PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present the Semi-Annual Report to Shareholders for Municipal Cash
Series II, a portfolio of Cash Trust Series II, which covers the six-month
period ended November 30, 1996. The Report begins with an investment review by
the fund's portfolio manager, which is followed by a complete listing of the
fund's tax-free securities issued by municipalities nationwide, and its
financial statements.
During the reporting period, the fund helped its shareholders earn a total of
$0.01 in tax-free dividends per share on their ready cash. In addition to
tax-free income*, the fund also offers the important advantages of daily
liquidity and stability of principal.** At the end of the reporting period, fund
net assets totaled $256.4 million, a tremendous increase over the $59.8 million
in total net assets on the first day of the period.
Thank you for choosing Municipal Cash Series II as a convenient way to put your
cash to work pursuing daily tax-free income. Please contact your investment
representative if you have any questions about the fund.
Sincerely,
LOGO
Richard B. Fisher
President
January 15, 1997
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** Although money market mutual 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. An
investment in the fund is neither insured nor guaranteed by the U.S.
government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Municipal Cash Series II invests in high quality, short-term tax-exempt debt
securities and seeks to maintain a stable net asset value of $1.00 per share.
For the six months ended November 30, 1996, the fund paid shareholders a total
return of 1.46%, which is a taxable equivalent return of 2.41% for an investor
in the highest federal tax bracket of 39.6%*. The seven-day net yield of the
fund as of November 30, 1996 was 3.01%.*
Although the Federal Reserve Board (the "Fed") maintained a constant monetary
policy over the reporting period in focus, the interest rate environment was
clouded by uncertainty. The reason for the concern was shifting sentiment
regarding the strength of the U.S. economy. The overriding concern beginning the
third quarter of 1996 was the undue strength of the economy. The Fed was worried
about rising consumer spending, gains in employment, and higher consumer prices.
Economic strength that initially appeared during the latter part of the second
quarter of 1996 influenced the interest rate environment through mid-July. From
June to mid-July, believing that inflation was an immediate concern, market
expectations were biased toward a Fed tightening. The market later retreated
from the view that the Fed would intervene as signs of a more benign economy
emerged in early August. In their August meeting, the Fed cited an economic
expansion that had "moderated somewhat" from the growth levels that were earlier
influencing the economy. However, once more during the period, market
expectations became inflationary as signs of a tight labor market appeared. The
inflationary concerns in the labor markets subsided in mid-September, and the
markets retreated to earlier levels. The market relaxed through the end of the
reporting period as signs of moderating growth became more concrete.
Yields on short-term government securities reflected the volatile mood in the
markets. Rates rose steadily through mid-July as the market expected the Fed to
tighten. The yield on the Treasury Note Constant Maturity One-Year Index began
June 1996 at 5.78% and rose to 5.90% by mid-July 1996. By mid-August the index
had fallen to the 5.60% level and again rose to the 5.90% level by September.
The index ended November 1996 at 5.41%, which is approximately where it ended
the first quarter of 1996. The Bond Buyer One-Year Note Index, a proxy for the
yields of one-year municipal notes, exhibited roughly the same behavior as the
treasury index.** The Bond Buyer's Index began June 1996 at 3.88%, rose to 3.95%
by mid-July, retreated in August, climbed again in September, and ended November
1996 at 3.56%.
As long as inflation remains benign, the Fed should be content to sit on the
sidelines until confronted with signs of overriding strength or considerable
weakness in economic growth. The average maturity of the fund will continue to
be managed in accordance with our expectation for a stable monetary policy in
the near term. The average maturity target of 50 to 55 days reflects our neutral
stance. Nevertheless, we are vigilant in our watch of market developments to
best serve our municipal money market clients.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary.
** The Bond Buyer's Index is composed of 40 actively traded general obligation
and municipal revenue issues rated A or higher. Municipal bond yields are
measured against this unmanaged index.
MUNICIPAL CASH SERIES II
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A)SHORT-TERM MUNICIPALS--103.1%
- ----------------------------------------------------------------------------------
ALABAMA--3.1%
--------------------------------------------------------------
$ 815,000 Abbeville, AL, IDB Monthly VRDNs (Great Southern Wood
Preserving Co.)/(SouthTrust Bank of Alabama, Birmingham LOC) $ 815,000
--------------------------------------------------------------
4,745,000 Birmingham, AL IDA, Revenue Bonds (Series 1989) Weekly
VRDNs (O'Neal Steel, Inc.)/(SouthTrust Bank of Alabama,
Birmingham LOC) 4,745,000
--------------------------------------------------------------
2,500,000 Phoenix City, AL IDB, (Series 1988), 3.65% CP (Mead Coated
Board)/(ABN AMRO Bank N.V., Amsterdam LOC),
Mandatory Tender 1/13/1997 2,500,000
-------------------------------------------------------------- ------------
Total 8,060,000
-------------------------------------------------------------- ------------
ARKANSAS--6.3%
--------------------------------------------------------------
5,000,000 Arkansas Development Finance Authority, Single Family
Mortgage Revenue Bonds (1996 Series I), 3.80% TOBs,
Mandatory Tender 11/5/1997 5,000,000
--------------------------------------------------------------
2,500,000 Hope, AR, Solid Waste Disposal Revenue Bonds (Series 1994),
3.85% CP (Temple-Inland Forest Products Corporation Project)/
(Temple-Inland, Inc. GTD), Mandatory Tender 1/24/1997 2,500,000
--------------------------------------------------------------
8,750,000 Miller County, AR, Solid Waste Disposal Revenue Bonds
(Series 1996) Weekly VRDNs (Tyson Foods, Inc.)/
(Commerzbank AG, Frankfurt LOC) 8,750,000
-------------------------------------------------------------- ------------
Total 16,250,000
-------------------------------------------------------------- ------------
CALIFORNIA--2.7%
--------------------------------------------------------------
5,000,000 California Health Facilities Financing Authority, Solid Waste
Disposal Revenue Bonds (Series 1994A) Daily VRDNs
(Shell Oil Co.)/(Shell Oil Co. GTD) 5,000,000
--------------------------------------------------------------
2,000,000 California Statewide Communities Development Authority,
Certificates of Participation, 4.00% Bonds (Queen of Angels-
Hollywood Presbyterian Medical Center), 1/1/1997 2,000,000
-------------------------------------------------------------- ------------
Total 7,000,000
-------------------------------------------------------------- ------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
COLORADO--1.6%
--------------------------------------------------------------
$ 4,100,000 Lakewood, CO, (Series 1996) Weekly VRDNs (Marston Pointe
Apartments)/(PNC Bank, Kentucky LOC) $ 4,100,000
-------------------------------------------------------------- ------------
DISTRICT OF COLUMBIA--3.7%
--------------------------------------------------------------
1,600,000 District of Columbia Housing Finance Agency, (Series 1995B),
4.00% TOBs (United States Treasury COL), Mandatory Tender
12/19/1996 1,600,000
--------------------------------------------------------------
8,000,000 District of Columbia Housing Finance Agency, (Series 1996B),
3.75% TOBs (Trinity Funding Company INV), Mandatory Tender
12/1/1997 8,000,000
-------------------------------------------------------------- ------------
Total 9,600,000
-------------------------------------------------------------- ------------
GEORGIA--7.0%
--------------------------------------------------------------
2,000,000 Clayton County, GA Development Authority, (Series 1994)
Weekly VRDNs (Lear Seating Corp.)/(Chase Manhattan Bank N.A.,
New York LOC) 2,000,000
--------------------------------------------------------------
2,750,000 Crisp County, GA Development Authority, (Series B), 4.10% TOBs
(Masonite Corporation)/(International Paper Co. GTD), Optional
Tender 9/1/1997 2,750,000
--------------------------------------------------------------
1,800,000 Franklin County, GA Industrial Building Authority, (Series
1995) Weekly VRDNs (Bosal Industries, Inc.)/(ABN AMRO Bank
N.V., Amsterdam LOC) 1,800,000
--------------------------------------------------------------
8,000,000 Richmond County, GA Development Authority, Solid Waste
Disposal Revenue Bonds, (Series 1995) Weekly VRDNs
(Federal Paper Board Co., Inc.)/(Wachovia Bank of Georgia NA,
Atlanta LOC) 8,000,000
--------------------------------------------------------------
3,500,000 Savannah, GA EDA, (Series 1995A) Weekly VRDNs
(Home Depot, Inc.) 3,500,000
-------------------------------------------------------------- ------------
Total 18,050,000
-------------------------------------------------------------- ------------
ILLINOIS--1.5%
--------------------------------------------------------------
2,000,000 Chicago, IL, Gas Supply Revenue Bonds (1993 Series B),
3.85% TOBs (Peoples Gas Light & Coke Company),
Optional Tender 12/1/1996 2,000,000
--------------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
ILLINOIS--CONTINUED
--------------------------------------------------------------
$ 1,820,000 Illinois Development Finance Authority Weekly VRDNs
(Olympic Steel, Inc.)/(National City Bank, Cleveland, OH LOC) $ 1,820,000
-------------------------------------------------------------- ------------
Total 3,820,000
-------------------------------------------------------------- ------------
INDIANA--1.3%
--------------------------------------------------------------
1,020,000 Avilla, IN, IDRB, Weekly VRDNs (Group Dekko International)/
(Bank One, Indianapolis, IN LOC) 1,020,000
--------------------------------------------------------------
1,415,000 Indiana Development Finance Authority, Economic Development
Revenue Refunding Bonds Weekly VRDNs (T. M. Morris
Manufacturing Co., Inc. Project)/(Bank One, Indianapolis, IN
LOC) 1,415,000
--------------------------------------------------------------
1,000,000 Indiana Economic Development Commission, Revenue Bonds (Series
1989) Weekly VRDNs (O'Neal Steel, Inc.)/(SouthTrust Bank of
Alabama, Birmingham LOC) 1,000,000
-------------------------------------------------------------- ------------
Total 3,435,000
-------------------------------------------------------------- ------------
KANSAS--1.0%
--------------------------------------------------------------
2,460,000 Kansas City, KS, (Series YY), 3.80% BANs, 10/31/1997 2,460,000
-------------------------------------------------------------- ------------
KENTUCKY--5.3%
--------------------------------------------------------------
11,700,000 Kentucky Pollution Abatement & Water Resource Finance
Authority Daily VRDNs (Toyota Motor Credit Corp.) 11,700,000
--------------------------------------------------------------
2,000,000 Scottsville, KY, 4.00% TOBs (Sumitomo Electric Wiring
Systems)/
(Sumitomo Bank Ltd., Osaka LOC), Optional Tender 5/1/1997 2,000,000
-------------------------------------------------------------- ------------
Total 13,700,000
-------------------------------------------------------------- ------------
LOUISIANA--2.6%
--------------------------------------------------------------
6,700,000 Lincoln Parish, LA, Exempt Facility Revenue Bonds
(Series 1996) Weekly VRDNs (Willamette Industries, Inc.)/
(Deutsche Bank, AG LOC) 6,700,000
-------------------------------------------------------------- ------------
MARYLAND--3.5%
--------------------------------------------------------------
2,500,000 Harford County, MD, EDRB (Series 1996) Weekly VRDNs (Citrus
and Allied Essences Ltd.)/(First National Bank of Maryland,
Baltimore LOC) 2,500,000
--------------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
MARYLAND--CONTINUED
--------------------------------------------------------------
$ 1,500,000 Maryland State IDFA, (Series 1996) Weekly VRDNs
(Chesapeake Biological Labs, Inc.)/(First Union National Bank,
Charlotte, N.C. LOC) $ 1,500,000
--------------------------------------------------------------
5,000,000 Montgomery County, MD Housing Opportunities Commission,
(1996 Series A), 3.70% TOBs, Mandatory Tender 11/13/1997 5,000,000
-------------------------------------------------------------- ------------
Total 9,000,000
-------------------------------------------------------------- ------------
MASSACHUSETTS--0.6%
--------------------------------------------------------------
1,483,000 Gloucester, MA, 4.50% RANs, 7/18/1997 1,486,575
-------------------------------------------------------------- ------------
MICHIGAN--4.3%
--------------------------------------------------------------
5,000,000 Michigan Strategic Fund, Limited Obligation PCRs (Series 1993)
Weekly VRDNs (Allied-Signal, Inc.) 5,000,000
--------------------------------------------------------------
6,000,000 Michigan Strategic Fund, Limited Obligation Revenue Bonds
(Series 1995) Weekly VRDNs (United Waste Systems, Inc.)/
(Bank of America Illinois LOC) 6,000,000
-------------------------------------------------------------- ------------
Total 11,000,000
-------------------------------------------------------------- ------------
MINNESOTA--4.1%
--------------------------------------------------------------
1,000,000 Byron, MN IDB Weekly VRDNs (Schmidt Printing)/
(Norwest Bank Minnesota, Minneapolis LOC) 1,000,000
--------------------------------------------------------------
5,000,000 Faribault, MN IDA, (Series 1988) Weekly VRDNs (Jerome Foods)/
(Norwest Bank Minnesota, Minneapolis LOC) 5,000,000
--------------------------------------------------------------
4,500,000 Rochester, MN Health Care Facility Authority Weekly VRDNs
(Mayo Foundation) 4,500,000
-------------------------------------------------------------- ------------
Total 10,500,000
-------------------------------------------------------------- ------------
MISSISSIPPI--0.6%
--------------------------------------------------------------
1,500,000 Senatobia, MS Weekly VRDNs (Deltona Lighting Products, Inc.)/
(Southtrust Bank of West Florida, St. Petersburg LOC) 1,500,000
-------------------------------------------------------------- ------------
NEVADA--3.8%
--------------------------------------------------------------
2,500,000 Director of the State of Nevada Weekly VRDNs
(Smithey-Oasis Co.)/(Mellon Bank NA, Pittsburgh LOC) 2,500,000
--------------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
NEVADA--CONTINUED
--------------------------------------------------------------
$ 3,500,000 Nevada Housing Division, Multi-Unit Housing Revenue Bonds
(Series 1996A) Weekly VRDNs (Oakmont at Flamingo Road)/ (ABN
AMRO Bank N.V., Amsterdam LOC) $ 3,500,000
--------------------------------------------------------------
3,800,000 Nevada Housing Division, Multi-Unit Housing Revenue Bonds
(Series 1996A) Weekly VRDNs (Oakmont at Fort Apache Road)/
(ABN AMRO Bank N.V., Amsterdam LOC) 3,800,000
-------------------------------------------------------------- ------------
Total 9,800,000
-------------------------------------------------------------- ------------
NEW HAMPSHIRE--1.8%
--------------------------------------------------------------
2,500,000 New Hampshire Business Finance Authority, PCR Bonds
(Series A), 3.80% CP (New England Power Co.), Mandatory
Tender 1/6/1997 2,500,000
--------------------------------------------------------------
2,000,000 New Hampshire State IDA, (Series 1991), 4.05% TOBs
(International Paper Co.), Mandatory Tender 10/15/1997 2,000,000
-------------------------------------------------------------- ------------
Total 4,500,000
-------------------------------------------------------------- ------------
NEW MEXICO--1.8%
--------------------------------------------------------------
3,800,000 Farmington, NM, PCR Bonds (1994 Series C) Daily VRDNs (Arizona
Public Service Corp.)/(Union Bank of Switzerland,
Zurich LOC) 3,800,000
--------------------------------------------------------------
705,000 New Mexico Mortgage Finance Authority, (1996 Series F-2),
4.05% TOBs (Trinity Funding Company INV), Mandatory Tender
8/28/1997 705,000
-------------------------------------------------------------- ------------
Total 4,505,000
-------------------------------------------------------------- ------------
NORTH CAROLINA--3.9%
--------------------------------------------------------------
1,200,000 Bladen County, NC Industrial Facilities & Pollution Control
Financing Authority, (Series 1993) Weekly VRDNs (BCH Energy,
Limited Partnership)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 1,200,000
--------------------------------------------------------------
1,390,000 New Hanover County, NC PCFA Weekly VRDNs (Efson, Inc.)/
(Branch Banking & Trust Co, Wilson LOC) 1,390,000
--------------------------------------------------------------
6,800,000 Person County, NC Industrial Facilities & Pollution Control
Financing Authority Daily VRDNs (Carolina Power & Light Co.)/
(Fuji Bank, Ltd., Tokyo LOC) 6,800,000
--------------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
NORTH CAROLINA--CONTINUED
--------------------------------------------------------------
$ 500,000 Wilson County, NC PCA, (Series 1994) Weekly VRDNs
(Granutec, Inc.)/(Branch Banking & Trust Co, Wilson LOC) $ 500,000
-------------------------------------------------------------- ------------
Total 9,890,000
-------------------------------------------------------------- ------------
NORTH DAKOTA--0.8%
--------------------------------------------------------------
1,925,000 Fargo, ND, IDRB (Series 1994) Weekly VRDNs (Pan-O-Gold Baking
Co. Project)/(Norwest Bank Minnesota, Minneapolis LOC) 1,925,000
-------------------------------------------------------------- ------------
OHIO--4.5%
--------------------------------------------------------------
11,500,000 Ohio HFA, Trust Receipts, (Series 1996 FR/RI-5) Weekly VRDNs
(Bank of New York, New York LIQ)/(GNMA LOC) 11,500,000
-------------------------------------------------------------- ------------
OKLAHOMA--7.7%
--------------------------------------------------------------
12,000,000 Oklahoma State Industrial Authority, Health System Revenue
Bonds (Series 1995A) Weekly VRDNs (Baptist Medical Center,
OK)/(Credit Suisse, Zurich and Morgan Guaranty Trust Co.,
New York LIQs) 12,000,000
--------------------------------------------------------------
7,720,000 Tulsa County, OK HFA, CDC Municipal Products, Inc. Class A
Certificates (Series 1996E) Weekly VRDNs (CDC Municipal
Products, Inc. LIQ) 7,720,000
-------------------------------------------------------------- ------------
Total 19,720,000
-------------------------------------------------------------- ------------
PENNSYLVANIA--5.3%
--------------------------------------------------------------
1,200,000 Berks County, PA IDA Weekly VRDNs (Lutheran Home at Topton
Project)/(Corestates Bank N.A., Philadelphia, PA LOC) 1,200,000
--------------------------------------------------------------
7,000,000 Erie County, PA Hospital Authority Weekly VRDNs (St. Vincent
Health System)/(Mellon Bank NA, Pittsburgh LOC) 7,000,000
--------------------------------------------------------------
500,000 Pennsylvania EDFA Weekly VRDNs (Respironics, Inc.)/
(PNC Bank, N.A. LOC) 500,000
--------------------------------------------------------------
1,883,600 Pennsylvania EDFA, (Series 1992 C) Weekly VRDNs (Leonard H.
Berenfield/Berenfield Containers)/(PNC Bank, Ohio, N.A. LOC) 1,883,600
--------------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
PENNSYLVANIA--CONTINUED
--------------------------------------------------------------
$ 3,000,000 Pennsylvania EDFA, Economic Development Revenue Bonds
(1996 Series D6) Weekly VRDNs (Toyo Tanso Specialty
Materials, Inc.)/(PNC Bank, N.A. LOC) $ 3,000,000
-------------------------------------------------------------- ------------
Total 13,583,600
-------------------------------------------------------------- ------------
SOUTH CAROLINA--1.0%
--------------------------------------------------------------
2,500,000 York County, SC School District 003, (Series 1996B), 4.00%
BANs, 4/1/1997 2,502,024
-------------------------------------------------------------- ------------
SOUTH DAKOTA--0.8%
--------------------------------------------------------------
2,000,000 South Dakota Housing Development Authority, (Series 1996E),
3.75% TOBs, Mandatory Tender 11/13/1997 2,000,000
-------------------------------------------------------------- ------------
TENNESSEE--2.6%
--------------------------------------------------------------
1,950,000 Bradley County, TN IDB, Refunding Revenue Bonds (Series 1993)
Daily VRDNs (Olin Corp.)/(Wachovia Bank of NC, NA,
Winston-Salem LOC) 1,950,000
--------------------------------------------------------------
1,000,000 Chattanooga-Hamilton County, TN Hospital Authority Daily VRDNs
(Erlanger Medical Center)/(Morgan Guaranty Trust Co.,
New York LIQ) 1,000,000
--------------------------------------------------------------
1,000,000 Cocke County, TN IDB, (Series 1988) Weekly VRDNs (GLI, Inc.)/
(Great Lakes Chemical Corp. GTD) 1,000,000
--------------------------------------------------------------
2,825,000 Knox County, TN IDB, (Series 1996) Weekly VRDNs (Health
Ventures, Inc. Project)/(SunTrust Bank, Nashville LOC) 2,825,000
-------------------------------------------------------------- ------------
Total 6,775,000
-------------------------------------------------------------- ------------
TEXAS--1.6%
--------------------------------------------------------------
2,000,000 Angelina and Neches River Authority, Texas, Solid Waste
Disposal Revenue Bonds (Series 1993), 3.85% CP (Temple-Eastex
Inc. Project)/(Temple-Inland, Inc. GTD), Mandatory Tender
1/27/1997 2,000,000
--------------------------------------------------------------
2,000,000 Tyler, TX Health Facilities Development Corp., (Series 1993C),
4.00% CP (East Texas Medical Center)/(Banque Paribas,
Paris LOC), Mandatory Tender 1/13/1997 2,000,000
-------------------------------------------------------------- ------------
Total 4,000,000
-------------------------------------------------------------- ------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
UTAH--0.3%
--------------------------------------------------------------
$ 800,000 Utah State HFA, (Series 1988A), 4.125% TOBs, Optional Tender
1/1/1997 $ 800,000
-------------------------------------------------------------- ------------
VIRGINIA--9.6%
--------------------------------------------------------------
6,000,000 Alexandria, VA Redevelopment and Housing Authority Weekly
VRDNs (Crystal City Apartments)/(Safeco Insurance Co. of
America INS)/(Barclays Bank PLC, London LIQ) 6,000,000
--------------------------------------------------------------
9,000,000 Campbell County, VA IDA, Solid Waste Disposal Facilities
Revenue ACES Weekly VRDNs (Georgia-Pacific Corp.)/(Industrial
Bank of Japan Ltd., Tokyo LOC) 9,000,000
--------------------------------------------------------------
7,500,000 Richmond, VA Redevelopment & Housing Authority, (Series B-1)
Weekly VRDNs (Richmond, VA Red Tabacco Row)/(Westdeutsche
Landesbank Girozentrale LOC) 7,500,000
--------------------------------------------------------------
2,160,000 Richmond, VA Redevelopment & Housing Authority, (Series B-5)
Weekly VRDNs (Richmond, VA Red Tabacco Row)/(Westdeutsche
Landesbank Girozentrale LOC) 2,160,000
-------------------------------------------------------------- ------------
Total 24,660,000
-------------------------------------------------------------- ------------
WASHINGTON--1.4%
--------------------------------------------------------------
3,600,000 Washington State Housing Finance Commission,
(1996 Series 4A-S), 3.75% TOBs, Mandatory Tender 11/1/1997 3,600,000
-------------------------------------------------------------- ------------
WEST VIRGINIA--5.3%
--------------------------------------------------------------
11,500,000 Marshall County, WV, PCR (Series 1992) Weekly VRDNs
(PPG Industries, Inc.) 11,500,000
--------------------------------------------------------------
2,000,000 Ritchie County, WV, IDRB (Series 1996) Weekly VRDNs
(Simonton Building Products, Inc.)/(PNC Bank, N.A. LOC) 2,000,000
-------------------------------------------------------------- ------------
Total 13,500,000
-------------------------------------------------------------- ------------
WISCONSIN--1.7%
--------------------------------------------------------------
2,000,000 Plymouth, WI IDB Weekly VRDNs (Great Lakes Cheese)/ (Rabobank
Nederland, Utrecht LOC) 2,000,000
--------------------------------------------------------------
</TABLE>
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM MUNICIPALS--CONTINUED
- ----------------------------------------------------------------------------------
WISCONSIN--CONTINUED
--------------------------------------------------------------
$ 1,700,000 Portage, WI, IDRB (Series 1994) Weekly VRDNs
(Portage Industries Corporation Project)/(Bank One,
Milwaukee, WI N.A. LOC) $ 1,700,000
--------------------------------------------------------------
780,000 (b) Wisconsin Housing & Economic Development Authority,
(Series B), 4.20% TOBs (FSA INS)/(Corestates Bank N.A.,
Philadelphia, PA LIQ), Optional Tender 3/1/1997 780,000
-------------------------------------------------------------- ------------
Total 4,480,000
-------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST) (C) $264,402,199
-------------------------------------------------------------- ------------
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 78.59% of the
portfolio as calculated based upon total portfolio market value.
(a) The Trust 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. A
NRSROs 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 Corporation, MIG-1 or MIG-2 by Moody's Investors
Service, Inc., or FIN-1+, FIN-1 and FIN-2 by Fitch Investors Service, Inc.
are all considered rated in one of the two highest short-term rating
categories. Securities rated in the highest short-term rating category (and
unrated securities of comparable quality) are identified as First Tier
securities. Securities rated in the second highest short-term rating
category (and unrated securities of comparable quality) are identified as
Second Tier securities. The Fund follows applicable regulations in
determining whether a security is rated and whether a security rated by
multiple NRSRO's in different rating categories should be identified as a
First or Second Tier security. At November 30, 1996, the portfolio
securities were rated as follows:
TIER RATING PERCENTAGE BASED ON TOTAL MARKET VALUE (UNAUDITED)
<TABLE>
<CAPTION>
FIRST TIER SECOND TIER
---------- -----------
<S> <C>
97.04% 2.96%
</TABLE>
(b) Denotes a restricted security which is subject to restrictions on resale
under federal Securities laws.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($256,446,892) at November 30, 1996.
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
The following acronym(s) are used throughout this portfolio:
<TABLE>
<S> <C>
ACES -- Adjustable Convertible Extendable Securities
BANs -- Bond Anticipation Notes
COL -- Collateralized
CP -- Commercial Paper
EDA -- Economic Development Authority
EDFA -- Economic Development Financing Authority
EDRB -- Economic Development Revenue Bonds
FSA -- Financial Security Assurance
GNMA -- Government National Mortgage Association
GTD -- Guaranty
HFA -- Housing Finance Authority
IDA -- Industrial Development Authority
IDB -- Industrial Development Bond
IDR -- Industrial Development Revenue
IDRB -- Industrial Development Revenue Bond
IDFA -- Industrial Development Finance Authority
INS -- Insured
INV -- Investment Agreement
LIQ -- Liquidity Agreement
LOC -- Letter of Credit
PCA -- Pollution Control Authority
PCR -- Pollution Control Revenue
PCFA -- Pollution Control Finance Authority
PLC -- Public Limited Company
RANs -- Revenue Anticipation Notes
TOBs -- Tender Option Bonds
VRDNs -- Variable Rate Demand Notes
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $264,402,199
- --------------------------------------------------------------------------------
Cash 319,295
- --------------------------------------------------------------------------------
Income receivable 1,023,786
- -------------------------------------------------------------------------------- ------------
Total assets 265,745,280
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $9,000,000
- -------------------------------------------------------------------
Income distribution payable 229,617
- -------------------------------------------------------------------
Accrued expenses 68,771
- ------------------------------------------------------------------- ----------
Total liabilities 9,298,388
- -------------------------------------------------------------------------------- ------------
Net Assets for 256,452,265 shares outstanding $256,446,892
- -------------------------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
Paid in capital $256,452,265
- --------------------------------------------------------------------------------
Accumulated net realized loss on investments (5,373)
- -------------------------------------------------------------------------------- ------------
Total Net Assets $256,446,892
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
($256,446,892 / 256,452,265 shares 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, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $1,461,661
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $ 193,835
- ---------------------------------------------------------------------
Administrative personnel and services fee 62,672
- ---------------------------------------------------------------------
Custodian fees 13,142
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 23,260
- ---------------------------------------------------------------------
Directors'/Trustees' fees 2,745
- ---------------------------------------------------------------------
Auditing fees 6,588
- ---------------------------------------------------------------------
Legal fees 1,464
- ---------------------------------------------------------------------
Portfolio accounting fees 29,230
- ---------------------------------------------------------------------
Distribution services fee 77,534
- ---------------------------------------------------------------------
Share registration costs 9,882
- ---------------------------------------------------------------------
Printing and postage 8,601
- ---------------------------------------------------------------------
Insurance premiums 2,196
- ---------------------------------------------------------------------
Miscellaneous 5,124
- --------------------------------------------------------------------- ----------
Total expenses 436,273
- ---------------------------------------------------------------------
Waivers--Waiver of investment advisory fee (128,308)
- --------------------------------------------------------------------- ---------
Net expenses 307,965
- --------------------------------------------------------------------------------- ----------
Net investment income 1,153,696
- --------------------------------------------------------------------------------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------
Net realized loss on investments (5,373)
- --------------------------------------------------------------------------------- ----------
Change in net assets resulting from operations $1,148,323
- --------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, 1996 MAY 31, 1996
----------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------
Net investment income $ 1,153,696 $ 2,387,012
- --------------------------------------------------------
Net realized gain (loss) on investments ($(5,373) as
computed for tax purposes) (5373) --
- -------------------------------------------------------- ----------------- ------------
Change in net assets resulting from operation 1,148,323 2,387,012
- --------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------
Distributions from net investment income (1,153,696) (2,387,012)
- -------------------------------------------------------- ----------------- ------------
SHARE TRANSACTIONS--
- --------------------------------------------------------
Proceeds from sale of shares 304,275,557 410,205,449
- --------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 734,766 1,773,394
- --------------------------------------------------------
Cost of shares redeemed (108,446,288) (419,701,847)
- -------------------------------------------------------- ----------------- ------------
Change in net assets resulting from share
transactions 196,564,035 (7,723,004)
- -------------------------------------------------------- ----------------- ------------
Change in net assets 196,558,662 (7,723,004)
- --------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------
Beginning of period 59,888,230 67,611,234
- -------------------------------------------------------- ----------------- ------------
End of period $ 256,446,892 $ 59,888,230
- -------------------------------------------------------- ----------------- ------------
</TABLE>
(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>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED MAY 31,
NOVEMBER 30, -----------------------------------------------------------
1996 1996 1995 1994 1993 1992 1991(A)
------------ ------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00
- ----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------
Net investment income 0.01 0.03 0.03 0.02 0.02 0.04 0.01
- ----------------------------------
LESS DISTRIBUTIONS
- ----------------------------------
Distributions from net
investment income (0.01) (0.03) (0.03) (0.02) (0.02) (0.04) (0.01)
- ---------------------------------- -------- ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $1.00 $ 1.00 $ 1.00 $1.00 $1.00 $1.00
- ---------------------------------- -------- ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 1.46% 3.22% 3.02% 1.99% 2.29% 3.72% 1.19%
- ----------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------
Expenses 0.79%* 0.79% 0.79% 0.79% 0.77% 0.74% 0.47%*
- ----------------------------------
Net investment income 2.98%* 3.17% 2.91% 1.97% 2.23% 3.56% 4.68%*
- ----------------------------------
Expense waiver/reimbursement (c) 0.33%* 0.31% 0.23% 0.28% 0.50% 0.50% 0.39%*
- ----------------------------------
SUPPLEMENTAL DATA
- ----------------------------------
Net assets, end of period
(000 omitted) $256,447 $59,888 $67,611 $131,770 $104,563 $65,628 $34,048
- ----------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 13, 1991 (date of initial
public investment) to May 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
MUNICIPAL CASH SERIES II
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Cash Trust Series II (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end management investment
company. The Trust consists of two portfolios. The financial statements included
herein are only those of Municipal Cash Series II (the "Fund"). The financial
statements of the other portfolio are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held.
The investment objective of the Fund is to provide current income exempt from
all federal regular income tax consistent with stability of principal.
(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.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES--Restricted securities are securities that may only
be resold upon registration under federal securities laws or in
transactions exempt from such registration. In some cases, the issuer of
restricted securities has agreed to register such securities for resale, at
the issuer's expense either upon demand by the Fund or in connection with
another registered offering of the securities. Many restricted securities
may be resold in the secondary market in transactions exempt from
registration. Such restricted securities may be determined to be liquid
under criteria established by the Board of Trustees ("Trustees"). The Fund
will not incur any registration costs
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
upon such resales. The Fund's restricted securities are valued at the price
provided by dealers in the secondary market or, if no market prices are
available, at the fair value as determined by the Fund's pricing committee.
Additional information on the restricted security held at November 30, 1996
is as follows:
<TABLE>
<CAPTION>
FUND
SECURITY ACQUISITION DATE ACQUISITION COST
----------------------------------------------------- ---------------- ----------------
<S> <C> <C>
Wisconsin Housing & Economic Development Authority,
(Series B), 9/1/1996 $780,000
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) 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, 1996, capital paid-in aggregated $256,452,265.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1996 MAY 31, 1996
- --------------------------------------------------------- ----------------- ------------
<S> <C> <C>
Shares sold 304,275,557 410,205,449
- ---------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 734,766 1,773,394
- ---------------------------------------------------------
Shares redeemed (108,446,288) (419,701,847)
- --------------------------------------------------------- --------------- -----------
Net change resulting from share transactions 196,564,035 7,723,004
- --------------------------------------------------------- --------------- -----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.50% of the Fund's average daily net assets. The Adviser may voluntarily choose
to waive any portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
MUNICIPAL CASH SERIES II
- --------------------------------------------------------------------------------
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan ( the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will reimburse Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's shares. The Plan provides that the Fund may
incur distribution expenses up to 0.20% of the average daily net assets of the
Fund shares, annually, to reimburse FSC.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS--During the period ended November 30, 1996, the Fund
engaged in purchase and sale transactions with funds that have a common
investment adviser (or affiliated investment advisers), common
Directors/Trustees, and/or common Officers. These purchase and sale transactions
were made at current market value pursuant to Rule 17a-7 under the Act amounting
to $221,103,600 and $76,885,000, respectively.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland President
J. Christopher Donahue J. Christopher Donahue
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. Edward C. Gonzales
Edward L. Flaherty, Jr. Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President, Treasurer and
John E. Murray, Jr. Secretary
Wesley W. Posvar S. Elliott Cohan
Marjorie P. Smuts Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. 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.
MUNICIPAL
CASH
SERIES II
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1996
(LOGO)
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 147552103
1121604 (1/97)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present the Semi-Annual Report to Shareholders for Treasury Cash
Series II, a portfolio of Cash Trust Series II, which covers the six-month
period ended November 30, 1996. The Report begins with an investment review by
the fund's portfolio manager, which is followed by a complete listing of the
fund's investments and its financial statements.
During the reporting period, the fund helped its shareholders earn a total of
$0.02 in dividends per share on their ready cash--while offering the advantages
of daily liquidity and stability of principal.* Assets totaled $355 million at
the end of the reporting period.
At the end of the reporting period, 81.2% of the fund's assets was invested in
repurchase agreements backed by U.S. government securities, which offered a
yield advantage over many direct government securities. The remainder of the
fund's assets was invested in direct U.S. Treasury bills and notes.
Thank you for choosing Treasury Cash Series II as a convenient way to put your
cash to work pursuing daily income from U.S. Treasury obligations. Please
contact your investment representative if you have any questions about your
investment.
Sincerely,
LOGO
Richard B. Fisher
President
January 15, 1997
* Although money market mutual 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. An
investment in the fund is neither insured nor guaranteed by the U.S.
government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Treasury Cash Series II invests in U.S. Treasury and U.S. government agency
securities and in repurchase agreements collateralized by U.S. government
securities. The fund is rated AAAm by Standard & Poor's Ratings Group ("S&P")
and Aaa by Moody's Investors Service, Inc. ("Moody's")*
Over the six months ended November 30, 1996, the Federal Reserve Board (the
"Fed") stood pat in the face of economic growth that exceeded the 2.50% pace
thought to be non-inflationary. Confronted with persistent strength in the
housing, auto, and retail sectors, the Fed stuck to its belief that economic
growth in the second half of the year would return to a more moderate pace. Over
the reporting period, the market itself was not so sure, and movements in
interest rates proved to be rather volatile as expectations regarding the timing
and extent of the next policy move from the Fed swayed back and forth with each
new piece of economic data. Signs of an economic slowdown began to emerge in the
third quarter of 1996, but the market fretted that it might not be enough to
prevent the Fed from tightening to ward off inflationary pressures. By the end
of the reporting period, however, the market calmed as growth in employment and
housing moderated and inflation remained tame. Overall, the Federal funds target
rate remained unchanged at 5.25%, where it has been since late January 1996.
Movements in interest rates reflected the market uncertainty. The yield on the
three-month Treasury bill began the reporting period at 5.20% in early June and
rose to 5.35% by late August amid fears that the robust economy might spark
inflation--particularly in the face of tight labor market conditions. The yield
then fell to 5.15% as signs of tempered growth began to appear, rose once more
to 5.35% as the market continued to reflect concerns over developing wage
pressures, and then plunged to 5.00% in late September/early October as relief
finally took hold. The yield rebounded to a more realistic 5.15% and traded
within a narrow range for the remainder of the reporting period, as the market
broke its trend of over-reacting to each economic release and accepted the idea
that the Fed was likely to be on hold indefinitely. Overall, the short end of
the Treasury yield curve ended the reporting period 27 basis points flatter than
it began, reflecting the retreat from expectations of an imminent tightening in
monetary policy.
For most of the six-month reporting period, the fund was targeted in a 35 to 45
day average maturity range, representing a neutral stance. The average maturity
of the fund varied within that range according to relative value opportunities
available in the short-term Treasury and repo markets. The fund remained
barbelled in structure, combining repurchase agreements with purchases of
fixed-rate Treasury securities with longer maturities. With a friendly inflation
picture and no signs of a dramatic change in the overall fundamental picture of
the economy on the horizon, the fund will likely maintain its current neutral
positioning in the near future.
* These ratings are obtained after S&P evaluates a number of factors, including
credit quality, market price exposure and management. S&P monitors the
portfolio weekly for developments that could cause changes in the ratings.
Money market funds and bond funds rated Aaa by Moody's are judged to be of an
investment quality similar to Aaa-rated fixed income obligations, that is,
they are judged to be of the best quality. Ratings are subject to change and
do not remove market risks.
TREASURY CASH SERIES II
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM U.S. TREASURY OBLIGATIONS--20.8%
- ----------------------------------------------------------------------------------
(A) U.S. TREASURY BILL--5.8%
---------------------------------------------------------------
$21,000,000 4.925%-5.455%, 3/6/1997-8/21/1997 $ 20,469,114
--------------------------------------------------------------- ------------
U.S. TREASURY NOTE--15.0%
---------------------------------------------------------------
53,000,000 5.625%-8.625%, 12/31/1996-9/30/1997 53,252,555
--------------------------------------------------------------- ------------
TOTAL SHORT-TERM U.S. TREASURY OBLIGATIONS 73,721,669
--------------------------------------------------------------- ------------
(B)REPURCHASE AGREEMENTS--81.2%
- ----------------------------------------------------------------------------------
15,000,000 BT Securities Corporation, 5.720%, dated 11/29/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 Bank of Tokyo-Mitsubishi Ltd., 5.680%, dated 11/29/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
45,400,000 Barclays de Zoete Wedd Securities, Inc., 5.720%, dated
11/29/1996, due 12/2/1996 45,400,000
---------------------------------------------------------------
15,000,000 Bear, Stearns and Co., 5.700%, dated 11/29/1996, due 12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 CIBC Wood Gundy Securities Corp., 5.700%, dated 11/29/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 Daiwa Securities America, Inc., 5.375%, dated 11/27/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 Dean Witter Reynolds, Inc., 5.720%, dated 11/29/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 Deutsche Bank Government Securities, Inc., 5.700%, dated
11/29/1996, due 12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.650%, dated
11/29/1996, due 12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 Dresdner Securities (USA), Inc., 5.420%, dated 11/27/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 First Union Capital Markets, 5.660%, dated 11/29/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 Greenwich Capital Markets, Inc., 5.720%, dated 11/29/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
</TABLE>
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- --------------------------------------------------------------- ------------
<C> <C> <S> <C>
(B)REPURCHASE AGREEMENTS--CONTINUED
- ----------------------------------------------------------------------------------
$15,000,000 Nesbitt Burns Securities, Inc., 5.710%, dated 11/29/1996, due
12/2/1996 $ 15,000,000
---------------------------------------------------------------
15,000,000 Swiss Bank Capital Markets, 5.700%, dated 11/29/1996, due
12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 Toronto Dominion Securities (USA) Inc., 5.400%, dated
11/27/1996, due 12/2/1996 15,000,000
---------------------------------------------------------------
15,000,000 UBS Securities, Inc., 5.730%, dated 11/29/1996, due 12/2/1996 15,000,000
---------------------------------------------------------------
7,000,000 (c) CS First Boston, Inc., 6.250%, dated 11/19/1996, due 1/2/1997 7,000,000
---------------------------------------------------------------
3,000,000 (c) Swiss Bank Capital Markets, 5.350%, dated 10/7/1996, due
1/6/1997 3,000,000
---------------------------------------------------------------
8,000,000 (c) Morgan Stanley Group, Inc., 5.330%, dated 10/17/1996, due
1/16/1997 8,000,000
--------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 288,400,000
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(D) $362,121,669
--------------------------------------------------------------- ------------
</TABLE>
(a) Each issue shows the rate of discount at time of purchase.
(b) The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(c) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($355,047,564) at November 30, 1996.
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements $288,400,000
- -----------------------------------------------------------------
Investments in securities 73,721,669
- ----------------------------------------------------------------- ------------
Total investments in securities, at amortized cost and value $362,121,669
- --------------------------------------------------------------------------------
Cash 100,941
- --------------------------------------------------------------------------------
Income receivable 1,055,548
- -------------------------------------------------------------------------------- ------------
Total assets 363,278,158
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased 7,000,000
- -----------------------------------------------------------------
Income distribution payable 1,108,507
- -----------------------------------------------------------------
Accrued expenses 122,087
- ----------------------------------------------------------------- ------------
Total liabilities 8,230,594
- -------------------------------------------------------------------------------- ------------
Net Assets for 355,047,564 shares outstanding $355,047,564
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
($355,047,564 / 355,047,564) shares 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, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------
Interest $9,955,718
- ----------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------
Investment advisory fee $ 930,352
- ---------------------------------------------------------------------
Administrative personnel and services fee 140,657
- ---------------------------------------------------------------------
Custodian fees 49,209
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 15,432
- ---------------------------------------------------------------------
Directors'/Trustees' fees 5,024
- ---------------------------------------------------------------------
Auditing fees 6,312
- ---------------------------------------------------------------------
Legal fees 1,561
- ---------------------------------------------------------------------
Portfolio accounting fees 38,631
- ---------------------------------------------------------------------
Distribution services fee 372,141
- ---------------------------------------------------------------------
Share registration costs 12,524
- ---------------------------------------------------------------------
Printing and postage 7,672
- ---------------------------------------------------------------------
Insurance premiums 3,335
- ---------------------------------------------------------------------
Taxes 372
- ---------------------------------------------------------------------
Miscellaneous 5,024
- --------------------------------------------------------------------- ----------
Total expenses 1,588,246
- ---------------------------------------------------------------------
Waivers--Waiver of distribution services fee (13,025)
- --------------------------------------------------------------------- ----------
Net expenses 1,575,221
- ---------------------------------------------------------------------------------- ----------
Net investment income $8,380,497
- ---------------------------------------------------------------------------------- ----------
</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
(UNAUDITED) YEAR ENDED
NOVEMBER 30, 1996 MAY 31, 1996
------------------ -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------
Net investment income $ 8,380,497 $ 16,815,145
- ------------------------------------------------------- ----------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------
Distributions from net investment income (8,380,497) (16,815,145)
- ------------------------------------------------------- ----------------- ------------
SHARE TRANSACTIONS--
- -------------------------------------------------------
Proceeds from sale of shares 307,173,869 885,379,520
- -------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 5,374,167 12,675,598
- -------------------------------------------------------
Cost of shares redeemed (359,878,578) (739,327,594)
- ------------------------------------------------------- ----------------- ------------
Change in net assets resulting from share
transactions (47,330,542) 158,727,524
- ------------------------------------------------------- ----------------- ------------
Change in net assets (47,330,542) 158,727,524
- -------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------
Beginning of period 402,378,106 243,650,582
- ------------------------------------------------------- ----------------- ------------
End of period $ 355,047,564 $402,378,106
- ------------------------------------------------------- ----------------- ------------
</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>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED MAY 31,
NOVEMBER 30, --------------------------------------------------------------
1996 1996 1995 1994 1993 1992 1991(A)
------------- -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- -------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------------
Net investment income 0.02 0.05 0.04 0.02 0.03 0.04 0.02
- -------------------------------
LESS DISTRIBUTIONS
- -------------------------------
Distributions from net
investment income (0.02) (0.05) (0.04) (0.02) (0.03) (0.04) (0.02)
- ------------------------------- ------ ---- ---- ---- ---- ---- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------- ------ ---- ---- ---- ---- ---- -----
TOTAL RETURN(B) 2.28% 4.97% 4.47% 2.47% 2.64% 4.41% 2.06%
- -------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------
Expenses 0.84%* 0.86% 0.88% 0.89% 0.78% 0.73% 0.47%*
- -------------------------------
Net investment income 4.49%* 4.83% 4.40% 2.42% 2.55% 4.34% 5.71%*
- -------------------------------
Expense waiver/
reimbursement(c) 0.01%* 0.01% 0.00% 0.05% 0.19% 0.57% 0.37%*
- -------------------------------
SUPPLEMENTAL DATA
- -------------------------------
Net assets, end of period
(000 omitted) $355,048 $402,378 $243,651 $229,882 $310,648 $104,371 $70,798
- -------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 9, 1991 (date of initial
public investment) to May 31, 1991.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
TREASURY CASH SERIES II
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Cash Trust Series II (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of two portfolios. The financial statements included
herein are only those of Treasury Cash Series II (the "Fund"). The financial
statements of the other portfolios are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The investment objective of the Fund is
current income consistent with stability of principal and liquidity.
(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.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of 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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) 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, 1996, capital paid-in aggregated $355,047,564.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
NOVEMBER 30, 1996 MAY 31, 1996
- ------------------------------------------------------- ------------------ ------------
<S> <C> <C>
Shares sold 307,173,869 885,379,520
- -------------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 5,374,167 12,675,598
- -------------------------------------------------------
Shares redeemed (359,878,578) (739,327,594)
- ------------------------------------------------------- --------------- -----------
Net change resulting from share transactions (47,330,542) 158,727,524
- ------------------------------------------------------- --------------- -----------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
0.50% of the Fund's average daily net assets.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administra-
TREASURY CASH SERIES II
- --------------------------------------------------------------------------------
tive Services Agreement shall be at least $125,000 per portfolio and $30,000 per
each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
reimburse Federated Securities Corp. ("FSC"), the principal distributor, from
the net assets of the Fund to finance activities intended to result in the sale
of the Fund's shares. The Plan provides that the Fund may incur distribution
expenses up to 0.20% of the average daily net assets of the Fund shares,
annually, to reimburse FSC. FSC may voluntarily choose to waive any portion of
its fee. FSC can modify or terminate this voluntary waiver at any time at its
sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Richard B. Fisher
William J. Copeland President
J. Christopher Donahue J. Christopher Donahue
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. Edward C. Gonzales
Edward L. Flaherty, Jr. Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President,
John E. Murray, Jr. Treasurer and Secretary
Wesley W. Posvar S. Elliott Cohan
Marjorie P. Smuts Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. 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.
TREASURY
CASH
SERIES II
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1996
(LOGO)
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
CUSIP 147552301
1121606 (1/97)
