PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report for Municipal Cash Series II, a
portfolio of Cash Trust Series II, which covers the six-month reporting period
ended November 30, 1997. 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 paid a total of $0.02 in tax-free
dividends per share.* In addition to tax-free income on their ready cash, the
fund also offers tax-sensitive shareholders the important advantages of daily
liquidity and stability of principal.** At the end of the reporting period, fund
net assets totaled $252.3 million.
Thank you for choosing Municipal Cash Series II as a convenient way to keep your
cash working for you on a daily, tax-free basis. Please contact your investment
representative if you have any questions about the fund.
Sincerely,
Richard B. Fisher
President
January 15, 1998
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** 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. An investment
in this fund is not insured or 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.
The seven-day net yield for the fund on November 30, 1997, was 3.23% compared to
a seven-day net yield of 3.24% at the end of the previous reporting period.* The
latest yield was the equivalent of a 5.36% taxable yield for investors in the
highest federal tax bracket.*
The economy remained robust over the reporting period, posting a rate of growth
of 3.30% for the second and third quarters and is expected to continued at this
above-trend pace in for the fourth quarter 1997. At the same time, however,
inflationary pressures have remained quite benign over the period in spite of
impressive performance from the economy and historically low unemployment
figures. Early in the reporting period, in the wake of the Federal Reserve
Board's (the "Fed's") 25 basis point increase in the federal fund's target rate
on March 25, 1997, short-term interest rates remained relatively high as market
participants sought to ascertain whether another move was soon to follow. As
inflationary pressures remained mild, however, fears of a near-term tightening
by the Fed gradually receded and all but vanished by late June. The end of the
period coincided with very disappointing economic news from the Pacific Rim and
as a consequence, an unsteady U.S. stock market. These overriding macro issues
eliminated any rate tightening intentions the Fed may have had during the third
quarter of 1997. Short-term interest rates traded within a rather narrow range
during the period. Movements in the 1-year Treasury bill over the period best
revealed the market's shifting sentiment. The 1-year T-Bill traded as high as
5.75% in early June, but then fell to as low as 5.45% before closing the period
at 5.50%.
In addition to economic fundamentals, short-term municipal securities were
strongly influenced by technical factors over this reporting period, most
notably the summer note issuance season. Variable rate demand notes (VRDNs),
which comprise more than 50% of the Trust's assets, started the reporting period
at a yield of 3.45% but spiked upward to as high as 4.15% in late June of 1997
due to a substantial supply of notes in the market. VRDN yields fell in August
1997, but moved sharply higher in September to above 4.00% as supply and demand
imbalances occurred once again. Yields then fell again in October 1997, before
rising once again to close the reporting period at 3.85%. Over the reporting
period, VRDN yields averaged 70% or more of taxable rates making them attractive
for investors at the 31% or higher federal tax brackets.
The Trust remained in a 45- to 50-day average maturity target range over the
reporting period, a neutral stance, and moved within that range according to
relative value opportunities. Early in the reporting period, fixed-rate notes as
a percentage of treasuries were fairly expensive, so we held off on purchasing
these notes and locking in those yields. As the market cheapened in the third
quarter, we began to take advantage of attractive buying opportunities to
maintain the Trust's average maturity. We continue to emphasize a barbelled
structure for the portfolio, combining a significant position in 7-day VRDNs
with purchases of longer-term securities with maturities between 6 and 12
months.
With one pre-emptive tightening under their belt, Fed officials now appear to be
debating, both publicly and privately, whether the conditions at hand--strong
growth yet little to no price inflation and overseas economic
implications--would indicate that the non-inflationary potential of the economy
is actually greater than previously thought. Growth of 2 to 21o2% has generally
been embraced as this non-inflationary potential. As the Fed continues to
analyze the situation, the front end of the taxable and tax-exempt municipal
markets are destined to be range-bound, absent any signs of upward pressures on
prices. We will continue to watch, with great interest, market developments in
order to best serve our municipal clients.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary.
PORTFOLIO OF INVESTMENTS
MUNICIPAL CASH SERIES II
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--101.9%
ALABAMA--2.5%
$ 740,000 Abbeville, AL, IDB Monthly VRDNs (Great Southern Wood $ 740,000
Preserving Co.)/(SouthTrust Bank of Alabama, Birmingham LOC)
5,500,000 Selma, AL, IDB, Solid Waste Disposal Revenue Bonds (Series 5,500,000
A), 3.90% TOBs (International Paper Co.)/(International Paper
Co. GTD), Optional Tender 3/1/1998
TOTAL 6,240,000
ARKANSAS--5.7%
3,100,000 Arkansas Development Finance Authority, Single Family 3,100,000
Mortgage Revenue Bonds (1997 Series D), 4.05% TOBs, Mandatory
Tender 7/1/1998
2,500,000 Hope, AR, Solid Waste Disposal Revenue Bonds (Series 1994), 2,500,000
4.05% CP (Temple-Inland Forest Products Corp.
Project)/(Temple-Inland, Inc. GTD), Mandatory Tender
1/22/1998
8,750,000 Miller County, AR, Solid Waste Disposal Revenue Bonds (Series 8,750,000
1996) Weekly VRDNs (Tyson Foods, Inc.)/(Commerzbank AG,
Frankfurt LOC)
TOTAL 14,350,000
DISTRICT OF COLUMBIA--4.2%
8,000,000 District of Columbia Housing Finance Agency, (Series 1996B), 8,000,000
3.75% TOBs (Trinity Funding Company INV), Mandatory Tender
12/1/1997
2,500,000 District of Columbia Housing Finance Agency, (Series 1997C), 2,500,000
4.05% TOBs (AIG Funding, Inc. INV), Mandatory Tender 9/1/1998
TOTAL 10,500,000
GEORGIA--8.0%
1,500,000 Clayton County, GA Development Authority, (Series 1994) 1,500,000
Weekly VRDNs (Lear Seating Corp.)/ (Chase Manhattan Bank
N.A., New York LOC)
2,100,000 Columbus, GA Housing Authority Weekly VRDNs (Ralston 2,100,000
Towers)/(Columbus Bank and Trust Co., GA LOC)
2,775,000 Crisp County, GA Development Authority, (Series B), 4.10% 2,775,000
TOBs (Masonite Corporation)/ (International Paper Co. GTD),
Optional Tender 9/1/1998
4,300,000 Franklin County, GA Industrial Building Authority, (Series 4,300,000
1995) Weekly VRDNs (Bosal Industries, Inc.)/(ABN AMRO Bank
N.V., Amsterdam LOC)
5,800,000 Gwinnett County, GA IDA Daily VRDNs (Volvo AB)/(Union Bank of 5,800,000
Switzerland, Zurich LOC)
3,300,000 Marietta, GA Housing Authority, Multifamily Housing Revenue 3,300,000
Bonds (Series 1995) Weekly VRDNs (Chalet Apartments
Project)/(General Electric Capital Corp. LOC)
450,000 Savannah, GA EDA, (Series 1995A) Weekly VRDNs (Home Depot, 450,000
Inc.)
TOTAL 20,225,000
</TABLE>
MUNICIPAL CASH SERIES II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
IDAHO--2.1%
$ 5,240,000 Idaho Housing Agency, Single Family Mortgage Bonds (PA-145) $ 5,240,000
Weekly VRDNs (Merrill Lynch Capital Services, Inc. LIQ)
ILLINOIS--7.1%
3,200,000 Chicago, IL, (Series 1997) Weekly VRDNs (Trendler
Components, 3,200,000 Inc.)/(American National Bank &
Trust LOC)
7,000,000 Chicago, IL, Gas Supply Revenue Bonds (1993 Series B), 3.70% 7,000,000
TOBs (Peoples Gas Light & Coke Company), Optional Tender
12/1/1997
1,610,000 Illinois Development Finance Authority Weekly VRDNs (Olympic 1,610,000
Steel, Inc.)/ (National City Bank, Cleveland, OH LOC)
6,000,000 Illinois Housing Development Authority, (1997 Subseries B-2), 6,000,000
4.15% TOBs, Mandatory Tender 7/7/1998
TOTAL 17,810,000
INDIANA--1.8%
160,000 Avilla, IN, IDRB Weekly VRDNs (Group Dekko 160,000
International)/(Bank One, Indianapolis, N.A. LOC)
565,000 Avilla, IN, IDRB Weekly VRDNs (Group Dekko 565,000
International)/(Bank One, Indianapolis, N.A. LOC)
1,415,000 Indiana Development Finance Authority, Economic Development 1,415,000
Revenue Refunding Bonds Weekly VRDNs (T. M. Morris
Manufacturing Co., Inc. Project)/(Bank One, Indianapolis,
N.A. LOC)
1,000,000 Indiana Economic Development Commission, Revenue Bonds 1,000,000
(Series 1989) Weekly VRDNs (O'Neal Steel, Inc.)/(SouthTrust
Bank of Alabama, Birmingham LOC)
1,300,000 Tipton, IN, (Series 1997) Weekly VRDNs (MCJS, LLC)/(Bank One, 1,300,000
Indianapolis, N.A. LOC)
TOTAL 4,440,000
KENTUCKY--6.5%
5,000,000 Jefferson County, KY, (1997 Series A), 3.90% CP
(Louisville 5,000,000 Gas & Electric Company), Mandatory
Tender 1/21/1998
5,000,000 Louisville & Jefferson County, KY Regional Airport Authority, 5,000,000
(Series 1996-A) Weekly VRDNs (National City Bank, Kentucky
LOC)
2,590,000 Muhlenberg County, KY, (Series 1997) Weekly VRDNs (Plastic 2,590,000
Products Co. Project)/ (Norwest Bank Minnesota, Minneapolis
LOC)
1,910,000 Muhlenberg County, KY, (Series A) Weekly VRDNs (Plastic 1,910,000
Products Co. Project)/ (Norwest Bank Minnesota, Minneapolis
LOC)
2,000,000 Scottsville, KY, 4.50% TOBs (Sumitomo Electric Wiring 2,000,000
Systems)/(Sumitomo Bank Ltd., Osaka LOC), Optional Tender
5/1/1998
TOTAL 16,500,000
LOUISIANA--4.7%
3,110,000 Louisiana HFA, Single Family Mortgage Revenue Bonds (Series 3,110,000
1997A-3), 3.75% TOBs (Trinity Funding Company INV), Mandatory
Tender 3/1/1998
</TABLE>
MUNICIPAL CASH SERIES II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
LOUISIANA--CONTINUED
$ 8,885,000 Stephens Municipal Investment Products Company, Inc., (Series $ 8,885,000
1997-3) Weekly VRDNs (Louisiana HFA)/(GNMA COL)/(Bank of New
York Co., Inc. LIQ)
TOTAL 11,995,000
MARYLAND--1.5%
1,400,000 Harford County, MD, EDRB (Series 1996) Weekly VRDNs (Citrus 1,400,000
and Allied Essences Ltd.)/ (First National Bank of Maryland,
Baltimore LOC)
1,000,000 Maryland State Community Development Administration, (Series 1,000,000
1990A) Weekly VRDNs (College Estates)/(First National Bank of
Maryland, Baltimore LOC)
1,500,000 Maryland State IDFA, (Series 1996) Weekly VRDNs (Chesapeake 1,500,000
Biological Labs, Inc.)/ (First Union National Bank,
Charlotte, N.C. LOC)
TOTAL 3,900,000
MASSACHUSETTS--2.7%
2,000,000 Amherst-Pelham Regional School District, MA, 4.09% BANs, 2,001,288
2/13/1998
4,800,000 Massachusetts IFA Weekly VRDNs (Commonwealth Laurel Lake 4,800,000
Realty)/(KeyBank, N.A. LOC)
TOTAL 6,801,288
MINNESOTA--1.2%
1,000,000 Byron, MN IDB Weekly VRDNs (Schmidt Printing)/(Norwest
Bank 1,000,000 Minnesota, Minneapolis LOC)
2,000,000 White Bear Lake, MN City of, (Series 1997), 4.5475% TOBs 2,000,000
(Century Townhomes)/ (Westdeutsche Landesbank Girozentrale
INV), Mandatory Tender 6/1/1998
TOTAL 3,000,000
MISSISSIPPI--5.5%
5,000,000 Mississippi Business Finance Corp., (Series 1995) Weekly 5,000,000
VRDNs (Mississippi Baking Company L.L.C. Project)/(First
National Bank of Maryland, Baltimore LOC)
7,500,000 Mississippi Home Corp., Multifamily Housing Adjustable/Fixed 7,500,000
Rate Revenue Bonds (Series 1997) Weekly VRDNs (Windsor Park
Apartments)/(SouthTrust Bank of Alabama, Birmingham LOC)
1,400,000 Senatobia, MS Weekly VRDNs (Deltona Lighting Products, 1,400,000
Inc.)/(Southtrust Bank of West Florida, St. Petersburg LOC)
TOTAL 13,900,000
NEVADA--1.0%
2,500,000 Director of the State of Nevada Weekly VRDNs
(Smithey-Oasis 2,500,000 Co.)/(Mellon Bank N.A.,
Pittsburgh LOC)
NEW HAMPSHIRE--7.7%
6,080,000 New Hampshire Business Finance Authority, IDRB (Series A) 6,080,000
Weekly VRDNs (Upper Valley Press)/(KeyBank, N.A. LOC)
</TABLE>
MUNICIPAL CASH SERIES II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
NEW HAMPSHIRE--CONTINUED
$ 11,450,000 New Hampshire Business Finance Authority, PCR Bonds (Series $ 11,450,000
A), 3.95% CP (New England Power Co.), Mandatory Tender
12/11/1997
2,000,000 New Hampshire State IDA, (Series 1991), 4.10% TOBs 2,000,000
(International Paper Co.), Optional Tender 10/15/1998
TOTAL 19,530,000
NEW MEXICO--0.6%
500,000 New Mexico Mortgage Finance Authority, (Series D-2), 3.95% 500,000
TOBs (FGIC INV), Mandatory Tender 6/15/1998
1,000,000 New Mexico Mortgage Finance Authority, Single Family Mortgage 1,000,000
Program Bonds (1997 Issue 2), 3.90% TOBs (FGIC INV),
Mandatory Tender 10/15/1998
TOTAL 1,500,000
NORTH CAROLINA--3.2%
8,100,000 Wilson County, NC PCA, (Series 1994) Weekly VRDNs
(Granutec, 8,100,000 Inc.)/(Branch Banking & Trust Co,
Wilson LOC)
NORTH DAKOTA--0.7%
1,675,000 Fargo, ND, IDRB (Series 1994) Weekly VRDNs (Pan-O-Gold Baking 1,675,000
Co. Project)/ (Norwest Bank Minnesota, Minneapolis LOC)
OKLAHOMA--3.1%
7,720,000 Tulsa County, OK HFA, CDC Municipal Products, Inc. Class A 7,720,000
Certificates (Series 1996E) Weekly VRDNs (GNMA COL)/(CDC
Municipal Products, Inc. LIQ)
PENNSYLVANIA--6.0%
450,000 Pennsylvania EDFA Weekly VRDNs (Respironics, Inc.)/(PNC Bank, 450,000
N.A. LOC)
1,652,000 Pennsylvania EDFA, (Series 1992 C) Weekly VRDNs (Leonard H. 1,652,000
Berenfield/Berenfield Containers)/(PNC Bank, Ohio, N.A. LOC)
3,000,000 Pennsylvania EDFA, Economic Development Revenue Bonds (1996 3,000,000
Series D6) Weekly VRDNs (Toyo Tanso Specialty Materials,
Inc.)/(PNC Bank, N.A. LOC)
10,000,000 Philadelphia, PA, GO (Series 1990), 4.10% CP (Fuji Bank, 10,000,000
Ltd., Tokyo LOC), Mandatory Tender 1/21/1998
TOTAL 15,102,000
SOUTH DAKOTA--10.3%
2,500,000 South Dakota Housing Development Authority, (Series G), 3.95% 2,500,000
TOBs, Mandatory Tender 8/13/1998
23,400,000 South Dakota Housing Development Authority, Homeownership 23,400,000
Mortgage Bonds (1997 Series E) Weekly VRDNs
TOTAL 25,900,000
</TABLE>
MUNICIPAL CASH SERIES II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
TEXAS--4.7%
$ 5,200,000 Angelina and Neches River Authority, Texas, Solid Waste $ 5,200,000
Disposal Revenue Bonds (Series 1993), 4.00% CP (Temple-Eastex
Inc. Project)/(Temple-Inland, Inc. GTD), Mandatory Tender
12/5/1997
4,100,000 Angelina and Neches River Authority, Texas, Solid Waste 4,100,000
Disposal Revenue Bonds (Series 1993), 4.05% CP (Temple-Eastex
Inc. Project)/(Temple-Inland, Inc. GTD), Mandatory Tender
1/20/1998
2,700,000 Lubbock, TX IDC Daily VRDNs (McLane Co.,
Inc.)/(Nationsbank, 2,700,000 N.A., Charlotte LOC)
TOTAL 12,000,000
UTAH--1.7%
4,435,000 Utah County, UT, Industrial Development Revenue Bonds (Series 4,435,000
1992) Weekly VRDNs (McWane, Inc. Project)/(Amsouth Bank N.A.,
Birmingham LOC)
VIRGINIA--1.7%
500,000 Campbell County, VA IDA, Solid Waste Disposal Facilities 500,000
Revenue ACES Weekly VRDNs (Georgia-Pacific Corp.)/(Industrial
Bank of Japan Ltd., Tokyo LOC)
900,000 Carroll County, VA IDA, IDRB (Series 1995) Weekly VRDNs 900,000
(Kentucky Derby Hosiery Co., Inc. Project)/(Bank One,
Kentucky LOC)
2,900,000 South Hill, VA IDA, (Series 1997) Weekly VRDNs (International 2,900,000
Veneer Co., Inc.)/(Bank One, Indianapolis, N.A. LOC)
TOTAL 4,300,000
WEST VIRGINIA--0.8%
2,000,000 Ritchie County, WV, IDRB (Series 1996) Weekly VRDNs (Simonton 2,000,000
Building Products, Inc.)/ (PNC Bank, N.A. LOC)
WISCONSIN--6.9%
1,700,000 Combined Locks, WI, Development Revenue Bonds, Series 1997 1,700,000
Weekly VRDNs (Appleton Papers)/(Bank of Nova Scotia, Toronto
LOC)
1,000,000 Howard-Suamico, WI School District, 4.07% TRANs, 8/21/1998 1,000,132
2,840,000 McFarland, WI School District, 4.75% BANs, 12/15/1997 2,840,524
1,520,000 Milwaukee, WI Weekly VRDNs (Pelton Casteel, Inc.)/(Norwest 1,520,000
Bank Minnesota, Minneapolis LOC)
1,050,000 New Richmond, WI School District, 4.22% TRANs, 10/30/1998
1,051,102 2,500,000 Pewaukee, WI School District, 4.19% TRANs,
9/17/1998 2,501,713 2,000,000 Plymouth, WI IDB Weekly VRDNs (Great
Lakes Cheese)/(Rabobank 2,000,000
Nederland, Utrecht LOC)
1,150,000 Portage, WI, IDRB (Series 1994) Weekly VRDNs (Portage 1,150,000
Industries Corp. Project)/(Bank One, Wisconsin, N.A. LOC)
1,065,000 Wisconsin Health and Educational Facilities Authority, 1,065,078
Revenue Refunding Bonds (Series 1997-B), 4.00% Bonds (United
Health Group, Inc.)/(MBIA Insurance Corporation INS),
12/15/1997
</TABLE>
MUNICIPAL CASH SERIES II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
WISCONSIN--CONTINUED
$ 300,000 (b)Wisconsin Housing & Economic Development Authority, $ 300,000
(Series B), 4.15% TOBs (FSA INS)/ (Corestates Bank N.A.,
Philadelphia, PA LIQ), Optional Tender 12/1/1997
2,155,000 Wisconsin Housing & Economic Development Authority, Business 2,155,000
Development Revenue Bonds (Series 1995) Weekly VRDNs (Carlson
Tool & Manufacturing Corp.)
TOTAL 17,283,549
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $ 256,946,837
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 91.26% of the
portfolio as calculated based upon total portfolio market value.
(a) The fund may only invest in securities rated in one of the two highest
short-term rating categories by one or more nationally recognized statistical
rating organizations ("NRSROs") or unrated securities of comparable quality. An
NRSRO's two highest rating categories are determined without regard for
sub-categories and gradations. For example, securities rated SP-1+, SP-1, or
SP-2 by Standard & Poor's Ratings Group, MIG-1, or MIG-2 by Moody's Investors
Service, Inc., or F-1+, F-1, and F-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 NRSROs in different rating categories
should be identified as a First or Second Tier security.
At November 30, 1997, the portfolio securities were rated as follows:
Tier Rating Percent Based on Total Market Value (unaudited)
FIRST TIER SECOND TIER
88.4% 11.6%
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1997, these securities amounted
to $300,000 which represents 0.1% of net assets.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($252,266,986) at November 30, 1997.
The following acronym(s) are used throughout this portfolio:
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 FGIC --Financial Guaranty Insurance Company FSA
- --Financial Security Assurance GNMA --Government National Mortgage Association
GO --General Obligation GTD --Guaranty HFA --Housing Finance Authority IDA
- --Industrial Development Authority IDB --Industrial Development Bond IDC
- --Industrial Development Corporation IDRB --Industrial Development Revenue Bond
IDFA --Industrial Development Finance Authority IFA --Industrial Finance
Authority INS --Insured INV --Investment Agreement LIQ --Liquidity Agreement LLC
- --Limited Liability Corporation LOC --Letter of Credit MBIA --Municipal Bond
Investors Assurance PCA --Pollution Control Authority PCR --Pollution Control
Revenue TOBs --Tender Option Bonds TRANs --Tax and Revenue Anticipation Notes
VRDNs --Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
MUNICIPAL CASH SERIES II
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 256,946,837
Income receivable 1,733,386
Total assets 258,680,223
LIABILITIES:
Payable for investments purchased $ 6,000,000
Income distribution payable 239,738
Payable to Bank 86,080
Accrued expenses 87,419
Total liabilities 6,413,237
NET ASSETS for 252,266,986 shares outstanding $ 252,266,986
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$252,266,986 / 252,266,986 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
MUNICIPAL CASH SERIES II
SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 5,177,763
EXPENSES:
Investment advisory fee $ 666,913
Administrative personnel and services fee 100,704
Custodian fees 13,636
Transfer and dividend disbursing agent fees and expenses 40,133
Directors'/Trustees' fees 3,858
Auditing fees 6,699
Legal fees 3,256
Portfolio accounting fees 40,196
Distribution services fee 266,765
Share registration costs 12,114
Printing and postage 7,660
Insurance premiums 1,450
Miscellaneous 1,871
Total expenses 1,165,255
Waiver --
Waiver of investment advisory fee (82,548)
Net expenses 1,082,707
Net investment income $ 4,095,056
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
MUNICIPAL CASH SERIES II
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, MAY 31,
1997 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 4,095,056 $ 5,215,377
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (4,095,056) (5,215,377)
SHARE TRANSACTIONS--
Proceeds from sale of shares 606,038,518 1,009,714,269
Net asset value of shares issued to shareholders in payment of 3,854,689 4,290,294
distributions declared
Cost of shares redeemed (610,732,705) (820,786,309)
Change in net assets resulting from share transactions (839,498) 193,218,254
Change in net assets (839,498) 193,218,254
NET ASSETS:
Beginning of period 253,106,484 59,888,230
End of period $ 252,266,986 $ 253,106,484
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
NOVEMBER 30, YEAR ENDED MAY 31,
1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.03 0.03 0.03 0.02 0.02
LESS DISTRIBUTIONS
Distributions from net
investment income (0.02) (0.03) (0.03) (0.03) (0.02) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 1.55% 2.96% 3.22% 3.02% 1.99% 2.29%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.81%* 0.79% 0.79% 0.79% 0.79% 0.77%
Net investment income 3.07%* 2.93% 3.17% 2.91% 1.97% 2.23%
Expense waiver/reimbursement(b) 0.06%* 0.16% 0.31% 0.23% 0.28% 0.50%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $252,267 $253,106 $59,888 $67,611 $131,770 $104,563
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) 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)
NOTES TO FINANCIAL STATEMENTS
MUNICIPAL CASH SERIES II
NOVEMBER 30, 1997 (UNAUDITED)
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 federal regular income tax consistent with
stability of principal.
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 uses the amortized cost method to value its portfolio securities 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.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Board of Trustees (the "Trustees"). The Fund will not incur any registration
costs upon such resales. Restricted securities are valued at amortized cost in
accordance with Rule 2a-7 under the Act.
Additional information on each restricted security held at November 30, 1997, is
as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
<S> <C> <C>
Wisconsin Housing & Economic Development Authority, 9/1/1997 $300,000
Business Development Revenue Bonds (Series 1995)
</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.
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, 1997, capital paid-in aggregated $252,266,986. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
NOVEMBER 30, 1997 MAY 31, 1997
<S> <C> <C>
Shares sold 606,038,518 1,009,714,269
Shares issued to shareholders in payment of distributions declared 3,854,689 4,290,294
Shares redeemed (610,732,705) (820,786,309)
Net change resulting from share transactions (839,498) 193,218,254
</TABLE>
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.
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, 1997, 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 $195,460,000 and $259,945,000,
respectively.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
J. Crilley Kelly
Assistant Secretary
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 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.
[Federated Securities Logo]
MUNICIPAL CASH SERIES II
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-245-7400
www.federatedinvestors.com
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
NOVEMBER 30, 1997
Cusip 147552103
1121604 (1/98)
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report for Treasury Cash Series II, a
portfolio of Cash Trust Series II, which covers the six-month reporting period
ended November 30, 1997. 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 paid a total of $0.02 in dividends per
share. In addition to income on their ready cash, the fund also offers
shareholders the important advantages of daily liquidity and stability of
principal.* Assets totaled $285 million at the end of the reporting period.
At the end of the reporting period, 83.5% of the fund's net assets was invested
in repurchase agreements backed by U.S. government securities because these
securities 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 keep your
cash working every day through the relative safety of U.S. Treasury obligations.
Please contact your investment representative if you have any questions about
your investment.
Sincerely,
[Graphic]
Richard B. Fisher
President
January 15, 1998
* 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. An investment
in this fund is not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
Treasury Cash Series II invests in direct obligations of the U.S. Treasury,
either in the form of notes and bills or as collateral for repurchase
agreements. The fund is rated AAAm by Standard & Poor's Rating Group ("S&P") and
Aaa by Moody's Investors Service, Inc. ("Moody's").*
Over the six months ended November 30, 1997, Federal Reserve Board (the "Fed")
policy remained on hold with the federal funds target rate at 5.50%. Economic
fundamentals remained strong over the reporting period, but inflationary
pressures remained benign. On the heels of the 25 basis point tightening by the
Fed in late March, 1997, short-term interest rates gradually declined over the
second quarter as fears of another near-term Fed tightening receded notably in
light of little to no evidence of price pressures. The market then traded within
a fairly narrow range through the summer months, with few new developments to
break it out of its holding pattern. Fed tightening fears were rekindled in
early October, however, as comments by Fed officials indicated an internal
debate at the Fed over whether tight labor markets and above-trend growth would
eventually lead to inflationary pressures, and many analysts expected a 25 basis
point hike in the federal funds target rate at the Fed's November 12 Federal
Open-Market Committee meeting. Turmoil in the overseas markets in late October
and into November, particularly in the Asian equity markets, took pressure off
of the Fed in the near term, however, and put them back on the sidelines until
the situation stabilizes.
Very short-term Treasury bills were heavily influenced by technical factors over
the reporting reporting period--namely, a reduction in the overall Treasury bill
auction sizes due to stronger than expected tax receipts and continued
improvement in the budget deficit. As a result, movements in the relatively
longer 1-year Treasury bill were the best barometer of the shifting market
sentiment over the reporting period. The yield on this security declined
steadily from 5.75% in early June to 5.50% in early July, then traded within a
fairly narrow range until early October. The yield then rose to 5.60% by the
middle of October as Fed tightening expectations resurfaced, plunged to 5.20% in
the midst of the Asian crisis as investors sought a safe haven in Treasury
securities, and ended the reporting period around 5.50% as the overseas markets
found some tenuous support.
Over the 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 Treasury market. Technical influences in shorter-term Treasury securities
offered opportunities to sell out of these securities and reinvest farther out
the curve. The fund remained barbelled in structure, combining a significant
position in overnight and term repurchase agreements with purchases of Treasury
bills and notes with 6- to 12-month maturities. Although the economic
fundamentals still point to an economy with a decent head of steam, the
uncertainty about the recent developments in Asia is likely to keep the Fed on
hold for the time being, and the fund will likely maintain its current stance in
the near term.
* 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.
PORTFOLIO OF INVESTMENTS
TREASURY CASH SERIES II
NOVEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM U.S. TREASURY OBLIGATIONS--22.1%
(A)U.S. TREASURY BILLS--4.5%
$ 13,000,000 5.300% - 5.625%, 12/16/97 - 6/25/1998 $ 12,839,459
U.S. TREASURY NOTE--17.6%
50,000,000 6.250%, 6/30/1998 50,122,809
Total Short-Term U.S. Treasury Obligations 62,962,268
(B)REPURCHASE AGREEMENTS--83.5%
2,000,000 (c)Credit Suisse First Boston, Inc., 5.49%, dated 10/28/1997, 2,000,000
due 12/31/1997
2,000,000 (c)Credit Suisse First Boston, Inc., 5.54%, dated 10/28/1997, 2,000,000
due 1/15/1998
4,000,000 (c)Deutsche Bank Government Securities, Inc., 7.30%, dated 4,000,000
11/24/1997, due 1/5/1998
6,000,000 (c)Morgan Stanley Group, Inc., 5.56%, dated 10/29/1997, due 6,000,000
1/27/1998
6,000,000 (c)Swiss Bank Capital Markets, 5.62%, dated 11/20/1997, due 6,000,000
1/20/1998
7,000,000 (c)Morgan Stanley Group, Inc., 5.56%, dated 10/15/1997, due 7,000,000
1/12/1998
7,000,000 (c)Swiss Bank Capital Markets, 5.54%, dated 10/2/1997, due 7,000,000
1/2/1998
8,000,000 (c)Goldman Sachs Group, LP, 5.54%, dated 10/28/1997, due 8,000,000
1/26/1998
10,000,000 Bank of Tokyo-Mitsubishi Ltd., 5.72%, dated 11/28/1997, due 10,000,000
12/1/1997
10,000,000 Barclays de Zoete Wedd Securities, Inc., 5.72%, dated 10,000,000
11/28/1997, due 12/1/1997
10,000,000 Bear, Stearns and Co., 5.72%, dated 11/28/1997, due
12/1/1997 10,000,000 10,000,000 CIBC Wood Gundy Securities Corp.,
5.70%, dated 11/28/1997, 10,000,000
due 12/1/1997
10,000,000 Deutsche Bank Government Securities, Inc., 5.72%, dated 10,000,000
11/28/1997, due 12/1/1997
10,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.70%, dated 10,000,000
11/28/1997, due 12/1/1997
10,000,000 Greenwich Capital Markets, Inc., 5.72%, dated 11/28/1997, due 10,000,000
12/1/1997
10,000,000 J.P. Morgan & Co., Inc., 5.70%, dated 11/28/1997, due 10,000,000
12/1/1997
10,000,000 Merrill Lynch, Pierce, Fenner and Smith, 5.72%, dated 10,000,000
11/28/1997, due 12/1/1997
10,000,000 Morgan Stanley Group, Inc., 5.72%, dated 11/28/1997, due 10,000,000
12/1/1997
10,000,000 Societe Generale Securities Corp., 5.70%, dated 11/28/1997, 10,000,000
due 12/1/1997
10,000,000 Toronto Dominion Securities (USA) Inc., 5.72%, dated 10,000,000
11/28/1997, due 12/1/1997
10,000,000 Westdeutsche Landesbank Girozentrale, 5.70%, dated 10,000,000
11/28/1997, due 12/1/1997
</TABLE>
TREASURY CASH SERIES II
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)REPURCHASE AGREEMENTS--CONTINUED
$ 15,000,000 BT Securities Corp., 5.73%, dated 11/28/1997, due 12/1/1997 $ 15,000,000
15,000,000 UBS Securities, Inc., 5.73%, dated 11/28/1997, due 12/1/1997 15,000,000
36,100,000 Swiss Bank Capital Markets, 5.70%, dated 11/28/1997, due 36,100,000
12/1/1997
Total Repurchase Agreements 238,100,000
Total Investments (at amortized cost)(d) $ 301,062,268
</TABLE>
(a) The issue shows the rate of discount at time of purchase.
(b) The repurchase agreements are fully collateralized by U.S. Treasury
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
($285,282,411) at November 30, 1997.
The following acronym is used throughout this portfolio:
LP--Limited Partnership
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
TREASURY CASH SERIES II
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 238,100,000
Investments in securities 62,962,268
Total investments in securities, at amortized cost and value $ 301,062,268
Income receivable 1,159,324
Total assets 302,221,592
LIABILITIES:
Payable for investments purchased 12,035,243
Income distribution payable 984,880
Payable to Bank 3,853,389
Accrued expenses 65,669
Total liabilities 16,939,181
Net Assets for 285,282,411 shares outstanding $ 285,282,411
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
$285,282,411 / 285,282,411 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
TREASURY CASH SERIES II
SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 9,218,537
EXPENSES:
Investment advisory fee $ 824,630
Administrative personnel and services fee 124,519
Custodian fees 23,516
Transfer and dividend disbursing agent fees and expenses 3,942
Directors'/Trustees' fees 4,948
Auditing fees 6,351
Legal fees 1,895
Portfolio accounting fees 38,599
Distribution services fee 318,307
Share registration costs 12,517
Printing and postage 3,133
Insurance premiums 2,639
Taxes 825
Miscellaneous 4,453
Total expenses 1,370,274
Net investment income $ 7,848,263
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
TREASURY CASH SERIES II
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
NOVEMBER 30, MAY 31,
1997 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 7,848,263 $ 16,144,501
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (7,848,263) (16,144,501)
SHARE TRANSACTIONS--
Proceeds from sale of shares 400,979,081 680,043,354
Net asset value of shares issued to shareholders in payment of 4,888,494 11,709,406
distributions declared
Cost of shares redeemed (463,656,145) (751,059,885)
Change in net assets resulting from share transactions (57,788,570) (59,307,125)
Change in net assets (57,788,570) (59,307,125)
NET ASSETS:
Beginning of period 343,070,981 402,378,106
End of period $ 285,282,411 $ 343,070,981
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
NOVEMBER 30, YEAR ENDED MAY 31,
1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
INCOME FROM
INVESTMENT OPERATIONS
Net investment income 0.02 0.05 0.05 0.04 0.02 0.03
LESS DISTRIBUTIONS
Distributions from net
investment income (0.02) (0.05) (0.05) (0.04) (0.02) (0.03)
NET ASSET VALUE,
END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
TOTAL RETURN(A) 2.42% 4.65% 4.97% 4.47% 2.47% 2.64%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.83%* 0.85% 0.86% 0.88% 0.89% 0.78%
Net investment income 4.76%* 4.55% 4.83% 4.40% 2.42% 2.55%
Expense waiver/
reimbursement(b) 0.00%* 0.01% 0.01% 0.00% 0.05% 0.19%
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $285,282 $343,071 $402,378 $243,651 $229,882 $310,648
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) 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)
NOTES TO FINANCIAL STATEMENTS
TREASURY CASH SERIES II
NOVEMBER 30, 1997 (UNAUDITED)
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 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 consistent with stability of principal and liquidity.
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 uses the amortized cost method to value its portfolio securities 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.
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.
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, 1997, capital paid-in aggregated $285,282,411.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
November 30, May 31,
1997 1997
<S> <C> <C>
Shares sold 400,979,081 680,043,354
Shares issued to shareholders in payment of distributions
declared 4,888,494 11,709,406
Shares redeemed (463,656,145) (751,059,885)
Net change resulting from share transactions (57,788,570) (59,307,125)
</TABLE>
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 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.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
J. Crilley Kelly
Assistant Secretary
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 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.
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Treasury Cash Series II
Semi-Annual Report to Shareholders
November 30, 1997
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Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 147552301
1121606 (1/98)
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