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, Pennsylvania 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: 05/31/13
Date of Reporting Period: 05/31/13
Item 1. Reports to Stockholders
Annual Shareholder Report
May 31, 2013
Federated Government Cash Series
A Portfolio of Cash Trust Series, Inc.
Not FDIC Insured
May Lose Value
No Bank Guarantee
Portfolio of Investments Summary Tables (unaudited)
At May 31, 2013, the Fund's portfolio composition1 was as follows:
| Portfolio Composition | Percentage of
Total Net Assets |
| U.S. Government Agency Securities | 43.5% |
| U.S. Treasury Security | 0.2% |
| Repurchase Agreements | 57.9% |
| Other Assets and Liabilities—Net2 | (1.6)% |
| TOTAL | 100.0% |
At May 31, 2013, the Fund's effective maturity3 schedule was as follows:
Securities With an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 66.8% |
| 8-30 Days | 7.6% |
| 31-90 Days | 7.0% |
| 91-180 Days | 11.5% |
| 181 Days or more | 8.7% |
| Other Assets and Liabilities—Net2 | (1.6)% |
| 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. |
Annual Shareholder Report
Portfolio of Investments
May 31, 2013
Principal
Amount | | | Value |
| | | GOVERNMENT AGENCIES—43.5% | |
| $95,250,000 | 1 | Federal Farm Credit System Floating Rate Notes, 0.120% - 0.330%, 6/2/2013 - 6/26/2013 | $95,282,943 |
| 25,065,000 | | Federal Farm Credit System Notes, 0.150% - 3.875%, 7/23/2013 - 2/13/2014 | 25,120,806 |
| 96,700,000 | 1 | Federal Home Loan Bank System Floating Rate Notes, 0.100% - 0.280%, 6/3/2013 - 8/5/2013 | 96,685,887 |
| 421,660,000 | | Federal Home Loan Bank System Notes, 0.110% - 5.375%, 6/6/2013 - 6/26/2014 | 422,474,087 |
| 31,000,000 | 2 | Federal Home Loan Mortgage Corp. Discount Notes, 0.100% - 0.150%, 9/3/2013 - 12/3/2013 | 30,987,126 |
| 51,200,000 | 1 | Federal Home Loan Mortgage Corp. Floating Rate Notes, 0.148% - 0.168%, 6/4/2013 - 6/17/2013 | 51,197,004 |
| 17,000,000 | 1 | Federal Home Loan Mortgage Corp. Floating Rate Notes, 0.148%, 6/3/2013 | 16,999,962 |
| 94,799,000 | | Federal Home Loan Mortgage Corp. Notes, 0.130% - 4.875%, 9/27/2013 - 2/7/2014 | 95,482,946 |
| 19,051,000 | 2 | Federal National Mortgage Association Discount Notes, 0.100% - 0.150%, 9/3/2013 - 11/27/2013 | 19,043,005 |
| 114,020,000 | 1 | Federal National Mortgage Association Floating Rate Notes, 0.158% - 0.320%, 6/3/2013 - 6/27/2013 | 114,002,615 |
| 120,512,000 | | Federal National Mortgage Association Notes, 0.500% - 4.625%, 6/26/2013 - 2/28/2014 | 121,127,661 |
| | | TOTAL GOVERNMENT AGENCIES | 1,088,404,042 |
| | | U.S. Treasury—0.2% | |
| 5,000,000 | | United States Treasury Notes, 3.375%, 7/31/2013 | 5,026,167 |
| | | Repurchase Agreements—57.9% | |
| 83,000,000 | 3 | Interest in $1,353,000,000 joint repurchase agreement 0.10%, dated 5/20/2013 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $1,353,342,008 on 8/19/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 6/1/2043 and the market value of those underlying securities was $1,385,422,074. | 83,000,000 |
| 24,000,000 | 3 | Interest in $386,000,000 joint repurchase agreement 0.10%, dated 5/20/2013 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $386,097,572 on 8/20/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 6/1/2043 and the market value of those underlying securities was $395,538,728. | 24,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Repurchase Agreements—continued | |
| $48,000,000 | 3 | Interest in $772,000,000 joint repurchase agreement 0.11%, dated 5/15/2013 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $772,070,767 on 6/14/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 5/1/2043 and the market value of those underlying securities was $794,990,144. | $48,000,000 |
| 19,614,000 | | Interest in $3,435,000,000 joint repurchase agreement 0.09%, dated 5/31/2013 under which Bank of America, N.A. will repurchase securities provided as collateral for $3,435,025,763 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 12/1/2041 and the market value of those underlying securities was $3,503,726,278. | 19,614,000 |
| 22,000,000 | | Interest in $385,000,000 joint repurchase agreement 0.04%, dated 5/30/2013 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $385,002,994 on 6/6/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, was a U.S. Treasury security and U.S. Government Agency securities with various maturities to 12/28/2022 and the market value of those underlying securities was $392,701,794. | 22,000,000 |
| 21,000,000 | | Interest in $386,000,000 joint repurchase agreement 0.08%, dated 5/31/2013 under which Barclays Capital, Inc. will repurchase security provided as collateral for $386,006,004 on 6/7/2013. The security provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, was a U.S. Government Agency security maturing on 11/21/2018 and the market value of that underlying security was $393,725,137. | 21,000,000 |
| 32,000,000 | 3 | Interest in $585,000,000 joint repurchase agreement 0.14%, dated 4/22/2013 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $585,207,025 on 7/22/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 6/1/2043 and the market value of those underlying securities was $596,797,461. | 32,000,000 |
| 46,000,000 | 3 | Interest in $776,000,000 joint repurchase agreement 0.15%, dated 3/4/2013 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $776,294,233 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 10/25/2044 and the market value of those underlying securities was $796,930,659. | 46,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Repurchase Agreements—continued | |
| $43,000,000 | 3 | Interest in $750,000,000 joint repurchase agreement 0.15%, dated 3/7/2013 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $750,281,250 on 6/6/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, was a U.S. Treasury security and U.S. Government Agency securities with various maturities to 4/1/2043 and the market value of those underlying securities was $766,591,478. | $43,000,000 |
| 198,000,000 | | Interest in $1,203,000,000 joint repurchase agreement 0.07%, dated 5/28/2013 under which Citigroup Global Markets, Inc. will repurchase securities provided as collateral for $1,203,016,374 on 6/4/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 4/15/2053 and the market value of those underlying securities was $1,229,435,240. | 198,000,000 |
| 92,000,000 | | Interest in $1,621,000,000 joint repurchase agreement 0.06%, dated 5/30/2013 under which Deutsche Bank Securities, Inc. will repurchase securities provided as collateral for $1,621,018,912 on 6/6/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 6/1/2043 and the market value of those underlying securities was $1,669,636,911. | 92,000,000 |
| 93,000,000 | 3 | Interest in $1,611,000,000 joint repurchase agreement 0.10%, dated 5/13/2013 under which Deutsche Bank Securities, Inc. will repurchase securities provided as collateral for $1,611,143,200 on 6/14/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 10/15/2047 and the market value of those underlying securities was $1,655,163,141. | 93,000,000 |
| 35,000,000 | | Interest in $580,000,000 joint repurchase agreement 0.04%, dated 5/30/2013 under which Goldman Sachs & Co. will repurchase securities provided as collateral for $580,004,511 on 6/6/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 4/25/2043 and the market value of those underlying securities was $597,402,655. | 35,000,000 |
| 12,000,000 | | Interest in $445,000,000 joint repurchase agreement 0.05%, dated 5/29/2013 under which Goldman Sachs & Co. will repurchase securities provided as collateral for $445,004,326 on 6/5/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 7/25/2039 and the market value of those underlying securities was $458,353,183. | 12,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Repurchase Agreements—continued | |
| $22,000,000 | | Interest in $385,000,000 joint repurchase agreement 0.06%, dated 5/28/2013 under which Goldman Sachs & Co. will repurchase securities provided as collateral for $385,003,850 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 6/1/2043 and the market value of those underlying securities was $394,537,055. | $22,000,000 |
| 57,000,000 | 3 | Interest in $1,000,000,000 joint repurchase agreement 0.17%, dated 4/19/2013 under which ING Financial Markets LLC will repurchase securities provided as collateral for $1,000,425,000 on 7/18/2013. The securities provided as collateral at the end of the period held with JPMorgan Chase & Co., tri-party agent, were U.S. Government Agency securities with various maturities to 7/25/2048 and the market value of those underlying securities was $1,029,758,236. | 57,000,000 |
| 68,000,000 | 3 | Interest in $421,000,000 joint repurchase agreement 0.12%, dated 5/2/2013 under which Merrill Lynch, Pierce, Fenner, and Smith will repurchase securities provided as collateral for $421,044,907 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 1/1/2043 and the market value of those underlying securities was $431,151,481. | 68,000,000 |
| 20,000,000 | 3 | Interest in $400,000,000 joint repurchase agreement 0.25%, dated 3/20/2013 under which Mitsubishi UFJ Securities (USA), Inc. will repurchase securities provided as collateral for $400,250,000 on 6/18/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 8/1/2048 and the market value of those underlying securities was $408,606,917. | 20,000,000 |
| 400,000,000 | | Interest in $600,000,000 joint repurchase agreement 0.10%, dated 5/31/2013 under which Mizuho Securities USA, Inc. will repurchase securities provided as collateral for $600,005,000 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 9/16/2050 and the market value of those underlying securities was $612,237,880. | 400,000,000 |
| 28,000,000 | 3 | Interest in $500,000,000 joint repurchase agreement 0.07%, dated 5/21/2013 under which RBC Capital Markets, LLC will repurchase securities provided as collateral for $500,029,167 on 6/20/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 3/1/2043 and the market value of those underlying securities was $510,012,892. | 28,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Repurchase Agreements—continued | |
| $29,000,000 | 3 | Interest in $500,000,000 joint repurchase agreement 0.14%, dated 4/3/2013 under which RBC Capital Markets, LLC will repurchase securities provided as collateral for $500,175,000 on 7/2/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 6/25/2043 and the market value of those underlying securities was $512,781,122. | $29,000,000 |
| 57,000,000 | 3 | Interest in $1,000,000,000 joint repurchase agreement 0.15%, dated 5/13/2013 under which RBC Capital Markets, LLC will repurchase securities provided as collateral for $1,000,125,000 on 6/12/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 5/1/2043 and the market value of those underlying securities was $1,020,089,251. | 57,000,000 |
| | | TOTAL REPURCHASE AGREEMENTS (AT COST) | 1,449,614,000 |
| | | TOTAL INVESTMENTS—101.6%
(AT AMORTIZED COST)4 | 2,543,044,209 |
| | | OTHER ASSETS AND LIABILITIES - NET—(1.6)%5 | (38,869,919) |
| | | TOTAL NET ASSETS—100% | $2,504,174,290 |
| 1 | Floating rate notes with current rate and next reset date shown. |
| 2 | Discount rate(s) at time of purchase. |
| 3 | 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. |
| 4 | Also represents cost for federal tax purposes. |
| 5 | 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 May 31, 2013.
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 May 31, 2013, 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
Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Year Ended May 31 | 2013 | 2012 | 2011 | 2010 | 2009 |
| Net Asset Value, Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Income From Investment Operations: | | | | | |
| Net investment income | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0063 |
| Net realized gain on investments | 0.00001 | 0.00001 | 0.00001 | 0.0001 | — |
| TOTAL FROM INVESTMENT OPERATIONS | 0.0001 | 0.0001 | 0.0001 | 0.0002 | 0.0063 |
| Less Distributions: | | | | | |
| Distributions from net investment income | (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0063) |
| Distributions from net realized gain on investments | (0.0000)1 | (0.0000)1 | (0.0000)1 | (0.0001) | — |
| TOTAL DISTRIBUTIONS | (0.0001) | (0.0001) | (0.0001) | (0.0002) | (0.0063) |
| Net Asset Value, End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.01% | 0.01% | 0.01% | 0.01% | 0.64% |
| Ratios to Average Net Assets: | | | | | |
| Net expenses | 0.18% | 0.16% | 0.23% | 0.31% | 1.00% |
| Net investment income | 0.01% | 0.01% | 0.01% | 0.01% | 0.60% |
| Expense waiver/reimbursement3 | 0.88% | 0.90% | 0.84% | 0.78% | 0.11% |
| Supplemental Data: | | | | | |
| Net assets, end of period (000 omitted) | $2,504,174 | $2,557,022 | $2,522,787 | $861,225 | $946,354 |
| 1 | Represents less than $0.0001. |
| 2 | Based on net asset value. |
| 3 | 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
Annual Shareholder Report
Statement of Assets and Liabilities
May 31, 2013
| Assets: | | |
| Investment in repurchase agreements | $1,449,614,000 | |
| Investment in securities | 1,093,430,209 | |
| Total investment in securities, at amortized cost and fair value | | $2,543,044,209 |
| Cash | | 209,623 |
| Income receivable | | 2,339,895 |
| Receivable for shares sold | | 78,639 |
| TOTAL ASSETS | | 2,545,672,366 |
| Liabilities: | | |
| Payable for investments purchased | 41,000,000 | |
| Payable for shares redeemed | 139,084 | |
| Payable to adviser (Note 5) | 226,131 | |
| Accrued expenses (Note 5) | 132,861 | |
| TOTAL LIABILITIES | | 41,498,076 |
| Net assets for 2,504,174,290 shares outstanding | | $2,504,174,290 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,504,174,290 |
| TOTAL NET ASSETS | | $2,504,174,290 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| ($2,504,174,290 ÷ 2,504,174,290 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
Annual Shareholder Report
Statement of Operations
Year Ended May 31, 2013
| Investment Income: | | | |
| Interest | | | $5,315,226 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $13,736,892 | |
| Administrative fee (Note 5) | | 2,143,856 | |
| Custodian fees | | 103,177 | |
| Transfer and dividend disbursing agent fees and expenses | | 2,956,920 | |
| Directors'/Trustees' fees (Note 5) | | 15,910 | |
| Auditing fees | | 19,250 | |
| Legal fees | | 7,860 | |
| Portfolio accounting fees | | 162,150 | |
| Distribution services fee (Note 5) | | 2,747,378 | |
| Shareholder services fee (Note 5) | | 6,867,522 | |
| Account administration fee | | 924 | |
| Share registration costs | | 91,505 | |
| Printing and postage | | 119,062 | |
| Insurance premiums (Note 5) | | 8,769 | |
| Taxes | | 204,782 | |
| Miscellaneous (Note 5) | | 11,133 | |
| TOTAL EXPENSES | | 29,197,090 | |
| Waivers: | | | |
| Waiver of investment adviser fee (Note 5) | $(11,856,522) | | |
| Waiver of administrative fee (Note 5) | (13,071) | | |
| Waiver of distribution services fee (Note 5) | (2,747,378) | | |
| Waiver of shareholder services fee (Note 5) | (6,867,522) | | |
| Waiver of account administration fee (Note 5) | (924) | | |
| Waiver of transfer and dividend disbursing agent fees and expenses | (2,670,687) | | |
| TOTAL WAIVERS | | (24,156,104) | |
| Net expenses | | | 5,040,986 |
| Net investment income | | | 274,240 |
| Net realized gain on investments | | | 341 |
| Change in net assets resulting from operations | | | $274,581 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Statement of Changes in Net Assets
| Year Ended May 31 | 2013 | 2012 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $274,240 | $258,864 |
| Net realized gain on investments | 341 | 3,474 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 274,581 | 262,338 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (274,240) | (258,864) |
| Distributions from net realized gain on investments | (341) | (4,961) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (274,581) | (263,825) |
| Share Transactions: | | |
| Proceeds from sale of shares | 3,165,346,089 | 3,370,176,828 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 274,374 | 263,664 |
| Cost of shares redeemed | (3,218,468,378) | (3,336,203,917) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (52,847,915) | 34,236,575 |
| Change in net assets | (52,847,915) | 34,235,088 |
| Net Assets: | | |
| Beginning of period | 2,557,022,205 | 2,522,787,117 |
| End of period | $2,504,174,290 | $2,557,022,205 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Notes to Financial Statements
May 31, 2013
1. ORGANIZATION
Cash Trust Series, Inc. (the “ Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Government Cash Series (the “Fund”), 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 fair value, the value of the portfolio securities will be determined under procedures established by and under the general supervision of the Directors.
The Directors have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to determine fair value of securities and in overseeing the comparison of amortized cost to market value. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of monitoring the relationship of market value and amortized cost. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions) and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Annual Shareholder Report
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.
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 year ended May 31, 2013, 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 May 31, 2013, tax years 2010 through 2013 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.
Annual Shareholder Report
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.
3. CAPITAL STOCK
The following table summarizes share activity:
| Year Ended May 31 | 2013 | 2012 |
| Shares sold | 3,165,346,089 | 3,370,176,828 |
| Shares issued to shareholders in payment of distributions declared | 274,374 | 263,664 |
| Shares redeemed | (3,218,468,378) | (3,336,203,917) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (52,847,915) | 34,236,575 |
4. FEDERAL TAX INFORMATION
The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended May 31, 2013 and 2012, was as follows:
| | 2013 | 2012 |
| Ordinary income1 | $274,581 | $263,825 |
| 1 | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
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 year ended May 31, 2013, the Adviser voluntarily waived $11,856,522 of its fee.
Annual Shareholder Report
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Daily Net Assets
of the Investment Complex |
| 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 |
Prior to September 1, 2012, the administrative fee received during any fiscal year was 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 year ended May 31, 2013, FAS waived $13,071 of its fee. The net fee paid to FAS was 0.078% of average daily net assets of the Fund.
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 year ended May 31, 2013, FSC voluntarily waived its entire fee of $2,747,378. 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 year ended May 31, 2013, unaffiliated third-party financial intermediaries waived $6,867,522 of shareholder services fees and $924 of account administration fees. These waivers can be modified or terminated at any time.
Annual Shareholder Report
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 certain of its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their respective 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, 2014; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable 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 certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.
6. 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 May 31, 2013, there were no outstanding loans. During the year ended May 31, 2013, 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 May 31, 2013, there were no outstanding loans. During the year ended May 31, 2013, the program was not utilized.
Annual Shareholder Report
Report of Independent Registered Public Accounting Firm
TO THE BOARD OF directors OF Cash TRUST SERIES, INC. AND SHAREHOLDERS Of Federated government cash Series:
We have audited the accompanying statement of assets and liabilities of Federated Government Cash Series (the “Fund”) (one of the portfolios constituting Cash Trust Series, Inc.), including the portfolio of investments, as of May 31, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of May 31, 2013, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Federated Government Cash Series, a portfolio of Cash Trust Series, Inc., at May 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
July 24, 2013
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 December 1, 2012 to May 31, 2013.
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.
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
12/1/2012 | Ending
Account Value
5/31/2013 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.10 | $0.90 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,024.03 | $0.91 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.18%, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half-year period). |
| 2 | Actual and Hypothetical expenses paid during the period utilizing the Fund's current Fee Limit of 1.05% (as reflected in the Notes to Financial Statements, Note 5 under Expense Limitation), multiplied by the average account value over the period, multiplied by 182/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.24 and $5.29, respectively. |
Annual Shareholder Report
Board of Directors and Corporation Officers
The Board of Directors is responsible for managing the Corporation's business affairs and for exercising all the Corporation's powers except those reserved for the shareholders. The following tables give information about each Director and the senior officers of the Fund. Where required, the tables separately list Directors who are “interested persons” of the Fund (i.e., “Interested” Directors) and those who are not (i.e., “ Independent” Directors). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Directors listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2012, the Corporation comprised four portfolio(s), and the Federated Fund Family consisted of 42 investment companies (comprising 137 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Director oversees all portfolios in the Federated Fund Family and serves for an indefinite term. The Fund's Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-341-7400.
In Memoriam - John F. Cunningham, Independent Director
With deep sadness, Federated announces the passing of John F. Cunningham, who served as an independent member of the Board of the Federated Fund Family since 1999. Mr. Cunningham's savvy business acumen and incisive intellect made him a powerful force on the Federated Fund Board. He was an advocate for shareholders and a respected colleague within the Federated family. Mr. Cunningham enjoyed an outstanding career in technology, having served as President and in other Senior Executive positions with leading companies in the industry. Federated expresses gratitude to Mr. Cunningham for his fine contributions as a Board member, colleague and friend. He will be greatly missed.
Interested DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
John F. Donahue*
Birth Date: July 28, 1924
Director
Began serving: May 1989 | Principal Occupations: Director or Trustee of the Federated Fund Family; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Family's Executive Committee.
Previous Positions: Chairman of the Federated Fund Family; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
J. Christopher Donahue*
Birth Date: April 11, 1949
President and Director
Began serving: May 1989 | Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Fund Family; Director or Trustee of certain of the Funds in the Federated Fund Family; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company.
Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd. |
| * | Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries. |
INDEPENDENT DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Maureen Lally-Green
Birth Date: July 5, 1949
Director
Began serving: August 2009 | Principal Occupations: Director or Trustee of the Federated Fund Family; Director, Office of Church Relations, and Associate General Secretary, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne University School of Law.
Other Directorships Held: Director, Auberle; Member, Pennsylvania State Board of Education; Director, Saint Vincent College; Director, Ireland Institute of Pittsburgh; Chair and Director, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society, Allegheny County; Director, Our Campaign for the Church Alive, Inc.
Previous Position: Pennsylvania Superior Court Judge.
Qualifications: Legal and director experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Peter E. Madden
Birth Date: March 16, 1942
Director
Began serving: August 1991 | Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Family.
Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
Qualifications: Business management, mutual fund services and director experience. |
Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee of the Federated Fund Family; Management Consultant.
Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President, DVC Group, Inc. (marketing, communications and technology).
Qualifications: Banking, business management, education and director experience. |
Thomas M. O'Neill
Birth Date: June 14, 1951
Director
Began serving: October 2006 | Principal Occupations: Director or Trustee, Vice Chairman of the Audit Committee of the Federated Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College; Board of Directors, Medicines for Humanity; Board of Directors, The Golisano Children's Museum of Naples, Florida.
Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber).
Qualifications: Business management, mutual fund, director and investment experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
John S. Walsh
Birth Date: November 28, 1957
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee, Chairman of the Audit Committee of the Federated Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
Previous Position: Vice President, Walsh & Kelly, Inc.
Qualifications: Business management and director experience. |
OFFICERS
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT AND SECRETARY
Officer since: May 1989 | Principal Occupations: Executive Vice President and Secretary of the Federated Fund Family; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp. |
Lori A. Hensler, CPA
Birth Date: January 6, 1967
TREASURER
Officer since: April 2013 | Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp. and Edgewood Services, Inc.; and Assistant Treasurer, Federated Investors Trust Company.
Previous Positions: Controller of Federated Investors, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
Peter J. Germain
Birth Date: September 3, 1959
CHIEF LEGAL OFFICER
Officer since: January 2005 | Principal Occupations: Mr. Germain is Chief Legal Officer of the Federated Fund Family. He is General Counsel and Vice President, Federated Investors, Inc.; President, Federated Administrative Services and Federated Administrative Services, Inc.; Vice President, Federated Securities Corp.; Secretary, Federated Private Asset Management, Inc.; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated in 1984 and is a member of the Pennsylvania Bar Association.
Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Investors, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Investors, Inc. |
Richard B. Fisher
Birth Date: May 17, 1923
VICE CHAIRMAN
Officer since: August 2002 | Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Family; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Family; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated Securities Corp. |
Brian P. Bouda
Birth Date: February 28, 1947
CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
Officer since: August 2004 | Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Family; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
Previous Positions: Served in Senior Management positions with a large regional banking organization. |
Deborah A. Cunningham
Birth Date: September 15, 1959
CHIEF INVESTMENT OFFICER
Officer since: May 2004
Portfolio Manager since: January 1994 | Principal Occupations: Deborah A. Cunningham has been the Fund's Portfolio Manager since January 1994. Ms. Cunningham was named Chief Investment Officer of money market products in 2004. She joined Federated in 1981 and has been a Senior Portfolio Manager since 1997 and an Executive Vice President of the Fund's Adviser since 2009. Ms. Cunningham has received the Chartered Financial Analyst designation and holds an M.S.B.A. in Finance from Robert Morris College. |
Susan R. Hill
Birth Date: June 20, 1963
VICE PRESIDENT
Officer since: June 2012
Portfolio Manager since: January 1994 | Principal Occupations: Susan R. Hill has been the Fund's Portfolio Manager since January 1994. She is Vice President of the Corporation with respect to the Fund.. Ms. Hill joined Federated in 1990 and has been a Senior Portfolio Manager since 2003 and a Senior Vice President of the Fund's Adviser since 2005. Ms. Hill was a Portfolio Manager from 1994 until 2003 and served as Vice President of the Fund's Adviser from 1997 until 2004 and an Assistant Vice President of the Fund's Adviser from 1994 until 1997. Ms. Hill has received the Chartered Financial Analyst designation and holds an M.S. in Industrial Administration from Carnegie Mellon University. |
Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2013
Federated Government Cash Series (the “Fund”)
Following a review and recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2013 meetings the Fund's investment advisory contract for an additional one-year term. 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.
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 to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders or the family of funds; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees charged to institutional and other clients of the Adviser for what might be viewed as like 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.
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, and in connection with its May meetings, the Board 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 substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent directors and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. 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; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; 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.
Annual Shareholder Report
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. The Board focused on comparisons with other similar 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 relative indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
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, noting that the overall expense structure of the Fund, after waivers and expense reimbursements, was above the median of the relevant peer group, but the Board still was satisfied that the overall expense structure of the Fund remained competitive.
By contrast, 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 the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Fund's ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as 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.
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, though not conclusive, in judging the reasonableness of proposed fees.
Annual Shareholder Report
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, adjustment 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, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in arbitrarily allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate can dramatically alter the resulting estimate of cost and/or profitability of a fund. 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. The Board agreed with this assessment.
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 family of funds, such as personnel and processes for the portfolio management, shareholder services, 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 family as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject,
Annual Shareholder Report
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 noted that, subject to the 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 were reasonable. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
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 concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
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.
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 Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “ Literature and Prospectuses” 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 Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”
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.
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
28564 (7/13)
Federated is a registered trademark of Federated Investors, Inc.
2013 ©Federated Investors, Inc.
Annual Shareholder Report
May 31, 2013
Federated Municipal Cash Series
A Portfolio of Cash Trust Series, Inc.
Not FDIC Insured
May Lose Value
No Bank Guarantee
Portfolio of Investments Summary Tables (unaudited)
At May 31, 2013, the Fund's portfolio composition1 was as follows:
| | Percentage of
Total Net Assets |
| Variable Rate Demand Instruments | 78.3% |
| Municipal Notes | 21.7% |
| Commercial Paper | 0.6% |
| Other Assets and Liabilities—Net2 | (0.6)% |
| TOTAL | 100.0% |
At May 31, 2013, the Fund's effective maturity schedule3 was as follows:
Securities with an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 78.8% |
| 8-30 Days | 7.3% |
| 31-90 Days | 5.7% |
| 91-180 Days | 2.8% |
| 181 Days or more | 6.0% |
| Other Assets and Liabilities—Net2 | (0.6)% |
| 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. |
Annual Shareholder Report
Portfolio of Investments
May 31, 2013
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—100.6%1,2 | |
| | | Alabama—1.2% | |
| $974,500 | | Birmingham, AL IDA, IDRBs (Series 1999) Weekly VRDNs (Glasforms, Inc.)/(Wells Fargo Bank, N.A. LOC), 0.170%, 6/6/2013 | $974,500 |
| 3,200,000 | | Mobile, AL IDB, PCRBs (Series 2007B), 0.40% TOBs (Alabama Power Co.), Mandatory Tender 4/2/2014 | 3,200,000 |
| | | TOTAL | 4,174,500 |
| | | Arizona—7.8% | |
| 855,000 | | Casa Grande, AZ IDA, (Series 2002A) Weekly VRDNs (Price Cos., Inc.)/(Bank of America N.A. LOC), 0.300%, 6/6/2013 | 855,000 |
| 7,221,000 | | Flagstaff, AZ IDA, (Series 1999) Weekly VRDNs (Joy Cone Co.)/(Citizens Bank of Pennsylvania LOC), 0.250%, 6/6/2013 | 7,221,000 |
| 5,610,000 | | Maricopa County, AZ, IDA, (Series 1999) Weekly VRDNs (Redman Homes, Inc.)/(Wells Fargo & Co. LOC), 0.240%, 6/6/2013 | 5,610,000 |
| 770,000 | | Phoenix, AZ IDA, (Series 2000) Weekly VRDNs (MechoShade West, Inc.)/(JPMorgan Chase Bank, N.A. LOC), 0.320%, 6/6/2013 | 770,000 |
| 2,100,000 | | Pinal County, AZ IDA, (Series 2002) Weekly VRDNs (D.A. Holdings LLC)/(Wells Fargo Bank, N.A. LOC), 0.200%, 6/6/2013 | 2,100,000 |
| 6,750,000 | | Pinal County, AZ IDA, (Series 2002) Weekly VRDNs (Milky Way Dairy LLC)/(Rabobank Nederland NV, Utrecht LOC), 0.160%, 6/6/2013 | 6,750,000 |
| 3,630,000 | | Pinal County, AZ IDA, (Series 2005) Weekly VRDNs (Three C Eloy LLC)/(CoBank, ACB LOC), 0.210%, 6/6/2013 | 3,630,000 |
| 1,175,000 | | Pinal County, AZ IDA, (Series 2006) Weekly VRDNs (Three C Eloy LLC)/(CoBank, ACB LOC), 0.210%, 6/6/2013 | 1,175,000 |
| | | TOTAL | 28,111,000 |
| | | California—2.8% | |
| 8,000,000 | | California State, (Series A-2), 2.50% RANs, 6/20/2013 | 8,008,590 |
| 2,065,000 | | Oxnard, CA IDFA, (Series 2004) Weekly VRDNs (J. Harris Industrial Water Treatment, Inc.)/(City National Bank LOC), 1.200%, 6/6/2013 | 2,065,000 |
| | | TOTAL | 10,073,590 |
| | | Colorado—3.8% | |
| 3,300,000 | | Colorado Agricultural Development Authority, (Series 2006) Weekly VRDNs (Monte Vista Dairy, LLC)/(Bank of the West, San Francisco, CA LOC), 0.370%, 6/6/2013 | 3,300,000 |
| 390,000 | | Colorado HFA (Class I Bonds), (Series 2000A) Weekly VRDNs (New Belgium Brewing Co., Inc.)/(Wells Fargo Bank, N.A. LOC), 0.280%, 6/6/2013 | 390,000 |
| 9,970,000 | 3,4 | Denver, CO City & County Airport Authority, SPEARs (Series DBE-485), 0.30% TOBs (GTD by Deutsche Bank AG)/(Deutsche Bank AG LIQ), Optional Tender 6/20/2013 | 9,970,000 |
| | | TOTAL | 13,660,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | Florida—6.7% | |
| $5,000,000 | | Citizens Property Insurance Corp. FL, SIFMA Floating Rate Notes (Series 2010A-3), 1.87% Bonds (Citizens Property Insurance Coastal Account), 6/6/2013 | $5,000,000 |
| 315,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Florida AMT)/(Series 2009-75) Weekly VRDNs (GNMA COL)/(State Street Bank and Trust Co. LIQ), 0.240%, 6/6/2013 | 315,000 |
| 5,855,000 | | Collier County, FL IDA, (Series 2005) Weekly VRDNs (Ave Maria Utility Company)/(SunTrust Bank LOC), 0.310%, 6/5/2013 | 5,855,000 |
| 7,000,000 | 3,4 | Hillsborough County, FL Aviation Authority, SPEARs (Series DBE-645), 0.19% TOBs (GTD by Deutsche Bank AG)/(Deutsche Bank AG LIQ) 6/6/2013 | 7,000,000 |
| 6,015,000 | | UCF Health Facilities Corp., Capital Improvement Revenue Bonds (Series 2007) Weekly VRDNs (UCF Health Sciences Campus at Lake Nona)/(Fifth Third Bank, Cincinnati LOC), 0.240%, 6/7/2013 | 6,015,000 |
| | | TOTAL | 24,185,000 |
| | | Georgia—6.3% | |
| 3,350,000 | | Atlanta, GA, Urban Residential Finance Authority, (Series 1995) Weekly VRDNs (West End Housing Development)/(FNMA LOC), 0.280%, 6/6/2013 | 3,350,000 |
| 4,000,000 | | Bartow County, GA, (Series 2013), 1.00% TANs, 12/31/2013 | 4,011,577 |
| 7,990,000 | 3,4 | Georgia State HFA, MERLOTS (Series 2006-B11), 0.35% TOBs (Wells Fargo Bank, N.A. LIQ), Optional Tender 8/7/2013 | 7,990,000 |
| 4,000,000 | | Pike County, GA Development Authority, (Series 2003) Weekly VRDNs (Southern Mills, Inc.)/(Bank of America N.A. LOC), 0.300%, 6/5/2013 | 4,000,000 |
| 3,500,000 | | Wayne County, GA Development Authority, (Series 2000) Weekly VRDNs (Republic Services of Georgia)/(Wells Fargo Bank, N.A. LOC), 0.290%, 6/5/2013 | 3,500,000 |
| | | TOTAL | 22,851,577 |
| | | Illinois—11.2% | |
| 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), 0.160%, 6/5/2013 | 4,900,000 |
| 1,355,000 | | Chicago, IL, (Series 2001) Weekly VRDNs (J.M.B. Moesle LLC)/(BMO Harris Bank, N.A. LOC), 0.440%, 6/6/2013 | 1,355,000 |
| 9,200,000 | | Cook County, IL, (Series 2005) Weekly VRDNs (Catholic Theological Union)/(RBS Citizens Bank N.A. LOC), 0.230%, 6/5/2013 | 9,200,000 |
| 1,145,000 | | Illinois Development Finance Authority IDB Weekly VRDNs (T&D Investments LLC)/(U.S. Bank, N.A. LOC), 0.390%, 6/6/2013 | 1,145,000 |
| 2,100,000 | | Illinois Development Finance Authority IDB, (Series 1997) Weekly VRDNs (Tempco Electric Heater Corp.)/(JPMorgan Chase Bank, N.A. LOC), 0.380%, 6/6/2013 | 2,100,000 |
| 1,000,000 | | Illinois Development Finance Authority IDB, (Series 2001) Weekly VRDNs (Apogee Enterprises, Inc.)/(Comerica Bank LOC), 0.350%, 6/6/2013 | 1,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | Illinois—continued | |
| $2,750,000 | | Illinois Finance Authority, (Series 2008) Weekly VRDNs (Jasper Meats, Inc.)/(BMO Harris Bank, N.A. LOC), 0.230%, 6/6/2013 | $2,750,000 |
| 3,300,000 | | Lockport, IL IDA, (Series 1990) Weekly VRDNs (Panduit Corp.)/(Fifth Third Bank, Cincinnati LOC), 0.280%, 6/5/2013 | 3,300,000 |
| 5,800,000 | | Orland Park, IL IDA, (Series 1996) Weekly VRDNs (Panduit Corp.)/(Fifth Third Bank, Cincinnati LOC), 0.280%, 6/5/2013 | 5,800,000 |
| 8,800,000 | | Will County, IL, (Series 2007) Weekly VRDNs (University of St. Francis)/(Fifth Third Bank, Cincinnati LOC), 0.240%, 6/7/2013 | 8,800,000 |
| | | TOTAL | 40,350,000 |
| | | Indiana—2.5% | |
| 1,500,000 | | Indiana Development Finance Authority, EDRB (Series 2002) Weekly VRDNs (Vreba-Hoff Dairy Leasing LLC)/(Wells Fargo Bank, N.A. LOC), 0.200%, 6/6/2013 | 1,500,000 |
| 2,000,000 | | Indiana State Finance Authority Industrial Revenue, IDRB (Series 2011) Weekly VRDNs (Modern Forge Indiana LLC)/(Fifth Third Bank, Cincinnati LOC), 0.280%, 6/7/2013 | 2,000,000 |
| 5,500,000 | | Indianapolis, IN MFH, (Series 2007A: Forest Ridge Apartments) Weekly VRDNs (Pedcor Investments-2006-LXXXVIII LP)/(RBS Citizens Bank N.A. LOC), 0.220%, 6/6/2013 | 5,500,000 |
| | | TOTAL | 9,000,000 |
| | | Iowa—2.1% | |
| 7,700,000 | | Iowa Finance Authority, (Series 2006) Weekly VRDNs (Ag Real Estate Iowa One, LP)/(Rabobank Nederland NV, Utrecht LOC), 0.190%, 6/6/2013 | 7,700,000 |
| | | Kansas—1.0% | |
| 1,738,000 | 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), 0.240%, 6/6/2013 | 1,738,000 |
| 1,725,000 | | Wyandotte County, KS, (Series 1999) Weekly VRDNs (Shor-Line)/(U.S. Bank, N.A. LOC), 0.200%, 6/5/2013 | 1,725,000 |
| | | TOTAL | 3,463,000 |
| | | Kentucky—0.7% | |
| 400,000 | | Henderson County, KY, (Series 1996A) Weekly VRDNs (Gibbs Die Casting Corp.)/(Fifth Third Bank, Cincinnati LOC), 0.420%, 6/6/2013 | 400,000 |
| 2,100,000 | | Kentucky Housing Corp., (Series 2007) Weekly VRDNs (Arbors of Madisonville Apartments LP)/(U.S. Bank, N.A. LOC), 1.150%, 6/6/2013 | 2,100,000 |
| | | TOTAL | 2,500,000 |
| | | Louisiana—2.1% | |
| 3,000,000 | | Ascension Parish, LA IDB, (Series 2011) Weekly VRDNs (Impala Warehousing LLC)/(Natixis LOC), 0.500%, 6/6/2013 | 3,000,000 |
| 2,600,000 | | Port of New Orleans, LA, (Series 2000) Weekly VRDNs (New Orleans Steamboat Co.)/(FHLB of Dallas LOC), 0.280%, 6/6/2013 | 2,600,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | Louisiana—continued | |
| $2,000,000 | | St. James Parish, LA, (Series 2010B-1) Weekly VRDNs (Nucor Steel Louisiana LLC)/(GTD by Nucor Corp.), 0.330%, 6/5/2013 | $2,000,000 |
| | | TOTAL | 7,600,000 |
| | | Maine—0.6% | |
| 2,030,000 | | Dover-Foxcroft, ME, (Series 2005) Weekly VRDNs (Pleasant River Lumber Co.)/(Wells Fargo Bank, N.A. LOC), 0.250%, 6/5/2013 | 2,030,000 |
| | | Multi-State—9.2% | |
| 450,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Multi-State AMT)/(Series 2009-68) Weekly VRDNs (GNMA COL)/(State Street Bank and Trust Co. LIQ), 0.270%, 6/6/2013 | 450,000 |
| 1,023,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Multi-State AMT)/(Series 2009-78) Weekly VRDNs (State Street Bank and Trust Co. LIQ), 0.270%, 6/6/2013 | 1,023,000 |
| 6,700,000 | 3,4 | Nuveen Dividend Advantage Municipal Fund 2, Weekly VRDPs (Series 2)/(GTD by Deutsche Bank AG), 0.230%, 6/6/2013 | 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), 0.220%, 6/6/2013 | 5,000,000 |
| 5,000,000 | 3,4 | Nuveen Municipal Market Opportunity Fund, Inc., Weekly VRDPs (Series 1)/(GTD by Deutsche Bank AG), 0.260% 6/6/2013 | 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), 0.220%, 6/6/2013 | 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.), 0.190%, 6/6/2013 | 10,000,000 |
| | | TOTAL | 33,173,000 |
| | | New Jersey—7.2% | |
| 6,000,000 | | Belmar, NJ, 1.00% BANs, 3/14/2014 | 6,011,644 |
| 4,453,216 | | East Greenwich Township, NJ, (Series 2013A), 1.00% BANs, 11/21/2013 | 4,461,642 |
| 3,937,540 | | Evesham Township, NJ, 1.00% BANs, 10/23/2013 | 3,944,020 |
| 3,000,000 | | Fairview, NJ, 1.00% BANs, 2/21/2014 | 3,005,395 |
| 3,232,000 | | Long Branch, NJ, 1.50% BANs, 6/14/2013 | 3,232,971 |
| 3,000,000 | | North Plainfield, NJ, 1.50% BANs, 6/11/2013 | 3,000,496 |
| 2,500,000 | | Union Township, NJ, (Series 2013), 1.00% BANs, 6/3/2014 | 2,509,150 |
| | | TOTAL | 26,165,318 |
| | | New York—6.0% | |
| 525,000 | | Cattaraugus County, NY IDA, (Series 1999A) Weekly VRDNs (Gernatt Asphalt Products, Inc.)/(Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.270%, 6/6/2013 | 525,000 |
| 995,000 | | Cayuga County, NY IDA, (Series 1998) Weekly VRDNs (NFR Northeast, Inc.)/(Citizens Bank of Pennsylvania LOC), 0.260%, 6/5/2013 | 995,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | New York—continued | |
| $1,395,000 | | Erie County, NY IDA, IDRB (Series 1994) Weekly VRDNs (Servotronics, Inc.)/(Bank of America N.A. LOC), 0.370%, 6/6/2013 | $1,395,000 |
| 1,300,000 | | New York City, NY IDA, IDRBs (Series 2003) Weekly VRDNs (Novelty Crystal Corp.)/(TD Bank, N.A. LOC), 0.260%, 6/6/2013 | 1,300,000 |
| 2,800,000 | | New York City, NY, (Fiscal 2012 Series A-4) Daily VRDNs (KBC Bank N.V. LOC), 0.160%, 6/3/2013 | 2,800,000 |
| 14,500,000 | | Nuveen NY AMT-Free Municipal Income Fund, Weekly VRDPs (Series 1)/(GTD by Citibank NA, New York), 0.200%, 6/6/2013 | 14,500,000 |
| | | TOTAL | 21,515,000 |
| | | North Carolina—0.5% | |
| 2,000,000 | | Hertford County, NC Industrial Facilities & PCFA, (Series 2000B) Weekly VRDNs (Nucor Corp.), 0.280%, 6/5/2013 | 2,000,000 |
| | | Ohio—9.0% | |
| 3,000,000 | | Butler County, OH, 0.40% BANs, 8/1/2013 | 3,000,000 |
| 100,000 | | Franklin County, OH Health Care Facilities, (Series 2005) Weekly VRDNs (Traditions Healthcare Obligated Group)/(U.S. Bank, N.A. LOC), 0.130%, 6/6/2013 | 100,000 |
| 6,480,000 | | Greene County, OH Hospital Facilities Revenue Authority, (Series 1999A) Weekly VRDNs (Med Health System)/(JPMorgan Chase Bank, N.A. LOC), 0.160%, 6/6/2013 | 6,480,000 |
| 400,000 | | Hamilton County, OH Hospital Facilities Authority, (Series 2002A) Weekly VRDNs (The Elizabeth Gamble Deaconess Home Association)/(Northern Trust Co., Chicago, IL LOC), 0.170%, 6/5/2013 | 400,000 |
| 1,500,000 | | Hamilton, OH, 1.125% BANs, 10/3/2013 | 1,502,657 |
| 4,470,000 | | Lorain County, OH EDA Weekly VRDNs (Lake Ridge Academy)/(FirstMerit Bank, N.A. LOC), 0.200%, 6/6/2013 | 4,470,000 |
| 7,700,000 | | Ohio HFA, (Series J) Weekly VRDNs (GNMA COL)/(State Street Bank and Trust Co. LIQ), 0.130%, 6/5/2013 | 7,700,000 |
| 6,200,000 | | Ohio State Higher Educational Facility Commission, (Series B) Weekly VRDNs (FirstMerit Bank, N.A. LOC), 0.220%, 6/6/2013 | 6,200,000 |
| 2,652,160 | | Painesville, OH, 1.45% BANs, 8/2/2013 | 2,655,962 |
| | | TOTAL | 32,508,619 |
| | | Oregon—4.6% | |
| 10,000,000 | | Oregon State Housing and Community Services Department, Single-Family Mortgage Program (2008 Series F) Weekly VRDNs (JPMorgan Chase Bank, N.A. LIQ), 0.160%, 6/6/2013 | 10,000,000 |
| 6,650,000 | | Oregon State Housing and Community Services Department, Single-Family Mortgage Program (2008 Series I) Weekly VRDNs (JPMorgan Chase Bank, N.A. LIQ), 0.160%, 6/6/2013 | 6,650,000 |
| | | TOTAL | 16,650,000 |
| | | South Carolina—1.2% | |
| 4,180,000 | | South Carolina Jobs-EDA, (Series 2007) Weekly VRDNs (ACI Industries LLC)/(Bank of America N.A. LOC), 0.330%, 6/6/2013 | 4,180,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | South Carolina—continued | |
| $125,000 | | South Carolina Jobs-EDA, (Series 2007A) Weekly VRDNs (Woodhead LLC)/(FHLB of Atlanta LOC), 0.210%, 2/21/2014 | $125,000 |
| | | TOTAL | 4,305,000 |
| | | Tennessee—2.8% | |
| 10,000,000 | | Metropolitan Government Nashville & Davidson County, TN IDB, (Series 2006) Weekly VRDNs (The Fountains Apartments, LLC)/(Fifth Third Bank, Cincinnati LOC), 0.240%, 6/7/2013 | 10,000,000 |
| | | Texas—2.0% | |
| 7,240,000 | | Texas State Department of Housing & Community Affairs, (Series 2007 A) Weekly VRDNs (Texas State LIQ), 0.160%, 6/6/2013 | 7,240,000 |
| | | Virginia—8.8% | |
| 2,200,000 | | Arlington County, VA IDA, (Series 2005) Weekly VRDNs (Gates of Ballston Apartments)/(PNC Bank, N.A. LOC), 0.150%, 6/5/2013 | 2,200,000 |
| 3,000,000 | | Brunswick County, VA IDA, (Series 1996) Weekly VRDNs (Aegis Waste Solutions, Inc.)/(Bank of America N.A. LOC), 0.310%, 6/6/2013 | 3,000,000 |
| 6,900,000 | | Campbell County, VA IDA Weekly VRDNs (Georgia-Pacific Corp.)/(U.S. Bank, N.A. LOC), 0.130%, 6/5/2013 | 6,900,000 |
| 3,000,000 | | Fairfax County, VA EDA, (Series 2001) Weekly VRDNs (Young Men's Christian Association of Metropolitan Washington)/(Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.170%, 6/7/2013 | 3,000,000 |
| 2,975,000 | | Fairfax County, VA IDA, (Inova Health System), (Series 2012 C), 0.200%, 6/6/2013 | 2,975,000 |
| 4,500,000 | | Fairfax County, VA IDA, (Series 2005C-2) Weekly VRDNs (Inova Health System)/(Northern Trust Co., Chicago, IL LOC), 0.170%, 6/5/2013 | 4,500,000 |
| 2,100,000 | | Halifax, VA IDA, MMMs, PCR (Series 1992), 0.70% CP (Virginia Electric & Power Co.), Mandatory Tender 6/20/2013 | 2,100,000 |
| 5,050,000 | | Hampton, VA Redevelopment & Housing Authority, (Series 1998) Weekly VRDNs (Township Apartments)/(FNMA LOC), 0.120%, 6/5/2013 | 5,050,000 |
| 2,000,000 | | Harrisonburg, VA Redevelopment & Housing Authority, (Series 2008) Weekly VRDNs (Woodman West Preservation, LP)/(FNMA LOC), 0.120%, 6/6/2013 | 2,000,000 |
| | | TOTAL | 31,725,000 |
| | | Wisconsin—0.5% | |
| 2,000,000 | | Combined Locks, WI IDRB, (Series 1997) Weekly VRDNs (Appleton Papers)/(Fifth Third Bank, Cincinnati LOC), 0.340%, 6/6/2013 | 2,000,000 |
| | | TOTAL MUNICIPAL INVESTMENTS—100.6%
(AT AMORTIZED COST)5 | 362,980,604 |
| | | OTHER ASSETS AND LIABILITIES - NET—(0.6)%6 | (2,150,412) |
| | | TOTAL NET ASSETS—100% | $360,830,192 |
Annual Shareholder Report
Securities that are subject to the federal alternative minimum tax (AMT) represent 63.3% of the portfolio as calculated based upon total market value (percentage is unaudited).
| 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. |
| | At May 31, 2013, the portfolio securities were rated as follows: |
| | Tier Rating Percentages Based on Total Market Value (unaudited) |
| First Tier | Second Tier |
| 96.7% | 3.3% |
| 2 | Current rate and next reset date shown for Variable Rate Demand Instruments. |
| 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 May 31, 2013, these restricted securities amounted to $60,186,000, which represented 16.7% 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 May 31, 2013, these liquid restricted securities amounted to $60,186,000, which represented 16.7% 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 May 31, 2013.
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 May 31, 2013, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
Annual Shareholder Report
The following acronyms are used throughout this portfolio:
| AMT | —Alternative Minimum Tax |
| BANs | —Bond Anticipation Notes |
| COL | —Collateralized |
| CP | —Commercial Paper |
| EDA | —Economic Development Authority |
| EDRB | ��Economic Development Revenue Bond |
| FHLB | —Federal Home Loan Bank |
| FNMA | —Federal National Mortgage Association |
| GNMA | —Government National Mortgage Association |
| GTD | —Guaranteed |
| HFA | —Housing Finance Authority |
| IDA | —Industrial Development Authority |
| IDB | —Industrial Development Bond |
| IDFA | —Industrial Development Finance Authority |
| IDRBs | —Industrial Development Revenue Bonds |
| LIQ | —Liquidity Agreement |
| LOC | —Letter of Credit |
| MERLOTS | —Municipal Exempt Receipts-Liquidity Optional Tender Series |
| MFH | —Multi-Family Housing |
| MMMs | —Money Market Municipals |
| PCFA | —Pollution Control Finance Authority |
| PCR | —Pollution Control Revenue |
| PCRBs | —Pollution Control Revenue Bonds |
| RANs | —Revenue Anticipation Notes |
| SIFMA | —Securities Industry and Financial Markets Association |
| SPEARs | —Short Puttable Exempt Adjustable Receipts |
| TANs | —Tax Anticipation Notes |
| TOBs | —Tender Option Bonds |
| VRDNs | —Variable Rate Demand Notes |
| VRDPs | —Variable Rate Demand Preferreds |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Year Ended May 31 | 2013 | 2012 | 2011 | 2010 | 2009 |
| Net Asset Value, Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Income From Investment Operations: | | | | | |
| Net investment income | — | — | — | 0.0001 | 0.010 |
| Net realized gain on investments | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.010 |
| Less Distributions: | | | | | |
| Distributions from net investment income | — | — | — | (0.000)1 | (0.010) |
| 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 | (0.000)1 | (0.000)1 | (0.010) |
| Net Asset Value, End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.00%3 | 0.00%3 | 0.00%3 | 0.03% | 1.03% |
| Ratios to Average Net Assets: | | | | | |
| Net expenses | 0.31% | 0.42% | 0.49% | 0.75% | 1.08%4 |
| Net investment income | 0.00% | 0.00% | 0.00% | 0.03% | 1.00% |
| Expense waiver/reimbursement5 | 0.72% | 0.68% | 0.59% | 0.35% | 0.05% |
| Supplemental Data: | | | | | |
| Net assets, end of period (000 omitted) | $360,830 | $461,541 | $539,081 | $474,268 | $512,018 |
| 1 | Represents less than $0.001. |
| 2 | Based on net asset value. |
| 3 | Represents less than 0.01%. |
| 4 | The net expense ratio is calculated without reduction for expense offset arrangements. The net expense ratio is 1.08% for the year ended May 31, 2009, after taking into account this expense reduction. |
| 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
Annual Shareholder Report
Statement of Assets and Liabilities
May 31, 2013
| Assets: | | |
| Total investment in securities, at amortized cost and fair value | | $362,980,604 |
| Income receivable | | 484,096 |
| Receivable for shares sold | | 26,036 |
| TOTAL ASSETS | | 363,490,736 |
| Liabilities: | | |
| Payable for investments purchased | $2,509,150 | |
| Payable for shares redeemed | 23,145 | |
| Bank overdraft | 32,876 | |
| Payable for investment adviser fee (Note 5) | 7,652 | |
| Payable for Directors'/Trustees' fees (Note 5) | 518 | |
| Accrued expenses (Note 5) | 87,203 | |
| TOTAL LIABILITIES | | 2,660,544 |
| Net assets for 360,830,445 shares outstanding | | $360,830,192 |
| Net Assets Consist of: | | |
| Paid-in capital | | $360,823,456 |
| Accumulated net realized gain on investments | | 6,736 |
| TOTAL NET ASSETS | | $360,830,192 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $360,830,192 ÷ 360,830,445 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
Annual Shareholder Report
Statement of Operations
Year Ended May 31, 2013
| Investment Income: | | | |
| Interest | | | $1,449,226 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $2,328,832 | |
| Administrative fee (Note 5) | | 363,460 | |
| Custodian fees | | 19,278 | |
| Transfer and dividend disbursing agent fees and expenses | | 474,734 | |
| Directors'/Trustees' fees (Note 5) | | 4,354 | |
| Auditing fees | | 19,250 | |
| Legal fees | | 8,467 | |
| Portfolio accounting fees | | 89,260 | |
| Distribution services fee (Note 5) | | 465,766 | |
| Shareholder services fee (Note 5) | | 872,002 | |
| Account administration fee | | 1,512 | |
| Share registration costs | | 88,477 | |
| Printing and postage | | 23,761 | |
| Insurance premiums (Note 5) | | 4,758 | |
| Taxes | | 35,651 | |
| Miscellaneous (Note 5) | | 3,075 | |
| TOTAL EXPENSES | | 4,802,637 | |
| Waivers and Reimbursements: | | | |
| Waiver of investment adviser fee (Note 5) | $(1,974,765) | | |
| Waiver of administrative fee (Note 5) | (2,366) | | |
| Waiver of distribution services fee (Note 5) | (465,766) | | |
| Waiver of shareholder services fee (Note 5) | (871,557) | | |
| Reimbursement of shareholder services fee (Note 5) | (445) | | |
| Reimbursement of account administration fee (Note 5) | (1,512) | | |
| Waiver of transfer and dividend disbursing agent fees and expenses | (37,000) | | |
| TOTAL WAIVERS AND REIMBURSEMENTS | | (3,353,411) | |
| Net expenses | | | 1,449,226 |
| Net investment income | | | — |
| Net realized gain on investments | | | 6,741 |
| Change in net assets resulting from operations | | | $6,741 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Statement of Changes in Net Assets
| Year Ended May 31 | 2013 | 2012 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $— | $— |
| Net realized gain on investments | 6,741 | 9,373 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 6,741 | 9,373 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | (3,813) | (5,565) |
| Share Transactions: | | |
| Proceeds from sale of shares | 960,616,122 | 1,332,559,828 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 3,797 | 5,490 |
| Cost of shares redeemed | (1,061,333,446) | (1,410,109,704) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (100,713,527) | (77,544,386) |
| Change in net assets | (100,710,599) | (77,540,578) |
| Net Assets: | | |
| Beginning of period | 461,540,791 | 539,081,369 |
| End of period | $360,830,192 | $461,540,791 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Notes to Financial Statements
May 31, 2013
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 fair value, the value of the portfolio securities will be determined under procedures established by and under the general supervision of the Directors.
The Directors have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to determine fair value of securities and in overseeing the comparison of amortized cost to market value. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of monitoring the relationship of market value and amortized cost. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions) and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Annual Shareholder Report
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 year ended May 31, 2013, 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 May 31, 2013, tax years 2010 through 2013 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 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.
Annual Shareholder Report
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:
| Year Ended May 31 | 2013 | 2012 |
| Shares sold | 960,616,122 | 1,332,559,828 |
| Shares issued to shareholders in payment of distributions declared | 3,797 | 5,490 |
| Shares redeemed | (1,061,333,446) | (1,410,109,704) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (100,713,527) | (77,544,386) |
4. FEDERAL TAX INFORMATION
The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended May 31, 2013 and 2012, was as follows:
| | 2013 | 2012 |
| Ordinary income1 | $1,395 | $5,565 |
| Long-term capital gains | $2,418 | $— |
| 1 | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
| | |
As of May 31, 2013, the components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income2 | $5,164 |
| Undistributed long-term capital gains | $1,572 |
| 2 | For tax purposes, short-term capital gains are considered ordinary income in determining distributable earnings. |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
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 year ended May 31, 2013, the Adviser voluntarily waived $1,974,765 of its fee.
Annual Shareholder Report
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Daily Net Assets
of the Investment Complex |
| 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 |
Prior to September 1, 2012, the administrative fee received during any fiscal year was 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 year ended May 31, 2013, FAS waived $2,366 of its fee. The net fee paid to FAS was 0.078% of average daily net assets of the Fund.
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 year ended May 31, 2013, FSC voluntarily waived its entire fee of $465,766. 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 year ended May 31, 2013, FSSC voluntarily reimbursed $445 of shareholder services fees and $1,512 of account administration fees. In addition, for the year ended May 31, 2013, unaffiliated third-party financial intermediaries waived $871,557 of shareholder services fees. These waivers 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 certain of its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their respective 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
Annual Shareholder Report
and reimbursements) will not exceed 1.05% (the “Fee Limit”), up to but not including the later of (the “Termination Date”): (a) August 1, 2014; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable 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 year ended May 31, 2013, 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 $966,870,000 and $980,100,000, respectively.
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.
6. 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 May 31, 2013, there were no outstanding loans. During the year ended May 31, 2013, 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 May 31, 2013, there were no outstanding loans. During the year ended May 31, 2013, the program was not utilized.
8. FEDERAL TAX INFORMATION (UNAUDITED)
For the year ended May 31, 2013, the amount of long-term capital gains designated by the Fund was $2,418.
Annual Shareholder Report
Report of Independent Registered Public Accounting Firm
TO THE BOARD OF directors OF Cash trust Series, INc. AND SHAREHOLDERS Of Federated Municipal Cash series:
We have audited the accompanying statement of assets and liabilities of Federated Municipal Cash Series (the “Fund”) (one of the portfolios constituting Cash Trust Series, Inc.), including the portfolio of investments, as of May 31, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of May 31, 2013, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Federated Municipal Cash Series, a portfolio of Cash Trust Series, Inc., at May 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
July 24, 2013
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 December 1, 2012 to May 31, 2013.
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.
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
12/1/2012 | Ending
Account Value
5/31/2013 | Expenses Paid
During Period1, 2 |
| Actual | $1,000 | $1,000.00 | $1.55 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,023.39 | $1.56 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.31%, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half-year period). |
| 2 | Actual and Hypothetical expenses paid during the period utilizing the Fund's current Fee Limit of 1.05% (as reflected in the Notes to Financial Statements, Note 5 under Expense Limitation), multiplied by the average account value over the period, multiplied by 182/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.24 and $5.29, respectively. |
Annual Shareholder Report
Board of Directors and Corporation Officers
The Board of Directors is responsible for managing the Corporation's business affairs and for exercising all the Corporation's powers except those reserved for the shareholders. The following tables give information about each Director and the senior officers of the Fund. Where required, the tables separately list Directors who are “interested persons” of the Fund (i.e., “Interested” Directors) and those who are not (i.e., “ Independent” Directors). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Directors listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2012, the Corporation comprised four portfolio(s), and the Federated Fund Family consisted of 42 investment companies (comprising 137 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Director oversees all portfolios in the Federated Fund Family and serves for an indefinite term. The Fund's Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-341-7400.
In Memoriam - John F. Cunningham, Independent Director
With deep sadness, Federated announces the passing of John F. Cunningham, who served as an independent member of the Board of the Federated Fund Family since 1999. Mr. Cunningham's savvy business acumen and incisive intellect made him a powerful force on the Federated Fund Board. He was an advocate for shareholders and a respected colleague within the Federated family. Mr. Cunningham enjoyed an outstanding career in technology, having served as President and in other Senior Executive positions with leading companies in the industry. Federated expresses gratitude to Mr. Cunningham for his fine contributions as a Board member, colleague and friend. He will be greatly missed.
Interested DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
John F. Donahue*
Birth Date: July 28, 1924
Director
Began serving: May 1989 | Principal Occupations: Director or Trustee of the Federated Fund Family; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Family's Executive Committee.
Previous Positions: Chairman of the Federated Fund Family; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
J. Christopher Donahue*
Birth Date: April 11, 1949
President and Director
Began serving: May 1989 | Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Fund Family; Director or Trustee of certain of the Funds in the Federated Fund Family; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company.
Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd. |
| * | Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries. |
INDEPENDENT DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Maureen Lally-Green
Birth Date: July 5, 1949
Director
Began serving: August 2009 | Principal Occupations: Director or Trustee of the Federated Fund Family; Director, Office of Church Relations, and Associate General Secretary, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne University School of Law.
Other Directorships Held: Director, Auberle; Member, Pennsylvania State Board of Education; Director, Saint Vincent College; Director, Ireland Institute of Pittsburgh; Chair and Director, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society, Allegheny County; Director, Our Campaign for the Church Alive, Inc.
Previous Position: Pennsylvania Superior Court Judge.
Qualifications: Legal and director experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Peter E. Madden
Birth Date: March 16, 1942
Director
Began serving: August 1991 | Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Family.
Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
Qualifications: Business management, mutual fund services and director experience. |
Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee of the Federated Fund Family; Management Consultant.
Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President, DVC Group, Inc. (marketing, communications and technology).
Qualifications: Banking, business management, education and director experience. |
Thomas M. O'Neill
Birth Date: June 14, 1951
Director
Began serving: October 2006 | Principal Occupations: Director or Trustee, Vice Chairman of the Audit Committee of the Federated Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College; Board of Directors, Medicines for Humanity; Board of Directors, The Golisano Children's Museum of Naples, Florida.
Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber).
Qualifications: Business management, mutual fund, director and investment experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
John S. Walsh
Birth Date: November 28, 1957
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee, Chairman of the Audit Committee of the Federated Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
Previous Position: Vice President, Walsh & Kelly, Inc.
Qualifications: Business management and director experience. |
OFFICERS
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT AND SECRETARY
Officer since: May 1989 | Principal Occupations: Executive Vice President and Secretary of the Federated Fund Family; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp. |
Lori A. Hensler, CPA
Birth Date: January 6, 1967
TREASURER
Officer since: April 2013 | Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp. and Edgewood Services, Inc.; and Assistant Treasurer, Federated Investors Trust Company.
Previous Positions: Controller of Federated Investors, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
Peter J. Germain
Birth Date: September 3, 1959
CHIEF LEGAL OFFICER
Officer since: January 2005 | Principal Occupations: Mr. Germain is Chief Legal Officer of the Federated Fund Family. He is General Counsel and Vice President, Federated Investors, Inc.; President, Federated Administrative Services and Federated Administrative Services, Inc.; Vice President, Federated Securities Corp.; Secretary, Federated Private Asset Management, Inc.; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated in 1984 and is a member of the Pennsylvania Bar Association.
Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Investors, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Investors, Inc. |
Richard B. Fisher
Birth Date: May 17, 1923
Vice Chairman
Officer since: August 2002 | Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Family; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Family; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated Securities Corp. |
Brian P. Bouda
Birth Date: February 28, 1947
CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
Officer since: August 2004 | Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Family; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
Previous Positions: Served in Senior Management positions with a large regional banking organization. |
Deborah A. Cunningham
Birth Date: September 15, 1959
Chief Investment Officer
Officer since: May 2004 | Principal Occupations: Deborah A. Cunningham was named Chief Investment Officer of money market products in 2004. She joined Federated in 1981 and has been a Senior Portfolio Manager since 1997 and an Executive Vice President of the Fund's Adviser since 2009. Ms. Cunningham has received the Chartered Financial Analyst designation and holds an M.S.B.A. in Finance from Robert Morris College. |
Mary Jo Ochson
Birth Date: September 12, 1953
Chief Investment Officer and Vice President
Officer since: November 1998
Portfolio Manager since: August 1989 | Principal Occupations: Mary Jo Ochson has been the Fund's Portfolio Manager since August 1989. Ms. Ochson was named Chief Investment Officer of tax-exempt fixed-income products in 2004 and Chief Investment Officer of Tax-Free Money Markets in 2010 and is a Vice President of the Corporation. She joined Federated in 1982 and has been a Senior Portfolio Manager and a Senior Vice President of the Fund's Adviser since 1996. Ms. Ochson has received the Chartered Financial Analyst designation and holds an M.B.A. in Finance from the University of Pittsburgh. |
Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2013
Federated Municipal Cash Series (the “Fund”)
Following a review and recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2013 meetings the Fund's investment advisory contract for an additional one-year term. 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.
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 to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders or the family of funds; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees charged to institutional and other clients of the Adviser for what might be viewed as like 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.
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, and in connection with its May meetings, the Board 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 substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent directors and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. 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; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; 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.
Annual Shareholder Report
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. The Board focused on comparisons with other similar 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 relative indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
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, noting that the overall expense structure of the Fund, after waivers and expense reimbursements, was above the median of the relevant peer group, but the Board still was satisfied that the overall expense structure of the Fund remained competitive.
By contrast, 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 the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Fund's ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as 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.
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, though not conclusive, in judging the reasonableness of proposed fees.
Annual Shareholder Report
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 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, adjustment 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, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in arbitrarily allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate can dramatically alter the resulting estimate of cost and/or profitability of a fund. 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. The Board agreed with this assessment.
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 family of funds, such as personnel and processes for the portfolio management, shareholder services, 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 family as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject,
Annual Shareholder Report
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 noted that, subject to the 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 were reasonable. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
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 concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
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.
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 Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “ Literature and Prospectuses” 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 Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”
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.
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
28565 (7/13)
Federated is a registered trademark of Federated Investors, Inc.
2013 ©Federated Investors, Inc.
Annual Shareholder Report
May 31, 2013
Federated Prime Cash Series
A Portfolio of Cash Trust Series, Inc.
Not FDIC Insured
May Lose Value
No Bank Guarantee
Portfolio of Investments Summary Tables (unaudited)
At May 31, 2013, the Fund's portfolio composition1 was as follows:
| Security Type | Percentage of
Total Net Assets |
| Commercial Paper and Notes | 37.1% |
| Bank Instruments | 41.7% |
| Variable Rate Instruments | 11.6% |
| Repurchase Agreements | 10.4% |
| Other Assets and Liabilities—Net2 | (0.8)% |
| TOTAL | 100.0% |
At May 31, 2013, the Fund's effective maturity schedule3 was as follows:
Securities with an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 42.9% |
| 8-30 Days | 13.4% |
| 31-90 Days | 32.3% |
| 91-180 Days | 10.3% |
| 181 Days or more | 1.9% |
| Other Assets and Liabilities—Net2 | (0.8)% |
| 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, bank note, collateralized loan agreements, commercial paper and corporate 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. |
Annual Shareholder Report
Portfolio of Investments
May 31, 2013
Principal
Amount | | | Value |
| | | Asset-Backed Securities—0.8% | |
| | | Finance - Automotive—0.6% | |
| $590,236 | | SMART ABS Series 2012-4US Trust, Class A1, 0.290%, 10/14/2013 | $590,236 |
| 18,000,000 | | SMART ABS Series 2013-2US Trust, Class A1, 0.260%, 5/14/2014 | 18,000,000 |
| | | TOTAL | 18,590,236 |
| | | Finance - Equipment—0.2% | |
| 1,447,838 | | GE Equipment Transportation LLC, (Series 2012-2), Class A1, 0.260%, 10/24/2013 | 1,447,838 |
| 3,365,692 | 1,2 | Macquarie Equipment Funding Trust 2012-A, Class A1, 0.290%, 10/21/2013 | 3,365,692 |
| | | TOTAL | 4,813,530 |
| | | TOTAL ASSET-BACKED SECURITIES | 23,403,766 |
| | | Bank Note—2.2% | |
| | | Finance - Banking—2.2% | |
| 65,000,000 | | Bank of America N.A., 0.280%, 7/12/2013 - 9/6/2013 | 65,000,000 |
| | | Certificates of Deposit—41.7% | |
| | | Finance - Banking—41.7% | |
| 60,000,000 | | BNP Paribas SA, 0.270%, 8/14/2013 | 60,000,000 |
| 30,000,000 | 3 | Bank of Montreal, 0.303%, 8/6/2013 | 30,000,000 |
| 50,000,000 | 3 | Bank of Montreal, 0.325%, 8/15/2013 | 50,000,000 |
| 50,000,000 | | Bank of Tokyo-Mitsubishi UFJ Ltd., 0.235%, 7/2/2013 | 50,000,000 |
| 70,000,000 | | Barclays Bank PLC, 0.220%, 6/7/2013 | 70,000,000 |
| 120,000,000 | | Citibank NA, New York, 0.270%, 8/16/2013 - 8/29/2013 | 120,000,000 |
| 20,000,000 | | Credit Agricole Corporate and Investment Bank, 0.290%, 6/14/2013 | 20,000,000 |
| 40,000,000 | | Credit Suisse, Zurich, 0.255%, 6/3/2013 | 40,000,000 |
| 60,000,000 | | Credit Suisse, Zurich, 0.260%, 8/26/2013 | 60,000,000 |
| 11,000,000 | | DNB Bank ASA, 0.220%, 6/14/2013 | 11,000,000 |
| 130,000,000 | | Deutsche Bank AG, 0.230%—0.250%, 6/7/2013 - 8/29/2013 | 130,000,083 |
| 28,000,000 | | Fifth Third Bank, Cincinnati, 0.300%—0.310%, 6/6/2013 - 7/25/2013 | 28,000,000 |
| 93,000,000 | | JPMorgan Chase Bank, N.A., 0.397%, 6/21/2013 | 93,000,000 |
| 43,500,000 | | Natixis, 0.230%, 8/22/2013 | 43,500,000 |
| 25,000,000 | 3 | Royal Bank of Canada, Montreal, 0.280%, 6/3/2013 | 25,000,000 |
| 40,000,000 | 3 | Royal Bank of Canada, Montreal, 0.300%, 6/3/2013 | 40,000,000 |
| 20,000,000 | 3 | Royal Bank of Canada, Montreal, 0.332%, 7/5/2013 | 20,000,000 |
| 60,000,000 | | Standard Chartered Bank PLC, 0.220%, 9/19/2013 | 60,000,000 |
| 40,000,000 | | Standard Chartered Bank PLC, 0.255%, 6/26/2013 | 40,000,139 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Certificates of Deposit—continued | |
| | | Finance - Banking—continued | |
| $147,000,000 | | Sumitomo Mitsui Banking Corp., 0.230%—0.250%, 6/14/2013 - 9/4/2013 | $147,000,000 |
| 20,000,000 | | Svenska Handelsbanken, Stockholm, 0.220%, 7/15/2013 | 20,000,122 |
| 50,000,000 | | Toronto Dominion Bank, 0.380%, 9/20/2013 | 50,000,000 |
| 25,000,000 | | UBS AG, 0.220%, 6/13/2013 | 25,000,000 |
| | | TOTAL CERTIFICATES OF DEPOSIT | 1,232,500,344 |
| | | Collateralized Loan Agreements—9.1% | |
| | | Finance - Banking—9.1% | |
| 27,000,000 | | Citigroup Global Markets, Inc., 0.588%—0.791%, 6/3/2013 - 7/26/2013 | 27,000,000 |
| 30,000,000 | | Credit Suisse Securities (USA) LLC, 0.689%, 7/17/2013 | 30,000,000 |
| 80,000,000 | | Merrill Lynch, Pierce, Fenner & Smith, Inc., 0.385%—0.700%, 6/3/2013 - 8/20/2013 | 80,000,000 |
| 81,500,000 | | RBS Securities, Inc., 0.446%—0.872%, 7/2/2013 - 2/20/2014 | 81,500,000 |
| 50,000,000 | | Wells Fargo Securities, LLC, 0.355%, 7/22/2013 | 50,000,000 |
| | | TOTAL COLLATERALIZED LOAN AGREEMENTS | 268,500,000 |
| | | Commercial Paper—24.0%4 | |
| | | Aerospace/Auto—0.5% | |
| 2,300,000 | 1,2 | Nissan Motor Acceptance Corp., (Nissan Motor Co., Ltd. Support Agreement), 0.280%, 6/12/2013 | 2,299,803 |
| 12,500,000 | 1,2 | VW Credit, Inc., (GTD by Volkswagen AG), 0.270%, 6/19/2013 - 6/26/2013 | 12,497,814 |
| | | TOTAL | 14,797,617 |
| | | Containers & Packaging—0.1% | |
| 2,620,000 | 1,2 | Bemis Co., Inc., 0.290%—0.310%, 6/12/2013 - 7/3/2013 | 2,619,586 |
| | | Electric Power—0.5% | |
| 14,790,000 | | Virginia Electric & Power Co., 0.270%—0.300%, 6/7/2013 - 6/21/2013 | 14,788,654 |
| | | Finance - Banking—11.2% | |
| 20,000,000 | | Barclays US Funding Corp., 0.210%, 7/16/2013 | 19,994,750 |
| 30,000,000 | | Credit Agricole North America, Inc., 0.260%, 7/8/2013 | 29,991,983 |
| 38,000,000 | 1,2 | LMA-Americas LLC, 0.260%—0.280%, 7/17/2013 - 8/20/2013 | 37,980,981 |
| 100,000,000 | | Lloyds TSB Bank PLC, London, 0.095%, 6/6/2013 | 99,998,681 |
| 10,000,000 | | Los Angeles County, CA Metropolitan Transportation Authority (Series A-T-UB), (Union Bank, N.A. LOC), 0.230%, 7/1/2013 | 10,000,000 |
| 75,000,000 | | Nederlandse Waterschapsbank NV, 0.240%, 8/1/2013 | 74,969,500 |
| 13,000,000 | | Societe Generale North America, Inc., (GTD by Societe Generale, Paris), 0.270%—0.320%, 6/3/2013 - 7/3/2013 | 12,998,997 |
| 45,000,000 | 3 | Westpac Banking Corp. Ltd., Sydney, 0.248%, 6/3/2013 | 45,000,000 |
| | | TOTAL | 330,934,892 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Commercial Paper—continued4 | |
| | | Finance - Commercial—1.9% | |
| $56,500,000 | 1,2 | Versailles Commercial Paper LLC, 0.270%—0.280%, 7/2/2013 - 9/4/2013 | $56,474,592 |
| | | Finance - Retail—2.9% | |
| 20,000,000 | 1,2 | Barton Capital LLC, 0.260%, 6/5/2013 | 19,999,422 |
| 50,000,000 | 1,2 | Chariot Funding LLC, 0.270%, 10/2/2013 | 49,953,875 |
| 15,000,000 | 1,2 | Jupiter Securitization Co. LLC, 0.301%, 2/24/2014 | 14,966,500 |
| | | TOTAL | 84,919,797 |
| | | Mining—0.5% | |
| 650,000 | 1,2 | Xstrata Finance (Canada) Ltd., (GTD by GlencoreXstrata PLC), 0.400%, 6/28/2013 | 649,805 |
| 14,900,000 | 1,2 | Xstrata Finance (Dubai) Ltd., 0.400%, 6/3/2013 - 6/7/2013 | 14,899,344 |
| | | TOTAL | 15,549,149 |
| | | Oil & Oil Finance—0.5% | |
| 14,500,000 | 1,3 | Devon Energy Corp., 0.346%, 6/24/2013 | 14,500,000 |
| | | Sovereign—5.4% | |
| 105,000,000 | 1,2 | Caisse des Depots et Consignations (CDC), 0.230%—0.310%, 6/13/2013 - 8/30/2013 | 104,958,514 |
| 55,000,000 | 1,2 | Kells Funding, LLC, 0.260%—0.310%, 7/8/2013 - 8/15/2013 | 54,975,785 |
| | | TOTAL | 159,934,299 |
| | | Telecommunications—0.5% | |
| 15,600,000 | 1,2 | Verizon Communications, Inc., 0.300%, 6/13/2013 - 6/25/2013 | 15,597,840 |
| | | TOTAL COMMERCIAL PAPER | 710,116,426 |
| | | Corporate Bonds—1.0% | |
| | | Finance - Banking—0.1% | |
| 2,718,000 | | JPMorgan Chase & Co., 1.650%, 9/30/2013 | 2,730,229 |
| | | Finance - Commercial—0.9% | |
| 2,804,000 | | General Electric Capital Corp., 1.875%, 9/16/2013 | 2,816,222 |
| 19,600,000 | | General Electric Capital Corp., 5.500%, 6/4/2014 | 20,607,440 |
| 800,000 | | General Electric Capital Corp., 5.650%, 6/9/2014 | 842,712 |
| 1,500,000 | | General Electric Capital Corp., 5.900%, 5/13/2014 | 1,578,345 |
| | | TOTAL | 25,844,719 |
| | | TOTAL CORPORATE BONDS | 28,574,948 |
| | | Notes - Variable—11.6%3 | |
| | | Finance - Banking—8.8% | |
| 1,415,000 | | 6380 Brackbill Associates LP, (Series 2000), (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.540%, 6/7/2013 | 1,415,000 |
| 25,000,000 | | Australia & New Zealand Banking Group, Melbourne, 0.238%, 6/10/2013 | 25,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Notes - Variable—continued3 | |
| | | Finance - Banking—continued | |
| $50,000,000 | | Australia & New Zealand Banking Group, Melbourne, 0.423%, 6/4/2013 | $50,000,000 |
| 14,515,000 | | Carew Realty, Inc., (Series 2012), (Fifth Third Bank, Cincinnati LOC), 0.320%, 6/6/2013 | 14,515,000 |
| 3,390,000 | | Gannett Fleming, Inc., (Series 2001), (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.540%, 6/7/2013 | 3,390,000 |
| 1,520,000 | | Graywood Farms LLC, (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.540%, 6/7/2013 | 1,520,000 |
| 76,035,000 | 1,2 | Illinois State, Taxable PUTTERs (Series SGT01), 0.120%, 6/3/2013 | 76,035,000 |
| 50,000,000 | | Maryland State Economic Development Corp., (Series 2001A) Human Genome Sciences, (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.550%, 6/4/2013 | 50,000,000 |
| 6,995,000 | | New York City Housing Development Corp., (Series 2010-A2), (RBS Citizens Bank N.A. LOC), 0.170%, 6/5/2013 | 6,995,000 |
| 15,335,000 | | Serra Works Bond Holding Co. LLC, (Series 2008-A), (Fifth Third Bank, Cincinnati LOC), 0.290%, 6/6/2013 | 15,335,000 |
| 3,020,000 | | Sun Valley, Inc., (Wells Fargo Bank, N.A. LOC), 0.250%, 6/7/2013 | 3,020,000 |
| 9,200,000 | | Village Green Finance Co. LLC, (Series 1997), (Wells Fargo Bank, N.A. LOC), 0.200%, 6/5/2013 | 9,200,000 |
| 3,250,000 | | Wiley Properties, Inc., (Series 2002), (Fifth Third Bank, Cincinnati LOC), 0.320%, 6/6/2013 | 3,250,000 |
| | | TOTAL | 259,675,000 |
| | | Finance - Commercial—0.4% | |
| 800,000 | 1,2 | KORDSA, Inc., (Series 2006), (General Electric Capital Corp. LOC), 0.220%, 6/6/2013 | 800,000 |
| 12,725,000 | 1,2 | Mountain Creek Properties LLC, (General Electric Capital Corp. LOC), 0.220%, 6/6/2013 | 12,725,000 |
| | | TOTAL | 13,525,000 |
| | | Finance - Retail—1.1% | |
| 32,000,000 | | AFS Insurance Premium Receivables Trust, (Series 1994-A), 0.754%, 6/17/2013 | 32,000,000 |
| | | Government Agency—0.9% | |
| 17,835,000 | | BBC Enterprises LLC, (Series 2007), (FHLB of San Francisco LOC), 0.140%, 6/6/2013 | 17,835,000 |
| 10,000,000 | | Capital Trust Agency, FL, (FNMA LOC), 0.160%, 6/6/2013 | 10,000,000 |
| | | TOTAL | 27,835,000 |
| | | Metals—0.4% | |
| 3,000,000 | | Berkeley County, SC IDB, (Nucor Corp.) (Series 1996A), 0.340%, 6/5/2013 | 3,000,000 |
| 4,300,000 | | Hertford County, NC Industrial Facilities & PCFA, (Nucor Corp.) (Series 2000A), 0.400%, 6/5/2013 | 4,300,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Notes - Variable—continued3 | |
| | | Metals—continued | |
| $400,000 | | Memphis-Shelby County, TN Industrial Development Board—PCRB, (Series 2007), (GTD by Nucor Corp.), 0.390%, 6/5/2013 | $400,000 |
| 3,000,000 | | St. James Parish, LA, (Series 2010B-1), (GTD by Nucor Corp.), 0.330%, 6/5/2013 | 3,000,000 |
| | | TOTAL | 10,700,000 |
| | | TOTAL NOTES - VARIABLE | 343,735,000 |
| | | Repurchase Agreements—10.4% | |
| 206,751,000 | | Interest in $3,435,000,000 joint repurchase agreement 0.09%, dated 5/31/2013 under which Bank of America, N.A. will repurchase securities provided as collateral for $3,435,025,763 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 12/1/2041 and the market value of those underlying securities was $3,503,726,278. | 206,751,000 |
| 100,000,000 | | Interest in $600,000,000 joint repurchase agreement 0.10%, dated 5/31/2013 under which Mizuho Securities USA, Inc. will repurchase securities provided as collateral for $600,005,000 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with various maturities to 9/16/2050 and the market value of those underlying securities was $612,237,880. | 100,000,000 |
| | | TOTAL REPURCHASE AGREEMENTS
(AT COST) | 306,751,000 |
| | | TOTAL INVESTMENTS—100.8%
(AT AMORTIZED COST)5 | 2,978,581,484 |
| | | OTHER ASSETS AND LIABILITIES - NET—(0.8)%6 | (22,678,265) |
| | | TOTAL NET ASSETS—100% | $2,955,903,219 |
| 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 May 31, 2013, these restricted securities amounted to $495,299,553, which represented 16.8% 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 May 31, 2013, these liquid restricted securities amounted to $480,799,553, which represented 16.3% of total net assets. |
| 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 May 31, 2013.
Annual Shareholder Report
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 May 31, 2013, 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 |
| PCFA | —Pollution Control Finance Authority |
| PCRB | —Pollution Control Revenue Bond |
| PUTTERs | —Puttable Tax-Exempt Receipts |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Year Ended May 31 | 2013 | 2012 | 2011 | 2010 | 2009 |
| Net Asset Value, Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Income From Investment Operations: | | | | | |
| Net investment income | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.014 |
| Net realized gain (loss) on investments | 0.0001 | (0.000)1 | 0.0001 | 0.0001 | — |
| TOTAL FROM INVESTMENT OPERATIONS | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.014 |
| Less Distributions: | | | | | |
| Distributions from net investment income | (0.000)1 | (0.000)1 | (0.000)1 | (0.000)1 | (0.014) |
| 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 | (0.000)1 | (0.000)1 | (0.014) |
| Net Asset Value, End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.01% | 0.01% | 0.01% | 0.01% | 1.39% |
| Ratios to Average Net Assets: | | | | | |
| Net expenses | 0.35% | 0.38% | 0.43% | 0.58% | 1.08% |
| Net investment income | 0.01% | 0.01% | 0.01% | 0.01% | 1.34% |
| Expense waiver/reimbursement3 | 0.73% | 0.70% | 0.65% | 0.49% | 0.01% |
| Supplemental Data: | | | | | |
| Net assets, end of period (000 omitted) | $2,955,903 | $2,966,768 | $4,559,876 | $4,791,221 | $6,661,244 |
| 1 | Represents less than $0.001. |
| 2 | Based on net asset value. |
| 3 | 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
Annual Shareholder Report
Statement of Assets and Liabilities
May 31, 2013
| Assets: | | |
| Investment in repurchase agreements | $306,751,000 | |
| Investment in securities | 2,671,830,484 | |
| Total investment in securities, at amortized cost and fair value | | $2,978,581,484 |
| Cash | | 233,083 |
| Income receivable | | 839,229 |
| Receivable for shares sold | | 67,890 |
| TOTAL ASSETS | | 2,979,721,686 |
| Liabilities: | | |
| Payable for investments purchased | 23,058,998 | |
| Payable for shares redeemed | 274,631 | |
| Income distribution payable | 72 | |
| Payable for investment adviser fee (Note 5) | 25,706 | |
| Payable for Directors'/Trustees' fees (Note 5) | 2,403 | |
| Accrued expenses (Note 5) | 456,657 | |
| TOTAL LIABILITIES | | 23,818,467 |
| Net assets for 2,955,896,296 shares outstanding | | $2,955,903,219 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,955,896,296 |
| Accumulated net realized gain on investments | | 6,995 |
| Distributions in excess of net investment income | | (72) |
| TOTAL NET ASSETS | | $2,955,903,219 |
Net Asset Value, Offering Price and
Redemption Proceeds Per Share: | | |
| $2,955,903,219 ÷ 2,955,896,296 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
Annual Shareholder Report
Statement of Operations
Year Ended May 31, 2013
| Investment Income: | | | |
| Interest | | | $10,995,840 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $15,353,494 | |
| Administrative fee (Note 5) | | 2,396,109 | |
| Custodian fees | | 110,253 | |
| Transfer and dividend disbursing agent fees and expenses | | 3,363,509 | |
| Directors'/Trustees' fees (Note 5) | | 13,866 | |
| Auditing fees | | 20,100 | |
| Legal fees | | 7,858 | |
| Portfolio accounting fees | | 161,866 | |
| Distribution services fee (Note 5) | | 3,070,715 | |
| Shareholder services fee (Note 5) | | 7,674,906 | |
| Share registration costs | | 331,743 | |
| Printing and postage | | 323,676 | |
| Insurance premiums (Note 5) | | 9,230 | |
| Taxes | | 318,300 | |
| Miscellaneous (Note 5) | | 13,531 | |
| TOTAL EXPENSES | | 33,169,156 | |
| Waivers and Reimbursement (Note 5): | | | |
| Waiver of investment adviser fee | $(11,716,887) | | |
| Waiver of administrative fee | (14,574) | | |
| Waiver of distribution services fee | (3,070,715) | | |
| Waiver of shareholder services fee | (7,667,290) | | |
| Reimbursement of shareholder services fee | (7,616) | | |
| TOTAL WAIVERS AND REIMBURSEMENT | | (22,477,082) | |
| Net expenses | | | 10,692,074 |
| Net investment income | | | 303,766 |
| Net realized gain on investments | | | 21,067 |
| Change in net assets resulting from operations | | | $324,833 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Statement of Changes in Net Assets
| Year Ended May 31 | 2013 | 2012 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $303,766 | $350,389 |
| Net realized gain (loss) on investments | 21,067 | (9,749) |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 324,833 | 340,640 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (303,756) | (350,664) |
| Distributions from net realized gain on investments | (1,973) | (6,502) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (305,729) | (357,166) |
| Share Transactions: | | |
| Proceeds from sale of shares | 4,467,237,107 | 4,885,313,197 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 303,190 | 354,685 |
| Cost of shares redeemed | (4,478,424,123) | (6,478,759,153) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (10,883,826) | (1,593,091,271) |
| Change in net assets | (10,864,722) | (1,593,107,797) |
| Net Assets: | | |
| Beginning of period | 2,966,767,941 | 4,559,875,738 |
| End of period (including distributions in excess of net investment income of $(72) and $(82), respectively) | $2,955,903,219 | $2,966,767,941 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Notes to Financial Statements
May 31, 2013
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 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 fair value, the value of the portfolio securities will be determined under procedures established by and under the general supervision of the Directors.
The Directors have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to determine fair value of securities and in overseeing the comparison of amortized cost to market value. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of monitoring the relationship of market value and amortized cost. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions), and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
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
Annual Shareholder Report
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.
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 year ended May 31, 2013, 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 May 31, 2013, tax years 2010 through 2013 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.
Annual Shareholder Report
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.
Additional information on restricted securities, excluding securities purchased under Rule 144A that have been deemed liquid by the Directors, if applicable, held at May 31, 2013, is as follows:
| Security | Acquisition Date | Cost | Market Value |
| Devon Energy Corp., 0.346%, 6/24/2013 | 3/22/2013 | $14,500,000 | $14,500,000 |
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:
| Year Ended May 31 | 2013 | 2012 |
| Shares sold | 4,467,237,107 | 4,885,313,197 |
| Shares issued to shareholders in payment of distributions declared | 303,190 | 354,685 |
| Shares redeemed | (4,478,424,123) | (6,478,759,153) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (10,883,826) | (1,593,091,271) |
4. FEDERAL TAX INFORMATION
The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended May 31, 2013 and 2012, was as follows:
| | 2013 | 2012 |
| Ordinary income1 | $305,729 | $357,166 |
| 1 | For tax purposes, short-term capital gain distributions are considered ordinary income distributions. |
| | |
As of May 31, 2013, the components of distributable earnings on a tax basis were as follows:
| Undistributed ordinary income2 | | $6,923 |
| 2 | For tax purposes, short-term capital gains are considered ordinary income in determining distributable earnings. |
Annual Shareholder Report
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
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 year ended May 31, 2013, the Adviser voluntarily waived $11,716,887 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Daily Net Assets
of the Investment Complex |
| 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 |
Prior to September 1, 2012, the administrative fee received during any fiscal year was 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 year ended May 31, 2013, FAS waived $14,574 of its fee. The net fee paid to FAS was 0.078% of average daily net assets of the Fund.
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 year ended May 31, 2013, FSC voluntarily waived its entire fee of $3,070,715. 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 year ended May 31, 2013, FSSC voluntarily reimbursed $7,616 of Service Fees. In addition, for the year ended May 31, 2013, unaffiliated third-party financial intermediaries waived $7,667,290 of Service Fees. This waiver can be modified or terminated at any time.
Annual Shareholder Report
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 certain of its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their respective 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, 2014; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable 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 year ended May 31, 2013, 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 $3,000,000 and $76,685,000, respectively.
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.
6. 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.
7. 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 May 31, 2013, there were no outstanding loans. During the year ended May 31, 2013, the Fund did not utilize the LOC.
8. 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 May 31, 2013, there were no outstanding loans. During the year ended May 31, 2013, the program was not utilized.
Annual Shareholder Report
Report of Independent Registered Public Accounting Firm
TO THE BOARD OF directors OF Cash trust Series, INc. AND SHAREHOLDERS Of Federated Prime Cash Series:
We have audited the accompanying statement of assets and liabilities of Federated Prime Cash Series (the “Fund”) (one of the portfolios constituting Cash Trust Series, Inc.), including the portfolio of investments, as of May 31, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of May 31, 2013, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Federated Prime Cash Series, a portfolio of Cash Trust Series, Inc., at May 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
July 24, 2013
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 December 1, 2012 to May 31, 2013.
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
12/1/2012 | Ending
Account Value
5/31/2013 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.00 | $1.55 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,023.39 | $1.56 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.31%, multiplied by the average account value over the period, multiplied by 182/365 (to reflect the one-half-year period). |
| 2 | Actual and Hypothetical expenses paid during the period utilizing the Fund's current Fee Limit of 1.05% (as reflected in the Notes to Financial Statements, Note 5 under Expense Limitation), multiplied by the average account value over the period, multiplied by 182/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.24 and $5.29, respectively. |
Annual Shareholder Report
Board of Directors and Corporation Officers
The Board of Directors is responsible for managing the Corporation's business affairs and for exercising all the Corporation's powers except those reserved for the shareholders. The following tables give information about each Director and the senior officers of the Fund. Where required, the tables separately list Directors who are “interested persons” of the Fund (i.e., “Interested” Directors) and those who are not (i.e., “ Independent” Directors). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Directors listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2012, the Corporation comprised four portfolio(s), and the Federated Fund Family consisted of 42 investment companies (comprising 137 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Director oversees all portfolios in the Federated Fund Family and serves for an indefinite term. The Fund's Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-341-7400.
In Memoriam - John F. Cunningham, Independent Director
With deep sadness, Federated announces the passing of John F. Cunningham, who served as an independent member of the Board of the Federated Fund Family since 1999. Mr. Cunningham's savvy business acumen and incisive intellect made him a powerful force on the Federated Fund Board. He was an advocate for shareholders and a respected colleague within the Federated family. Mr. Cunningham enjoyed an outstanding career in technology, having served as President and in other Senior Executive positions with leading companies in the industry. Federated expresses gratitude to Mr. Cunningham for his fine contributions as a Board member, colleague and friend. He will be greatly missed.
Interested DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
John F. Donahue*
Birth Date: July 28, 1924
Director
Began serving: May 1989 | Principal Occupations: Director or Trustee of the Federated Fund Family; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Family's Executive Committee.
Previous Positions: Chairman of the Federated Fund Family; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
J. Christopher Donahue*
Birth Date: April 11, 1949
President and Director
Began serving: May 1989 | Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Fund Family; Director or Trustee of certain of the Funds in the Federated Fund Family; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company.
Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd. |
| * | Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries. |
INDEPENDENT DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Maureen Lally-Green
Birth Date: July 5, 1949
Director
Began serving: August 2009 | Principal Occupations: Director or Trustee of the Federated Fund Family; Director, Office of Church Relations, and Associate General Secretary, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne University School of Law.
Other Directorships Held: Director, Auberle; Member, Pennsylvania State Board of Education; Director, Saint Vincent College; Director, Ireland Institute of Pittsburgh; Chair and Director, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society, Allegheny County; Director, Our Campaign for the Church Alive, Inc.
Previous Position: Pennsylvania Superior Court Judge.
Qualifications: Legal and director experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Peter E. Madden
Birth Date: March 16, 1942
Director
Began serving: August 1991 | Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Family.
Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
Qualifications: Business management, mutual fund services and director experience. |
Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee of the Federated Fund Family; Management Consultant.
Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President, DVC Group, Inc. (marketing, communications and technology).
Qualifications: Banking, business management, education and director experience. |
Thomas M. O'Neill
Birth Date: June 14, 1951
Director
Began serving: October 2006 | Principal Occupations: Director or Trustee, Vice Chairman of the Audit Committee of the Federated Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College; Board of Directors, Medicines for Humanity; Board of Directors, The Golisano Children's Museum of Naples, Florida.
Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber).
Qualifications: Business management, mutual fund, director and investment experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
John S. Walsh
Birth Date: November 28, 1957
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee, Chairman of the Audit Committee of the Federated Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
Previous Position: Vice President, Walsh & Kelly, Inc.
Qualifications: Business management and director experience. |
OFFICERS
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT AND SECRETARY
Officer since: May 1989 | Principal Occupations: Executive Vice President and Secretary of the Federated Fund Family; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp. |
Lori A. Hensler, CPA
Birth Date: January 6, 1967
TREASURER
Officer since: April 2013 | Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp. and Edgewood Services, Inc.; and Assistant Treasurer, Federated Investors Trust Company.
Previous Positions: Controller of Federated Investors, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
Peter J. Germain
Birth Date: September 3, 1959
CHIEF LEGAL OFFICER
Officer since: January 2005 | Principal Occupations: Mr. Germain is Chief Legal Officer of the Federated Fund Family. He is General Counsel and Vice President, Federated Investors, Inc.; President, Federated Administrative Services and Federated Administrative Services, Inc.; Vice President, Federated Securities Corp.; Secretary, Federated Private Asset Management, Inc.; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated in 1984 and is a member of the Pennsylvania Bar Association.
Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Investors, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Investors, Inc. |
Richard B. Fisher
Birth Date: May 17, 1923
Vice Chairman
Officer since: August 2002 | Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Family; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Family; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated Securities Corp. |
Brian P. Bouda
Birth Date: February 28, 1947
CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
Officer since: August 2004 | Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Family; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
Previous Positions: Served in Senior Management positions with a large regional banking organization. |
Deborah A. Cunningham
Birth Date: September 15, 1959
CHIEF INVESTMENT OFFICER
Officer since: May 2004 | Principal Occupations: Deborah A. Cunningham was named Chief Investment Officer of money market products in 2004. She joined Federated in 1981 and has been a Senior Portfolio Manager since 1997 and an Executive Vice President of the Fund's Adviser since 2009. Ms. Cunningham has received the Chartered Financial Analyst designation and holds an M.S.B.A. in Finance from Robert Morris College. |
Paige M. Wilhelm
Birth Date: May 28, 1962
Vice President
Began serving: June 2012
Portfolio Manager since: April 1997 | Principal Occupations: Paige M. Wilhelm has been the Fund's Portfolio Manager since April 1997. She is Vice President of the Corporation with respect to the Fund. Ms. Wilhelm joined Federated in 1985 and has been a Sr. Vice President of the Funds Adviser since January 2006 and a Senior Portfolio Manager since January 2004. She is responsible for portfolio management and research in the fixed-income area concentrating on taxable money market instruments. Previous associations include Senior Credit Analyst, Federated Investors; Performance Analysis Supervisor; Performance Analyst, Federated Investment Counseling. Ms. Wilhelm is a member of the CFA Society of Pittsburgh and received her B.S. from Indiana University and her M.B.A. from Duquesne University. |
Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2013
Federated Prime Cash Series (the “Fund”)
Following a review and recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2013 meetings the Fund's investment advisory contract for an additional one-year term. 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.
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 to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders or the family of funds; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees charged to institutional and other clients of the Adviser for what might be viewed as like 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.
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, and in connection with its May meetings, the Board 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 substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent directors and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. 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; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; 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.
Annual Shareholder Report
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. The Board focused on comparisons with other similar 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 relative indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
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, noting that the overall expense structure of the Fund, after waivers and expense reimbursements, was above the median of the relevant peer group, but the Board still 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.
By contrast, 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 the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Fund's ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as 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.
Annual Shareholder Report
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, though not conclusive, 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, adjustment 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, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in arbitrarily allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate can dramatically alter the resulting estimate of cost and/or profitability of a fund. 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. The Board agreed with this assessment.
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 family of funds, such as personnel and processes for the portfolio management, shareholder services, 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
Annual Shareholder Report
likely to be enjoyed by the fund family 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 noted that, subject to the 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 were reasonable. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
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 concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
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.
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 Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “ Literature and Prospectuses” 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 Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”
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.
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
28566 (7/13)
Federated is a registered trademark of Federated Investors, Inc.
2013 ©Federated Investors, Inc.
Annual Shareholder Report
May 31, 2013
Federated Treasury Cash Series
A Portfolio of Cash Trust Series, Inc.
Not FDIC Insured
May Lose Value
No Bank Guarantee
Portfolio of Investments Summary Tables (unaudited)
At May 31, 2013, the Fund's portfolio composition1 was as follows:
| Portfolio Composition | Percentage of
Total Net Assets |
| Repurchase Agreements | 68.8% |
| U.S. Treasury Securities | 33.0% |
| Other Assets and Liabilities—Net2 | (1.8)% |
| TOTAL | 100.0% |
At May 31, 2013, the Fund's effective maturity3 schedule was as follows:
Securities With an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 68.8% |
| 8-30 Days | 7.9% |
| 31-90 Days | 5.8% |
| 91-180 Days | 12.1% |
| 181 Days or more | 7.2% |
| Other Assets and Liabilities—Net2 | (1.8)% |
| 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. |
Annual Shareholder Report
Portfolio of Investments
May 31, 2013
Principal
Amount | | | Value |
| | | U.S. Treasury—33.0% | |
| $14,000,000 | 1 | United States Treasury Bills, 0.110%, 8/8/2013 | $13,997,091 |
| 43,000,000 | 1 | United States Treasury Bills, 0.130%, 8/22/2013 | 42,987,267 |
| 65,500,000 | | United States Treasury Notes, 0.125% - 3.125%, 8/31/2013 | 65,869,715 |
| 21,500,000 | | United States Treasury Notes, 0.125% - 3.125%, 9/30/2013 | 21,623,715 |
| 86,500,000 | | United States Treasury Notes, 0.250% - 2.750%, 10/31/2013 | 86,879,917 |
| 19,000,000 | | United States Treasury Notes, 0.250%, 1/31/2014 | 19,013,949 |
| 15,000,000 | | United States Treasury Notes, 0.250%, 2/28/2014 | 15,011,142 |
| 115,500,000 | | United States Treasury Notes, 0.375% - 3.375%, 6/30/2013 | 115,597,498 |
| 65,000,000 | | United States Treasury Notes, 0.500%, 10/15/2013 | 65,080,267 |
| 52,000,000 | | United States Treasury Notes, 0.500% - 4.250%, 11/15/2013 | 52,744,379 |
| 17,000,000 | | United States Treasury Notes, 0.750%, 9/15/2013 | 17,028,156 |
| 20,000,000 | | United States Treasury Notes, 0.750%, 12/15/2013 | 20,068,691 |
| 25,000,000 | | United States Treasury Notes, 1.000%, 7/15/2013 | 25,022,895 |
| 9,000,000 | | United States Treasury Notes, 1.000%, 1/15/2014 | 9,048,266 |
| 86,250,000 | | United States Treasury Notes, 1.125%, 6/15/2013 | 86,280,867 |
| 26,000,000 | | United States Treasury Notes, 1.250%, 2/15/2014 | 26,198,703 |
| 22,000,000 | | United States Treasury Notes, 1.250%, 3/15/2014 | 22,184,812 |
| 8,500,000 | | United States Treasury Notes, 1.250%, 4/15/2014 | 8,578,656 |
| 30,000,000 | | United States Treasury Notes, 2.000%, 11/30/2013 | 30,266,877 |
| 12,000,000 | | United States Treasury Notes, 2.250%, 5/31/2014 | 12,250,893 |
| 21,000,000 | | United States Treasury Notes, 2.625%, 6/30/2014 | 21,558,037 |
| 17,000,000 | | United States Treasury Notes, 3.375%, 7/31/2013 | 17,089,174 |
| 47,000,000 | | United States Treasury Notes, 4.250%, 8/15/2013 | 47,400,022 |
| | | TOTAL U.S. TREASURY | 841,780,989 |
| | | Repurchase Agreements—68.8% | |
| 100,000,000 | | Interest in $1,435,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $1,435,007,175 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 5/31/2015 and the market value of those underlying securities was $1,463,766,651. | 100,000,000 |
| 44,000,000 | 2 | Interest in $470,000,000 joint repurchase agreement 0.08%, dated 5/20/2013 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $470,095,044 on 8/19/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2040 and the market value of those underlying securities was $479,414,964. | 44,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Repurchase Agreements—continued | |
| $60,000,000 | | Interest in $1,500,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which Bank of Nova Scotia will repurchase securities provided as collateral for $1,500,007,500 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 11/15/2028 and the market value of those underlying securities was $1,530,007,710. | $60,000,000 |
| 100,000,000 | | Interest in $2,850,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $2,850,014,250 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 8/31/2017 and the market value of those underlying securities was $2,904,038,689. | 100,000,000 |
| 100,000,000 | | Interest in $200,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which CIBC World Markets Corp. will repurchase securities provided as collateral for $200,001,000 on 6/3/2013. The securities provided as collateral at the end of the period held with JPMorgan Chase & Co., tri-party agent, were U.S. Treasury securities with various maturities to 11/15/2028 and the market value of those underlying securities was $204,004,615. | 100,000,000 |
| 100,000,000 | | Interest in $270,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which CS First Boston Corp. will repurchase a security provided as collateral for $270,001,350 on 6/3/2013. The security provided as collateral at the end of the period held with JPMorgan Chase & Co., tri-party agent, was a U.S. Treasury security maturing on 11/30/2014 and the market value of that underlying security was $275,404,650. | 100,000,000 |
| 100,000,000 | | Interest in $250,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which Citibank, N.A. will repurchase securities provided as collateral for $250,001,250 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 8/15/2021 and the market value of those underlying securities was $255,063,514. | 100,000,000 |
| 100,000,000 | | Interest in $750,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which Citigroup Global Markets, Inc. will repurchase securities provided as collateral for $750,003,750 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2027 and the market value of those underlying securities was $765,003,921. | 100,000,000 |
| 424,858,000 | | Interest in $4,000,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which Credit Agricole CIB New York will repurchase securities provided as collateral for $4,000,020,000 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2043 and the market value of those underlying securities was $4,080,020,481. | 424,858,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Repurchase Agreements—continued | |
| $81,000,000 | | Interest in $1,000,000,000 joint repurchase agreement 0.04%, dated 5/29/2013 under which Deutsche Bank Securities, Inc. will repurchase securities provided as collateral for $1,000,007,778 on 6/5/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2043 and the market value of those underlying securities was $1,020,005,682. | $81,000,000 |
| 100,000,000 | | Interest in $1,000,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which Deutsche Bank Securities, Inc. will repurchase securities provided as collateral for $1,000,005,000 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2043 and the market value of those underlying securities was $1,020,005,101. | 100,000,000 |
| 55,000,000 | 2 | Interest in $640,000,000 joint repurchase agreement 0.10%, dated 5/6/2013 under which Goldman Sachs & Co. will repurchase a security provided as collateral for $640,060,444 on 6/10/2013. The security provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, was a U.S. Treasury security maturing on 1/15/2017 and the market value of that underlying security was $652,849,016. | 55,000,000 |
| 101,000,000 | 2 | Interest in $1,183,000,000 joint repurchase agreement 0.11%, dated 5/1/2013 under which Goldman Sachs & Co. will repurchase securities provided as collateral for $1,183,122,901 on 6/5/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 1/15/2022 and the market value of those underlying securities was $1,206,778,045. | 101,000,000 |
| 100,000,000 | | Interest in $800,000,000 joint repurchase agreement 0.07%, dated 5/31/2013 under which Mitsubishi UFJ Securities (USA), Inc. will repurchase securities provided as collateral for $800,004,667 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 11/15/2042 and the market value of those underlying securities was $816,004,799. | 100,000,000 |
| 8,000,000 | 2 | Interest in $100,000,000 joint repurchase agreement 0.08%, dated 5/15/2013 under which RBS Securities, Inc. will repurchase a security provided as collateral for $100,006,667 on 6/14/2013. The security provided as collateral at the end of the period held with JPMorgan Chase & Co., tri-party agent, was a U.S. Treasury security maturing on 4/15/2016 and the market value of that underlying security was $102,004,385. | 8,000,000 |
| 100,000,000 | | Interest in $2,000,000,000 joint repurchase agreement 0.06%, dated 5/31/2013 under which Societe Generale, New York will repurchase securities provided as collateral for $2,000,010,000 on 6/3/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 11/15/2040 and the market value of those underlying securities was $2,040,172,915. | 100,000,000 |
Annual Shareholder Report
Principal
Amount | | | Value |
| | | Repurchase Agreements—continued | |
| $39,000,000 | 2 | Interest in $453,000,000 joint repurchase agreement 0.10%, dated 5/7/2013 under which Societe Generale, New York will repurchase securities provided as collateral for $453,036,492 on 6/5/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2042 and the market value of those underlying securities was $462,094,695. | $39,000,000 |
| 42,000,000 | | Interest in $500,000,000 joint repurchase agreement 0.04%, dated 5/28/2013 under which TD Securities (USA), LLC will repurchase securities provided as collateral for $500,003,889 on 6/4/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2043 and the market value of those underlying securities was $510,003,452. | 42,000,000 |
| | | TOTAL REPURCHASE AGREEMENTS (AT COST) | 1,754,858,000 |
| | | TOTAL INVESTMENTS—101.8%
(AT AMORTIZED COST)3 | 2,596,638,989 |
| | | OTHER ASSETS AND LIABILITIES – NET—(1.8)%4 | (46,763,647) |
| | | TOTAL NET ASSETS—100% | $2,549,875,342 |
| 1 | Discount rate(s) 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 May 31, 2013.
See Notes which are an integral part of the Financial Statements
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 May 31, 2013, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| Year Ended May 31 | 2013 | 2012 | 2011 | 2010 | 2009 |
| Net Asset Value, Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Income From Investment Operations: | | | | | |
| Net investment income | — | — | — | — | 0.0032 |
| 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 |
| Less Distributions: | | | | | |
| Distributions from net investment income | — | — | — | — | (0.0032) |
| Distributions from net realized gain on investments | (0.0000)1 | (0.0000)1 | (0.0000)1 | — | (0.0001) |
| TOTAL DISTRIBUTIONS | (0.0000)1 | (0.0000)1 | (0.0000)1 | — | (0.0033) |
| Net Asset Value, End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.00%3 | 0.00%3 | 0.00%3 | 0.00%3 | 0.32% |
| Ratios to Average Net Assets: | | | | | |
| Net expenses | 0.16% | 0.10% | 0.19% | 0.21% | 0.47% |
| Net investment income | 0.00% | 0.00% | 0.00% | 0.00% | 0.15% |
| Expense waiver/reimbursement4 | 0.92% | 0.98% | 0.89% | 0.87% | 0.62% |
| Supplemental Data: | | | | | |
| Net assets, end of period (000 omitted) | $2,549,875 | $2,355,609 | $1,445,337 | $1,339,308 | $1,457,691 |
| 1 | Represents less than $0.0001. |
| 2 | Based on net asset value. |
| 3 | Represents less than 0.01%. |
| 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
Annual Shareholder Report
Statement of Assets and Liabilities
May 31, 2013
| Assets: | | |
| Investment in repurchase agreements | $1,754,858,000 | |
| Investment in securities | 841,780,989 | |
| Total investment in securities, at amortized cost and fair value | | $2,596,638,989 |
| Cash | | 583,060 |
| Income receivable | | 3,137,929 |
| Receivable for shares sold | | 2,100 |
| TOTAL ASSETS | | 2,600,362,078 |
| Liabilities: | | |
| Payable for investments purchased | 50,092,341 | |
| Payable for shares redeemed | 29,358 | |
| Payable to adviser (Note 5) | 226,237 | |
| Payable for Directors'/Trustees' fees (Note 5) | 1,135 | |
| Accrued expenses (Note 5) | 137,665 | |
| TOTAL LIABILITIES | | 50,486,736 |
| Net assets for 2,549,875,328 shares outstanding | | $2,549,875,342 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,549,875,342 |
| TOTAL NET ASSETS | | $2,549,875,342 |
Net Asset Value, Offering Price and Redemption Proceeds
Per Share: | | |
| ($2,549,875,342 ÷ 2,549,875,328 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
Annual Shareholder Report
Statement of Operations
Year Ended May 31, 2013
| Investment Income: | | | |
| Interest | | | $3,874,193 |
| Expenses: | | | |
| Investment adviser fee (Note 5) | | $12,250,227 | |
| Administrative fee (Note 5) | | 1,911,847 | |
| Custodian fees | | 104,148 | |
| Transfer and dividend disbursing agent fees and expenses | | 2,712,675 | |
| Directors'/Trustees' fees (Note 5) | | 20,257 | |
| Auditing fees | | 19,250 | |
| Legal fees | | 8,359 | |
| Portfolio accounting fees | | 159,289 | |
| Distribution services fee (Note 5) | | 2,450,045 | |
| Shareholder services fee (Note 5) | | 6,117,751 | |
| Account administration fee | | 6,544 | |
| Share registration costs | | 400,020 | |
| Printing and postage | | 123,917 | |
| Insurance premiums (Note 5) | | 8,282 | |
| Taxes | | 105,599 | |
| Miscellaneous (Note 5) | | 30,925 | |
| TOTAL EXPENSES | | 26,429,135 | |
| Waivers: | | | |
| Waiver of investment adviser fee (Note 5) | $(11,592,780) | | |
| Waiver of administrative fee (Note 5) | (12,117) | | |
| Waiver of distribution services fee (Note 5) | (2,450,045) | | |
| Waiver of shareholder services fee (Note 5) | (6,117,751) | | |
| Waiver of account administration fee (Note 5) | (6,544) | | |
| Waiver of transfer and dividend disbursing agent fees and expenses | (2,375,705) | | |
| TOTAL WAIVERS | | (22,554,942) | |
| Net expenses | | | 3,874,193 |
| Net investment income | | | — |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Statement of Changes in Net Assets
| Year Ended May 31 | 2013 | 2012 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $— | $— |
| Net realized gain on investments | — | 3,088 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | — | 3,088 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | (2,736) | (2,777) |
| Share Transactions: | | |
| Proceeds from sale of shares | 5,250,011,995 | 6,273,085,141 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 2,720 | 2,715 |
| Cost of shares redeemed | (5,055,745,365) | (5,362,816,786) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 194,269,350 | 910,271,070 |
| Change in net assets | 194,266,614 | 910,271,381 |
| Net Assets: | | |
| Beginning of period | 2,355,608,728 | 1,445,337,347 |
| End of period | $2,549,875,342 | $2,355,608,728 |
See Notes which are an integral part of the Financial Statements
Annual Shareholder Report
Notes to Financial Statements
May 31, 2013
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 fair value, the value of the portfolio securities will be determined under procedures established by and under the general supervision of the Fund's Board of Directors (the “Directors”).
The Directors have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and certain of the Adviser's affiliated companies to determine fair value of securities and in overseeing the comparison of amortized cost to market value. The Directors have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of monitoring the relationship of market value and amortized cost. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and assumptions) and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Directors. The Directors periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
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
Annual Shareholder Report
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.
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 year ended May 31, 2013, 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 May 31, 2013, tax years 2010 through 2013 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.
Annual Shareholder Report
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:
| Year Ended May 31 | 2013 | 2012 |
| Shares sold | 5,250,011,995 | 6,273,085,141 |
| Shares issued to shareholders in payment of distributions declared | 2,720 | 2,715 |
| Shares redeemed | (5,055,745,365) | (5,362,816,786) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 194,269,350 | 910,271,070 |
4. FEDERAL TAX INFORMATION
The tax character of distributions as reported on the Statement of Changes in Net Assets for the years ended May 31, 2013 and 2012, was as follows:
| | 2013 | 2012 |
| Ordinary income1 | $2,736 | $2,777 |
| 1 | For tax purposes, short-term capital gain distributions are treated as ordinary income distributions. |
5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
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 year ended May 31, 2013, the Adviser voluntarily waived $11,592,780 of its fee.
Administrative Fee
Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, “Investment Complex” is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below, plus certain out-of-pocket expenses:
| Administrative Fee | Average Daily Net Assets
of the Investment Complex |
| 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 |
Annual Shareholder Report
Prior to September 1, 2012, the administrative fee received during any fiscal year was 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 year ended May 31, 2013, FAS waived $12,117 of its fee. The net fee paid to FAS was 0.078% of average daily net assets of the Fund.
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 year ended May 31, 2013, FSC voluntarily waived its entire fee of $2,450,045. 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 year ended May 31, 2013, FSSC voluntarily waived $6,544 of account administration fees. In addition, for the year ended May 31, 2013, unaffiliated third-party financial intermediaries waived $6,117,751 of shareholder services 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 certain of its affiliates (which may include FSC, FAS and FSSC) have voluntarily agreed to waive their respective 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/or reimbursements) will not exceed 1.05% (the “Fee Limit”), up to but not including the later of (the “ Termination Date”): (a) August 1, 2014; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its applicable 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 year ended May 31, 2013, 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 $195,009,897 and $0, respectively.
Annual Shareholder Report
General
Certain Officers and Directors of the Fund are Officers and Directors or Trustees of certain of the above companies. To efficiently facilitate payment, Directors'/Trustees' fees and certain expenses related to conducting meetings of the Directors/Trustees and other miscellaneous expenses are paid by an affiliate of the Adviser which in due course are reimbursed by the Fund.
6. 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 May 31, 2013, there were no outstanding loans. During the year ended May 31, 2013, 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 May 31, 2013, there were no outstanding loans. During the year ended May 31, 2013, the program was not utilized.
Annual Shareholder Report
Report of Independent Registered Public Accounting Firm
TO THE BOARD OF Directors OF Cash trust Series, INc. AND SHAREHOLDERS Of Federated Treasury Cash Series:
We have audited the accompanying statement of assets and liabilities of Federated Treasury Cash Series (the “Fund”) (one of the portfolios constituting Cash Trust Series, Inc.), including the portfolio of investments, as of May 31, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of May 31, 2013, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Federated Treasury Cash Series, a portfolio of Cash Trust Series, Inc., at May 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
Boston, Massachusetts
July 24, 2013
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 December 1, 2012 to May 31, 2013.
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
12/1/2012 | Ending
Account Value
5/31/2013 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.00 | $0.70 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,024.23 | $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 182/365 (to reflect the one-half-year period). |
| 2 | Actual and Hypothetical expenses paid during the period utilizing the Fund's current Fee Limit of 1.05% (as reflected in the Notes to Financial Statements, Note 5 under Expense Limitation), multiplied by the average account value over the period, multiplied by 182/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.24 and $5.29, respectively. |
Annual Shareholder Report
Board of Directors and Corporation Officers
The Board of Directors is responsible for managing the Corporation's business affairs and for exercising all the Corporation's powers except those reserved for the shareholders. The following tables give information about each Director and the senior officers of the Fund. Where required, the tables separately list Directors who are “interested persons” of the Fund (i.e., “Interested” Directors) and those who are not (i.e., “ Independent” Directors). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Directors listed is 4000 Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2012, the Corporation comprised four portfolio(s), and the Federated Fund Family consisted of 42 investment companies (comprising 137 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Director oversees all portfolios in the Federated Fund Family and serves for an indefinite term. The Fund's Statement of Additional Information includes additional information about Corporation Directors and is available, without charge and upon request, by calling 1-800-341-7400.
In Memoriam - John F. Cunningham, Independent Director
With deep sadness, Federated announces the passing of John F. Cunningham, who served as an independent member of the Board of the Federated Fund Family since 1999. Mr. Cunningham's savvy business acumen and incisive intellect made him a powerful force on the Federated Fund Board. He was an advocate for shareholders and a respected colleague within the Federated family. Mr. Cunningham enjoyed an outstanding career in technology, having served as President and in other Senior Executive positions with leading companies in the industry. Federated expresses gratitude to Mr. Cunningham for his fine contributions as a Board member, colleague and friend. He will be greatly missed.
Interested DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
John F. Donahue*
Birth Date: July 28, 1924
Director
Began serving: May 1989 | Principal Occupations: Director or Trustee of the Federated Fund Family; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Family's Executive Committee.
Previous Positions: Chairman of the Federated Fund Family; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s) |
J. Christopher Donahue*
Birth Date: April 11, 1949
President and Director
Began serving: May 1989 | Principal Occupations: Principal Executive Officer and President of certain of the Funds in the Federated Fund Family; Director or Trustee of certain of the Funds in the Federated Fund Family; President, Chief Executive Officer and Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.; Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services Company.
Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd. |
| * | Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries. |
INDEPENDENT DIRECTORS Background
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Maureen Lally-Green
Birth Date: July 5, 1949
Director
Began serving: August 2009 | Principal Occupations: Director or Trustee of the Federated Fund Family; Director, Office of Church Relations, and Associate General Secretary, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne University School of Law.
Other Directorships Held: Director, Auberle; Member, Pennsylvania State Board of Education; Director, Saint Vincent College; Director, Ireland Institute of Pittsburgh; Chair and Director, UPMC Mercy Hospital; Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society, Allegheny County; Director, Our Campaign for the Church Alive, Inc.
Previous Position: Pennsylvania Superior Court Judge.
Qualifications: Legal and director experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
Peter E. Madden
Birth Date: March 16, 1942
Director
Began serving: August 1991 | Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Family.
Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired); Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
Qualifications: Business management, mutual fund services and director experience. |
Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee of the Federated Fund Family; Management Consultant.
Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA (formerly Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice President, DVC Group, Inc. (marketing, communications and technology).
Qualifications: Banking, business management, education and director experience. |
Thomas M. O'Neill
Birth Date: June 14, 1951
Director
Began serving: October 2006 | Principal Occupations: Director or Trustee, Vice Chairman of the Audit Committee of the Federated Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College; Board of Directors, Medicines for Humanity; Board of Directors, The Golisano Children's Museum of Naples, Florida.
Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software (investment order management software); Director, Midway Pacific (lumber).
Qualifications: Business management, mutual fund, director and investment experience. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications |
John S. Walsh
Birth Date: November 28, 1957
Director
Began serving: January 1999 | Principal Occupations: Director or Trustee, Chairman of the Audit Committee of the Federated Fund Family; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.
Previous Position: Vice President, Walsh & Kelly, Inc.
Qualifications: Business management and director experience. |
OFFICERS
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT AND SECRETARY
Officer since: May 1989 | Principal Occupations: Executive Vice President and Secretary of the Federated Fund Family; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp. |
Lori A. Hensler, CPA
Birth Date: January 6, 1967
TREASURER
Officer since: April 2013 | Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp. and Edgewood Services, Inc.; and Assistant Treasurer, Federated Investors Trust Company.
Previous Positions: Controller of Federated Investors, Inc.; Senior Vice President and Assistant Treasurer, Federated Investors Management Company; Treasurer, Federated Investors Trust Company; Assistant Treasurer, Federated Administrative Services, Federated Administrative Services, Inc., Federated Securities Corp., Edgewood Services, Inc., Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Federated Investment Counseling, Federated Investment Management Company, Passport Research, Ltd., and Federated MDTA, LLC; Financial and Operations Principal for Federated Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc. |
Annual Shareholder Report
Name
Birth Date
Positions Held with Corporation
Date Service Began | Principal Occupation(s) for Past Five Years
and Previous Position(s) |
Richard B. Fisher
Birth Date: May 17, 1923
Vice Chairman
Officer since: August 2002 | Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Family; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Family; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated Securities Corp. |
Peter J. Germain
Birth Date: September 3, 1959
CHIEF LEGAL OFFICER
Officer since: January 2005 | Principal Occupations: Mr. Germain is Chief Legal Officer of the Federated Fund Family. He is General Counsel and Vice President, Federated Investors, Inc.; President, Federated Administrative Services and Federated Administrative Services, Inc.; Vice President, Federated Securities Corp.; Secretary, Federated Private Asset Management, Inc.; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined Federated in 1984 and is a member of the Pennsylvania Bar Association.
Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Investors, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate Counsel, Federated Investors, Inc. |
Brian P. Bouda
Birth Date: February 28, 1947
CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
Officer since: August 2004 | Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Family; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
Previous Positions: Served in Senior Management positions with a large regional banking organization. |
Deborah A. Cunningham
Birth Date: September 15, 1959
Chief Investment Officer
Officer since: May 2004 | Principal Occupations: Deborah A. Cunningham was named Chief Investment Officer of money market products in 2004. She joined Federated in 1981 and has been a Senior Portfolio Manager since 1997 and an Executive Vice President of the Fund's Adviser since 2009. Ms. Cunningham has received the Chartered Financial Analyst designation and holds an M.S.B.A. in Finance from Robert Morris College. |
Susan R. Hill
Birth Date: June 20, 1963
VICE PRESIDENT
Officer since: June 2012
Portfolio Manager since: January 1994 | Principal Occupations: Susan R. Hill has been the Fund's Portfolio Manager since January 1994. She is Vice President of the Corporation with respect to the Fund. Ms. Hill joined Federated in 1990 and has been a Senior Portfolio Manager since 2003 and a Senior Vice President of the Fund's Adviser since 2005. Ms. Hill was a Portfolio Manager from 1994 until 2003 and served as Vice President of the Fund's Adviser from 1997 until 2004 and an Assistant Vice President of the Fund's Adviser from 1994 until 1997. Ms. Hill has received the Chartered Financial Analyst designation and holds an M.S. in Industrial Administration from Carnegie Mellon University. |
Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2013
Federated Treasury Cash Series (the “Fund”)
Following a review and recommendation of approval by the Fund's independent directors, the Fund's Board reviewed and approved at its May 2013 meetings the Fund's investment advisory contract for an additional one-year term. 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.
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 to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders or the family of funds; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. Consistent with these judicial decisions, the Board also considered management fees charged to institutional and other clients of the Adviser for what might be viewed as like 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.
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, and in connection with its May meetings, the Board 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 substantial information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent directors and their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the directors. 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; the entrepreneurial risk assumed by the Adviser in sponsoring the funds; 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.
Annual Shareholder Report
While mindful that courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be relevant. The Board focused on comparisons with other similar 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 relative indicator of what consumers have found to be reasonable in the precise marketplace in which the Fund competes.
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, noting that the overall expense structure of the Fund, after waivers and expense reimbursements, was above the median of the relevant peer group, but the Board still was satisfied that the overall expense structure of the Fund remained competitive.
By contrast, 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 the time spent by portfolio managers and their teams, funds financial services, legal, compliance and risk management in reviewing securities pricing, addressing different administrative responsibilities, addressing different degrees of risk associated with management and a variety of different costs. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund advisory fees.
The Fund's ability to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as 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.
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, though not conclusive, in judging the reasonableness of proposed fees.
Annual Shareholder Report
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, adjustment 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, while these cost allocation reports apply consistent allocation processes, the inherent difficulties in arbitrarily allocating costs continues to cause the Senior Officer to question the precision of the process and to conclude that such reports may be unreliable, since a single change in an allocation estimate can dramatically alter the resulting estimate of cost and/or profitability of a fund. 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. The Board agreed with this assessment.
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 family of funds, such as personnel and processes for the portfolio management, shareholder services, 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 family as a whole. Finally, the Board also noted the absence of any applicable regulatory or industry guidelines on this subject,
Annual Shareholder Report
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 noted that, subject to the 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 were reasonable. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
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 concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
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.
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 Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “ Literature and Prospectuses” 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 Class.” Select a fund name to go to the Fund Overview page, then select a share class, if applicable. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”
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.
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
28567 (7/13)
Federated is a registered trademark of Federated Investors, Inc.
2013 ©Federated Investors, Inc.
Item 2. Code of Ethics
(a) As of the end of the period covered by this report, the registrant has adopted a code of ethics (the "Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers") that applies to the registrant's Principal Executive Officer and Principal Financial Officer; the registrant's Principal Financial Officer also serves as the Principal Accounting Officer.
(c) Not Applicable
(d) Not Applicable
(e) Not Applicable
(f)(3) The registrant hereby undertakes to provide any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive and Financial Officers.
Item 3. Audit Committee Financial Expert
The registrant's Board has determined that each of the following members of the Board's Audit Committee is an “audit committee financial expert,” and is "independent," for purposes of this Item: Charles F. Mansfield, Jr., Thomas M. O'Neill and John S. Walsh.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2013 - $78,650
Fiscal year ended 2012 - $78,650
(b) Audit-Related Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2013 - $145
Fiscal year ended 2012 - $0
Travel to Audit Committee meeting.
Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(c) Tax Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $ 0 and $ 0 respectively.
(d) All Other Fees billed to the registrant for the two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
Amount requiring approval of the registrant’s audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(e)(1) Audit Committee Policies regarding Pre-approval of Services.
The Audit Committee is required to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such services do not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has received general pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved cost levels will require specific pre-approval by the Audit Committee.
Certain services have the general pre-approval of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the Audit Committee specifically provides for a different period. The Audit Committee will annually review the services that may be provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval for such services. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent determinations. The Audit Committee will not delegate its responsibilities to pre-approve services performed by the independent auditor to management.
The Audit Committee has delegated pre-approval authority to its Chairman. The Chairman will report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Committee will designate another member with such pre-approval authority when the Chairman is unavailable.
AUDIT SERVICES
The annual Audit services engagement terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee must approve any changes in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.
In addition to the annual Audit services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other Audit Services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved certain Audit services, all other Audit services must be specifically pre-approved by the Audit Committee.
AUDIT-RELATED SERVICES
Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related services does not impair the independence of the auditor, and has pre-approved certain Audit-related services, all other Audit-related services must be specifically pre-approved by the Audit Committee.
TAX SERVICES
The Audit Committee believes that the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved certain Tax services, all Tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee.
ALL OTHER SERVICES
With respect to the provision of services other than audit, review or attest services the pre-approval requirement is waived if:
| (1) | The aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues paid by the registrant, the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant to its accountant during the fiscal year in which the services are provided; |
| (2) | Such services were not recognized by the registrant, the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant at the time of the engagement to be non-audit services; and |
| (3) | Such services are promptly brought to the attention of the Audit Committee of the issuer and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the Audit Committee. |
The Audit Committee may grant general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and recurring services, and would not impair the independence of the auditor.
The SEC’s rules and relevant guidance should be consulted to determine the precise definitions of prohibited non-audit services and the applicability of exceptions to certain of the prohibitions.
PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding these levels will require specific pre-approval by the Audit Committee.
PROCEDURES
Requests or applications to provide services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent auditor and the Principal Accounting Officer and/or Internal Auditor, and must include a joint statement as to whether, in their view, the request or application is consistent with the SEC’s rules on auditor independence.
(e)(2) Percentage of services identified in items 4(b) through 4(d) that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X:
4(b)
Fiscal year ended 2013 – 0%
Fiscal year ended 2012 - 0%
Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(c)
Fiscal year ended 2013 – 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(d)
Fiscal year ended 2013 – 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrants investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, 0% and 0% respectively.
| (g) | Non-Audit Fees billed to the registrant, the registrant’s investment adviser, and certain entities controlling, controlled by or under common control with the investment adviser: |
Fiscal year ended 2013 - $97,001
Fiscal year ended 2012 - $377,220
(h) The registrant’s Audit Committee has considered that the provision of non-audit services that were rendered to the registrant’s adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.
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
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers
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 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/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date July 19, 2013
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 July 19, 2013
By /S/ Lori A. Hensler
Lori A. Hensler, Principal Financial Officer
Date July 19, 2013
