority IDB -- Industrial Development Bond IDFA --
Industrial Development Finance Authority LLC -- Limited Liability
Corporation LOC -- Letter of Credit LP -- Limited Partnership PLC --
Public Limited Company SA -- Support Agreement VRDB -- Variable Rate
Demand Bond
(See Notes which are an integral part of the Financial Statements)
PRIME CASH SERIES
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 257,395,000
Investments in securities 2,107,548,601
Total investments in securities, at amortized cost and value $ 2,364,943,601
Cash 2,899,522
Income receivable 5,822,158
Receivable for shares sold 343,218
Total assets 2,374,008,499
LIABILITIES:
Payable for shares redeemed 5,362,521
Income distribution payable 3,781,781
Accrued expenses 1,482,317
Total liabilities 10,626,619
NET ASSETS for 2,363,381,880 shares outstanding $ 2,363,381,880
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$2,363,381,880 / 2,363,381,880 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME CASH SERIES
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $117,488,699
EXPENSES:
Investment advisory fee $ 10,596,936
Administrative personnel and services fee 1,601,019
Custodian fees 221,250
Transfer and dividend disbursing agent fees and expenses 4,433,731
Directors'/Trustees' fees 22,157
Auditing fees 13,425
Legal fees 9,867
Portfolio accounting fees 143,317
Distribution services fee 2,119,387
Shareholder services fee 5,298,468
Share registration costs 326,622
Printing and postage 274,607
Insurance premiums 18,168
Taxes 164,412
Miscellaneous 17,258
Total expenses 25,260,624
Waiver of investment advisory fee (4,185,437)
Net expenses 21,075,187
Net investment income $ 96,413,512
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME CASH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 96,413,512 $ 63,907,688
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (96,413,512) (63,907,688)
SHARE TRANSACTIONS --
Proceeds from sale of shares 9,031,450,524 6,213,736,052
Net asset value of shares issued to shareholders in payment of
distributions declared 90,848,174 60,421,530
Cost of shares redeemed (8,298,152,325) (5,762,005,353)
Change in net assets resulting from share transactions 824,146,373 512,152,229
Change in net assets 824,146,373 512,152,229
NET ASSETS:
Beginning of period 1,539,235,507 1,027,083,278
End of period $ 2,363,381,880 $1,539,235,507
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME CASH SERIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996 1995 1994 1993 1992 1991 1990(A)
<S> <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
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.02 0.03 0.04 0.07 0.06
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (0.05) (0.05) (0.02) (0.03) (0.04) (0.07) (0.06)
NET ASSET VALUE, END OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD
TOTAL RETURN(B) 4.64% 4.90% 4.60% 2.48% 2.61% 4.37% 6.99% 6.56%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.99% 0.99% 0.99% 0.99% 0.99% 0.98% 0.94% 0.73%*
Net investment income 4.55% 4.78% 4.57% 2.45% 2.58% 4.21% 6.50% 7.82%*
Expense 0.20% 0.38% 0.20% 0.18% 0.15% 0.22% 0.44% 0.46%*
waiver/reimbursement(c)
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $2,363,382 $1,539,235 $1,027,083 $791,147 $796,832 $750,016 $562,465 $189,254
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 18, 1989 (date of
initial public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) 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)
PRIME CASH SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. ORGANIZATION
Cash Series Trust, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an
open-end, management investment company. The Corporation consists of
four portfolios. The financial statements included herein are only
those of Prime Cash Series (the "Fund"). The financial statements of
the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to
the portfolio in which shares are held. The investment objective of
the Fund is current income consistent with stability of principal and
liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS -- The Fund 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 Fund 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 Fund 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 Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers,
which are deemed by the Fund's adviser to be creditworthy pursuant
to the guidelines and/or standards reviewed or established by the
Board of Directors (the "Directors"). Risks may arise from the
potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund 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 Fund'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 Fund may
engage in when-issued or delayed delivery transactions. The Fund
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. In some cases,
the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense either upon demand
by the Fund or in connection with another registered offering of
the securities. Many restricted securities may be resold in the
secondary market in transactions exempt from registration. Such
restricted securities may be determined to be liquid under criteria
established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted
securities are valued at the price provided by dealers in the
secondary market or, if no market prices are available, at the fair
value as determined by the Fund's pricing committee.
Additional information on each restricted security held at May 31,
1997 is as follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
AFS Insurance Premium Receivables Trust 8/16/94 - 8/28/96 $21,000,000
Goldman Sachs Group, LP 4/28/97 35,000,000
SALTS II Cayman Islands Corp. 3/12/97 12,000,000
SALTS III Cayman Islands Corp. 1/21/97 15,000,000
Sun America Life Insurance Company 5/28/97 15,000,000
</TABLE>
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. CAPITAL STOCK
At May 31, 1997, there were 12,500,000,000 shares ($0.001 par value
per share) authorized. At May 31, 1997, capital paid-in aggregated
$2,363,381,180. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
Shares sold 9,031,450,524 6,213,736,052
Shares issued to shareholders in payment of distributions declared 90,848,174 60,421,530
Shares redeemed (8,298,152,325) (5,762,005,353)
Net change resulting from share transactions 824,146,373 512,152,229
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's
investment adviser (the "Adviser"), receives for its services an
annual investment advisory fee equal to 0.50% of the Fund'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 Fund 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.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the
terms of the Plan, the Fund will reimburse Federated Securities
Corp., ("FSC"), the principal distributor, from the net assets of
the Fund to finance activities intended to result in the sale of
the Fund's shares. The Plan provides that the Fund may incur
distribution expenses up to 0.35% of the average daily net assets
of the Fund shares, annually, to reimburse FSC.
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder
Services Agreement with Federated Shareholder Services, ("FSS"),
the Fund will pay FSS up to 0.25% of average daily net assets of
the Fund for the period. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder
accounts.
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
Fund. 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 Fund's accounting
records for which it receives a fee. The fee is based on the level
of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
GENERAL -- Certain of the Officers and Directors of the Corporation
are Officers and Directors or Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
CASH TRUST SERIES, INC. and Shareholders of
PRIME CASH SERIES:
We have audited the accompanying statement of assets and liabilities
of Prime Cash Series (one of the portfolios comprising Cash Trust
Series, Inc.) including the portfolio of investments, as of May 31,
1997, the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended May 31, 1997
and 1996, and the financial highlights for the periods presented.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned as of May 31, 1997, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Prime Cash Series as of May 31, 1997, the results of its operations,
the changes in its net assets and its financial highlights for the
respective stated periods in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
July 8, 1997
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
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
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
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
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 fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses and other information.
PRIME
CASH
SERIES
ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1997
FEDERATED INVESTORS
Federated Securities Corp., Distributor
[Graphic]
Cusip 147551105
0062904 (7/97)
[Graphic]
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Treasury
Cash Series, a portfolio of Cash Trust Series, Inc., which covers the
twelve-month period from June 1, 1996, through May 31, 1997. The
report begins with a commentary by the fund's portfolio manager,
followed by a complete listing of the fund's investments on the last
day of the reporting period, and its financial statements.
Treasury Cash Series is a highly conservative way to help your ready
cash earn daily income -- while offering you the advantages of daily
liquidity and stability of principal.* The fund invests in some of the
safest investments available -- short-term U.S. Treasury obligations
or repurchase agreements backed by these obligations.
Dividends paid to shareholders during the reporting period totaled
$0.04 per share. At the end of the reporting period, the fund's total
net assets reached $771.2 million.
As always, we thank you for keeping your ready cash working through
the relative safety of Treasury Cash Series. Please contact your
investment representative if you have any questions.
Sincerely,
[Graphic]
Richard B. Fisher
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 not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
Treasury Cash Series is invested in direct obligations of the U.S. Treasury,
either in the form of notes and bills or as collateral for repurchase
agreements. The fund is rated AAAm by Standard & Poor's Ratings Group
("S&P") and Aaa by Moody's Investors Service, Inc. ("Moody's").*
After keeping monetary policy on hold for over a year, the Federal
Reserve Board (the "Fed") voted to raise the federal funds target rate
by 0.25% on March 25, 1997, from 5.25% to 5.50%. The move was seen as
being preemptive against inflation in the face of persistent demand.
The reporting period was characterized by a fair amount of market
volatility, as sentiment regarding the need for a more restrictive
monetary policy swayed back and forth.
Amid strong economic growth well above the 2.00% to 2.50% thought to
be the non-inflationary potential in the summer of 1996, fears of an
imminent Fed tightening gripped the short-term markets. Economic
growth slowed in the third quarter of 1996 to a more manageable 2.10%.
Continued evidence of benign inflationary pressures brought comfort to
market participants, and short-term interest rates declined steadily
through November 1996 as a result. The market then traded within a
fairly narrow range for the next few months, as the overall economic
fundamentals changed little.
However, persistent above-trend economic growth in the first quarter
of 1997 -- at 5.80% -- began to weigh heavily on the market in light
of tight labor market conditions. Short-term interest rates then
started to rise in late February 1997, spurred onward by a
particularly hawkish Humphrey-Hawkins testimony by Fed Chairman Alan
Greenspan late in the month, in which he indicated that the transitory
factors preventing a rise in wages in the face of fairly robust growth
may be ending. By the time of the Fed tightening in late March 1997,
much of the move had already been priced into the financial markets.
In the following weeks, short-term interest rates traded within a
relatively narrow range as market participants debated the timing of
the next tightening. As signs of a weakening in consumer demand
finally appeared, rates declined in late April 1997 and throughout May
1997. The decline in rates offered on U.S. Treasury bills over this
reporting period, however, was exacerbated by technical factors -- in
particular, a reduction in the overall auction sizes of U.S. Treasury
bills due to larger-than-expected tax receipts at the U.S. Treasury.
Movements in the three-month U.S. Treasury bill over the reporting
period reflected both the shifting market sentiment regarding the Fed
and these technical influences. Beginning the reporting period at
5.20%, the yield on the three-month bill declined to close to 5.00% in
early December 1996, then rose to 5.40% in advance of the tightening
by the Fed in March 1997. Since that time, as the effects of reduced
supply have gripped the front end of the market, the yield on this
security has fallen to 5.00% once more. Overall, the slope of the
front end of the U.S. Treasury yield curve steepened by 27 basis
points over the reporting period, with most of that due to the decline
in yield on the three-month U.S. Treasury bill.
The fund was targeted in a 35- to 45-day average maturity range
throughout the reporting period, which mostly represents a neutral
stance for the portfolio. The average maturity of the fund varied
within that range according to relative value opportunities available
in the short-term U.S. Treasury and repurchase agreement markets. The
fund remained barbelled in structure, combining repurchase agreements
with purchases of fixed rate U.S. Treasury securities with longer
maturities. We reduced our holdings of U.S. Treasury bills within the
portfolio from 10% to 3%, and added to our positions of U.S. Treasury
coupon securities -- where wide spreads made these investments more
attractive -- and term repurchase agreements, which offered value
relative to overnight repurchase agreements. With a friendly inflation
picture and signs of a slowing in the demand side of the economy, we
would expect the Fed to remain on hold in the near future, and the
fund will likely maintain its current positioning.
* An AAAm rating is obtained after S&P evaluates a number of factors,
including credit quality, market price exposure and management. S&P
monitors the portfolio weekly for developments that could cause
changes in the ratings. 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. These ratings do not remove market risks and
are subject to change.
TREASURY CASH SERIES
PORTFOLIO OF INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S> <C>
SHORT-TERM U.S. TREASURY OBLIGATIONS -- 16.3%
(A)U.S. TREASURY BILLS -- 3.0%
$ 24,500,000 5.42% - 6.03%, 11/13/1997 - 5/28/1998 $
23,533,155
U.S. TREASURY NOTES -- 13.3%
102,000,000 5.00% - 7.875%, 8/31/1997 - 5/31/1998
102,455,485
TOTAL SHORT-TERM U.S. TREASURY OBLIGATIONS
125,988,640
(B)REPURCHASE AGREEMENTS -- 83.1%
20,000,000 BA Securities, Inc., 5.55%, dated 5/30/1997, due 6/2/1997
20,000,000
35,000,000 BT Securities Corporation, 5.56%, dated 5/30/1997, due 6/2/1997
35,000,000
35,000,000 Bank of Tokyo-Mitsubishi Ltd., 5.57%, dated 5/30/1997, due 6/2/1997
35,000,000
35,000,000 Barclays de Zoete Wedd Securities, Inc., 5.55%, dated 5/30/1997,
due 6/2/1997
35,000,000
35,000,000 Bear, Stearns and Co., 5.55%, dated 5/30/1997, due 6/2/1997
35,000,000
35,000,000 CIBC Wood Gundy Securities Corp., 5.52%, dated 5/30/1997,
due 6/2/1997
35,000,000
35,000,000 Chase Government Securities, Inc., 5.50%, dated 5/30/1997,
due 6/2/1997
35,000,000
35,000,000 Dean Witter Reynolds, Inc., 5.55%, dated 5/30/1997, due 6/2/1997
35,000,000
35,000,000 Deutsche Bank Government Securities, Inc., 5.57%, dated 5/30/1997,
due 6/2/1997
35,000,000
35,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.52%,
dated 5/30/1997, due 6/2/1997
35,000,000
35,000,000 First Union Capital Markets, 5.52%, dated 5/30/1997, due 6/2/1997
35,000,000
14,000,000 (c)Goldman Sachs Group, LP, 5.44%, dated 5/23/1997, due 7/3/1997
14,000,000
35,000,000 Greenwich Capital Markets, Inc., 5.55%, dated 5/30/1997,
due 6/2/1997
35,000,000
35,000,000 Harris Government Securities, Inc., 5.55%, dated 5/30/1997,
due 6/2/1997
35,000,000
35,000,000 Societe Generale, 5.54%, dated 5/30/1997, due 6/2/1997
35,000,000
18,000,000 (c)Swiss Bank Capital Markets, 5.51%, dated 4/3/1997, due 6/2/1997
18,000,000
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S> <C>
(B)REPURCHASE AGREEMENTS -- CONTINUED
$ 12,900,000 Swiss Bank Capital Markets, 5.55%, dated 5/30/1997, due 6/2/1997 $
12,900,000
35,000,000 Toronto Dominion Securities (USA), Inc., 5.53%, dated 5/30/1997,
due 6/2/1997
35,000,000
15,000,000 (c)UBS Securities, Inc., 5.50%, dated 4/2/1997, due 6/2/1997
15,000,000
35,000,000 UBS Securities, Inc., 5.57%, dated 5/30/1997, due 6/2/1997
35,000,000
35,000,000 Westdeutsche Landesbank Girozentrale, 5.52%, dated 5/30/1997,
due 6/2/1997
35,000,000
TOTAL REPURCHASE AGREEMENTS
639,900,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(D) $
765,888,640
</TABLE>
(a) Each issue shows the rate of discount at time of purchase.
(b) 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.
(c) 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.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($771,163,822) at May 31, 1997.
The following acronym is used throughout this portfolio:
LP -- Limited Partnership
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 639,900,000
Investments in securities 125,988,640
Total investments in securities, at amortized cost and value $
765,888,640
Cash
79,932
Income receivable
2,279,288
Receivable for investment matured
4,000,000
Receivable for shares sold
556,172
Total assets
772,804,032
LIABILITIES:
Payable for shares redeemed 50,568
Income distribution payable 1,337,257
Accrued expenses 252,385
Total liabilities
1,640,210
NET ASSETS for 771,163,822 shares outstanding $
771,163,822
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$771,163,822 / 771,163,822 shares
outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $
38,058,240
EXPENSES:
Investment advisory fee $ 3,518,991
Administrative personnel and services fee 531,651
Custodian fees 118,912
Transfer and dividend disbursing agent fees and expenses 249,287
Directors'/Trustees' fees 12,145
Auditing fees 13,425
Legal fees 5,017
Portfolio accounting fees 109,084
Distribution services fee 703,798
Shareholder services fee 1,759,496
Share registration costs 76,854
Printing and postage 44,970
Insurance premiums 7,161
Taxes 59,812
Miscellaneous 21,246
Total expenses 7,231,849
Waiver of investment advisory fee (233,279)
Net expenses
6,998,570
Net investment income $
31,059,670
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATION --
Net investment income $ 31,059,670 $
28,646,187
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (31,059,670)
(28,646,187)
SHARE TRANSACTIONS --
Proceeds from sale of shares 3,450,893,937
3,620,620,510
Net asset value of shares issued to shareholders in payment of
distributions declared 24,708,694
22,590,400
Cost of shares redeemed (3,298,168,881)
(3,473,572,068)
Change in net assets resulting from share transactions 177,433,750
169,638,842
Change in net assets 177,433,750
169,638,842
NET ASSETS:
Beginning of period 593,730,072
424,091,230
End of period $ 771,163,822 $
593,730,072
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996 1995 1994 1993 1992 1991
1990(A)
<S> <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
INCOME FROM
INVESTMENT OPERATIONS
Net investment income 0.04 0.05 0.04 0.02 0.02 0.04
0.07 0.02
LESS DISTRIBUTIONS
Distributions from
net investment income (0.04) (0.05) (0.04) (0.02) (0.02) (0.04)
(0.07) (0.02)
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00
TOTAL RETURN(B) 4.50% 4.83% 4.34% 2.37% 2.47% 4.24%
6.83% 2.42%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.99% 0.99% 0.99% 0.99% 0.99% 0.98%
0.88% 0.60%*
Net investment income 4.41% 4.70% 4.26% 2.33% 2.46% 4.18%
6.39% 7.75%*
Expense waiver/
reimbursement(c) 0.03% 0.29% 0.08% 0.10% 0.04% 0.04%
0.22% 0.44%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $771,164 $593,730 $424,091 $427,005 $532,334 $638,761
$713,430 $127,800
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 7, 1990 (date of
initial public investment) to May 31, 1990.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) 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)
TREASURY CASH SERIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1997
1. ORGANIZATION
Cash Series Trust, Inc. (the "Corporation") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an
open-end, management investment company. The Corporation consists of
four portfolios. The financial statements included herein are only
those of Treasury Cash Series (the "Fund"). The financial statements
of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to
the portfolio in which shares are held. The investment objective of
the Fund is current income consistent with stability of principal and
liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS -- The Fund'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 Fund 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 Fund 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 Fund will only enter into repurchase agreements with banks and
other recognized financial institutions, such as broker/dealers,
which are deemed by the Fund's adviser to be creditworthy pursuant
to the guidelines and/or standards reviewed or established by the
Board of Directors (the "Directors"). Risks may arise from the
potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund 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 Fund'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 Fund may engage
in when-issued or delayed delivery transactions. The Fund 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.
3. CAPITAL STOCK
At May 31, 1997, there were 12,500,000,000 shares ($0.001 par value
per share) authorized. At May 31, 1997, capital paid-in aggregated
$771,163,822.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1997 1996
<S> <C> <C>
Shares sold 3,450,893,937
3,620,620,510
Shares issued to shareholders in payment of distributions declared 24,708,694
22,590,400
Shares redeemed (3,298,168,881)
(3,473,572,068)
Net change resulting from share transactions 177,433,750
169,638,842
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment
adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.50% of the Fund'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 Fund 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.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the
terms of the Plan, the Fund will reimburse Federated Securities
Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the
Fund's shares. The Plan provides that the Fund may incur
distribution expenses up to 0.35% of the average daily net assets of
the Fund shares, annually, to reimburse FSC.
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder
Services Agreement with Federated Shareholder Services ("FSS"), the
Fund will pay FSS, up to 0.25% of average daily net assets of the
Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts.
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
Fund. 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 Fund's accounting
records for which it receives a fee. The fee is based on the level
of the Fund's average daily net assets for the period, plus
out-of-pocket expenses.
GENERAL -- Certain of the Officers and Directors of the Corporation
are Officers and Directors or Trustees of the above companies.
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
CASH TRUST SERIES, INC. and Shareholders of
TREASURY CASH SERIES:
We have audited the accompanying statement of assets and liabilities
of Treasury Cash Series (one of the portfolios comprising Cash Trust
Series, Inc.) including the portfolio of investments, as of May 31,
1997, the related statements of operations for the year then ended,
the statements of changes in net assets for the years ended May 31,
1997 and 1996, and the financial highlights for the periods presented.
These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of the securities owned as of May 31, 1997, by
correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of
Treasury Cash Series as of May 31, 1997, the results of its
operations, the changes in its net assets and its financial highlights
for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
July 8, 1997
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
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
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
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
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 fund's prospectus which
contains facts concerning its objective and policies, management fees,
expenses and other information.
TREASURY CASH SERIES
ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1997
[Graphic]Federated Investors
Federated Securities Corp., Distributor
Cusip 147551402
2062301 (7/97)
[Graphic]
