United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of Registered Management Investment Companies
811-5843
(Investment Company Act File Number)
Cash Trust Series, Inc.
______________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Date of Fiscal Year End: 05/31/2012
Date of Reporting Period: Six months ended 11/30/2011
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Item 1. Reports to Stockholders
 | | Semi-Annual Shareholder Report |
| | November 30, 2011 |
|
Federated Government Cash Series
A Portfolio of Cash Trust Series, Inc.
CONTENTS
Portfolio of Investments Summary Tables (unaudited)
At November 30, 2011, the Fund's portfolio composition1 was as follows:
| Portfolio Composition | | Percentage of
Total Net Assets |
| U.S. Government Agency Securities | | 45.3% |
| U.S. Treasury Securities | | 0.9% |
| Repurchase Agreements | | 54.3% |
| Other Assets and Liabilities — Net2 | | (0.5)% |
| TOTAL | | 100.0% |
At November 30, 2011, the Fund's effective maturity3 schedule was as follows:
Securities With an
Effective Maturity of: | | Percentage of
Total Net Assets |
| 1-7 Days | | 59.3% |
| 8-30 Days | | 10.1% |
| 31-90 Days | | 17.4% |
| 91-180 Days | | 5.3% |
| 181 Days or more | | 8.4% |
| Other Assets and Liabilities — Net2 | | (0.5)% |
| TOTAL | | 100.0% |
| 1 | See the Fund's Prospectus and Statement of Additional Information for a description of the principal types of securities in which the Fund invests. |
| 2 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 3 | Effective maturity is determined in accordance with the requirements of Rule 2a-7 under the Investment Company Act of 1940, which regulates money market mutual funds. |
Semi-Annual Shareholder Report Portfolio of Investments
November 30, 2011 (unaudited)
Principal
Amount | | | Value |
| | GOVERNMENT AGENCIES – 45.3% | |
| $52,570,000 | 1 | Federal Farm Credit System Floating Rate Notes, 0.213% - 0.399%, 12/11/2011 - 2/20/2012 | 52,567,588 |
| 56,000,000 | 1 | Federal Home Loan Bank System Floating Rate Notes, 0.207% - 0.298%, 12/9/2011 - 1/30/2012 | 55,987,902 |
| 351,000,000 | | Federal Home Loan Bank System Notes, 0.100% - 0.440%, 12/6/2011 - 12/21/2011 | 350,991,056 |
| 20,000,000 | 2 | Federal Home Loan Mortgage Corp. Discount Notes, 0.095% - 0.140%, 1/17/2012 - 2/23/2012 | 19,995,956 |
| 135,255,000 | 1 | Federal Home Loan Mortgage Corp. Floating Rate Notes, 0.165% - 0.240%, 12/1/2011 - 12/29/2011 | 135,206,785 |
| 51,000,000 | 1 | Federal Home Loan Mortgage Corp. Floating Rate Notes, 0.195% - 0.198%, 12/3/2011 - 12/6/2011 | 50,969,998 |
| 36,664,000 | | Federal Home Loan Mortgage Corp. Notes, 2.125% - 5.000%, 3/5/2012 - 3/29/2012 | 37,101,312 |
| 60,700,000 | 1 | Federal National Mortgage Association Floating Rate Notes, 0.205% - 0.376%, 12/1/2011 - 2/17/2012 | 60,670,566 |
| 51,250,000 | | Federal National Mortgage Association Notes, 0.875% - 6.125%, 1/12/2012 - 3/30/2012 | 51,643,403 |
| 58,000,000 | 1 | General Electric Capital Corp. (GTD by FDIC) Floating Rate Notes, 1.267%, 12/9/2011 | 58,010,899 |
| 31,100,000 | 1 | Morgan Stanley (GTD by FDIC) Floating Rate Notes, 0.701%, 12/20/2011 | 31,166,576 |
| 259,806,000 | 2,3,4 | Straight A Funding, LLC (Unconditional Liquidity Support from Federal Financing Bank), Discount Notes, 0.190%, 12/2/2011 - 2/7/2012 | 259,730,993 |
| | TOTAL GOVERNMENT AGENCIES | 1,164,043,034 |
| | U.S. Treasury – 0.9% | |
| 17,000,000 | | United States Treasury Notes, 1.000% - 4.625%, 12/31/2011 | 17,028,109 |
| 7,000,000 | | United States Treasury Notes, 4.625%, 2/29/2012 | 7,076,084 |
| | TOTAL U.S. TREASURY | 24,104,193 |
| | Repurchase Agreements – 54.3% | |
| 150,613,000 | | Interest in $3,800,000,000 joint repurchase agreement 0.14%, dated 11/30/2011 under which Bank of America, N.A. will repurchase securities provided as collateral for $3,800,014,778 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Government Agency securities with various maturities to 1/20/2040 and the market value of those underlying securities was $3,914,015,222. | 150,613,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $100,000,000 | | Interest in $500,000,000 joint repurchase agreement 0.15%, dated 11/30/2011 under which Citibank NA will repurchase securities provided as collateral for $500,002,083 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Government Agency securities with various maturities to 6/15/2048 and the market value of those underlying securities was $514,980,992. | 100,000,000 |
| 94,000,000 | 5 | Interest in $1,900,000,000 joint repurchase agreement 0.10%, dated 10/12/2011 under which Deutsche Bank Securities, Inc. will repurchase securities provided as collateral for $1,900,475,000 on 1/10/2012. The securities provided as collateral at the end of the period were U.S. Government Agency securities with various maturities to 11/15/2052 and the market value of those underlying securities was $1,942,814,720. | 94,000,000 |
| 100,000,000 | | Interest in $2,000,000,000 joint repurchase agreement 0.14%, dated 11/25/2011 under which Goldman Sachs & Co. will repurchase securities provided as collateral for $2,000,054,444 on 12/2/2011. The securities provided as collateral at the end of the period were U.S. Government Agency securities with various maturities to 12/25/2041 and the market value of those underlying securities was $2,060,048,067. | 100,000,000 |
| 250,000,000 | | Repurchase agreement 0.03%, dated 11/30/2011 under which Merrill Lynch, Pierce, Fenner & Smith, Inc. will repurchase securities provided as collateral for $250,000,208 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Government Agency securities with various maturities to 10/15/2041 and the market value of those underlying securities was $256,943,515. | 250,000,000 |
| 600,000,000 | | Interest in $1,150,000,000 joint repurchase agreement 0.15%, dated 11/30/2011 under which Mizuho Securities USA, Inc. will repurchase securities provided as collateral for $1,150,004,792 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Government Agency and U.S. Treasury securities with various maturities to 10/15/2046 and the market value of those underlying securities was $1,175,674,533. | 600,000,000 |
| 100,000,000 | | Interest in $1,000,000,000 joint repurchase agreement 0.15%, dated 11/30/2011 under which Societe Generale, New York will repurchase securities provided as collateral for $1,000,004,167 on 12/1/2011. ctag:bx]The securities provided as collateral at the end of the period were U.S. Government Agency securities with various maturities to 12/1/2040 and the market value of those underlying securities was $1,023,216,849. | 100,000,000 |
| | TOTAL REPURCHASE AGREEMENTS | 1,394,613,000 |
| | TOTAL INVESTMENTS — 100.5%
(AT AMORTIZED COST)6 | 2,582,760,227 |
| | OTHER ASSETS AND LIABILITIES - NET — (0.5)%7 | (12,034,406) |
| | TOTAL NET ASSETS — 100% | $2,570,725,821 |
| 1 | Floating rate notes with current rate and next reset date shown. |
| 2 | Discount rate at time of purchase. |
Semi-Annual Shareholder Report| 3 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At November 30, 2011, these restricted securities amounted to $259,730,993, which represented 10.1% of total net assets. |
| 4 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors (the “Directors”). At November 30, 2011, these liquid restricted securities amounted to $259,730,993, which represented 10.1% of total net assets. |
| 5 | Although the repurchase date is more than seven days after the date of purchase, the Fund has the right to terminate the repurchase agreement at any time with seven-days' notice. |
| 6 | Also represents cost for federal tax purposes. |
| 7 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at November 30, 2011.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of November 30, 2011, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
The following acronyms are used throughout this portfolio:
| FDIC | — Federal Deposit Insurance Corporation |
| GTD | — Guaranteed |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Six Months
Ended
(unaudited)
11/30/2011 | Year Ended May 31, |
| 2011 | 2010 | 2009 | 2008 | 2007 |
| 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 | 0.0001 | 0.0001 | 0.0001 | 0.0063 | 0.0324 | 0.0424 |
| Net realized gain on investments | 0.00001 | 0.00001 | 0.0001 | — | — | — |
TOTAL FROM
INVESTMENT
OPERATIONS | 0.0001 | 0.0001 | 0.0002 | 0.0063 | 0.0324 | 0.0424 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.0001) | (0.0001) | (0.0001) | (0.0063) | (0.0324) | (0.0424) |
| Distributions from net realized gain on investments | (0.0000)1 | (0.0000)1 | (0.0001) | — | — | — |
| TOTAL DISTRIBUTIONS | (0.0001) | (0.0001) | (0.0002) | (0.0063) | (0.0324) | (0.0424) |
Net Asset Value,
End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.01% | 0.01% | 0.01% | 0.64% | 3.29% | 4.32% |
Ratios to Average
Net Assets: | | | | | | |
| Net expenses | 0.14%3 | 0.23% | 0.31% | 1.00% | 1.05% | 1.05% |
| Net investment income | 0.01%3 | 0.01% | 0.01% | 0.60% | 3.08% | 4.24% |
| Expense waiver/reimbursement4 | 0.92%3 | 0.84% | 0.78% | 0.11% | 0.01% | 0.03% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $2,570,726 | $2,522,787 | $861,225 | $946,354 | $850,101 | $549,287 |
| 1 | Represents less than $0.0001. |
| 2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Assets and Liabilities
November 30, 2011 (unaudited)
| Assets: | | |
| Investments in repurchase agreements | $1,394,613,000 | |
| Investments in securities | 1,188,147,227 | |
| Total investments in securities, at amortized cost and fair value | | $2,582,760,227 |
| Income receivable | | 1,351,128 |
| Receivable for shares sold | | 5,860 |
| TOTAL ASSETS | | 2,584,117,215 |
| Liabilities: | | |
| Payable for investments purchased | 13,051,310 | |
| Payable for shares redeemed | 63,279 | |
| Bank overdraft | 5,265 | |
| Payable for investment adviser fee (Note 4) | 116,497 | |
| Accrued expenses | 155,043 | |
| TOTAL LIABILITIES | | 13,391,394 |
| Net assets for 2,570,727,991 shares outstanding | | $2,570,725,821 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,570,727,991 |
| Accumulated net realized loss on investments | | (2,535) |
| Undistributed net investment income | | 365 |
| TOTAL NET ASSETS | | $2,570,725,821 |
Net Asset Value, Offering Price and Redemption
Proceeds Per Share: | | |
| ($2,570,725,821 ÷ 2,570,727,991 shares outstanding), $0.001 par value, 12,500,000,000 shares authorized | | $1.00 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations
Six Months Ended November 30, 2011 (unaudited)
| Investment Income: | | | |
| Interest | | | $1,992,134 |
| Expenses: | | | |
| Investment adviser fee (Note 4) | | $6,451,389 | |
| Administrative fee (Note 4) | | 1,007,707 | |
| Custodian fees | | 46,703 | |
| Transfer and dividend disbursing agent fees and expenses | | 1,392,318 | |
| Directors'/Trustees' fees | | 13,615 | |
| Auditing fees | | 9,258 | |
| Legal fees | | 3,369 | |
| Portfolio accounting fees | | 77,281 | |
| Distribution services fee (Note 4) | | 1,290,278 | |
| Shareholder services fee (Note 4) | | 3,225,480 | |
| Account administration fee | | 215 | |
| Share registration costs | | 34,444 | |
| Printing and postage | | 77,593 | |
| Insurance premiums | | 4,747 | |
| Taxes | | 69,297 | |
| Miscellaneous | | 4,372 | |
| TOTAL EXPENSES | | 13,708,066 | |
| Waivers and Reimbursement: | | | |
| Waiver of investment adviser fee (Note 4) | $(6,036,749) | | |
| Waiver of administrative fee (Note 4) | (25,806) | | |
| Waiver of distribution services fee (Note 4) | (1,290,278) | | |
| Waiver of shareholder services fee (Note 4) | (3,225,480) | | |
| Waiver of account administration fee (Note 4) | (215) | | |
| Waiver of transfer and dividend disbursing agent fees and expenses | (1,266,678) | | |
| TOTAL WAIVERS AND REIMBURSEMENT | | (11,845,206) | |
| Net expenses | | | 1,862,860 |
| Net investment income | | | 129,274 |
| Net realized gain on investments | | | 1,084 |
| Change in net assets resulting from operations | | | $130,358 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets
| Six Months
Ended
(unaudited)
11/30/2011 | Year Ended
5/31/2011 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $129,274 | $230,640 |
| Net realized gain on investments | 1,084 | 7,311 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 130,358 | 237,951 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (128,909) | (229,294) |
| Distributions from net realized gain on investments | (5,106) | (13,200) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (134,015) | (242,494) |
| Share Transactions: | | |
| Proceeds from sale of shares | 1,773,700,479 | 2,549,868,743 |
| Proceeds from shares issued in connection with the tax-free transfer of assets from Hilliard Lyons Government Fund | — | 1,606,098,314 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 133,912 | 243,721 |
| Cost of shares redeemed | (1,725,892,030) | (2,494,644,541) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 47,942,361 | 1,661,566,237 |
| Change in net assets | 47,938,704 | 1,661,561,694 |
| Net Assets: | | |
| Beginning of period | 2,522,787,117 | 861,225,423 |
| End of period (including distributions in excess of net investment income of $365 and $0, respectively) | $2,570,725,821 | $2,522,787,117 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements
November 30, 2011 (unaudited)
1. ORGANIZATION
Cash Trust Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Federated Government Cash Series (the “Fund”), a diversified portfolio. 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. Each portfolio pays its own expenses. The primary investment objective of the Fund is current income consistent with stability of principal and liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
Securities are valued at amortized cost. Under the amortized cost valuation method, an investment is valued initially at its cost as determined in accordance with GAAP. The Fund then adjusts the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost of the investment and the amount payable at its maturity. If amortized cost is determined not to approximate market value, the fair value of the portfolio securities will be determined under procedures established by and under the general supervision of the Directors.
Repurchase Agreements
The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.
The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.
Semi-Annual Shareholder Report
The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly.
Premium and Discount Amortization
All premiums and discounts are amortized/accreted using the effective interest rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended November 30, 2011, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of November 30, 2011, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland and the Commonwealth of Pennsylvania.
Other Taxes
As an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.
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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Other
The preparation of financial statements in conformity with GAAP 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.
Semi-Annual Shareholder Report
3. CAPITAL STOCKThe following table summarizes share activity:
| | Six Months Ended
11/30/2011 | Year Ended
5/31/2011 |
| Shares sold | 1,773,700,479 | 2,549,868,743 |
| Proceeds from shares issued in connection with the tax free transfer of assets from Hilliards Lyons Government Fund | — | 1,606,098,314 |
| Shares issued to shareholders in payment of distributions declared | 133,912 | 243,721 |
| Shares redeemed | (1,725,892,030) | (2,494,644,541) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 47,942,361 | 1,661,566,237 |
4. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.50% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, the Adviser voluntarily waived $6,036,749 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets
of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, the net fee paid to FAS was 0.076% of average daily net assets of the Fund. FAS waived $25,806 of its fee.
Semi-Annual Shareholder Report
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 daily net assets of the Fund to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.35% of average daily net assets, annually, to reimburse FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, FSC voluntarily waived its entire fee of $1,290,278. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares.
Shareholder Services Fee
The Fund may pay fees (“Service Fees”) up to 0.25% of the average daily net assets of the Fund's Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended November 30, 2011, unaffiliated third-party financial intermediaries waived $3,225,480 of shareholder services fees and $215 of account administration fees. This waiver can be modified or terminated at any time.
Expense Limitation
Due to the possibility of changes in market conditions and other factors, there can be no assurance that the level of waivers/reimbursement/reduction of Fund expenses reflected in the financial highlights will be maintained in the future. However, the Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund (after the voluntary waivers and reimbursements) will not exceed 1.05% (the “Fee Limit”), up to but not including the later of (the “Termination Date”): (a) August 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Directors.
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
5. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2011, there were no outstanding loans. During the six months ended November 30, 2011, the Fund did not utilize the LOC.
Semi-Annual Shareholder Report
6. INTERFUND LENDINGPursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2011, there were no outstanding loans. During the six months ended November 30, 2011, the program was not utilized.
7. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets or results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2011 to November 30, 2011.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| Beginning
Account Value
6/1/2011 | Ending
Account Value
11/30/2011 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.10 | $0.70 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,024.30 | $0.71 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.14%, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half-year period). |
| 2 | Actual and Hypothetical expenses paid during the period utilizing the Fund's current annualized net expense ratio of 1.05% (as reflected in the Notes to Financial Statements, Note 4 under Expense Limitation), multiplied by the average account value over the period, multiplied by 183/366 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.25 and $5.30, respectively. |
Semi-Annual Shareholder Report Evaluation and Approval of Advisory Contract – May 2011
Federated government cash series (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
The Fund's performance was above the median of the relevant peer group for the one-year period covered by the Evaluation.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.
Semi-Annual Shareholder Report
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds are reasonable and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these circumstances, no changes Semi-Annual Shareholder Report
were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder ReportMutual 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 the possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Federated Government Cash Series
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 147551204
0122604 (1/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| | Semi-Annual Shareholder Report |
| | November 30, 2011 |
|
Federated Municipal Cash Series
A Portfolio of Cash Trust Series, Inc.
CONTENTS
Portfolio of Investments Summary Tables (unaudited)
At November 30, 2011, the Fund's portfolio composition1 was as follows:
| Portfolio Composition | Percentage of
Total Net Assets |
| Variable Rate Demand Instruments | 83.7% |
| Municipal Notes | 14.9% |
| Commercial Paper | 0.9% |
| Other Assets and Liabilities — Net2 | 0.5% |
| TOTAL | 100.0% |
At November 30, 2011, the Fund's effective maturity3 schedule was as follows:
Securities with an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 83.4% |
| 8-30 Days | 0.9% |
| 31-90 Days | 1.4% |
| 91-180 Days | 4.2% |
| 181 Days or more | 9.6% |
| Other Assets and Liabilities — Net2 | 0.5% |
| TOTAL | 100.0% |
| 1 | See the Fund's Prospectus and Statement of Additional Information for a description of these investments. |
| 2 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 3 | Effective maturity is determined in accordance with the requirements of Rule 2a-7 under the Investment Company Act of 1940, which regulates money market mutual funds. |
Semi-Annual Shareholder Report Portfolio of Investments
November 30, 2011 (unaudited)
Principal
Amount | | | Value |
| | SHORT-TERM MUNICIPALS – 99.5%1,2 | |
| | Alabama – 0.2% | |
| $1,178,000 | | Birmingham, AL IDA, IDRBs (Series 1999) Weekly VRDNs (Glasforms, Inc.)/(Wells Fargo Bank, N.A. LOC), 0.210%, 12/1/2011 | 1,178,000 |
| | Arizona – 9.8% | |
| 1,255,000 | | Casa Grande, AZ IDA, (Series 2002A) Weekly VRDNs (Price Cos., Inc.)/(Bank of America N.A. LOC), 0.480%, 12/1/2011 | 1,255,000 |
| 7,221,000 | | Flagstaff, AZ IDA, (Series 1999) Weekly VRDNs (Joy Cone Co.)/(Citizens Bank of Pennsylvania LOC), 0.280%, 12/1/2011 | 7,221,000 |
| 3,500,000 | | Maricopa County, AZ, IDA MFH, (Series 2008: Village at Sun Valley Apartments) Weekly VRDNs (Western Sun Valley, LP)/(FHLMC LOC), 0.210%, 12/1/2011 | 3,500,000 |
| 4,000,000 | | Maricopa County, AZ, IDA Solid Waste Disposal, (Series 2009) Weekly VRDNs (DC Paloma 2 LLC)/(CoBank, ACB LOC), 0.270%, 12/1/2011 | 4,000,000 |
| 5,610,000 | | Maricopa County, AZ, IDA, (Series 1999) Weekly VRDNs (Redman Homes, Inc.)/(Wells Fargo & Co. LOC), 0.220%, 12/1/2011 | 5,610,000 |
| 1,160,000 | | Phoenix, AZ IDA, (Series 2000) Weekly VRDNs (MechoShade West, Inc.)/(JPMorgan Chase Bank, N.A. LOC), 0.340%, 12/1/2011 | 1,160,000 |
| 2,100,000 | | Pinal County, AZ IDA, (Series 2002) Weekly VRDNs (D.A. Holdings LLC)/(Wells Fargo Bank, N.A. LOC), 0.250%, 12/1/2011 | 2,100,000 |
| 6,750,000 | | Pinal County, AZ IDA, (Series 2002) Weekly VRDNs (Milky Way Dairy LLC)/(Rabobank Nederland NV, Utrecht LOC), 0.250%, 12/1/2011 | 6,750,000 |
| 3,630,000 | | Pinal County, AZ IDA, (Series 2005) Weekly VRDNs (Three C Eloy LLC)/(CoBank, ACB LOC), 0.310%, 12/1/2011 | 3,630,000 |
| 1,175,000 | | Pinal County, AZ IDA, (Series 2006) Weekly VRDNs (Three C Eloy LLC)/(CoBank, ACB LOC), 0.310%, 12/1/2011 | 1,175,000 |
| 3,795,000 | | Pinal County, AZ IDA, (Series 2007) Weekly VRDNs (Artistic Paver Mfg. Phoenix, Inc.)/(SunTrust Bank LOC), 0.530%, 12/7/2011 | 3,795,000 |
| 2,135,000 | 3,4 | Salt River Project, AZ Agricultural Improvement & Power District, ROCs (Series 12276) Weekly VRDNs (Citibank NA, New York LIQ), 0.140%, 12/1/2011 | 2,135,000 |
| 6,500,000 | | Show Low, AZ IDA, (Series 2006) Weekly VRDNs (Snowflake White Mountain Power LLC)/(JPMorgan Chase Bank, N.A. LOC), 0.280%, 12/1/2011 | 6,500,000 |
| 290,000 | | Sun Devil Energy Center LLC, AZ, (Series 2008) Weekly VRDNs (Arizona State University)/(Assured Guaranty Corp. INS)/(Royal Bank of Canada, Montreal LIQ), 0.140%, 12/7/2011 | 290,000 |
| 6,180,000 | | Yavapai County, AZ IDA Hospital Facilities, (Series 2008B) Weekly VRDNs (Northern Arizona Healthcare System, Inc.)/(Banco Bilbao Vizcaya Argentaria SA LOC), 0.850%, 12/1/2011 | 6,180,000 |
| | TOTAL | 55,301,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| | California – 1.5% | |
| $3,000,000 | | Big Bear Lake, CA IDRB, (Series 1993A) Weekly VRDNs (Southwest Gas Corp.)/(KBC Bank N.V. LOC), 1.250%, 12/7/2011 | 3,000,000 |
| 3,000,000 | | California State, (Series A-2), 2.00% RANs, 6/26/2012 | 3,027,250 |
| 2,205,000 | | Oxnard, CA IDFA, (Series 2004) Weekly VRDNs (J. Harris Industrial Water Treatment, Inc.)/(City National Bank LOC), 1.200%, 12/1/2011 | 2,205,000 |
| | TOTAL | 8,232,250 |
| | Colorado – 0.7% | |
| 3,300,000 | | Colorado Agricultural Development Authority, (Series 2006) Weekly VRDNs (Monte Vista Dairy, LLC)/(Bank of the West, San Francisco, CA LOC), 1.000%, 12/1/2011 | 3,300,000 |
| 655,000 | | Colorado HFA (Class I Bonds), (Series 2000A) Weekly VRDNs (New Belgium Brewing Co., Inc.)/(Wells Fargo Bank, N.A. LOC), 0.300%, 12/1/2011 | 655,000 |
| | TOTAL | 3,955,000 |
| | Florida – 3.3% | |
| 725,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Florida AMT)/(Series 2009-75) Weekly VRDNs (GNMA COL)/(State Street Bank and Trust Co. LIQ), 0.260%, 12/1/2011 | 725,000 |
| 10,000,000 | | Miami-Dade County, FL Transit System, (Series 2011), 0.80% BANs, 11/21/2012 | 10,000,000 |
| 1,440,000 | | Orange County, FL IDA, (Series 2004) Weekly VRDNs (UCF Hospitality School Student Housing Foundation)/(SunTrust Bank LOC), 0.500%, 12/7/2011 | 1,440,000 |
| 6,140,000 | | UCF Health Facilities Corp., Capital Improvement Revenue Bonds (Series 2007) Weekly VRDNs (UCF Health Sciences Campus at Lake Nona)/(Fifth Third Bank, Cincinnati LOC), 0.280%, 12/2/2011 | 6,140,000 |
| | TOTAL | 18,305,000 |
| | Georgia – 18.8% | |
| 5,500,000 | 3,4 | Atlanta, GA Water & Wastewater, Lehman FR/RI-K2 Floater Certificates (Series 2006) Weekly VRDNs (Assured Guaranty Municipal Corp. INS)/(Citibank NA, New York LIQ), 0.260%, 12/1/2011 | 5,500,000 |
| 3,350,000 | | Atlanta, GA, Urban Residential Finance Authority, (Series 1995) Weekly VRDNs (West End Housing Development)/(FNMA LOC), 0.350%, 12/1/2011 | 3,350,000 |
| 10,000,000 | | Bartow County, GA Development Authority, (1st Series 2009) Weekly VRDNs (Georgia Power Co.), 0.220%, 12/7/2011 | 10,000,000 |
| 1,895,000 | | Bartow County, GA Development Authority, (Series 2010) Weekly VRDNs (VMC Specialty Alloys LLC)/(Comerica Bank LOC), 0.160%, 12/1/2011 | 1,895,000 |
| 6,530,000 | | Clayton County, GA Housing Authority, (Series 1990 E) Weekly VRDNs (Chateau Forest Apartments)/(Assured Guaranty Municipal Corp. INS)/(Societe Generale, Paris LIQ), 0.880%, 12/7/2011 | 6,530,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $6,280,000 | | Clayton County, GA Housing Authority, (Series 1990F) Weekly VRDNs (Ten Oaks Apartments)/(Assured Guaranty Municipal Corp. INS)/(Societe Generale, Paris LIQ), 0.880%, 12/7/2011 | 6,280,000 |
| 5,000,000 | | Cobb County, GA Housing Authority, (Series 2002) Weekly VRDNs (Walton Reserve Apartments)/(FHLB of Atlanta LOC), 0.150%, 12/7/2011 | 5,000,000 |
| 1,800,000 | | Columbus, GA Development Authority, (Series 2008) Weekly VRDNs (Lumpkin Park Partners, Ltd.)/(FHLMC LOC), 0.200%, 12/1/2011 | 1,800,000 |
| 645,000 | | Fitzgerald & Ben Hill County, GA Development Authority, (Series 2007) Weekly VRDNs (Agri-Products, Inc.)/(Wells Fargo Bank, N.A. LOC), 0.200%, 12/1/2011 | 645,000 |
| 2,450,000 | | Fulton County, GA Housing Authority, (Series 2008A) Weekly VRDNs (Walton Lakes LLC)/(FHLB of Atlanta LOC), 0.150%, 12/7/2011 | 2,450,000 |
| 5,375,000 | | Gainesville and Hall County, GA Development Authority, (Series 2002) Weekly VRDNs (Fieldale Farms Corp.)/(Rabobank Nederland NV, Utrecht LOC), 0.240%, 12/1/2011 | 5,375,000 |
| 1,900,000 | | Georgia Ports Authority, (Series 1996A) Weekly VRDNs (Colonel's Island Terminal)/(Branch Banking & Trust Co. LOC), 0.200%, 12/7/2011 | 1,900,000 |
| 15,715,000 | | Kennesaw, GA Development Authority, (Series 2004) Weekly VRDNs (Lakeside Vista Apartments)/(FNMA LOC), 0.200%, 12/1/2011 | 15,715,000 |
| 6,700,000 | | Kennesaw, GA Development Authority, (Series 2004) Weekly VRDNs (Walton Ridenour Apts)/(FHLB of Atlanta LOC), 0.150%, 12/7/2011 | 6,700,000 |
| 1,250,000 | | Main Street Gas, Inc., (Series 2010A) Weekly VRDNs (GTD by Royal Bank of Canada, Montreal)/(Royal Bank of Canada, Montreal LIQ), 0.130%, 12/1/2011 | 1,250,000 |
| 2,250,000 | | Monroe County, GA Development Authority, (Second Series 2006) Daily VRDNs (Georgia Power Co.), 0.190%, 12/1/2011 | 2,250,000 |
| 5,000,000 | | Monroe County, GA Development Authority, (Series 2010A) Weekly VRDNs (Oglethorpe Power Corp.)/(Bank of America N.A. LOC), 0.120%, 12/7/2011 | 5,000,000 |
| 4,000,000 | | Pike County, GA Development Authority, (Series 2003) Weekly VRDNs (Southern Mills, Inc.)/(Bank of America N.A. LOC), 0.450%, 12/7/2011 | 4,000,000 |
| 8,240,000 | | Roswell, GA Housing Authority, (Series 2005) Weekly VRDNs (Wood Creek Apartments)/(FNMA LOC), 0.170%, 12/1/2011 | 8,240,000 |
| 2,850,000 | | Roswell, GA Housing Authority, MFH Refunding Revenue Bonds (Series 1988A) Weekly VRDNs (Belcourt Ltd.)/(Northern Trust Co., Chicago, IL LOC), 0.130%, 12/7/2011 | 2,850,000 |
| 3,500,000 | | Wayne County, GA Development Authority, (Series 2000) Weekly VRDNs (Republic Services of Georgia)/(Wells Fargo Bank, N.A. LOC), 0.300%, 12/1/2011 | 3,500,000 |
| 5,600,000 | | Willacoochee, GA Development Authority, (Series 1997) Weekly VRDNs (Langboard, Inc.)/(FHLB of Atlanta LOC), 0.240%, 12/1/2011 | 5,600,000 |
| | TOTAL | 105,830,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| | Hawaii – 0.4% | |
| $2,000,000 | | Hawaii State Airport System, 2.00% Bonds, 7/1/2012 | 2,016,881 |
| | Illinois – 5.7% | |
| 3,755,000 | | Chicago, IL MFH Revenue, (Series 2003) Weekly VRDNs (Churchview Supportive Living L.P.)/(BMO Harris Bank, N.A. LOC), 0.240%, 12/1/2011 | 3,755,000 |
| 4,900,000 | | Chicago, IL O'Hare International Airport, Special Facility Revenue Bonds (Series 1990) Weekly VRDNs (Compagnie Nationale Air France Project)/(Societe Generale, Paris LOC), 0.450%, 12/7/2011 | 4,900,000 |
| 1,470,000 | | Chicago, IL, (Series 2001) Weekly VRDNs (J.M.B. Moesle LLC)/(BMO Harris Bank, N.A. LOC), 0.470%, 12/1/2011 | 1,470,000 |
| 1,295,000 | | Illinois Development Finance Authority IDB Weekly VRDNs (T&D Investments LLC)/(U.S. Bank, N.A. LOC), 0.420%, 12/1/2011 | 1,295,000 |
| 2,525,000 | | Illinois Development Finance Authority IDB, (Series 1997) Weekly VRDNs (Tempco Electric Heater Corp.)/(JPMorgan Chase Bank, N.A. LOC), 0.400%, 12/1/2011 | 2,525,000 |
| 1,000,000 | | Illinois Development Finance Authority IDB, (Series 2001) Weekly VRDNs (Apogee Enterprises, Inc.)/(Comerica Bank LOC), 0.410%, 12/1/2011 | 1,000,000 |
| 3,000,000 | | Illinois Development Finance Authority, (Series 2002) Weekly VRDNs (Kasbergen Family Living Trust)/(Bank of the West, San Francisco, CA LOC), 1.000%, 12/1/2011 | 3,000,000 |
| 2,900,000 | | Illinois Finance Authority, (Series 2008) Weekly VRDNs (Jasper Meats, Inc.)/(BMO Harris Bank, N.A. LOC), 0.290%, 12/1/2011 | 2,900,000 |
| 3,300,000 | | Lockport, IL IDA, (Series 1990) Weekly VRDNs (Panduit Corp.)/(Fifth Third Bank, Cincinnati LOC), 0.310%, 12/7/2011 | 3,300,000 |
| 8,100,000 | | Will County, IL, (Series 2007) Weekly VRDNs (University of St. Francis)/(Fifth Third Bank, Cincinnati LOC), 0.280%, 12/2/2011 | 8,100,000 |
| | TOTAL | 32,245,000 |
| | Indiana – 5.2% | |
| 7,250,000 | | Bloomington, IN EDRB, (Series 2008: Henderson Court Apartments) Weekly VRDNs (SY Henderson Court Investors, LP)/(FHLMC LOC), 0.200%, 12/1/2011 | 7,250,000 |
| 1,500,000 | | Indiana Development Finance Authority, EDRB (Series 2002) Weekly VRDNs (Vreba-Hoff Dairy Leasing LLC)/(Wells Fargo Bank, N.A. LOC), 0.250%, 12/1/2011 | 1,500,000 |
| 12,000,000 | | Indianapolis, IN MFH, (Series 2004A) Weekly VRDNs (Nora Commons LP)/(Bank of America N.A. LOC), 0.230%, 12/1/2011 | 12,000,000 |
| 5,500,000 | | Indianapolis, IN MFH, (Series 2007A: Forest Ridge Apartments) Weekly VRDNs (Pedcor Investments-2006-LXXXVIII LP)/(RBS Citizens Bank N.A. LOC), 0.290%, 12/1/2011 | 5,500,000 |
| 2,935,000 | | Lawrence, IN Economic Development Revenue Board, (Series 2002) Weekly VRDNs (Westminster Village North, Inc.)/(Fifth Third Bank, Cincinnati LOC), 0.280%, 12/1/2011 | 2,935,000 |
| | TOTAL | 29,185,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| | Iowa – 1.4% | |
| $7,700,000 | | Iowa Finance Authority, (Series 2006) Weekly VRDNs (Ag Real Estate Iowa One, LP)/(Rabobank Nederland NV, Utrecht LOC), 0.240%, 12/1/2011 | 7,700,000 |
| | Kansas – 0.9% | |
| 2,872,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Kansas-AMT)/(Series 2009-11) Weekly VRDNs (Sedgwick & Shawnee Counties, KS)/(GNMA COL)/(State Street Bank and Trust Co. LIQ), 0.260%, 12/1/2011 | 2,872,000 |
| 1,930,000 | | Wyandotte County, KS, (Series 1999) Weekly VRDNs (Shor-Line)/(U.S. Bank, N.A. LOC), 0.220%, 12/7/2011 | 1,930,000 |
| | TOTAL | 4,802,000 |
| | Kentucky – 0.5% | |
| 500,000 | | Henderson County, KY, (Series 1996A) Weekly VRDNs (Gibbs Die Casting Corp.)/(Fifth Third Bank, Cincinnati LOC), 0.500%, 12/1/2011 | 500,000 |
| 2,100,000 | | Kentucky Housing Corp., (Series 2007) Weekly VRDNs (Arbors of Madisonville Apartments LP)/(U.S. Bank, N.A. LOC), 1.150%, 12/1/2011 | 2,100,000 |
| | TOTAL | 2,600,000 |
| | Louisiana – 0.5% | |
| 2,800,000 | | Port of New Orleans, LA, (Series 2000) Weekly VRDNs (New Orleans Steamboat Co.)/(FHLB of Dallas LOC), 0.350%, 12/1/2011 | 2,800,000 |
| | Maine – 1.7% | |
| 2,190,000 | | Dover-Foxcroft, ME, (Series 2005) Weekly VRDNs (Pleasant River Lumber Co.)/(Wells Fargo Bank, N.A. LOC), 0.250%, 12/7/2011 | 2,190,000 |
| 7,420,000 | | Old Town, ME, (Series 2004) Weekly VRDNs (Georgia-Pacific Corp.)/(BNP Paribas SA LOC), 0.490%, 12/7/2011 | 7,420,000 |
| | TOTAL | 9,610,000 |
| | Michigan – 0.4% | |
| 2,515,000 | | Kent Hospital Finance Authority, MI, (Series 2008B-2) Weekly VRDNs (Spectrum Health)/(Landesbank Baden-Wurttemberg LIQ), 0.400%, 12/7/2011 | 2,515,000 |
| | Minnesota – 0.0% | |
| 50,000 | | Plymouth, MN Weekly VRDNs (Nuaire, Inc.)/(Wells Fargo Bank, N.A. LOC), 0.500%, 12/1/2011 | 50,000 |
| | Missouri – 1.6% | |
| 9,175,000 | 3,4 | Kansas City, MO IDA, SPEARs (Series DBE-712) Weekly VRDNs (Orchards Apartments)/(GTD by Deutsche Bank AG)/(Deutsche Bank AG LIQ), 0.290%, 12/1/2011 | 9,175,000 |
| | Multi-State – 6.5% | |
| 2,000,000 | 3,4 | Blackrock MuniYield Quality Fund III, Inc., (3,564 Series W-7 VRDP Shares), 0.280%, 12/1/2011 | 2,000,000 |
| 1,055,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Multi-State AMT)/(Series 2009-68) Weekly VRDNs (GNMA COL)/(State Street Bank and Trust Co. LIQ), 0.290%, 12/1/2011 | 1,055,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $2,038,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Multi-State AMT)/(Series 2009-78) Weekly VRDNs (State Street Bank and Trust Co. LIQ), 0.290%, 12/1/2011 | 2,038,000 |
| 6,700,000 | 3,4 | Nuveen Dividend Advantage Municipal Fund 2, Weekly VRDPs (Series 2)/(GTD by Deutsche Bank AG), 0.290%, 12/1/2011 | 6,700,000 |
| 5,000,000 | 3,4 | Nuveen Investment Quality Municipal Fund, Inc., Weekly VRDPs (2,118 Series 1)/GTD by Barclays Bank PLC), 0.290%, 12/1/2011 | 5,000,000 |
| 5,000,000 | 3,4 | Nuveen Municipal Market Opportunity Fund, Inc., Weekly VRDPs (Series 1)/(GTD by Deutsche Bank AG), 0.320% 12/1/2011 | 5,000,000 |
| 5,000,000 | 3,4 | Nuveen Premier Municipal Income Fund, Inc., Weekly VRDPs (1.277 Series 1)/(GTD by Barclays Bank PLC), 0.270%, 12/1/2011 | 5,000,000 |
| 10,000,000 | 3,4 | Nuveen Premium Income Municipal Fund 4, Inc., Weekly VRDPs (Series 1)/(GTD by JPMorgan Chase Bank, N.A.), 0.270%, 12/1/2011 | 10,000,000 |
| | TOTAL | 36,793,000 |
| | New Hampshire – 0.4% | |
| 2,500,000 | | New Hampshire Business Finance Authority, PCRBs (1990 Series A), 0.60% CP (New England Power Co.), Mandatory Tender 12/5/2011 | 2,500,000 |
| | New Jersey – 3.5% | |
| 2,500,000 | | Edgewater, NJ, 1.50% BANs, 12/6/2012 | 2,514,850 |
| 3,957,860 | | Evesham Township, NJ, 1.50% BANs, 10/25/2012 | 3,985,044 |
| 2,742,164 | | Glassboro Borough, NJ, (Series 2011B), 2.00% BANs, 4/26/2012 | 2,750,314 |
| 3,181,000 | | Medford Township, NJ, (Series 2011A), 1.50% BANs, 7/10/2012 | 3,193,034 |
| 2,911,620 | | New Providence, NJ, 1.00% BANs, 1/27/2012 | 2,913,645 |
| 4,034,000 | | Saddle River, NJ, 1.50% BANs, 8/3/2012 | 4,054,205 |
| | TOTAL | 19,411,092 |
| | New Mexico – 1.1% | |
| 5,950,000 | | New Mexico Educational Assistance Foundation, (Senior
Series 2003A-2) Weekly VRDNs (Royal Bank of Canada, Montreal LOC), 0.150%, 12/7/2011 | 5,950,000 |
| | New York – 10.4% | |
| 4,118,330 | | Brasher Falls, NY CSD, 1.75% BANs, 6/29/2012 | 4,135,947 |
| 765,000 | | Cattaraugus County, NY IDA, (Series 1999A) Weekly VRDNs (Gernatt Asphalt Products, Inc.)/(Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.290%, 12/1/2011 | 765,000 |
| 1,100,000 | | Cayuga County, NY IDA, (Series 1998) Weekly VRDNs (NFR Northeast, Inc.)/(Citizens Bank of Pennsylvania LOC), 0.350%, 12/7/2011 | 1,100,000 |
| 1,565,000 | | Erie County, NY IDA, IDRB (Series 1994) Weekly VRDNs (Servotronics, Inc.)/(Bank of America N.A. LOC), 0.420%, 12/1/2011 | 1,565,000 |
| 1,700,000 | | Madison County, NY IDA, (Series A) Weekly VRDNs (Owl Wire and Cable)/(Key Bank, N.A. LOC), 0.390%, 12/7/2011 | 1,700,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $1,300,000 | | New York City, NY IDA, IDRBs (Series 2003) Weekly VRDNs (Novelty Crystal Corp.)/(TD Bank, N.A. LOC), 0.290%, 12/1/2011 | 1,300,000 |
| 12,900,000 | | New York City, NY, (Fiscal 2008 Subseries J-11) Weekly VRDNs
(KBC Bank N.V. LIQ), 0.900%, 12/1/2011 | 12,900,000 |
| 2,500,000 | 3,4 | New York State Dormitory Authority, ROCs (Series 11975) Weekly VRDNs (New York State Personal Income Tax Revenue Bond Fund)/(Citibank NA, New York LIQ), 0.140%, 12/1/2011 | 2,500,000 |
| 6,295,000 | 3,4 | Niagara Falls, NY HFA, Red Stone Trust (Series 2010C-2) Weekly VRDNs (Niagara II LP)/(Wells Fargo Bank, N.A. LIQ)/(Wells Fargo Bank, N.A. LOC), 0.310%, 12/1/2011 | 6,295,000 |
| 20,000,000 | 3,4 | Nuveen New York Investment Quality Municipal Fund, Inc., Weekly VRDPs (Series 1)/(GTD by Citibank NA, New York), 0.260%, 12/1/2011 | 20,000,000 |
| 2,250,000 | | Riverhead, NY IDA, IDRB (Series 1998) Weekly VRDNs (Altaire Pharmaceuticals, Inc.)/(Bank of New York Mellon LOC), 0.180%, 12/1/2011 | 2,250,000 |
| 4,190,000 | 3,4 | Tonawanda, NY Housing Authority, Red Stone (Series 2010 C-3) Weekly VRDNs (Tonawanda Towers )/(Wells Fargo Bank, N.A. LIQ)/(Wells Fargo Bank, N.A. LOC), 0.310%, 12/1/2011 | 4,190,000 |
| | TOTAL | 58,700,947 |
| | Ohio – 11.2% | |
| 2,720,000 | | Akron, OH, (Series B), 1.125% BANs, 12/8/2011 | 2,720,272 |
| 2,200,000 | | Ashtabula County, OH, 1.15% BANs, 5/24/2012 | 2,203,650 |
| 4,850,000 | | Berea, OH, 1.05% BANs, 3/29/2012 | 4,856,260 |
| 2,500,000 | | Bowling Green, OH, 1.00% BANs, 3/16/2012 | 2,502,150 |
| 1,345,000 | | Brunswick, OH, 1.15% BANs, 11/14/2012 | 1,351,366 |
| 5,000,000 | | Butler County, OH, 0.50% BANs, 8/2/2012 | 5,000,000 |
| 5,500,000 | | Cleveland, OH, Subordinated Water Revenue Notes (Series 2011), 1.00% BANs, 7/26/2012 | 5,517,775 |
| 2,685,000 | | Cuyahoga County, OH, (Series 2008) Weekly VRDNs (Cleveland Hearing and Speech Center)/(PNC Bank, N.A. LOC), 0.140%, 12/1/2011 | 2,685,000 |
| 4,500,000 | | Hunting Valley, OH, 1.00% BANs, 4/11/2012 | 4,505,631 |
| 1,500,000 | | Kent, OH, 1.50% BANs, 5/17/2012 | 1,505,123 |
| 1,180,000 | | Marion County, OH, 1.50% BANs, 4/26/2012 | 1,182,343 |
| 1,100,000 | | Mayfield, OH, 1.125% BANs, 8/30/2012 | 1,102,642 |
| 4,500,000 | | Medina County, OH, (Series 1998) Weekly VRDNs (Mack Industries, Inc.)/(JPMorgan Chase Bank, N.A. LOC), 0.300%, 12/1/2011 | 4,500,000 |
| 1,650,000 | | North Royalton, OH, 1.25% BANs, 2/22/2012 | 1,652,049 |
| 7,875,000 | | Ohio State Higher Educational Facility Commission, (Series B) Weekly VRDNs (FirstMerit Bank, N.A. LOC), 0.280%, 12/1/2011 | 7,875,000 |
| 1,200,000 | | Painesville, OH, (Series 1), 1.80% BANs, 3/8/2012 | 1,202,864 |
| 1,500,000 | | Parma Heights, OH, 1.25% BANs, 8/1/2012 | 1,504,955 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $1,615,000 | | Sandusky, OH, 1.25% BANs, 10/11/2012 | 1,622,573 |
| 1,000,000 | | South Euclid, OH, (Series B), 1.25% BANs, 9/26/2012 | 1,006,526 |
| 2,000,000 | | Streetsboro, OH, (Series 2011), 1.40% BANs, 1/26/2012 | 2,001,660 |
| 1,223,000 | | Tipp City, OH, 1.25% BANs, 2/21/2012 | 1,224,637 |
| 2,000,000 | | Toledo-Lucas County, OH Port Authority, (Series 2006) Weekly VRDNs (Van Deurzen Dairy LLC)/(Bank of America N.A. LOC), 0.500%, 12/1/2011 | 2,000,000 |
| 1,405,000 | | Trotwood, OH, 1.75% BANs, 3/15/2012 | 1,406,987 |
| 475,000 | | Williams County, OH, (Series 2008) Weekly VRDNs (Community Hospital and Wellness Centers)/(Fifth Third Bank, Cincinnati LOC), 0.280%, 12/2/2011 | 475,000 |
| 1,400,000 | | Willowick, OH, 1.15% BANs, 3/8/2012 | 1,401,488 |
| | TOTAL | 63,005,951 |
| | Oregon – 0.7% | |
| 4,000,000 | | Oregon State Housing and Community Services Department, (2008 Series C) Weekly VRDNs (KBC Bank N.V. LIQ), 0.950%, 12/1/2011 | 4,000,000 |
| | South Carolina – 0.8% | |
| 4,480,000 | | South Carolina Jobs-EDA, (Series 2007) Weekly VRDNs (ACI Industries LLC)/(Bank of America N.A. LOC), 0.350%, 12/1/2011 | 4,480,000 |
| 125,000 | | South Carolina Jobs-EDA, (Series 2007A) Weekly VRDNs (Woodhead LLC)/(FHLB of Atlanta LOC), 0.240%, 12/1/2011 | 125,000 |
| | TOTAL | 4,605,000 |
| | South Dakota – 0.5% | |
| 3,000,000 | | South Dakota Value Added Finance Authority, (Series 2004) Weekly VRDNs (Prairie Gold Dairy LLC)/(CoBank, ACB LOC), 0.170%, 12/1/2011 | 3,000,000 |
| | Tennessee – 3.1% | |
| 10,000,000 | | Metropolitan Government Nashville & Davidson County, TN IDB, (Series 2006) Weekly VRDNs (The Fountains Apartments, LLC)/(Fifth Third Bank, Cincinnati LOC), 0.360%, 12/2/2011 | 10,000,000 |
| 7,140,000 | | Sevier County, TN Public Building Authority, Local Government Public Improvement Bonds (Series VII-E-1) Weekly VRDNs (Oak Ridge, TN)/(KBC Bank N.V. LOC), 1.030%, 12/7/2011 | 7,140,000 |
| | TOTAL | 17,140,000 |
| | Texas – 1.7% | |
| 5,500,000 | | Harris County, TX HFDC, (Series B) Daily VRDNs (St. Luke's Episcopal Hospital)/(Bank of America N.A., JPMorgan Chase Bank, N.A. and Northern Trust Co., Chicago, IL LIQs), 0.110%, 12/1/2011 | 5,500,000 |
| 4,105,000 | 3,4 | Texas State Department of Housing & Community Affairs, P-FLOATs (Series PT-4594) Weekly VRDNs (Tranquility Housing Ltd.)/(GTD by FHLMC)/(FHLMC LIQ), 0.340%, 12/1/2011 | 4,105,000 |
| | TOTAL | 9,605,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| | Vermont – 2.2% | |
| $2,355,000 | | Vermont EDA, (Series 2008A) Weekly VRDNs (Green Mountain College)/(Key Bank, N.A. LOC), 0.250%, 12/1/2011 | 2,355,000 |
| 4,300,000 | | Vermont HFA, (Series A) Weekly VRDNs (Assured Guaranty Municipal Corp. INS)/(Bank of New York Mellon LIQ), 0.190%, 12/7/2011 | 4,300,000 |
| 5,500,000 | | Vermont HFA, (Series C) Weekly VRDNs (Assured Guaranty Municipal Corp. INS)/(Bank of New York Mellon LIQ), 0.190%, 12/7/2011 | 5,500,000 |
| | TOTAL | 12,155,000 |
| | Virginia – 3.9% | |
| 4,000,000 | | Fairfax County, VA IDA, (Inova Health System), (Series 2010A-1), 0.260%, 12/1/2011 | 4,000,000 |
| 12,000,000 | | Fairfax County, VA IDA, (Series 2005C-2) Weekly VRDNs (Inova Health System)/(Northern Trust Co., Chicago, IL LOC), 0.130%, 12/7/2011 | 12,000,000 |
| 2,600,000 | | Halifax, VA IDA, MMMs, PCR (Series 1992), 1.25% CP (Virginia Electric & Power Co.), Mandatory Tender 12/14/2011 | 2,600,000 |
| 1,800,000 | | Virginia Small Business Financing Authority, (Series 2010) Weekly VRDNs (Bon Secours Health System)/(JPMorgan Chase Bank, N.A. LOC), 0.110%, 12/7/2011 | 1,800,000 |
| 1,405,000 | 3,4 | Virginia State Housing Development Authority, MERLOTS (Series 2006-B22) Weekly VRDNs (Wells Fargo Bank, N.A. LIQ), 0.190%, 12/7/2011 | 1,405,000 |
| | TOTAL | 21,805,000 |
| | Wisconsin – 0.9% | |
| 2,000,000 | | Combined Locks, WI IDRB, (Series 1997) Weekly VRDNs (Appleton Papers)/(Fifth Third Bank, Cincinnati LOC), 0.400%, 12/1/2011 | 2,000,000 |
| 3,155,000 | | Whitewater, WI CDA, (Series 2007) Weekly VRDNs (Wisconsin Housing Preservation Corp.)/(BMO Harris Bank, N.A. LOC), 0.160%, 12/1/2011 | 3,155,000 |
| | TOTAL | 5,155,000 |
| | TOTAL MUNICIPAL INVESTMENTS — 99.5%
(AT AMORTIZED COST)5 | 559,326,121 |
| | OTHER ASSETS AND LIABILITIES - NET — 0.5%6 | 2,655,414 |
| | TOTAL NET ASSETS — 100% | $561,981,535 |
Securities that are subject to the federal alternative minimum tax (AMT) represent 59.0% of the portfolio as calculated based upon total market value.
Semi-Annual Shareholder Report| 1. | 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, or F-1+, F-1 or F-2 by Fitch Ratings, 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, 2011, the portfolio securities were rated as follows: |
| | Tier Rating Percentages Based on Total Market Value |
| First Tier | Second Tier |
| 98.2% | 1.8% |
| 2 | Current rate and next reset date shown for Variable Rate Demand Notes. |
| 3 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At November 30, 2011, these restricted securities amounted to $95,695,000, which represented 17.0% of total net assets. |
| 4 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors (the “Directors”). At November 30, 2011, these liquid restricted securities amounted to $95,695,000, which represented 17.0% of total net assets. |
| 5 | Also represents cost for federal tax purposes. |
| 6 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at November 30, 2011.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of November 30, 2011, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
Semi-Annual Shareholder Report
The following acronyms are used throughout this portfolio:| AMT | — Alternative Minimum Tax |
| BANs | — Bond Anticipation Notes |
| CDA | — Community Development Authority |
| COL | — Collateralized |
| CP | — Commercial Paper |
| CSD | — Central School District |
| EDA | — Economic Development Authority |
| EDRB | — Economic Development Revenue Bond |
| FHLB | — Federal Home Loan Bank |
| FHLMC | — Federal Home Loan Mortgage Corporation |
| FNMA | — Federal National Mortgage Association |
| GNMA | — Government National Mortgage Association |
| GTD | — Guaranteed |
| HFA | — Housing Finance Authority |
| HFDC | — Health Facility Development Corporation |
| IDA | — Industrial Development Authority |
| IDB | — Industrial Development Bond |
| IDFA | — Industrial Development Finance Authority |
| IDRB(s) | — Industrial Development Revenue Bond(s) |
| INS | — Insured |
| LIQ | — Liquidity Agreement |
| LOC | — Letter of Credit |
| MERLOTS | — Municipal Exempt Receipts-Liquidity Optional Tender Series |
| MFH | — Multi-Family Housing |
| MMMs | — Money Market Municipals |
| PCR | — Pollution Control Revenue |
| PCRBs | — Pollution Control Revenue Bonds |
| P-FLOATs | — Puttable Floating Option Tax-Exempt Receipts |
| RANs | — Revenue Anticipation Notes |
| ROCs | — Reset Option Certificates |
| SPEARs | — Short Puttable Exempt Adjustable Receipts |
| VRDNs | — Variable Rate Demand Notes |
| VRDPs | — Variable Rate Demand Preferreds |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Six Months
Ended
(unaudited)
11/30/2011 | Year Ended May 31, |
| 2011 | 2010 | 2009 | 2008 | 2007 |
| 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 | — | — | 0.0001 | 0.010 | 0.023 | 0.027 |
| Net realized gain on investments | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 |
TOTAL FROM
INVESTMENT
OPERATIONS | 0.0001 | 0.0001 | 0.0001 | 0.010 | 0.023 | 0.027 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | — | — | (0.000)1 | (0.010) | (0.023) | (0.027) |
| Distributions from net realized gain on investments | — | (0.000)1 | — | (0.000)1 | (0.000)1 | (0.000)1 |
| TOTAL DISTRIBUTIONS | — | (0.000)1 | (0.000)1 | (0.010) | (0.023) | (0.027) |
Net Asset Value,
End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.00%3 | 0.00%3 | 0.03% | 1.03% | 2.36% | 2.72% |
Ratios to Average
Net Assets: | | | | | | |
| Net expenses | 0.44%4 | 0.49% | 0.75% | 1.08%5 | 1.05%5 | 1.05% |
| Net investment income | 0.00%4 | 0.00% | 0.03% | 1.00% | 2.26% | 2.69% |
| Expense waiver/reimbursement6 | 0.65%4 | 0.59% | 0.35% | 0.05% | 0.05% | 0.05% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $561,982 | $539,081 | $474,268 | $512,018 | $476,382 | $342,760 |
| 1 | Represents less than $0.001. |
| 2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 3 | Represents less than 0.01%. |
| 4 | Computed on an annualized basis. |
| 5 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratios are 1.08% and 1.05% for the years ended May 31, 2009 and 2008, respectively, after taking into account these expense reductions. |
| 6 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Assets and Liabilities
November 30, 2011 (unaudited)
| Assets: | | |
| Total investments in securities, at amortized cost and fair value | | $559,326,121 |
| Cash | | 2,653,666 |
| Income receivable | | 560,326 |
| Receivable for investments sold | | 2,008,889 |
| Receivable for shares sold | | 170,400 |
| TOTAL ASSETS | | 564,719,402 |
| Liabilities: | | |
| Payable for investments purchased | $2,514,850 | |
| Payable for shares redeemed | 173,443 | |
| Payable for investment adviser fee (Note 4) | 14,433 | |
| Accrued expenses | 35,141 | |
| TOTAL LIABILITIES | | 2,737,867 |
| Net assets for 561,980,909 shares outstanding | | $561,981,535 |
| Net Assets Consist of: | | |
| Paid-in capital | | $561,973,920 |
| Accumulated net realized gain on investments | | 7,615 |
| TOTAL NET ASSETS | | $561,981,535 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $561,981,535 ÷ 561,980,909 shares outstanding, $0.001 par value, 12,500,000,000 shares authorized | | $1.00 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations
Six Months Ended November 30, 2011 (unaudited)
| Investment Income: | | | |
| Interest | | | $1,195,002 |
| Expenses: | | | |
| Investment adviser fee (Note 4) | | $1,368,674 | |
| Administrative fee (Note 4) | | 213,787 | |
| Custodian fees | | 10,840 | |
| Transfer and dividend disbursing agent fees and expenses | | 295,869 | |
| Directors'/Trustees' fees | | 3,368 | |
| Auditing fees | | 9,250 | |
| Legal fees | | 3,956 | |
| Portfolio accounting fees | | 47,398 | |
| Distribution services fee (Note 4) | | 273,735 | |
| Shareholder services fee (Note 4) | | 683,653 | |
| Account administration fee | | 547 | |
| Share registration costs | | 35,834 | |
| Printing and postage | | 14,258 | |
| Insurance premiums | | 2,677 | |
| Taxes | | 20,251 | |
| Miscellaneous | | 1,388 | |
| TOTAL EXPENSES | | 2,985,485 | |
| Waivers (Note 4): | | | |
| Waiver of investment adviser fee | $(827,073) | | |
| Waiver of administrative fee | (5,475) | | |
| Waiver of distribution services fee | (273,735) | | |
| Waiver of shareholder services fee | (683,653) | | |
| Waiver of account administration fee | (547) | | |
| TOTAL WAIVERS | | (1,790,483) | |
| Net expenses | | | 1,195,002 |
| Net investment income | | | — |
| Net realized gain on investments | | | 7,615 |
| Change in net assets resulting from operations | | | $7,615 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets
| Six Months
Ended
(unaudited)
11/30/2011 | Year Ended
5/31/2011 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net realized gain on investments | $7,615 | $4,585 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | — | (6,306) |
| Share Transactions: | | |
| Proceeds from sale of shares | 669,788,050 | 1,403,633,028 |
| Net asset value of shares issued to shareholders in payment of distributions declared | — | 6,291 |
| Cost of shares redeemed | (646,895,499) | (1,338,824,124) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 22,892,551 | 64,815,195 |
| Change in net assets | 22,900,166 | 64,813,474 |
| Net Assets: | | |
| Beginning of period | 539,081,369 | 474,267,895 |
| End of period | $561,981,535 | $539,081,369 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements
November 30, 2011 (unaudited)
1. ORGANIZATION
Cash Trust Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Federated Municipal Cash Series (the “Fund”), a diversified portfolio. 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. Each portfolio pays its own expenses. The investment objective of the Fund is to provide current income exempt from federal regular income tax consistent with stability of principal. Interest income from the Fund's investments may be subject to the federal AMT for individuals and corporations and state and local taxes.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
Securities are valued at amortized cost. Under the amortized cost valuation method, an investment is valued initially at its cost as determined in accordance with GAAP. The Fund then adjusts the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost of the investment and the amount payable at its maturity. If amortized cost is determined not to approximate market value, the fair value of the portfolio securities will be determined under procedures established by and under the general supervision of the Directors.
Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly.
Premium and Discount Amortization
All premiums and discounts are amortized/accreted using the effective interest rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended November 30, 2011, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of November 30, 2011, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland and the Commonwealth of Pennsylvania.
Semi-Annual Shareholder Report
Other TaxesAs an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.
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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Restricted Securities
The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security 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 such restricted securities may be resold in the secondary market in transactions exempt from registration. 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. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act.
Other
The preparation of financial statements in conformity with GAAP 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.
3. CAPITAL STOCK
The following table summarizes capital stock activity:
| | Six Months
Ended
11/30/2011 | Year Ended
5/31/2011 |
| Shares sold | 669,788,050 | 1,403,637,721 |
| Shares issued to shareholders in payment of distributions declared | — | 6,291 |
| Shares redeemed | (646,895,499) | (1,338,824,124) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 22,892,551 | 64,819,888 |
Semi-Annual Shareholder Report4. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.50% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, the Adviser voluntarily waived $827,073 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets
of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, the net fee paid to FAS was 0.076% of average daily net assets of the Fund. FAS waived $5,475 of its fee.
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 daily net assets of the Fund to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.35% of average daily net assets, annually, to reimburse FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, FSC voluntarily waived its entire fee of $273,735. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares.
Shareholder Services Fee
The Fund may pay fees (“Service Fees”) up to 0.25% of the average daily net assets of the Fund's Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended November 30, 2011, unaffiliated third-party financial intermediaries waived $683,653 of shareholder services fees and $547 of account administration fees. These waivers can be modified or terminated at any time.
Semi-Annual Shareholder Report
Expense LimitationDue to the possibility of changes in market conditions and other factors, there can be no assurance that the level of waivers/reimbursement/reduction of Fund expenses reflected in the financial highlights will be maintained in the future. However, the Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Shares (after the voluntary waivers and reimbursements) will not exceed 1.05% (the “Fee Limit”), up to but not including the later of (the “Termination Date”): (a) August 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing this arrangement prior to the Termination Date, this arrangement may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Directors.
Interfund Transactions
During the six months ended November 30, 2011, 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 complied with Rule 17a-7 under the Act and amounted to $593,900,000 and $667,245,000, respectively.
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
5. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2011, there were no outstanding loans. During the six months ended November 30, 2011, the Fund did not utilize the LOC.
6. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2011, there were no outstanding loans. During the six months ended November 30, 2011, the program was not utilized.
Semi-Annual Shareholder Report
7. RECENT ACCOUNTING PRONOUNCEMENTSIn April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets or results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2011 to November 30, 2011.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| Beginning
Account Value
6/1/2011 | Ending
Account Value
11/30/2011 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.00 | $2.20 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,022.80 | $2.23 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.44%, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half-year period). |
| 2 | Actual and Hypothetical expenses paid during the period utilizing the Fund's current annualized net expense ratio of 1.05% (as reflected in the Notes to Financial Statements, Note 4 under Expense Limitation), multiplied by the average account value over the period, multiplied by 183/366 (to reflect current expenses as if they had been in effect throughout the most recent one-half-year period) would be $5.25 and $5.30, respectively. |
Semi-Annual Shareholder Report Evaluation and Approval of Advisory Contract – May 2011
Federated municipal cash series (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
The Fund's performance fell below the median of the relevant peer group for the one-year period covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees Semi-Annual Shareholder Report
and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was above the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive. The Board will continue to monitor advisory fees and other expenses borne by the Fund.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds are Semi-Annual Shareholder Report
reasonable and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder Report
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 the possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so.This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Federated Municipal Cash Series
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 147551303
0122605 (1/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| | Semi-Annual Shareholder Report |
| | November 30, 2011 |
|
Federated Prime Cash Series
A Portfolio of Cash Trust Series, Inc.
CONTENTS
Portfolio of Investments Summary Tables (unaudited)
At November 30, 2011, the Fund's portfolio composition1 was as follows:
| Security Type | Percentage of
Total Net Assets |
| Commercial Paper and Notes | 47.1% |
| Bank Instruments | 31.9% |
| Variable Rate Instruments | 18.2% |
| Repurchase Agreements | 2.7% |
| Other Assets and Liabilities — Net2 | 0.1% |
| TOTAL | 100.0% |
At November 30, 2011, the Fund's effective maturity schedule3 was as follows:
Securities with an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 31.2% |
| 8-30 Days | 29.5% |
| 31-90 Days | 30.8% |
| 91-180 Days | 4.9% |
| 181 Days or more | 3.5% |
| Other Assets and Liabilities — Net2 | 0.1% |
| TOTAL | 100.0% |
| 1 | See the Fund's Prospectus and Statement of Additional Information for more complete information regarding these security types. With respect to this table, Commercial Paper and Notes includes asset-backed securities, collateralized loan agreements, commercial paper, corporate bonds, loan participation and municipal bonds, with interest rates that are fixed or that reset periodically. |
| 2 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 3 | Effective maturity is determined in accordance with the requirements of Rule 2a-7 under the Investment Company Act of 1940, which regulates money market mutual funds. |
Semi-Annual Shareholder Report Portfolio of Investments
November 30, 2011 (unaudited)
Principal
Amount | | | Value |
| | Asset-Backed Securities – 3.7% | |
| | Finance - Automotive – 1.9% | |
| $3,259,841 | | AmeriCredit Automobile Receivables Trust 2011-3, Class A1, 0.277%, 7/9/2012 | 3,259,841 |
| 13,125,153 | | Honda Auto Receivables Trust 2011-3, Class A1, 0.398%, 10/22/2012 | 13,125,153 |
| 9,489,101 | 1,2 | SMART (Series 2011-2US Trust), Class A1, 0.365%, 7/14/2012 | 9,489,101 |
| 9,587,222 | | Santander Drive Auto Receivables Trust 2011-2, Class A1, 0.286%, 6/15/2012 | 9,587,222 |
| 23,416,865 | | Santander Drive Auto Receivables Trust 2011-3, Class A1, 0.372%, 9/17/2012 | 23,416,865 |
| 4,279,257 | | Santander Drive Auto Receivables Trust 2011-4, Class A1, 0.419%, 10/15/2012 | 4,279,257 |
| | TOTAL | 63,157,439 |
| | Finance - Equipment – 0.5% | |
| 7,633,744 | | GE Equipment Mid Ticket LLC, (Series 2011-1), Class A1, 0.429%, 10/22/2012 | 7,633,744 |
| 4,372,218 | | GE Equipment Transportation LLC, (Series 2011-1), Class A1, 0.294%, 7/20/2012 | 4,372,218 |
| 3,758,861 | 1,2 | MMAF Equipment Finance LLC, (Series 2011-A), Class A1, 0.323%, 8/15/2012 | 3,758,861 |
| 2,030,555 | 1,2 | Macquarie Equipment Funding Trust 2011-A, Class A1, 0.432%, 3/20/2012 | 2,030,555 |
| | TOTAL | 17,795,378 |
| | Finance - Retail – 1.3% | |
| 20,000,000 | 1,2,3 | Fosse Master Issuer PLC 2011-1, Class A1, 0.382%, 12/19/2011 | 20,000,000 |
| 25,000,000 | 1,2,3 | Holmes Master Issuer PLC 2011-3, Class A1, 0.379%, 12/15/2011 | 25,000,000 |
| | TOTAL | 45,000,000 |
| | TOTAL ASSET-BACKED SECURITIES | 125,952,817 |
| | Bank Note – 0.6% | |
| | Finance - Banking – 0.6% | |
| 22,000,000 | | Bank of America N.A., 0.350%, 12/19/2011 | 22,000,000 |
| | Certificates of Deposit – 31.3% | |
| | Finance - Banking – 31.3% | |
| 40,000,000 | 3 | Bank of Montreal, 0.398%, 12/14/2011 | 40,000,000 |
| 25,000,000 | 3 | Bank of Montreal, 0.450%, 12/30/2011 | 25,000,000 |
| 50,000,000 | 3 | Bank of Nova Scotia, Toronto, 0.398%, 12/8/2011 | 50,000,000 |
| 170,000,000 | | Bank of Tokyo-Mitsubishi UFJ Ltd., 0.320% — 0.450%, 12/2/2011 — 2/28/2012 | 170,000,000 |
| 25,000,000 | 3 | Barclays Bank PLC, 0.677%, 12/28/2011 | 25,000,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $15,000,000 | | Barclays Bank PLC, 0.790%, 1/27/2012 | 15,000,000 |
| 15,000,000 | | Barclays Bank PLC, 0.810%, 1/25/2012 | 15,000,000 |
| 20,000,000 | | Commonwealth Bank of Australia, 0.335%, 2/28/2012 | 20,000,247 |
| 25,000,000 | 3 | Credit Suisse, Zurich, 0.338%, 12/8/2011 | 25,000,000 |
| 33,000,000 | | Credit Suisse, Zurich, 0.420% — 0.650%, 1/12/2012 — 1/25/2012 | 33,000,000 |
| 106,000,000 | | Deutsche Bank AG, 0.400% — 0.450%, 12/28/2011 — 1/23/2012 | 106,000,233 |
| 25,000,000 | 3 | Deutsche Bank AG, 0.729%, 2/21/2012 | 25,000,000 |
| 110,000,000 | | Mizuho Corporate Bank Ltd., 0.420% — 0.450%, 1/27/2012 — 2/21/2012 | 110,000,000 |
| 50,000,000 | 3 | National Australia Bank Ltd., Melbourne, 0.395%, 12/2/2011 | 50,000,000 |
| 20,000,000 | | National Australia Bank Ltd., Melbourne, 0.600%, 5/18/2012 | 20,000,468 |
| 25,000,000 | 3 | Rabobank Nederland NV, Utrecht, 0.328%, 12/6/2011 | 25,000,000 |
| 25,000,000 | 3 | Rabobank Nederland NV, Utrecht, 0.338%, 12/8/2011 | 25,000,000 |
| 25,000,000 | 3 | Rabobank Nederland NV, Utrecht, 0.345%, 12/2/2011 | 25,000,000 |
| 25,000,000 | 3 | Rabobank Nederland NV, Utrecht, 0.352%, 12/28/2011 | 24,999,500 |
| 35,000,000 | 3 | Rabobank Nederland NV, Utrecht, 0.398%, 12/13/2011 | 35,000,000 |
| 25,000,000 | 3 | Royal Bank of Canada, Montreal, 0.541%, 12/19/2011 | 25,000,000 |
| 20,000,000 | 3 | Royal Bank of Canada, Montreal, 0.570%, 12/21/2011 | 20,000,000 |
| 50,000,000 | | Sumitomo Mitsui Banking Corp., 0.300%, 1/17/2012 | 50,000,000 |
| 50,000,000 | 3 | Toronto Dominion Bank, 0.448%, 12/12/2011 | 50,000,000 |
| 15,000,000 | 3 | Westpac Banking Corp. Ltd., Sydney, 0.352%, 12/19/2011 | 15,000,000 |
| 47,000,000 | | Westpac Banking Corp. Ltd., Sydney, 0.470%, 4/16/2012 | 47,000,000 |
| | TOTAL CERTIFICATES OF DEPOSIT | 1,071,000,448 |
| | Collateralized Loan Agreements – 13.9% | |
| | Finance - Banking – 13.9% | |
| 117,700,000 | | Barclays Capital, Inc., 0.335% — 0.507%, 12/1/2011 — 1/4/2012 | 117,700,000 |
| 25,000,000 | | Citigroup Global Markets, Inc., 0.588%, 12/1/2011 | 25,000,000 |
| 50,000,000 | | Credit Suisse Securities (USA) LLC, 0.375%, 1/9/2012 | 50,000,000 |
| 20,000,000 | | JPMorgan Securities LLC, 0.558%, 12/20/2011 | 20,000,000 |
| 75,000,000 | 3 | Merrill Lynch, Pierce, Fenner & Smith, Inc., 0.680%, 12/1/2011 | 75,000,000 |
| 25,000,000 | | Mizuho Securities USA, Inc., 0.284%, 12/1/2011 | 25,000,000 |
| 75,000,000 | 3 | RBS Securities, Inc., 0.480%, 12/1/2011 | 75,000,000 |
| 90,000,000 | | Wells Fargo Securities, LLC, 0.284% — 0.507%, 12/1/2011 — 1/17/2012 | 90,000,000 |
| | TOTAL COLLATERALIZED LOAN AGREEMENTS | 477,700,000 |
| | Commercial Paper – 26.0%4 | |
| | Aerospace/Auto – 0.7% | |
| 25,000,000 | | Toyota Motor Credit Corp., (Toyota Motor Corp. Support Agreement), 0.341%, 12/22/2011 | 24,995,042 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| | Consumer Products – 0.5% | |
| $17,000,000 | 1,2 | Diageo Capital PLC, (GTD by Diageo PLC), 0.500%, 1/12/2012 | 16,990,083 |
| | Diversified – 0.0% | |
| 1,500,000 | 1,2 | BAE Systems Holdings, Inc., (GTD by BAE Systems PLC), 0.430%, 1/3/2012 | 1,499,409 |
| | Finance - Automotive – 0.7% | |
| 25,000,000 | | FCAR Owner Trust, (A1+/P1 Series), 0.351%, 1/4/2012 | 24,991,736 |
| | Finance - Banking – 18.4% | |
| 50,000,000 | 1,2 | Caisse des Depots et Consignations (CDC), 0.501%, 1/4/2012 | 49,976,389 |
| 55,000,000 | 1,2 | Danske Corp., Inc., 0.300%, 12/19/2011 | 54,991,750 |
| 170,000,000 | 1,2 | Grampian Funding LLC, 0.270%, 12/5/2011 — 12/7/2011 | 169,993,100 |
| 155,000,000 | | ING (U.S.) Funding LLC, 0.350% — 0.451%, 12/21/2011 — 2/13/2012 | 154,888,639 |
| 50,000,000 | 1,2 | National Australia Funding (Delaware), Inc., 0.300%, 3/1/2012 | 49,962,083 |
| 25,000,000 | 1,2 | Northern Pines Funding LLC, 0.501%, 1/25/2012 | 24,980,903 |
| 125,000,000 | | Svenska Handelsbanken, Inc., (GTD by Svenska Handelsbanken, Stockholm), 0.421%, 2/16/2012 | 124,887,708 |
| | TOTAL | 629,680,572 |
| | Finance - Commercial – 2.9% | |
| 100,000,000 | 1,2 | Versailles Commercial Paper LLC, 0.700%, 12/1/2011 | 100,000,000 |
| | Finance - Retail – 1.5% | |
| 25,000,000 | 1,2 | Alpine Securitization Corp., 0.451%, 2/24/2012 | 24,973,438 |
| 25,000,000 | 1,2 | Barton Capital LLC, 0.740%, 12/1/2011 | 25,000,000 |
| | TOTAL | 49,973,438 |
| | Machinery/Equipment/Auto – 0.4% | |
| 11,900,000 | 1,2 | Harley-Davidson Funding Corp., (Harley-Davidson, Inc. Support Agreement), 0.390% — 0.460%, 12/8/2011 — 1/6/2012 | 11,897,793 |
| | Media – 0.5% | |
| 16,854,000 | 1,2 | NBC Universal Media, LLC, 0.380%, 12/23/2011 — 12/30/2011 | 16,849,099 |
| | Oil & Oil Finance – 0.4% | |
| 13,000,000 | 1,2 | Devon Energy Corp., 0.350% — 0.420%, 12/8/2011 — 1/6/2012 | 12,997,004 |
| | TOTAL COMMERCIAL PAPER | 889,874,176 |
| | Corporate Bonds – 1.3% | |
| | Finance - Commercial – 1.3% | |
| 18,071,000 | | General Electric Capital Corp., 5.250%, 10/19/2012 | 18,784,173 |
| 10,846,000 | | General Electric Capital Corp., 5.875%, 2/15/2012 | 10,966,881 |
| 14,294,000 | | General Electric Capital Corp., 6.000%, 6/15/2012 | 14,710,198 |
| | TOTAL CORPORATE BONDS | 44,461,252 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| | Loan Participation – 2.2% | |
| | Chemicals – 2.2% | |
| $75,000,000 | | DuPont Teijin Films U.K. Ltd., (GTD by Du Pont (E.I.) de Nemours & Co.), 0.400%, 12/28/2011 | 75,000,000 |
| | Notes - Variable – 18.2%3 | |
| | Finance - Banking – 14.9% | |
| 1,735,000 | | 6380 Brackbill Associates LP, (Series 2000), (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.610%, 12/2/2011 | 1,735,000 |
| 43,585,000 | | Albany-Dougherty County, GA Hospital Authority, (Series 2008A), (SunTrust Bank LOC), 0.290%, 12/1/2011 | 43,585,000 |
| 50,000,000 | 1,2 | Australia & New Zealand Banking Group, Melbourne, 0.338%, 12/7/2011 | 50,000,000 |
| 50,000,000 | 1,2 | Australia & New Zealand Banking Group, Melbourne, 0.338%, 12/9/2011 | 50,000,000 |
| 50,000,000 | | Australia & New Zealand Banking Group, Melbourne, 0.398%, 12/4/2011 | 50,000,000 |
| 4,825,000 | | Bond Holdings LP, (Wells Fargo Bank, N.A. LOC), 0.220%, 12/2/2011 | 4,825,000 |
| 20,000,000 | | Commonwealth Bank of Australia, 0.353%, 12/7/2011 | 19,998,042 |
| 495,000 | | Engle Printing & Publishing, (Series 2001), (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.610%, 12/2/2011 | 495,000 |
| 3,690,000 | | Gannett Fleming, Inc., (Series 2001), (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.610%, 12/2/2011 | 3,690,000 |
| 1,590,000 | | Graywood Farms LLC, (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.610%, 12/2/2011 | 1,590,000 |
| 2,380,000 | | Grob Systems, Inc., (Series 1998 & 1999), (Fifth Third Bank, Cincinnati LOC), 0.470%, 12/1/2011 | 2,380,000 |
| 100,000,000 | | JPMorgan Chase Bank, N.A., 0.295%, 12/21/2011 | 100,000,000 |
| 47,000,000 | | JPMorgan Chase Bank, N.A., 0.297%, 12/28/2011 | 47,000,000 |
| 50,000,000 | | Maryland State Economic Development Corp., (Series 2001A) Human Genome Sciences, (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.610%, 12/6/2011 | 50,000,000 |
| 7,770,000 | | New York City Housing Development Corp., (Series 2009-A1), (RBS Citizens Bank N.A. LOC), 0.220%, 12/7/2011 | 7,770,000 |
| 6,995,000 | | New York City Housing Development Corp., (Series 2010-A2), (RBS Citizens Bank N.A. LOC), 0.240%, 12/7/2011 | 6,995,000 |
| 16,805,000 | | Serra Works Bond Holding Co. LLC, (Series 2008-A), (Fifth Third Bank, Cincinnati LOC), 0.390%, 12/1/2011 | 16,805,000 |
| 1,100,000 | | South Pittsburg, TN IDB, Lodge Manufacturing Co. Project, (Series 1999), (SunTrust Bank LOC), 0.450%, 12/1/2011 | 1,100,000 |
| 3,475,000 | | Sun Valley, Inc., (Wells Fargo Bank, N.A. LOC), 0.270%, 12/2/2011 | 3,475,000 |
| 20,000,000 | 1,2 | Svenska Handelsbanken, Stockholm, 0.516%, 2/17/2012 | 20,000,000 |
| 15,000,000 | | Texas State, Veterans' Housing Assistance Program, Fund II (Series 2004B), 0.150%, 12/7/2011 | 15,000,000 |
| 9,800,000 | | Village Green Finance Co. LLC, (Series 1997), (Wells Fargo Bank, N.A. LOC), 0.220%, 12/7/2011 | 9,800,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $3,750,000 | | Wiley Properties, Inc., (Series 2002), (Fifth Third Bank, Cincinnati LOC), 0.420%, 12/1/2011 | 3,750,000 |
| | TOTAL | 509,993,042 |
| | Finance - Commercial – 0.5% | |
| 1,000,000 | | General Electric Capital Corp., 0.347%, 2/28/2012 | 999,244 |
| 2,500,000 | 1,2 | KORDSA, Inc., (Series 2006), (General Electric Capital Corp. LOC), 0.260%, 12/1/2011 | 2,500,000 |
| 13,670,000 | 1,2 | Mountain Creek Properties LLC, (General Electric Capital Corp. LOC), 0.260%, 12/1/2011 | 13,670,000 |
| | TOTAL | 17,169,244 |
| | Finance - Retail – 0.9% | |
| 32,000,000 | | AFS Insurance Premium Receivables Trust, (Series 1994-A), 0.804%, 12/15/2011 | 32,000,000 |
| | Government Agency – 1.7% | |
| 18,455,000 | | BBC Enterprises LLC, (Series 2007), (FHLB of San Francisco LOC), 0.150%, 12/1/2011 | 18,455,000 |
| 10,000,000 | | Capital Trust Agency, FL, (FNMA LOC), 0.210%, 12/1/2011 | 10,000,000 |
| 31,000,000 | | Utah Telecommunication Open Infrastructure Agency, (Series 2008), (FHLB of Cincinnati LOC), 0.200%, 12/1/2011 | 31,000,000 |
| | TOTAL | 59,455,000 |
| | University – 0.2% | |
| 6,000,000 | | University of California, (Series 2011 Y-2), 0.326%, 12/1/2011 | 6,000,000 |
| | TOTAL NOTES — VARIABLE | 624,617,286 |
| | Repurchase Agreement – 2.7% | |
| 92,287,000 | | Interest in $3,800,000,000 joint repurchase agreement 0.14%, dated 11/30/2011 under which Bank of America N.A. will repurchase securities provided as collateral for $3,800,014,778 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Government Agency securities with various maturities to 1/20/2040 and the market value of those underlying securities was $3,914,015,222. | 92,287,000 |
| | TOTAL INVESTMENTS — 99.9%
(AT AMORTIZED COST)5 | 3,422,892,979 |
| | OTHER ASSETS AND LIABILITIES - NET — 0.1%6 | 1,976,818 |
| | TOTAL NET ASSETS — 100% | $3,424,869,797 |
| 1 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At November 30, 2011, these restricted securities amounted to $756,559,568, which represented 22.1% of total net assets. |
| 2 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors (the “Directors”). At November 30, 2011, these liquid restricted securities amounted to $756,559,568, which represented 22.1% of total net assets. |
Semi-Annual Shareholder Report| 3 | Denotes a variable rate security with current rate and next reset date shown. |
| 4 | Discount rate at time of purchase. |
| 5 | Also represents cost for federal tax purposes. |
| 6 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at November 30, 2011.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of November 30, 2011, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
The following acronyms are used throughout this portfolio:
| FHLB | — Federal Home Loan Bank |
| FNMA | — Federal National Mortgage Association |
| GTD | — Guaranteed |
| IDB | — Industrial Development Bond |
| LOC | — Letter of Credit |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Six Months
Ended
(unaudited)
11/30/2011 | Year Ended May 31, |
| 2011 | 2010 | 2009 | 2008 | 2007 |
| 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 | 0.0001 | 0.0001 | 0.0001 | 0.014 | 0.036 | 0.043 |
| Net realized gain on investments | 0.0001 | 0.0001 | 0.0001 | — | — | — |
TOTAL FROM INVESTMENT
OPERATIONS | 0.0001 | 0.0001 | 0.0001 | 0.014 | 0.036 | 0.043 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.000)1 | (0.000)1 | (0.000)1 | (0.014) | (0.036) | (0.043) |
| Distributions from net realized gain on investments | (0.000)1 | (0.000)1 | (0.000)1 | — | — | — |
| TOTAL DISTRIBUTIONS | (0.000)1 | (0.000)1 | (0.000)1 | (0.014) | (0.036) | (0.043) |
| Net Asset Value, End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.01% | 0.01% | 0.01% | 1.39% | 3.70% | 4.42% |
Ratios to Average
Net Assets: | | | | | | |
| Net expenses | 0.34%3 | 0.43% | 0.58% | 1.08% | 1.05% | 1.05% |
| Net investment income | 0.01%3 | 0.01% | 0.01% | 1.34% | 3.58% | 4.34% |
| Expense waiver/reimbursement4 | 0.75%3 | 0.65% | 0.49% | 0.01% | 0.02% | 0.01% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $3,424,870 | $4,559,876 | $4,791,221 | $6,661,244 | $5,787,122 | $4,758,790 |
| 1 | Represents less than $0.001. |
| 2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Assets and Liabilities
November 30, 2011 (unaudited)
| Assets: | | |
| Total investments in securities, at amortized cost and fair value | | $3,422,892,979 |
| Cash | | 1,543 |
| Income receivable | | 1,590,621 |
| Receivable for shares sold | | 1,168,770 |
| TOTAL ASSETS | | 3,425,653,913 |
| Liabilities: | | |
| Payable for shares redeemed | $63,158 | |
| Income distribution payable | 129 | |
| Payable for investment adviser fee (Note 4) | 50,310 | |
| Payable for transfer and dividend disbursing agent fees and expenses | 656,297 | |
| Payable for Directors'/Trustees' fees | 1,032 | |
| Accrued expenses | 13,190 | |
| TOTAL LIABILITIES | | 784,116 |
| Net assets for 3,424,869,681 shares outstanding | | $3,424,869,797 |
| Net Assets Consist of: | | |
| Paid-in capital | | $3,424,869,681 |
| Undistributed net investment income | | 116 |
| TOTAL NET ASSETS | | $3,424,869,797 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $3,424,869,797 ÷ 3,424,869,681 shares outstanding, $0.001 par value, 12,500,000,000 shares authorized | | $1.00 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations
Six Months Ended November 30, 2011 (unaudited)
| Investment Income: | | | |
| Interest | | | $6,711,115 |
| Expenses: | | | |
| Investment adviser fee (Note 4) | | $9,645,889 | |
| Administrative fee (Note 4) | | 1,506,688 | |
| Custodian fees | | 105,648 | |
| Transfer and dividend disbursing agent fees and expenses | | 2,362,192 | |
| Directors'/Trustees' fees | | 18,737 | |
| Auditing fees | | 10,046 | |
| Legal fees | | 3,700 | |
| Portfolio accounting fees | | 81,034 | |
| Distribution services fee (Note 4) | | 1,929,178 | |
| Shareholder services fee (Note 4) | | 4,822,074 | |
| Share registration costs | | 179,121 | |
| Printing and postage | | 205,107 | |
| Insurance premiums | | 7,018 | |
| Taxes | | 162,458 | |
| Miscellaneous | | 8,954 | |
| TOTAL EXPENSES | | 21,047,844 | |
| Waivers and Reimbursement (Note 4): | | | |
| Waiver of investment adviser fee | $(7,738,117) | | |
| Waiver of administrative fee | (38,584) | | |
| Waiver of distribution services fee | (1,929,178) | | |
| Waiver of shareholder services fee | (4,820,836) | | |
| Reimbursement of shareholder services fee | (1,238) | | |
| TOTAL WAIVERS AND REIMBURSEMENT | | (14,527,953) | |
| Net expenses | | | 6,519,891 |
| Net investment income | | | 191,224 |
| Net realized gain on investments | | | 2,350 |
| Change in net assets resulting from operations | | | $193,574 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets
| Six Months
Ended
(unaudited)
11/30/2011 | Year Ended
5/31/2011 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $191,224 | $469,270 |
| Net realized gain on investments | 2,350 | 5,207 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 193,574 | 474,477 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (191,301) | (469,522) |
| Distributions from net realized gain on investments | (6,502) | (4,832) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (197,803) | (474,354) |
| Share Transactions: | | |
| Proceeds from sale of shares | 2,697,076,057 | 7,226,461,421 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 196,446 | 472,738 |
| Cost of shares redeemed | (3,832,274,215) | (7,458,279,390) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (1,135,001,712) | (231,345,231) |
| Change in net assets | (1,135,005,941) | (231,345,108) |
| Net Assets: | | |
| Beginning of period | 4,559,875,738 | 4,791,220,846 |
| End of period (including undistributed net investment income of $116 and $193, respectively) | $3,424,869,797 | $4,559,875,738 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements
November 30, 2011 (unaudited)
1. ORGANIZATION
Cash Trust Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Federated Prime Cash Series (the “Fund”), a diversified portfolio. 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. Each portfolio pays its own expenses. The investment objective of the Fund is to provide current income consistent with stability of principal and liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
Securities are valued at amortized cost. Under the amortized cost valuation method, an investment is valued initially at its cost as determined in accordance with GAAP. The Fund then adjusts the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost of the investment and the amount payable at its maturity. If amortized cost is determined not to approximate market value, the fair value of the portfolio securities will be determined under procedures established by and under the general supervision of the Directors.
Repurchase Agreements
The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.
The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.
Semi-Annual Shareholder Report
The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly.
Premium and Discount Amortization
All premiums and discounts are amortized/accreted using the effective interest rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended November 30, 2011, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of November 30, 2011, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland and the Commonwealth of Pennsylvania.
Other Taxes
As an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.
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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Restricted Securities
The Fund may purchase securities which are considered restricted. Restricted securities are securities that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) are subject to contractual restrictions on public sales. In some cases, when a security cannot be offered for public sale without first being registered, the issuer of the restricted security 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 Semi-Annual Shareholder Report
securities. Many such restricted securities may be resold in the secondary market in transactions exempt from registration. 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. Restricted securities are valued at amortized cost in accordance with Rule 2a-7 under the Act.Other
The preparation of financial statements in conformity with GAAP 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.
3. CAPITAL STOCK
The following table summarizes capital stock activity:
| | Six Months Ended
11/30/2011 | Year Ended
5/31/2011 |
| Shares sold | 2,697,076,057 | 7,226,461,421 |
| Shares issued to shareholders in payment of distributions declared | 196,446 | 472,738 |
| Shares redeemed | (3,832,274,215) | (7,458,279,390) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (1,135,001,712) | (231,345,231) |
4. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.50% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, the Adviser voluntarily waived $7,738,117 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets
of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, the net fee paid to FAS was 0.076% of average daily net assets of the Fund. FAS waived $38,584 of its fee.
Semi-Annual Shareholder Report
Distribution Services FeeThe 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 daily net assets of the Fund to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.35% of average daily net assets, annually, to reimburse FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, FSC voluntarily waived its entire fee of $1,929,178. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares.
Shareholder Services Fee
The Fund may pay fees (“Service Fees”) up to 0.25% of the average daily net assets of the Fund's Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended November 30, 2011, FSSC voluntarily reimbursed $1,238 of Service Fees. In addition, for the six months ended November 30, 2011, unaffiliated third-party financial intermediaries waived $4,820,836 of Service Fees. This waiver can be modified or terminated at any time.
Expense Limitation
Due to the possibility of changes in market conditions and other factors, there can be no assurance that the level of waivers/reimbursement/reduction of Fund expenses reflected in the financial highlights will be maintained in the future. However, the Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund (after the voluntary waivers and/or reimbursements) will not exceed 1.05% (the “Fee Limit”) up to but not including the later of (the “Termination Date”): (a) August 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Directors.
Interfund Transactions
During the six months ended November 30, 2011, the Fund engaged in sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees and/or common Officers. These sale transactions complied with Rule 17a-7 under the Act and amounted to $163,025,000.
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
5. CONCENTRATION OF RISK
A substantial part of the Fund's portfolio may be comprised of obligations of banks. As a result, the Fund may be more susceptible to any economic, business, political or other developments which generally affect these entities.
Semi-Annual Shareholder Report
6. LINE OF CREDITThe Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2011, there were no outstanding loans. During the six months ended November 30, 2011, the Fund did not utilize the LOC.
7. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2011, there were no outstanding loans. During the six months ended November 30, 2011, the program was not utilized.
8. RECENT ACCOUNTING PRONOUNCEMENTS
In April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets or results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2011 to November 30, 2011.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semi-Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. | Beginning
Account Value
6/1/2011 | Ending
Account Value
11/30/2011 | Expenses Paid
During Period1, 2 |
| Actual | $1,000 | $1,000.10 | $1.70 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,023.30 | $1.72 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.34%, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half-year period). |
| 2 | Actual and Hypothetical expenses paid during the period utilizing the Fund's current annualized net expense ratio of 1.05% (as reflected in the Notes to Financial Statements, Note 4 under Expense Limitation), multiplied by the average account value over the period, multiplied by 183/366 (to reflect current expenses as if they had been in effect throughout the most recent one-half-year period) would be $5.25 and $5.30, respectively. |
Semi-Annual Shareholder Report Evaluation and Approval of Advisory Contract – May 2011
Federated prime cash series (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
The Fund's performance was above the median of the relevant peer group for the one-year period covered by the Evaluation.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.
Semi-Annual Shareholder Report
Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was above the median of the relevant peer group. The Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive. The Board will continue to monitor advisory fees and other expenses borne by the Fund.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds are reasonable and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these circumstances, no changes Semi-Annual Shareholder Report
were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder ReportMutual 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 the possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Notes [Page Intentionally Left Blank]
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Notes [Page Intentionally Left Blank]Federated Prime Cash Series
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 147551105
0122606 (1/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
| | Semi-Annual Shareholder Report |
| | November 30, 2011 |
|
Federated Treasury Cash Series
A Portfolio of Cash Trust Series, Inc.
CONTENTS
Portfolio of Investments Summary Tables (unaudited)
At November 30, 2011, the Fund's portfolio composition1 was as follows:
| Portfolio Composition | Percentage of
Total Net Assets |
| Repurchase Agreements | 62.3% |
| U.S. Treasury Securities | 37.5% |
| Other Assets and Liabilities — Net2 | 0.2% |
| TOTAL | 100.0% |
At November 30, 2011, the Fund's effective maturity3 schedule was as follows:
Securities With an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 56.3% |
| 8-30 Days | 0.0% |
| 31-90 Days | 11.3% |
| 91-180 Days | 25.3% |
| 181 Days or more | 6.9% |
| Other Assets and Liabilities — Net2 | 0.2% |
| TOTAL | 100.0% |
| 1 | See the Fund's Prospectus and Statement of Additional Information for a description of the types of securities in which the Fund invests. |
| 2 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 3 | Effective maturity is determined in accordance with the requirements of Rule 2a-7 under the Investment Company Act of 1940, which regulates money market mutual funds. |
Semi-Annual Shareholder Report Portfolio of Investments
November 30, 2011 (unaudited)
Principal
Amount | | | Value |
| | U.S. Treasury – 37.5% | |
| $40,000,000 | 1 | United States Treasury Bills, 0.050%, 5/24/2012 | 39,990,278 |
| 42,000,000 | | United States Treasury Notes, 0.375%, 8/31/2012 | 42,073,261 |
| 45,000,000 | | United States Treasury Notes, 0.625%, 6/30/2012 | 45,142,684 |
| 21,500,000 | | United States Treasury Notes, 0.750% - 4.750%, 5/31/2012 | 21,737,703 |
| 354,000,000 | | United States Treasury Notes, 0.875% - 4.625%, 2/29/2012 | 357,078,173 |
| 25,500,000 | | United States Treasury Notes, 0.875%, 1/31/2012 | 25,524,692 |
| 139,000,000 | | United States Treasury Notes, 1.000% - 4.500%, 3/31/2012 | 139,958,705 |
| 62,000,000 | | United States Treasury Notes, 1.000% - 4.500%, 4/30/2012 | 62,398,557 |
| 58,500,000 | | United States Treasury Notes, 1.000% - 4.625%, 12/31/2011 | 58,555,737 |
| 47,000,000 | | United States Treasury Notes, 1.375% - 4.875%, 2/15/2012 | 47,211,385 |
| 10,000,000 | | United States Treasury Notes, 1.375%, 3/15/2012 | 10,037,590 |
| 17,000,000 | | United States Treasury Notes, 1.375%, 5/15/2012 | 17,102,633 |
| 35,000,000 | | United States Treasury Notes, 1.875%, 6/15/2012 | 35,339,106 |
| 25,500,000 | | United States Treasury Notes, 4.375%, 8/15/2012 | 26,260,231 |
| | TOTAL U.S. TREASURY | 928,410,735 |
| | Repurchase Agreements – 62.3% | |
| 100,000,000 | | Interest in $350,000,000 joint repurchase agreement 0.11%, dated 11/30/2011 under which Bank of Montreal will repurchase a security provided as collateral for $350,001,069 on 12/1/2011. The security provided as collateral at the end of the period was a U.S. Treasury security maturing on 11/30/2018 and the market value of that underlying security was $357,001,127. | 100,000,000 |
| 150,000,000 | 2 | Interest in $1,500,000,000 joint repurchase agreement 0.09%, dated 11/18/2011 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $1,500,225,000 on 1/17/2012. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 8/15/2040 and the market value of those underlying securities was $1,530,049,823. | 150,000,000 |
| 100,000,000 | | Interest in $3,500,000,000 joint repurchase agreement 0.11%, dated 11/30/2011 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $3,500,010,694 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury Securities with various maturities to 8/15/2040 and the market value of those underlying securities was $3,578,103,008. | 100,000,000 |
| 100,000,000 | | Interest in $1,524,000,000 joint repurchase agreement 0.11%, dated 11/30/2011 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $1,524,004,657 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 8/15/2021 and the market value of those underlying securities was $1,554,484,829. | 100,000,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $73,484,000 | | Interest in $4,000,000,000 joint repurchase agreement 0.11%, dated 11/30/2011 under which Credit Agricole CIB New York will repurchase securities provided as collateral for $4,000,012,222 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 8/15/2041 and the market value of those underlying securities was $4,080,012,468. | 73,484,000 |
| 150,000,000 | | Interest in $2,000,000,000 joint repurchase agreement 0.07%, dated 11/30/2011 under which CS First Boston Corp. will repurchase securities provided as collateral for $2,000,027,222 on 12/7/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 2/15/2040 and the market value of those underlying securities was $2,040,006,195. | 150,000,000 |
| 100,000,000 | | Interest in $1,485,000,000 joint repurchase agreement 0.10%, dated 11/30/2011 under which CS First Boston Corp. will repurchase securities provided as collateral for $1,485,004,125 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 1/15/2020 and the market value of those underlying securities was $1,514,706,139. | 100,000,000 |
| 171,000,000 | | Interest in $3,000,000,000 joint repurchase agreement 0.09%, dated 11/30/2011 under which Deutsche Bank Securities, Inc. will repurchase securities provided as collateral for $3,000,052,500 on 12/7/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 2/15/2041 and the market value of those underlying securities was $3,060,007,731. | 171,000,000 |
| 100,000,000 | | Interest in $3,000,000,000 joint repurchase agreement 0.08%, dated 11/30/2011 under which HSBC Securities (USA), Inc. will repurchase securities provided as collateral for $3,000,006,667 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 2/15/2041 and the market value of those underlying securities was $3,060,000,914. | 100,000,000 |
| 100,000,000 | | Interest in $1,000,000,000 joint repurchase agreement 0.10%, dated 11/30/2011 under which HSBC Securities (USA), Inc. will repurchase securities provided as collateral for $1,000,002,778 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 5/15/2037 and the market value of those underlying securities was $1,020,004,558. | 100,000,000 |
| 100,000,000 | | Interest in $500,000,000 joint repurchase agreement 0.09%, dated 11/30/2011 under which Merrill Lynch, Pierce, Fenner and Smith will repurchase securities provided as collateral for $500,001,250 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 8/15/2014 and the market value of those underlying securities was $510,001,282. | 100,000,000 |
| 100,000,000 | | Interest in $5,450,000,000 joint repurchase agreement 0.09%, dated 11/30/2011 under which RBS Securities, Inc. will repurchase securities provided as collateral for $5,450,013,625 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 5/15/2041 and the market value of those underlying securities was $5,559,002,411. | 100,000,000 |
Semi-Annual Shareholder ReportPrincipal
Amount | | | Value |
| $100,000,000 | | Interest in $1,650,000,000 joint repurchase agreement 0.11%, dated 11/30/2011 under which Societe Generale, New York will repurchase securities provided as collateral for $1,650,005,042 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 1/15/2021 and the market value of those underlying securities was $1,683,005,196. | 100,000,000 |
| 100,000,000 | | Interest in $1,400,000,000 joint repurchase agreement 0.11%, dated 11/30/2011 under which TD Securities (USA), LLC will repurchase securities provided as collateral for $1,400,004,278 on 12/1/2011. The securities provided as collateral at the end of the period were U.S. Treasury securities with various maturities to 11/15/2041 and the market value of those underlying securities was $1,428,004,395. | 100,000,000 |
| | TOTAL REPURCHASE AGREEMENTS | 1,544,484,000 |
| | TOTAL INVESTMENTS — 99.8%
(AT AMORTIZED COST)3 | 2,472,894,735 |
| | OTHER ASSETS AND LIABILITIES - NET — 0.2%4 | 5,266,256 |
| | TOTAL NET ASSETS — 100% | $2,478,160,991 |
| 1 | Discount rate at time of purchase. |
| 2 | Although the repurchase date is more than seven days after the date of purchase, the Fund has the right to terminate the repurchase agreement at any time with seven-days' notice. |
| 3 | Also represents cost for federal tax purposes. |
| 4 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at November 30, 2011.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2 — other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of November 31, 2011, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Six Months
Ended
(unaudited)
11/30/2011 | Year Ended May 31, |
| 2011 | 2010 | 2009 | 2008 | 2007 |
| 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 | — | — | — | 0.0032 | 0.0273 | 0.0419 |
| Net realized gain on investments | 0.00001 | 0.00001 | 0.00001 | 0.0001 | — | — |
TOTAL FROM
INVESTMENT
OPERATIONS | 0.00001 | 0.00001 | 0.00001 | 0.0033 | 0.0273 | 0.0419 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | — | — | — | (0.0032) | (0.0273) | (0.0419) |
| Distributions from net realized gain on investments | (0.0000)1 | (0.0000)1 | — | (0.0001) | — | — |
| TOTAL DISTRIBUTIONS | (0.0000)1 | (0.0000)1 | — | (0.0033) | (0.0273) | (0.0419) |
Net Asset Value,
End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.00%3 | 0.00%3 | 0.00%3 | 0.32% | 2.76% | 4.27% |
Ratios to Average
Net Assets: | | | | | | |
| Net expenses | 0.08%4 | 0.19% | 0.21% | 0.47% | 1.04% | 1.05% |
| Net investment income | 0.00%4 | 0.00% | 0.00% | 0.15% | 2.45% | 4.18% |
| Expense waiver/reimbursement5 | 0.98%4 | 0.89% | 0.87% | 0.62% | 0.05% | 0.06% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $2,478,161 | $1,445,337 | $1,339,308 | $1,457,691 | $712,164 | $345,669 |
| 1 | Represents less than $0.0001. |
| 2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 3 | Represents less than 0.01%. |
| 4 | Computed on an annualized basis. |
| 5 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Assets and Liabilities
November 30, 2011 (unaudited)
| Assets: | | |
| Investments in repurchase agreements | $1,544,484,000 | |
| Investments in securities | 928,410,735 | |
| Total investments in securities, at amortized cost and fair value | | $2,472,894,735 |
| Income receivable | | 5,363,099 |
| Receivable for shares sold | | 400 |
| Other assets | | 118,237 |
| TOTAL ASSETS | | 2,478,376,471 |
| Liabilities: | | |
| Payable to adviser (Note 4) | 212,711 | |
| Payable for shares redeemed | 1,985 | |
| Bank overdraft | 784 | |
| TOTAL LIABILITIES | | 215,480 |
| Net assets for 2,478,160,969 shares outstanding | | $2,478,160,991 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,478,160,991 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| ($2,478,160,991 ÷ 2,478,160,969 shares outstanding), $0.001 par value, 12,500,000,000 shares authorized | | $1.00 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Operations
Six Months Ended November 30, 2011 (unaudited)
| Investment Income: | | | |
| Interest | | | $882,259 |
| Expenses: | | | |
| Investment adviser fee (Note 4) | | $5,325,614 | |
| Administrative fee (Note 4) | | 831,861 | |
| Custodian fees | | 38,762 | |
| Transfer and dividend disbursing agent fees and expenses | | 1,112,052 | |
| Directors'/Trustees' fees | | 5,699 | |
| Auditing fees | | 9,250 | |
| Legal fees | | 3,516 | |
| Portfolio accounting fees | | 70,444 | |
| Distribution services fee (Note 4) | | 1,065,123 | |
| Shareholder services fee (Note 4) | | 2,660,515 | |
| Account administration fee | | 1,668 | |
| Share registration costs | | 76,170 | |
| Printing and postage | | 54,150 | |
| Insurance premiums | | 3,443 | |
| Taxes | | 58,424 | |
| Miscellaneous | | 8,594 | |
| TOTAL EXPENSES | | 11,325,285 | |
| Waivers and Reimbursements: | | | |
| Waiver of investment adviser fee (Note 4) | $(5,325,614) | | |
| Waiver of administrative fee (Note 4) | (21,302) | | |
| Waiver of distribution services fee (Note 4) | (1,065,123) | | |
| Waiver of shareholder services fee (Note 4) | (2,648,702) | | |
| Reimbursement of shareholder services fee (Note 4) | (11,813) | | |
| Reimbursement of account administration fee (Note 4) | (1,668) | | |
| Waiver of transfer and dividend disbursing agent fees and expenses | (1,037,398) | | |
| Reimbursement of other operating expenses (Note 4) | (331,406) | | |
| TOTAL WAIVERS AND REIMBURSEMENTS | | (10,443,026) | |
| Net expenses | | | 882,259 |
| Net investment income | | | — |
| Net realized gain on investments | | | 361 |
| Change in net assets resulting from operations | | | $361 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Statement of Changes in Net Assets
| Six Months
Ended
(unaudited)
11/30/2011 | Year Ended
5/31/2011 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $ — | $ — |
| Net realized gain on investments | 361 | 2,417 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 361 | 2,417 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | (2,778) | (1,182) |
| Share Transactions: | | |
| Proceeds from sale of shares | 3,829,061,295 | 6,308,216,081 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 2,715 | 1,172 |
| Cost of shares redeemed | (2,796,237,949) | (6,202,189,037) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 1,032,826,061 | 106,028,216 |
| Change in net assets | 1,032,823,644 | 106,029,451 |
| Net Assets: | | |
| Beginning of period | 1,445,337,347 | 1,339,307,896 |
| End of period | $2,478,160,991 | $1,445,337,347 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report Notes to Financial Statements
November 30, 2011 (unaudited)
1. ORGANIZATION
Cash Trust Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Federated 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. Each portfolio pays its own expenses. The investment objective of the Fund is to provide current income consistent with stability of principal and liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
Securities are valued at amortized cost. Under the amortized cost valuation method, an investment is valued initially at its cost as determined in accordance with GAAP. The Fund then adjusts the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost of the investment and the amount payable at its maturity. If amortized cost is determined not to approximate market value, the fair value of the portfolio securities will be determined under procedures established by and under the general supervision of the Board of Directors (the “Directors”).
Repurchase Agreements
The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value.
The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.
Semi-Annual Shareholder Report
The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities.Investment Income, Gains and Losses, Expenses and Distributions
Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Distributions to shareholders are recorded on the ex-dividend date. Distributions of net investment income, if any, are declared daily and paid monthly.
Premium and Discount Amortization
All premiums and discounts are amortized/accreted using the effective interest rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended November 30, 2011, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of November 30, 2011, tax years 2008 through 2011 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland and the Commonwealth of Pennsylvania.
Other Taxes
As an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.
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. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Other
The preparation of financial statements in conformity with GAAP 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.
Semi-Annual Shareholder Report
3. CAPITAL STOCKThe following table summarizes capital stock activity:
| | Six Months
Ended
11/30/2011 | Year Ended
5/31/2011 |
| Shares sold | 3,829,061,295 | 6,308,216,081 |
| Shares issued to shareholders in payment of distributions declared | 2,715 | 1,172 |
| Shares redeemed | (2,796,237,949) | (6,202,189,037) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 1,032,826,061 | 106,028,216 |
4. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
Federated Investment Management Company is the Fund's investment adviser (the “Adviser”). The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.50% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee and/or reimburse certain operating expenses of the Fund. For the six months ended November 30, 2011, the Adviser voluntarily waived its entire fee of $5,325,614 and voluntarily reimbursed $331,406 of other operating expenses.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as specified below:
| Administrative Fee | Average Aggregate Daily Net Assets
of the Federated Funds |
| 0.150% | on the first $5 billion |
| 0.125% | on the next $5 billion |
| 0.100% | on the next $10 billion |
| 0.075% | on assets in excess of $20 billion |
The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, the net fee paid to FAS was 0.076% of average daily net assets of the Fund. FAS waived $21,302 of its fee.
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 daily net assets of the Fund to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses of up to 0.35% of average daily net assets, annually, to reimburse FSC. Subject to the Semi-Annual Shareholder Report
terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2011, FSC voluntarily waived its entire fee of $1,065,123. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares.Shareholder Services Fee
The Fund may pay fees (“Service Fees”) up to 0.25% of the average daily net assets of the Fund to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the six months ended November 30, 2011, FSSC voluntarily reimbursed $11,813 of shareholder service fees and $1,668 of account administration fees. In addition, unaffiliated third-party financial intermediaries waived $2,648,702 of shareholder service fees. This waiver can be modified or terminated at any time.
Expense Limitation
Due to the possibility of changes in market conditions and other factors, there can be no assurance that the level of waivers/reimbursement/reduction of Fund expenses reflected in the financial highlights will be maintained in the future. However, the Adviser and its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's Shares (after the voluntary waivers and reimbursements) will not exceed 1.05% (the “Fee Limit”), up to but not including the later of (the “Termination Date”): (a) August 1, 2012; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Directors.
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of the above companies.
5. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2011, there were no outstanding loans. During the six months ended November 30, 2011, the Fund did not utilize the LOC.
6. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2011, there were no outstanding loans. During the six months ended November 30, 2011, the program was not utilized.
Semi-Annual Shareholder Report
7. RECENT ACCOUNTING PRONOUNCEMENTSIn April 2011, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) No. 2011-03, “Reconsideration of Effective Control for Repurchase Agreements.” This ASU amends FASB Accounting Standards Codification (ASC) Topic 860, “Transfers and Servicing”; specifically the criteria required to determine whether a repurchase agreement and similar agreements should be accounted for as sales of financial assets or secured borrowings with commitments. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-03 is not expected to have a material impact on the Fund's financial statements and the accompanying notes, net assets and results of operations.
In addition, in May 2011, FASB released ASU No. 2011-04, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” This ASU amends FASB ASC Topic 820, “Fair Value Measurement,” to establish common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP. This ASU is effective for fiscal years and interim periods beginning after December 15, 2011. Management has concluded that the adoption of ASU No. 2011-04 is not expected to have a material impact on the Fund's financial statements and the accompanying notes.
Semi-Annual Shareholder Report Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2011 to November 30, 2011.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| Beginning
Account Value
6/1/2011 | Ending
Account Value
11/30/2011 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.00 | $0.40 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,024.60 | $0.40 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.08%, multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half-year period). |
| 2 | Actual and Hypothetical expenses paid during the period utilizing the Fund's current annualized net expense ratio of 1.05% (as reflected in the Notes to Financial Statements, Note 4 under Expense Limitation), multiplied by the average account value over the period, multiplied by 183/366 (to reflect current expenses as if they had been in effect throughout the most recent one-half-year period) would be $5.25 and $5.30, respectively. |
Semi-Annual Shareholder Report Evaluation and Approval of Advisory Contract – May 2011
federated treasury cash series (the “Fund”)
The Fund's Board reviewed the Fund's investment advisory contract at meetings held in May 2011. The Board's decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection, the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
During its review of the contract, the Board considered compensation and benefits received by the Adviser. This included the fees received for services provided to the Fund by other entities in the Federated organization and research services (if any) received by the Adviser from brokers that execute Federated fund trades, as well as advisory fees. The Board is also familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize “economies of scale” as a fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with a fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts the Board deems relevant bearing on the Adviser's services and fees. The Board further considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like services, and the cost to the Adviser and its affiliates of supplying services pursuant to the management fee agreements, excluding any intra-corporate profit and profit margins of the Adviser and its affiliates for supplying such services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Semi-Annual Shareholder Report
The Board considered and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by independent legal counsel. Throughout the year, the Board has requested and received substantial and detailed information about the Fund and the Federated organization that was in addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional information in connection with the particular meeting at which the Board's formal review of the advisory contract occurred. Between regularly scheduled meetings, the Board also received information on particular matters as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar Semi-Annual Shareholder Report
mutual funds more heavily than non-mutual fund products or services because it is believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group was a useful indicator of how the Adviser is executing the Fund's investment program, which in turn assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g., institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory contracts.The Senior Officer reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to fund peer groups are relevant in judging the reasonableness of proposed fees.
The Fund's performance fell below the median of the relevant peer group for the one-year period covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The information also detailed any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waived fees Semi-Annual Shareholder Report
and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover, the Board receives regular reporting as to the institution or elimination of these voluntary waivers.Federated furnished information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive and the Board agreed.
The Senior Officer's Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, compliance, internal audit, and risk management functions; and systems technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory services at this time.
It was noted in the materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee was waived in its entirety. The Board reviewed the contractual fee rate and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
The Senior Officer noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds are reasonable and that Federated appeared to provide appropriate administrative services to the Fund for the fees paid. Under these circumstances, no changes Semi-Annual Shareholder Report
were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract. The Board concluded that the nature, quality and scope of services provided the Fund by the Adviser and its affiliates were satisfactory.In its decision to continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund.
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Documents” tab. At the bottom of that page, select “Form N-Q.”
Semi-Annual Shareholder Report
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 the possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so.This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Federated Treasury Cash Series
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
Cusip 147551402
0122607 (1/12)
Federated is a registered trademark of Federated Investors, Inc.
2012 © Federated Investors, Inc.
Item 2. Code of Ethics
Not Applicable
Item 3. Audit Committee Financial Expert
Not Applicable
Item 4. Principal Accountant Fees and Services
Not Applicable
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the reporting period covered since the previous Form N-CSR filing.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Not Applicable
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Not Applicable
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
Not Applicable
Item 10. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have concluded that the
registrant’s disclosure controls and procedures (as defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics- Not Applicable to this Semi-Annual Report.
(a)(2) Certifications of Principal Executive Officer and Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Registrant Cash Trust Series, Inc.
By /S/ Richard A. Novak
Richard A. Novak, Principal Financial Officer
Date January 23, 2012
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /S/ J. Christopher Donahue
J. Christopher Donahue, Principal Executive Officer
Date January 23, 2012
By /S/ Richard A. Novak
Richard A. Novak, Principal Financial Officer
Date January 23, 2012
