United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of Registered Management Investment Companies
811-5843
(Investment Company Act File Number)
Cash Trust Series, Inc.
______________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)
Date of Fiscal Year End: 05/31/15
Date of Reporting Period: Six months ended 11/30/14
Item 1. Reports to Stockholders
Semi-Annual Shareholder Report
November 30, 2014
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 November 30, 2014, the Fund's portfolio composition1 was as follows:
| Portfolio Composition | Percentage of
Total Net Assets |
| U.S. Government Agency Securities | 34.9% |
| U.S. Treasury Security | 0.4% |
| Repurchase Agreements | 64.3% |
| Other Assets and Liabilities—Net2 | 0.4% |
| TOTAL | 100.0% |
At November 30, 2014, the Fund's effective maturity3 schedule was as follows:
Securities With an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 67.2% |
| 8-30 Days | 8.9% |
| 31-90 Days | 18.0% |
| 91-180 Days | 1.8% |
| 181 Days or more | 3.7% |
| Other Assets and Liabilities—Net2 | 0.4% |
| TOTAL | 100.0% |
| 1 | See the Fund's Prospectus and Statement of Additional Information for a description of the principal types of securities in which the Fund invests. |
| 2 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 3 | Effective maturity is determined in accordance with the requirements of Rule 2a-7 under the Investment Company Act of 1940, which regulates money market mutual funds. |
Semi-Annual Shareholder Report
Portfolio of Investments
November 30, 2014 (unaudited)
Principal
Amount | | | Value |
| | | GOVERNMENT AGENCIES—34.9% | |
| $135,586,000 | 1 | Federal Farm Credit System Floating Rate Notes, 0.085%—0.184%, 12/1/2014 - 12/28/2014 | $135,602,519 |
| 41,250,000 | 2 | Federal Home Loan Bank System Discount Notes, 0.099%—0.110%, 1/14/2015 - 2/25/2015 | 41,242,320 |
| 138,000,000 | 1 | Federal Home Loan Bank System Floating Rate Notes, 0.118%—0.162%, 12/6/2014 - 2/25/2015 | 137,992,131 |
| 248,705,000 | | Federal Home Loan Bank System Notes, 0.060%—2.750%,
12/12/2014 - 10/9/2015 | 248,703,321 |
| 23,000,000 | 2 | Federal Home Loan Mortgage Corp. Discount Notes, 0.050%—0.095%, 1/14/2015 - 3/3/2015 | 22,997,086 |
| 19,000,000 | 1 | Federal Home Loan Mortgage Corp. Floating Rate Notes, 0.135%, 12/16/2014 | 18,999,219 |
| 8,566,000 | | Federal Home Loan Mortgage Corp. Notes, 0.350%—4.375%, 3/18/2015 - 7/17/2015 | 8,713,630 |
| 112,500,000 | 2 | Federal National Mortgage Association Discount Notes, 0.060%—0.120%, 1/5/2015 - 4/1/2015 | 112,483,269 |
| 38,000,000 | 1 | Federal National Mortgage Association Floating Rate Notes, 0.125%—0.126%, 12/5/2014 - 12/27/2014 | 37,998,123 |
| 11,000,000 | | Federal National Mortgage Association Note, 0.750%, 12/19/2014 | 11,003,859 |
| | | TOTAL GOVERNMENT AGENCIES | 775,735,477 |
| | | U.S. TREASURY—0.4% | |
| 9,000,000 | | United States Treasury Notes, 2.250%, 1/31/2015 | 9,031,783 |
| | | REPURCHASE AGREEMENTS—64.3% | |
| 33,860,000 | | Interest in $3,500,000,000 joint repurchase agreement 0.08%, dated 11/28/2014 under which Credit Agricole CIB New York will repurchase securities provided as collateral for $3,500,023,333 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 11/15/2044 and the market value of those underlying securities was $3,570,023,831. | 33,860,000 |
| 45,000,000 | 3 | Interest in $400,000,000 joint repurchase agreement 0.14%, dated 7/10/2014 under which ING Financial Markets LLC will repurchase securities provided as collateral for $400,280,000 on 1/6/2015. The securities provided as collateral at the end of the period held with JPMorgan Chase as tri-party agent, were U.S. Government Agency securities with various maturities to 9/1/2044 and the market value of those underlying securities was $412,226,393. | 45,000,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | REPURCHASE AGREEMENTS—continued | |
| $400,000,000 | | Repurchase agreement 0.10%, dated 11/28/2014 under which JPMorgan Securities LLC will repurchase securities provided as collateral for $400,003,333 on 12/1/2014. The securities provided as collateral at the end of the period held with JPMorgan Chase as tri-party agent, were U.S. Government Agency securities with various maturities to 1/15/2054 and the market value of those underlying securities was $410,004,056. | $400,000,000 |
| 22,000,000 | 3 | Interest in $400,000,000 joint repurchase agreement 0.08%, dated 9/11/2014 under which Mitsubishi UFJ Securities (USA), Inc. will repurchase securities provided as collateral for $400,106,667 on 1/9/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to 5/20/2062 and the market value of those underlying securities was $411,932,358. | 22,000,000 |
| 500,000,000 | | Interest in $1,400,000,000 joint repurchase agreement 0.10%, dated 11/28/2014 under which Mitsubishi UFJ Securities (USA), Inc. will repurchase securities provided as collateral for $1,400,011,667 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to 8/20/2062 and the market value of those underlying securities was $1,439,943,610. | 500,000,000 |
| 340,000,000 | | Interest in $500,000,000 joint repurchase agreement 0.10%, dated 11/28/2014 under which Mizuho Securities USA, Inc. will repurchase securities provided as collateral for $500,004,167 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency securities with various maturities to 3/1/2044 and the market value of those underlying securities was $510,090,032. | 340,000,000 |
| 90,000,000 | | Interest in $100,000,000 joint repurchase agreement 0.10%, dated 11/28/2014 under which Pershing LLC will repurchase securities provided as collateral for $100,000,833 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency and U.S. Treasury securities with various maturities to 11/1/2044 and the market value of those underlying securities was $102,001,330. | 90,000,000 |
| | | TOTAL REPURCHASE AGREEMENTS
(AT COST) | 1,430,860,000 |
| | | TOTAL INVESTMENTS—99.6%
(AT AMORTIZED COST)4 | 2,215,627,260 |
| | | OTHER ASSETS AND LIABILITIES - NET—0.4%5 | 9,023,904 |
| | | TOTAL NET ASSETS—100% | $2,224,651,164 |
Semi-Annual Shareholder Report
| 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 November 30, 2014.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1—quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of November 30, 2014, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
11/30/2014 | Year Ended May 31, |
| | 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Income From Investment Operations: | | | | | | |
| Net investment income | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 |
| Net realized gain on investments | 0.00001 | 0.00001 | 0.00001 | 0.00001 | 0.00001 | 0.0001 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0002 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0001) |
| Distributions from net realized gain on investments | (0.0000)1 | (0.0000)1 | (0.0000)1 | (0.0000)1 | (0.0000)1 | (0.0001) |
| TOTAL DISTRIBUTIONS | (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0001) | (0.0002) |
| Net Asset Value, End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 0.09%3 | 0.09% | 0.18% | 0.16% | 0.23% | 0.31% |
| Net investment income | 0.01%3 | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% |
| Expense waiver/reimbursement4 | 0.98%3 | 0.97% | 0.88% | 0.90% | 0.84% | 0.78% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $2,224,651 | $2,470,320 | $2,504,174 | $2,557,022 | $2,522,787 | $861,225 |
| 1 | Represents less than $0.0001. |
| 2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
November 30, 2014 (unaudited)
| Assets: | | |
| Investment in repurchase agreements | $1,430,860,000 | |
| Investment in securities | 784,767,260 | |
| Total investment in securities, at amortized cost and fair value | | $2,215,627,260 |
| Income receivable | | 487,269 |
| Receivable for investments sold | | 9,000,000 |
| Receivable for shares sold | | 2,640 |
| Prepaid expenses | | 30,695 |
| TOTAL ASSETS | | 2,225,147,864 |
| Liabilities: | | |
| Bank overdraft | $253,460 | |
| Income distribution payable | 3 | |
| Payable to adviser (Note 4) | 181,394 | |
| Payable for transfer agent fee | 61,843 | |
| TOTAL LIABILITIES | | 496,700 |
| Net assets for 2,224,645,058 shares outstanding | | $2,224,651,164 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,224,645,058 |
| Accumulated net realized gain on investments | | 6,106 |
| TOTAL NET ASSETS | | $2,224,651,164 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $2,224,651,164 ÷ 2,224,645,058 shares outstanding, no par value, unlimited shares authorized | | $1.00 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended November 30, 2014 (unaudited)
| Investment Income: | | | |
| Interest | | | $1,144,200 |
| Expenses: | | | |
| Investment adviser fee (Note 4) | | $5,917,063 | |
| Administrative fee (Note 4) | | 926,207 | |
| Custodian fees | | 41,263 | |
| Transfer agent fee | | 1,275,538 | |
| Directors'/Trustees' fees (Note 4) | | 8,107 | |
| Auditing fees | | 9,827 | |
| Legal fees | | 6,575 | |
| Portfolio accounting fees | | 81,545 | |
| Distribution services fee (Note 4) | | 1,183,413 | |
| Other service fees (Note 2) | | 2,958,531 | |
| Share registration costs | | 31,181 | |
| Printing and postage | | 59,459 | |
| Taxes | | 90,095 | |
| Miscellaneous (Note 4) | | 10,102 | |
| TOTAL EXPENSES | | 12,598,906 | |
| Waivers and Reimbursement: | | | |
| Waiver of investment adviser fee (Note 4) | $(5,917,063) | | |
| Waivers/reimbursement of other operating expenses (Notes 2 and 4) | (5,655,407) | | |
| TOTAL WAIVERS AND REIMBURSEMENT | | (11,572,470) | |
| Net expenses | | | 1,026,436 |
| Net investment income | | | 117,764 |
| Net realized gain on investments | | | 6,650 |
| Change in net assets resulting from operations | | | $124,414 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Changes in Net Assets
| | Six Months
Ended
(unaudited)
11/30/2014 | Year Ended
5/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $117,764 | $249,730 |
| Net realized gain on investments | 6,650 | 2,463 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 124,414 | 252,193 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (118,146) | (249,348) |
| Distributions from net realized gain on investments | (544) | (2,463) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (118,690) | (251,811) |
| Share Transactions: | | |
| Proceeds from sale of shares | 911,876,013 | 1,941,111,954 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 118,579 | 251,703 |
| Cost of shares redeemed | (1,157,669,599) | (1,975,217,882) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (245,675,007) | (33,854,225) |
| Change in net assets | (245,669,283) | (33,853,843) |
| Net Assets: | | |
| Beginning of period | 2,470,320,447 | 2,504,174,290 |
| End of period | $2,224,651,164 | $2,470,320,447 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
November 30, 2014 (unaudited)
1. ORGANIZATION
Cash Trust Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Federated Government Cash Series (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The 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-based 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-based 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
Semi-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.
Repurchase agreements are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
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.
For the six months ended November 30, 2014, unaffiliated third parties waived $1,155,233 of transfer agent fees.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Shares to unaffiliated 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 other service fees. For the six months ended November 30, 2014, unaffiliated third-party financial intermediaries waived $2,958,531 of other service fees. This wavier can be modified or terminated at any time.
Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.
Premium and Discount Amortization
All premiums and discounts are amortized/accreted using the effective-interest-rate method.
Semi-Annual Shareholder Report
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended November 30, 2014, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of November 30, 2014, tax years 2011 through 2014 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America, the state of Maryland and the Commonwealth of Pennsylvania.
Other Taxes
As an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.
When-Issued and Delayed-Delivery Transactions
The Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. The Fund applies Investment Company accounting and reporting guidance.
3. CAPITAL STOCK
The following table summarizes capital stock activity:
| | Six Months
Ended
11/30/2014 | Year Ended
5/31/2014 |
| Shares sold | 911,876,013 | 1,941,111,954 |
| Shares issued to shareholders in payment of distributions declared | 118,579 | 251,703 |
| Shares redeemed | (1,157,669,599) | (1,975,217,882) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (245,675,007) | (33,854,225) |
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4. 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 and/or reimburse certain operating expenses of the Fund. For the six months ended November 30, 2014, the Adviser voluntarily waived its entire fee of $5,917,063 and voluntarily reimbursed $358,230 of other operating expenses.
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 |
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2014, the annualized 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 six months ended November 30, 2014, FSC voluntarily waived its entire fee of $1,183,413. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares.
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) on their own initiative have agreed to waive their respective fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights, excluding extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund (after the voluntary waivers and/or reimbursements) will not exceed 1.05% (the “Fee Limit”), up to but not including the later of
Semi-Annual Shareholder Report
(the “Termination Date”): (a) August 1, 2015; 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. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
5. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2014, there were no outstanding loans. During the six months ended November 30, 2014, the Fund did not utilize the LOC.
6. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2014, there were no outstanding loans. During the six months ended November 30, 2014, the program was not utilized.
7. REGULATORY MATTERS
On July 23, 2014, the SEC voted to amend the rules under the Act which currently govern the operations of the Fund. A significant change resulting from these amendments will be a requirement that institutional prime funds (i.e., not government or retail as defined in the amendments), transact fund shares based on a market-based Net Asset Value (NAV). This change does not impact government money market funds, and because it is anticipated that the Fund will constitute a government money market fund under the new rules, the Fund will be permitted to continue transacting fund shares at an NAV calculated using the amortized cost valuation method. Among additional disclosure and other requirements, the amendments also will permit a money market fund, or, in certain circumstances, require a money market fund (other than a government money market fund, like the Fund, which satisfies the requirements of the amended rules) to impose liquidity fees on redemptions, and permit a money market fund to limit (or gate) redemptions for up to 10 business days in any 90-day period. The amendments have staggered compliance dates. Compliance with a majority of these amendments will be required on October 14, 2016, two years after the effective date for the rule amendments. The degree to which a money market fund will be impacted by the rule amendments will depend upon the type of fund and type of investors (retail or institutional). At this time, management is evaluating the implications of these amendments and their impact to the Fund's operations, financial statements and accompanying notes.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2014 to November 30, 2014.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semi-Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Beginning
Account Value
6/1/2014 | Ending
Account Value
11/30/2014 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.10 | $0.45 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,024.62 | $0.46 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.09%, multiplied by the average account value over the period, multiplied by 183/365 (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 4 under Expense Limitation), multiplied by the average account value over the period, multiplied by 183/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.26 and $5.32, respectively. |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2014
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 2014 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 of care, conscientiousness and independence with which the Board members perform their duties and their expertise, including whether they are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. The Board noted that SEC disclosure requirements regarding the basis for the Board's approval of the Fund's advisory contract generally track the factors listed above. Consistent with these judicial decisions and SEC disclosure requirements, the Board also considered management fees charged to
Semi-Annual Shareholder Report
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.
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
Semi-Annual Shareholder Report
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.
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. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. 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 advisory fee rate, net advisory fee rate and other expenses of the Fund with the Adviser and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted that the investment advisory fee was waived in its entirety and 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 and sub-adviser services). 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; and different portfolio management techniques made necessary by different cash flows and different associated costs; 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.
Semi-Annual Shareholder Report
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 was one of the Board's considerations 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 may be helpful, though not conclusive, in judging the reasonableness of proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group.
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. In addition, following discussions regarding the Senior Officer's May 2013 recommendations, Federated made meaningful reductions to gross advisory fees for several funds. At the Board meeting in May 2014, the Senior Officer proposed, and the Board approved, reductions in the contractual advisory fees of certain other funds.
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 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
Semi-Annual Shareholder Report
change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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 concluded that Federated's profit margins did not appear to be excessive.
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, 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.
Semi-Annual Shareholder Report
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report
Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. 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 via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
Semi-Annual Shareholder Report
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
Federated Government Cash Series
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 147551204
0122604 (1/15)
Federated is a registered trademark of Federated Investors, Inc.
2015 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
November 30, 2014
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 November 30, 2014, the Fund's portfolio composition1 was as follows:
| Portfolio Composition | Percentage of
Total Net Assets |
| Variable Rate Demand Instruments | 77.1% |
| Municipal Notes | 23.5% |
| Other Assets and Liabilities—Net2 | (0.6)% |
| TOTAL | 100.0% |
At November 30, 2014, the Fund's effective maturity schedule3 was as follows:
Securities with an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 76.0% |
| 8-30 Days | 2.4% |
| 31-90 Days | 3.4% |
| 91-180 Days | 5.8% |
| 181 Days or more | 13.0% |
| 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. |
Semi-Annual Shareholder Report
Portfolio of Investments
November 30, 2014 (unaudited)
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—100.6%1,2 | |
| | | Alabama—1.4% | |
| $3,200,000 | | Mobile, AL IDB, PCRBs (Series 2007B), 0.28% TOBs (Alabama Power Co.), Mandatory Tender 4/8/2015 | $3,200,000 |
| 555,000 | | Montgomery, AL IDB, (Series 2001) Weekly VRDNs (Hager Hinge)/(U.S. Bank, N.A. LOC), 0.090%, 12/4/2014 | 555,000 |
| | | TOTAL | 3,755,000 |
| | | Arizona—10.4% | |
| 755,000 | | Casa Grande, AZ IDA, (Series 2002A) Weekly VRDNs (Price Cos., Inc.)/(Bank of America N.A. LOC), 0.200%, 12/4/2014 | 755,000 |
| 7,221,000 | | Flagstaff, AZ IDA, (Series 1999) Weekly VRDNs (Joy Cone Co.)/(Citizens Bank of Pennsylvania LOC), 0.160%, 12/5/2014 | 7,221,000 |
| 5,610,000 | | Maricopa County, AZ, IDA, (Series 1999) Weekly VRDNs (Redman Homes, Inc.)/(Wells Fargo & Co. LOC), 0.090%, 12/5/2014 | 5,610,000 |
| 575,000 | | Phoenix, AZ IDA, (Series 2000) Weekly VRDNs (MechoShade West, Inc.)/(JPMorgan Chase Bank, N.A. LOC), 0.240%, 12/4/2014 | 575,000 |
| 2,100,000 | | Pinal County, AZ IDA, (Series 2002) Weekly VRDNs (D.A. Holdings LLC)/(Wells Fargo Bank, N.A. LOC), 0.130%, 12/4/2014 | 2,100,000 |
| 6,750,000 | | Pinal County, AZ IDA, (Series 2002) Weekly VRDNs (Milky Way Dairy LLC)/(Rabobank Nederland NV, Utrecht LOC), 0.090%, 12/4/2014 | 6,750,000 |
| 3,630,000 | | Pinal County, AZ IDA, (Series 2005) Weekly VRDNs (Three C Eloy LLC)/(CoBank, ACB LOC), 0.100%, 12/4/2014 | 3,630,000 |
| 1,175,000 | | Pinal County, AZ IDA, (Series 2006) Weekly VRDNs (Three C Eloy LLC)/(CoBank, ACB LOC), 0.100%, 12/4/2014 | 1,175,000 |
| | | TOTAL | 27,816,000 |
| | | California—0.7% | |
| 1,935,000 | | Oxnard, CA IDFA, (Series 2004) Weekly VRDNs (J. Harris Industrial Water Treatment, Inc.)/(City National Bank LOC), 0.290%, 12/4/2014 | 1,935,000 |
| | | Colorado—1.3% | |
| 3,300,000 | | Colorado Agricultural Development Authority, (Series 2006) Weekly VRDNs (Monte Vista Dairy, LLC)/(Bank of the West, San Francisco, CA LOC), 0.190%, 12/4/2014 | 3,300,000 |
| 100,000 | | Colorado HFA (Class I Bonds), (Series 2000A) Weekly VRDNs (New Belgium Brewing Co., Inc.)/(Wells Fargo Bank, N.A. LOC), 0.190%, 12/4/2014 | 100,000 |
| | | TOTAL | 3,400,000 |
| | | Florida—6.9% | |
| 130,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Florida AMT)/(Series 2009-75) Weekly VRDNs (GNMA COL)/(State Street Bank and Trust Co. LIQ), 0.160%, 12/4/2014 | 130,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | Florida—continued | |
| $5,545,000 | | Collier County, FL IDA, (Series 2005) Weekly VRDNs (Ave Maria Utility Company)/(SunTrust Bank LOC), 0.200%, 12/3/2014 | $5,545,000 |
| 6,985,000 | 3,4 | Hillsborough County, FL Aviation Authority, SPEARs (Series DBE-645) Weekly VRDNs (GTD by Deutsche Bank AG)/(Deutsche Bank AG LIQ), 0.140%, 12/4/2014 | 6,985,000 |
| 5,745,000 | | UCF Health Facilities Corp., FL, Capital Improvement Revenue Bonds (Series 2007) Weekly VRDNs (UCF Health Sciences Campus at Lake Nona)/(Fifth Third Bank, Cincinnati LOC), 0.150%, 12/5/2014 | 5,745,000 |
| | | TOTAL | 18,405,000 |
| | | Georgia—6.8% | |
| 3,350,000 | | Atlanta, GA, Urban Residential Finance Authority, (Series 1995) Weekly VRDNs (West End Housing Development)/(FNMA LOC), 0.190%, 12/4/2014 | 3,350,000 |
| 1,500,000 | | DeKalb County, GA MFH Authority, (Series 2004) Weekly VRDNs (Highlands at East Atlanta Apartments)/(Mizuho Bank Ltd. LOC), 0.080%, 12/4/2014 | 1,500,000 |
| 2,000,000 | | Dougherty County, GA School System, (Series 2014), 0.75% TANs, 12/31/2014 | 2,000,682 |
| 7,470,000 | 3,4 | Private Colleges & Universities Facilities of GA, Floater Certificates (Series 2008-3068X) Weekly VRDNs (Emory University)/(Morgan Stanley Bank, N.A. LIQ), 0.050%, 12/4/2014 | 7,470,000 |
| 4,000,000 | | Roswell, GA Housing Authority, (Series 2005) Weekly VRDNs (Wood Creek Apartments)/(FNMA LOC), 0.060%, 12/4/2014 | 4,000,000 |
| | | TOTAL | 18,320,682 |
| | | Illinois—7.3% | |
| 1,000,000 | | Chicago, IL O'Hare International Airport, (Series D), 5.00% Bonds, 1/1/2015 | 1,003,820 |
| 845,000 | | Illinois Development Finance Authority IDB Weekly VRDNs (T&D Investments LLC)/(U.S. Bank, N.A. LOC), 0.310%, 12/4/2014 | 845,000 |
| 1,250,000 | | Illinois Development Finance Authority IDB, (Series 1997) Weekly VRDNs (Tempco Electric Heater Corp.)/(JPMorgan Chase Bank, N.A. LOC), 0.290%, 12/4/2014 | 1,250,000 |
| 1,000,000 | | Illinois Development Finance Authority IDB, (Series 2001) Weekly VRDNs (Apogee Enterprises, Inc.)/(Comerica Bank LOC), 0.150%, 12/4/2014 | 1,000,000 |
| 3,935,000 | | Illinois Finance Authority—Solid Waste, (Series 2013) Weekly VRDNs (Kuusakoski US LLC)/(Fifth Third Bank, Cincinnati LOC), 0.170%, 12/3/2014 | 3,935,000 |
| 2,450,000 | | Illinois Finance Authority, (Series 2008) Weekly VRDNs (Jasper Meats, Inc.)/(BMO Harris Bank, N.A. LOC), 0.160%, 12/4/2014 | 2,450,000 |
| 3,300,000 | | Lockport, IL IDA, (Series 1990) Weekly VRDNs (Panduit Corp.)/(Fifth Third Bank, Cincinnati LOC), 0.170%, 12/3/2014 | 3,300,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | Illinois—continued | |
| $5,800,000 | | Orland Park, IL IDA, (Series 1996) Weekly VRDNs (Panduit Corp.)/(Fifth Third Bank, Cincinnati LOC), 0.170%, 12/3/2014 | $5,800,000 |
| | | TOTAL | 19,583,820 |
| | | Indiana—3.9% | |
| 5,500,000 | | Indianapolis, IN MFH, (Series 2007A: Forest Ridge Apartments) Weekly VRDNs (Pedcor Investments-2006-LXXXVIII LP)/(Citizens Bank, N.A., Providence LOC), 0.210%, 12/4/2014 | 5,500,000 |
| 5,000,000 | | Posey County, IN EDA, (Series 2013A), 0.23% TOBs (Midwest Fertilizer Corp.)/(GTD by United States Treasury) 4/2/2015 | 5,000,000 |
| | | TOTAL | 10,500,000 |
| | | Kansas—0.8% | |
| 748,000 | 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), 0.160%, 12/5/2014 | 748,000 |
| 1,285,000 | | Wyandotte County, KS, (Series 1999) Weekly VRDNs (Shor-Line)/(U.S. Bank, N.A. LOC), 0.110%, 12/3/2014 | 1,285,000 |
| | | TOTAL | 2,033,000 |
| | | Kentucky—0.8% | |
| 2,085,000 | | Kentucky Housing Corp., (Series 2007) Weekly VRDNs (Arbors of Madisonville Apartments LP)/(U.S. Bank, N.A. LOC), 0.300%, 12/4/2014 | 2,085,000 |
| | | Louisiana—1.0% | |
| 2,200,000 | | Port of New Orleans, LA, (Series 2000) Weekly VRDNs (New Orleans Steamboat Co.)/(FHLB of Dallas LOC), 0.190%, 12/4/2014 | 2,200,000 |
| 500,000 | | St. James Parish, LA, (Series 2010B-1) Weekly VRDNs (Nucor Steel Louisiana LLC)/(GTD by Nucor Corp.), 0.220%, 12/3/2014 | 500,000 |
| | | TOTAL | 2,700,000 |
| | | Maine—0.6% | |
| 1,690,000 | | Dover-Foxcroft, ME, (Series 2005) Weekly VRDNs (Pleasant River Lumber Co.)/(Wells Fargo Bank, N.A. LOC), 0.150%, 12/3/2014 | 1,690,000 |
| | | Michigan—5.6% | |
| 3,000,000 | | Michigan State Finance Authority Revenue, (Series C) Weekly VRDNs (Fifth Third Bank, Cincinnati LOC), 0.150%, 12/3/2014 | 3,000,000 |
| 2,100,000 | | Michigan State Housing Development Authority, (Series 2007C) Weekly VRDNs (JPMorgan Chase Bank, N.A. LIQ), 0.070%, 12/3/2014 | 2,100,000 |
| 10,000,000 | | Michigan State Housing Development Authority, (Series 2007E) Weekly VRDNs (Bank of Tokyo-Mitsubishi UFJ Ltd. LIQ), 0.110%, 12/3/2014 | 10,000,000 |
| | | TOTAL | 15,100,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | Multi-State—12.1% | |
| $240,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Multi-State AMT)/(Series 2009-68) Weekly VRDNs (GNMA COL)/(State Street Bank and Trust Co. LIQ), 0.190%, 12/4/2014 | $240,000 |
| 404,000 | 3,4 | Clipper Tax-Exempt Certificates Trust (Multi-State AMT)/(Series 2009-78) Weekly VRDNs (State Street Bank and Trust Co. LIQ), 0.190%, 12/4/2014 | 404,000 |
| 6,700,000 | 3,4 | Nuveen Dividend Advantage Municipal Fund 2, Weekly VRDPs (Series 2)/(Toronto Dominion Bank LIQ), 0.150%, 12/4/2014 | 6,700,000 |
| 5,000,000 | 3,4 | Nuveen Investment Quality Municipal Fund, Inc., Weekly VRDPs (2,118 Series 1)/(Barclays Bank PLC LIQ), 0.130%, 12/5/2014 | 5,000,000 |
| 5,000,000 | 3,4 | Nuveen Municipal Market Opportunity Fund, Inc., Weekly VRDPs (Series 1)/(Deutsche Bank AG LIQ), 0.160%, 12/4/2014 | 5,000,000 |
| 5,000,000 | 3,4 | Nuveen Premier Municipal Income Fund, Inc., Weekly VRDPs
(1.277 Series 1)/(Barclays Bank PLC LIQ), 0.130%, 12/4/2014 | 5,000,000 |
| 10,000,000 | 3,4 | Nuveen Premium Income Municipal Fund 4, Inc., Weekly VRDPs (Series 1)/(JPMorgan Chase Bank NA LIQ), 0.120%, 12/4/2014 | 10,000,000 |
| | | TOTAL | 32,344,000 |
| | | New Jersey—6.9% | |
| 6,000,000 | | Belmar, NJ, 1.00% BANs, 2/13/2015 | 6,005,154 |
| 3,000,000 | | Brigantine, NJ, (Series 2013C), 1.00% BANs, 12/11/2014 | 3,000,384 |
| 1,737,000 | | Freehold Borough, NJ, (Series 2013A), 1.00% BANs, 12/17/2014 | 1,737,173 |
| 3,000,000 | | Hazlet Township, NJ, 1.00% BANs, 6/22/2015 | 3,007,944 |
| 1,400,000 | | Linden, NJ, 1.00% BANs, 12/18/2014 | 1,400,168 |
| 3,411,870 | | Linden, NJ, 1.00% BANs, 5/1/2015 | 3,416,909 |
| | | TOTAL | 18,567,732 |
| | | New York—8.3% | |
| 2,140,000 | | Ausable Valley, NY CSD, 0.75% BANs, 6/25/2015 | 2,143,720 |
| 3,000,000 | | East Moriches, NY UFSD, 1.00% TANs, 6/19/2015 | 3,010,810 |
| 1,310,000 | | Erie County, NY IDA, IDRB (Series 1994) Weekly VRDNs (Servotronics, Inc.)/(Bank of America N.A. LOC), 0.300%, 12/4/2014 | 1,310,000 |
| 1,300,000 | | New York City, NY IDA, IDRBs (Series 2003) Weekly VRDNs (Novelty Crystal Corp.)/(TD Bank, N.A. LOC), 0.180%, 12/4/2014 | 1,300,000 |
| 14,500,000 | 3,4 | Nuveen NY AMT-Free Municipal Income Fund, Weekly VRDPs (Series 1)/(Citibank NA LIQ), 0.110%, 12/4/2014 | 14,500,000 |
| | | TOTAL | 22,264,530 |
| | | North Carolina—0.6% | |
| 1,600,000 | | Hertford County, NC Industrial Facilities & PCFA, (Series 2000B) Weekly VRDNs (Nucor Corp.), 0.190%, 12/3/2014 | 1,600,000 |
| | | Ohio—7.3% | |
| 4,000,000 | | Avon Lake, OH, 1.00% BANs, 7/14/2015 | 4,018,692 |
| 1,400,000 | | Canton, OH, 1.00% BANs, 6/19/2015 | 1,404,576 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | Ohio—continued | |
| $55,000 | | Greene County, OH Hospital Facilities Revenue Authority, (Series 1999A) Weekly VRDNs (Med Health System)/(JPMorgan Chase Bank, N.A. LOC), 0.090%, 12/4/2014 | $55,000 |
| 1,500,000 | | Lima, OH, 1.25% BANs, 3/17/2015 | 1,504,255 |
| 2,800,000 | | Montgomery, OH, 1.00% BANs, 6/24/2015 | 2,811,764 |
| 1,280,000 | | Newark, OH, 1.00% BANs, 7/23/2015 | 1,285,491 |
| 3,935,000 | | Ontario, OH, 1.00% BANs, 10/22/2015 | 3,958,370 |
| 2,500,000 | | West Chester Township, OH, 1.625% BANs, 11/4/2015 | 2,530,573 |
| 2,000,000 | | Willowick, OH, 0.75% BANs, 3/4/2015 | 2,001,774 |
| | | TOTAL | 19,570,495 |
| | | Pennsylvania—1.5% | |
| 4,000,000 | 3,4 | Pennsylvania State Higher Education Facilities Authority, Joint Venture Interest Trust Receipts (JVI-1006) Weekly VRDNs (Thomas Jefferson University)/(GTD by Bank of America N.A.)/(Bank of America N.A. LIQ), 0.270%, 12/4/2014 | 4,000,000 |
| | | South Carolina—1.4% | |
| 3,605,000 | | South Carolina Jobs-EDA, (Series 2007) Weekly VRDNs (ACI Industries LLC)/(Bank of America N.A. LOC), 0.240%, 12/4/2014 | 3,605,000 |
| 125,000 | | South Carolina Jobs-EDA, (Series 2007A) Weekly VRDNs (Woodhead LLC)/(FHLB of Atlanta LOC), 0.140%, 12/4/2014 | 125,000 |
| | | TOTAL | 3,730,000 |
| | | Texas—3.7% | |
| 10,000,000 | | Calhoun, TX Port Authority, (Series 2011C) Weekly VRDNs (Formosa Plastic Corp.)/(Sumitomo Mitsui Banking Corp. LOC), 0.080%, 12/4/2014 | 10,000,000 |
| | | Virginia—10.6% | |
| 10,650,000 | | Arlington County, VA IDA, (Series 2005) Weekly VRDNs (Gates of Ballston Apartments)/(PNC Bank, N.A. LOC), 0.060%, 12/3/2014 | 10,650,000 |
| 2,950,000 | | Fairfax County, VA IDA, (Inova Health System) MVRENs, (Series 2012 C), 0.120%, 12/4/2014 | 2,950,000 |
| 8,000,000 | | Lynchburg, VA IDA, (Series 2004 C) Weekly VRDNs (Centra Health, Inc.)/(Branch Banking & Trust Co. LOC), 0.030%, 1/1/2035 | 8,000,000 |
| 6,700,000 | 3,4 | Virginia State Housing Development Authority, Stage Trust (Series 2008-47C), 0.24% TOBs (Wells Fargo & Co. LIQ), Optional Tender 7/8/2015 | 6,700,000 |
| | | TOTAL | 28,300,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | SHORT-TERM MUNICIPALS—continued1,2 | |
| | | Wisconsin—0.7% | |
| $2,000,000 | | Combined Locks, WI IDRB, (Series 1997) Weekly VRDNs (Appleton Papers)/(Fifth Third Bank, Cincinnati LOC), 0.270%, 12/4/2014 | $2,000,000 |
| | | TOTAL MUNICIPAL INVESTMENTS—100.6%
(AT AMORTIZED COST)5 | 269,700,259 |
| | | OTHER ASSETS AND LIABILITIES - NET—(0.6)%6 | (1,498,277) |
| | | TOTAL NET ASSETS—100% | $268,201,982 |
Securities that are subject to the federal alternative minimum tax (AMT) represent 63.0% of the portfolio as calculated based upon total market value.
| 1 | The Fund may only invest in securities rated in one of the two highest short-term rating categories by nationally recognized statistical rating organizations (NRSROs) or unrated securities of comparable quality. An NRSRO's two highest rating categories are determined without regard for sub-categories and gradations. For example, securities rated SP-1+, SP-1 or SP-2 by Standard & Poor's, MIG-1 or MIG-2 by Moody's Investors Service, or F-1+, F-1 or F-2 by Fitch Ratings, are all considered rated in one of the two highest short-term rating categories. |
| | Securities rated in the highest short-term rating category (and unrated securities of comparable quality) are identified as First Tier securities. Securities rated in the second highest short-term rating category (and unrated securities of comparable quality) are identified as Second Tier securities. The Fund follows applicable regulations in determining whether a security is rated and whether a security rated by multiple NRSROs in different rating categories should be identified as a First or Second Tier security. |
| | At November 30, 2014, the portfolio securities were rated as follows: |
| | Tier Rating Percentages Based on Total Market Value |
| | |
| First Tier | Second Tier |
| 92.2% | 7.8% |
| 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 November 30, 2014, these restricted securities amounted to $72,877,000, which represented 27.2% of total net assets. |
| 4 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors (the “Directors”). At November 30, 2014, these liquid restricted securities amounted to $72,877,000, which represented 27.2% of total net assets. |
| 5 | Also represents cost for federal tax purposes. |
| 6 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
Note: The categories of investments are shown as a percentage of total net assets at November 30, 2014.
Semi-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 November 30, 2014, 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:
| AMT | —Alternative Minimum Tax |
| BANs | —Bond Anticipation Notes |
| COL | —Collateralized |
| CSD | —Central School District |
| EDA | —Economic Development Authority |
| 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 |
| MFH | —Multi-Family Housing |
| MVRENs | —Municipal Variable Rate Exchangeable Notes |
| PCFA | —Pollution Control Finance Authority |
| PCRBs | —Pollution Control Revenue Bonds |
| 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
Semi-Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
11/30/2014 | Year Ended May 31, |
| 2014 | 2013 | 2012 | 2011 | 2010 |
Net Asset Value,
Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
Income From
Investment Operations: | | | | | | |
| Net investment income | — | — | — | — | — | 0.0001 |
| 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 | 0.0001 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | — | — | — | — | — | (0.000)1 |
| 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 | (0.000)1 |
| Net Asset Value, End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.00% | 0.02% | 0.00%3 | 0.00%3 | 0.00%3 | 0.03% |
| Ratios to Average Net Assets: | | | | | | |
| Net expenses | 0.19%4 | 0.23% | 0.31% | 0.42% | 0.49% | 0.75% |
| Net investment income | 0.00%4 | 0.00% | 0.00% | 0.00% | 0.00% | 0.03% |
| Expense waiver/reimbursement5 | 0.94%4 | 0.89% | 0.72% | 0.68% | 0.59% | 0.35% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $268,202 | $317,849 | $360,830 | $461,541 | $539,081 | $474,268 |
| 1 | Represents less than $0.001. |
| 2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 3 | Represents less than 0.01%. |
| 4 | Computed on an annualized basis. |
| 5 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
November 30, 2014 (unaudited)
| Assets: | | |
| Total investment in securities, at amortized cost and fair value | | $269,700,259 |
| Income receivable | | 288,673 |
| Receivable for shares sold | | 15,570 |
| TOTAL ASSETS | | 270,004,502 |
| Liabilities: | | |
| Payable for investments purchased | $1,024,792 | |
| Payable for shares redeemed | 7,276 | |
| Bank overdraft | 720,828 | |
| Payable to adviser (Note 4) | 22,365 | |
| Payable for Directors'/Trustees' fees (Note 4) | 124 | |
| Accrued expenses (Note 4) | 27,135 | |
| TOTAL LIABILITIES | | 1,802,520 |
| Net assets for 268,204,282 shares outstanding | | $268,201,982 |
| Net Assets Consist of: | | |
| Paid-in capital | | $268,197,293 |
| Accumulated net realized gain on investments | | 4,689 |
| TOTAL NET ASSETS | | $268,201,982 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $268,201,982 ÷ 268,204,282 shares outstanding, $0.001 par value, 12,500,000,000 shares authorized | | $1.00 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended November 30, 2014 (unaudited)
| Investment Income: | | | |
| Interest | | | $288,503 |
| Expenses: | | | |
| Investment adviser fee (Note 4) | | $773,261 | |
| Administrative fee (Note 4) | | 121,038 | |
| Custodian fees | | 6,263 | |
| Transfer agent fee | | 167,662 | |
| Directors'/Trustees' fees (Note 4) | | 1,725 | |
| Auditing fees | | 9,827 | |
| Legal fees | | 7,285 | |
| Portfolio accounting fees | | 38,080 | |
| Distribution services fee (Note 4) | | 154,652 | |
| Other service fees (Note 2) | | 386,480 | |
| Share registration costs | | 44,734 | |
| Printing and postage | | 14,509 | |
| Taxes | | 12,035 | |
| Miscellaneous (Note 4) | | 3,247 | |
| TOTAL EXPENSES | | 1,740,798 | |
| Waivers: | | | |
| Waiver of investment adviser fee (Note 4) | $(760,801) | | |
| Waivers of other operating expenses (Notes 2 and 4) | (691,494) | | |
| TOTAL WAIVERS | | (1,452,295) | |
| Net expenses | | | 288,503 |
| Net investment income | | | — |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Changes in Net Assets
| | Six Months
Ended
(unaudited)
11/30/2014 | Year Ended
5/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $— | $— |
| Net realized gain on investments | — | 47,381 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | — | 47,381 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | — | (49,428) |
| Share Transactions: | | |
| Proceeds from sale of shares | 149,823,926 | 425,851,930 |
| Net asset value of shares issued to shareholders in payment of distributions declared | — | 49,203 |
| Cost of shares redeemed | (199,470,870) | (468,880,352) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (49,646,944) | (42,979,219) |
| Change in net assets | (49,646,944) | (42,981,266) |
| Net Assets: | | |
| Beginning of period | 317,848,926 | 360,830,192 |
| End of period | $268,201,982 | $317,848,926 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
November 30, 2014 (unaudited)
1. ORGANIZATION
Cash Trust Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Federated Municipal Cash Series (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The investment objective of the Fund is to provide current income which is 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-based 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-based 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.
Semi-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.
For the six months ended November 30, 2014, unaffiliated third parties waived $150,362 of transfer agent fees.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Shares to unaffiliated 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 other service fees. For the six months ended November 30, 2014, unaffiliated third-party financial intermediaries waived $386,480 of other service fees. This waiver can be modified or terminated at any time.
Premium and Discount Amortization
All premiums and discounts are amortized/accreted using the effective-interest-rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended November 30, 2014, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of November 30, 2014, tax years 2011 through 2014 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.
Semi-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.
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. The Fund applies Investment Company accounting and reporting guidance.
3. CAPITAL STOCK
The following table summarizes capital stock activity:
| | Six Months
Ended
11/30/2014 | Year Ended
5/31/2014 |
| Shares sold | 149,823,926 | 425,851,930 |
| Shares issued to shareholders in payment of distributions declared | — | 49,203 |
| Shares redeemed | (199,470,870) | (468,880,352) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (49,646,944) | (42,979,219) |
4. 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 six months ended November 30, 2014, the Adviser voluntarily waived $760,801 of its fee.
Semi-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 |
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2014, the annualized 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 six months ended November 30, 2014, FSC voluntarily waived its entire fee of $154,652. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares.
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) on their own initiative have agreed to waive their respective fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights, excluding extraordinary expenses and proxy-related expenses paid by the Fund, if any) 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, 2015; 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.
Semi-Annual Shareholder Report
Interfund Transactions
During the six months ended November 30, 2014, 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 $432,560,000 and $451,375,000, 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. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
5. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2014, there were no outstanding loans. During the six months ended November 30, 2014, the Fund did not utilize the LOC.
6. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2014, there were no outstanding loans. During the six months ended November 30, 2014, the program was not utilized.
7. REGULATORY MATTERS
On July 23, 2014, the SEC voted to amend the rules under the Act which currently govern the operations of the Fund. A significant change resulting from these amendments will be a requirement that institutional prime funds (i.e., not retail as defined in the amendments) transact fund shares based on a market-based Net Asset Value (NAV). Other types of money market funds may continue to transact fund shares at an NAV calculated using the amortized cost valuation method. Among additional disclosure and other requirements, the amendments also will permit a money market fund, or, in certain circumstances, require a money market fund (other than a government money market fund which satisfies the requirements of the amended rules) to impose liquidity fees on redemptions and permit a money market fund to limit (or gate) redemptions for up to 10 business days in any 90-day period. The amendments have staggered compliance dates. Compliance with a majority of these amendments will be required on October 14, 2016, two years after the effective date for the rule amendments. The degree to which a money market fund will be impacted by the rule amendments will depend upon the type of fund and type of investors (retail or institutional). At this time, management is evaluating the implications of these amendments and their impact to the Fund's operations, financial statements and accompanying notes.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2014 to November 30, 2014.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Semi-Annual Shareholder Report
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Beginning
Account Value
6/1/2014 | Ending
Account Value
11/30/2014 | Expenses Paid
During Period1, 2 |
| Actual | $1,000 | $1,000.00 | $0.95 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,024.12 | $0.96 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.19%, multiplied by the average account value over the period, multiplied by 183/365 (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 4 under Expense Limitation), multiplied by the average account value over the period, multiplied by 183/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.26 and $5.32, respectively. |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2014
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 2014 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 of care, conscientiousness and independence with which the Board members perform their duties and their expertise, including whether they are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. The Board noted that SEC disclosure requirements regarding the basis for the Board's approval of the Fund's advisory contract generally track the factors listed above. Consistent with these judicial decisions and SEC disclosure requirements, the Board also considered management fees charged to
Semi-Annual Shareholder Report
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.
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
Semi-Annual Shareholder Report
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.
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. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. 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 advisory fee rate, net advisory fee rate and other expenses of the Fund with the Adviser and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted that the investment advisory fee was waived in its entirety and 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 and sub-adviser services). 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; and different portfolio management techniques made necessary by different cash flows and different associated costs; 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.
Semi-Annual Shareholder Report
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 was one of the Board's considerations 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 may be helpful, though not conclusive, in judging the reasonableness of proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group.
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. In addition, following discussions regarding the Senior Officer's May 2013 recommendations, Federated made meaningful reductions to gross advisory fees for several funds. At the Board meeting in May 2014, the Senior Officer proposed, and the Board approved, reductions in the contractual advisory fees of certain other funds.
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 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
Semi-Annual Shareholder Report
change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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 concluded that Federated's profit margins did not appear to be excessive.
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, 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.
Semi-Annual Shareholder Report
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report
Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. 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 via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
Semi-Annual Shareholder Report
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
Federated Municipal Cash Series
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 147551303
0122605 (1/15)
Federated is a registered trademark of Federated Investors, Inc.
2015 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
November 30, 2014
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 November 30, 2014, the Fund's portfolio composition1 was as follows:
| Security Type | Percentage of
Total Net Assets |
| Bank Instruments | 34.9% |
| Commercial Paper and Notes | 30.0% |
| Variable Rate Instruments | 11.1% |
| Repurchase Agreements and Other Repurchase Agreements | 24.0% |
| Other Assets and Liabilities—Net2 | 0.0% |
| TOTAL | 100.0% |
At November 30, 2014, the Fund's effective maturity schedule3 was as follows:
Securities with an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 33.2% |
| 8-30 Days | 22.9% |
| 31-90 Days | 33.6% |
| 91-180 Days | 8.8% |
| 181 Days or more | 1.5% |
| Other Assets and Liabilities—Net2 | 0.0% |
| 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 include asset-backed securities, commercial paper, corporate bonds and loan participation with interest rates that are fixed or that reset periodically. |
| 2 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 3 | Effective maturity is determined in accordance with the requirements of Rule 2a-7 under the Investment Company Act of 1940, which regulates money market mutual funds. |
Semi-Annual Shareholder Report
Portfolio of Investments
November 30, 2014 (unaudited)
Principal
Amount | | | Value |
| | | ASSET-BACKED SECURITIES—2.4% | |
| | | Finance - Automotive—1.9% | |
| $7,573,636 | | Ally Auto Receivables Trust 2014-SN2, Class A1, 0.250%, 10/20/2015 | $7,573,636 |
| 7,454,835 | 1,2 | GM Financial Automobile Leasing Trust 2014-2, Class A1, 0.250%, 9/21/2015 | 7,454,835 |
| 20,000,000 | | Santander Drive Auto Receivables Trust 2014-5, Class A1, 0.270%, 12/15/2015 | 20,000,000 |
| 20,870,544 | 1,2,3 | Westlake Automobile Receivables Trust 2014-2, Class A1, 0.350%, 12/15/2014 | 20,870,544 |
| | | TOTAL | 55,899,015 |
| | | Finance - Equipment—0.5% | |
| 14,388,213 | 1,2 | Macquarie Equipment Funding Trust 2014-A, Class A1, 0.260%, 9/21/2015 | 14,388,213 |
| | | TOTAL ASSET-BACKED SECURITIES | 70,287,228 |
| | | CERTIFICATES OF DEPOSIT—34.9% | |
| | | Finance - Banking—34.9% | |
| 15,000,000 | | BMO Harris Bank, N.A., 0.250%, 2/23/2015 | 15,000,000 |
| 145,000,000 | | BNP Paribas SA, 0.220%, 1/9/2015 - 1/14/2015 | 145,000,000 |
| 10,000,000 | 3 | Bank of Montreal, 0.226%, 12/8/2014 | 10,000,000 |
| 50,000,000 | 3 | Bank of Montreal, 0.234%, 12/3/2014 | 50,000,000 |
| 20,000,000 | | Bank of Nova Scotia, Toronto, 0.280%, 6/12/2015 | 19,999,497 |
| 70,000,000 | | Bank of Tokyo-Mitsubishi UFJ Ltd., 0.200%, 12/22/2014 - 3/5/2015 | 70,000,000 |
| 6,880,000 | | Citizens Bank, N.A., Providence, 0.320%, 12/4/2014 - 12/30/2014 | 6,880,000 |
| 25,000,000 | | Credit Agricole Corporate and Investment Bank, 0.210%, 2/2/2015 | 25,000,000 |
| 63,000,000 | | Credit Suisse, Zurich, 0.220%—0.230%, 12/18/2014 - 2/27/2015 | 63,000,000 |
| 75,000,000 | | DZ Bank AG Deutsche Zentral-Genossenschaftbank, 0.220%, 3/16/2015 | 75,000,000 |
| 93,000,000 | 3 | JPMorgan Chase Bank, N.A., 0.415%, 12/21/2014 | 93,000,000 |
| 125,000,000 | | Mizuho Bank Ltd., 0.200%—0.210%, 12/15/2014 - 2/13/2015 | 125,000,643 |
| 14,500,000 | | Natixis, 0.240%, 2/2/2015 | 14,500,000 |
| 39,100,000 | 3 | Natixis, 0.266%, 12/10/2014 | 39,100,000 |
| 30,000,000 | 3 | Royal Bank of Canada, Montreal, 0.236%, 12/29/2014 | 30,000,000 |
| 30,000,000 | 3 | Royal Bank of Canada, Montreal, 0.281%, 1/9/2015 | 30,000,000 |
| 20,000,000 | 3 | Royal Bank of Canada, Montreal, 0.351%, 1/5/2015 | 20,000,000 |
| 30,000,000 | | Standard Chartered Bank PLC, 0.200%, 2/23/2015 | 30,000,000 |
| 15,000,000 | 3 | State Street Bank and Trust Co., 0.281%, 10/7/2015 | 15,000,000 |
| 75,000,000 | | Sumitomo Mitsui Banking Corp., 0.220%, 1/20/2015 - 3/17/2015 | 75,000,000 |
| 25,000,000 | 3 | Toronto Dominion Bank, 0.231%, 1/15/2015 | 25,000,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | CERTIFICATES OF DEPOSIT—continued | |
| | | Finance - Banking—continued | |
| $25,000,000 | 3 | Toronto Dominion Bank, 0.243%, 2/23/2015 | $25,000,000 |
| 25,000,000 | 3 | Toronto Dominion Bank, 0.246%, 12/4/2014 | 25,000,000 |
| | | TOTAL CERTIFICATES OF DEPOSIT | 1,026,480,140 |
| | | COMMERCIAL PAPER—25.4%4 | |
| | | Aerospace/Auto—0.5% | |
| 13,260,000 | 1,2 | Nissan Motor Acceptance Corp., (Nissan Motor Co., Ltd. SA), 0.260%—0.340%, 12/1/2014 - 1/5/2015 | 13,259,390 |
| | | Chemicals—0.6% | |
| 4,700,000 | 1,2 | LyondellBasell Investment LLC, 0.300%, 12/12/2014 | 4,699,569 |
| 12,500,000 | | PPG Industries, Inc., 0.300%—0.340%, 12/4/2014 - 12/16/2014 | 12,498,970 |
| | | TOTAL | 17,198,539 |
| | | Container - Packaging—0.2% | |
| 7,250,000 | 1,2 | Bemis Co., Inc., 0.320%, 12/9/2014 | 7,249,484 |
| | | Finance - Banking—12.1% | |
| 125,000,000 | | Barclays US Funding Corp., 0.250%, 12/15/2014 | 124,987,847 |
| 25,000,000 | | HSBC USA, Inc., 0.240%, 3/3/2015 | 24,984,667 |
| 80,000,000 | | ING (U.S.) Funding LLC, 0.200%, 2/5/2015 | 79,970,667 |
| 15,000,000 | 1,2 | JPMorgan Securities LLC, 0.331%, 6/15/2015 | 14,973,050 |
| 55,000,000 | 1,2 | LMA-Americas LLC, 0.220%—0.230%, 12/16/2014 - 2/12/2015 | 54,989,219 |
| 35,000,000 | 1,2 | Nationwide Building Society, 0.200%, 2/9/2015 | 34,986,389 |
| 20,000,000 | | PNC Bank, N.A., 0.310%, 1/13/2015 | 20,000,000 |
| | | TOTAL | 354,891,839 |
| | | Finance - Commercial—8.3% | |
| 50,000,000 | 1,2 | Alpine Securitization Corp., 0.220%, 12/8/2014 - 1/6/2015 | 49,994,439 |
| 58,600,000 | 1,2 | Atlantic Asset Securitization LLC, 0.210%, 1/14/2015 - 1/23/2015 | 58,583,575 |
| 35,000,000 | 1,2 | CIESCO, LLC, 0.240%, 2/4/2015 - 5/5/2015 | 34,969,833 |
| 40,000,000 | 1,2 | Sheffield Receivables Corp., 0.220%, 3/6/2015 | 39,976,778 |
| 60,000,000 | 1,2 | Versailles Commercial Paper LLC, 0.210%—0.230%,
1/5/2015 - 2/11/2015 | 59,983,382 |
| | | TOTAL | 243,508,007 |
| | | Finance - Retail—2.2% | |
| 25,000,000 | | American Express Credit Corp., 0.280%, 2/9/2015 | 24,986,389 |
| 20,000,000 | 1,2 | Chariot Funding LLC, 0.271%, 3/4/2015 | 19,986,050 |
| 20,000,000 | 1,2 | Salisbury Receivables Company LLC, 0.220%, 2/24/2015 | 19,989,611 |
| | | TOTAL | 64,962,050 |
| | | Food & Beverage—0.5% | |
| 14,870,000 | 1,2 | Agrium, Inc., 0.320%, 12/8/2014 - 12/11/2014 | 14,869,064 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | COMMERCIAL PAPER—continued4 | |
| | | Oil & Oil Finance—1.0% | |
| $14,860,000 | 1,2 | Enbridge (U.S.) Inc., (GTD by Enbridge, Inc.), 0.360%—0.380%, 12/4/2014 - 12/23/2014 | $14,857,688 |
| 14,800,000 | | Motiva Enterprises LLC, 0.320%, 12/2/2014 | 14,799,868 |
| | | TOTAL | 29,657,556 |
| | | TOTAL COMMERCIAL PAPER | 745,595,929 |
| | | CORPORATE BONDS—1.9% | |
| | | Finance - Banking—1.9% | |
| 4,000,000 | | Bank of America Corp., 5.000%, 1/15/2015 | 4,022,425 |
| 6,473,000 | | Citigroup, Inc., 6.010%, 1/15/2015 | 6,517,585 |
| 14,765,000 | | HSBC USA, Inc., 2.375%, 2/13/2015 | 14,826,830 |
| 284,000 | | JPMorgan Chase & Co., 4.750%, 3/1/2015 | 286,998 |
| 19,090,000 | | Wells Fargo & Co., 1.250%, 2/13/2015 | 19,126,110 |
| 10,000,000 | | Wells Fargo & Co., 1.500%, 7/1/2015 | 10,069,778 |
| | | TOTAL CORPORATE BONDS | 54,849,726 |
| | | LOAN PARTICIPATION—0.3% | |
| | | Chemicals—0.3% | |
| 10,000,000 | | DuPont Teijin Films U.S. L.P., (GTD by DuPont (E.I.) de Nemours & Co.), 0.400%, 12/23/2014 | 10,000,000 |
| | | NOTES - VARIABLE—11.1%3 | |
| | | Aerospace/Auto—1.6% | |
| 16,000,000 | | BMW US Capital LLC, (GTD by Bayerische Motoren Werke AG), 0.348%, 1/19/2015 | 16,000,000 |
| 20,000,000 | | Toyota Motor Credit Corp., (Toyota Motor Corp. SA), 0.230%, 1/14/2015 | 20,000,000 |
| 10,000,000 | | Toyota Motor Credit Corp., (Toyota Motor Corp. SA), 0.233%, 1/29/2015 | 10,000,000 |
| | | TOTAL | 46,000,000 |
| | | Finance - Banking—7.1% | |
| 1,240,000 | | 6380 Brackbill Associates LP, (Series 2000), (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.510%, 12/5/2014 | 1,240,000 |
| 10,000,000 | 1,2 | Bedford Row Funding Corp., (GTD by Royal Bank of Canada, Montreal), 0.262%, 1/28/2015 | 10,000,000 |
| 30,000,000 | 1,2 | Bedford Row Funding Corp., (GTD by Royal Bank of Canada, Montreal), 0.266%, 12/9/2014 | 30,000,000 |
| 9,000,000 | 1,2 | BlackRock Municipal Income Quality Trust, VMTP Preferred Shares (Series T0009), 0.160%, 12/1/2014 | 9,000,000 |
| 14,005,000 | | Carew Realty, Inc., (Series 2012), (Fifth Third Bank, Cincinnati LOC), 0.240%, 12/4/2014 | 14,005,000 |
| 3,225,000 | | Gannett Fleming, Inc., (Series 2001), (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.510%, 12/5/2014 | 3,225,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | NOTES - VARIABLE—continued3 | |
| | | Finance - Banking—continued | |
| $1,375,000 | | Graywood Farms LLC, (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.510%, 12/5/2014 | $1,375,000 |
| 66,245,000 | 1,2 | Illinois State, Taxable PUTTERs (Series SGT01), 0.140%, 12/1/2014 | 66,245,000 |
| 50,000,000 | | Maryland State Economic Development Corp., (Series 2001A Human Genome Sciences), (Manufacturers & Traders Trust Co., Buffalo, NY LOC), 0.510%, 12/2/2014 | 50,000,000 |
| 12,765,000 | | Serra Works Bond Holding Co. LLC, (Series 2008-A), (Fifth Third Bank, Cincinnati LOC), 0.220%, 12/4/2014 | 12,765,000 |
| 2,770,000 | | Sun Valley, Inc., (Wells Fargo Bank, N.A. LOC), 0.200%, 12/5/2014 | 2,770,000 |
| 8,500,000 | | Village Green Finance Co. LLC, (Series 1997), (Wells Fargo Bank, N.A. LOC), 0.150%, 12/3/2014 | 8,500,000 |
| | | TOTAL | 209,125,000 |
| | | Finance - Commercial—0.4% | |
| 12,235,000 | 1,2 | Mountain Creek Properties LLC, (General Electric Capital Corp. LOC), 0.140%, 12/4/2014 | 12,235,000 |
| | | Finance - Retail—1.1% | |
| 32,000,000 | | AFS Insurance Premium Receivables Trust, (Series 1994-A), 0.710%, 12/15/2014 | 32,000,000 |
| | | Government Agency—0.9% | |
| 17,485,000 | | BBC Enterprises LLC, (Series 2007), (FHLB of San Francisco LOC), 0.110%, 12/4/2014 | 17,485,000 |
| 9,920,000 | | Capital Trust Agency, FL, (FNMA LOC), 0.120%, 12/4/2014 | 9,920,000 |
| | | TOTAL | 27,405,000 |
| | | TOTAL NOTES - VARIABLE | 326,765,000 |
| | | OTHER REPURCHASE AGREEMENTS—13.9% | |
| | | Finance - Banking—13.9% | |
| 15,000,000 | | Barclays Capital, Inc., 0.152%, 12/26/2014, interest in a $250,000,000 collateralized loan agreement, dated 11/24/2014, in which U.S. Government Agency securities with a market value of $255,007,438 have been received as collateral and held with BNY Mellon as tri-party agent. | 15,000,000 |
| 29,900,000 | | Citigroup Global Markets, Inc., 0.608%—0.760%, 12/1/2014 - 1/23/2015, interest in a $205,000,000 collateralized loan agreement, dated 11/26/2014 - 11/28/2014, in which asset-backed securities, collateralized mortgage obligations and a convertible bond with a market value of $209,115,152 have been received as collateral and held with BNY Mellon as tri-party agent. | 29,900,000 |
| 20,400,000 | | Credit Suisse Securities (USA) LLC, 0.639%, 12/23/2014, interest in a $115,000,000 collateralized loan agreement, dated 9/26/2014 in which collateralized mortgage obligations with a market value of $117,430,019 have been received as collateral and held with JPMorgan Chase as tri-party agent. | 20,400,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | OTHER REPURCHASE AGREEMENTS—continued | |
| | | Finance - Banking—continued | |
| $30,000,000 | | JPMorgan Securities LLC, 0.314%, 1/2/2015, interest in a $250,000,000 collateralized loan agreement, dated 10/1/2014, in which asset-backed securities with a market value of $255,128,831 have been received as collateral and held with JP Morgan Chase as tri-party agent. | $30,000,000 |
| 125,000,000 | | Merrill Lynch, Pierce, Fenner & Smith, Inc., 0.406%—0.689%, 12/1/2014 - 2/23/2015, interest in a $305,000,000 collateralized loan agreement, dated 11/24/2014 - 11/28/2014, in which asset-backed securities, certificates of deposits, collateralized mortgage obligations and municipal bonds with a market value of $311,120,826 have been received as collateral and held with BNY Mellon as tri-party agent. | 125,000,000 |
| 14,500,000 | | Mitsubishi UFJ Securities (USA), Inc., 0.253%, 12/3/2014 - 12/5/2014, interest in a $350,000,000 collateralized loan agreement, dated 11/3/2014-11/5/2014 in which american depositary receipts, asset-backed securities, common stock, corporate bonds, exchange-traded funds, medium-term notes, municipal bonds, mutual funds, commercial paper, medium term notes and mortgage-backed securities with a market value of $316,288,560 have been received as collateral and held with JPMorgan Chase as tri-party agent. | 14,500,000 |
| 20,000,000 | | Mizuho Securities USA, Inc., 0.456%, 12/10/2014, interest in a $110,000,000 collateralized loan agreement, dated 11/26/2014, in which asset-backed securities, collateralized mortgage obligations, corporate bonds, medium term notes and mortgage-backed securities with a market value of $112,207,013 have been received as collateral and held with BNY Mellon as tri-party agent. | 20,000,000 |
| 50,000,000 | | Pershing LLC, 0.355%—0.406%, 12/1/2014, interest in a $400,000,000 collateralized loan agreement, dated 11/28/2014, in which asset-backed securities, commercial paper, corporate bonds, medium-term notes and municipal bonds with a market value of $408,075,313 have been received as collateral and held with BNY Mellon as tri-party agent. | 50,000,000 |
| 105,000,000 | | Wells Fargo Securities, LLC, 0.203%—0.456%, 12/1/2014 - 1/20/2015, interest in a $620,000,000 collateralized loan agreement, dated 10/17/2014 - 11/28/2014, in which asset-backed securities, collateralized mortgage obligations, commercial paper, corporate bonds, convertible bonds, common stock and exchange-traded funds with a market value of $632,578,507 have been received as collateral and held with BNY Mellon as tri-party agent. | 105,000,000 |
| | | TOTAL OTHER REPURCHASE AGREEMENTS | 409,800,000 |
| | | REPURCHASE AGREEMENTS—10.1% | |
| | | Finance - Banking—10.1% | |
| 65,341,000 | | Interest in $3,500,000,000 joint repurchase agreement 0.08%, dated 11/28/2014 under which Credit Agricole CIB New York will repurchase securities provided as collateral for $3,500,023,333 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 11/15/2044 and the market value of those underlying securities was $3,570,023,831. | 65,341,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | REPURCHASE AGREEMENTS—continued | |
| | | Finance - Banking—continued | |
| $230,000,000 | | Interest in $2,500,000,000 joint repurchase agreement 0.10%, dated 11/28/2014 under which Natixis Financial Products LLC will repurchase securities provided as collateral for $2,500,020,833 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Government Agency and U.S. Treasury securities with various maturities to 12/25/2044 and the market value of those underlying securities was $2,552,363,245. | $230,000,000 |
| | | TOTAL REPURCHASE AGREEMENTS | 295,341,000 |
| | | TOTAL INVESTMENTS—100.0%
(AT AMORTIZED COST)5 | 2,939,119,023 |
| | | OTHER ASSETS AND LIABILITIES - NET—0.0%6 | 1,053,745 |
| | | TOTAL NET ASSETS—100% | $2,940,172,768 |
| 1 | Denotes a restricted security that either: (a) cannot be offered for public sale without first being registered, or being able to take advantage of an exemption from registration, under the Securities Act of 1933; or (b) is subject to a contractual restriction on public sales. At November 30, 2014, these restricted securities amounted to $613,561,113, which represented 20.9% of total net assets. |
| 2 | Denotes a restricted security that may be resold without restriction to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933 and that the Fund has determined to be liquid under criteria established by the Fund's Board of Directors (the “Directors”). At November 30, 2014, these liquid restricted securities amounted to $613,561,113, which represented 20.9% 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 November 30, 2014.
Various inputs are used in determining the value of the Fund's investments.
These inputs are summarized in the three broad levels listed below:
Level 1—quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of November 30, 2014, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
Semi-Annual Shareholder Report
The following acronyms are used throughout this portfolio:
| FHLB | —Federal Home Loan Bank |
| FNMA | —Federal National Mortgage Association |
| GTD | —Guaranteed |
| LOC | —Letter of Credit |
| PUTTERs | —Puttable Tax-Exempt Receipts |
| VMTP | —Variable Municipal Term Preferred |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
11/30/2014 | Year Ended May 31, |
| | 2014 | 2013 | 2012 | 2011 | 2010 |
Net Asset Value,
Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
Income From
Investment Operations: | | | | | | |
| Net investment income | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 |
| Net realized gain (loss) on investments | 0.0001 | 0.0001 | 0.0001 | (0.000)1 | 0.0001 | 0.0001 |
| TOTAL FROM INVESTMENT OPERATIONS | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 | 0.0001 |
| Less Distributions: | | | | | | |
| Distributions from net investment income | (0.000)1 | (0.000)1 | (0.000)1 | (0.000)1 | (0.000)1 | (0.000)1 |
| Distributions from net realized gain on investments | (0.000)1 | (0.000)1 | (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 | (0.000)1 | (0.000)1 |
Net Asset Value,
End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% |
Ratios to Average
Net Assets: | | | | | | |
| Net expenses | 0.26%3 | 0.27% | 0.35% | 0.38% | 0.43% | 0.58% |
| Net investment income | 0.01%3 | 0.01% | 0.01% | 0.01% | 0.01% | 0.01% |
| Expense waiver/reimbursement4 | 0.82%3 | 0.82% | 0.73% | 0.70% | 0.65% | 0.49% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $2,940,173 | $2,926,756 | $2,955,903 | $2,966,768 | $4,559,876 | $4,791,221 |
| 1 | Represents less than $0.001. |
| 2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 3 | Computed on an annualized basis. |
| 4 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
November 30, 2014 (unaudited)
| Assets: | | |
| Investment in repurchase agreements and other repurchase agreements | $705,141,000 | |
| Investment in securities | 2,233,978,023 | |
| Total investment in securities, at amortized cost and fair value | | $2,939,119,023 |
| Income receivable | | 1,063,316 |
| Receivable for shares sold | | 461,308 |
| Prepaid expenses | | 98,311 |
| TOTAL ASSETS | | 2,940,741,958 |
| Liabilities: | | |
| Payable for shares redeemed | 27,845 | |
| Bank overdraft | 12,680 | |
| Capital gain distribution payable | 20 | |
| Payable to adviser (Note 4) | 17,854 | |
| Payable for transfer agent fee | 348,695 | |
| Payable for share registration costs | 162,096 | |
| TOTAL LIABILITIES | | 569,190 |
| Net assets for 2,940,170,302 shares outstanding | | $2,940,172,768 |
| Net Assets Consist of: | | |
| Paid-in capital | | $2,940,170,302 |
| Accumulated net realized gain on investments | | 2,448 |
| Undistributed net investment income | | 18 |
| TOTAL NET ASSETS | | $2,940,172,768 |
Net Asset Value, Offering Price and Redemption Proceeds
Per Share: | | |
| $2,940,172,768 ÷ 2,940,170,302 shares outstanding, no par value, unlimited shares authorized | | $1.00 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended November 30, 2014 (unaudited)
| Investment Income: | | | |
| Interest | | | $4,077,534 |
| Expenses: | | | |
| Investment adviser fee (Note 4) | | $7,442,095 | |
| Administrative fee (Note 4) | | 1,164,935 | |
| Custodian fees | | 67,598 | |
| Transfer agent fee | | 1,611,354 | |
| Directors'/Trustees' fees (Note 4) | | 10,002 | |
| Auditing fees | | 10,654 | |
| Legal fees | | 7,367 | |
| Portfolio accounting fees | | 81,283 | |
| Distribution services fee (Note 4) | | 1,488,419 | |
| Other service fees (Notes 2 and 4) | | 3,721,047 | |
| Share registration costs | | 278,325 | |
| Printing and postage | | 156,813 | |
| Taxes | | 111,025 | |
| Miscellaneous (Note 4) | | 11,626 | |
| TOTAL EXPENSES | | 16,162,543 | |
| Waivers and Reimbursement: | | | |
| Waiver of investment adviser fee (Note 4) | $(7,023,589) | | |
Waivers/reimbursement of other operating expenses
(Notes 2 and 4) | (5,209,466) | | |
| TOTAL WAIVERS AND REIMBURSEMENT | | (12,233,055) | |
| Net expenses | | | 3,929,488 |
| Net investment income | | | 148,046 |
| Net realized gain on investments | | | 2,573 |
| Change in net assets resulting from operations | | | $150,619 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Changes in Net Assets
| | Six Months
Ended
(unaudited)
11/30/2014 | Year Ended
5/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $148,046 | $295,617 |
| Net realized gain on investments | 2,573 | 12,611 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 150,619 | 308,228 |
| Distributions to Shareholders: | | |
| Distributions from net investment income | (148,039) | (295,534) |
| Distributions from net realized gain on investments | (8,676) | (11,055) |
| CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS | (156,715) | (306,589) |
| Share Transactions: | | |
| Proceeds from sale of shares | 1,556,918,105 | 3,070,879,415 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 156,079 | 305,010 |
| Cost of shares redeemed | (1,543,651,415) | (3,100,333,188) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | 13,422,769 | (29,148,763) |
| Change in net assets | 13,416,673 | (29,147,124) |
| Net Assets: | | |
| Beginning of period | 2,926,756,095 | 2,955,903,219 |
| End of period (including undistributed net investment income of $18 and $11, respectively) | $2,940,172,768 | $2,926,756,095 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
November 30, 2014 (unaudited)
1. ORGANIZATION
Cash Trust Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as a diversified open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Federated Prime Cash Series (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The investment objective of the Fund is 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-based 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-based 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
Semi-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.
Repurchase agreements are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
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.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund's Shares to unaffiliated 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 other service fees. For the six months ended November 30, 2014, FSSC voluntarily reimbursed $954 of other service fees. In addition, for the six months ended November 30, 2014, unaffiliated third-party financial intermediaries waived $3,720,093 of other service fees. This wavier can be modified or terminated at any time.
Premium and Discount Amortization
All premiums and discounts are amortized/accreted using the effective-interest-rate method.
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended November 30, 2014, the Fund did not have a liability for any uncertain tax positions. The Fund
Semi-Annual Shareholder Report
recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of November 30, 2014, tax years 2011 through 2014 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.
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. The Fund applies Investment Company accounting and reporting guidance.
3. CAPITAL STOCK
The following table summarizes capital stock activity:
| | Six Months
Ended
11/30/2014 | Year Ended
5/31/2014 |
| Shares sold | 1,556,918,105 | 3,070,879,415 |
| Shares issued to shareholders in payment of distributions declared | 156,079 | 305,010 |
| Shares redeemed | (1,543,651,415) | (3,100,333,188) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | 13,422,769 | (29,148,763) |
Semi-Annual Shareholder Report
4. 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 six months ended November 30, 2014, the Adviser voluntarily waived $7,023,589 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 |
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2014, the annualized 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 six months ended November 30, 2014, FSC voluntarily waived its entire fee of $1,488,419. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares
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) on their own initiative have agreed to waive their respective fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights, excluding extraordinary expenses and proxy-related expenses paid by the Fund, if any) paid by the Fund (after the voluntary waivers and/or reimbursements) will not exceed 1.05% (the “Fee Limit”), up to but not including the later of (the “Termination Date”): (a) August 1, 2015; or (b) the date of the Fund's next effective
Semi-Annual Shareholder Report
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 six months ended November 30, 2014, the Fund engaged in sale transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These sale transactions complied with Rule 17a-7 under the Act and amounted to $18,380,000.
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. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
5. CONCENTRATION OF RISK
A substantial part of the Fund's portfolio may be comprised of obligations of banks. As a result, the Fund may be more susceptible to any economic, business, political or other developments which generally affect these entities.
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 November 30, 2014, there were no outstanding loans. During the six months ended November 30, 2014, the Fund did not utilize the LOC.
7. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2014, there were no outstanding loans. During the six months ended November 30, 2014, the program was not utilized.
Semi-Annual Shareholder Report
8. REGULATORY MATTERS
On July 23, 2014, the SEC voted to amend the rules under the Act which currently govern the operations of the Fund. A significant change resulting from these amendments will be a requirement that institutional prime funds (i.e. not retail as defined in the amendments) transact fund shares based on a market-based Net Asset Value (NAV). Other types of money market funds may continue to transact fund shares at an NAV calculated using the amortized cost valuation method. Among additional disclosure and other requirements, the amendments also will permit a money market fund, or, in certain circumstances, require a money market fund (other than a government money market fund which satisfies the requirements of the amended rules) to impose liquidity fees on redemptions, and permit a money market fund to limit (or gate) redemptions for up to 10 business days in any 90-day period. The amendments have staggered compliance dates. Compliance with a majority of these amendments will be required on October 14, 2016, two years after the effective date for the rule amendments. The degree to which a money market fund will be impacted by the rule amendments will depend upon the type of fund and type of investors (retail or institutional). At this time, management is evaluating the implications of these amendments and their impact to the Fund's operations, financial statements and accompanying notes.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2014 to November 30, 2014.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Beginning
Account
Value
6/1/2014 | Ending
Account
Value
11/30/2014 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.10 | $1.30 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,023.76 | $1.32 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.26%, multiplied by the average account value over the period, multiplied by 183/365 (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 4 under Expense Limitation), multiplied by the average account value over the period, multiplied by 183/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.26 and $5.32, respectively. |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2014
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 2014 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 of care, conscientiousness and independence with which the Board members perform their duties and their expertise, including whether they are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. The Board noted that SEC disclosure requirements regarding the basis for the Board's approval of the Fund's advisory contract generally track the factors listed above. Consistent with these judicial decisions and SEC disclosure requirements, the Board also considered management fees charged to
Semi-Annual Shareholder Report
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.
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
Semi-Annual Shareholder Report
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.
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. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. 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.
The Board reviewed the contractual advisory fee rate, net advisory fee rate where partially waived and other expenses of the Fund and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted the applicable waivers and reimbursements and 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 in the context of the other factors considered relevant by the Board.
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 and sub-adviser services). 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; and different portfolio management techniques made necessary by different cash flows and different associated costs; 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.
Semi-Annual Shareholder Report
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 was one of the Board's considerations 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 may be helpful, though not conclusive, in judging the reasonableness of proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group.
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. In addition, following discussions regarding the Senior Officer's May 2013 recommendations, Federated made meaningful reductions to gross advisory fees for several funds. At the Board meeting in May 2014, the Senior Officer proposed, and the Board approved, reductions in the contractual advisory fees of certain other funds.
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 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
Semi-Annual Shareholder Report
change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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 concluded that Federated's profit margins did not appear to be excessive.
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, 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.
Semi-Annual Shareholder Report
The Board based its decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Semi-Annual Shareholder Report
Voting Proxies on Fund Portfolio Securities
A description of the policies and procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. 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 via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
Semi-Annual Shareholder Report
Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
Federated Prime Cash Series
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 147551105
0122606 (1/15)
Federated is a registered trademark of Federated Investors, Inc.
2015 ©Federated Investors, Inc.
Semi-Annual Shareholder Report
November 30, 2014
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 November 30, 2014, the Fund's portfolio composition1 was as follows:
| Portfolio Composition | Percentage of
Total Net Assets |
| Repurchase Agreements | 48.2% |
| U.S. Treasury Securities | 40.4% |
| Other Assets and Liabilities—Net2 | 11.4% |
| TOTAL | 100.0% |
At November 30, 2014, the Fund's effective maturity3 schedule was as follows:
Securities with an
Effective Maturity of: | Percentage of
Total Net Assets |
| 1-7 Days | 50.4% |
| 8-30 Days | 0.0% |
| 31-90 Days | 15.7% |
| 91-180 Days | 16.0% |
| 181 Days or more | 6.5% |
| Other Assets and Liabilities—Net2 | 11.4% |
| TOTAL | 100.0% |
| 1 | See the Fund's Prospectus and Statement of Additional Information for a description of the principal types of securities in which the Fund invests. |
| 2 | Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. |
| 3 | Effective maturity is determined in accordance with the requirements of Rule 2a-7 under the Investment Company Act of 1940, which regulates money market mutual funds. |
Semi-Annual Shareholder Report
Portfolio of Investments
November 30, 2014 (unaudited)
Principal
Amount | | | Value |
| | | U.S. TREASURY—40.4% | |
| $13,000,000 | 1 | United States Treasury Bills, 0.050%, 4/23/2015 | $12,997,418 |
| 26,350,000 | 1 | United States Treasury Bills, 0.105%, 4/30/2015 | 26,338,472 |
| 17,250,000 | | United States Treasury Bonds, 11.250%, 2/15/2015 | 17,648,254 |
| 45,000,000 | 2 | United States Treasury Floating Rate Notes, 0.065%—0.089%, 12/2/2014 | 44,997,247 |
| 26,000,000 | | United States Treasury Notes, 0.125%—2.500%, 4/30/2015 | 26,065,553 |
| 140,250,000 | | United States Treasury Notes, 0.125%—2.625%, 12/31/2014 | 140,447,722 |
| 19,500,000 | | United States Treasury Notes, 0.250%—1.750%, 7/31/2015 | 19,614,494 |
| 67,000,000 | | United States Treasury Notes, 0.250%—2.125%, 5/31/2015 | 67,252,924 |
| 125,000,000 | | United States Treasury Notes, 0.250%—2.375%, 2/28/2015 | 125,358,958 |
| 28,000,000 | | United States Treasury Notes, 0.250%, 1/15/2015 | 28,006,458 |
| 45,475,000 | | United States Treasury Notes, 0.250%, 5/15/2015 | 45,509,088 |
| 17,000,000 | | United States Treasury Notes, 0.250%, 7/15/2015 | 17,009,467 |
| 66,000,000 | | United States Treasury Notes, 0.375%, 3/15/2015 | 66,054,901 |
| 10,000,000 | | United States Treasury Notes, 0.375%, 4/15/2015 | 10,011,279 |
| 22,500,000 | | United States Treasury Notes, 0.375%, 6/30/2015 | 22,532,189 |
| 37,000,000 | | United States Treasury Notes, 2.250%, 1/31/2015 | 37,131,192 |
| 82,000,000 | | United States Treasury Notes, 4.000%, 2/15/2015 | 82,663,267 |
| | | TOTAL U.S. TREASURY | 789,638,883 |
| | | REPURCHASE AGREEMENTS—48.2% | |
| 80,000,000 | | Interest in $500,000,000 joint repurchase agreement 0.08%, dated 11/28/2014 under which ABN Amro Bank N.V., Netherlands will repurchase securities provided as collateral for $500,003,333 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 8/15/2043 and the market value of those underlying securities was $510,003,446. | 80,000,000 |
| 50,000,000 | 3 | Interest in $1,000,000,000 joint repurchase agreement 0.06%, dated 10/21/2014 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $1,000,151,667 on 1/20/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 5/15/2044 and the market value of those underlying securities was $1,020,069,716. | 50,000,000 |
| 30,000,000 | 3 | Interest in $350,000,000 joint repurchase agreement 0.06%, dated 9/10/2014 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $350,052,500 on 12/9/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2041 and the market value of those underlying securities was $357,048,953. | 30,000,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | REPURCHASE AGREEMENTS—continued | |
| $33,000,000 | 3 | Interest in $400,000,000 joint repurchase agreement 0.07%, dated 11/12/2014 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $400,069,222 on 2/9/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2040 and the market value of those underlying securities was $408,015,144. | $33,000,000 |
| 33,000,000 | 3 | Interest in $933,000,000 joint repurchase agreement 0.08%, dated 11/17/2014 under which BNP Paribas Securities Corp. will repurchase securities provided as collateral for $933,124,400 on 1/16/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2041 and the market value of those underlying securities was $951,689,646. | 33,000,000 |
| 48,000,000 | 3 | Interest in $650,000,000 joint repurchase agreement 0.07%, dated 11/13/2014 under which Bank of Montreal will repurchase securities provided as collateral for $650,079,625 on 1/15/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 5/15/2044 and the market value of those underlying securities was $663,023,307. | 48,000,000 |
| 40,000,000 | 3 | Interest in $400,000,000 joint repurchase agreement 0.07%, dated 11/14/2014 under which Bank of Montreal will repurchase securities provided as collateral for $400,040,444 on 1/5/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2044 and the market value of those underlying securities was $408,013,530. | 40,000,000 |
| 80,000,000 | | Interest in $300,000,000 joint repurchase agreement 0.08%, dated 11/28/2014 under which Bank of Nova Scotia will repurchase securities provided as collateral for $300,002,000 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 8/15/2029 and the market value of those underlying securities was $306,002,107. | 80,000,000 |
| 50,000,000 | 3 | Interest in $675,000,000 joint repurchase agreement 0.06%, dated 10/14/2014 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $675,066,375 on 12/12/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2040 and the market value of those underlying securities was $688,555,144. | 50,000,000 |
| 65,000,000 | 3 | Interest in $935,000,000 joint repurchase agreement 0.06%, dated 10/15/2014 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $935,095,058 on 12/15/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 5/15/2044 and the market value of those underlying securities was $953,774,708. | 65,000,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | REPURCHASE AGREEMENTS—continued | |
| $25,000,000 | 3 | Interest in $380,000,000 joint repurchase agreement 0.08%, dated 11/20/2014 under which Barclays Capital, Inc. will repurchase securities provided as collateral for $380,021,111 on 12/15/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 5/15/2023 and the market value of those underlying securities was $387,609,549. | $25,000,000 |
| 27,000,000 | | Interest in $300,000,000 joint repurchase agreement 0.07%, dated 11/26/2014 under which Citigroup Global Markets, Inc. will repurchase securities provided as collateral for $300,004,083 on 12/3/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 4/15/2028 and the market value of those underlying securities was $306,002,985. | 27,000,000 |
| 59,460,000 | | Interest in $3,500,000,000 joint repurchase agreement 0.08%, dated 11/28/2014 under which Credit Agricole CIB New York will repurchase securities provided as collateral for $3,500,023,333 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to11/15/2044 and the market value of those underlying securities was $3,570,023,831. | 59,460,000 |
| 45,000,000 | 3 | Interest in $1,244,000,000 joint repurchase agreement 0.07%, dated 10/27/2014 under which Goldman Sachs and Co. will repurchase securities provided as collateral for $1,244,169,322 on 1/5/2015. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 11/15/2022 and the market value of those underlying securities was $1,268,966,405. | 45,000,000 |
| 80,000,000 | | Interest in $250,000,000 joint repurchase agreement 0.08%, dated 11/28/2014 under which Mitsubishi UFJ Securities (USA), Inc. will repurchase securities provided as collateral for $250,001,667 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2044 and the market value of those underlying securities was $255,001,701. | 80,000,000 |
| 80,000,000 | | Interest in $500,000,000 joint repurchase agreement 0.08%, dated 11/28/2014 under which RBC Capital Markets, LLC will repurchase securities provided as collateral for $500,003,333 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 8/15/2022 and the market value of those underlying securities was $510,003,431. | 80,000,000 |
| 35,000,000 | 3 | Interest in $500,000,000 joint repurchase agreement 0.06%, dated 10/29/2014 under which Societe Generale, New York will repurchase securities provided as collateral for $500,028,333 on 12/2/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2040 and the market value of those underlying securities was $510,028,119. | 35,000,000 |
Semi-Annual Shareholder Report
Principal
Amount | | | Value |
| | | REPURCHASE AGREEMENTS—continued | |
| $35,000,000 | 3 | Interest in $500,000,000 joint repurchase agreement 0.09%, dated 11/21/2014 under which Societe Generale, New York will repurchase securities provided as collateral for $500,038,750 on 12/22/2044. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 2/15/2042 and the market value of those underlying securities was $510,012,826. | $35,000,000 |
| 45,000,000 | | Interest in $250,000,000 joint repurchase agreement 0.08%, dated 11/24/2014 under which TD Securities (USA), LLC will repurchase securities provided as collateral for $250,003,889 on 12/1/2014. The securities provided as collateral at the end of the period held with BNY Mellon as tri-party agent, were U.S. Treasury securities with various maturities to 5/15/2044 and the market value of those underlying securities was $255,004,044. | 45,000,000 |
| | | TOTAL REPURCHASE AGREEMENTS
(AT COST) | 940,460,000 |
| | | TOTAL INVESTMENTS—88.6%
(AT AMORTIZED COST)4 | 1,730,098,883 |
| | | OTHER ASSETS AND LIABILITIES - NET—11.4%5 | 222,352,194 |
| | | TOTAL NET ASSETS—100% | $1,952,451,077 |
| 1 | Discount rate(s) at time of purchase. |
| 2 | Floating rate notes with current rate(s) and next reset date(s) shown. |
| 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. A significant portion of this balance represents an outstanding balance of receivable for investments sold. |
Note: The categories of investments are shown as a percentage of total net assets at November 30, 2014.
Various inputs are used in determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1—quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2—other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3—significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.
As of November 30, 2014, all investments of the Fund are valued at amortized cost, which is considered a Level 2 input, in valuing the Fund's assets.
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Financial Highlights
(For a Share Outstanding Throughout Each Period)
| | Six Months
Ended
(unaudited)
11/30/2014 | Year Ended May 31, |
| 2014 | 2013 | 2012 | 2011 | 2010 |
| Net Asset Value, Beginning of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Income From Investment Operations: | | | | | | |
| Net investment income | — | — | — | — | — | — |
| Net realized gain on investments | 0.00001 | 0.00001 | — | 0.00001 | 0.00001 | 0.00001 |
TOTAL FROM INVESTMENT
OPERATIONS | 0.00001 | 0.00001 | — | 0.00001 | 0.00001 | 0.00001 |
| Less Distributions: | | | | | | |
| Distributions from net realized gain on investments | (0.0000)1 | (0.0000)1 | (0.0000)1 | (0.0000)1 | (0.0000)1 | — |
Net Asset Value,
End of Period | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 | $1.00 |
| Total Return2 | 0.00%3 | 0.00%3 | 0.00%3 | 0.00%3 | 0.00%3 | 0.00%3 |
Ratios to Average
Net Assets: | | | | | | |
| Net expenses | 0.07%4 | 0.07% | 0.16% | 0.10% | 0.19% | 0.21% |
| Net investment income | 0.00%4 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| Expense waiver/reimbursement5 | 1.01%4 | 1.01% | 0.92% | 0.98% | 0.89% | 0.87% |
| Supplemental Data: | | | | | | |
| Net assets, end of period (000 omitted) | $1,952,451 | $2,358,885 | $2,549,875 | $2,355,609 | $1,445,337 | $1,339,308 |
| 1 | Represents less than $0.0001. |
| 2 | Based on net asset value. Total returns for periods of less than one year are not annualized. |
| 3 | Represents less than 0.01%. |
| 4 | Computed on an annualized basis. |
| 5 | This expense decrease is reflected in both the net expense and the net investment income ratios shown above. |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Assets and Liabilities
November 30, 2014 (unaudited)
| Assets: | | |
| Investment in repurchase agreements | $940,460,000 | |
| Investment in securities | 789,638,883 | |
| Total investment in securities, at amortized cost and fair value | | $1,730,098,883 |
| Cash | | 91,388 |
| Income receivable | | 5,493,928 |
| Receivable for investments sold | | 217,000,000 |
| Receivable for shares sold | | 100 |
| TOTAL ASSETS | | 1,952,684,299 |
| Liabilities: | | |
| Payable to adviser (Note 4) | 156,784 | |
| Payable for transfer agent fee | 72,149 | |
| Accrued expenses (Note 4) | 4,289 | |
| TOTAL LIABILITIES | | 233,222 |
| Net assets for 1,952,451,063 shares outstanding | | $1,952,451,077 |
| Net Assets Consist of: | | |
| Paid-in capital | | $1,952,451,077 |
| TOTAL NET ASSETS | | $1,952,451,077 |
| Net Asset Value, Offering Price and Redemption Proceeds Per Share: | | |
| $1,952,451,077 ÷ 1,952,451,063 shares outstanding, $0.001 par value, 12,500,000,000 shares authorized | | $1.00 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Operations
Six Months Ended November 30, 2014 (unaudited)
| Investment Income: | | | |
| Interest | | | $774,966 |
| Expenses: | | | |
| Investment adviser fee (Note 4) | | $5,601,390 | |
| Administrative fee (Note 4) | | 876,774 | |
| Custodian fees | | 39,054 | |
| Transfer agent fee | | 1,212,962 | |
| Directors'/Trustees' fees (Note 4) | | 8,178 | |
| Auditing fees | | 9,827 | |
| Legal fees | | 7,239 | |
| Portfolio accounting fees | | 81,274 | |
| Distribution services fee (Note 4) | | 1,120,278 | |
| Other service fees (Note 2) | | 2,800,695 | |
| Share registration costs | | 190,690 | |
| Printing and postage | | 64,748 | |
| Taxes | | 88,892 | |
| Miscellaneous (Note 4) | | 24,298 | |
| TOTAL EXPENSES | | 12,126,299 | |
| Waivers and Reimbursement: | | | |
| Waiver of investment adviser fee (Note 4) | $(5,601,390) | | |
| Waivers/reimbursement of other operating expenses (Notes 2 and 4) | (5,749,943) | | |
| TOTAL WAIVERS AND REIMBURSEMENT | | (11,351,333) | |
| Net expenses | | | 774,966 |
| Net investment income | | | — |
| Net realized gain on investments | | | 31 |
| Change in net assets resulting from operations | | | $31 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Statement of Changes in Net Assets
| | Six Months
Ended
(unaudited)
11/30/2014 | Year Ended
5/31/2014 |
| Increase (Decrease) in Net Assets | | |
| Operations: | | |
| Net investment income | $— | $— |
| Net realized gain on investments | 31 | 10,423 |
| CHANGE IN NET ASSETS RESULTING FROM OPERATIONS | 31 | 10,423 |
| Distributions to Shareholders: | | |
| Distributions from net realized gain on investments | (8,149) | (2,305) |
| Share Transactions: | | |
| Proceeds from sale of shares | 1,756,175,491 | 3,624,431,619 |
| Net asset value of shares issued to shareholders in payment of distributions declared | 8,004 | 2,294 |
| Cost of shares redeemed | (2,162,609,166) | (3,815,432,507) |
| CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS | (406,425,671) | (190,998,594) |
| Change in net assets | (406,433,789) | (190,990,476) |
| Net Assets: | | |
| Beginning of period | 2,358,884,866 | 2,549,875,342 |
| End of period | $1,952,451,077 | $2,358,884,866 |
See Notes which are an integral part of the Financial Statements
Semi-Annual Shareholder Report
Notes to Financial Statements
November 30, 2014 (unaudited)
1. ORGANIZATION
Cash Trust Series, Inc. (the “Corporation”) is registered under the Investment Company Act of 1940, as amended (the “Act”), as an open-end management investment company. The Corporation consists of four portfolios. The financial statements included herein are only those of Federated Treasury Cash Series (the “Fund”), a diversified portfolio. The financial statements of the other portfolios are presented separately. The assets of each portfolio are segregated and a shareholder's interest is limited to the portfolio in which shares are held. Each portfolio pays its own expenses. The investment objective of the Fund is to provide current income consistent with stability of principal and liquidity.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (GAAP).
Investment Valuation
Securities are valued at amortized cost. Under the amortized cost valuation method, an investment is valued initially at its cost as determined in accordance with GAAP. The Fund then adjusts the amount of interest income accrued each day over the term of the investment to account for any difference between the initial cost of the investment and the amount payable at its maturity. If amortized cost is determined not to approximate 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-based 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-based 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
Semi-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.
Repurchase agreements are subject to Master Netting Agreements which are agreements between the Fund and its counterparties that provide for the net settlement of all transactions and collateral with the Fund, through a single payment, in the event of default or termination. Amounts presented on the Portfolio of Investments and Statement of Assets and Liabilities are not net settlement amounts but gross. As indicated above, the cash or securities to be repurchased, as shown on the Portfolio of Investments, exceeds the repurchase price to be paid under the agreement reducing the net settlement amount to zero.
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. For the six months ended November 30, 2014, unaffiliated third parties waived $1,090,908 of transfer agent fees.
Other Service Fees
The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund to unaffiliated 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 other service fees. This waiver can be modified or terminated at any time. In addition, unaffiliated third-party financial intermediaries may waive other service fees. For the six months ended November 30, 2014, unaffiliated third-party financial intermediaries waived $2,800,695 of other service fees.
Premium and Discount Amortization
All premiums and discounts are amortized/accreted using the effective-interest-rate method.
Semi-Annual Shareholder Report
Federal Taxes
It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended November 30, 2014, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of November 30, 2014, tax years 2011 through 2014 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the state of Maryland and the Commonwealth of Pennsylvania.
Other Taxes
As an open-end management investment company incorporated in the state of Maryland but domiciled in the Commonwealth of Pennsylvania, the Fund is subject to the Pennsylvania Franchise Tax. This franchise tax is assessed annually on the value of the Fund, as represented by average net assets for the tax year.
When-Issued and Delayed-Delivery Transactions
The Fund may engage in when-issued or delayed-delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed-delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.
Other
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts of assets, liabilities, expenses and revenues reported in the financial statements. Actual results could differ from those estimated. The Fund applies Investment Company accounting and reporting guidance.
3. CAPITAL STOCK
The following table summarizes capital stock activity:
| | Six Months
Ended
11/30/2014 | Year Ended
5/31/2014 |
| Shares sold | 1,756,175,491 | 3,624,431,619 |
| Shares issued to shareholders in payment of distributions declared | 8,004 | 2,294 |
| Shares redeemed | (2,162,609,166) | (3,815,432,507) |
| NET CHANGE RESULTING FROM FUND SHARE TRANSACTIONS | (406,425,671) | (190,998,594) |
Semi-Annual Shareholder Report
4. 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 and/or reimburse certain operating expenses of the Fund. For the six months ended November 30, 2014, the Adviser voluntarily waived its entire fee of $5,601,390 and voluntarily reimbursed $738,062 of other operating expenses.
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 |
Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended November 30, 2014, the annualized 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 six months ended November 30, 2014, FSC voluntarily waived its entire fee of $1,120,278. When FSC receives fees, it may pay some or all of them to financial intermediaries whose customers purchase shares.
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) on their own initiative have agreed to waive their respective fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights, excluding extraordinary expenses and proxy-related expenses paid by the Fund, if any) 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
Semi-Annual Shareholder Report
including the later of (the “Termination Date”): (a) August 1, 2015; 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 six months ended November 30, 2014, the Fund engaged in purchase transactions with funds that have a common investment adviser (or affiliated investment advisers), common Directors/Trustees, and/or common Officers. These purchase transactions complied with Rule 17a-7 under the Act and amounted to $4,092,070.
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. Such expenses may be included in Accrued and Miscellaneous Expenses on the Statement of Assets and Liabilities and Statement of Operations, respectively.
5. LINE OF CREDIT
The Fund participates in a $100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of November 30, 2014, there were no outstanding loans. During the six months ended November 30, 2014, the Fund did not utilize the LOC.
6. INTERFUND LENDING
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission (SEC), the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of November 30, 2014, there were no outstanding loans. During the six months ended November 30, 2014, the program was not utilized.
7. REGULATORY MATTERS
On July 23, 2014, the SEC voted to amend the rules under the Act which currently govern the operations of the Fund. A significant change resulting from these amendments will be a requirement that institutional prime funds (i.e. not government or retail as defined in the amendments), transact fund shares based on a market-based Net Asset Value (NAV). This change does not impact government money market funds, and because it is anticipated that the Fund will constitute a government money market fund under the new rules, the Fund will be permitted to continue transacting fund shares at an NAV calculated using the amortized cost valuation method. Among additional disclosure and other requirements, the amendments also will permit a money market fund, or, in certain circumstances, require a money market fund (other than a government money market fund, like the Fund, which satisfies the requirements of the amended rules) to impose liquidity fees on redemptions, and permit a money market fund to limit (or gate) redemptions for up to 10 business days in any 90-day period. The amendments have staggered compliance dates. Compliance with a majority of
Semi-Annual Shareholder Report
these amendments will be required on October 14, 2016, two years after the effective date for the rule amendments. The degree to which a money market fund will be impacted by the rule amendments will depend upon the type of fund and type of investors (retail or institutional). At this time, management is evaluating the implications of these amendments and their impact to the Fund's operations, financial statements and accompanying notes.
Semi-Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or other service fees and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from June 1, 2014 to November 30, 2014.
ACTUAL EXPENSES
The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| | Beginning
Account Value
6/1/2014 | Ending
Account Value
11/30/2014 | Expenses Paid
During Period1,2 |
| Actual | $1,000 | $1,000.00 | $0.35 |
Hypothetical (assuming a 5% return
before expenses) | $1,000 | $1,024.72 | $0.36 |
| 1 | Expenses are equal to the Fund's annualized net expense ratio of 0.07%, multiplied by the average account value over the period, multiplied by 183/365 (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 4 under Expense Limitation), multiplied by the average account value over the period, multiplied by 183/365 (to reflect expenses paid as if they had been in effect throughout the most recent one-half-year period) would be $5.26 and $5.32, respectively. |
Semi-Annual Shareholder Report
Evaluation and Approval of Advisory Contract–May 2014
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 2014 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 of care, conscientiousness and independence with which the Board members perform their duties and their expertise, including whether they are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees. The Board noted that SEC disclosure requirements regarding the basis for the Board's approval of the Fund's advisory contract generally track the factors listed above. Consistent with these judicial decisions and SEC disclosure requirements, the Board also considered management fees charged to
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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.
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
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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.
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. In this regard, the Board was presented with, and considered, information regarding the contractual advisory fee rates, net advisory fee rates and total expense ratios relative to a fund's peers. 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 advisory fee rate, net advisory fee rate and other expenses of the Fund with the Adviser and noted the position of the Fund's fee rates relative to its peers. In this regard, the Board noted that the contractual advisory fee rate was above the median of the relevant peer group, but the Board noted that the investment advisory fee was waived in its entirety and 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 and sub-adviser services). 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; and different portfolio management techniques made necessary by different cash flows and different associated costs; 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.
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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 was one of the Board's considerations 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 may be helpful, though not conclusive, in judging the reasonableness of proposed fees. The Board considered, in evaluating such comparisons, that in some cases individual funds may exhibit significant and unique differences in their objectives and management techniques when compared to other funds within an industry peer group.
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. In addition, following discussions regarding the Senior Officer's May 2013 recommendations, Federated made meaningful reductions to gross advisory fees for several funds. At the Board meeting in May 2014, the Senior Officer proposed, and the Board approved, reductions in the contractual advisory fees of certain other funds.
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 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
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change in an allocation estimate may dramatically alter the resulting estimate of cost and/or profitability of a fund and may produce unintended consequences. The allocation information, including the Senior Officer's view that fund-by-fund estimations may be unreliable, was considered in the analysis by the Board.
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 concluded that Federated's profit margins did not appear to be excessive.
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, 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.
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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.
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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 via the Proxy Voting Record (Form N-PX) link associated with the Fund and share class name at www.FederatedInvestors.com/FundInformation. 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 via the link to the Fund and share class name at www.FederatedInvestors.com/FundInformation.
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Mutual funds are not bank deposits or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment in mutual funds involves investment risk, including the possible loss of principal. Although money market funds seek to maintain a stable net asset value of $1.00 per share, there is no assurance that they will be able to do so.
This Report is authorized for distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY
In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called “householding”), as permitted by applicable rules. The Fund's “householding” program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the “householding” program. The Fund is also permitted to treat a shareholder as having given consent (“implied consent”) if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to “household” at least sixty (60) days before it begins “householding” and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to “opt out” of “householding.” Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of “householding” at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.
Semi-Annual Shareholder Report
Federated Treasury Cash Series
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp., Distributor
CUSIP 147551402
0122607 (1/15)
Federated is a registered trademark of Federated Investors, Inc.
2015 ©Federated Investors, Inc.
Item 2. Code of Ethics
Not Applicable
Item 3. Audit Committee Financial Expert
Not Applicable
Item 4. Principal Accountant Fees and Services
Not Applicable
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
(a) The registrant’s Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the reporting period covered since the previous Form N-CSR filing.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
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
No Changes to Report
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 January 21, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /S/ J. Christopher Donahue
J. Christopher Donahue
Principal Executive Officer
Date January 21, 2015
By /S/ Lori A. Hensler
Lori A. Hensler
Principal Financial Officer
Date January 21, 2015
