MUNICIPAL
CASH
SERIES II
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1993
ESTABLISHED 1990
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
1121604 (1/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Municipal
Cash Series II (the "Fund"), which covers the six-month period ended November
30, 1993. This report includes the Investment Review and Financial Statements,
which contain the Portfolio of Investments.
Municipal Cash Series II keeps your cash working for you by pursuing current
income exempt from federal regular income tax*--with the advantages of daily
liquidity and stability of principal**-- through a diversified portfolio of
short-term municipal securities. At the end of the report period, Fund assets
were invested in 57 different issuers in 20 states and Puerto Rico to provide
broad diversification.
The 1993 increase in federal income tax rates prompted many investors to
increase their tax-free investments. This fact helped the Fund's net assets rise
from $104.6 million to $133.2 million during the six-month report period.
Dividends paid to shareholders during the period totaled $1.2 million, or $0.01
per share.
Thank you for your choosing Municipal Cash Series II as a short-term investment.
We will continue to keep you up to date on the Fund's activity. In the meantime,
please contact your investment representative if you have any questions about
the Fund.
Sincerely,
Richard B. Fisher
President
January 14, 1994
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** While no money market mutual fund can guarantee that a stable net asset value
will be maintained, the Fund has done so since its inception. Investments in
mutual funds are neither insured nor guaranteed by the U.S. government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
U.S. economic growth accelerated over the six month period ending November 30,
1993. Third quarter real Gross National Product ("GNP") grew at a 2.8% annual
rate, up from a 1.3% annual rate for the first half of 1993. Growth in the
economy was fueled primarily by increased consumer spending, a surge in new home
sales, and increased productivity of capital and labor resources. At this point,
data on the economy suggests growth as high as 4.0% to 5.0% in the fourth
quarter. The economy, however, may not be able to sustain the vigorous fourth
quarter pace in 1994, due to fiscal constraints, particularly the Clinton tax
increases, defense downsizing, corporate restructuring, weaker exports, and the
prospect for health care reform.
Despite the evidence of stronger growth in the economy, yields on U.S. Treasury
and prime money market instruments remained relatively stable and at
historically low levels over the reporting period. Three-month commercial paper,
representative of short-term rates, traded in a narrow range near the 3.25%
level until late October, before moving slightly higher in November to the 3.40%
level. The increase in rates in November reflected higher year-end financing
costs by corporations. The Federal Reserve Board (the "Fed") also continued to
maintain a steady monetary policy leaving the discount and federal funds rate
unchanged at 3.00% since September 1992. However, if the economy continues to
accelerate in 1994, this may influence the Fed to implement a more restrictive
monetary policy by increasing the federal funds rate.
Tax-exempt securities also remained at historically low levels over the period.
However, unlike the short-term taxable markets, yields on short-term tax-exempt
securities exhibited substantial volatility, due to imbalances in the supply of
paper relative to demand. Interest rates on seven-day Variable Rate Demand Notes
("VRDNs") averaged 2.20% over the period but were as low as 1.85% in early July
and as high as 3.10% in late September. On a week-to-week basis, tax-exempt
money market fund yields are driven by the VRDN market since they typically
comprise 60% or more of a fund's assets. For the most part, this volatility in
VRDN yields worked to the favor of the tax-exempt investor, as VRDNs average 80%
of comparable taxable rates over the report period. Normally, VRDN rates will
vary in a range somewhere between 70% and 75% of comparable taxable rates. In
the fixed-rate note sector, the addition of increased supply in June, July and
August, due to traditional summer financing by municipal issuers, provided many
opportunities to purchase and lock in attractive yields on high quality notes.
Reflecting activity in the short term tax-exempt market, the 7-day net yield of
the Fund as of November 30, 1993, was 1.90%*. Meanwhile, net assets were $133.2
million and the average maturity was 61 days. Management will continue to
monitor the short-term tax-exempt market for investments consistent with the
objective of the Fund.
*Past performance is not indicative of future results. Yield will vary.
MUNICIPAL CASH SERIES II
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 6) VALUE
- ---------- ------------------------------------------------------- -------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--98.8%
- ---------------------------------------------------------------------
ALABAMA--8.3%
-------------------------------------------------------
$1,000,000 Abbeville and Mobile, AL, IDB Monthly VRDNs
(Great Southern Wood Preserving Co.)/(SouthTrust
Bank of Alabama LOC)/(Subject to AMT) A-1 $ 1,000,000
-------------------------------------------------------
3,500,000 Anniston, AL, IDB Weekly VRDNs (Hoover Group)/
(Comerica Bank LOC)/(Subject to AMT) P-1 3,500,000
-------------------------------------------------------
2,000,000 Birmingham, AL, IDA Weekly VRDNs (Altec Industries,
Inc.)/(Wachovia Bank of GA LOC)/(Subject to AMT) P-1 2,000,000
-------------------------------------------------------
1,700,000 McIntosh, AL, IDB Weekly VRDNs (Ciba Geigy)/(Union Bank
of Switzerland, Zurich LOC)/(Subject to AMT) A-1+ 1,700,000
-------------------------------------------------------
305,000 Muscle Shoals, AL, IDB Weekly VRDNs (Whitesell
Manufacturing)/(SouthTrust Bank of Alabama LOC)/
(Subject to AMT) P-1 305,000
-------------------------------------------------------
1,000,000 Piedmont, AL, IDB Weekly VRDNs (Industrial Partners
Project)/(First National Bank, Atlanta LOC)/
(Subject to AMT) A-1 1,000,000
-------------------------------------------------------
1,575,000 St. Clair Co., AL, IDB Weekly VRDNs (EBSCO Industries
Project)/(National Australia Bank, Ltd., Melbourne
LOC)/(Subject to AMT) A-1+ 1,575,000
------------------------------------------------------- ------------
Total 11,080,000
------------------------------------------------------- ------------
ARKANSAS--0.8%
-------------------------------------------------------
1,000,000 City of Springdale, AR, Weekly VRDNs, (Newlywed
Food Project)/(Mellon Bank, Pittsburgh, LOC)/
(Subject to AMT) A-1 1,000,000
------------------------------------------------------- ------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 6) VALUE
- ---------- ------------------------------------------------------- -------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
CALIFORNIA--7.1%
-------------------------------------------------------
$5,000,000 California School Cash Reserve Program Authority, 3.40%
TANs (Series A)/(California School Boards Pooled Loan
Program 1993) 7/5/94 SP-1+ $ 5,014,352
-------------------------------------------------------
1,000,000 Housing Authority of the County of Sacramento
California, 3.25% Annual TOBs, (Shadowwood Apartments
Project)/(General Electric Capital Corporation
Guaranty)/(Subject to AMT) Mandatory Tender 12/1/93 A-1+ 1,000,000
-------------------------------------------------------
1,000,000 Housing Authority of the County of Sacramento
California, 3.10% Annual TOBs, (Shadowwood Apartments
Project)/(General Electric Capital Corporation Guaranty
LOC)/(Subject to AMT) 12/1/94 A-1+ 1,000,000
-------------------------------------------------------
2,400,000 Riverside County, CA, IDA Weekly VRDNs (1991 Series
A)/(Golden West Homes Project)/(Wells Fargo Bank NA,
San Francisco LOC)/(Subject to AMT) VMIG-1 2,400,000
------------------------------------------------------- ------------
Total 9,414,352
------------------------------------------------------- ------------
GEORGIA--4.0%
-------------------------------------------------------
5,300,000 Gwinett County, GA, IDA Daily VRDNs (Volvo of America,
Inc.)/(Union Bank of Switzerland, Zurich LOC)/ (Subject
to AMT) A-1+ 5,300,000
------------------------------------------------------- ------------
ILLINOIS--1.8%
-------------------------------------------------------
2,450,000 Illinois Development Finance Corp., Weekly VRDNs
(Olympic Steel)/(National City Bank, Cleveland LOC)/
(Subject to AMT) P-1 2,450,000
------------------------------------------------------- ------------
INDIANA--4.6%
-------------------------------------------------------
3,785,000 Avilla, IN, IDR Weekly VRDNs (Group Dekko
International, Inc.)/(Bank One, Indianapolis LOC) P-1 3,785,000
-------------------------------------------------------
1,125,000 Lawrence, IN, EDA Monthly VRDNs (H&H Steel)/
(Bank One, Indianapolis N.A. LOC)/(Subject to AMT) P-1 1,125,000
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 6) VALUE
- ---------- ------------------------------------------------------- -------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
INDIANA--CONTINUED
-------------------------------------------------------
$1,200,000 Tippecanoe, IN, School Corp., 3.15% Temporary Loan
Warrants, 12/31/93 NR(3) $ 1,200,096
------------------------------------------------------- ------------
Total 6,110,096
------------------------------------------------------- ------------
KENTUCKY--4.7%
-------------------------------------------------------
3,300,000 Kentucky Housing Corp., 2.75%, Semi-Annual TOBs
(Subject to AMT), Mandatory Tender 4/28/94 VMIG-1 3,300,000
-------------------------------------------------------
1,000,000 Kentucky Pollution Abatement and Water Res., Daily
VRDNs (Toyota Motors Co. Guaranty)/(Subject to AMT) A-1+ 1,000,000
-------------------------------------------------------
2,000,000 Scottsville, KY, IDA, 2.85% Semi-Annual TOBs, (Sumitomo
Electrical Wiring Systems)/(Sumitomo Bank, Ltd.
LOC)/(Subject to AMT), Optional Tender 5/1/94 A-1+ 2,000,000
------------------------------------------------------- ------------
Total 6,300,000
------------------------------------------------------- ------------
MASSACHUSETTS--3.9%
-------------------------------------------------------
1,300,000 New Bedford, MA, 3.75% BANs (Fleet National
Bank BPA) 8/12/94 P-1 1,308,431
-------------------------------------------------------
2,000,000 Springfield, MA, 3.30% RANs (Fleet National
Bank BPA) 2/4/94 P-1 2,002,295
-------------------------------------------------------
1,825,000 Worcester, MA, 3.25% BANs (Subject to AMT) 8/24/94 NR(4) 1,826,075
------------------------------------------------------- ------------
Total 5,136,801
------------------------------------------------------- ------------
MINNESOTA--16.4%
-------------------------------------------------------
4,000,000 City of New Hope, MN, Weekly VRDNs (Paddock Labs)/
(Norwest Bank MN LOC)/(Subject to AMT) A-1+ 4,000,000
-------------------------------------------------------
3,560,000 Minneapolis/St. Paul HS Finance Board Revenue Bond
(Series 88A), 3.00% Quarterly TOBs (Minn/St. Paul
Family Housing Program Phase V1)/(GNMA Collateralized
LOC)/(Subject to AMT) (Meridian Bank BPA), Optional
Tender 2/1/94 NR(1) 3,560,000
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 6) VALUE
- ---------- ------------------------------------------------------- -------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
MINNESOTA--CONTINUED
-------------------------------------------------------
$4,000,000 Minnesota State Higher Ed. Coordinating Brd., Weekly
VRDNs (MN Higher Ed. Coordination Board)/
(Suppl. Student Loan Pr.)/(Subject to AMT) VMIG-1 $ 4,000,000
-------------------------------------------------------
1,460,000 City of Plymouth, MN, Weekly VRDNs, (Nuaire
Inc.)/(Norwest Bank, MN, LOC)/(Subject to AMT) P-1 1,460,000
-------------------------------------------------------
9,000,000 Rochester, MN Health Care Facilities, Weekly VRDNs
(Mayo Clinic Foundation Guaranty) VMIG-1 9,000,000
------------------------------------------------------- ------------
Total 22,020,000
------------------------------------------------------- ------------
MONTANA--1.2%
-------------------------------------------------------
1,600,000 Forsythe, MT, PCR Daily VRDNs (Pacificorp)/
(Mitsubishi Bank Ltd., LOC) (Subject to AMT) A-1+ 1,600,000
------------------------------------------------------- ------------
NEVADA--1.9%
-------------------------------------------------------
2,500,000 State of Nevada Department of Commerce, IDA
Weekly VRDNs (Smithey-Oasis Co. Project)/
(Mellon Bank N.A. LOC) P-1 2,500,000
------------------------------------------------------- ------------
NEW HAMPSHIRE--4.9%
-------------------------------------------------------
2,000,000 New Hampshire State, IDA 2.90% Semi-Annual TOBs,
(United Illuminating Co.)/(Barclays Bank PLC, London
LOC)/(Subject to AMT), Mandatory Tender 3/1/94 A-1+ 2,000,000
-------------------------------------------------------
4,500,000 New Hampshire Business Finance Authority,
2.95% Annual TOBs Pollution Control Revenue Bonds)/
(New England Power Co. Guaranty)/(Subject to AMT),
Mandatory Tender 7/1/94 A-1 4,500,000
------------------------------------------------------- ------------
Total 6,500,000
------------------------------------------------------- ------------
NEW JERSEY--4.2%
-------------------------------------------------------
2,000,000 West Milford Township, NJ, 3.28% BAN, 1/28/94 NR(4) 2,000,551
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 6) VALUE
- ---------- ------------------------------------------------------- -------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
NEW JERSEY--CONTINUED
-------------------------------------------------------
$1,902,000 Pemberton Township, NJ, 3.15% BAN, 2/28/94 NR(4) $ 1,902,896
-------------------------------------------------------
1,725,000 Long Beach Township, NJ, 3.30% BAN, 3/31/94 NR 1,727,041
------------------------------------------------------- ------------
Total 5,630,488
------------------------------------------------------- ------------
NEW YORK--1.5%
-------------------------------------------------------
2,000,000 Longwood Central School District, NY, 3.25% TANs,
6/30/94 NR 2,001,680
------------------------------------------------------- ------------
NORTH CAROLINA--4.2%
-------------------------------------------------------
1,755,000 Almance County, NC, IDA (Series B), Weekly VRDNs (Culp,
Inc.)/(First Union National Bank LOC)/
(Subject to AMT) P-1 1,755,000
-------------------------------------------------------
2,340,000 Burke Co., NC, IDA PCR Weekly VRDNs
(Norwalk Furniture & Hickory Furniture Corp.)/
(Branch Banking & Trust LOC)/(Subject to AMT) P-1 2,340,000
-------------------------------------------------------
1,500,000 Franklin Co., NC, Weekly VRDNs (Series 1992)/(Doninger
Metals Corp.)/(Branch Banking & Trust LOC)/
(Subject to AMT) P-1 1,500,000
------------------------------------------------------- ------------
Total 5,595,000
------------------------------------------------------- ------------
PENNSYLVANIA--8.7%
-------------------------------------------------------
1,000,000 Northampton County, PA IDA, 2.65%, CP
(Citizens Utilities Co. Guaranty)/(Subject to AMT),
Mandatory Tender 1/14/94 A-1+ 1,000,000
-------------------------------------------------------
2,025,000 Pennsylvania, EDA Weekly VRDNs (Series G)/
(Cyrogenics, Inc.)/(Pittsburgh National Bank LOC)/
(Subject to AMT) P-1 2,025,000
-------------------------------------------------------
800,000 Pennsylvania, EDA Weekly VRDNs (Series F)/
(Respironics, Inc.)/(Pittsburgh National Bank LOC)/
(Subject to AMT) P-1 800,000
-------------------------------------------------------
1,225,000 Philadelphia, PA IDA, 3.00%, Annual TOBs
(Economy Inn Project)/(Bank of Tokyo Limited LOC) P-1 1,225,000
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 6) VALUE
- ---------- ------------------------------------------------------- -------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
-------------------------------------------------------
$1,500,000 Piedmont Triad Airport Authority Weekly VRDNs
(Triad International Maintenance Corp.)/(Mellon Bank,
N.A., Pittsburgh LOC)/(Subject to AMT) A-1 $ 1,500,000
-------------------------------------------------------
5,000,000 Reading, PA, 2.875% TRAN, 12/31/93 NR(3) 5,000,000
------------------------------------------------------- ------------
Total 11,550,000
------------------------------------------------------- ------------
PUERTO RICO--3.5%
-------------------------------------------------------
4,600,000 Government Bank of Puerto Rico, Weekly VRDNs (Credit
Suisse, Zurich LOC)/(Sumitomo Bank, Ltd. LOC) A-1+ 4,600,000
------------------------------------------------------- ------------
TENNESSEE--1.4%
-------------------------------------------------------
1,000,000 County of Cocke, TN, IDR Weekly VRDNs (GLI, Inc.)/
(Sanwa Bank Ltd. LOC)/(Subject to AMT) P-1 1,000,000
-------------------------------------------------------
900,000 Paris City, TN, IDB Weekly VRDNs (Plumley-Mareigo,
Ltd.)/(Citizens Fidelity Bank LOC)/(Subject to AMT) P-1 900,000
------------------------------------------------------- ------------
Total 1,900,000
------------------------------------------------------- ------------
TEXAS--2.6%
-------------------------------------------------------
1,500,000 Harris County, TX, IDA Daily VRDNs (Yokohama Tire
Corp.)/(Industrial Bank of Japan, Ltd., Tokyo LOC)/
(Subject to AMT) A-1+ 1,500,000
-------------------------------------------------------
1,900,000 Harris County, TX, IDA Weekly VRDNs
(Precision General, Inc.)/(Morgan Guaranty Trust Co.,
New York LOC)/(Subject to AMT) A-1+ 1,900,000
------------------------------------------------------- ------------
Total 3,400,000
------------------------------------------------------- ------------
VIRGINIA--7.9%
-------------------------------------------------------
500,000 Greensville County, VA, IDA Daily VRDNs
(Purdue Farms, Inc.)/(Morgan Guaranty Trust Co.,
New York LOC)/(Subject to AMT) A-1+ 500,000
-------------------------------------------------------
3,055,000 Richmond, VA, Redevelopment Housing Authority, Weekly
VRDNs (Series B-6)/(Tobacco Row)/(Bayerische
Landesbank, Munich LOC)/(Subject to AMT) A-1+ 3,055,000
-------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 6) VALUE
- ---------- ------------------------------------------------------- -------- ------------
<C> <S> <C> <C>
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
- ---------------------------------------------------------------------
VIRGINIA--CONTINUED
-------------------------------------------------------
$3,000,000 Richmond, VA, Redevelopment Housing Authority, Weekly
VRDNs (Series B)/(Tobacco Row)/(Bayerische Landesbank,
Munich LOC)/(Subject to AMT) A-1+ $ 3,000,000
-------------------------------------------------------
4,000,000 Virginia Housing Development Authority, 2.80%,
Annual TOBs (1993 Series I)/(Subject to AMT),
Mandatory Tender 11/4/94 A-1+ 4,000,000
------------------------------------------------------- ------------
Total 10,555,000
------------------------------------------------------- ------------
WISCONSIN--5.2%
-------------------------------------------------------
1,440,000 City of West Allis, Wisconsin IDA 3.12% Semi-Annual
TOBs (Renaissance Faire Limited Partnership Project)/
(American National Bank LOC)/(Subject to AMT),
Optional Tender 12/1/94 P-1 1,440,000
-------------------------------------------------------
3,450,000 Germantown, WI, IDA Weekly VRDNs (Zenith
Sintered Products, Inc.)/(Bank One, Milwaukee LOC)/
(Subject to AMT) P-1 3,450,000
-------------------------------------------------------
2,000,000 Plymouth, WI, IDA Weekly VRDNs (Great Lakes Cheese
of Wisconsin Project)/(Rabobank Nederland LOC)/
(Subject to AMT) P-1 2,000,000
------------------------------------------------------- ------------
Total 6,890,000
------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $131,533,417+
------------------------------------------------------- ------------
</TABLE>
* See Notes to Portfolio of Investments.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($133,170,272) at November 30, 1993.
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
The following abbreviations are used in this portfolio:
<TABLE>
<S> <C>
AMT -- Alternative Minimum Tax
BAN -- Bond Anticipation Notes
BPA -- Bond Purchase Agreement
CP -- Commercial Paper
EDA -- Economic Development Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Board
IDR -- Industrial Development Revenue
LOC -- Letter(s) of Credit
NR -- Not Rated
PCR -- Pollution Control Revenue
PLC -- Public Limited Company
RAN -- Revenue Anticipation Notes
TANs -- Tax Anticipation Notes
TOBs -- Tender Option Bonds
VRDNs -- Variable Rate Demand Notes
</TABLE>
MUNICIPAL CASH SERIES II
NOTES TO PORTFOLIO OF INVESTMENTS
- --------------------------------------------------------------------------------
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
STANDARD & POOR'S CORPORATION ("S&P")
S&P's note rating reflects the liquidity concerns and market access risks unique
to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a
plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. ("MOODY'S")
Moody's short-term ratings are designated Moody's Investment Grade (MIG or VMIG
(see below)). The purpose of the MIG or VMIG ratings is to provide investors
with a simple system by which the relative investment qualities of short-term
obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong protection
by establishing cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
FITCH INVESTORS SERVICE, INC. ("FITCH")
Fitch's short term ratings place greater emphasis on the existence of liquidity
necessary to meet the issuer's obligations in a timely manner.
F-1 Strongest degree of assurance for timely payment. Those issues determined to
provide exceptionally strong credit quality are given a plus (+)
designation.
F-2 Notes reflecting a degree of assurance for timely payment only slightly less
in degree than the highest category.
VARIABLE RATE DEMAND NOTES (VRDNS)
AND
TENDER OPTION BONDS (TOBS)
RATINGS
S&P
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest
when due, and the second rating (short-term rating) describes the demand
characteristics.
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)
MOODY'S
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1); the
first representing an evaluation of the degree of risk associated with scheduled
principal and interest payments, and the second representing an evaluation of
the degree of risk associated with the demand feature. The VMIG rating can be
assigned a 1 or 2 designation using the same definitions described above for the
MIG rating.
FITCH
Fitch usually assigns two ratings to long-term debt issues that include
provisions for a variable rate demand feature. The long-term rating addresses
the ability of the obligor to pay debt service and the short-term rating
addresses the timely payment of the demand feature. Examples of rating
designations are as follows: AAA/F-1+, AA/F-1+, A/F-1+. (The definitions for the
long-term and short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
S&P
S&P's commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined
to possess overwhelming safety characteristics are denoted with a plus (+)
sign designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-1."
MOODY'S
P-1 Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.
P-2 Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations.
The following is an explanation of the Fitch ratings. These ratings are not
referenced in the Portfolio of Investments.
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
FITCH
F-1Issues assigned this rating reflect a strong degree of assurance for timely
payment. Those issuers determined to possess the strongest degree of
assurance for timely payment are denoted with a plus (+) sign designation.
F-2Issuers carrying this rating have a satisfactory degree of assurance for
timely payment, but the margin of safety is not as great as the "F-1+" and
"F-1" categories.
LONG TERM DEBT RATINGS
(INVESTMENT GRADE)
S&P
AAA Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest that
debt rated in higher ratings categories.
MOODY'S
AAABonds that are rated AAA are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large margin and principal is
secure. While the various protective elements are likely to change, such
changes which can be foreseen are most unlikely to impair the fundamentally
strong position of such issues.
AA Bonds that are rated AA are judged to be of high quality by all standards.
Together with the AAA group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in AAA securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risks appear somewhat larger than
in AAA securities.
A Bonds that are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
adequate, but elements may be present that suggest a susceptibility to
impairment some time in the future.
BAA Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any
great length of time. Such bonds lack outstanding investment characteristics
and in fact have speculative characteristics as well.
FITCH
AAA Bonds that are rated AAA are of the highest credit quality. The obligor has
an exceptionally strong ability to pay debt service.
AA Bonds that are rated AA are of very high quality. The obligor has a very
strong ability to pay debt service. Debt rated in this category may also
have a (+) or (-) sign with a rating to indicate the relative position
within the rating category.
A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to
be adequate. Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and
therefore impair timely payment. The likelihood that the ratings of these
bonds will fall below investment grade is higher than for bonds with higher
ratings.
NR indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P, Moody's, or Fitch with respect to short-term
indebtedness. However, management considers them to be of comparable quality
to securities rated in one of the two highest short-term ratings categories
by a nationally recognized statistical ratings organization.
NR(1) The underlying issuer/obligor/guarantor has other outstanding long-term
debt rated "'AAA" by S&P, "Aaa" by Moody's or "AA" by Fitch.
NR(2) The underlying issuer/obligor/guarantor has other outstanding long-term
debt rated "AA" by S&P, "Aa" Moody's or "AA" by Fitch.
NR(3) The underlying issuer/obligor/guarantor has other outstanding long-term
debt rated "A" by S&P, Moody's, or Fitch.
NR(4) The underlying issuer/obligor/guarantor has other outstanding long-term
debt rated "BBB" by S&P, "Baa" by Moody's, or "BBB" by Fitch.
(The accompanying Notes are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A) $131,533,417
- --------------------------------------------------------------------------------
Cash 1,374,172
- --------------------------------------------------------------------------------
Interest receivable 845,169
- --------------------------------------------------------------------------------
Receivable for fund shares sold 505,000
- --------------------------------------------------------------------------------
Deferred expenses (Note 2E) 52,639
- -------------------------------------------------------------------------------- ------------
Total assets 134,310,397
- --------------------------------------------------------------------------------
LIABILITIES:
- -------------------------------------------------------------------
Payable for investments purchased $1,000,000
- -------------------------------------------------------------------
Dividends payable 81,169
- -------------------------------------------------------------------
Payable to distributor 35,854
- -------------------------------------------------------------------
Accrued expenses 23,102
- ------------------------------------------------------------------- ----------
Total liabilities 1,140,125
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 133,170,272 shares of beneficial interest outstanding $133,170,272
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($133,170,272 / 133,170,272 shares of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
STATEMENT OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest income (Note 2B) $1,711,524
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee (Note 5) $306,341
- ----------------------------------------------------------------------
Distribution fees (Note 5) 122,537
- ----------------------------------------------------------------------
Trustees' fees 2,874
- ----------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 141,563
- ----------------------------------------------------------------------
Custodian, transfer agent and dividend disbursing agent fees and
expenses 44,265
- ----------------------------------------------------------------------
Fund share registration costs 40,288
- ----------------------------------------------------------------------
Auditing fees 7,250
- ----------------------------------------------------------------------
Legal fees 6,050
- ----------------------------------------------------------------------
Printing and postage 4,750
- ----------------------------------------------------------------------
Insurance premiums 3,435
- ----------------------------------------------------------------------
Miscellaneous 4,656
- ---------------------------------------------------------------------- --------
Total expenses 684,009
- ----------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 5) 199,987
- ---------------------------------------------------------------------- --------
Net expenses 484,022
- --------------------------------------------------------------------------------- ----------
NET INVESTMENT INCOME $1,227,502
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------
1994* 1993
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 1,227,502 $ 2,674,468
- -------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------------------------------
Dividends to shareholders from net investment income (1,227,502) (2,674,468)
- -------------------------------------------------------------- ------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- --------------------------------------------------------------
Proceeds from sale of shares 612,792,509 787,537,022
- --------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 997,251 2,050,356
- --------------------------------------------------------------
Cost of shares redeemed (585,182,657) (750,651,239)
- -------------------------------------------------------------- ------------- -------------
Change in net assets from Fund share transactions 28,607,103 38,936,139
- -------------------------------------------------------------- ------------- -------------
Change in net assets 28,607,103 38,936,139
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 104,563,169 65,627,030
- -------------------------------------------------------------- ------------- -------------
End of period $ 133,170,272 $ 104,563,169
- -------------------------------------------------------------- ------------- -------------
</TABLE>
*Six months ended November 30, 1993 (unaudited).
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------
1994* 1993 1992 1991**
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------
Net investment income 0.01 0.02 0.04 0.01
- --------------------------------------------- ------ ------ ------ ------
LESS DISTRIBUTIONS
- ---------------------------------------------
Dividends to shareholders from net
investment income (0.01) (0.02) (0.04) (0.01)
- --------------------------------------------- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------- ------ ------ ------ ------
TOTAL RETURN*** 1.01 2.29 3.72 1.19
- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------
Expenses 0.79%(a) 0.77% 0.74% 0.47%(a)
- ---------------------------------------------
Net investment income 2.00%(a) 2.23% 3.56% 4.68%(a)
- ---------------------------------------------
Expense adjustment(b) 0.33%(a) 0.50% 0.50% 0.39%(a)
- ---------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------
Net assets, end of period (000 omitted) 133,170 104,563 65,628 34,048
- ---------------------------------------------
</TABLE>
* Six months ended November 30, 1993 (unaudited).
** Reflects operations for the period from February 13, 1991 (data of initial
public investment) to May 31, 1991.
*** Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) Increase/decrease in above expense ratios due to waiver or reimbursement.
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Municipal Cash Series II (the "Fund"), is one of the portfolios of Cash Trust
Series II (the "Trust"), an open-end, management investment company registered
under the Investment Company Act of 1940, as amended. 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.
(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. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Board of Trustees ("Trustees") has determined that
the best method currently available for valuing portfolio securities is
amortized cost. The Fund's use of the amortized cost method to value its
portfolio securities is conditioned on its compliance with Rule 2a-7 under
the Investment Company Act of 1940, as amended.
B. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest earned net of premium, and original issue discount as
required by the Internal Revenue Code.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to investment companies and to distribute to
shareholders each year all of its taxable income. Accordingly, no provision
for federal tax is necessary. Dividends paid by the Fund representing net
interest received on tax-exempt municipal securities are not includable by
shareholders as gross income for federal regular income tax purposes because
the Fund intends to meet certain requirements of the Internal Revenue Code
applicable to regulated investment companies which will enable the Fund to
pay exempt-interest dividends. The portion of such interest, if any, earned
on private activity bonds issued after August 7, 1986, may be considered a
tax preference item to certain shareholders.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. To the extent the Fund engages
in such transactions, it will do so for the purpose of acquiring portfolio
securities consistent with its investment objective and policies and not for
the purpose of investment leverage. The Fund will record a when-issued
security and the related liability on the trade date. Until the securities
are received and paid for, the Fund will maintain 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.
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to the
registration of its shares in its first fiscal year, excluding the initial
expenses of registering the shares, have been deferred and are being
amortized using the straight-line method through December, 1995.
F. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
The Fund computes its net income daily and, immediately prior to the calculation
of its net asset value at the close of business, declares and records dividends
to shareholders of record at the time of the previous computation of the Fund's
net asset value. Payment of dividends is made monthly in cash, or in additional
shares at the net asset value on the payable date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
November 30, 1993, capital paid in aggregated $133,170,272. Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
----------------------------
1994* 1993
- ---------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares outstanding, beginning of period 104,563,169 65,627,030
- ----------------------------------------------------------------
Shares sold 612,792,509 787,537,022
- ----------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 997,251 2,050,356
- ----------------------------------------------------------------
Shares redeemed (585,182,657) (750,651,239)
- ---------------------------------------------------------------- ------------ ------------
Shares outstanding, end period 133,170,272 104,563,169
- ---------------------------------------------------------------- ------------ ------------
</TABLE>
* Six months ended November 30, 1993 (unaudited).
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Advisers, the Fund's investment adviser ("the Adviser"), receives for
its services an annual investment advisory fee equal to .50 of 1% of the Fund's
average daily net assets. The Adviser has voluntarily agreed to waive a portion
of its fee. The Adviser can modify or terminate this voluntary waiver of
expenses at any time at its sole discretion. For the six months ended November
30, 1993, the Adviser earned an investment advisory fee of $306,341, of which
$199,987 was voluntarily waived in accordance with such undertaking.
The Trust will reimburse Federated Securities Corp., the principal distributor,
from the assets of the Fund, for fees it paid which relate to the distribution
and administration of the Fund's shares, an amount up to .20 of 1% of the
average net asset value of shares of the Fund held during the year by
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
clients or customers of financial institutions. For the six months ended
November 30, 1993, the Fund incurred expenses of $122,537 related to this
agreement.
Organization expenses ($18,628) and start-up administrative service expenses
($82,502) were borne initially by Federated Administrative Services, Inc.
("FAS"). The Fund has agreed to pay FAS, at an annual rate of .005 of 1% and .01
of 1% of average daily net assets for organization and start-up administrative
expenses, respectively, until expenses borne by FAS are reimbursed or five years
from January 25, 1991 (the date the Trust's portfolio became effective),
whichever occurs earlier. For the six months ended November 30, 1993, the Fund
paid FAS $3,040 and $6,076 for organization expenses and start-up administrative
services expenses, respectively, pursuant to this agreement.
Administrative personnel and services were provided at approximate cost by FAS.
For the six months ended November 30, 1993, the Fund paid $141,563 to FAS for
administrative personnel and services. Certain of the Officers and Trustees of
the Fund are Officers and Directors of the above corporations.
(6) CURRENT CREDIT RATINGS
Current credit ratings and related notes are unaudited.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Richard B. Fisher
J. Christopher Donahue President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Vice President and Treasurer
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts John A. Staley, IV
Vice President
David M. Taylor
Assistant Treasurer
Charles H. Field
Assistant Secretary
</TABLE>
Mutual funds are not obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies. Investment in these
shares involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
TREASURY
CASH
SERIES
II
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1993
ESTABLISHED 1990
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
1121606 (1/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Treasury Cash
Series II (the "Fund"), which covers the six-month period ended November 30,
1993. This report includes the Investment Review and Financial Statements, which
contain the Portfolio of Investments.
Treasury Cash Series II keeps your cash working for you by pursuing current
income--with the advantages of daily liquidity and stability of principal*--
through a diversified portfolio of short-term U.S. Treasury obligations or
repurchase agreements backed by these obligations. At the end of the report
period, U.S. Treasury bills and notes made up 33.2% of the Fund's holdings.
Repurchase agreements accounted for 66.5% of the portfolio, reflecting their
yield advantage over many direct government obligations.
At the end of the period, the Fund's net assets stood at $260.1 million.
Dividends paid to shareholders during the period totaled $3.1 million, or $0.01
per share.
Thank you for your choosing Treasury Cash Series II as a short-term investment.
We will continue to keep you up to date on the Fund's activity. In the meantime,
please contact your investment representative if you have any questions about
the Fund.
Sincerely,
Richard B. Fisher
President
January 14, 1994
* While no money market mutual fund can guarantee that a stable net asset value
will be maintained, the Fund has done so since its inception. Investments in
mutual funds are neither insured nor guaranteed by the U.S. government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Treasury Cash Series II, which is rated AAAm by Standard & Poor's Corporation
and Aaa by Moody's Investors Service, Inc.,* is invested in direct obligations
of the U.S. Treasury, either in the form of notes and bills or as collateral for
repurchase agreements. Recently, the Fund has been managed with an average
maturity of 45-55 days, which is toward the higher end of its range.
During the semi-annual reporting period, the Federal Reserve Board (the "Fed")
continued to target a federal funds rate of 3.00%. The Fed's monetary policy has
remained on hold for well over a year now, since early September 1992. A
comparison of three-month Treasury bill rates, during the same time period,
showed a rise from 3.11% at the beginning of the period to 3.20% early in June
followed by a decline in rates to 2.97% late in September, and then a rise to
3.21% by the end of November. A yield advantage continued to exist for
investments in repurchase agreements versus direct investments in short-term
Treasury securities. The barbell structure of the Fund was maintained over the
period, combining a significant position in overnight repurchase agreements with
Treasury securities with longer maturities of six to twelve months.
With the Fed on hold, movements in short rates over the period were driven by
market sentiment, and more recently, stronger economic statistics. Short rates
reached a peak in early June 1993, fueled by fears that data showing higher
inflation would force the Fed to raise interest rates. Rates then declined until
the near end of September, as inflationary worries subsided in the face of
weaker economic growth and more favorable reports on consumer and producer
prices. Strong fourth quarter economic growth has forced short rates upward
again, on speculation that if the growth is sustainable, unlike the strong
fourth quarter growth experienced in 1992, the Fed might be moved to tighten
monetary policy sometime in the first half of 1994, in order to keep a strict
rein on inflation. The current slack in the economy and recent inflation
reports, however, argue against the need for the Fed to move aggressively in the
very near future. Over the reporting period, the Fund has been managed with a
somewhat longer average maturity, based on relative market opportunities.
However, changing economic and market developments are continuously monitored to
best serve our clients attracted to the short-term U.S. government market.
*Ratings are subject to change.
TREASURY CASH SERIES II
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--33.2%
- -----------------------------------------------------------------------------------
** U.S. TREASURY BILLS--18.2%
----------------------------------------------------------------
$48,000,000 3.03%-3.40%, 1/13/94-5/26/94 $ 47,443,610
----------------------------------------------------------------
U.S. TREASURY NOTES--15.0%
----------------------------------------------------------------
38,300,000 4.25%-13.125%, 2/15/94-7/31/94 38,881,687
---------------------------------------------------------------- ------------
TOTAL SHORT-TERM U.S. GOVERNMENT OBLIGATIONS 86,325,297
---------------------------------------------------------------- ------------
REPURCHASE AGREEMENTS(A)--66.5%
- -----------------------------------------------------------------------------------
10,000,000 BOT Securities, Inc., 3.20%, dated 11/30/93, due 12/1/93 10,000,000
----------------------------------------------------------------
20,000,000 BT Securities, Inc., 3.20%-3.25%, dated 11/30/93, due 12/1/93 20,000,000
----------------------------------------------------------------
20,000,000 BZW Securities, 3.20%-3.23%, dated 11/30/93, due 12/1/93 20,000,000
----------------------------------------------------------------
10,000,000 Bear, Stearns & Co., Inc., 3.20%, dated 11/30/93, due 12/1/93 10,000,000
----------------------------------------------------------------
10,000,000 Sanwa--BGK Securities, Co., 3.20%, dated 11/30/93, due 12/1/93 10,000,000
----------------------------------------------------------------
10,000,000 Daiwa Securities America, Inc., 3.20%, dated 11/30/93,
due 12/1/93 10,000,000
----------------------------------------------------------------
10,000,000 Donaldson, Lufkin & Jenrette Securities, 3.20%,
dated 11/30/93, due 12/1/93 10,000,000
----------------------------------------------------------------
10,000,000 Fuji Government Securities, Inc., 3.20%, dated 11/30/93, due
12/1/93 10,000,000
----------------------------------------------------------------
20,000,000 Goldman, Sachs & Co., 3.23%, dated 11/30/93, due 12/1/93 20,000,000
----------------------------------------------------------------
10,000,000 Greenwich Capital Markets, Inc., 3.25%, dated 11/30/93,
due 12/1/93 10,000,000
----------------------------------------------------------------
10,000,000 J. P. Morgan Securities, Inc., 3.24%, dated 11/30/93, due
12/1/93 10,000,000
----------------------------------------------------------------
10,000,000 Kidder Peabody & Co., Inc., 3.20%, dated 11/30/93, due 12/1/93 10,000,000
----------------------------------------------------------------
10,000,000 Nikko Securities Co. International, Inc., 3.20%, dated 11/30/93,
due 12/1/93 10,000,000
----------------------------------------------------------------
4,000,000 * Goldman, Sachs & Co., 3.10%, dated 11/30/93, due 12/20/93 4,000,000
----------------------------------------------------------------
6,000,000 * Morgan Stanley & Co., Inc., 3.25%, dated 10/5/93,
due 1/4/94 6,000,000
----------------------------------------------------------------
</TABLE>
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
REPURCHASE AGREEMENTS(A)--CONTINUED
- -----------------------------------------------------------------------------------
$ 3,000,000 * Kidder Peabody & Co., Inc., 3.20%, dated 10/25/93, due 1/24/94 $ 3,000,000
---------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) $173,000,000
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $259,325,297+
---------------------------------------------------------------- ------------
</TABLE>
+ Also represents cost for federal tax purposes.
(a) Repurchase agreements are fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio. The investments in
repurchase agreements are through participation in joint accounts with other
Federated funds.
* Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement.
** Each issue shows rate of discount at time of purchase.
Forward Trade Commitments--At November 30, 1993, the Fund was under contract to
enter into the following repurchase agreements:
$3,000,000 Nikko Securities Co. International, Inc., 5.40%, dated 12/31/93, due
1/3/94
$4,000,000 First Boston Corp., 3.20%, dated 1/3/94, due 1/31/94
These repurchase agreements were made under the normal course of business. If
Nikko Securities Co. International, Inc., or First Boston Corp. will not be able
to meet the required collateralization, the amount of these repurchase
agreements will be reduced to an amount that would have been sufficiently
collateralized; in this event, the Fund will receive interest income on the
amount of the original repurchase agreements.
Note: The categories of investments are shown as a percentage of net assets
($260,071,024) at November 30, 1993.
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -----------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $173,000,000
- -----------------------------------------------------------------
Investments in other securities 86,325,297
- ----------------------------------------------------------------- ------------
Total investments, at amortized cost and value (Notes 2A and 2B) $259,325,297
- --------------------------------------------------------------------------------
Cash 281,520
- --------------------------------------------------------------------------------
Interest receivable 548,196
- --------------------------------------------------------------------------------
Receivable for Fund shares sold 60,230
- --------------------------------------------------------------------------------
Deferred expenses (Note 2F) 66,359
- -------------------------------------------------------------------------------- ------------
Total assets 260,281,602
- --------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------
Dividends payable $ 99,393
- -----------------------------------------------------------------
Payable to distributor 43,834
- -----------------------------------------------------------------
Payable for Fund shares redeemed 2,582
- -----------------------------------------------------------------
Accrued expenses 64,769
- ----------------------------------------------------------------- ------------
Total liabilities 210,578
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 260,071,024 shares of beneficial interest outstanding $260,071,024
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($260,071,024 / 260,071,024 shares of beneficial interest outstanding) $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
STATEMENT OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest income (Note 2C) $4,342,009
- ----------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------
Investment advisory fee (Note 5) $ 678,269
- ---------------------------------------------------------------------
Distribution fees (Note 5) 271,307
- ---------------------------------------------------------------------
Trustees' fees 3,885
- ---------------------------------------------------------------------
Administrative personnel and services fees (Note 5) 181,539
- ---------------------------------------------------------------------
Custodian, transfer and dividend disbursing agent fees and expenses 61,073
- ---------------------------------------------------------------------
Fund share registration costs 33,916
- ---------------------------------------------------------------------
Auditing fees 14,500
- ---------------------------------------------------------------------
Legal fees 8,010
- ---------------------------------------------------------------------
Printing and postage 3,775
- ---------------------------------------------------------------------
Insurance premiums 4,795
- ---------------------------------------------------------------------
Miscellaneous 2,689
- --------------------------------------------------------------------- ----------
Total expenses 1,263,758
- ---------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 5) 59,535
- --------------------------------------------------------------------- ----------
Net expenses 1,204,223
- ---------------------------------------------------------------------------------- ----------
Net investment income $3,137,786
- ---------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
11/30/93 ENDED
(UNAUDITED) 5/31/93
------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 3,137,786 $ 6,509,114
- -------------------------------------------------------------- ------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------------------------------
Dividends to shareholders from net investment income (3,137,786) (6,509,114)
- -------------------------------------------------------------- ------------- --------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- --------------------------------------------------------------
Proceeds from sale of shares 370,849,445 1,179,058,540
- --------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 2,679,957 5,132,853
- --------------------------------------------------------------
Cost of shares redeemed (424,106,688) (977,913,742)
- -------------------------------------------------------------- ------------- --------------
Change in net assets from Fund share transactions (50,577,286) 206,277,651
- -------------------------------------------------------------- ------------- --------------
Change in net assets (50,577,286) 206,277,651
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 310,648,310 104,370,659
- -------------------------------------------------------------- ------------- --------------
End of period $ 260,071,024 $ 310,648,310
- -------------------------------------------------------------- ------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------------
1994** 1993 1992 1991***
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $1.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.01 0.03 0.04 0.02
- -------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------
Dividends to shareholders from net
investment income (0.01) (0.03) (0.04) (0.02 )
- ------------------------------------------- ------ ------ ------ -----
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $1.00
- ------------------------------------------- ------ ------ ------ -----
TOTAL RETURN* 1.17% 2.64% 4.41% 2.06 %
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.89%(a) 0.78% 0.73% 0.47 %(a)
- -------------------------------------------
Net investment income 2.31%(a) 2.55% 4.34% 5.71 %(a)
- -------------------------------------------
Expense waiver/reimbursement (b) 0.04%(a) 0.19% 0.57% 0.37 %(a)
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) 260,0 310,6 104,3 70,798
- -------------------------------------------
</TABLE>
* Based on net asset value which does not reflect the sales load or redemption
fee, if applicable.
** Six months ended November 30, 1993 (unaudited).
*** Reflects operations for the period from February 9, 1991 (date of initial
public investment) to May 31, 1991.
(a) Computed on an annualized basis.
(b) Increase/decrease in above expense/income ratios due to waivers or
reimbursements of expenses (Note 5).
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Treasury Cash Series II (the "Fund") is one of the portfolios of Cash Trust
Series II (the "Trust"), an open-end management investment company registered
under the Investment Company Act of 1940, as amended. The financial statements
of the other portfolios are presently separately. The assets of each portfolio
are segregated and an investor's interest is limited to the portfolio in which
shares are held.
(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 generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Fund uses the amortized cost method to value its
portfolio securities in accordance with Rule 2a-7 under the Investment
Company Act of 1940.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral in support of repurchase agreement
investments. Additionally, procedures have been established by the Fund to
monitor on a daily basis, the market value of each repurchase agreement's
underlying securities to ensure the value at least equals the principal
amount of the repurchase transaction, including accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by
the Fund's adviser to be creditworthy pursuant to guidelines established by
the Board of Trustees (the "Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
C. INCOME--Interest income is recorded on the accrual basis and includes
discount earned.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year substantially all of its taxable income.
Accordingly, no provision for federal tax is necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities 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.
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the date of the
transaction.
(3) DIVIDENDS
Dividends from net investment income are declared daily and paid monthly.
Distributions of any net realized capital gains are made at least once every
twelve months. Dividends and capital gain distributions, if any, are recorded on
the ex-dividend date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
November 30, 1993, capital paid-in aggregated $260,071,024. Transactions in Fund
shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
11/30/93 ENDED
(UNAUDITED) 5/31/93
- --------------------------------------------------------------- ------------ -------------
<S> <C> <C>
Shares outstanding, beginning of period 310,648,310 104,370,659
- ---------------------------------------------------------------
Shares sold 370,849,445 1,179,058,540
- ---------------------------------------------------------------
Shares issued to shareholders electing to receive payment of
distributions in Fund shares 2,679,957 5,132,853
- ---------------------------------------------------------------
Shares redeemed (424,106,688) (977,913,742)
- --------------------------------------------------------------- ------------ -------------
Shares outstanding, end of period 260,071,024 310,648,310
- --------------------------------------------------------------- ------------ -------------
</TABLE>
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to .50 of 1% of the Fund's
average daily net assets. The Adviser has voluntarily agreed to waive a portion
of its fee. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion. For six months ended November 30, 1993, the Adviser
earned a fee of $678,269, of which $59,535 was voluntarily waived.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Trust will reimburse Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund, for fees the Fund paid which relate to the distribution and administration
of the Fund's shares. The Plan provides that the Fund may incur distribution
expenses
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
up to .20 of 1% of the average daily net assets of the Fund annually, to pay
commissions, maintenance fees and to reimburse the distributor. For the six
months ended November 30, 1993, FSC earned $271,307.
Organizational expenses ($20,484) and start-up administrative service expenses
($53,519) were borne initially by Federated Administrative Services, Inc.
("FAS"). The Fund has agreed to pay FAS, at an annual rate of .005 of 1% and .01
of 1% of the average daily net assets for organizational and start-up
administrative expenses, respectively, until expenses initially borne by FAS are
fully reimbursed or the expiration of five years after January 25, 1991 (date
the Fund's portfolio first became effective) whichever occurs earlier. For the
six months ended November 30, 1993, the Fund paid $4,228 and $14,054,
respectively pursuant to this agreement. The commitment, with regards to
organizational expenses, expired in August 1993. Administrative personnel and
services were provided at approximate cost by FAS. Certain of the Officers and
Trustees of the Fund are Officers and Directors of the above corporations.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Richard B. Fisher
J. Christopher Donahue President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Vice President and Treasurer
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts John A. Staley, IV
Vice President
David M. Taylor
Assistant Treasurer
Charles H. Field
Assistant Secretary
</TABLE>
Mutual funds are not obligations of or insured by any bank nor are they insured
by the
federal government or any of its agencies. Investment in these shares involves
risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
