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 12-month period
from June 1, 1997, through May 31, 1998. The report contains 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 pursue
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 $0.05 per
share. At the end of the reporting period, the fund's total net assets reached
$557.2 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. We look forward to keeping you up to date on your
investment.
Sincerely,
[Graphic]
Richard B. Fisher
President
July 15, 1998
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no guarantee 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 may maintain a small Treasury position for liquidity purposes.
The Federal Reserve Board (the "Fed") kept monetary policy unchanged, with the
federal funds target rate at 5.50%, over the annual reporting period ended May
31, 1998. Economic fundamentals remained quite strong over the reporting period,
as gross domestic product grew at over 3.00% for the second, third, and fourth
quarters of 1997, and expanded by 5.40% in the first quarter of 1998. The growth
was spurred on by lower long-term interest rates and robust consumer spending.
Outward signs of inflation remained benign, although concerns over tight labor
markets in the face of economic growth in excess of the pace generally thought
to be non-inflationary kept Fed policy makers vigilant. All things considered,
it is likely that the Fed would have tightened monetary policy in a preemptive
move to ward off future inflationary pressures had not the crises in the Asian
economies developed toward the end of 1997. With the economies of many Asian
nations unsteady at best and with the ultimate impact of the turmoil on the
domestic economy unclear, the Fed was content to remain on the sidelines for the
next several months.
Spreads on U.S. government agency securities relative to Treasury bills
("T-bills") were historically wide over the reporting period, as the T-bill
market was heavily influenced by technical factors. A reduction in the overall
T-bill auction sizes due to stronger than expected tax receipts and continued
improvement in the budget deficit kept this sector well bid. The yield on
one-year agency discount notes opened the period at 5.90%, and traded down to
5.60% in the summer months as inflation remained benign. It then rose to 5.80%
by early October, as fears gripped the market that tight labor markets might
spark upward pressure on prices. With the intensifying Asian economic crisis and
concern about its impact on the domestic economy, the yield on this security
declined sharply to close to 5.40% in early 1998, amid speculation that the Fed
might have to ease monetary policy as a result. The yield then rebounded to end
the reporting period at 5.60%, as domestic growth remained at a robust level.
Over the reporting period, the fund was targeted in a 35- to 45-day average
maturity range, representing a neutral stance. The average maturity of the fund
varied within that range according to relative value opportunities available in
the agency market. The fund remained barbelled in structure, combining a
significant position in overnight and term repurchase agreements and floating
rate securities with purchases of agency securities with 6 to 13 month
maturities. In spite of the torrid pace of growth in the first quarter, the
economy is expected to slow in upcoming months. Inventory accumulation combined
with a net export drag may trim growth back to a more sustainable level. With
that in mind, we will likely maintain our neutral portfolio stance, as the Fed
should continue to stay on hold as long as inflation remains under control.
SHAREHOLDER MEETING RESULTS
A Special Meeting of Shareholders of Cash Trust Series, Inc. (the "Company") was
held on May 15, 1998. On February 26, 1998, the record date for shareholders
voting at the meeting, there were 5,569,771,582 total outstanding shares. The
following item was considered by shareholders of the Company and the results of
their voting were as follows:
AGENDA ITEM: To elect Directors.*
SHARES VOTED SHARES WITHHELD
FOR AUTHORITY
Thomas G. Bigley 3,096,135,538 166,988,035
John E. Murray, Jr., J.D., S.J.D. 3,096,268,650 166,854,923
Nicholas P. Constantakis 3,096,798,545 166,325,028
* The following Directors of the Company continued their terms as Directors
of the Company: John F. Donahue, John T. Conroy, Jr., William J. Copeland,
J. Christopher Donahue, James E. Dowd, Esq., Lawrence D. Ellis, M.D., Edward
L. Flaherty, Jr., Esq., Peter E. Madden, Wesley W. Posvar, Marjorie P. Smuts
PORTFOLIO OF INVESTMENTS
GOVERNMENT CASH SERIES
MAY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM OBLIGATIONS--43.0%
$ 14,000,000 (a)Federal Farm Credit Bank, Floating Rate Note 5.323%, $ 13,996,702
6/1/1998
6,000,000 Federal Farm Credit Bank, Notes 5.500% - 5.600%, 10/1/1998 - 5,994,344
4/1/1999
5,900,000 (b)Federal Home Loan Bank, Discount Notes 5.380% - 5.390%, 5,800,237
6/22/1998 - 11/12/1998
16,500,000 (a)Federal Home Loan Bank, Floating Rate Notes 5.418% - 16,495,702
5.650%, 6/3/1998 - 6/23/1998
16,500,000 Federal Home Loan Bank, Notes 5.500% - 5.705%, 10/23/1998 - 16,492,027
5/5/1999
21,000,000 (b)Federal Home Loan Mortgage Corp., Discount Notes 5.380% - 20,871,103
5.440%, 6/10/1998 - 9/30/1998
14,000,000 (a)Federal Home Loan Mortgage Corp., Floating Rate Notes 13,996,499
5.436% - 5.456%, 6/21/1998 - 6/22/1998
4,000,000 Federal Home Loan Mortgage Corp., Notes 5.550% - 5.605%, 3,997,653
3/12/1999 - 4/29/1999
60,082,000 (b)Federal National Mortgage Association, Discount Notes 59,559,997
5.300% - 5.555%, 6/2/1998 - 12/7/1998
42,000,000 (a)Federal National Mortgage Association, Floating Rate
Notes 41,979,550 5.446% - 5.655%, 6/1/1998 - 8/28/1998
26,000,000 Federal National Mortgage Association, Notes 5.360% - 7.000%, 25,991,228
6/18/1998 - 5/26/1999
7,000,000 (a)Student Loan Marketing Association, Floating Rate Note 6,998,618
5.655%, 6/2/1998
5,500,000 Student Loan Marketing Association, Notes 5.580% - 5.830%, 5,499,777
10/29/1998 - 3/11/1999
UNITED STATES TREASURY NOTES -- 4.0%
2,000,000 United States Treasury Notes, 5.875%, 1/31/1999 2,004,173
Total Short-Term Obligations 239,677,610
(C)REPURCHASE AGREEMENTS--56.9%
25,000,000 Bear, Stearns and Co., 5.650%, dated 5/29/1998, due 6/1/1998 25,000,000
7,800,000 Deutsche Bank Government Securities, Inc., 5.570%, dated 7,800,000
5/29/1998, due 6/1/1998
70,000,000 Fuji Government Securities, Inc., 5.640%, dated 5/29/1998, 70,000,000
due 6/1/1998
13,000,000 (d)J.P. Morgan & Co., Inc., 5.540%, dated 4/1/1998, due 13,000,000
6/30/1998
14,000,000 (d)J.P. Morgan & Co., Inc., 5.550%, dated 5/11/1998, due 14,000,000
8/10/1998
13,000,000 (d)J.P. Morgan & Co., Inc., 5.570%, dated 5/29/1998, due 13,000,000
7/28/1998
10,000,000 (d)Lehman Brothers, Inc., 5.520%, dated 4/7/1998, due 10,000,000
6/8/1998
19,000,000 (d)Morgan Stanley Group, Inc., 5.535%, dated 5/11/1998, due 19,000,000
7/13/1998
70,000,000 PaineWebber Group, Inc., 5.630%, dated 5/29/1998, due 70,000,000
6/1/1998
25,000,000 Prudential Securities, Inc., 5.650%, dated 5/29/1998, due 25,000,000
6/1/1998
</TABLE>
GOVERNMENT CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS--CONTINUED
$ 25,000,000 Salomon Brothers, Inc., 5.650%, dated 5/29/1998, due 6/1/1998 $ 25,000,000
25,000,000 Toronto Dominion Securities (USA) Inc., 5.650%, dated 25,000,000
5/29/1998, due 6/1/1998
Total Repurchase Agreements 316,800,000
Total Investments (at amortized cost)(e) $ 556,477,610
</TABLE>
(a) Denotes variable rate securities which show current rate and next demand
date.
(b) The issue shows the rate of discount at time of purchase.
(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
($557,183,543) at May 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
GOVERNMENT CASH SERIES
MAY 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 316,800,000
Investments in securities 239,677,610
Total investments in securities, at amortized cost and value $ 556,477,610
Cash 3,907
Income receivable 1,715,923
Receivable for shares sold 152,320
Total assets 558,349,760
LIABILITIES:
Payable for shares redeemed 358,231
Income distribution payable 645,735
Accrued expenses 162,251
Total liabilities 1,166,217
Net Assets for 557,183,543 shares outstanding $ 557,183,543
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER
SHARE:
$557,183,543 / 557,183,543 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
GOVERNMENT CASH SERIES
YEAR ENDED MAY 31, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 31,721,150
EXPENSES:
Investment advisory fee $ 2,817,822
Administrative personnel and services fee 425,199
Custodian fees 54,774
Transfer and dividend disbursing agent fees and 569,826
expenses
Directors'/Trustees' fees 6,544
Auditing fees 13,141
Legal fees 6,015
Portfolio accounting fees 100,229
Distribution services fee 1,611,059
Shareholder services fee 1,408,911
Share registration costs 71,358
Printing and postage 75,000
Insurance premiums 5,388
Taxes 23,667
Miscellaneous 1,967
Total expenses 7,190,900
Waivers--
Waiver of investment advisory fee $ (485,748)
Waiver of distribution services fee (1,047,495)
Total waivers (1,533,243)
Net expenses 5,657,657
Net investment income $ 26,063,493
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
GOVERNMENT CASH SERIES
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 26,063,493 $ 24,576,217
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (26,063,493) (24,576,217)
SHARE TRANSACTIONS--
Proceeds from sale of shares 2,571,697,688 3,215,216,492
Net asset value of shares issued to shareholders in payment 22,794,145 21,740,385
of distributions declared
Cost of shares redeemed (2,567,675,348) (3,154,718,528)
Change in net assets resulting from share transactions 26,816,485 82,238,349
Change in net assets 26,816,485 82,238,349
NET ASSETS:
Beginning of period 530,367,058 448,128,709
End of period $ 557,183,543 $ 530,367,058
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04 0.05 0.04 0.02
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.04) (0.05) (0.04) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 4.73% 4.54% 4.85% 4.43% 2.45%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.00% 0.99% 0.99% 0.99% 0.99%
Net investment income 4.62% 4.45% 4.75% 4.35% 2.41%
Expense waiver/reimbursement(b) 0.27% 0.10% 0.30% 0.08% 0.09%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $557,184 $530,367 $448,129 $453,096 $401,334
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
GOVERNMENT CASH SERIES
MAY 31, 1998
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.
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.
CAPITAL STOCK
At May 31, 1998, there were 12,500,000,000 shares of $0.001 par value capital
stock authorized. At May 31, 1998, capital paid in aggregated $557,183,543.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
Shares sold 2,571,697,688 3,215,216,492
Shares issued to shareholders in payment of distributions declared 22,794,145 21,740,385
Shares redeemed (2,567,675,348) (3,154,718,528)
Net change resulting from share transactions 26,816,485 82,238,349
</TABLE>
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, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
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. The
distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.
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 shares 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.
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
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, 1998, the related
statements of operations for the year then ended, the statements of changes in
net assets for the years ended May 31, 1998 and 1997, 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, 1998, by correspondence with the custodian and brokers; where replies
were not received, 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, 1998, 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 10, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
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
Nicholas J. Seitanakis
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Government Cash Series
ANNUAL REPORT TO SHAREHOLDERS MAY 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 147551204
0062902 (7/98)
[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 12-month period
from June 1, 1997, through May 31, 1998. The report contains commentary by the
fund's portfolio manager, followed by a complete listing of the fund's holdings,
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 40 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 $647.8 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,
Richard B. Fisher
President
July 15, 1998
* 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 per
share. There is no guarantee 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
An interview with the fund's portfolio manager, Mary Jo Ochson, CFA,
Senior Vice President, Federated Advisers
Q. What is your review of the economic and interest rate environment during the
fund's twelve-month reporting period?
A. During the fund's annual reporting period, the Federal Reserve Board (the
"Fed") kept monetary policy unchanged despite robust economic growth. The
economy posted a rate of growth of over 3.00% in the last three quarters of
1997, and continued at an above-trend pace of 4.80% in the first quarter of
1998. At the beginning of the reporting period, signs of tight labor markets
began to build expectation of a need for a tightening by the Fed as added
insurance against inflation. However, dramatic declines in the Asian equity
markets in the fourth quarter of 1997 curtailed this expectation, and overseas
developments dominated the rest of the year. Concern over these events and their
impact on the domestic economy abated somewhat in the first quarter of 1998.
Nevertheless, more recent employment growth and tight labor markets are
producing much anxiety in the market, as wage inflation pressures could build.
In March, the Fed adopted a "tightening bias" toward monetary policy but
declined to raise short-term interest rates in May, content to wait until the
economic picture becomes more clear.
Movements in short-term Treasury securities -- particularly Treasury bills
("T-bills") -- were strongly influenced by technical factors over the reporting
period. A reduction in the overall size of T-bills due to improvement in the
federal budget deficit kept these securities well-bid and trading well below the
5.50% federal funds target rate for most of the period. In addition, a periodic
flight-to-quality to these securities from investors seeking a safe haven from
the turmoil overseas also drove their yields lower.
Reflecting aggressive demand for T-bills, yields on one-year tax-free municipal
notes were attractive for most of the reporting period, averaging over 68% of
T-bills. One-year municipal notes, for example, began the annual reporting
period at close to 3.85%, and remained within a 3.80%-3.88% range until late
November. Yields then fell to 3.75% by the end of the year as inflation remained
friendly. Yields dropped again to 3.60% in January, and to 3.50% in February due
to supply constraints and fears that the as-yet-unknown impact of the financial
troubles in Asia on the domestic economy might be worse than previously thought.
Yields then rose to close the reporting period at 3.75% as domestic economic
growth continued.
In addition to economic fundamentals, short-term municipal variable rate demand
notes ("VRDNs") were strongly influenced by technical factors over this
reporting period, most notably calendar year-end and income tax payments in
April. VRDNs, which comprise more than 50% of the fund's assets, started the
reporting period in the 3.50% range but moved sharply higher in December to
above 4.00% as supply and demand imbalances occurred. Yields fell again in
January and February as strong demand fueled municipal purchases while supply
remained limited. In late March and April, cash flow redemptions due to income
tax payments moved yields higher to above 4.00%. Over the reporting period, VRDN
yields averaged 66% or more of taxable rates making them generally attractive
over time for investors at the 35% or higher federal tax brackets.
Q. What was your strategy for the fund during the reporting period?
A. The fund's average maturity at the beginning of the reporting period was
approximately 40 days. The fund remained close to a 40-55 average maturity range
over the reporting period, a neutral stance, and moved within that range
according to relative value opportunities. We continued to emphasize a barbelled
structure for the portfolio, combining a significant position in seven-day VRDNs
with purchases of longer-term securities with maturities between six and twelve
months. Once an average maturity range was targeted, we attempted 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 treasury
securities. This portfolio structure continued to pursue a competitive yield
over time.
Q. How has the fund performed?
A. The seven-day net yield for the fund on May 31,1998, was 2.90% compared to
3.05% at the beginning of the reporting period on June 1, 1997.* The latest
yield was the equivalent of a 4.80% taxable yield for investors in the highest
federal bracket. Over the one-year reporting period, the tax-exempt yield
averaged 2.86%, which is equivalent to a pre-tax yield of 4.74% for those same
investors.
Q. As we approach mid-year, what is your outlook for the remainder of 1998?
A. The jury is still out on the extent of the impact that the crisis in Asian
economies will have on U.S. growth. As a result, the Fed, although certain to be
troubled by persistent above-trend growth in an environment where labor markets
are tight, will likely remain on hold until the effect is better known. Much of
this should be revealed over the second and third quarters of 1998, and if the
drag on the U.S. economy does not materialize, expectations of a need for a Fed
rate increase will most likely rebuild. In the near term, however, market
movements will as likely reflect technical factors as fundamental ones. These
supply/demand imbalances could very well present attractive investment
opportunities for the fund. We will continue to watch, with great interest,
market developments in order to best serve our municipal clients.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the fund's current earnings. 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.
SHAREHOLDER MEETING RESULTS
A Special Meeting of Shareholders of Cash Trust Series, Inc. (the "Company") was
held on May 15, 1998. On February 26, 1998, the record date for shareholders
voting at the meeting, there were 5,569,771,582 total outstanding shares. The
following item was considered by shareholders of the Company and the results of
their voting were as follows:
AGENDA ITEM 1: To elect Directors.*
<TABLE>
<CAPTION>
SHARED VOTED SHARES WITHHELD
FOR AUTHORITY
<S> <C> <C>
Thomas G. Bigley 3,096,135,538 166,988,035
John E. Murray, Jr., J.D., S.J.D 3,096,268,650 166,854,923
Nicholas P. Constantakis 3,096,798,545 166,325,028
</TABLE>
On February 26, 1998, the record date for shareholders of Municipal Cash Series
(the "Fund") voting at the meeting, there were 618,768,623 total outstanding
shares. The following items were considered by shareholders of the Fund and the
results of their voting were as follows:
AGENDA ITEM 2: To approve or disapprove an amendment in the Fund's
fundamental investment policy on diversification of its investments.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES BROKER
FOR AGAINST ABSTAIN NON-VOTE
<S> <C> <C> <C>
239,908,782 5,861,211 6,689,056 85,945,816
</TABLE>
AGENDA ITEM 3: To approve or disapprove an amendment to change from a
fundamental to an operating policy the Fund's ability to invest in restricted
securities.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES BROKER
FOR AGAINST ABSTAIN NON-VOTE
<S> <C> <C> <C>
232,164,427 9,463,315 10,831,308 85,945,815
</TABLE>
* The following Directors of the Company continued their terms as Directors
of the Company: John F. Donahue, John T. Conroy, Jr., William J. Copeland,
J. Christopher Donahue, James E. Dowd, Esq., Lawrence D. Ellis, M.D.,
Edward L. Flaherty, Jr., Esq., Peter E. Madden, Wesley W. Posvar, Marjorie
P. Smuts.
PORTFOLIO OF INVESTMENTS
MUNICIPAL CASH SERIES
MAY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--99.4%
ALABAMA--3.1%
$ 1,900,000 Alabama State IDA, Revenue Bonds Weekly VRDNs (Southern Bag $ 1,900,000
Corporation, Ltd.)/ (SouthTrust Bank of Alabama, Birmingham
LOC)
6,000,000 Birmingham, AL IDA, (Series 1997) Weekly VRDNs (Millcraft,
AL 6,000,000 Inc.)/(Regions Bank, Alabama LOC)
4,745,000 Birmingham, AL IDA, Revenue Bonds (Series 1989) Weekly VRDNs 4,745,000
(O'Neal Steel, Inc.)/ (SouthTrust Bank of Alabama, Birmingham
LOC)
285,000 Hoover, AL IDA Weekly VRDNs (Bud's Best Cookies, 285,000
Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC)
370,000 (b)Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell 370,000
Manufacturing)/(SouthTrust Bank of Alabama, Birmingham LOC)
395,000 (b)Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell 395,000
Manufacturing)/(SouthTrust Bank of Alabama, Birmingham LOC)
345,000 (b)Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell 345,000
Manufacturing)/(SouthTrust Bank of Alabama, Birmingham LOC)
1,000,000 Prattville, AL IDB, IDR Bonds Weekly VRDNs (Kuhnash 1,000,000
Properties/Arkay Plastics Project)/ (PNC Bank, Ohio, N.A.
LOC)
5,000,000 St. Clair County, AL IDB, (Series 1993) Weekly VRDNs (Ebsco 5,000,000
Industries, Inc.)/(National Australia Bank, Ltd., Melbourne
LOC)
TOTAL 20,040,000
ARIZONA--3.7%
3,800,000 Cochise County, AZ Pollution Control Corp., (Pooled Series
3,800,000 1994A), 3.55% TOBs (Arizona Electric Power
Cooperative, Inc. Project)/(National Rural Utilities
Cooperative Finance Corp.
GTD), Optional Tender 9/1/1998
6,400,000 Eloy, AZ IDA, (Series 1996) Weekly VRDNs (The Marley Cooling 6,400,000
Tower Co.)/(First Union National Bank, Charlotte, NC LOC)
9,170,000 Maricopa County, AZ, IDA, 3.70% CP (Citizens Utilities
Co.), 9,170,000 Mandatory Tender 7/20/1998
4,700,000 Yuma County, AZ Airport Authority, Inc., (Series 1997A) 4,700,000
Weekly VRDNs (Bank One, Arizona N.A. LOC)
TOTAL 24,070,000
ARKANSAS--6.7%
9,000,000 Arkansas Development Finance Authority, (Series 1995) Weekly 9,000,000
VRDNs (Paco Steel & Engineering Corporation Project)/(Union
Bank of California LOC)
4,000,000 Arkansas Development Finance Authority, Home Mortgage Revenue 4,000,000
Bonds (Series C), 3.65% BANs, 3/1/1999
4,700,000 Arkansas Development Finance Authority, Single Family 4,700,000
Mortgage Revenue Bonds (1997 Series D), 4.05% TOBs, Mandatory
Tender 7/1/1998
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
ARKANSAS--CONTINUED
$ 8,000,000 Crossett, AR, (Series 1997) Weekly VRDNs (Bemis Co., Inc.) $ 8,000,000
6,000,000 Hope, AR, Solid Waste Disposal Revenue Bonds (Series 1994), 6,000,000
4.10% CP (Temple-Inland Forest Products
Corp.)/(Temple-Inland, Inc. GTD), Mandatory Tender 6/26/1998
1,000,000 Sheridan, AR IDA, (Series B) Weekly VRDNs (H.H. Robertson 1,000,000
Co.)/(PNC Bank, N.A. LOC)
7,500,000 Siloam Springs, AR, IDRB (Series 1994) Weekly VRDNs (La-Z Boy 7,500,000
Chair Co.)/(NBD Bank, Michigan LOC)
3,000,000 Springdale, AR, IDA Weekly VRDNs (Newlywed Food)/(Mellon
Bank 3,000,000 N.A., Pittsburgh LOC)
TOTAL 43,200,000
COLORADO--2.2%
4,000,000 Adams County, CO IDB, (Series 1993) Weekly VRDNs (Bace 4,000,000
Manufacturing, Inc.)/(Citibank N.A., New York LOC)
2,640,000 Colorado HFA, (Series 1996) Weekly VRDNs (Neppl-Springs 2,640,000
Fabrication)/(Bank One, Colorado LOC)
7,900,000 Denver (City & County), CO, Airport System Subordinate 7,900,000
Revenue Bonds (Series 1997A), 3.80% CP (Bayerische Landesbank
Girozentrale LOC), Mandatory Tender 8/14/1998
TOTAL 14,540,000
CONNECTICUT--0.5%
3,000,000 Connecticut State HEFA, (Series B) Weekly VRDNs 3,000,000
(Edgehill)/(Banque Paribas, Paris LOC)
DELAWARE--0.5%
3,000,000 Delaware EDA, (Series 1997A) Weekly VRDNs (Star 3,000,000
Enterprise)/(Canadian Imperial Bank of Commerce, Toronto
LOC)
DISTRICT OF COLUMBIA--0.6%
4,200,000 District of Columbia Housing Finance Agency, (Series 1997C), 4,200,000
4.05% TOBs (AIG Funding, Inc.), Mandatory Tender 9/1/1998
FLORIDA--4.2%
8,000,000 Broward County, FL, (Series B), 3.60% CP, Mandatory Tender 8,000,000
7/13/1998
9,000,000 Broward County, FL, (Series B), 4.25% CP, Mandatory Tender 9,000,000
6/12/1998
3,900,000 Broward County, FL, (Series B), 4.30% CP, Mandatory Tender 3,900,000
6/17/1998
6,570,000 Florida HFA, Multifamily Housing Revenue Bonds (1995 Series 6,570,000
M) Weekly VRDNs (Bainbridge Club Apartments Project)/(PNC
Bank, Kentucky LOC)
TOTAL 27,470,000
GEORGIA--3.9%
1,250,000 De Kalb County, GA Development Authority Weekly VRDNs 1,250,000
(Rock-Tenn Company, Inc. Project)/(SunTrust Bank, Atlanta
LOC)
5,585,000 Douglas County, GA Development Authority, (Series 1998A) 5,585,000
Weekly VRDNs (Heritage Bag)/ (Wachovia Bank of NC, N.A.,
Winston-Salem LOC)
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
GEORGIA--CONTINUED
$ 1,000,000 Forsythe County, GA Development Authority, IDRB (Series 1995) $ 1,000,000
Weekly VRDNs (American BOA, Inc. Project)/(Dresdner Bank AG,
Frankfurt LOC)
4,000,000 Franklin County, GA Industrial Building Authority, (Series 4,000,000
1995) Weekly VRDNs (Bosal Industries, Inc.)/(ABN AMRO Bank
N.V., Amsterdam LOC)
2,075,000 Fulton County, GA IDA, (Series 1996) Weekly VRDNs 2,075,000
(Peachtree-Broad Building, Ltd. Project)/ (SouthTrust Bank of
Georgia, Atlanta LOC)
2,260,000 Gainesville, GA Redevelopment Authority, IDRB (Series 1986) 2,260,000
Weekly VRDNs (Hotel of Gainesville Associates
Project)/(Regions Bank, Alabama LOC)
1,500,000 Hart County, GA IDA, Revenue Bonds (Series 1996) Weekly VRDNs 1,500,000
(Rock-Tenn Converting Co. Project)/(SunTrust Bank, Atlanta
LOC)
2,000,000 Richmond County, GA Development Authority, Solid Waste 2,000,000
Disposal Revenue Bonds, (Series 1995) Weekly VRDNs (Federal
Paper Board Co., Inc.)/(Wachovia Bank of NC, N.A.,
Winston-Salem LOC)
750,000 Savannah, GA EDA, (Series 1995A) Weekly VRDNs (Home Depot, 750,000
Inc.)
5,000,000 Summerville, GA Development Authority, (Series 1997) Weekly 5,000,000
VRDNs (Image Industries, Inc.)/(First Union National Bank,
Charlotte, NC LOC)
TOTAL 25,420,000
IDAHO--1.3%
8,710,000 (b)Idaho Housing Agency, PA-115 (1994 Series F) Weekly VRDNs 8,710,000
(Merrill Lynch Capital Services, Inc. LIQ)
ILLINOIS--5.7%
6,850,000 Chicago, IL, Gas Supply Revenue Bonds (1993 Series B), 3.90% 6,850,000
TOBs (Peoples Gas Light & Coke Company), Optional Tender
12/1/1998
7,400,000 Illinois Development Finance Authority, (Series 1997) Weekly 7,400,000
VRDNs (Tempco Electric Heater Corp.)/(First National Bank of
Chicago LOC)
2,700,000 Illinois Development Finance Authority, Adjustable Rate IDRB 2,700,000
(Series 1996A) Weekly VRDNs (Nimlok Company)/(Bank One,
Illinois, N.A. LOC)
7,605,000 Illinois Housing Development Authority, (1997 Subseries B-2), 7,605,000
4.15% TOBs, Mandatory Tender 7/7/1998
8,455,000 (b)Illinois Housing Development Authority, PT-82 (1994 Series 8,455,000
B),% TOBs (Rabobank Nederland, Utrecht LIQ), Mandatory Tender
12/10/1998
3,735,000 Morton, IL, IDRB (Series 1996) Weekly VRDNs (Morton Welding 3,735,000
Co, Inc. Project)/(Bank One, Illinois, N.A. LOC)
TOTAL 36,745,000
INDIANA--5.9%
310,000 Avilla, IN, IDRB Weekly VRDNs (Group Dekko 310,000
International)/(Bank One, Indianapolis, N.A. LOC)
1,500,000 Carmel, IN, (Series 1996-A) Weekly VRDNs (Telamon 1,500,000
Corp.)/(Huntington National Bank, Columbus, OH LOC)
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
INDIANA--CONTINUED
$ 1,945,000 Crown Point, IN, IDA Weekly VRDNs (D & M $ 1,945,000
Manufacturing)/(National City Bank, Kentucky LOC)
2,600,000 Franklin, IN, Economic Development Revenue Refunding Bonds 2,600,000
(Series 1994) Weekly VRDNs (Pedcor Investments L.P.)/(Federal
Home Loan Bank of Indianapolis LOC)
2,275,000 Huntingburg, IN, (Series 1994) Weekly VRDNs (DMI Furniture, 2,275,000
Inc.)/(Bank One, Indianapolis, N.A. LOC)
2,230,000 Huntingburg, IN, EDRB (Series 1993) Weekly VRDNs (DMI 2,230,000
Furniture, Inc.)/(Bank One, Indianapolis, N.A. LOC)
1,870,000 Indiana Development Finance Authority, (Series 1996) Weekly 1,870,000
VRDNs (Meridian Group LLC Project)/(Bank One, Indianapolis,
N.A. LOC)
9,000,000 Indiana Development Finance Authority, Solid Waste Disposal 9,000,000
Revenue Bonds (Series 1990A), 3.60% CP (Pure Air on the Lake,
Limited Partnership)/(National Westminster Bank, PLC, London
LOC), Mandatory Tender 6/22/1998
700,000 Indiana Economic Development Commission, (Series 1989) Weekly 700,000
VRDNs (O'Neal Steel, Inc.)/(SouthTrust Bank of Alabama,
Birmingham LOC)
2,570,000 Indianapolis, IN, (Series 1991) Weekly VRDNs (Cantor & 2,570,000
Coleman II Project)/(Bank One, Indianapolis, N.A. LOC)
1,840,000 Lebanon, IN IDA, (Series 1991) Weekly VRDNs (White Castle 1,840,000
System)/(Bank One, Ohio, N.A. LOC)
5,950,000 North Manchester, IN, (Series 1997) Weekly VRDNs (Eften, 5,950,000
Inc.)/(Comerica Bank, Detroit, MI LOC)
2,400,000 Tippecanoe County, IN Economic Development Revenue Weekly 2,400,000
VRDNs (Lafayette Venetian Blind)/(PNC Bank, Ohio, N.A. LOC)
3,085,000 Westfield, IN IDR, (Series 1994) Weekly VRDNs (Standard 3,085,000
Locknut & Lockwasher, Inc.)/ (Bank One, Indianapolis, N.A.
LOC)
TOTAL 38,275,000
IOWA--0.3%
2,040,000 Iowa Finance Authority, IDRB Weekly VRDNs (V-T Industries, 2,040,000
Inc. Project)/(Norwest Bank Minnesota, N.A. LOC)
KENTUCKY--4.6%
490,000 Caldwell County, KY, (Series 1990) Weekly VRDNs (Thompson 490,000
Steel Pipe)/(Corestates Bank N.A., Philadelphia, PA LOC)
2,600,000 Clark County, KY, IDR, (Series 1990) Weekly VRDNs (Walle 2,600,000
Corp.)/(Union Bank of Switzerland, Zurich LOC)
3,505,000 Glasgow, KY, (Series 1994) Weekly VRDNs (Ply Tech 3,505,000
Corp.)/(Bank One, Kentucky LOC)
1,900,000 Henderson County, KY, (Series 1996A) Weekly VRDNs (Gibbs Die 1,900,000
Casting Corporation)/(Harris Trust & Savings Bank, Chicago
LOC)
700,000 Jefferson County, KY Weekly VRDNs (Gateway Press, Inc.)/(PNC 700,000
Bank, Kentucky LOC)
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
KENTUCKY--CONTINUED
6,000,000 Jefferson County, KY, (1997 Series A), 3.80% CP (Louisville $ 6,000,000
Gas & Electric Company), Mandatory Tender 8/14/1998
1,360,000 Jefferson County, KY, IDR (Series 1991) Weekly VRDNs (Findley 1,360,000
Adhesives)/(Bank One, Ohio, N.A. LOC)
2,000,000 Jefferson County, KY, IDR Weekly VRDNs (O'Neal Steel, 2,000,000
Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC)
1,400,000 (b)Kentucky Rural EDA, (Series 1990) Weekly VRDNs
(Thompson 1,400,000 Steel Pipe)/(NBD Bank, Michigan LOC)
5,000,000 Louisville & Jefferson County, KY Regional Airport Authority, 5,000,000
(Series 1996-A) Weekly VRDNs (National City Bank, Kentucky
LOC)
5,000,000 Louisville & Jefferson County, KY Regional Airport Authority, 5,000,000
(Series 1997 AA-1) Weekly VRDNs (National City Bank, Kentucky
LOC)
TOTAL 29,955,000
LOUISIANA--1.7%
8,000,000 Lake Charles, LA Harbor & Terminal District, Revenue Bonds 8,000,000
(Series 1995A) Weekly VRDNs (Polycom-Huntsman, Inc.
Project)/(National City, Pennsylvania LOC)
1,170,000 Louisiana PFA, (Series 1997B), 4.40% TANs (Monroe City
School 1,175,838 Board)/(Louisiana State GTD), 10/29/1998
2,005,000 Louisiana PFA, (Series 1997C), 4.40% TANs (St. James
Parish, 2,008,960 LA)/(Louisiana State GTD), 10/29/1998
TOTAL 11,184,798
MARYLAND--1.0%
2,250,000 Cecil County, MD, County Commissioners EDRB (Series 1988S) 2,250,000
Weekly VRDNs (Williams Mobile Offices, Inc.)/(First National
Bank of Maryland, Baltimore LOC)
995,000 Maryland State Community Development Administration, (Series 995,000
1990A) Weekly VRDNs (College Estates)/(First National Bank of
Maryland, Baltimore LOC)
800,000 Maryland State Community Development Administration, (Series 800,000
1990B) Weekly VRDNs (Cherry Hill Apartment
Ltd.)/(Nationsbank, N.A., Charlotte LOC)
2,260,000 Wicomico County, MD, EDRB (Series 1994) Weekly VRDNs (Field 2,260,000
Container Co. L.P.)/(Northern Trust Co., Chicago, IL LOC)
TOTAL 6,305,000
MASSACHUSETTS--2.4%
15,400,000 Massachusetts HEFA, (Series I) Weekly VRDNs (Harvard 15,400,000
University)
MICHIGAN--0.7%
3,300,000 Michigan Strategic Fund Weekly VRDNs (Tesco 3,300,000
Engineering)/(Bank of Tokyo-Mitsubishi Ltd. LOC)
1,215,000 Michigan Strategic Fund, (Series 1991) Weekly VRDNs (AGA Gas, 1,215,000
Inc.)/(Svenska Handelsbanken, Stockholm LOC)
TOTAL 4,515,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
MINNESOTA--2.6%
$ 5,775,000 (b)Dakota County & Washington County MN Housing & $ 5,775,000
Redevelopment Authority, MERLOTS (Series J), 4.00% TOBs
(United States Treasury COL)/(Corestates Bank N.A.,
Philadelphia, PA LIQ), Optional Tender 6/1/1998
700,000 Minnesota State Higher Education Coordinating Board, (Series 700,000
1992A) Weekly VRDNs (U.S. Bank, N.A., Minneapolis LIQ)
1,650,000 New Hope, MN, Park Acres Apartments (Series 1997), 5.015% 1,650,000
TOBs (Bayerische Landesbank Girozentrale), Mandatory Tender
3/1/1999
825,000 Plymouth, MN Weekly VRDNs (Nuaire, Inc.)/(Norwest Bank 825,000
Minnesota, N.A. LOC)
1,920,000 Red Wing, MN Port Authority, (Series 1998) Weekly VRDNs (Food 1,920,000
Service Specialties)/ (Norwest Bank Minnesota, N.A. LOC)
2,200,000 Robbinsdale, MN, Bridgeway Apartments (Series 1997), 5.015% 2,200,000
TOBs (Bayerische Landesbank Girozentrale), Mandatory Tender
3/1/1999
1,210,000 St. Paul, MN Port Authority Weekly VRDNs (H.M. Smyth Co., 1,210,000
Inc.)/(Norwest Bank Minnesota, N.A. LOC)
2,730,000 White Bear, MN Weekly VRDNs (Thermoform Plastic, 2,730,000
Inc.)/(Norwest Bank Minnesota, N.A. LOC)
TOTAL 17,010,000
MISSISSIPPI--1.7%
1,700,000 Mississippi Business Finance Corp. Weekly VRDNs (O'Neal 1,700,000
Steel, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC)
1,950,000 Mississippi Business Finance Corp., IDRB (Series 1994) Weekly 1,950,000
VRDNs (Flexsteel Industries, Inc.)/(Norwest Bank Minnesota,
N.A. LOC)
7,500,000 Mississippi Home Corp., Multifamily Housing Adjustable/Fixed 7,500,000
Rate Revenue Bonds (Series 1997) Weekly VRDNs (Windsor Park
Apartments)/(SouthTrust Bank of Alabama, Birmingham LOC)
TOTAL 11,150,000
MISSOURI--2.2%
2,550,000 Missouri Development Finance Board, Industrial Development 2,550,000
Revenue Bonds (Series 1996) Weekly VRDNs (LaGrange Foundry
Inc. Project)/(Harris Trust & Savings Bank, Chicago LOC)
675,000 (b)Missouri Export & Infrastructure Board Weekly VRDNs 675,000
(Ex-L-Tube, Inc.)/(Norwest Bank Minnesota, N.A. LOC)
4,050,000 Moberly, MO IDA, (Series 1996) Weekly VRDNs (Everlast Fitness 4,050,000
Manufacturing Corp.)/(Chase Manhattan Bank N.A., New York
LOC)
7,000,000 Perry County, MO, (Series 1996) Weekly VRDNs (TG (U.S.A), 7,000,000
Inc.)/(Bank of Tokyo-Mitsubishi Ltd. LOC)
TOTAL 14,275,000
MONTANA--0.5%
3,440,000 (b)Montana State Board of Housing, MERLOTS (Series F), 4.10% 3,440,000
TOBs (Corestates Bank N.A., Philadelphia, PA LIQ), Optional
Tender 7/1/1998
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
MULTI STATE--2.3%
$ 15,000,000 (b)Charter Mac Floater Certificates Trust I Weekly VRDNs $ 15,000,000
(MBIA INS)/(Bayerische Landesbank Girozentrale, Commerzbank
AG, Frankfurt, Credit Communal de Belgique, Brussles and
Landesbank Hessen-Thueringen, Frankfurt LIQs)
NEBRASKA--2.2%
4,000,000 Douglas County, NE, (Series 1991) Weekly VRDNs (Malhove, 4,000,000
Inc.)/(Norwest Bank Minnesota, N.A. LOC)
10,000,000 Nebraska Investment Finance Authority, Single Family Housing 10,000,000
Revenue Bonds (1997 Series C), 3.90% TOBs, Mandatory Tender
7/1/1998
TOTAL 14,000,000
NEW HAMPSHIRE--1.2%
6,000,000 New Hampshire Business Finance Authority, PCR Bonds (Series 6,000,000
A), 3.85% CP (New England Power Co.), Mandatory Tender
6/22/1998
2,010,000 New Hampshire State IDA, (Series 1991), 4.10% TOBs 2,010,000
(International Paper Co.), Optional Tender 10/15/1998
TOTAL 8,010,000
NEW JERSEY--0.9%
1,143,927 Hopatcong, NJ, 4.20% BANs, 6/12/1998 1,144,010
1,000,000 (b)New Jersey State, Trust Receipts (Series 1998 FR/RI-A8) 1,000,000
Weekly VRDNs (Bayerische Hypotheken-Und Wechsel-Bank AG LIQ)
3,670,000 Trenton, NJ, 3.80% BANs, 3/10/1999 3,675,652
TOTAL 5,819,662
NEW MEXICO--0.6%
4,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 4,000,000
Program Bonds (1997 Issue 2), 3.90% TOBs (FGIC), Mandatory
Tender 10/15/1998
NEW YORK--2.7%
4,000,000 New York City, NY, (Series G), 4.25% Bonds, 8/1/1998 4,003,913
4,000,000 New York City, NY, UT GO, 4.50% Bonds, 8/1/1998 4,003,583
6,200,000 New York State Energy Research & Development Authority, Poll 6,200,000
Ctrl Revenue Adj Rate Bonds Daily VRDNs (Niagara Mohawk Power
Corp.)/(Morgan Guaranty Trust Co., New York LOC)
3,000,000 William Floyd UFSD, 4.125% TANs, 6/30/1998 3,000,406
TOTAL 17,207,902
NORTH CAROLINA--0.5%
2,010,000 New Hanover County, NC PCFA Weekly VRDNs (Efson, 2,010,000
Inc.)/(Branch Banking & Trust Co, Wilson LOC)
1,030,000 Wilson County, NC PCA, (Series 1994) Weekly VRDNs
(Granutec, 1,030,000 Inc.)/(Branch Banking & Trust Co,
Wilson LOC)
TOTAL 3,040,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
NORTH DAKOTA--0.2%
$ 1,000,000 Fargo, ND, Variable Rate Demand IDRB's (Series 1997) Weekly $ 1,000,000
VRDNs (Owen Industries, Inc.)/(Mellon Bank N.A., Pittsburgh
LOC)
OKLAHOMA--4.0%
2,300,000 Adair County, OK IDA, (Series B) Weekly VRDNs (Baldor
2,300,000 Electric Co.)/(Wachovia Bank of NC, N.A.,
Winston-Salem LOC)
8,000,000 Broken Arrow, OK EDA Weekly VRDNs (Blue Bell 8,000,000
Creameries)/(Banque Nationale de Paris LOC)
4,500,000 Oklahoma Development Finance Authority, 3.85% TOBs (Simmons 4,500,000
Poultry Farms)/(Rabobank Nederland, Utrecht LOC), Optional
Tender 8/1/1998
3,835,000 (b)Oklahoma HFA, CDC Municipal Products, Inc. (Series 1996G) 3,835,000
Weekly VRDNs (GNMA COL)/ (CDC Municipal Products, Inc. LIQ)
7,320,000 (b)Tulsa County, OK HFA, CDC Municipal Products, Inc. Class A 7,320,000
Certificates (Series 1996E) Weekly VRDNs (GNMA COL)/(CDC
Municipal Products, Inc. LIQ)
TOTAL 25,955,000
PENNSYLVANIA--5.5%
5,700,000 Carbon County, PA IDA, Solid Waste Disposal Revenue Bonds, 5,700,000
4.15% RANs (Horsehead Resource Development, Inc.)/(Chase
Manhattan Bank N.A., New York LOC), 12/3/1998
5,000,000 Clinton County, PA IDA, Solid Waste Disposal Revenue Bonds 5,000,000
(Series 1992A), 3.95% TOBs (International Paper Co.),
Optional Tender 1/15/1999
1,475,000 Pennsylvania EDFA Weekly VRDNs (Stone and Lime Co.)/(PNC 1,475,000
Bank, N.A. LOC)
1,600,000 Pennsylvania EDFA, (1995 Series D2) Weekly VRDNs (ARCO 1,600,000
Enterprises, Inc./Ronald L. Repasky, Sr. Project)/(PNC Bank,
N.A. LOC)
1,000,000 Pennsylvania EDFA, (1995 Series D9) Weekly VRDNs (North 1,000,000
American Communications, Inc. Project)/(PNC Bank, N.A. LOC)
13,000,000 Philadelphia, PA, GO Series 1990, 4.45% CP (Fuji Bank,
Ltd., 13,000,000 Tokyo LOC), Mandatory Tender 6/16/1998
8,100,000 Philadelphia, PA, GO Series 1990, 4.45% CP (Fuji Bank,
Ltd., 8,100,000 Tokyo LOC), Mandatory Tender 6/18/1998
TOTAL 35,875,000
SOUTH CAROLINA--1.5%
4,000,000 Georgetown County, SC, Pollution Control Facilities 4,000,000
Adjustable Rate Bonds (Series A), 4.00% TOBs (International
Paper Co.), Optional Tender 9/1/1998
3,700,000 South Carolina Job Development Authority, (Series 1996) 3,700,000
Weekly VRDNs (PVC Container Corp. Project)/(Fleet Bank N.A.
LOC)
2,085,000 South Carolina Job Development Authority, EDRB (Series 1994) 2,085,000
Weekly VRDNs (Carolina Cotton Works, Inc. Project)/(Branch
Banking & Trust Co, Wilson LOC)
TOTAL 9,785,000
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
SOUTH DAKOTA--4.5%
$ 5,500,000 South Dakota Housing Development Authority, (Series G), 3.95% $ 5,500,000
TOBs, Mandatory Tender 8/13/1998
23,400,000 South Dakota Housing Development Authority, Homeownership 23,400,000
Mortgage Bonds (1997 Series E) Weekly VRDNs
TOTAL 28,900,000
TENNESSEE--3.4%
1,870,000 Benton County TN IDB, (Series 1996) Weekly VRDNs (Jones 1,870,000
Plastic and Engineering Corp.)/ (National City Bank, Kentucky
LOC)
5,000,000 Cocke County, TN IDB, (Series 1996) Weekly VRDNs (Newport 5,000,000
Precision, Inc.)/(Bank of Tokyo- Mitsubishi Ltd. LOC)
820,000 Greenfield, TN IDB, (Series 1995) Weekly VRDNs (Plastic 820,000
Products Co. Project)/(Norwest Bank Minnesota, N.A. LOC)
1,100,000 Hawkins County, TN IDB, (Series 1995) Weekly VRDNs (Sekisui 1,100,000
Ta Industries, Inc. Project)/ (Bank of Tokyo-Mitsubishi Ltd.
LOC)
1,000,000 Jackson, TN IDB, Solid Waste Facility Bonds (Series 1995) 1,000,000
Weekly VRDNs (Florida Steel Corp.)/(Nationsbank, N.A.,
Charlotte LOC)
3,215,000 McMinn County, TN IDB, Industrial Development Bonds (Series 3,215,000
1995) Weekly VRDNs (Creative Fabrication Corp.)/(NBD Bank,
Michigan LOC)
1,800,000 Oak Ridge, TN IDB, Solid Waste Facility Bonds (Series 1996) 1,800,000
Weekly VRDNs (M4 Environmental L.P. Project)/(SunTrust Bank,
Atlanta LOC)
6,000,000 Sevier County, TN Public Building Authority, Local Government 6,000,000
Improvement Bonds, (Series II-G-2) Weekly VRDNs (Knoxville,
TN)/(AMBAC INS)/(Kredietbank N.V., Brussels LIQ)
1,000,000 Union City, TN IDB, (Series 1995) Weekly VRDNs (Kohler 1,000,000
Co.)/(Wachovia Bank of NC, N.A., Winston-Salem LOC)
TOTAL 21,805,000
TEXAS--5.3%
5,000,000 Angelina and Neches River Authority, Texas, Solid Waste 5,000,000
Disposal Revenue Bonds (Series 1993), 4.30% CP (Temple-Eastex
Inc.)/(Temple-Inland, Inc. GTD), Mandatory Tender 6/24/1998
3,250,000 Brazos Harbor, TX Industrial Development Corp., (Series 1991) 3,250,000
Weekly VRDNs (Rangen, Inc. Project)/(Norwest Bank Minnesota,
N.A. LOC)
2,000,000 Brazos River Authority, TX, (Series 1996B) Daily VRDNs (Texas 2,000,000
Utilities Electric Co.)/(AMBAC INS)/(Bank of New York, New
York LIQ)
5,700,000 Brazos River Authority, TX, Revenue Refunding Bonds (Series 5,700,000
1997) Daily VRDNs (Houston Light & Power Co.)/(AMBAC
INS)/(Royal Bank of Canada, Montreal LIQ)
5,000,000 San Antonio, TX, Special Facilities Airport Revenue Bonds 5,000,000
(Series 1995) Weekly VRDNs (Cessna Aircraft Company
Project)/(Nationsbank of Texas, N.A. LOC)
2,995,000 (b)Southeast Texas Housing Finance Corp., PT-165, 3.75%
TOBs 2,995,000 (GNMA COL)/(Banque Nationale de Paris LIQ),
Optional Tender 3/18/1999
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
TEXAS--CONTINUED
$ 9,500,000 Tarrant County, TX IDC, (Series 1997) Weekly VRDNs (Lear $ 9,500,000
Operations Corp.)/(Chase Manhattan Bank N.A., New York LOC)
TOTAL 33,445,000
VIRGINIA--1.0%
1,940,000 Carroll County, VA IDA, IDRB (Series 1995) Weekly VRDNs 1,940,000
(Kentucky Derby Hosiery Co, Inc. Project)/(Bank One, Kentucky
LOC)
150,000 Frederick County, VA IDA, (Series 1997) Weekly VRDNs (Jouan, 150,000
Inc.)/(Wachovia Bank of NC, N.A., Winston-Salem LOC)
4,295,000 Newport News, VA IDA, (Series 1997) Weekly VRDNs (Iceland 4,295,000
Seafood Corp.)/(Crestar Bank of Virginia, Richmond LOC)
100,000 Richmond, VA Redevelopment & Housing Authority, (Series B-10) 100,000
Weekly VRDNs (Richmond, VA Red Tobacco Row)/(Bayerische
Landesbank Girozentrale LOC)
TOTAL 6,485,000
WASHINGTON--2.4%
8,000,000 Pierce County, WA Economic Development Corp., (Series 1995) 8,000,000
Weekly VRDNs (Simpson- Tacoma Kraft Company Project)/(Bank of
America, Northwest LOC)
7,515,000 Washington State Housing Finance Commission, (1997 Series 7,515,000
5A-S), 3.90% TOBs, Mandatory Tender 12/15/1998
TOTAL 15,515,000
WEST VIRGINIA--0.3%
1,750,000 West Virginia Public Energy Authority, Energy Revenue Bonds 1,750,000
(1989 Series A), 3.60% CP (Morgantown Energy
Associates)/(Swiss Bank Corp., Basle LOC), Mandatory Tender
6/19/1998
WISCONSIN--3.4%
2,060,000 Marshfield, WI, IDR (Series 1993) Weekly VRDNs (Building 2,060,000
Systems, Inc.)/(Bank One, Wisconsin, N.A. LOC)
1,340,000 Plover, WI Weekly VRDNs (Sirco Manufacturing, Inc.)/(Norwest 1,340,000
Bank Minnesota, N.A. LOC)
3,425,000 Port Washington-Saukville, WI School District, 4.10% TRANs, 3,426,494
10/30/1998
3,125,000 Prentice Village, WI, Limited Obligation Revenue Refunding 3,125,000
Bonds (Series A) Weekly VRDNs (Biewer-Wisconsin Sawmill, Inc.
Project)/(Michigan National Bank, Farmington Hills LOC)
750,000 Shell Lake, WI Weekly VRDNs (Doboy Packaging)/(Union Bank of 750,000
Switzerland, Zurich LOC)
3,200,000 Slinger, WI School District, 4.10% TRANs, 9/29/1998 3,201,003
2,000,000 Tomah, WI Area School District, 4.10% TRANs, 9/23/1998 2,000,595
1,540,000 Waukesha, WI, IDRB (Series 1995) Weekly VRDNs (Weldall 1,540,000
Manufacturing Inc. Project)/(Bank One, Wisconsin, N.A. LOC)
250,000 (b)Wisconsin Housing & Economic Development Authority, 250,000
(Series B), 4.05% TOBs (FSA INS)/ (Corestates Bank N.A.,
Philadelphia, PA LIQ), Optional Tender 6/1/1998
</TABLE>
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
WISCONSIN--CONTINUED
$ 4,555,000 (b)Wisconsin Housing & Economic Development Authority, PT-90 $ 4,555,000
(Series 1996F) Weekly VRDNs (Banque Nationale de Paris LIQ)
TOTAL 22,248,092
WYOMING--1.5%
10,000,000 Wyoming Community Development Authority, PT-195, 3.85% TOBs 10,000,000
(Banco Santander LIQ), Optional Tender 5/13/1999
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $ 643,785,454
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 88.6% of the
portfolio as calculated based upon total portfolio market value.
(a) The fund may only invest in securities rated in one of the two highest
short-term rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") or unrated securities of comparable quality. An
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, MIG-1, or MIG-2 by Moody's Investors Service, Inc.,
or F-1+, F-1, and F-2 by Fitch IBCA, 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, 1998, the portfolio securities were rated as follows:
TIER RATING BASED ON TOTAL MARKET VALUE (UNAUDITED)
FIRST TIER SECOND TIER
93.3% 6.7%
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At May 31, 1998, these securities amounted to
$64,520,000 which represents 10.0% of net assets.
(c) Also represents cost for federal tax purposes. Note: The categories of
investments are shown as a percentage of net assets ($647,812,770) at May 31,
1998.
The following acronyms are used throughout this portfolio:
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 FSA
- --Financial Security Assurance GNMA --Government National Mortgage Association
GO --General Obligation GTD --Guaranty HEFA --Health and Education Facilities
Authority 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 INS
- --Insured LIQ --Liquidity Agreement LLC --Limited Liability Corporation LOC
- --Letter of Credit MBIA --Municipal Bond Investors Assurance MERLOTS --Municipal
Exempt Receipts - Liquidity Optional Tender Series PCA --Pollution Control
Authority PCR --Pollution Control Revenue PCFA --Pollution Control Finance
Authority PFA --Public Facility Authority PLC --Public Limited Company RANs
- --Revenue Anticipation Notes TANs --Tax Anticipation Notes TOBs --Tender Option
Bonds TRANs --Tax and Revenue Anticipation Notes UT --Unlimited Tax VRDNs
- --Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
MUNICIPAL CASH SERIES
MAY 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 643,785,454
Cash 735,777
Income receivable 4,324,905
Receivable for shares sold 121,870
Prepaid expenses 32,828
Total assets 649,000,834
LIABILITIES:
Payable for shares redeemed $ 650,940
Income distribution payable 290,328
Accrued expenses 246,796
Total liabilities 1,188,064
NET ASSETS for 647,812,770 shares outstanding $ 647,812,770
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$647,812,770 / 647,812,770 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
MUNICIPAL CASH SERIES
YEAR ENDED MAY 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 22,527,547
EXPENSES:
Investment advisory fee $ 2,910,985
Administrative personnel and services fee 439,247
Custodian fees 29,487
Transfer and dividend disbursing agent fees and expenses 645,088
Directors'/Trustees' fees 8,216
Auditing fees 13,348
Legal fees 18,853
Portfolio accounting fees 99,693
Distribution services fee 582,197
Shareholder services fee 1,455,493
Share registration costs 84,649
Printing and postage 162,328
Insurance premiums 19,713
Taxes 18,036
Miscellaneous 16,654
Total expenses 6,503,987
Waiver --
Waiver of investment advisory fee (605,529)
Net expenses 5,898,458
Net investment income $ 16,629,089
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
MUNICIPAL CASH SERIES
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 16,629,089 $ 15,321,345
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (16,629,089) (15,321,345)
SHARE TRANSACTIONS--
Proceeds from sale of shares 2,320,881,148 2,221,134,502
Net asset value of shares issued to shareholders in payment 16,001,086 14,397,804
of distributions declared
Cost of shares redeemed (2,204,129,137) (2,199,077,184)
Change in net assets resulting from share transactions 132,753,097 36,455,122
Change in net assets 132,753,097 36,455,122
NET ASSETS:
Beginning of period 515,059,673 478,604,551
End of period $ 647,812,770 $ 515,059,673
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.03 0.02
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.90% 2.80% 3.04% 2.84% 1.83%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.01% 0.99% 0.99% 0.99% 0.99%
Net investment income 2.86% 2.75% 2.99% 2.76% 1.81%
Expense waiver/reimbursement(b) 0.10% 0.09% 0.33% 0.05% 0.06%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $647,813 $515,060 $478,605 $445,164 $574,801
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
MUNICIPAL CASH SERIES
MAY 31, 1998
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.
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, 1998 is as
follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Charter Mac Floater Certificates Trust I Weekly VRDNs 5/21/1998 $ 15,000,000
Dakota County & Washington County MN Housing &
Redevelopment Authority, MERLOTS (Series J) 3/1/1998 5,775,000
Idaho Housing Agency, PA-115 (1994 Series F) 7/9/1996 ,710,000
Illinois Housing Development Authority, PT-82
(1994 Series B) 1/6/1998 8,455,000
Kentucky Rural EDA, (Series 1990) 7/31/1991 1,400,000
Missouri Export & Infrastructure Board Weekly VRDNs 5/7/1993 675,000
Montana State Board of Housing, MERLOTS (Series F) 4/1/1998 3,440,000
Muscle Shoals, AL, IDB Weekly VRDNs 3/22/1991 370,000
Muscle Shoals, AL, IDB Weekly VRDNs 3/22/1991 395,000
Muscle Shoals, AL, IDB Weekly VRDNs 3/22/1991 345,000
New Jersey State, Trust Receipts (Series 1998 FR/RI-A8) 5/20/1998 1,000,000
Oklahoma HFA, CDC Municipal Products, Inc. (Series 1996G) 12/12/1996 3,835,000
Southeast Texas Housing Finance Corp., PT-165 3/25/1998 2,995,000
Tulsa County, OK HFA, CDC Municipal Products, Inc.
Class A Certificates (Series 1996E) 11/22/1996 7,320,000
Wisconsin Housing & Economic Development Authority,
(Series B) 3/1/1998 250,000
Wisconsin Housing & Economic Development Authority,
PT-90 (Series 1996F) 12/5/1996 4,555,000
</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.
Capital Stock At May 31, 1998, there were 12,500,000,000 shares ($0.001 par
value per share) authorized. At May 31, 1998, capital paid-in aggregated
$647,812,770. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
Shares sold 2,320,881,148 2,221,134,502
Shares issued to shareholders in
payment of distributions declared 16,001,086 14,397,804
Shares redeemed (2,204,129,137) (2,199,077,184)
Net change resulting from share transactions 132,753,097 36,455,122
</TABLE>
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, Inc. for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
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, 1998, the Fund
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 $741,945,000 and $694,789,650, respectively.
GENERAL
Certain of the Officers and Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
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 schedule of portfolio of investments, as of May 31, 1998, and the
related statement of operations for the year then ended, the statement of
changes in net assets for the years ended May 31, 1998 and 1997, and 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, 1998, by correspondence with the custodian and brokers; where replies were
not received, 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, 1998, 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 10, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
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
Nicholas J. Seitanakis
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other
information.Municipal Cash Series
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
[Graphic]
Federated Investors
MUNICIPAL CASH SERIES
ANNUAL REPORT
TO SHAREHOLDERS
May 31, 1998
Cusip 147551303
0062903 (7/98)
[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 12-month period from
June 1, 1997 through May 31, 1998. The report contains 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 pursue 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 (44.1%) and variable rate obligations (19.6%). It
also held positions in repurchase agreements (15.6%), certificates of deposit
(7.4%) time deposits (5.3%), short-term notes (3.5%), asset-backed securities
(2.3%), and bank notes (1.9%).
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 reached
the $3.7 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, 1998
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no guarantee 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.
Growth during 1997 continued at an above-average pace, slowing only moderately
during the third quarter. Specifically, third quarter gross domestic product
("GDP") registered 3.10% while fourth quarter GDP climbed back up to 3.90% and
first quarter 1998 GDP soared to 4.80%. Despite the high growth, inflation
remained subdued by all measures. The consumer price index rose just 1.50% for
the twelve months ended May 31, 1998. For the same time period, the producer
price index actually declined 0.90%, due mostly to a decline in energy prices,
while the employment cost index grew 3.30% during the twelve-month period ended
March 31, 1998.
Thirty-day commercial paper started the reporting period at 5.57% on June 1,
1997, and then rose as high as 5.98% on December 29, 1997, reflecting year-end
technical pressures. Rates fell back off again in January 1998 with 30-day
commercial paper settling in at the 5.50% federal funds target rate level.
Thirty-day commercial paper rates on May 31, 1998, were 5.55%.
The money market yield curve flattened throughout the reporting period.
One-month commercial paper rates declined two basis points while six-month rates
declined 17 basis points reflecting concern in the market about the "Asian
contagion" and its overall effect on U.S. growth.
The target average range maturity for the fund remained in the 35- to 45-day
range throughout the reporting period, reflecting neutral economic and monetary
sentiment. In structuring the fund, there is continued emphasis placed on
positioning 30%-35% of the fund's assets in variable rate demand notes and
accomplishing a modest barbell structure.
During the twelve-month period ended May 31, 1998, total net assets of the fund
increased from $2.4 billion to $3.7 billion while the seven-day net yield
decreased from 4.70% on June 1, 1997, to 4.69% on May 31, 1998.* The effective
average maturity of the fund on May 31, 1998, was 45 days.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the fund's current earnings. 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.
SHAREHOLDER MEETING RESULTS
A Special Meeting of Shareholders of Cash Trust Series, Inc. (the "Company") was
held on May 15, 1998. On February 26, 1998, the record date for shareholders
voting at the meeting, there were 5,569,771,582 total outstanding shares. The
following item was considered by shareholders of the Company and the results of
their voting were as follows:
AGENDA ITEM 1: TO ELECT DIRECTORS.*
SHARES VOTED SHARES WITHHELD
FOR AUTHORITY
Thomas G. Bigley 3,096,135,538 166,988,035
John E. Murray, Jr., J.D., S.J.D. 3,096,268,650 166,854,923
Nicholas P. Constantakis 3,096,798,545 166,325,028
On February 26, 1998, the record date for shareholders of Prime Cash Series (the
"Fund") voting at the meeting, there were 3,520,377,078 total outstanding
shares. The following items were considered by shareholders of the Fund and the
results of their voting were as follows:
AGENDA ITEM 2: To approve or disapprove an amendment in the fund's
Fundamental investment policy on diversification of its investments.
SHARES VOTED SHARES VOTED SHARES BROKER
FOR AGAINST ABSTAIN NON-VOTE
1,512,588,840 32,612,786 75,203,288 559,973,364
AGENDA ITEM 3: To approve or disapprove an amendment in the fund's Fundamental
investment policy on its intention to concentrate portfolio Investments in one
industry.
SHARES VOTED SHARES VOTED SHARES BROKER
FOR AGAINST ABSTAIN NON-VOTE
1,467,187,926 70,422,501 82,794,487 559,973,364
AGENDA ITEM 4: To approve or disapprove an amendment to change from a
Fundamental to an operating policy the fund's ability to invest in Restricted
securities.
SHARES VOTED SHARES VOTED SHARES BROKER
FOR AGAINST ABSTAIN NON-VOTE
1,468,556,965 65,420,630 86,427,319 559,973,364
* The following Directors of the Company continued their terms as Directors
of the Company: John F. Donahue, John T. Conroy, Jr., William J. Copeland,
J. Christopher Donahue, James E. Dowd, Esq., Lawrence D. Ellis, M.D., Edward
L. Flaherty, Jr., Esq., Peter E. Madden, Wesley W. Posvar, Marjorie P. Smuts
PORTFOLIO OF INVESTMENTS
PRIME CASH SERIES
MAY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
ASSET-BACKED SECURITIES--2.3%
FINANCE - AUTOMOTIVE--1.1%
$ 2,523,336 Arcadia Automobile Receivables Trust 1997-D, Class A-1, $ 2,523,336
5.888%, 1/15/1999
12,928,927 Chase Manhattan Auto Owner Trust 1998-A, Class A-1, 12,928,927
5.549%, 3/12/1999
16,521,864 Chase Manhattan Auto Owner Trust 1998-B, Class A-1, 16,521,864
5.578%, 5/10/1999
6,580,020 Ford Credit Auto Owner Trust 1997-B, Class A-1, 5.748%, 6,580,020
10/15/1998
4,241,520 MMCA Auto Owner Trust 1997-1, Class A-1, 5.630%, 4,241,100
11/15/1998
TOTAL 42,795,247
FINANCE - EQUIPMENT--1.1%
21,250,133 Capita Equipment Receivables Trust 1997-1, Class A-1, 21,247,912
5.800%, 12/15/1998
7,178,051 Caterpillar Financial Asset Trust 1997-B, Class A-1, 7,178,051
5.805%, 11/25/1998
104,531 Copelco Capital Funding Corp. X 1997-A, Class A-1, 5.809%, 104,531
7/20/1998
13,958,488 Green Tree Lease Finance 1997-1 LLC, Class A-1, 5.906%, 13,958,488
1/20/1999
TOTAL 42,488,982
INSURANCE--0.1%
2,873,322 WFS Financial 1997-C Owner Trust, Class A-1 (Guaranteed by 2,873,322
FSA), 5.710%, 9/20/1998
TOTAL ASSET-BACKED SECURITIES 88,157,551
BANK NOTES--1.9%
BANKING--1.9%
70,000,000 Bank of Boston, Connecticut, 5.840%, 6/1/1998 - 6/15/1998 70,000,000
CERTIFICATE OF DEPOSIT--7.4%
BANKING--7.4%
30,000,000 Bank of Nova Scotia, Toronto, 5.870%, 4/29/1999 29,981,721
48,000,000 Bankers Trust Co., New York, 5.800% - 5.910%, 10/13/1998 - 47,987,572
4/1/1999
15,000,000 Canadian Imperial Bank of Commerce, Toronto, 5.800%, 14,992,822
4/1/1999
171,000,000 Societe Generale, Paris, 5.580% - 5.970%, 8/13/1998 - 170,948,090
4/27/1999
13,000,000 Svenska Handelsbanken, Stockholm, 5.800%, 4/6/1999 12,995,261
TOTAL 276,905,466
(A)COMMERCIAL PAPER--44.1%
BANKING--13.4%
138,000,000 Aspen Funding Corp., (Guaranteed by Deutsche Bank, AG), 137,115,631
5.375% - 5.700%, 6/1/1998 - 12/18/1998
16,000,000 Commonwealth Bank of Australia, Sydney, 5.470%, 10/19/1998 15,659,644
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMERCIAL PAPER--CONTINUED
BANKING--CONTINUED
$ 60,000,000 Cregem North America, Inc., (Guaranteed by Credit Communal $ 58,472,461
de Belgique, Brussles), 5.500% - 5.515%, 11/9/1998 -
11/17/1998
131,470,000 Gotham Funding Corp., 5.590% - 5.620%, 6/4/1998 - 131,235,690
6/23/1998
30,000,000 Paribas Finance, Inc., (Guaranteed by Banque Paribas, 29,580,642
Paris), 5.530%, 8/31/1998
30,000,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska 29,249,700
Handelsbanken, Stockholm), 5.645%, 11/12/1998
100,000,000 UBS Finance (Delaware), Inc., (Guaranteed by Union Bank of 100,000,000
Switzerland, Zurich), 5.650%, 6/1/1998
TOTAL 501,313,768
BROKERAGE--3.4%
19,000,000 Credit Suisse First Boston, Inc., 5.500% - 5.520%, 18,855,250
7/10/1998 - 8/20/1998
60,000,000 Merrill Lynch & Co., Inc., 5.500% - 5.520%, 6/15/1998 - 59,505,050
8/24/1998
50,000,000 Morgan Stanley Group, Inc., 5.500%, 7/28/1998 49,564,583
TOTAL 127,924,883
CHEMICALS--0.9%
33,711,000 IMC Global, Inc., 5.690% - 5.710%, 7/7/1998 - 7/22/1998 33,491,136
CONSUMER PRODUCTS--1.3%
50,000,000 Diageo Capital PLC, 5.530%, 8/4/1998 49,508,444
ELECTRIC POWER--0.5%
20,000,000 Southern Electric Generating Co. (SEGCO), (Guaranteed by 19,990,550
Alabama Power Co., Guaranteed by Georgia Power Co.),
5.670%, 6/4/1998
FINANCE - AUTOMOTIVE--0.3%
10,000,000 Ford Motor Credit Corp., 5.470%, 7/14/1998 9,934,664
FINANCE - COMMERCIAL--15.7%
35,000,000 CIT Group Holdings, Inc., 5.520%, 8/17/1998 34,586,767
12,500,000 FINOVA Capital Corp., 5.550%, 7/29/1998 12,388,229
15,000,000 Falcon Asset Securitization Corp., 5.530%, 6/17/1998 14,963,133
150,000,000 General Electric Capital Corp., 5.380% - 5.750%, 6/1/1998 149,825,150
- 8/18/1998
126,358,000 Greenwich Funding Corp., 5.480% - 5.680%, 6/5/1998 - 125,489,382
8/27/1998
76,473,000 Receivables Capital Corp., 5.510% - 5.530%, 6/15/1998 - 76,275,069
6/23/1998
141,850,000 Sheffield Receivables Corp., 5.500% - 5.520%, 6/1/1998 - 141,630,802
7/6/1998
33,000,000 Sheffield Receivables Corp., 5.530% - 5.540%, 6/24/1998 - 32,869,322
7/1/1998
TOTAL 588,027,854
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMERCIAL PAPER--CONTINUED
FINANCE - EQUIPMENT--0.2%
$ 8,000,000 Comdisco, Inc., 5.660% - 5.720%, 7/13/1998 - 7/28/1998 $ 7,945,456
FINANCE - RETAIL--4.0%
50,000,000 Associates Corp. of North America, 5.680%, 6/1/1998 50,000,000
25,225,000 CommoLoCo, (Guaranteed by American General Finance Corp.), 24,708,934
5.440% - 5.470%, 10/13/1998 - 10/15/1998
50,000,000 Household Finance Corp., 5.700%, 6/1/1998 50,000,000
25,000,000 New Center Asset Trust, A1+/P1 Series, 5.490%, 7/29/1998 24,778,875
TOTAL 149,487,809
INDUSTRIAL PRODUCTS--1.0%
37,000,000 Praxair, Inc., 5.620% - 5.650%, 6/19/1998 - 7/27/1998 36,776,452
INSURANCE--1.4%
37,670,000 AI Credit Corp., (AIG Support Agreement), 5.650%, 6/1/1998 37,670,000
3,148,000 CNA Financial Corp., 5.700%, 6/17/1998 3,140,025
10,000,000 CXC, Inc., 5.480%, 7/10/1998 9,940,633
TOTAL 50,750,658
OIL & OIL FINANCE--1.0%
36,820,000 Occidental Petroleum Corp., 5.680% - 5.740%, 6/16/1998 - 36,688,727
7/30/1998
RETAIL--1.0%
37,050,000 Safeway, Inc., 5.670% - 5.720%, 6/4/1998 - 8/3/1998 36,921,072
TOTAL COMMERCIAL PAPER 1,648,761,473
(B)NOTES - VARIABLE--19.6%
BANKING--8.8%
4,380,000 Aurora City, IL, (Series 1995), (First of America Bank - 4,380,000
Illinois LOC), 5.902%, 6/4/1998
800,000 Avalon Hotel Associates, (Corestates Bank N.A., 800,000
Philadelphia, PA LOC), 6.144%, 6/4/1998
30,000,000 (c)Bankers Trust New York Corp., 5.790%, 6/1/1998 30,000,000
1,500,000 BeMacs Service, Inc., (SouthTrust Bank of Alabama, 1,500,000
Birmingham LOC), 5.740%, 6/5/1998
3,165,000 Blackwell Investments, Inc., (Bank One, Louisiana LOC), 3,165,000
5.740%, 6/4/1998
1,810,000 Boozer Lumber Co., (SouthTrust Bank of Alabama, Birmingham 1,810,000
LOC), 5.740%, 6/5/1998
6,655,000 Cliffbreakers, LLC Project, series 1997, (First of
America 6,655,000 Bank - Illinois LOC), 5.750%, 6/4/1998
6,900,000 Cloquet, MN, Series 1996-B Potlach Corp., (Credit Suisse 6,900,000
First Boston LOC), 5.700%, 6/3/1998
11,410,000 Congregate Care Corp., (Union Bank of California LOC), 11,410,000
5.790%, 6/3/1998
1,430,000 Denver Urban Renewal Authority, (Series 1992-B), (Banque 1,430,000
Paribas, Paris LOC), 5.740%, 6/4/1998
5,850,000 Dewberry III, L.P., (First National Bank of Maryland, 5,850,000
Baltimore LOC), 5.690%, 6/2/1998
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)NOTES - VARIABLE--CONTINUED
BANKING--CONTINUED
$ 1,500,000 Edgefield County, SC, Series 1997 (Bondex Inc. Project), $ 1,500,000
(Marine Midland Bank N.A., Buffalo, NY LOC), 5.688%,
6/4/1998
2,435,000 Gahanna, OH, City of, Franklin Steel Co. Project, (Star 2,435,000
Bank, N.A., Cincinnati LOC), 5.610%, 6/4/1998
10,805,000 HJH Associates of Alabama, Hilton Hotel, Huntsville, 10,805,000
(SouthTrust Bank of Alabama, Birmingham LOC), 5.740%,
6/5/1998
8,350,000 HIS Funding, LLC, Variable Rate (Series A), (First of 8,350,000
America Bank - Michigan LOC), 5.630%, 6/4/1998
5,000,000 Kenny, Donald R. and Cheryl A., Series 1996-C, (Star Bank, 5,000,000
N.A., Cincinnati LOC), 5.710%, 6/4/1998
2,000,000 La-Man Corp., (SouthTrust Bank of Alabama, Birmingham 2,000,000
LOC), 5.740%, 6/5/1998
2,290,000 Lake Sherwood Senior Living Center, LLC, (Union Planters 2,290,000
NB, Memphis, TN LOC), 5.940%, 6/4/1998
51,000,000 (c)Liquid Asset Backed Securities Trust, Series 1996-3, 51,000,000
(Westdeutsche Landesbank Girozentrale Swap Agreement),
5.676%, 6/15/1998
39,433,572 (c)Liquid Asset Backed Securities Trust, Series 1997-1, 39,433,572
(Westdeutsche Landesbank Girozentrale Swap Agreement),
5.656%, 6/15/1998
10,000,000 Long Lane Master Trust III (Bank Boston, NA Swap 10,000,000
Agreement), Series 1997-C, 5.749%, 8/3/1998
3,680,000 Maryland State IDFA, (Genetic Therapy, Inc.), (First 3,680,000
National Bank of Maryland, Baltimore LOC), 5.720%,
6/1/1998
5,700,000 Maryland State IDFA, (Kelly Springfield Tire), (First 5,700,000
National Bank of Maryland, Baltimore LOC), 5.640%,
6/1/1998
2,430,000 Maryland State IDFA, Human Genome, Series1994, (First 2,430,000
National Bank of Maryland, Baltimore LOC), 5.640%,
6/1/1998
9,000,000 Mississippi Business Finance Corp., Howard Industries, 9,000,000
Inc. Series 1997, (First American National Bank,
Nashville, TN LOC), 5.838%, 6/4/1998
615,000 New Jersey EDA, Series 1992 K-3, (Banque Nationale de 615,000
Paris LOC), 5.860%, 6/1/1998
3,745,000 New Jersey EDA, Series 1992-H, (Banque Nationale de Paris 3,745,000
LOC), 5.730%, 6/1/1998
5,700,000 Pennsylvania EDFA, (Series 1993-C), (Barclays Bank PLC, 5,700,000
London LOC), 5.610%, 6/3/1998
33,963,410 (c)Rabobank Optional Redemption Trust, Series 1997-101, 33,963,410
5.688%, 7/15/1998
1,800,000 Saegertown Manufacturing Corp. (PNC Bank, N.A. LOC), 1,800,000
5.642%, 6/1/1998
4,780,000 Sojourn Project, Series 1997, (First National Bank of 4,780,000
Ohio, Akron LOC), 5.850%, 6/4/1998
4,000,000 South Carolina Job Development Authority, Boozer Lumber 4,000,000
LLC, (SouthTrust Bank of Alabama, Birmingham LOC), 5.740%,
6/5/1998
3,575,000 Southeast Regional Holdings, LLC, Series 1995-A,
(Columbus 3,575,000 Bank and Trust Co., GA LOC), 5.890%,
6/4/1998
5,320,000 Sun Valley, Inc., (SouthTrust Bank of Georgia, Atlanta 5,320,000
LOC), 5.740%, 6/5/1998
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)NOTES - VARIABLE--CONTINUED
BANKING--CONTINUED
$ 3,620,000 (c)Toledo Medical Building I L.P., (Huntington National $ 3,620,000
Bank, Columbus, OH LOC), 6.270%, 11/1/1998
18,975,000 Union Development Co., (Bank of America NT and SA, San 18,975,000
Francisco LOC), 5.601%, 6/4/1998
3,775,000 United Jewish Federation of Greater Pittsburgh VRDB, 3,775,000
Series 1995A, (PNC Bank, N.A. LOC), 5.650%, 6/4/1998
6,520,000 Van Dyne Crotty Co., (Huntington National Bank, Columbus, 6,520,000
OH LOC), 5.660%, 6/4/1998
5,505,000 Woodbury Business Forms, Inc./Carribean Business Forms, 5,505,000
Series 1996 Taxable Revenue Bonds, (Columbus Bank and
Trust Co., GA LOC), 5.840%, 6/4/1998
TOTAL 329,416,982
FINANCE - EQUIPMENT--1.5%
28,000,000 Pitney Bowes Credit Corp., 5.655%, 6/10/1998 27,960,415
29,400,000 Comdisco, Inc., 5.799%, 8/26/1998 29,400,000
TOTAL 57,360,415
FINANCE - RETAIL--2.8%
21,000,000 AFS Insurance Premium Receivables Trust, (Series 1994-A), 21,000,000
6.212%, 6/15/1998
60,000,000 (c)Associates Corp. of North America, 5.730%, 6/1/1998 59,982,729
23,000,000 Carco Auto Loan Master Trust 1993-2, (Class A1), 5.580%, 23,000,000
6/15/1998
TOTAL 103,982,729
INSURANCE--6.5%
121,000,000 General American Life Insurance Co., 5.850%, 6/22/1998 121,000,000
52,237,808 (c)Liquid Asset Backed Securities Trust, Series 1997-3 52,237,808
Senior Notes, (Guaranteed by AMBAC), 5.718%, 6/27/1998
25,000,000 SunAmerica Life Insurance Company, 5.746%, 6/1/1998 25,000,000
15,000,000 SunAmerica Life Insurance Company, 5.746%, 6/1/1998 15,000,000
30,000,000 Transamerica Occidental Life Insurance Co., 5.729%, 30,000,000
8/5/1998
TOTAL 243,237,808
TOTAL NOTES - VARIABLE 733,997,934
SHORT-TERM NOTES--3.5%
BANKING--1.9%
31,000,000 SALTS II Cayman Islands Corp., (Guaranteed by Bankers 31,000,000
Trust International, PLC), 5.738%, 6/18/1998
25,000,000 SALTS III Cayman Island Corp., (Bankers Trust 25,000,000
International, PLC Swap Agreement), 5.725%, 7/23/1998
16,300,000 SALTS III Cayman Island Corp., (Bankers Trust 16,300,000
International, PLC Swap Agreement), 6.038%, 6/18/1998
TOTAL 72,300,000
</TABLE>
PRIME CASH SERIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM NOTES--CONTINUED
BROKERAGE--0.8%
$ 30,000,000 Goldman Sachs & Co., 5.600%, 7/27/1998 $ 30,000,000
FINANCE - COMMERCIAL--0.8%
20,000,000 Beta Finance, Inc., 5.790%, 4/8/1999 19,998,296
10,000,000 (c)Triangle Funding Ltd., 5.656%, 11/16/1998 10,000,000
TOTAL 29,998,296
TOTAL SHORT-TERM NOTES 132,298,296
TIME DEPOSIT--5.3%
BANKING--5.3%
50,000,000 Bank of Tokyo-Mitsubishi Ltd., 5.688%, 6/1/1998 50,000,000
50,000,000 Chase Manhattan Bank (USA) N.A., Wilmington, 5.688%, 50,000,000
6/1/1998
75,000,000 Royal Bank of Canada, Montreal, 5.688%, 6/1/1998 75,000,000
25,000,000 Westdeutsche Landesbank Girozentrale, 5.688%, 6/1/1998 25,000,000
TOTAL 200,000,000
(D)REPURCHASE AGREEMENTS--15.6%
75,000,000 ABN AMRO Chicago Corp., 5.650%, dated 5/29/1998, due 75,000,000
6/1/1998
126,655,000 Bear, Stearns and Co., 5.650%, dated 5/29/1998, due 126,655,000
6/1/1998
80,000,000 Fuji Government Securities, Inc., 5.570%, dated 5/29/1998, 80,000,000
due 6/1/1998
100,000,000 HSBC Securities, Inc., 5.650%, dated 5/29/1998, due 100,000,000
6/1/1998
38,000,000 PaineWebber Group, Inc., 5.570%, dated 5/29/1998, due 38,000,000
6/1/1998
100,000,000 Salomon Brothers, Inc., 5.650%, dated 5/29/1998, due 100,000,000
6/1/1998
28,600,000 Societe Generale Securities Corp., 5.570%, dated 28,600,000
5/29/1998, due 6/1/1998
35,400,000 UBS Securities, Inc., 5.570%, dated 5/29/1998, due 35,400,000
6/1/1998
TOTAL 583,655,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $ 3,733,775,720
</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, 1998, these securities amounted to
$280,237,519 which represents 7.5% 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
($3,748,033,965) at May 31, 1998.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation EDA --Economic Development
Authority EDFA --Economic Development Financing Authority IDFA --Industrial
Development Finance Authority LLC --Limited Liability Corporation LOC --Letter
of Credit PLC --Public Limited Company SA --Support Agreement
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
PRIME CASH SERIES
MAY 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 583,655,000
Investments in securities 3,150,120,720
Total investments in securities, at amortized cost and value $ 3,733,775,720
Cash 9,177,864
Income receivable 13,231,359
Receivable for shares sold 2,354,603
Prepaid expenses 222,902
Total assets 3,758,762,448
LIABILITIES:
Payable for shares redeemed 4,647,336
Income distribution payable 3,910,200
Accrued expenses 2,170,947
Total liabilities 10,728,483
Net Assets for 3,748,033,965 shares outstanding $ 3,748,033,965
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER
SHARE:
$3,748,033,965 / 3,748,033,965 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
PRIME CASH SERIES
YEAR ENDED MAY 31, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 180,157,760
EXPENSES:
Investment advisory fee $ 15,717,524
Administrative personnel and services fee 2,371,597
Custodian fees 208,632
Transfer and dividend disbursing agent fees and expenses 6,564,143
Directors'/Trustees' fees 26,662
Auditing fees 13,348
Legal fees 11,639
Portfolio accounting fees 153,282
Distribution services fee 3,143,506
Shareholder services fee 7,858,762
Share registration costs 514,021
Printing and postage 632,809
Insurance premiums 45,283
Taxes 48,875
Miscellaneous 10,297
Total expenses 37,320,380
Waiver of investment advisory fee (5,759,049)
Net expenses 31,561,331
Net investment income $ 148,596,429
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
PRIME CASH SERIES
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 148,596,429 $ 96,413,512
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (148,596,429) (96,413,512)
SHARE TRANSACTIONS--
Proceeds from sale of shares 12,363,460,681 9,031,450,524
Net asset value of shares issued to shareholders in 144,001,210 90,848,174
payment of distributions declared
Cost of shares redeemed (11,122,809,806) (8,298,152,325)
Change in net assets resulting from share transactions 1,384,652,085 824,146,373
Change in net assets 1,384,652,085 824,146,373
NET ASSETS:
Beginning of period 2,363,381,880 1,539,235,507
End of period $ 3,748,033,965 $ 2,363,381,880
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.02
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.05) (0.05) (0.05) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 4.83% 4.64% 4.90% 4.60% 2.48%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.00% 0.99% 0.99% 0.99% 0.99%
Net investment income 4.73% 4.55% 4.78% 4.57% 2.45%
Expense waiver/reimbursement(b) 0.18% 0.20% 0.38% 0.20% 0.18%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $3,748,034 $2,363,382 $1,539,235 $1,027,083 $791,147
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
PRIME CASH SERIES
MAY 31, 1998
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 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.
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 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 these
agreements. 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 Board of 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, 1998, is as
follows:
SECURITY ACQUISITION DATE ACQUISITION COST
Associates Corp. of North America 12/3/1997 $59,982,729
Bankers Trust New York Corp. 1/29/1998 30,000,000
Liquid Asset Backed Securities Trust, 8/15/1996 51,000,000
Series 1996-3
Liquid Asset Backed Securities Trust, 2/19/1997 39,433,572
Series 1997-1
Liquid Asset Backed Securities Trust, 6/27/1997 52,237,808
Series 1997-3 Senior Notes
Rabobank Optional Redemption Trust, 4/17/1997 33,963,410
Series 1997-101
Toledo Medical Building I L.P. 11/2/1992 3,620,000
Triangle Funding Ltd. 10/16/1997 10,000,000
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
CAPITAL STOCK
At May 31, 1998, there were 12,500,000,000 shares ($0.001 par value per share)
authorized. At May 31, 1998, capital paid-in aggregated $3,748,033,965.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
1998 1997
<S> <C> <C>
Shares sold 12,363,460,681 9,031,450,524
Shares issued to shareholders in payment of distributions declared 144,001,210 90,848,174
Shares redeemed (11,122,809,806) (8,298,152,325)
Net change resulting from share transactions 1,384,652,085 824,146,373
</TABLE>
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, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
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.
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
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, 1998, the related statement of
operations for the year then ended, the statements of changes in net assets for
the years ended May 31, 1998 and 1997, 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, 1998, by correspondence with the custodian and brokers; where replies
were not received, 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, 1998, 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 10, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
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
Nicholas J. Seitanakis
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Prime Cash Series
ANNUAL REPORT TO SHAREHOLDERS
MAY 31, 1998
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 147551105
0062904 (7/98)
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 12-month period
from June 1, 1997, through May 31, 1998. The report begins with 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 pursue
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 $0.05 per
share. At the end of the reporting period, the fund's total net assets reached
$821.4 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. We look forward to keeping you up to date on your
investment.
Sincerely,
[Graphic]
Richard B. Fisher
President
July 15, 1998
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no guarantee that they will 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 ("S&P") and Aaa by
Moody's Investors Service, Inc. ("Moody's").*
The Federal Reserve Board (the "Fed") kept monetary policy unchanged, with the
federal funds target rate at 5.50%, over the annual reporting period ended May
31, 1998. Economic fundamentals remained quite strong over the reporting period,
as gross domestic product grew at over 3.00% for the second, third, and fourth
quarters of 1997, and expanded by 5.40% in the first quarter of 1998. The growth
was spurred on by lower long-term interest rates and robust consumer spending.
Outward signs of inflation remained benign, although concerns over tight labor
markets in the face of economic growth in excess of the pace generally thought
to be non-inflationary kept Fed policy makers vigilant. All things considered,
it is likely that the Fed would have tightened monetary policy in a preemptive
move to ward off future inflationary pressures had not the crises in the Asian
economies developed toward the end of 1997. With the economies of many Asian
nations unsteady at best and with the ultimate impact of the turmoil on the
domestic economy unclear, the Fed was content to remain on the sidelines for the
next several months.
Very short-term Treasury bills ("T-bills") were heavily influenced by technical
factors over the reporting period--namely, a reduction in the overall T-bill
auction sizes due to stronger than expected tax receipts and continued
improvement in the budget deficit. As a result, movements in the relatively
longer one-year T-bill were the best barometer of market sentiment over the
reporting period. The yield on this security declined steadily from 5.75% in
early June to 5.50% in early July, then traded within a fairly narrow range
until early October. The yield then rose to 5.60% by the middle of the month as
Fed tightening expectations resurfaced but then plunged to 5.20% by late October
in the midst of the Asian crisis as investors sought a safe haven in Treasury
securities. The next few months were characterized by shifting market
expectations, alternating between fears of building inflation as the economy
remained strong and fears that the impact from Asia would be so great that the
Fed would eventually be forced to ease. After rising to 5.60% by late-November,
the yield on the one year T-bill fell to 5.10% in January, rebounded to 5.40% by
late February, and then traded within a relatively narrow range until the end of
the reporting period in May.
Over the reporting period, the fund was targeted in a 35- to 45-day average
maturity range, representing a neutral stance. The average maturity of the fund
varied within that range according to relative value opportunities available in
the Treasury market. Technical influences in shorter-term Treasury securities
offered opportunities to sell out of these securities and reinvest farther out
the curve. The fund remained barbelled in structure, combining a significant
position in overnight and term repurchase agreements with purchases of T-bills
and notes with 6 to 13 month maturities. In spite of the torrid pace of growth
in the first quarter, the economy is expected to slow in upcoming months.
Inventory accumulation combined with a net export drag may trim growth back to a
more sustainable level. With that in mind, the Fed will likely continue to stay
on hold in the meantime, as long as inflation remains under control.
* 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.
SHAREHOLDER MEETING RESULTS
A Special Meeting of Shareholders of Cash Trust Series, Inc. (the "Company") was
held on May 15, 1998. On February 26, 1998, the record date for shareholders
voting at the meeting, there were 5,569,771,582 total outstanding shares. The
following item was considered by shareholders of the Company and the results of
their voting were as follows:
AGENDA ITEM: To elect Directors.*
SHARES VOTED SHARES WITHHELD
FOR AUTHORITY
Thomas G. Bigley 3,096,135,538 166,988,035
John E. Murray, Jr., J.D., S.J.D. 3,096,268,650 166,854,923
Nicholas P. Constantakis 3,096,798,545 166,325,028
* The following Directors of the Company continued their terms as Directors
of the Company: John F. Donahue, John T. Conroy, Jr., William J. Copeland,
J. Christopher Donahue, James E. Dowd, Esq., Lawrence D. Ellis, M.D., Edward
L. Flaherty, Jr., Esq., Peter E. Madden, Wesley W. Posvar, Marjorie P. Smuts
PORTFOLIO OF INVESTMENTS
TREASURY CASH SERIES
MAY 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM U.S. TREASURY OBLIGATION--15.8%
U.S. TREASURY NOTE -- 15.8%
$ 129,500,000 4.750% - 9.250%, 8/15/1998 - 5/15/1999 $ 129,819,391
TOTAL SHORT-TERM U.S. TREASURY OBLIGATION 129,819,391
(A)REPURCHASE AGREEMENTS--83.6%
35,000,000 ABN AMRO Chicago Corp., 5.590%, dated 5/29/1998, due 35,000,000
6/1/1998
35,000,000 BT Securities Corp., 5.570%, dated 5/29/1998, due 6/1/1998 35,000,000
35,000,000 Bank of Tokyo-Mitsubishi Ltd., 5.590%, dated 5/29/1998, due 35,000,000
6/1/1998
35,000,000 Barclays de Zoete Wedd Securities, Inc., 5.560%, dated 35,000,000
5/29/1998, due 6/1/1998
25,000,000 Bear, Stearns and Co., 5.570%, dated 5/29/1998, due 6/1/1998 25,000,000
20,000,000 (b)Deutsche Bank Government Securities, Inc., 5.490%, dated 20,000,000
5/28/1998, due 6/30/1998
18,600,000 Deutsche Bank Government Securities, Inc., 5.570%, dated 18,600,000
5/29/1998, due 6/1/1998
35,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.570%, 35,000,000
dated 5/29/1998, due 6/1/1998
25,000,000 First Union Capital Markets, 5.580%, dated 5/29/1998, due 25,000,000
6/1/1998
35,000,000 Greenwich Capital Markets, Inc., 5.550%, dated 5/29/1998, 35,000,000
due 6/1/1998
35,000,000 Harris Government Security, Inc., 5.580%, dated 5/29/1998, 35,000,000
due 6/1/1998
35,000,000 J.P. Morgan & Co., Inc., 5.570%, dated 5/29/1998, due 35,000,000
6/1/1998
35,000,000 Morgan Stanley Group, Inc., 5.550%, dated 5/29/1998, due 35,000,000
6/1/1998
35,000,000 Salomon Brothers, Inc., 5.590%, dated 5/29/1998, due 35,000,000
6/1/1998
35,000,000 Societe Generale, New York, 5.570%, dated 5/29/1998, due 35,000,000
6/1/1998
40,000,000 Swiss Bank Capital Markets, 5.550%, dated 5/29/1998, due 40,000,000
6/1/1998
35,000,000 Toronto Dominion Securities (USA) Inc., 5.570%, dated 35,000,000
5/29/1998, due 6/1/1998
35,000,000 UBS Securities, Inc., 5.570%, dated 5/29/1998, due 6/1/1998 35,000,000
35,000,000 Westdeutsche Landesbank Girozentrale, 5.570%, dated 35,000,000
5/29/1998, due 6/1/1998
9,000,000 (b)Credit Suisse First Boston, Inc., 5.440%, dated 4/9/1998, 9,000,000
due 7/8/1998
34,000,000 (b)Goldman Sachs Group, LP, 5.490%, dated 5/19/1998, due 34,000,000
6/9/1998
25,000,000 (b)Merrill Lynch, Pierce, Fenner and Smith, 5.500%, dated 25,000,000
5/8/1998, due 8/10/1998
TOTAL REPURCHASE AGREEMENTS 686,600,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $ 816,419,391
</TABLE>
(a) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(b) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($821,484,227) at May 31, 1998.
The following acronym is used throughout this portfolio:
LP --Limited Partnership
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
TREASURY CASH SERIES
MAY 31, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 686,600,000
Investments in securities 129,819,391
Total investments in securities, at amortized cost and value $ 816,419,391
Cash 22,747
Income receivable 1,907,880
Receivable for investments sold 5,053,966
Receivable for shares sold 432,441
Total assets 823,836,425
LIABILITIES:
Payable for shares redeemed 1,198,007
Income distribution payable 844,711
Accrued expenses 309,480
Total liabilities 2,352,198
NET ASSETS for 821,484,227 shares outstanding $ 821,484,227
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$821,484,227 / 821,484,227 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
TREASURY CASH SERIES
YEAR ENDED MAY 31, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 46,348,470
Expenses:
Investment advisory fee $ 4,134,411
Administrative personnel and services fee 623,879
Custodian fees 86,299
Transfer and dividend disbursing agent fees and 628,730
expenses
Directors'/Trustees' fees 7,988
Auditing fees 13,141
Legal fees 6,030
Portfolio accounting fees 140,071
Distribution services fee 2,374,689
Shareholder services fee 2,067,206
Share registration costs 57,369
Printing and postage 70,029
Insurance premiums 6,846
Taxes 52,947
Miscellaneous 3,997
Total expenses 10,273,632
Waivers--
Waiver of investment advisory fee $ (424,670)
Waiver of distribution services fee (1,547,806)
Total waivers (1,972,476)
Net expenses 8,301,156
Net investment income $ 38,047,314
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
TREASURY CASH SERIES
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 38,047,314 $ 31,059,670
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (38,047,314) (31,059,670)
SHARE TRANSACTIONS--
Proceeds from sale of shares 3,586,341,688 3,450,893,937
Net asset value of shares issued to shareholders in payment 33,442,587 24,708,694
of distributions declared
Cost of shares redeemed (3,569,463,870) (3,298,168,881)
Change in net assets resulting from share transactions 50,320,405 177,433,750
Change in net assets 50,320,405 177,433,750
NET ASSETS:
Beginning of period 771,163,822 593,730,072
End of period $ 821,484,227 $ 771,163,822
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
YEAR ENDED MAY 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04 0.05 0.04 0.02
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.04) (0.05) (0.04) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 4.70% 4.50% 4.83% 4.34% 2.37%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.00% 0.99% 0.99% 0.99% 0.99%
Net investment income 4.60% 4.41% 4.70% 4.26% 2.33%
Expense waiver/reimbursement(b) 0.24% 0.03% 0.29% 0.08% 0.10%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $821,484 $771,164 $593,730 $424,091 $427,005
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
TREASURY CASH SERIES
MAY 31, 1998
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 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.
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.
CAPITAL STOCK
At May 31, 1998, there was 12,500,000,000 shares ($0.001 par value per share)
authorized. At May 31, 1998, capital paid-in aggregated $821,484,227.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
1998 1997
<S> <C> <C>
Shares sold 3,586,341,688 3,450,893,937
Shares issued to shareholders in
payment of distributions declared 33,442,587 24,708,694
Shares redeemed (3,569,463,870) (3,298,168,881)
Net change resulting from share transactions 50,320,405 177,433,750
</TABLE>
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, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
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 compensate 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 compensate 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.
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
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, 1998, and the related statement of
operations for the year then ended, the statements of changes in net assets for
the years ended May 31, 1998 and 1997, 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, 1998, by correspondence with the custodian and brokers; where replies
were not received, 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, 1998, 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 10, 1998
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
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
Nicholas J. Seitanakis
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]FEDERATED INVESTORS
Treasury Cash Series
ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 147551402
2062301 (7/98)
[Graphic]
