President's Message
Dear Shareholder:
Government Cash Series, a portfolio of Cash Trust Series, Inc., was established
in 1989, and I am pleased to present its Semi-Annual Report to shareholders,
which covers the six-month period ended November 30, 1998. The report begins
with an investment review by the fund's portfolio manager, Susan R. Hill, Vice
President of Federated Advisers, which is followed by a complete listing of the
fund's investments, and its financial statements.
During the reporting period, Government Cash Series paid a total of $0.02 in
dividends per share. In addition to income on their ready cash, shareholders
benefited from the fund's daily liquidity and stability of principal.* The fund
has maintained a net asset value of $1.00 per share since its inception.
At the end of the reporting period, the fund's net assets totaled $652 million,
with approximately 56% of the assets invested in securities issued by various
government agencies, including the Federal Farm Credit Bank, Federal Home Loan
Bank, Federal Home Loan Mortgage Association, Federal National Mortgage
Association, and Student Loan Marketing Association. More than 45% of the fund's
assets were invested in repurchase agreements backed by government and/or agency
securities, because repurchase agreements offered a yield advantage over many
direct government obligations.
Thank you for choosing Government Cash Series as a convenient way to help your
ready cash earn daily income through the relative safety of U.S. government
money market obligations. Please contact your investment representative if you
have any questions about the fund.
Sincerely,
/s/ Richard B. Fisher
Richard B. Fisher
President
January 15, 1999
* An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
Investment Review
Government Cash Series invests 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.
Early in the reporting period, economic fundamentals were still the driving
factor behind movements in short-term interest rates. With economic growth still
strong--albeit slowing from its torrid 5.50% pace of growth in the first quarter
of 1998--market participants were content with the idea that the Federal Reserve
Board (the "Fed") would remain on the sidelines. The anticipated drag on the
U.S. economy resulting from the economic crises in Asia had become apparent--
particularly in the manufacturing sector--over the second quarter of 1998. This
slowdown lent comfort to investors that economic growth would not be so robust
as to ignite inflationary pressures.
By the third quarter of 1998, however, a dramatic shift in market sentiment was
evident. Uncertainty in the world economies resulted in vulnerability in our
domestic equity market, and led to a substantial flight to quality to U.S.
Treasury securities across the yield curve. Economic trouble spread to include
Russia and Latin America, and what had been perceived to have been a fairly
modest drag on the U.S. economies, as a result of the remote Asian crisis, now
became an overpowering influence on the market and expectations regarding future
U.S. growth. Although economic fundamentals still remained fairly positive in
this environment, fear dominated market sentiment over this period.
Expectations regarding the direction of the next change in monetary policy did
an abrupt about-face over the reporting period. The Fed had adopted a tightening
bias in March, a reflection of their underlying concern about inflationary
pressures. By August, the Fed had removed its tightening bias as Fed officials
perceived that the risks to the economy had become more balanced. By late
August, however, market expectations that the Fed might eventually need to ease
monetary policy to help the U.S. economy along, as a result of the world
economic struggles, had begun to grow. This expectation intensified throughout
September, and at the September 29, 1998 Federal Open Market Committee("FOMC")
meeting, the Fed voted to ease monetary policy by a modest 25 basis points. The
Fed followed that move with another 25 basis point ease on October 15, 1998
which brought the Federal Funds Target Rate down to 5.00%. The Fed also voted to
cut the discount rate by the same magnitude, from 5.00% to 4.75%, at that time.
And finally, in mid-November, the Fed voted once again at its November 17, 1998
FOMC meeting to reduce the Federal Funds Target Rate and the discount rate by 25
basis points. These moves were a reflection of concern over the potential
economic impact that the crises in foreign economies would have on U.S. domestic
growth, as well as with the liquidity/credit crisis evident in the fixed-income
markets.
Short-term interest rates reflected the turmoil and shift in monetary policy
over the reporting period. From June through August, the yield on the three-
month agency discount note traded within a narrow range of 5.40% to 5.50%. By
late August, however, the trouble in Asian economies had broadened to include
Russia and Latin America, and concern over the potential impact the turmoil
would have on the domestic economy gripped the market. The yield on the three-
month agency discount note declined sharply in ensuing weeks to 4.75% by mid
October, around the time of the second easing step by the Fed. The sudden inter-
meeting move by the Fed in October, coupled with the added insurance of the ease
in November, had the desired affect of calming the turbulent financial markets,
however, and the three-month agency discount note retraced some of this decline
to end the reporting period at 5.00%.
For most of the reporting period, the fund was targeted in a 35-45 day average
maturity range attempting to maximize performance through ongoing relative value
analysis. Because the overseas turmoil resulted in a substantial flight to
quality to U.S. Treasury securities from investors seeking a safe haven, the
fund's purchases were predominantly agency securities and repurchase agreements.
We believe the 75 basis point cumulative easing in monetary policy by the Fed
should be sufficient, for now, to provide comfort to the market that the economy
will be able to withstand the drag from overseas. As a result, the Fed should
remain on the sidelines in the near term until additional light is shed on the
health of the economy and its longer term prospects for growth.
Portfolio of Investments
Government Cash Series
November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Short-Term Obligations--56.4%
$ 14,000,000 (a)Federal Farm Credit Bank, Floating Rate Notes, 4.420%, 1/4/1999 $ 14,000,000
3,000,000 Federal Farm Credit Bank Notes, 5.500%, 4/1/1999 2,998,636
56,000,000 (a)Federal Home Loan Bank, Floating Rate Notes, 4.840% - 5.050%, 12/2/1998 - 3/1/1999 55,982,279
15,100,000 Federal Home Loan Bank Notes, 5.080% - 5.705%, 3/1/1999 - 11/9/1999 15,095,733
55,000,000 (b)Federal Home Loan Mortgage Corp., Discount Notes, 4.890% - 5.090%,
1/29/1999 - 3/15/1999 54,368,188
33,000,000 (a)Federal Home Loan Mortgage Corp., Floating Rate Notes, 4.849% - 5.202%,
12/17/1998 - 2/17/1999 32,984,788
9,000,000 Federal Home Loan Mortgage Corp. Notes, 5.544% - 5.605%, 3/12/1999 - 8/13/1999 8,997,040
119,717,000 (b)Federal National Mortgage Association, Discount Notes, 4.400% - 5.380%,
12/7/1998 - 7/30/1999 117,734,619
39,000,000 (a)Federal National Mortgage Association, Floating Rate Notes, 4.820% - 5.448%,
12/2/1998 - 2/28/1999 38,992,921
18,700,000 Federal National Mortgage Association Notes, 5.360% - 5.650%, 2/19/1999 - 8/9/1999 18,693,164
5,000,000 (a)Student Loan Marketing Association, Floating Rate Notes, 5.260%, 12/8/1998 4,998,158
2,500,000 Student Loan Marketing Association Notes, 5.580%, 3/11/1999 2,499,853
Total Short-Term Obligations 367,345,379
(c)Repurchase Agreements--45.1%
20,000,000 ABN AMRO Chicago Corp., 5.500%, dated 11/30/1998, due 12/1/1998 20,000,000
30,000,000 Bear, Stearns and Co., 5.350%, dated 11/30/1998, due 12/1/1998 30,000,000
4,900,000 Deutsche Bank Government Securities, Inc., 5.320%, dated 11/30/1998, due 12/1/1998 4,900,000
13,000,000 (d)Goldman Sachs Group, LP, 5.190%, dated 10/8/1998, due 1/6/1999 13,000,000
15,000,000 Goldman Sachs Group, LP, 5.370%, dated 11/30/1998, due 12/1/1998 15,000,000
28,000,000 (d)J.P. Morgan & Co., Inc., 5.150%, dated 10/14/1998, due 1/13/1999 28,000,000
27,000,000 (d)J.P. Morgan & Co., Inc., 5.150%, dated 11/2/1998, due 1/6/1999 27,000,000
26,000,000 (d)Morgan Stanley Group, Inc., 4.860%, dated 10/15/1998, due 1/14/1999 26,000,000
15,000,000 Nationsbank Montgomery Securities, Inc., 5.300%, dated 11/30/1998, due 12/1/1998 15,000,000
100,000,000 PaineWebber Group, Inc., 5.300%, dated 11/30/1998, due 12/1/1998 100,000,000
15,000,000 Paribas Corp., 5.320%, dated 11/30/1998, due 12/1/1998 15,000,000
Total Repurchase Agreements 293,900,000
Total Investments (at amortized cost)(e) $661,245,379
</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 a
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
($651,729,675) at November 30, 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
Government Cash Series
November 30, 1998 (unaudited)
<TABLE>
<S> <C> <C>
Assets:
Investments in repurchase agreements $293,900,000
Investments in securities 367,345,379
Total investments in securities, at amortized cost and value $661,245,379
Income receivable 2,171,649
Total assets 663,417,028
Liabilities:
Payable for investments purchased 9,992,640
Income distribution payable 1,315,554
Payable to Bank 244,530
Accrued expenses 134,629
Total liabilities 11,687,353
Net Assets for 651,729,675 shares outstanding $651,729,675
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$651,729,675 / 651,729,675 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Statement of Operations
Government Cash Series
Six Months Ended November 30, 1998 (unaudited)
<TABLE>
<S> <C> <C> <C>
Investment Income:
Interest $16,623,306
Expenses:
Investment advisory fee $ 1,522,110
Administrative personnel and services fee 229,534
Custodian fees 22,673
Transfer and dividend disbursing agent fees and expenses 384,003
Directors'/Trustees' fees 3,172
Auditing fees 6,645
Legal fees 2,708
Portfolio accounting fees 49,690
Distribution services fee 930,327
Shareholder services fee 761,055
Share registration costs 36,512
Printing and postage 69,335
Insurance premiums 2,676
Taxes 10,072
Miscellaneous 5,536
Total expenses 4,036,048
Waivers--
Waiver of investment advisory fee $ (352,529)
Waiver of distribution services fee (625,905)
Total waivers (978,434)
Net expenses 3,057,614
Net investment income $13,565,692
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Statement of Changes in Net Assets
Government Cash Series
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 13,565,692 $ 26,063,493
Distributions to Shareholders--
Distributions from net investment income (13,565,692) (26,063,493)
Share Transactions--
Proceeds from sale of shares 1,225,253,338 2,571,697,688
Net asset value of shares issued to shareholders in payment of
distributions declared 11,145,061 22,794,145
Cost of shares redeemed (1,141,852,267) (2,567,675,348)
Change in net assets resulting from share transactions 94,546,132 26,816,485
Change in net assets 94,546,132 26,816,485
Net Assets:
Beginning of period 557,183,543 530,367,058
End of period $ 651,729,675 $ 557,183,543
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Financial Highlights
Government Cash Series
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited)
November 30, Year Ended May 31,
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.02 0.05 0.04 0.05 0.04 0.02
Less distributions
Distributions from net investment income (0.02) (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 $ 1.00
Total return(a) 2.25% 4.73% 4.54% 4.85% 4.43% 2.45%
Ratios to average net assets
Expenses 1.00%* 1.00% 0.99% 0.99% 0.99% 0.99%
Net investment income 4.46%* 4.62% 4.45% 4.75% 4.35% 2.41%
Expense waiver/reimbursement(b) 0.32%* 0.27% 0.10% 0.30% 0.08% 0.09%
Supplemental data
Net assets, end of period (000 omitted) $651,730 $557,184 $530,367 $448,129 $453,096 $401,334
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Notes to Financial Statements
Government Cash Series
November 30, 1998 (unaudited)
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 November 30, 1998, there were 12,500,000,000 shares of $0.001 par value
capital stock authorized. At November 30, 1998, capital paid-in aggregated
$651,729,675. Transactions in capital stock as follows:
<TABLE>
<CAPTION>
Six Months Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Shares sold 1,225,253,338 2,571,697,688
Shares issued to shareholders in payment of distributions declared 11,145,061 22,794,145
Shares redeemed (1,141,852,267) (2,567,675,348)
Net change resulting from share transactions 94,546,132 26,816,485
</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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund shares for the period. The fee paid to FSSC 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, 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.
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,
and Secretary
Richard J. Thomas
Treasurer
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.
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.
[FEDERATED INVESTORS LOGO]
Government
Cash Series
Semi-Annual Report
to Shareholders
November 30, 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
0122604 (1/99) [RECYCLED PAPER LOGO]
President's Message
Dear Shareholder:
Municipal Cash Series, a portfolio of Cash Trust Series, Inc., was established
in 1989, and I am pleased to present its Semi-Annual Report to shareholders,
which covers the six-month period ended November 30, 1998. The report begins
with an investment review by the fund's portfolio manager, Mary Jo Ochson,
Senior Vice President of Federated Advisers, which is followed by a complete
listing of the fund's tax-free securities issued by municipalities nationwide,
and its financial statements.
During the reporting period, Municipal Cash Series paid a total of $0.01 in tax-
free dividends per share.* In addition to tax-free income, shareholders
benefited from the fund's daily liquidity and stability of principal.** The fund
has maintained a net asset value of $1.00 per share since its inception. By the
end of the reporting period, shareholders had invested a total of $650 million
in the fund's diversified portfolio.
Thank you for choosing Municipal Cash Series as a convenient way to help your
ready cash earn daily, tax-free income through the relative safety of high-
quality municipal obligations. Please contact your investment representative if
you have any questions about the fund.
Sincerely,
/s/ Richard B. Fisher
Richard B. Fisher
President
January 15, 1999
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** An investment in money market funds is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although money market funds seek to preserve the value of your investment
at $1.00 per share, it is possible to lose money by investing in the fund.
Investment Review
An interview with the fund's portfolio manager, Mary Jo Ochson, CFA, Senior Vice
President, Federated Advisers.
Q. What are your comments on the economy and the interest rate environment
during the fund's six-month reporting period?
A. The economy remained healthy over the reporting period. At the same time,
overall inflationary pressures were subdued due to slight weakness in the
manufacturing sector resulting from the economic turmoil in Asia. Strong labor
markets with consequences of wage inflation continued to occupy the thoughts of
the Federal Reserve Board (the "Fed") throughout much of the reporting period.
However, the reporting period coincided with a continuing unsteady economic
picture abroad and volatile equity markets in the U.S. as a result. Economic
activity began to slow relative to the robust pace of the first quarter of 1998
in large part due to business inventory drawdowns. Labor markets, with
unemployment at or near historical lows, continued to show strength especially
in the service sectors. Business and consumer spending moderated throughout the
reporting period while wages and prices remained stable. The Fed's policy
switched dramatically during the reporting period while economic indicators gave
mixed signals. The Fed was clearly concerned with overriding weakness from
turmoil overseas and the resulting flight to quality liquidity crunch. Beginning
in September, the Fed eased three times in the next seven weeks for a total of
75 basis points. Short-term interest rates, as one would expect, followed the
Fed's action. Movements in the one-year Treasury bill ("T-bill") over the
reporting period best reveal the market's sentiment. The one-year T-bill traded
in the 5.40% range during June and July of 1998, then fell to the 5.20% range by
August as market sentiment shifted toward an easing by the Fed. As the Fed ease
became more imminent, market participants pushed yields lower to the 4.75% range
by September. The reporting period ended with one-year T-bill rates in the 4.50%
range.
In addition to economic fundamentals, short-term municipal securities were
strongly influenced by technical factors over this reporting period, primarily
coupon payments and corporate income tax payments. These technical factors and
the Fed's bias toward easing contributed to the relative flatness of the short-
term tax-exempt yield curve. Variable rate demand notes ("VRDNs"), which
comprise more than 60% of the fund's assets, started the reporting period in the
3.50% range, but moved sharply lower in July to the 3.00% level as supply and
demand imbalances occurred. Yields then rose back to the 3.50% level by the end
of July as coupon payment reinvestment pressures eased. VRDN yields spiked in
mid September as corporate income tax payments provided a brief oversupply of
securities. Yields then fell as the Fed easing occurred, ending the reporting
period below where they began, at the 3.15% range. Over the six-month reporting
period, VRDN yields averaged roughly 64% of taxable rates making them marginally
attractive for investors at the 36% federal tax bracket and attractive for the
highest federal tax bracket. Over the same period, tax-exempt one-year notes, as
well as VRDNs, averaged 3.34%.
Q. What were your strategies 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 in a 45-50 day average maturity range
over the reporting period, 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, the portfolio attempted to maximize
performance through ongoing relative value analysis. Our relative value analysis
included the comparison of the richness or cheapness of municipal securities to
one another, as well as municipals to taxable instruments such as Treasury
securities.
Q. How did the fund's yield react during the reporting period?
A. The seven-day net yield* for the fund on November 30, 1998 was 2.67%
compared to 2.91% at the beginning of the reporting period on June 1, 1998, with
yields falling in July due in large part to technical factors related to coupon
reinvestment then continuing as the Fed eased. The latest yield was the
equivalent of a 4.43% taxable yield for investors in the highest federal and
state effective tax bracket.
Q. As we approach year end, what is your outlook for 1999?
A. The extent of the Asian economic crisis and its impact on U.S. growth should
be more clear as we continue into 1999. As a result, the Fed, although certain
to be troubled by persistent above-trend growth in an environment where labor
markets are tight, has shown the willingness to act quickly. If the drag on the
U.S. economy is not as great as once feared, expectations of a need for a Fed
tightening may then resurface. In the near term, market movements will likely
reflect technical as well as fundamental factors. 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.
Portfolio of Investments
Municipal Cash Series
November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
(a)Short-Term Municipals--99.4%
Alabama--3.6%
$ 7,500,000 Alabama HFA, Variable Rate Certificates (Series 1997J) Weekly VRDNs (Bank of America
NT and SA, San Francisco LIQ) $ 7,500,000
1,900,000 Alabama State IDA, Revenue Bonds Weekly VRDNs (Southern Bag Corporation, Ltd.)/
(SouthTrust Bank of Alabama, Birmingham LOC) 1,900,000
4,745,000 Birmingham, AL IDA, Revenue Bonds (Series 1989) Weekly VRDNs (O'Neal Steel, Inc.)/
(SouthTrust Bank of Alabama, Birmingham LOC) 4,745,000
285,000 Hoover, AL IDA Weekly VRDNs (Bud's Best Cookies, Inc.)/(SouthTrust Bank of Alabama,
Birmingham LOC) 285,000
370,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell Manufacturing)/(SouthTrust Bank of
Alabama, Birmingham LOC) 370,000
395,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell Manufacturing)/(SouthTrust Bank of
Alabama, Birmingham LOC) 395,000
7,000,000 Perry County, AL IDB, Revenue Bonds (Series 1998) Weekly VRDNs (Alabama Catfish
Feedmill, L.L.C.)/(Regions Bank, Alabama LOC) 7,000,000
1,000,000 Prattville, AL IDB, IDR Bonds Weekly VRDNs (Kuhnash Properties/Arkay Plastics Project)/
(PNC Bank, N.A. LOC) 1,000,000
Total 23,195,000
Alaska--0.8%
4,965,000 Alaska International Airports System, (Series 1998B), 4.49% BANs, 4/1/1999 4,971,105
Arizona--4.3%
3,500,000 Arizona Educational Loan Marketing Corp., (Senior Series), 5.75% Bonds, 9/1/1999 3,565,730
2,000,000 Cochise County, AZ Pollution Control Corp., (Pooled Series 1994A), 3.55% TOBs (Arizona
Electric Power Cooperative, Inc. Project)/(National Rural Utilities Cooperative Finance
Corp. GTD), Optional Tender 3/1/1999 2,000,000
2,750,000 Eloy, AZ IDA, (Series 1996) Weekly VRDNs (The Marley Cooling Tower Co.)/(First Union
National Bank, Charlotte, N.C. LOC) 2,750,000
9,000,000 Maricopa County, AZ, IDA, 3.25% CP (Citizens Utilities Co.), Mandatory Tender 2/5/1999 9,000,000
1,800,000 Phoenix, AZ IDA, (Series 1984) Weekly VRDNs (Del Mar Terrace Apartments)/(Bank of
America NT and SA, San Francisco LOC) 1,800,000
3,100,000 Phoenix, AZ IDA, (Series 1997) Weekly VRDNs (Interface Data Systems, Inc.)/(Bank One,
Arizona N.A. LOC) 3,100,000
1,000,000 Phoenix, AZ IDA, (Series 1998) Weekly VRDNs (ABPAC, Inc.)/(Bank One, Arizona N.A. LOC) 1,000,000
800,000 Phoenix, AZ IDA, (Series 1998) Weekly VRDNs (Standard Printing Company, Inc.)/(Bank One,
Arizona N.A. LOC) 800,000
579,000 Pima County, AZ IDA, Single Family Mortgage (PA-159) Weekly VRDNs (GNMA COL)/
(Merrill Lynch Capital Services, Inc. LIQ) 579,000
1,550,000 Yavapai, AZ IDA, (Series 1997B) Weekly VRDNs (Yavapai Regional Medical Center)/(FSA INS)/
(Credit Local de France LIQ) 1,550,000
1,900,000 Yuma County, AZ Airport Authority, Inc., (Series 1997A) Weekly VRDNs (Bank One, Arizona
N.A. LOC) 1,900,000
Total 28,044,730
Arkansas--5.5%
9,000,000 Arkansas Development Finance Authority, (Series 1995) Weekly VRDNs (Paco Steel &
Engineering Corporation Project)/(Union Bank of California LOC) 9,000,000
4,000,000 Arkansas Development Finance Authority, Home Mortgage Revenue Bonds (Series C), 3.65%
BANs, 3/1/1999 4,000,000
8,000,000 Crossett, AR, (Series 1997) Weekly VRDNs (Bemis Co., Inc.) 8,000,000
6,200,000 Hope, AR, Solid Waste Disposal Revenue Bonds (Series 1994), 3.70% CP (Temple-Inland
Forest Products Corp.)/(Temple-Inland, Inc. GTD), Mandatory Tender 3/11/1999 6,200,000
1,000,000 Sheridan, AR IDA, (Series B) Weekly VRDNs (H.H. Robertson Co.)/(PNC Bank, N.A. LOC) 1,000,000
7,400,000 Siloam Springs, AR, IDRB (Series 1994) Weekly VRDNs (La-Z Boy Chair Co.)/(NBD Bank,
Michigan LOC) 7,400,000
Total 35,600,000
California--1.1%
7,000,000 (b)California Community College Financing Authority, Trust Receipts (Series 1998
FR/RI-A24), 3.60% TOBs (FSA INS)/(Bank of New York, New York LIQ), Optional Tender
12/9/1998 7,000,000
Colorado--1.0%
4,000,000 Adams County, CO IDB, (Series 1993) Weekly VRDNs (Bace Manufacturing, Inc.)/(Citibank
NA, New York LOC) 4,000,000
2,475,000 Colorado HFA, (Series 1996) Weekly VRDNs (Neppl-Springs Fabrication)/(Bank One,
Colorado LOC) 2,475,000
Total 6,475,000
Connecticut--0.8%
5,000,000 Bridgeport, CT, UT GO, 4.25% BANs, 3/18/1999 5,006,420
District Of Columbia--1.5%
10,000,000 District of Columbia Housing Finance Agency, (1998 Series B), 3.80% TOBs (AIG Funding,
Inc.), Mandatory Tender 6/23/1999 10,000,000
Florida--3.6%
2,000,000 Dade County, FL IDA, IDRB's (Series 1996A) Weekly VRDNs (U.S. Holdings, Inc.)/(First
Union National Bank, Charlotte, N.C. LOC) 2,000,000
7,750,000 Escambia County, FL HFA, PT 1017 Weekly VRDNs (GNMA COL)/(Merrill Lynch Capital
Services, Inc. LIQ) 7,750,000
6,000,000 Greater Orlando (FL) Aviation Authority, Airport Facilities Subordinated CP Notes
(Series B), 3.15% CP, Mandatory Tender 1/25/1999 6,000,000
8,000,000 Greater Orlando (FL) Aviation Authority, Airport Facilities Subordinated CP Notes
(Series B), 3.50% CP, Mandatory Tender 12/28/1998 8,000,000
Total 23,750,000
Georgia--5.5%
5,000,000 Clayton County, GA Development Authority, (Series 1994) Weekly VRDNs (Lear Seating
Corp.)/(Chase Manhattan Bank N.A., New York LOC) 5,000,000
4,000,000 Columbus, GA IDA Industrial & Port Development Commission, (Series 1992) Weekly
VRDNs (Maine Street Village Partnership)/(Columbus Bank and Trust Co., GA LOC) 4,000,000
1,250,000 De Kalb County, GA Development Authority Weekly VRDNs (Rock-Tenn Company, Inc.
Project)/(SunTrust Bank, Atlanta LOC) 1,250,000
1,000,000 Forsythe County, GA Development Authority, IDRB (Series 1995) Weekly VRDNs
(American BOA, Inc. Project)/(Dresdner Bank Ag, Frankfurt LOC) 1,000,000
6,000,000 Franklin County, GA Industrial Building Authority, (Series 1995) Weekly VRDNs (Bosal
Industries, Inc.)/(Bank of New York, New York LOC) 6,000,000
1,985,000 Fulton County, GA IDA, (Series 1996) Weekly VRDNs (Peachtree-Broad Building,
Ltd. Project)/(SouthTrust Bank of Georgia, Atlanta LOC) 1,985,000
2,260,000 Gainesville, GA Redevelopment Authority, IDRB (Series 1986) Weekly VRDNs (Hotel of
Gainesville Associates Project)/(Regions Bank, Alabama LOC) 2,260,000
4,000,000 Jackson County, GA IDA, (Series 1996) Weekly VRDNs (Buhler Quality Yarns Corp.
Project)/(UBS AG LOC) 4,000,000
3,000,000 Richmond County, GA Development Authority, Solid Waste Disposal Revenue Bonds, (Series
1995) Weekly VRDNs (Federal Paper Board Co., Inc.)/(Wachovia Bank of NC, NA, Winston-
Salem LOC) 3,000,000
1,000,000 Savannah, GA EDA, (Series 1995A) Weekly VRDNs (Home Depot, Inc.) 1,000,000
6,000,000 Whitfield County, GA School System, 4.09% TANs, 12/31/1998 6,001,731
Total 35,496,731
Hawaii--0.9%
6,170,000 (b)Hawaii State Airport System, (2nd Series of 1998) PT-238, 3.10% TOBs (MBIA INS)/(Credit
Suisse First Boston LIQ), Optional Tender 4/8/1999 6,170,000
Idaho--1.3%
8,641,000 Idaho Housing Agency, PA-115 (1994 Series F) Weekly VRDNs (Merrill Lynch Capital
Services, Inc. LIQ) 8,641,000
Illinois--4.3%
6,850,000 Chicago, IL, Gas Supply Revenue Bonds (1993 Series B), 3.90% TOBs (Peoples Gas Light &
Coke Company), Optional Tender 12/1/1998 6,850,000
7,150,000 Illinois Development Finance Authority, (Series 1997) Weekly VRDNs (Tempco Electric
Heater Corp.)/(First National Bank of Chicago LOC) 7,150,000
2,700,000 Illinois Development Finance Authority, Adjustable Rate IDRB (Series 1996A) Weekly
VRDNs (Nimlok Company)/(Bank One, Illinois, N.A. LOC) 2,700,000
7,675,000 (b)Illinois Housing Development Authority, PT-82 (1994 Series B), % TOBs (Rabobank
Nederland, Utrecht LIQ), Mandatory Tender 12/10/1998 7,675,000
3,735,000 Morton, IL, IDRB (Series 1996) Weekly VRDNs (Morton Welding Co, Inc. Project)/(Bank One,
Illinois, N.A. LOC) 3,735,000
Total 28,110,000
Indiana--6.5%
1,445,000 Carmel, IN, (Series 1996-A) Weekly VRDNs (Telamon Corp.)/(Huntington National Bank,
Columbus, OH LOC) 1,445,000
1,760,000 Crown Point, IN, IDA Weekly VRDNs (D & M Manufacturing)/(National City Bank,
Kentucky LOC) 1,760,000
2,600,000 Franklin, IN, Economic Development Revenue Refunding Bonds (Series 1994) Weekly
VRDNs (Pedcor Investments L.P.)/(Federal Home Loan Bank of Indianapolis LOC) 2,600,000
2,020,000 Huntingburg, IN, (Series 1994) Weekly VRDNs (DMI Furniture, Inc.)/(Bank One,
Indiana, N.A. LOC) 2,020,000
2,230,000 Huntingburg, IN, EDRB (Series 1993) Weekly VRDNs (DMI Furniture, Inc.)/(Bank One,
Indiana, N.A. LOC) 2,230,000
1,740,000 Indiana Development Finance Authority, (Series 1996) Weekly VRDNs (Meridian Group
LLC Project)/(Bank One, Indiana, N.A. LOC) 1,740,000
700,000 Indiana Economic Development Commission, (Series 1989) Weekly VRDNs (O'Neal Steel,
Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC) 700,000
2,570,000 Indianapolis, IN, (Series 1991) Weekly VRDNs (Cantor & Coleman II Project)/(Bank One,
Indiana, N.A. LOC) 2,570,000
3,675,000 Lawrence, IN, (Series 1998) Weekly VRDNs (Lawrence Affordable Housing, LLC)/(Bank
One, Arizona N.A. LOC) 3,675,000
1,675,000 Lebanon, IN IDA, (Series 1991) Weekly VRDNs (White Castle System)/(Bank One,
Ohio, N.A. LOC) 1,675,000
5,950,000 North Manchester, IN, (Series 1997) Weekly VRDNs (Eften, Inc.)/(Comerica Bank,
Detroit, MI LOC) 5,950,000
10,000,000 Portage, IN, (Series 1998-A) Weekly VRDNs (American Iron Oxide Co. Project)/(Bank of
Tokyo-Mitsubishi Ltd. LOC) 10,000,000
2,600,000 Tippecanoe County, IN Economic Development Revenue Weekly VRDNs (Lafayette Venetian
Blind)/(PNC Bank, N.A. LOC) 2,600,000
3,085,000 Westfield, IN IDR, (Series 1994) Weekly VRDNs (Standard Locknut & Lockwasher, Inc.)/
(Bank One, Indiana, N.A. LOC) 3,085,000
Total 42,050,000
Iowa--0.3%
2,040,000 Iowa Finance Authority, IDRB Weekly VRDNs (V-T Industries, Inc. Project)/(Norwest Bank
Minnesota, N.A. LOC) 2,040,000
Kansas--1.2%
7,990,000 (b)Sedgwick & Shawnee Counties, KS, PT-227, 3.77% TOBs (GNMA COL)/(Credit Suisse
First Boston LIQ), Optional Tender 7/8/1999 7,990,000
Kentucky--5.4%
3,505,000 Glasgow, KY, (Series 1994) Weekly VRDNs (Ply Tech Corp.)/(Bank One, Kentucky LOC) 3,505,000
1,800,000 Henderson County, KY, (Series 1996A) Weekly VRDNs (Gibbs Die Casting Corporation)/
(Harris Trust & Savings Bank, Chicago LOC) 1,800,000
2,500,000 Jefferson County, KY, (1997 Series A), 3.60% CP (Louisville Gas & Electric Company),
Mandatory Tender 12/18/1998 2,500,000
1,020,000 Jefferson County, KY, IDR (Series 1991) Weekly VRDNs (Findley Adhesives)/(Bank One,
Ohio, N.A. LOC) 1,020,000
2,000,000 Jefferson County, KY, IDR Weekly VRDNs (O'Neal Steel, Inc.)/(SouthTrust Bank of
Alabama, Birmingham LOC) 2,000,000
6,000,000 (b)Kentucky Housing Corp., (Series 1998 O), 3.80% TOBs (Bank of America NT and SA,
San Francisco LIQ), Mandatory Tender 8/10/1999 6,000,000
6,000,000 (b)Kentucky Housing Corp., Variable Rate Certificates (Series 1998 W), 3.25% TOBs
(Bank of America NT and SA, San Francisco LIQ), Optional Tender 6/15/1999 6,000,000
5,000,000 Louisville & Jefferson County, KY Regional Airport Authority, (Series 1996-A)
Weekly VRDNs (National City Bank, Kentucky LOC) 5,000,000
5,000,000 Louisville & Jefferson County, KY Regional Airport Authority, (Series 1997 AA-1)
Weekly VRDNs (National City Bank, Kentucky LOC) 5,000,000
2,600,000 Winchester, KY, (Series 1990) Weekly VRDNs (Walle Corp.)/(UBS AG LOC) 2,600,000
Total 35,425,000
Louisiana--2.9%
2,000,000 Jefferson Parish, LA Home Mortgage Authority, (Series 1998A-2), 3.625% BANs, 9/1/1999 2,000,000
8,000,000 Lake Charles, LA Harbor & Terminal District, Revenue Bonds (Series 1995A) Weekly VRDNs
(Polycom-Huntsman, Inc. Project)/(National City, Pennsylvania LOC) 8,000,000
8,925,000 Louisiana HFA, Class A Certificates (Series 1997-3) Weekly VRDNs (GNMA COL)/(Bank of
New York, New York LIQ) 8,925,000
Total 18,925,000
Maryland--1.6%
2,050,000 Cecil County, MD, County Commissioners EDRB (Series 1988S) Weekly VRDNs (Williams
Mobile Offices, Inc.)/(First National Bank of Maryland, Baltimore LOC) 2,050,000
2,090,000 Maryland EDC, (Series 1998A) Weekly VRDNs (Catterton Printing Company Facility)/
(First National Bank of Maryland, Baltimore LOC) 2,090,000
1,255,000 Maryland EDC, (Series 1998B) Weekly VRDNs (Catterton Printing Company Facility)/
(First National Bank of Maryland, Baltimore LOC) 1,255,000
995,000 Maryland State Community Development Administration, (Series 1990A) Weekly VRDNs
(College Estates)/(First National Bank of Maryland, Baltimore LOC) 995,000
800,000 Maryland State Community Development Administration, (Series 1990B) Weekly VRDNs
(Cherry Hill Apartment Ltd.)/(Nationsbank, N.A., Charlotte LOC) 800,000
3,260,000 Wicomico County, MD, EDRB (Series 1994) Weekly VRDNs (Field Container Co. L.P.)/
(Northern Trust Co., Chicago, IL LOC) 3,260,000
Total 10,450,000
Massachusetts--0.8%
5,000,000 Westfield, MA, 3.75% BANs, 10/22/1999 5,030,229
Michigan--0.9%
1,215,000 Michigan Strategic Fund, (Series 1991) Weekly VRDNs (AGA Gas, Inc.)/(Svenska
Handelsbanken, Stockholm LOC) 1,215,000
4,500,000 Wayne County, MI, PT-1061 Weekly VRDNs (Detroit Metropolitan Wayne County
Airport)/(MBIA INS)/(Merrill Lynch Capital Services, Inc. LIQ) 4,500,000
Total 5,715,000
Minnesota--3.9%
5,775,000 (b)Dakota County & Washington County MN Housing & Redevelopment Authority, MERLOTs
(Series J), 3.80% TOBs (United States Treasury COL)/(Corestates Bank N.A.,
Philadelphia, PA LIQ), Optional Tender 12/1/1998 5,775,000
5,680,000 (b)Dakota County, Washington County & Anoka City, MN Housing & Redevelopment
Authority, MERLOTs (Series H), 3.35% TOBs (United States Treasury COL)/(Corestates
Bank N.A., Philadelphia, PA LIQ), Optional Tender 12/1/1998 5,680,000
3,000,000 Lino Lakes, MN, (Series 1998) Weekly VRDNs (Molin Concrete Products Co.)/(Norwest
Bank Minnesota, N.A. LOC) 3,000,000
700,000 Minnesota State Higher Education Coordinating Board, (Series 1992A) Weekly VRDNs
(U.S. Bank, NA, Minneapolis LIQ) 700,000
1,650,000 New Hope, MN, Park Acres Apartments (Series 1997), 5.015% TOBs (Bayerische
Landesbank Girozentrale), Mandatory Tender 3/1/1999 1,650,000
785,000 Plymouth, MN Weekly VRDNs (Nuaire, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 785,000
1,000,000 Plymouth, MN, (Series 1998) Weekly VRDNs (Nuaire, Inc.)/(Norwest Bank Minnesota,
N.A. LOC) 1,000,000
1,920,000 Red Wing, MN Port Authority, (Series 1998) Weekly VRDNs (Food Service Specialties)/
(Norwest Bank Minnesota, N.A. LOC) 1,920,000
2,200,000 Robbinsdale, MN, Bridgeway Apartments (Series 1997), 5.015% TOBs (Bayerische
Landesbank Girozentrale), Mandatory Tender 3/1/1999 2,200,000
605,000 St. Paul, MN Port Authority Weekly VRDNs (H.M. Smyth Co., Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 605,000
2,345,000 White Bear, MN Weekly VRDNs (Thermoform Plastic, Inc.)/(Norwest Bank Minnesota,
N.A. LOC) 2,345,000
Total 25,660,000
Mississippi--1.7%
1,700,000 Mississippi Business Finance Corp. Weekly VRDNs (O'Neal Steel, Inc.)/(SouthTrust
Bank of Alabama, Birmingham LOC) 1,700,000
1,950,000 Mississippi Business Finance Corp., IDRB (Series 1994) Weekly VRDNs (Flexsteel Industries,
Inc.)/(Norwest Bank Minnesota, N.A. LOC) 1,950,000
7,500,000 Mississippi Home Corp., Multifamily Housing Adjustable/Fixed Rate Revenue Bonds
(Series 1997) Weekly VRDNs (Windsor Park Apartments)/(SouthTrust Bank of
Alabama, Birmingham LOC) 7,500,000
Total 11,150,000
Missouri--2.2%
2,550,000 Missouri Development Finance Board, Industrial Development Revenue Bonds (Series 1996)
Weekly VRDNs (LaGrange Foundry Inc. Project)/(Harris Trust & Savings Bank, Chicago LOC) 2,550,000
600,000 Missouri Export & Infrastructure Board Weekly VRDNs (Ex-L-Tube, Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 600,000
4,050,000 Moberly, MO IDA, (Series 1996) Weekly VRDNs (Everlast Fitness Manufacturing Corp.)/
(Chase Manhattan Bank N.A., New York LOC) 4,050,000
7,000,000 Perry County, MO, (Series 1996) Weekly VRDNs (TG (U.S.A), Inc.)/(Bank of Tokyo-Mitsubishi
Ltd. LOC) 7,000,000
Total 14,200,000
Montana--0.4%
2,840,000 (b)Montana State Board of Housing, MERLOTs (Series F), 3.85% TOBs (Corestates Bank
N.A., Philadelphia, PA LIQ), Optional Tender 1/1/1999 2,840,000
Multi State--5.5%
26,000,000 Charter Mac Floater Certificates Trust I Weekly VRDNs (MBIA INS)/(Bayerische
Landesbank Girozentrale, Commerzbank AG, Frankfurt, Credit Communal de Belgique,
Brussles and Landesbank Hessen-Thueringen, Frankfurt LIQs) 26,000,000
9,775,000 Clipper Tax-Exempt Trust (AMT MultiState), (Series A) Weekly VRDNs (State Street
Bank and Trust Co. LIQ) 9,775,000
Total 35,775,000
Nebraska--1.4%
3,200,000 Douglas County, NE, (Series 1991) Weekly VRDNs (Malhove, Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 3,200,000
5,700,000 Stanton County, NE, (Series 1998) Weekly VRDNs (Nucor Corporation) 5,700,000
Total 8,900,000
New Hampshire--0.3%
2,010,000 New Hampshire State IDA, (Series 1991), 4.25% TOBs (International Paper Co.), Optional
Tender 10/15/1999 2,010,000
New Jersey--2.9%
7,375,000 Galloway Township, NJ, 4.00% BANs, 3/11/1999 7,390,029
6,000,000 New Jersey EDA Weekly VRDNs (Center-For-Aging - Applewood Estates)/(Fleet
National Bank, Springfield, MA LOC) 6,000,000
1,500,000 New Jersey Housing & Mortgage Financing Authority, CDC Municipal Products Class A
Certificates (Series 1996B) Weekly VRDNs (MBIA INS)/(CDC Municipal Products, Inc. LIQ) 1,500,000
3,670,000 Trenton, NJ, 3.80% BANs, 3/10/1999 3,671,533
Total 18,561,562
North Carolina--2.4%
15,500,000 Person County, NC Industrial Facilities & Pollution Control Financing Authority Daily
VRDNs (Carolina Power & Light Co.)/(SunTrust Bank, Atlanta LOC) 15,500,000
North Dakota--0.2%
1,000,000 Fargo, ND, Variable Rate Demand IDRB's (Series 1997) Weekly VRDNs (Owen Industries,
Inc.)/(Mellon Bank NA, Pittsburgh LOC) 1,000,000
Ohio--1.3%
4,995,000 (b)Ohio HFA, Variable Rate Certificates (Series 1998Q), 3.75% TOBs (GNMA COL)/
(Bank of America NT and SA, San Francisco LIQ), Optional Tender 8/4/1999 4,995,000
3,190,000 Ohio State Public Facilities Commission, (Series II-C), 5.10% Bonds (MBIA INS), 12/1/1999 3,256,512
Total 8,251,512
Oklahoma--1.5%
2,300,000 Adair County, OK IDA, (Series B) Weekly VRDNs (Baldor Electric Co.)/(Wachovia Bank of NC,
NA, Winston-Salem LOC) 2,300,000
4,300,000 Oklahoma Development Finance Authority, 3.85% TOBs (Simmons Poultry Farms)/(Rabobank
Nederland, Utrecht LOC), Mandatory Tender 2/1/1999 4,300,000
3,385,000 Oklahoma HFA, CDC Municipal Products, Inc. (Series 1996G) Weekly VRDNs (GNMA COL)/
(CDC Municipal Products, Inc. LIQ) 3,385,000
Total 9,985,000
Oregon--0.4%
2,490,000 Oregon School Boards Association, Pooled Short-Term Borrowing Program (Series 1998A),
4.00% TRANs, 6/30/1999 2,490,000
Pennsylvania--2.2%
5,700,000 Carbon County, PA IDA, Solid Waste Disposal Revenue Bonds, 4.15% RANs (Horsehead
Resource Development, Inc.)/(Chase Manhattan Bank N.A., New York LOC), 12/3/1998 5,700,000
5,000,000 Clinton County, PA IDA, Solid Waste Disposal Revenue Bonds (Series 1992A), 3.95%
TOBs (International Paper Co.), Optional Tender 1/15/1999 5,000,000
1,475,000 Pennsylvania EDFA Weekly VRDNs (Stone and Lime Co.)/(PNC Bank, N.A. LOC) 1,475,000
1,500,000 Pennsylvania EDFA, (1995 Series D2) Weekly VRDNs (ARCO Enterprises, Inc./
Ronald L. Repasky, Sr. Project)/(PNC Bank, N.A. LOC) 1,500,000
700,000 Pennsylvania EDFA, (1995 Series D9) Weekly VRDNs (North American Communications,
Inc. Project)/(PNC Bank, N.A. LOC) 700,000
Total 14,375,000
Rhode Island--0.4%
2,800,000 Central Falls, RI, 3.90% BANs, 7/15/1999 2,805,058
South Carolina--2.6%
7,325,000 ABN AMRO MuniTOPS Certificates Trust (Multistate AMT) Series 1998-7 Weekly VRDNs
(South Carolina State Ports Authority)/(FSA INS)/(ABN AMRO Bank N.V., Amsterdam LIQ) 7,325,000
4,000,000 Georgetown County, SC, Pollution Control Facilities Adjustable Rate Bonds (Series A),
4.10% TOBs (International Paper Co.), Optional Tender 9/1/1999 4,000,000
3,700,000 South Carolina Job Development Authority, (Series 1996) Weekly VRDNs (PVC
Container Corp. Project)/(Fleet Bank N.A. LOC) 3,700,000
1,885,000 South Carolina Job Development Authority, EDRB (Series 1994) Weekly VRDNs
(Carolina Cotton Works, Inc. Project)/(Branch Banking & Trust Co, Wilson LOC) 1,885,000
Total 16,910,000
South Dakota--2.0%
3,000,000 South Dakota Housing Development Authority, (1998 Series B), 3.75% BANs, 8/5/1999 3,000,000
9,765,000 South Dakota Housing Development Authority, Homeownership Mortgage Bonds (1997
Series E) Weekly VRDNs 9,765,000
Total 12,765,000
Tennessee--2.6%
2,550,000 Chattanooga, TN IDB, Revenue Bonds (Series 1997) Weekly VRDNs (TB Wood's Inc.
Project)/(PNC Bank, N.A. LOC) 2,550,000
5,000,000 Cocke County, TN IDB, (Series 1996) Weekly VRDNs (Newport Precision, Inc.)/
(Bank of Tokyo-Mitsubishi Ltd. LOC) 5,000,000
820,000 Greenfield, TN IDB, (Series 1995) Weekly VRDNs (Plastic Products Co. Project)/
(Norwest Bank Minnesota, N.A. LOC) 820,000
1,100,000 Hawkins County, TN IDB, (Series 1995) Weekly VRDNs (Sekisui Ta Industries, Inc.
Project)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 1,100,000
2,000,000 McMinn County, TN IDB, Industrial Development Bonds (Series 1995) Weekly VRDNs
(Creative Fabrication Corp.)/(NBD Bank, Michigan LOC) 2,000,000
800,000 Morristown, TN IDB Weekly VRDNs (Tuff Torq Corp.)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 800,000
3,500,000 Sevier County, TN Public Building Authority, Local Government Improvement Bonds,
(Series II-G-2) Weekly VRDNs (Knoxville, TN)/(AMBAC INS)/(KBC Bank N.V., Brussels LIQ) 3,500,000
1,000,000 Union City, TN IDB, (Series 1995) Weekly VRDNs (Kohler Co.)/(Wachovia Bank of
NC, NA, Winston-Salem LOC) 1,000,000
Total 16,770,000
Texas--4.5%
7,400,000 (b)ABIA Development Corporation, TX, Airport Facilities Revenue Bonds PT-117, 3.80%
TOBs (Austin Airport)/(Asset Guaranty INS)/(Rabobank Nederland, Utrecht LIQ), Optional
Tender 5/13/1999 7,400,000
5,000,000 Angelina and Neches River Authority, Texas, Solid Waste Disposal Revenue Bonds
(Series 1993), 3.80% CP (Temple-Eastex Inc.)/(Temple-Inland, Inc. GTD),
Mandatory Tender 3/12/1999 5,000,000
2,900,000 Brazos Harbor, TX Industrial Development Corp., (Series 1991) Weekly VRDNs (Rangen,
Inc. Project)/(Norwest Bank Minnesota, N.A. LOC) 2,900,000
3,255,000 Houston, TX Airport System, (Series 1998A) PT-1102 Weekly VRDNs (FGIC INS)/(Merrill
Lynch Capital Services, Inc. LIQ) 3,255,000
5,000,000 San Antonio, TX, Special Facilities Airport Revenue Bonds (Series 1995) Weekly VRDNs
(Cessna Aircraft Company Project)/(Nationsbank, N.A., Charlotte LOC) 5,000,000
2,995,000 (b)Southeast Texas Housing Finance Corp., PT-165, 3.75% TOBs (GNMA COL)/
(Banque Nationale de Paris LIQ), Optional Tender 3/18/1999 2,995,000
2,800,000 Tarrant County, TX IDC Weekly VRDNs (Holden Business Forms)/(Norwest
Bank Minnesota, N.A. LOC) 2,800,000
Total 29,350,000
Virginia--1.2%
4,500,000 Campbell County, VA IDA, Solid Waste Disposal Facilities Revenue ACES Weekly VRDNs
(Georgia-Pacific Corp.)/(SunTrust Bank, Atlanta LOC) 4,500,000
3,440,000 Carroll County, VA IDA, IDRB (Series 1995) Weekly VRDNs (Kentucky Derby Hosiery Co, Inc
Project)/(Bank One, Kentucky LOC) 3,440,000
100,000 Richmond, VA Redevelopment & Housing Authority, (Series B-10) Weekly VRDNs
(Richmond, VA Red Tobacco Row)/(Bayerische Landesbank Girozentrale LOC) 100,000
Total 8,040,000
Washington--1.5%
8,000,000 Pierce County, WA Economic Development Corp., (Series 1995) Weekly VRDNs
(Simpson-Tacoma Kraft Company Project)/(Bank of America, Northwest LOC) 8,000,000
1,485,000 Washington State Housing Finance Commission, (1997 Series 5A-S), 3.90% TOBs,
Mandatory Tender 12/15/1998 1,485,000
Total 9,485,000
West Virginia--0.5%
1,800,000 West Virginia EDA, (Series 1998) Weekly VRDNs (Quality Engineered Steels, LLC)/
(Commerce Bank, Kansas City, NA LOC) 1,800,000
1,750,000 West Virginia Public Energy Authority, Energy Revenue Bonds (1989 Series A), 3.20%
CP (Morgantown Energy Associates)/(UBS AG LOC), Mandatory Tender 2/11/1999 1,750,000
Total 3,550,000
Wisconsin--2.5%
1,800,000 Marshfield, WI, IDR (Series 1993) Weekly VRDNs (Building Systems, Inc.)/(Bank One,
Wisconsin, N.A. LOC) 1,800,000
1,230,000 Plover, WI Weekly VRDNs (Sirco Manufacturing, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 1,230,000
3,125,000 Prentice Village, WI, Limited Obligation Revenue Refunding Bonds (Series A) Weekly
VRDNs (Biewer-Wisconsin Sawmill, Inc. Project)/(Michigan National Bank,
Farmington Hills LOC) 3,125,000
600,000 Shell Lake, WI Weekly VRDNs (Doboy Packaging)/(UBS AG LOC) 600,000
1,540,000 Waukesha, WI, IDRB (Series 1995) Weekly VRDNs (Weldall Manufacturing Inc.
Project)/(Bank One, Wisconsin, N.A. LOC) 1,540,000
8,035,000 Wisconsin Housing & Economic Development Authority, PT-90 (Series 1996F)
Weekly VRDNs (Banque Nationale de Paris LIQ) 8,035,000
Total 16,330,000
Wyoming--1.5%
10,000,000 (b)Wyoming Community Development Authority, PT-195, 3.85% TOBs (Banco Santander SA
LIQ), Optional Tender 5/13/1999 10,000,000
Total Short-Term Municipals 646,788,347
Total Investments (at amortized cost)(c) 646,788,347
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 89.2% 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 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., 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 November 30, 1998, the portfolio securities were rated as follows:
Tier Rating Based on Total Market Value (unaudited)
First Tier Second Tier
95.4% 4.6%
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1998, these securities
amounted to $80,520,000 which represents 12.4% of net assets.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($650,820,445) at November 30, 1998.
The following acronyms are used throughout this portfolio:
ACES --Adjustable Convertible Extendable Securities
AMBAC --American Municipal Bond Assurance Corporation
AMT --Alternative Minimum Tax
BANs --Bond Anticipation Notes
COL --Collateralized
CP --Commercial Paper
EDA --Economic Development Authority
EDC --Economic Development Commission
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
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
RANs --Revenue Anticipation Notes
SA --Support Agreement
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
November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Assets:
<S> <C>
Total investments in securities, at amortized cost and value $646,788,347
Cash 651,038
Income receivable 4,451,974
Receivable for shares sold 600
Prepaid expenses 32,828
Total assets 651,924,787
Liabilities:
Income distribution payable $ 936,957
Accrued expenses 167,385
Total liabilities 1,104,342
Net Assets for 650,820,445 shares outstanding $650,820,445
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$650,820,445 / 650,820,445 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Statement of Operations
Municipal Cash Series
Six Months Ended November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income:
Interest $ 11,967,446
Expenses:
Investment advisory fee 1,621,986
Administrative personnel and services fee 244,596
Custodian fees 16,849
Transfer and dividend disbursing agent fees and expenses 334,240
Directors'/Trustees' fees 4,507
Auditing fees 6,994
Legal fees 9,981
Portfolio accounting fees 50,493
Distribution services fee 324,397
Shareholder services fee 810,993
Share registration costs 23,512
Printing and postage 99,824
Insurance premiums 26,888
Taxes 14,840
Miscellaneous 8,911
Total expenses 3,599,011
Waiver--
Waiver of investment advisory fee (308,325)
Net expenses 3,290,686
Net investment income $ 8,676,760
</TABLE>
(See Notes which are an integral part of the Financial Statements)
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Municipal Cash Series
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 8,676,760 $ 16,629,089
Distributions to Shareholders--
Distributions from net investment income (8,676,760) (16,629,089)
Share Transactions--
Proceeds from sale of shares 1,193,075,395 2,320,881,148
Net asset value of shares issued to shareholders in
payment of distributions declared 7,591,214 16,001,086
Cost of shares redeemed (1,197,658,934) (2,204,129,137)
Change in net assets resulting from share transactions 3,007,675 132,753,097
Change in net assets 3,007,675 132,753,097
Net Assets:
Beginning of period 647,812,770 515,059,673
End of period $ 650,820,445 $ 647,812,770
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Financial Highlights
Municipal Cash Series
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited)
November 30, Year Ended May 31,
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.01 0.03 0.03 0.03 0.03 0.02
Less distributions
Distributions from net investment income (0.01) (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 $ 1.00
Total return(a) 1.35% 2.90% 2.80% 3.04% 2.84% 1.83%
Ratios to average net assets
Expenses 1.01%* 1.01% 0.99% 0.99% 0.99% 0.99%
Net investment income 2.67%* 2.86% 2.75% 2.99% 2.76% 1.81%
Expense waiver/reimbursement(b) 0.09%* 0.10% 0.09% 0.33% 0.05% 0.06%
Supplemental data
Net assets, end of period (000 omitted) $650,820 $647,813 $515,060 $478,605 $445,164 $574,801
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Notes to Financial Statements
Municipal Cash Series
November 30, 1998 (unaudited)
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 November 30, 1998 is
as follows:
<TABLE>
<CAPTION>
Security Acquisition Date Acquisition Cost
<S> <C> <C>
ABIA Development Corporation, TX, Airport Facilities
Revenue Bonds PT-117 6/9/1998 $ 7,458,472
California Community College Financing Authority, Trust Receipts
(Series 1998 FR/RI-A24) 7/8/1998 7,004,833
Dakota County & Washington County MN Housing & Redevelopment
Authority, MERLOTs (Series J) 9/1/1998 5,775,000
Dakota County, Washington County & Anoka City, MN Housing &
Redevelopment Authority, MERLOTs (Series H) 9/1/1998 5,680,000
Hawaii State Airport System, (2nd Series of 1998) PT-238 10/29/1998 6,181,999
Illinois Housing Development Authority, PT-82 (1994 Series B) 1/6/1998 7,833,190
Kentucky Housing Corp., (Series 1998 O) 8/12/1998 6,000,000
Kentucky Housing Corp., Variable Rate Certificates
(Series 1998 W) 11/19/1998 6,000,000
Montana State Board of Housing, MERLOTs (Series F) 10/1/1998 2,840,000
Ohio HFA, Variable Rate Certificates (Series 1998Q) 8/25/1998 4,995,000
Sedgwick & Shawnee Counties, KS, PT-227 8/21/1998 7,990,825
Southeast Texas Housing Finance Corp., PT-165 3/25/1998 2,995,308
Wyoming Community Development Authority, PT-195 5/29/1998 10,001,055
</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 November 30, 1998, there were 12,500,000,000 shares ($0.001 par value per
share) authorized. At November 30, 1998, capital paid-in aggregated
$650,820,445. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Shares sold 1,193,075,395 2,320,881,148
Shares issued to shareholders in payment of distributions declared 7,591,214 16,001,086
Shares redeemed (1,197,658,934) (2,204,129,137)
Net change resulting from share transactions 3,007,675 132,753,097
Investment Advisory Fee and Other Transactions with Affiliates
</TABLE>
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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC 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, 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 November 30, 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 $334,485,000 and $337,235,000,
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.
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,
and Secretary
Richard J. Thomas
Treasurer
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.
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.
[Logo FEDERATED INVESTORS]
Municipal Cash Series
Semi-Annual Report
to Shareholders
November 30, 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 147551303
0122605 (1/99)
PRESIDENT'SMESSAGE
Dear Shareholder:
Prime Cash Series, a portfolio of Cash Trust Series, Inc., was established in
1989, and I am pleased to present its Semi-Annual Report to shareholders, which
covers the six-month period ended November 30, 1998. The report begins with an
investment review by the fund's portfolio manager, Paige M. Wilhelm, Vice
President of Federated Advisers, which is followed by a complete listing of the
fund's investments, and its financial statements.
During the reporting period, Prime Cash Series paid a total of $0.02 in
dividends per share. In addition to income on their ready cash, shareholders
benefited from the fund's daily liquidity and stability of principal.* The fund
has maintained a net asset value of $1.00 per share since its inception. Assets
continued to soar, surpassing the $4 billion mark at the reporting period's end.
At the end of the reporting period, the fund was invested across a diversified,
high-quality portfolio of money market securities that included commercial paper
(44.5%), variable rate notes (21.6%), repurchase agreements (11.9%), corporate
notes (7.0%), certificates of deposit (6.8%), time deposits (6.2%), and loan
participation notes (2.2%).
Thank you for choosing Prime Cash Series as a convenient way to help your ready
cash earn daily income through the relative safety of high-quality money market
obligations. Please contact your investment representative if you have any
questions about the fund.
Sincerely,
/s/Richard B. Fisher
Richard B. Fisher
President
January 15, 1999
* An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
Investment Review
Prime Cash Series invests in money market instruments maturing in 13 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 notes, and repurchase agreements.
Economic growth during the second half of 1998 resumed its above-average pace,
after a brief slowdown in the second quarter. Specifically, third quarter gross
domestic product ("GDP") registered 3.90% while fourth quarter GDP is estimated
to be in the 4.00% range. Despite the high growth, though, inflation remained
subdued by all measures. The consumer price index rose just 1.70% for the six
month period ended November 30, 1998, on an annualized basis. For the same time
period, the producer price index neither rose nor fell, due mostly to a decline
in food and energy prices, while the employment cost index grew 4.70% during the
third quarter.
Thirty-day commercial paper started the reporting period at 5.55% on June 1,
1998, and then dropped as low as 4.90% on November 20, 1998 before rising to end
the reporting period at 5.09%.
The money market yield curve flattened throughout the reporting period. One-
month commercial paper rates declined 46 basis points, while six-month rates
declined 55 basis points reflecting the concern in the market about the lack of
liquidity in the U.S. credit markets. The Federal Reserve Board (the "Fed")
responded to this by lowering the Federal Funds Target Rate two times during the
reporting period -- 25 basis points on September 29, 1998 and 25 basis points on
October 15, 1998 to end the reporting period with a 5.00% target rate. The Fed
also lowered the discount rate by 25 basis points to 4.75% on October 15, 1998.
The target average maturity range for the fund was lengthened from 35-45 days to
40-50 days on July 6, 1998. It was subsequently increased again to 45-55 days on
October 1, 1998, reflecting the Fed's concern about liquidity in the credit
markets and the current easing scenario. In structuring the fund, there is
continued emphasis placed on positioning 30-35% of the fund's assets in variable
rate notes and accomplishing a modest barbell structure.
During the six month period ended November 30, 1998, the net assets of Prime
Cash Series increased from $3.7 billion to $4.2 billion while the seven-day net
yield decreased from 4.66% to 4.30%.* The effective average maturity of the fund
on November 30, 1998 was 52 days.
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the fund's current earnings.
Portfolio of Investments
Prime Cash Series
November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount
or Shares Value
<C> <S> <C>
Certificate of Deposit--6.8%
Banking--6.8%
30,000,000 Bank of Nova Scotia, Toronto, 5.870%,
4/29/1999 $ 29,991,797
28,000,000 Bankers Trust Co., New York, 5.800%,
4/1/1999 27,996,000
15,000,000 Canadian Imperial Bank of Commerce,
Toronto, 5.800%, 4/1/1999 14,997,143
25,000,000 Commerzbank AG, Frankfurt, 5.066%,
4/6/1999 25,000,853
30,000,000 KeyBank, N.A., 5.080%, 4/9/1999 30,000,000
25,000,000 Mellon Bank NA, Pittsburgh, 5.680%,
12/28/1998 25,000,000
102,500,000 Societe Generale, Paris, 5.645% -
5.835%, 2/10/1999 - 4/27/1999 102,486,289
13,000,000 Svenska Handelsbanken, Stockholm,
5.800%, 4/6/1999 12,998,067
15,000,000 Toronto-Dominion Bank, 4.930%,
7/14/1999 15,058,487
Total Certificates of Deposit 283,528,636
(a)Commercial Paper--44.5%
Aerospace/Auto--4.4%
184,600,000 Johnson Controls, Inc., 5.379% -
5.494%, 1/13/1999 - 3/5/1999 182,959,930
Airlines--0.1%
3,000,000 United Parcel Service, 4.983%, 6/4/1999 2,925,692
Banking--11.9%
20,000,000 Abbey National N.A. Corp., (Guaranteed
by Abbey National Bank PLC, London),
5.003%, 5/4/1999 19,582,489
124,000,000 Aspen Funding Corp., (Insured by MBIA
Insurance Corporation, Guaranteed by
Deutsche Bank, AG), 5.563% - 8.007%,
12/1/1998 - 2/22/1999 123,493,641
8,000,000 Bankers Trust Corp., 5.606% - 5.656%,
12/18/1998 - 2/3/1999 7,957,728
5,000,000 Canadian Imperial Holdings, Inc.,
(Guaranteed by Canadian Imperial Bank
of Commerce, Toronto), 4.984%, 2/22/1999 4,943,514
56,000,000 Cregem North America, Inc.,
(Guaranteed by Credit Communal de
Belgique, Brussles),
4.943% - 5.605%, 1/21/1999 - 2/23/1999 55,454,554
27,412,000 Fountain Square Commercial Funding
Corp., (Fifth Third Bank, Cincinnati
Support Agreement), 5.352% - 5.393%,
12/1/1998 - 5/17/1999 27,053,820
20,000,000 National Australia Funding, Inc.,
(Guaranteed by National Australia
Bank, Ltd., Melbourne), 5.433%, 1/29/1999 19,825,622
24,000,000 Societe Generale North America, Inc.,
(Guaranteed by Societe Generale,
Paris), 5.123%, 4/7/1999 23,577,513
11,000,000 Trico Steel (IDB of Decatur, Alabama),
(Chase Manhattan Bank N.A., New York
LOC), 5.350%, 12/17/1998 11,000,000
75,000,000 UBS Finance (Delaware), Inc., (UBS AG
LOC), 4.953% - 5.609%,
12/31/1998 - 3/29/1999 74,148,125
33,000,000 Westpac Banking Corp. Ltd., Sydney,
5.129%, 4/1/1999 32,445,417
80,000,000 Westpac Capital Corp., (Guaranteed by
Westpac Banking Corp. Ltd., Sydney),
5.297% - 5.450%, 1/11/1999 - 3/22/1999 78,923,539
20,090,000 Wood Street Funding Corp., (PNC Bank,
N.A. Support Agreement),
5.373%, 12/2/1998 20,087,014
Total 498,492,976
Brokerage--0.9%
8,060,000 Merrill Lynch & Co., Inc., 5.207%,
1/13/1999 8,010,612
10,000,000 Morgan Stanley Group, Inc., 5.218%,
1/19/1999 9,929,903
20,000,000 Salomon Smith Barney Holdings, Inc.,
5.299%, 1/6/1999 19,895,400
Total 37,835,915
Chemicals--0.9%
37,014,000 IMC Global, Inc., 5.710% - 6.279%,
12/15/1998 - 1/22/1999 36,776,573
Electrical Equipment--0.3%
11,475,000 Whirlpool Corp., 5.628% - 5.629%,
1/19/1999 11,388,316
Finance - Automotive--2.8%
116,300,000 Ford Motor Credit Corp., 5.139% -
5.571%, 12/1/1998 - 2/5/1999 115,989,431
Finance - Commercial--8.9%
13,550,000 (b)Beta Finance, Inc., 5.106% -
5.271%, 2/19/1999 - 4/15/1999 13,364,944
21,000,000 Corporate Asset Funding Co., Inc.
(CAFCO), 5.080%, 2/10/1999 20,792,917
130,000,000 General Electric Capital Corp., 5.037%
- 5.501%, 12/1/1998 - 3/16/1999 128,924,199
23,202,000 Greenwich Funding Corp., 4.889% -
4.947%, 4/6/1999 - 4/16/1999 22,801,391
25,000,000 Receivables Capital Corp., 5.450% -
5.468%, 2/4/1999 - 2/12/1999 24,738,554
165,000,000 Sheffield Receivables Corp., 5.369% -
5.612%, 12/9/1998 - 3/12/1999 163,315,068
Total 373,937,073
Finance - Equipment--0.3%
11,211,000 Comdisco, Inc., 5.687% - 6.286%,
1/15/1999 - 1/28/1999 11,122,045
Finance - Retail--4.7%
10,000,000 American Express Credit Corp., 5.023%,
4/12/1999 9,820,333
66,000,000 Associates Corp. of North America,
4.867% - 5.401%, 3/9/1999 - 4/19/1999 64,909,733
50,000,000 Household Finance Corp., 5.561%,
12/1/1998 50,000,000
75,000,000 New Center Asset Trust, A1+/P1 Series,
5.501%, 12/1/1998 75,000,000
Total 199,730,066
Industrial Products--0.4%
18,906,000 Praxair, Inc., 5.731% - 6.065%,
1/8/1999 - 2/22/1999 $ 18,713,169
Insurance--4.4%
22,032,000 CNA Financial Corp., 5.533% - 5.809%,
12/14/1998 - 1/26/1999 21,882,700
85,000,000 CXC, Inc., 5.138% - 5.259%, 2/4/1999 -
5/17/1999 83,806,831
82,500,000 Marsh & McLennan Cos., Inc., 5.244% -
5.637%, 2/26/1999 - 4/26/1999 80,912,713
Total 186,602,244
Machinery, Equipment, Auto--2.3%
71,000,000 Allied-Signal, Inc., 5.625% - 5.671%,
1/22/1999 70,427,206
25,000,000 Eaton Corp., 5.597% - 5.670%, 5/7/1999
- 5/11/1999 24,403,799
Total 94,831,005
Oil & Oil Finance--1.3%
16,000,000 Chevron Transport Corp., (Guaranteed
by Chevron Corp.), 5.153%, 5/21/1999 15,618,480
40,896,000 Occidental Petroleum Corp., 5.492% -
5.978%, 12/11/1998 - 1/26/1999 40,681,116
Total 56,299,596
Telecommunications--0.8%
35,327,000 MCI Worldcom, Inc., 5.687% - 5.731%,
1/11/1999 - 1/15/1999 35,085,868
Transportation--0.1%
4,056,000 FDX Corp., 6.141% - 6.246%, 2/10/1999
- 2/26/1999 4,004,827
Total Commercial Paper 1,866,694,726
Corporate Notes--7.0%
Banking--1.4%
25,000,000 SALTS II Cayman Islands Corp.,
(Guaranteed by Bankers Trust
International, PLC),
5.738%, 6/17/1999 25,000,000
18,724,000 SALTS III Cayman Island Corp.,
(Guaranteed by Bankers Trust
International, PLC),
5.819%, 12/18/1998 18,724,000
15,000,000 SALTS III Cayman Island Corp.,
(Guaranteed by Bankers Trust
International, PLC),
5.850%, 1/23/1999 15,000,000
Total 58,724,000
Finance - Automotive--2.5%
10,000,000 Americredit Automobile Receivables
Trust 1998-D, Class A1, (Insured by
FSA), 5.199%, 11/12/1999 10,000,000
2,222,448 Chase Manhattan Auto Owner Trust
1998-B, Class A-1, 5.578%, 5/10/1999 2,222,448
7,168,493 Chase Manhattan Auto Owner Trust
1998-C, Class A1, 5.588%, 7/9/1999 7,168,016
3,517,358 Compass Auto Receivables Trust 1998-A,
Class A-1, 5.659%, 7/15/1999 3,517,358
22,736,413 Ford Credit Auto Owner Trust 1998-C,
Class A-2, 5.670%, 6/15/1999 22,736,413
23,162,164 MMCA Auto Owner Trust 1998-1, Class
A-1, 5.621%, 8/16/1999 $ 23,162,164
35,973,919 Premier Auto Trust 1998-5, Class A1,
5.140%, 7/8/1999 35,964,346
Total 104,770,745
Finance - Commercial--0.5%
20,000,000 Beta Finance, Inc., 5.790%, 4/8/1999 19,999,299
Finance - Equipment--0.9%
12,239,516 Case Equipment Receivables Trust
1998-B, Class A-1, 5.608%, 9/15/1999 12,239,516
24,341,606 Copelco Capital Funding Trust 1998-A,
Class A-1, 5.680%, 8/15/1999 24,341,606
Total 36,581,122
Finance - Retail--0.6%
24,332,838 Greentree Recreational, Equipment &
Consumer Trust 1998-C, Class A-1,
5.554%, 8/15/1999 24,332,838
Insurance--1.0%
10,823,271 Americredit Automobile Receivables
Trust 1998-C, Class A-1,
(Insured by FSA), 5.380%, 9/12/1999 10,823,271
4,784,640 ContiMortgage Home Equity Loan Trust
1998-2, Class A-1, (Guaranteed by MBIA
Insurance Corporation), 5.649%, 6/15/1999 4,784,640
8,104,626 WFS Financial 1998-B Owner Trust,
Class A-1, (Insured by FSA),
5.658%, 7/20/1999 8,104,626
20,000,000 WFS Financial 1998-C Owner Trust,
Class A1, (Guaranteed by FSA), 5.395%,
11/20/1999 20,000,000
Total 43,712,537
Recreation--0.1%
6,303,470 Greentree Recreational, Equipment &
Consumer Trust 1998-B, Class A-1,
5.669%, 7/15/1999 6,303,470
Total Corporate Notes 294,424,011
Loan Participation--2.2%
Electrical Equipment--0.6%
25,700,000 Mt. Vernon Phenol Plant Partnership,
(Guaranteed by General Electric Co.),
5.370%, 5/17/1999 25,700,000
Finance - Equipment--1.1%
46,000,000 Pitney Bowes Credit Corp., 5.324%,
12/10/1998 45,939,050
Insurance--0.5%
20,000,000 Marsh & McLennan Cos., Inc., 5.254%,
5/24/1999 20,000,000
Total Loan Participation 91,639,050
(c)Notes - Variable--21.6%
Banking--9.0%
4,750,000 Adena Health System, Adena Health
System Project (Series 1998),
(Fifth Third Bank, Cincinnati LOC),
5.190%, 12/3/1998 4,750,000
2,000,000 American Health Care Centers, (Series
1998), (FirstMerit Bank, N.A. LOC),
5.200%, 12/3/1998 $2,000,000
4,270,000 Aurora City, IL, (Series 1995),
(National City Bank, Michigan/Illinois
LOC), 5.311%, 12/3/1998 4,270,000
800,000 Avalon Hotel Associates, (Corestates
Bank N.A., Philadelphia, PA LOC),
5.769%, 12/3/1998 800,000
20,000,000 Bankers Trust Co., New York, 4.920%,
6/4/1999 19,993,075
30,000,000 (b)Bankers Trust Corp., 5.000%,
12/1/1998 30,000,000
26,800,000 (b)Bankers Trust Corp., 5.140%,
12/1/1998 26,800,000
1,500,000 BeMacs Service, Inc., (SouthTrust Bank
of Alabama, Birmingham LOC),
4.300%, 12/4/1998 1,500,000
3,165,000 Blackwell Investments, Inc., (Bank
One, Louisiana LOC), 5.300%, 12/3/1998 3,165,000
1,685,000 Boozer Lumber Co., (SouthTrust Bank of
Alabama, Birmingham LOC),
5.300%, 12/4/1998 1,685,000
6,900,000 Cloquet, MN, Series 1996-B Potlach
Corp, (Credit Suisse First Boston LOC),
5.100%, 12/2/1998 6,900,000
11,276,000 Congregate Care Corp., (Union Bank of
California LOC), 5.130%, 12/2/1998 11,276,000
1,375,000 Denver Urban Renewal Authority,
(Series 1992-B), (Paribas, Paris LOC),
5.130%, 12/3/1998 1,375,000
5,850,000 Dewberry III, L.P., (First National
Bank of Maryland, Baltimore LOC),
5.110%, 12/1/1998 5,850,000
1,500,000 Edgefield County, SC, Series 1997
(Bondex Inc Project), (Marine
Midland Bank N.A., Buffalo, NY LOC),
5.250%, 12/3/1998 1,500,000
2,360,000 Gahanna OH, City of, Franklin Steel Co
Project, (Star Bank, NA,
Cincinnati LOC), 5.270%, 12/3/1998 2,360,000
10,605,000 HJH Associates of Alabama, Hilton
Hotel, Huntsville, (SouthTrust Bank of
Alabama, Birmingham LOC), 5.300%,
12/4/1998 10,605,000
8,350,000 HSI Funding, LLC, Variable Rate
(Series A), (National City Bank,
Michigan/Illinois LOC), 5.070%,
12/3/1998 8,350,000
1,890,000 La-Man Corp., (SouthTrust Bank of
Alabama, Birmingham LOC), 5.300%,
12/4/1998 1,890,000
2,290,000 Lake Sherwood Senior Living Center,
LLC, (Union Planters NB, Memphis, TN
LOC), 5.500%, 12/3/1998 2,290,000
51,000,000 Liquid Asset Backed Securities Trust,
Series 1996-3, (Westdeutsche Landesbank
Girozentrale Swap Agreement), 5.429%,
12/15/1998 51,000,000
34,898,422 (b)Liquid Asset Backed Securities
Trust, Series 1997-1, (Westdeutsche
Landesbank Girozentrale Swap Agreement),
5.228%, 12/15/1998 34,898,422
3,515,000 Maryland State IDFA, (Genetic Therapy,
Inc.), (First National Bank of
Maryland, Baltimore LOC), 5.310%,
12/7/1998 3,515,000
5,600,000 Maryland State IDFA, (Kelly
Springfield Tire), (First National
Bank of Maryland, Baltimore LOC),
5.240%, 12/7/1998 5,600,000
2,430,000 Maryland State IDFA, Human Genome,
Series1994, (First National Bank of
Maryland, Baltimore LOC), 5.220%,
12/7/1998 2,430,000
2,170,000 McDuffie County, GA Development
Authority, Thomson Plastics, Inc.
Project (Series 1998), (SouthTrust
Bank of Alabama, Birmingham LOC),
5.350%, 12/4/1998 2,170,000
4,250,000 Memphis, TN Center City Revenue
Finance Corp., South Bluffs Project
(Series1998-B), (National Bank of
Commerce, Memphis, TN LOC),
5.450%, 12/3/1998 $4,250,000
9,000,000 Mississippi Business Finance Corp.,
Howard Industries, Inc. Series 1997,
(First American National Bank,
Nashville, TN LOC), 5.300%,
12/3/1998 9,000,000
615,000 New Jersey EDA, Series 1992 K-3,
(Banque Nationale de Paris LOC),
5.230%, 12/7/1998 615,000
3,605,000 New Jersey EDA, Series 1992-H, (Banque
Nationale de Paris LOC),
5.100%, 12/7/1998 3,605,000
6,150,000 O'Dovero Consolidated, LLC, (Series
1998-A), (National City Bank,
Michigan/Illinois LOC), 5.070%,
12/3/1998 6,150,000
5,500,000 Pennsylvania EDFA, (Series 1993-C),
(Barclays Bank PLC, London LOC),
5.270%, 12/2/1998 5,500,000
23,704,277 Rabobank Optional Redemption Trust,
Series 1997-101, 5.343%, 1/17/1999 23,704,277
1,600,000 Saegertown Manufacturing Corp., (PNC
Bank, N.A. LOC), 5.132%, 12/7/1998 1,600,000
21,000,000 Societe Generale, Paris, 4.923%,
8/11/1999 20,990,412
4,605,000 Sojourn Project, Series 1997,
(FirstMerit Bank, N.A. LOC), 5.200%,
12/3/1998 4,605,000
2,590,000 Southeast Regional Holdings, LLC,
Series 1995-A, (Columbus Bank and
Trust Co., GA LOC), 5.450%, 12/3/1998 2,590,000
5,320,000 Sun Valley, Inc., (SouthTrust Bank of
Georgia, Atlanta LOC), 5.300%,
12/4/1998 5,320,000
3,545,000 Toledo Medical Building I L.P.,
(Huntington National Bank, Columbus,
OH LOC), 5.180%, 5/1/1999 3,545,000
18,825,000 Union Development Co., (Bank of
America NT and SA, San Francisco LOC),
5.296%, 12/3/1998 18,825,000
3,075,000 United Jewish Federation of Greater
Pittsburgh VRDB, Series 1995A, (PNC
Bank, N.A. LOC), 5.050%, 12/3/1998 3,075,000
6,340,000 Van Dyne Crotty Co., (Huntington
National Bank, Columbus, OH LOC),
5.140%, 12/3/1998 6,340,000
4,760,000 Visalia, CA Community Redevelopment
Agency, East Visalia Redevelopment
Project (Series 1990), (Union Bank
of California LOC), 5.260%, 12/3/1998 4,760,000
5,505,000 Woodbury Business Forms,
Inc./Carribean Business Forms, Series
1996 Taxable Revenue Bonds,
(Columbus Bank and Trust Co., GA LOC),
4.460%, 12/3/1998 5,505,000
Total 376,952,186
Finance - Automotive--2.4%
100,000,000 General Motors Acceptance Corp.,
Mortgage of PA, (Guaranteed by General
Motors Acceptance Corp.),
5.322%, 1/4/1999 99,504,282
Finance - Equipment--0.7%
30,000,000 (b)Comdisco, Inc., 144 A Notes,
5.350%, 2/25/1999 30,000,000
Finance - Retail--1.9%
21,000,000 AFS Insurance Premium Receivables
Trust, (Series 1994-A), 5.965%,
12/15/1998 21,000,000
60,000,000 Associates Corp. of North America,
4.940%, 12/1/1998 59,997,294
Total 80,997,294
Insurance--7.6%
13,000,000 Aspen Funding Corp., 5.140%, 12/1/1998 $ 13,000,000
172,000,000 General American Life Insurance Co.,
5.250%, 12/21/1998 172,000,000
26,000,000 Jackson National Life Insurance Co.,
5.510%, 1/1/1999 26,000,000
39,685,740 Liquid Asset Backed Securities Trust,
Series 1997-3 Senior Notes,
(Guaranteed by AMBAC), 5.408%,
12/28/1998 39,685,740
15,000,000 SunAmerica Life Insurance Company,
5.310%, 12/1/1998 15,000,000
25,000,000 SunAmerica Life Insurance Company,
5.464%, 12/1/1998 25,000,000
30,000,000 Transamerica Occidental Life Insurance
Co., 5.209%, 2/5/1999 30,000,000
Total 320,685,740
Total Notes - Variable 908,139,502
(d)Repurchase Agreements--11.9%
65,000,000 ABN AMRO Chicago Corp., 5.500%, dated
11/30/1998, due 12/1/1998 65,000,000
75,000,000 Bear, Stearns and Co., 5.350%, dated
11/30/1998, due 12/1/1998 75,000,000
175,000,000 J.P. Morgan & Co., Inc., 5.500%, dated
11/30/1998, due 12/1/1998 175,000,000
175,000,000 Nationsbanc Montgomery Securities,
Inc., 5.320%, dated 11/30/1998, due
12/1/1998 175,000,000
10,100,000 Warburg Dillon Reed LLC, 5.350%, dated
11/30/1998, due 12/1/1998 10,100,000
Total Repurchase Agreements 500,100,000
Time Deposit--6.2%
Banking--6.2%
100,000,000 Bank of Tokyo-Mitsubishi Ltd., 5.625%,
12/1/1998 100,000,000
75,000,000 Royal Bank of Canada, Montreal,
5.625%, 12/1/1998 75,000,000
60,000,000 Societe Generale, Paris, 5.000%,
12/1/1998 60,000,000
25,000,000 Westdeutsche Landesbank Girozentrale,
5.625%, 12/1/1998 25,000,000
Total 260,000,000
Total Investments (at amortized cost)(e) $4,204,525,925
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase, or the
coupon for interest bearing issues.
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1998, these securities
amounted to $135,063,366 which represents 3.2% of net assets.
(c) Current rate and next reset date shown.
(d) The repurchase agrements 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
($4,195,780,886) at November 30, 1998.
The following acronym(s) are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
EDA --Economic Development Authority
EDFA --Economic Development Financing Authority
FSA --Financial Security Assurance
IDB --Industrial Development Bond
IDFA --Industrial Development Finance Authority
LLC --Limited Liability Corporation
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
PLC --Public Limited Company
SA --Support Agreement
VRDB --Variable Rate Demand Bond
(See Notes which are an integral part of the Financial Statements)
Statement of Assets and Liabilities
Prime Cash Series
November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments in repurchase agreements $ 500,100,000
Investments in securities 3,704,425,922
Total investments in securities, at amortized cost and value $4,204,525,922
Income receivable 16,146,780
Receivable for shares sold 4,478
Total assets 4,220,677,180
Liabilities:
Payable for investments purchased 14,986,667
Income distribution payable 7,527,110
Payable to Bank 692,098
Accrued expenses 1,690,419
Total liabilities 24,896,294
Net Assets for 4,195,780,886 shares outstanding $4,195,780,886
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$4,195,780,886 / 4,195,780,886 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
Prime Cash Series
Six Months Ended November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Investment Income:
<S> <C>
Interest $109,923,399
Expenses:
Investment advisory fee $ 9,787,317
Administrative personnel and services fee 1,475,927
Custodian fees 106,009
Transfer and dividend disbursing agent fees and expenses 3,801,047
Directors'/Trustees' fees 12,526
Auditing fees 6,530
Legal fees 6,334
Portfolio accounting fees 80,838
Distribution services fee 1,957,463
Shareholder services fee 4,893,659
Share registration costs 112,166
Printing and postage 311,862
Insurance premiums 169,623
Taxes 110,302
Miscellaneous 2,053
Total expenses 22,833,656
Waiver of investment advisory fee (3,172,799)
Net expenses 19,660,857
Net investment income $ 90,262,542
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
Prime Cash Series
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 90,262,542 $ 148,596,429
Distributions to Shareholders--
Distributions from net investment income (90,262,542) (148,596,429)
Share Transactions--
Proceeds from sale of shares 6,526,429,823 12,363,460,681
Net asset value of shares issued to shareholders in payment of distributions declared 83,614,801 144,001,210
Cost of shares redeemed (6,162,297,703) (11,122,809,806)
Change in net assets resulting from share transactions 447,746,921 1,384,652,085
Change in net assets 447,746,921 1,384,652,085
Net Assets:
Beginning of period 3,748,033,965 2,363,381,880
End of period $ 4,195,780,886 $ 3,748,033,965
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
Prime Cash Series
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited)
November 30, Year Ended May 31,
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.02 0.05 0.05 0.05 0.05 0.02
Less distributions
Distributions from net investment income (0.02) (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 $ 1.00
Total return (a) 2.33% 4.83% 4.64% 4.90% 4.60% 2.48%
Ratios to average net assets
Expenses 1.00%* 1.00% 0.99% 0.99% 0.99% 0.99%
Net investment income 4.61%* 4.73% 4.55% 4.78% 4.57% 2.45%
Expense waiver/reimbursement (b) 0.16%* 0.18% 0.20% 0.38% 0.20% 0.18%
Supplemental data
Net assets, end of period (000 omitted) $4,195,781 $3,748,034 $2,363,382 $1,539,235 $1,027,083 $791,147
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
Prime Cash Series
November 30, 1998 (unaudited)
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 the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities .
Investment Income, Expenses and Distributions
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
Federal Taxes
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
When-Issued and Delayed Delivery Transactions
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
Restricted Securities
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
In some cases, the issuer of restricted securities has agreed to register such
securities for resale, at the issuer's expense, either upon demand by the Fund
or in connection with another registered offering of the securities. Many
restricted securities may be resold in the secondary market in transactions
exempt from registration. Such restricted securities may be determined to be
liquid under criteria established by the Directors. The Fund will not incur any
registration costs upon such resales. The Fund's restricted securities are
valued at the price provided by dealers in the secondary market or, if no market
prices are available, at the fair value as determined by the Fund's pricing
committee.
Additional information on each restricted security held at November 30, 1998 is
as follows:
<TABLE>
<CAPTION>
Security Acquisition Date Acquisition Cost
<S> <C> <C>
Bankers Trust Corp. 1/29/1998 $30,000,000
Bankers Trust Corp. 7/30/1998 26,800,000
Beta Finance, Inc. 10/15/1998-11/18/1998 13,323,218
Comdisco, Inc., 144 A Notes 8/26/1998 30,000,000
Liquid Asset Backed Securities Trust, Series 1997-1 2/19/1997 34,898,422
Use of Estimates
</TABLE>
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 November 30, 1998, there were 12,500,000,000 shares ($0.001 par value per
share) authorized. At November 30, 1998, capital paid-in aggregated
$4,195,780,886. Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Shares sold $ 6,526,429,823 $ 12,363,460,681
Shares issued to shareholders in payment of distributions declared 83,614,801 144,001,210
Shares redeemed (6,162,297,703) (11,122,809,806)
Net change resulting from share transactions $ 447,746,921 $ 1,384,652,085
</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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC 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, 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 Transaction
During the period ended November 30, 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 $24,200,000 and $29,390,000, 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.
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
and Secretary
Richard J. Thomas
Treasurer
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.
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
[FEDERATED LOGO]
Prime Cash Series
Semi-Annual Report
to Shareholders
November 30, 1998
Cusip 147551105
0122606 (1/99)
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
[RECYCLED LOGO]
President's Message
Dear Shareholder:
Treasury Cash Series, a portfolio of Cash Trust Series, Inc., was established in
1990, and I am pleased to present its Semi-Annual Report to shareholders, which
covers the six-month period ended November 30, 1998. The report begins with an
investment review by the fund's portfolio manager, Susan R. Hill, Vice President
of Federated Advisers, which is followed by a complete listing of the fund's
investments, and its financial statements.
During the reporting period, Treasury Cash Series paid a total of $0.02 in
dividends per share. In addition to income on their ready cash, shareholders
benefited from the fund's daily liquidity and stability of principal.* The fund
has maintained a net asset value of $1.00 per share since its inception.
At the end of the reporting period, 84.8% of the fund's $1 billion portfolio was
invested in repurchase agreements backed by U.S. government securities, because
these securities offered yield advantage over many direct government securities.
The remainder of the fund's assets was invested in direct U.S. Treasury bills
and notes.
Thank you for choosing Treasury Cash Series as a convenient way to help your
ready cash earn daily income through the relative safety of U.S. Treasury money
market obligations. Please contact your investment representative if you have
any questions about the fund.
Sincerely,
/s/ Richard B. Fisher
Richard B. Fisher
President
January 15, 1999
* An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
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").**
Early in the reporting period, economic fundamentals were still the driving
factor behind movements in short-term interest rates. With economic growth still
strong of 1998--albeit slowing from its torrid 5.50% pace of growth in the first
quarter of 1998--market participants were content with the idea that the Federal
Reserve Board (the "Fed") would remain on the sidelines. The anticipated drag on
the U.S. economy resulting from the economic crises in Asia had become apparent-
- -particularly in the manufacturing sector--over the second quarter of 1998. This
slowdown lent comfort to investors that economic growth would not be so robust
as to ignite inflationary pressures.
By the third quarter of 1998, however, a dramatic shift in market sentiment was
evident. Uncertainty in the world economies resulted in vulnerability in our
domestic equity market, and led to a substantial flight to quality to U.S.
Treasury securities across the yield curve. Economic trouble spread to include
Russia and Latin America, and what had been perceived to have been a fairly
modest drag on the U.S. economies, as a result of the remote Asian crisis, now
became an overpowering influence on the market and expectations regarding future
U.S. growth. Although economic fundamentals still remained fairly positive in
this environment, fear dominated market sentiment over this period.
Expectations regarding the direction of the next change in monetary policy did
an abrupt about-face over the reporting period. The Fed adopted a tightening
bias in March, a reflection of their underlying concern about inflationary
pressures. By August, the Fed had removed its tightening bias as Fed officials
perceived that the risks to the economy had become more balanced. By late
August, however, market expectations that the Fed might eventually need to ease
monetary policy to help the U.S. economy along, as a result of the world
economic struggles, had begun to grow. This expectation intensified throughout
September, and at the September 29, 1998 Federal Open Market Committee ("FOMC")
meeting, the Fed voted to ease monetary policy by a modest 25 basis points. The
Fed followed that move with another 25 basis point ease on October 15, 1998,
which brought the Federal Funds Target Rate down to 5.00%. The Fed also voted to
cut the discount rate by the same magnitude, from 5.00% to 4.75%, at that time.
And finally, in mid-November, the Fed voted once again at its November 17, 1998
FOMC meeting to reduce the Federal Funds Target Rate and the discount rate by 25
basis points. These moves were a reflection of concern over the potential
economic impact that the crises in foreign economies would have on U.S. domestic
growth, as well as with the liquidity/credit crisis evident in the fixed-income
markets.
Short-term interest rates reflected the turmoil and shift in monetary policy
over the reporting period. From June through August, the yield on the three-
month Treasury bill traded within a range of 5.00%-5.25%, driven by technical
supply factors rather than market sentiment. By mid-August, however, the trouble
in the Asian economies had broadened to include Russia and Latin America, and a
flight to quality to U.S. Treasury securities from investors seeking a safe
haven became evident. The three-month bill declined steadily in ensuing weeks to
3.60% in mid-October, around the time of the second easing step by the Fed. The
yield decline was exacerbated by the overall decline in issuance of Treasury
securities due to the improving Federal budget picture. The sudden inter-meeting
move by the Fed in October, coupled with the added insurance of the ease in
November, had the desired affect of calming the turbulent financial markets,
however, and the three-month bill retraced some of the flight to quality
influence to end the reporting period at 4.50%.
* The AAAm rating is obtained after S&P evaluates a number of factors including
credit quality, market price exposure, and management. S&P monitiors the
portfolio weekly for developments that could cause changes in the ratings.
** Money market funds rated Aaa by Moody's are judged to be of an investment
quality similar to Aaa-rated, fixed-income obligations, that is, they are
judged to be of the best quality. Ratings are subject to change and do not
remove market risks.
Over the reporting period, the fund was targeted in a 35-to 45-day average
maturity range, reflecting the relatively expensive nature of the short-term
Treasury yield curve. The average maturity of the fund varied within that range
according to relative value opportunities available in the Treasury market. The
fund remained barbelled in structure, combining a significant position in
overnight and term repurchase agreements with purchases of Treasury securities-
-predominantly Treasury notes--with 6 to 13 month maturities. We believe the 75
basis point cumulative easing in monetary policy by the Fed should be
sufficient, for now, to provide comfort to the market that the economy will be
able to withstand the drag from overseas. As a result, the Fed should remain on
the sidelines in the near term until additional light is shed on the health of
the economy and it's longer term prospects for growth.
Portfolio of Investments
Treasury Cash Series
November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<S> <C> <C>
Short-Term U.S. Treasury Obligations--22.4%
(a)U.S. Treasury Bills--5.4%
$ 54,000,000 4.410% - 4.860%, 12/15/1998 - 1/21/1999 $ 53,871,795
U.S. Treasury Notes--17.0%
169,600,000 5.625% - 7.000%, 2/28/1999 - 11/30/1999 170,665,872
Total Short-Term U.S. Treasury Obligations 224,537,667
(b)Repurchase Agreements--84.8%
45,000,000 ABN AMRO Chicago Corp., 5.300%, dated 11/30/1998, due 12/1/1998 45,000,000
50,000,000 Barclays de Zoete Wedd Securities, Inc., 5.300%, dated
11/30/1998, due 12/1/1998 50,000,000
50,000,000 Bear, Stearns and Co., 5.380%, dated 11/30/1998, due 12/1/1998 50,000,000
50,000,000 CIBC Wood Gundy Securities Corp., 5.300%, dated
11/30/1998, due 12/1/1998 50,000,000
5,500,000 (c)Deutsche Bank Government Securities, Inc., 4.800%, dated
10/29/1998, due 1/28/1999 5,500,000
27,300,000 Deutsche Bank Government Securities, Inc., 5.320%, dated
11/30/1998, due 12/1/1998 27,300,000
50,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.300%, dated
11/30/1998, due 12/1/1998 50,000,000
50,000,000 First Union Capital Markets, 5.350%, dated 11/30/1998,
due 12/1/1998 50,000,000
20,000,000 (c)Goldman Sachs Group, LP, 4.88%, dated 11/30/1998, due 2/3/1999 20,000,000
40,000,000 (c)Goldman Sachs Group, LP, 5.100%, dated 10/8/1998, due 1/6/1999 40,000,000
50,000,000 Greenwich Capital Markets, Inc., 5.370%, dated 11/30/1998,
due 12/1/1998 50,000,000
40,000,000 (c)J.P. Morgan & Co., Inc., 4.740%, dated 11/17/1998, due 2/17/1999 40,000,000
50,000,000 Paribas Corp., 5.370%, dated 11/30/1998, due 12/1/1998 50,000,000
50,000,000 Salomon Brothers, Inc., 5.320%, dated 11/30/1998, due 12/1/1998 50,000,000
50,000,000 Societe Generale Securities Corp., 5.350%, dated 11/30/1998,
due 12/1/1998 50,000,000
50,000,000 Toronto Dominion Securities (USA) Inc., 5.350%, dated 11/30/1998,
due 12/1/1998 50,000,000
24,000,000 (c)Warburg Dillon Reed LLC, 4.740%, dated 11/19/1998, due 2/18/1999 24,000,000
50,000,000 Warburg Dillon Reed LLC, 5.350%, dated 11/30/1998, due 12/1/1998 50,000,000
100,000,000 Warburg Dillon Reed LLC, 5.370%, dated 11/30/1998, due 12/1/1998 100,000,000
Total Repurchase Agreements 851,800,000
Total Investments (at amortized cost)(d) $1,076,337,667
</TABLE>
(a) The issue shows the rate of discount at time of purchase.
(b) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
(c) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($1,004,270,257) at November 30, 1998.
The following acronyms are used throughout this portfolio:
LLC--Limited Liability Corporation
LP --Limited Partnership
(See Notes which are an integral part of the Financial Statements)
Statement of Assets and Liabilities
Treasury Cash Series
November 30, 1998 (unaudited)
<TABLE>
<S> <C> <C>
Assets:
Investments in repurchase agreements $ 851,800,000
Investments in securities 224,537,667
Total investments in securities, at amortized cost and value $1,076,337,667
Income receivable 2,491,151
Total assets 1,078,828,818
Liabilities:
Payable for investments purchased 71,946,461
Income distribution payable 2,413,091
Payable to Bank 58,501
Accrued expenses 140,508
Total liabilities 74,558,561
Net Assets for 1,004,270,257 shares outstanding $1,004,270,257
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$1,004,270,257 / 1,004,270,257 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Statement of Operations
Treasury Cash Series
Six Months Ended November 30, 1998 (unaudited)
<TABLE>
<S> <C> <C>
Investment Income:
Interest $25,307,866
Expenses:
Investment advisory fee $ 2,342,857
Administrative personnel and services fee 353,303
Custodian fees 35,494
Transfer and dividend disbursing agent fees and expenses 304,393
Directors'/Trustees' fees 4,255
Auditing fees 6,645
Legal fees 3,861
Portfolio accounting fees 63,897
Distribution services fee 468,571
Shareholder services fee 1,171,428
Share registration costs 26,614
Printing and postage 62,116
Insurance premiums 3,402
Taxes 25,217
Miscellaneous 3,438
Total expenses 4,875,491
Waiver of investment advisory fee (169,159)
Net expenses 4,706,332
Net investment income $20,601,534
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Statement of Changes in Net Assets
Treasury Cash Series
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 20,601,534 $ 38,047,314
Distributions to Shareholders--
Distributions from net investment income (20,601,534) (38,047,314)
Share Transactions--
Proceeds from sale of shares 2,028,936,538 3,586,341,688
Net asset value of shares issued to shareholders in payment of
distributions declared 16,583,623 33,442,587
Cost of shares redeemed (1,862,734,131) (3,569,463,870)
Change in net assets resulting from share transactions 182,786,030 50,320,405
Change in net assets 182,786,030 50,320,405
Net Assets:
Beginning of period 821,484,227 771,163,822
End of period $ 1,004,270,257 $ 821,484,227
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Financial Highlights
Treasury Cash Series
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited)
November 30, Year Ended May 31,
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.02 0.05 0.04 0.05 0.04 0.02
Less distributions
Distributions from net investment income (0.02) (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 $ 1.00
Total return(a) 2.23% 4.70% 4.50% 4.83% 4.34% 2.37%
Ratios to average net assets
Expenses 1.00%* 1.00% 0.99% 0.99% 0.99% 0.99%
Net investment income 4.40%* 4.60% 4.41% 4.70% 4.26% 2.33%
Expense waiver/reimbursement(b) 0.04%* 0.24% 0.03% 0.29% 0.08% 0.10%
Supplemental data
Net assets, end of period (000 omitted) $1,004,270 $821,484 $771,164 $593,730 $424,091 $427,005
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Notes to Financial Statements
Treasury Cash Series
November 30, 1998 (unaudited)
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 November 30, 1998, there were 12,500,000,000 shares ($0.001 per share)
authorized. At November 30, 1998, capital paid-in aggregated $1,004,270,257.
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
Six Months Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Shares sold 2,028,936,538 3,586,341,688
Shares issued to shareholders in payment of distributions declared 16,583,623 33,442,587
Shares redeemed (1,862,734,131) (3,569,463,870)
Net change resulting from share transactions 182,786,030 50,320,405
</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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC 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, 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.
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,
and Secretary
Richard J. Thomas
Treasurer
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.
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.
[FEDERATED INVESTORS LOGO]
Treasury Cash Series
Semi-Annual Report
to Shareholders
November 30, 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
0122607 (1/99) [RECYCLED PAPER LOGO]
