PRESIDENT'S MESSAGE
Dear Shareholder:
Municipal Cash Series II was established in 1990, and I am pleased to present
its Semi-Annual Report, which covers the six-month reporting period ended
November 30, 1998. The report begins with an investment review by the fund's
portfolio manager, Mary Jo Ochson, Senior Vice President of Federated Advisers,
which is followed by a complete listing of the fund's holdings in tax-free
securities issued by municipalities nationwide, and its financial statements.
During the reporting period, Municipal Cash Series II paid a total of $0.01 in
tax-free dividends per share.* In addition to tax-free income, this money market
fund also offers tax-sensitive shareholders the important advantages of daily
liquidity and stability of principal.** The fund has maintained a net asset
value of $1.00 per share since its inception. By the end of the reporting
period, fund assets totaled $271.9 million.
Thank you for choosing Municipal Cash Series II as a convenient way to help your
ready cash earn daily, tax-free income. Please contact your investment
representative if you have any questions about the fund.
Sincerely,
/s/ Richard B. Fisher
Richard B. Fisher
President
January 15, 1999
* Income may be subject to the federal alternative minimum tax and state and
local taxes.
** An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency.
Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
Investment Review
An interview with the fund's portfolio manager, Mary Jo Ochson, CFA, Senior Vice
President, Federated Advisers
Q. What are your comments on the economy and the interest rate environment
during the six-month reporting period?
A. The economy remained healthy over the reporting period. At the same time,
overall inflationary pressures were subdued due to a slight weakness in the
manufacturing sector resulting from the economic turmoil in Asia. Strong labor
markets with consequences of wage inflation continued to occupy the thoughts of
the Federal Reserve Board ("Fed") throughout much of the reporting period.
However, the reporting period coincided with a continuing unsteady economic
picture abroad and volatile equity markets in the U.S. as a result. Economic
activity began to slow relative to the robust pace of the first quarter of 1998
in large part due to business inventory drawdowns. Labor markets, with
unemployment at or near historical lows, continued to show strength especially
in the service sectors. Business and consumer spending moderated throughout the
reporting period, while wages and prices remained stable. The Fed's policy
switched dramatically during the reporting period, while economic indicators
gave mixed signals. Clearly the Fed was concerned with overriding weakness from
turmoil overseas and the resulting flight to quality liquidity crunch. Beginning
in September, the Fed eased 3 times in the next 7 weeks for a total of 75 basis
points. Short-term interest rates, as one would expect, followed the Fed's
action. Movements in the 1-year Treasury bill over the reporting period best
reveal the market's sentiment. The 1-year Treasury bill traded in the 5.40%
range during June and July of 1998, levels then fell to the 5.20% range by
August as market sentiment shifted toward an easing by the Fed. As the Fed ease
became more imminent, market participants pushed yields lower to the 4.75% range
by September. The reporting period ended with 1-year Treasury bill rates in the
4.50% range.
In addition to economic fundamentals, short-term municipal securities were
strongly influenced by technical factors over this reporting period, primarily
coupon payments and corporate income tax payments. These technical factors and
the Fed's bias toward easing contributed to the relative flatness of the short-
term tax-exempt yield curve. Variable rate demand notes ("VRDN"s), which
comprise more than 60% of the fund's assets, started the reporting period in the
3.50% range, but moved sharply lower in July to the 3.00% level as supply and
demand imbalances occurred. Yields then rose back to the 3.50% level by the end
of July as coupon payment reinvestment pressures eased. VRDNs yields spiked in
mid-September as corporate income tax payments provided a brief oversupply of
securities. Yields then fell as the Fed easing occurred, ending the reporting
period below where they began, at the 3.15% range. Over the six month reporting
reporting period, VRDN yields averaged roughly 64% of taxable rates making them
marginally attractive for investors at the 36% federal tax bracket and
attractive for the highest federal tax bracket. Over the same reporting period,
tax-exempt 1-year notes, as well as VRDNs, averaged 3.34%.
Q. What were your strategies for the fund during the reporting period?
A. The fund's average maturity at the beginning of the reporting period was
approximately 50 days. The fund remained in a 45 to 50 day average maturity
range over the reporting period, and moved within that range according to
relative value opportunities. We continued 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.
Once an average maturity range was targeted, the portfolio maximized performance
through ongoing relative value analysis. Our relative value analysis included
the comparison of the richness or cheapness of municipal securities to one
another, as well as municipals to taxable instruments, such as
treasury securities.
Q. How did the fund's yield react during the reporting period?
A. The 7-day net yield for the fund on November 30, 1998 was 2.79%* compared to
3.16% on June 1, 1998. Yields fell starting in July due in large part to
technical factors related to coupon reinvestment then continuing as the Fed
eased. The latest yield was the equivalent of a 4.62% taxable yield for
investors in the highest federal and state effective tax bracket.
Q. As we approach year end, what is your outlook for 1999?
A. The extent of the Asian economic crisis and its impact on U.S. growth should
be more clear as we continue into 1999. As a result, the Fed, although certain
to be troubled by persistent above-trend growth in an environment where labor
markets are tight, has shown the willingness to act quickly. If the drag on the
U.S. economy is not as great as once feared, expectations of a need for a Fed
tightening may then resurface. In the near term, market movements will likely
reflect technical as well as fundamental factors. These supply/demand imbalances
could very well present attractive investment opportunities for the fund. 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. Yields quoted for money market funds more closely
reflect the fund's current earnings.
Portfolio of Investments
Municipal Cash Series II
November 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal Amount Value
(a)Short-Term Municipals--99.3%
Alabama--5.7%
<S> <C> <C>
$655,000 Abbeville, AL, IDB Monthly VRDNs (Great Southern Wood Preserving Co.)/(SouthTrust $ 655,000
Bank of Alabama, Birmingham LOC)
3,150,000 Birmingham, AL IDA Weekly VRDNs (Mrs. Strattons Salads, Inc.)/(SouthTrust Bank of 3,150,000
Alabama, Birmingham LOC)
1,000,000 Huntsville, AL IDA Weekly VRDNs (Giles & Kendall, Inc.)/(SouthTrust Bank of Alabama, 1,000,000
Birmingham LOC)
3,100,000 Phenix City, AL, (Series 1998) Weekly VRDNs (Kudzu, LLC)/(SunTrust Bank, Atlanta LOC) 3,100,000
5,500,000 Selma, AL IDB, Solid Waste Disposal Revenue Bonds (Series A), 3.85% TOBs 5,500,000
(International Paper Co.), Optional Tender 3/1/1999
2,000,000 Troy, AL IDB, (Series 1997A) Weekly VRDNs (Hudson Cos.)/(Amsouth Bank N.A., 2,000,000
Birmingham LOC)
Total 15,405,000
Arizona--3.2%
3,650,000 Eloy, AZ IDA, (Series 1996) Weekly VRDNs (The Marley Cooling Tower Co.)/(First Union 3,650,000
National Bank, Charlotte, N.C. LOC)
5,100,000 Phoenix, AZ Civic Improvement Corp., (Airport Improvements, Series 1995) Weekly 5,100,000
VRDNs (Landesbank Hessen-Thueringen, Frankfurt LOC)
Total 8,750,000
Arkansas--1.5%
4,015,000 Arkansas Development Finance Authority, Home Mortgage Revenue Bonds (Series C), 4,015,000
3.65% BANs, 3/1/1999
California--2.2%
6,000,000 (b)California Public Capital Improvements Financing Authority, Trust Receipts
(Series 1996 FR-3) Weekly VRDNs (MBIA INS)/(Bank of New York, New York LIQ) 6,000,000
Colorado--2.3%
3,000,000 Colorado HFA, (Series 1998) Weekly VRDNs (W & R Investment Co. LLP and K & W Metal 3,000,000
Fabricators, Inc.)/(UMB Bank, N.A. LOC)
3,380,000 (b)Colorado HFA, MERLOTs (Series C), 3.40% TOBs (Corestates Bank N.A., Philadelphia, 3,380,000
PA LIQ), Optional Tender 2/1/1999
Total 6,380,000
Connecticut--1.5%
4,000,000 Bridgeport, CT, UT GO, 4.25% BANs, 3/18/1999 4,005,136
Florida--2.2%
6,000,000 Greater Orlando (FL) Aviation Authority, Airport Facilities Subordinated CP Notes 6,000,000
(Series B), 3.50% CP, Mandatory Tender 12/28/1998
Georgia--3.5%
$2,100,000 Columbus, GA Housing Authority Weekly VRDNs (Ralston Towers)/(Columbus Bank and $ 2,100,000
Trust Co., GA LOC)
2,000,000 Crisp County, GA Development Authority, (Series B), 4.20% TOBs (Masonite 2,000,000
Corporation)/ (International Paper Co. GTD), Optional Tender 9/1/1999
1,240,000 Franklin County, GA Industrial Building Authority, (Series 1995) Weekly VRDNs (Bosal 1,240,000
Industries, Inc.)/(Bank of New York, New York LOC)
3,300,000 Marietta, GA Housing Authority, Multifamily Housing Revenue Bonds (Series 1995) 3,300,000
Weekly VRDNs (Chalet Apartments Project)/(General Electric Capital Corp. LOC)
1,000,000 Savannah, GA EDA, (Series 1995A) Weekly VRDNs (Home Depot, Inc.) 1,000,000
Total 9,640,000
Hawaii--2.1%
3,000,000 Hawaii Finance and Development Corp., PT-1049 Weekly VRDNs (Merrill Lynch Capital 3,000,000
Services, Inc. LIQ)
2,745,000 (b)Hawaii State Airport System, (Second Series 1991) PT-163, 3.75% TOBs (AMBAC INS)/ 2,745,000
(Banque Nationale de Paris LIQ), Optional Tender 2/11/1999
Total 5,745,000
Idaho--1.9%
5,240,000 Idaho Housing Agency, Single Family Mortgage Bonds (PA-145) Weekly VRDNs (Merrill 5,240,000
Lynch Capital Services, Inc. LIQ)
Illinois--3.9%
3,200,000 Chicago, IL, (Series 1997) Weekly VRDNs (Trendler Components, Inc.)/(American 3,200,000
National Bank, Chicago LOC)
6,000,000 Chicago, IL, Gas Supply Revenue Bonds (1993 Series B), 3.90% TOBs (Peoples Gas Light 6,000,000
& Coke Company), Optional Tender 12/1/1998
1,400,000 Illinois Development Finance Authority Weekly VRDNs (Olympic Steel, Inc.)/(National 1,400,000
City Bank, Ohio LOC)
Total 10,600,000
Indiana--2.6%
1,500,000 Huntington, IN, (Series 1998) Weekly VRDNs (DK Enterprises LLC)/(Norwest Bank 1,500,000
Minnesota, N.A. LOC)
2,000,000 Huntington, IN, (Series 1998) Weekly VRDNs (Huesing Industries, Inc.)/(Norwest Bank 2,000,000
Minnesota, N.A. LOC)
1,325,000 Indiana Development Finance Authority, Economic Development Revenue Refunding Bonds 1,325,000
Weekly VRDNs (T. M. Morris Manufacturing Co., Inc. Project)/(Bank One, Indianapolis,
N.A. LOC)
1,000,000 Indiana Economic Development Commission, Revenue Bonds (Series 1989) Weekly VRDNs 1,000,000
(O'Neal Steel, Inc.)/(SouthTrust Bank of Alabama, Birmingham LOC)
1,210,000 Tipton, IN, (Series 1997) Weekly VRDNs (MCJS, LLC)/(Bank One, Indianapolis, N.A. LOC) 1,210,000
Total 7,035,000
Iowa--3.0%
$6,755,000 Iowa Falls, IA, (Series 1998) Weekly VRDNs (Heartland Pork Enterprises, Inc.)/(Bank $ 6,755,000
of Nova Scotia, Toronto LOC)
1,300,000 Iowa Finance Authority, (Series 1998) Weekly VRDNs (Schumacher Elevator)/(Norwest 1,300,000
Bank Minnesota, N.A. LOC)
Total 8,055,000
Kansas--0.6%
1,500,000 Olathe, KS, (Series 1998) Weekly VRDNs (Eskridge, Inc.)/(Commerce Bank, Kansas City, 1,500,000
NA LOC)
Kentucky--13.1%
6,000,000 Berea, KY, (Series 1997) Weekly VRDNs (Tokico (USA), Inc.)/(Bank of Tokyo-Mitsubishi 6,000,000
Ltd. LOC)
1,175,000 Jefferson County, KY Weekly VRDNs (Advanced Filtration, Inc.)/(Bank One, Kentucky 1,175,000
LOC)
2,500,000 Jefferson County, KY, (1997 Series A), 3.60% CP (Louisville Gas & Electric Company), 2,500,000
Mandatory Tender 12/18/1998
5,995,000 (b)Kentucky Housing Corp., (Series 1998 O), 3.80% TOBs (Bank of America NT and SA, 5,995,000
San Francisco LIQ), Mandatory Tender 8/10/1999
5,000,000 (b)Kentucky Housing Corp., Variable Rate Certificates (Series 1998 W), 3.25% TOBs 5,000,000
(Bank of America NT and SA, San Francisco LIQ), Optional Tender 6/15/1999
6,370,000 (b)Louisville & Jefferson County, KY Regional Airport Authority, (Series C) PT-211, 6,370,000
3.10% TOBs (MBIA INS)/(Bayerische Vereinsbank AG, Munich LIQ), Optional Tender
4/8/1999
2,515,000 Muhlenberg County, KY, (Series 1997) Weekly VRDNs (Plastic Products Co. 2,515,000
Project)/(Norwest Bank Minnesota, N.A. LOC)
1,785,000 Muhlenberg County, KY, (Series A) Weekly VRDNs (Plastic Products Co. 1,785,000
Project)/(Norwest Bank Minnesota, N.A. LOC)
4,400,000 Paris, KY Weekly VRDNs (Monessen Holdings, LLC)/(Bank One, Kentucky LOC) 4,400,000
Total 35,740,000
Maryland--3.9%
3,705,000 Maryland State Community Development Administration, (Series 1990 C) Weekly VRDNs 3,705,000
(Cherry Hill Apartment Ltd.)/(Nationsbank, N.A., Charlotte LOC)
990,000 Maryland State Community Development Administration, (Series 1990A) Weekly VRDNs 990,000
(College Estates)/(First National Bank of Maryland, Baltimore LOC)
6,000,000 Maryland State Community Development Administration, (Series 1990B) Weekly VRDNs 6,000,000
(Cherry Hill Apartment Ltd.)/(Nationsbank, N.A., Charlotte LOC)
Total 10,695,000
Massachusetts--1.8%
4,800,000 Massachusetts IFA Weekly VRDNs (Commonwealth Laurel Lake Realty)/(KeyBank, N.A. LOC) 4,800,000
Minnesota--4.8%
915,000 Byron, MN Weekly VRDNs (Schmidt Printing)/(Norwest Bank Minnesota, N.A. LOC) 915,000
$5,000,000 (b)Dakota County, Washington County & Anoka City, MN Housing & Redevelopment $ 5,000,000
Authority, MERLOTs (Series H), 3.35% TOBs (United States Treasury COL)/(Corestates
Bank N.A., Philadelphia, PA LIQ), Optional Tender 12/1/1998
5,000,000 Faribault, MN IDA, (Series 1988) Weekly VRDNs (Jerome Foods)/(Norwest Bank 5,000,000
Minnesota, N.A. LOC)
2,000,000 White Bear Lake, MN City of, Century Townhomes (Series 1997), 4.5475% 2,000,000
TOBs(Westdeutsche Landesbank Girozentrale), Optional Tender 5/1/1999
Total 12,915,000
Mississippi--0.5%
1,300,000 Senatobia, MS Weekly VRDNs (Deltona Lighting Products, Inc.)/(Southtrust Bank of 1,300,000
West Florida, St. Petersburg LOC)
Multi State--4.4%
12,000,000 Charter Mac Floater Certificates Trust I Weekly VRDNs (MBIA INS)/(Bayerische 12,000,000
Landesbank Girozentrale, Commerzbank AG, Frankfurt, Credit Communal de Belgique,
Brussles and Landesbank Hessen-Thueringen, Frankfurt LIQs)
Nevada--0.9%
2,500,000 Director of the State of Nevada Weekly VRDNs (Smithey-Oasis Co.)/(Mellon Bank NA, 2,500,000
Pittsburgh LOC)
New Hampshire--2.8%
5,520,000 New Hampshire Business Finance Authority, IDRB (Series A) Weekly VRDNs (Upper Valley 5,520,000
Press)/(KeyBank, N.A. LOC)
2,000,000 New Hampshire State IDA, (Series 1991), 4.25% TOBs (International Paper Co.), 2,000,000
Optional Tender 10/15/1999
Total 7,520,000
New Jersey--1.8%
1,850,025 Berkeley Township, NJ, 3.50% BANs, 7/30/1999 1,853,014
3,000,000 Lakewood Township, NJ, 3.50% BANs, 7/28/1999 3,005,746
Total 4,858,760
North Carolina--2.4%
6,600,000 Person County, NC Industrial Facilities & Pollution Control Financing Authority 6,600,000
Daily VRDNs (Carolina Power & Light Co.)/(SunTrust Bank, Atlanta LOC)
North Dakota--0.4%
1,145,000 Fargo, ND, IDRB (Series 1994) Weekly VRDNs (Pan-O-Gold Baking Co. Project)/(Norwest 1,145,000
Bank Minnesota, N.A. LOC)
Ohio--6.4%
5,000,000 Ohio HFA, Residential Mortgage Revenue Notes (1998 Series A-2), 3.80% BANs, 3/1/1999 5,000,000
7,600,000 Ohio State Air Quality Development Authority, Air Quality Development Revenue Bonds 7,600,000
(1995 Series B) Weekly VRDNs (JMG Funding Limited Partnership)/(Societe Generale,
Paris LOC)
Ohio--continued
$4,000,000 Ohio State Water Development Authority, Ohio PCR Bonds (Series 1989) Weekly VRDNs $ 4,000,000
(Duquesne Light Power Co.)/(First National Bank of Chicago LOC)
775,000 Strongsville, OH, 3.40% BANs, 11/4/1999 776,737
Total 17,376,737
Oregon--0.7%
2,000,000 Oregon School Boards Association, Pooled Short-Term Borrowing Program (Series 2,000,000
1998A), 4.00% TRANs, 6/30/1999
Pennsylvania--1.8%
450,000 Pennsylvania EDFA Weekly VRDNs (Respironics, Inc.)/(PNC Bank, N.A. LOC) 450,000
1,414,400 Pennsylvania EDFA, (Series 1992 C) Weekly VRDNs (Leonard H. Berenfield/Berenfield 1,414,400
Containers)/(PNC Bank, N.A. LOC)
3,000,000 Pennsylvania EDFA, Economic Development Revenue Bonds (1996 Series D6) Weekly VRDNs 3,000,000
(Toyo Tanso Specialty Materials, Inc.)/(PNC Bank, N.A. LOC)
Total 4,864,400
Rhode Island--0.7%
2,000,000 Central Falls, RI, 3.90% BANs, 7/15/1999 2,003,613
South Carolina--1.5%
4,000,000 South Carolina Job Development Authority Weekly VRDNs (Boozer Lumber 4,000,000
Co.)/(SouthTrust Bank of Alabama, Birmingham LOC)
South Dakota--2.3%
3,000,000 South Dakota Housing Development Authority, (1998 Series B), 3.75% BANs, 8/5/1999 3,000,000
3,130,000 South Dakota Housing Development Authority, Homeownership Mortgage Bonds (1997 3,130,000
Series E) Weekly VRDNs
Total 6,130,000
Tennessee--0.4%
500,000 Chattanooga, TN IDB, (Series 1997) Weekly VRDNs (YMCA Projects)/(SunTrust Bank, 500,000
Nashville LOC)
500,000 Jackson, TN IDB, Solid Waste Facility Bonds (Series 1995) Weekly VRDNs (Florida 500,000
Steel Corp.)/(Nationsbank, N.A., Charlotte LOC)
Total 1,000,000
Texas--2.3%
2,000,000 Angelina and Neches River Authority, Texas, Solid Waste Disposal Revenue Bonds 2,000,000
(Series 1993), 4.00% CP (Temple-Eastex Inc.)/(Temple-Inland, Inc. GTD),Mandatory
Tender 3/8/1999
3,200,000 Tarrant County, TX IDC Weekly VRDNs (Holden Business Forms)/(Norwest Bank Minnesota, 3,200,000
N.A. LOC)
$1,000,000 Tarrant County, TX IDC, (Series 1997) Weekly VRDNs (Lear Operations Corp.)/(Chase $ 1,000,000
Manhattan Bank N.A., New York LOC)
Total 6,200,000
Utah--2.8%
3,650,000 Heber City, UT, (Series 1998) Weekly VRDNs (Industrial Parkway Properties, 3,650,000
LLC)/(Bank One, Arizona N.A. LOC)
4,130,000 Utah County, UT, Industrial Development Revenue Bonds (Series 1992) Weekly VRDNs 4,130,000
(McWane, Inc. Project)/(Amsouth Bank N.A., Birmingham LOC)
Total 7,780,000
Virginia--1.3%
2,500,000 Carroll County, VA IDA, IDRB (Series 1995) Weekly VRDNs (Kentucky Derby Hosiery Co, 2,500,000
Inc Project)/(Bank One, Kentucky LOC)
1,110,000 South Hill, VA IDA, (Series 1997) Weekly VRDNs (International Veneer Co., 1,110,000
Inc.)/(Bank One, Indiana, N.A. LOC)
Total 3,610,000
West Virginia--0.7%
2,000,000 Ritchie County, WV, IDRB (Series 1996) Weekly VRDNs (Simonton Building Products, 2,000,000
Inc.)/ (PNC Bank, N.A. LOC)
Wisconsin--3.4%
1,700,000 Combined Locks, WI, Development Revenue Bonds, Series 1997 Weekly VRDNs (Appleton 1,700,000
Papers)/(Bank of Nova Scotia, Toronto LOC)
1,500,000 Lancaster, WI Community School District, 3.60% TRANs, 10/29/1999 1,503,957
1,360,000 Milwaukee, WI Weekly VRDNs (Pelton Casteel, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 1,360,000
2,000,000 Plymouth, WI IDB Weekly VRDNs (Great Lakes Cheese)/(Rabobank Nederland, Utrecht LOC) 2,000,000
600,000 Portage, WI, IDRB (Series 1994) Weekly VRDNs (Portage Industries Corp. 600,000
Project)/(Bank One, Wisconsin, N.A. LOC)
1,995,000 Wisconsin Housing & Economic Development Authority, Business Development Revenue 1,995,000
Bonds (Series 1995) Weekly VRDNs (Carlson Tool & Manufacturing Corp.)/(Firstar Bank,
Milwaukee LOC)
Total 9,158,957
Wyoming--2.0%
5,510,000 (b)Wyoming Community Development Authority, PT-195, 3.85% TOBs (Banco Santander SA 5,510,000
LIQ), Optional Tender 5/13/1999
Total Investments (at amortized cost)(c) $270,077,603
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 91.2% 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 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 Corporation, MIG-1, or MIG-2 by Moody's Investors
Service, Inc., 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, 1998, the portfolio securities were rated as follows:
Tier Rating Based On Total Market Value (unaudited)
First Tier Second Tier
93.5% 6.5%
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At November 30, 1998, these securities
amounted to $40,000,000 which represents 14.7% of net assets.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($271,904,415) at November 30, 1998.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation
BANs --Bond Anticipation Notes
COL --Collateralized
CP --Commercial Paper
EDA --Economic Development Authority
EDFA --Economic Development Financing Authority
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
IFA --Industrial Finance Authority
INS --Insured
LIQ --Liquidity Agreement
LLC --Limited Liability Corporation
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
MERLOTs --Municipal Exempt Receipts Liquidity Optional Tender Series
PCR --Pollution Control Revenue
SA --Support Agreement
TOBs --Tender Option Bonds
TRANs --Tax and Revenue Anticipation Notes
UT --Unlimited Tax
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, 1998 (unaudited)
<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Total investments in securities, at amortized cost and value $270,077,603
Cash 368,269
Income receivable 1,748,464
Prepaid expenses 16,684
Total assets 272,211,020
Liabilities:
Income distribution payable $246,030
Accrued expenses 60,575
Total liabilities 306,605
Net Assets for 271,904,415 shares outstanding $271,904,415
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$271,904,415 divide 271,904,415 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, 1998 (unaudited)
<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C>
Interest $4,810,587
Expenses:
Investment advisory fee $ 652,057
Administrative personnel and services fee 98,330
Custodian fees 4,684
Transfer and dividend disbursing agent fees and expenses 32,560
Directors'/Trustees' fees 4,793
Auditing fees 6,945
Legal fees 8,961
Portfolio accounting fees 31,168
Distribution services fee 260,823
Share registration costs 16,574
Printing and postage 6,487
Insurance premiums 14,267
Taxes 180
Miscellaneous 2,753
Total expenses 1,140,582
Waiver--
Waiver of investment advisory fee (78,511)
Net expenses 1,062,071
Net investment income $3,748,516
</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, 1998 May 31, 1998
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 3,748,516 $ 8,334,333
Distributions to Shareholders--
Distributions from net investment income (3,748,516) (8,334,333)
Share Transactions--
Proceeds from sale of shares 575,469,872 1,285,533,598
Net asset value of shares issued to shareholders in
payment of distributions declared 3,433,773 7,736,401
Cost of shares redeemed (573,075,158) (1,280,300,555)
Change in net assets resulting from share transactions 5,828,487 12,969,444
Change in net assets 5,828,487 12,969,444
Net Assets:
Beginning of period 266,075,928 253,106,484
End of period $ 271,904,415 $ 266,075,928
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Financial Highlights
Municipal Cash Series II
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited)
November 30, Year Ended May 31,
1998 1998 1997 1996 1995 1994
<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 0.01 0.03 0.03 0.03 0.03 0.02
Less distributions
Distributions from net investment income (0.01) (0.03) (0.03) (0.03) (0.03) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 1.45% 3.09% 2.96% 3.22% 3.02% 1.99%
Ratios to average net assets
Expenses 0.81%* 0.81% 0.79% 0.79% 0.79% 0.79%
Net investment income 2.88%* 3.03% 2.93% 3.17% 2.91% 1.97%
Expense waiver/reimbursement(b) 0.06%* 0.04% 0.16% 0.31% 0.23% 0.28%
Supplemental data
Net assets, end of period (000 omitted) $271,904 $266,076 $253,106 $59,888 $67,611 $131,770
</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, 1998 (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, 1998 is
as follows:
<TABLE>
<CAPTION>
Security Acquisition Date Acquisition Cost
<S> <C> <C>
California Public Capital Improvements Financing Authority,
Trust Receipts (Series 1996FR-3) Weekly VRDNs 11/24/1998-11/30/1998 $6,048,822
Colorado HFA, MERLOTs (Series C) 11/2/1998 3,413,274
Dakota County, Washington County & Anoka City, MN
Housing & Redevelopment Authority, MERLOTs (Series H) 9/1/1998 5,000,000
Hawaii State Airport System, (Second Series 1991) PT-163 3/6/1998 2,745,226
Kentucky Housing Corp., (Series 1998 O) 8/12/1998 5,995,000
Kentucky Housing Corp., Variable Rate Certificates
(Series 1998 W) 11/19/1998 5,000,000
Louisville & Jefferson County, KY Regional Airport Authority,
(Series C) PT-211 10/26/1998 6,430,025
Wyoming Community Development Authority, PT-195 5/29/1998 5,510,581
</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, 1998, capital paid-in aggregated $271,904,415. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended
(unaudited) Year Ended
November 30, 1998 May 31, 1998
<S> <C> <C>
Shares sold 575,469,872 1,285,533,598
Shares issued to shareholders in payment of distributions declared 3,433,773 7,736,401
Shares redeemed (573,075,158) (1,280,300,555)
Net change resulting from share transactions 5,828,487 12,969,444
</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, Inc. 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 Transaction
During the period ended November 30, 1998, the Fund engaged in the purchase and
sale transaction 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 $250,200,000 and $254,460,000,
respectively.
General
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
Year 2000 (Unaudited)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
Trustees Officers
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr.
Nicholas P. Constantakis Richard B. Fisher
William J. Copeland President
J. Christopher Donahue
James E. Dowd, Esq. J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr., Esq.
Peter E. Madden Edward C. Gonzales
John E. Murray, Jr., J.D., S.J.D. Executive Vice President
Wesley W. Posvar
Marjorie P. Smuts John W. McGonigle
Executive Vice President
and Secretary
Richard J. Thomas
Treasurer
Nicholas J. Seitanakis
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.
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.
[LOGO] FEDERATED INVESTORS
Municipal
Cash Series II
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Semi-Annual Report
to Shareholders
November 30, 1998
Cusip 147552103
1121604 (1/99)
[LOGO]
RECYCLED
PAPER
PRESIDENT'S MESSAGE
Dear Shareholder:
Treasury Cash Series II was established in 1990, and I am pleased to present its
Semi-Annual Report, which covers the six-month reporting period ended November
30, 1998. The report begins with an investment review by the fund's portfolio
manager, Susan R. Hill, Vice President of Federated Advisers, which is followed
by a complete listing of the fund's investments, and its financial statements.
During the reporting period, Treasury Cash Series II paid a total of $0.02 in
dividends per share. In addition to income on their ready cash, this highly
conservative money market fund also offers shareholders the important advantages
of daily liquidity and stability of principal.* Assets totaled $213 million at
the reporting period's end.
At the end of the reporting period, 85.6% of the fund's assets was invested in
repurchase agreements backed by U.S. government securities, because these
securities offered yield advantage over many direct government securities. The
remainder of the fund's assets were 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 through the relative safety of U.S. Treasury money market
obligations. Please contact your investment representative if you have any
questions about the fund.
Sincerely,
/s/ Richard B. Fisher
Richard B. Fisher
President
January 15, 1999
* An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
the fund seeks to preserve the value of your investment at $1.00 per share, it
is possible to lose money by investing in the fund.
INVESTMENT REVIEW
Treasury Cash Series II is invested 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 ("S&P")* and Aaa by
Moody's Investors Service, Inc., ("Moody's").**
Early in the reporting period, economic fundamentals were still the driving
factor behind movements in short-term interest rates. With economic growth still
strong--albeit slowing from its torrid 5.50% pace of growth in the first quarter
of 1998--market participants were content with the idea that the Federal Reserve
Board ("Fed") would remain on the sidelines. The anticipated drag on the U.S.
economy resulting from the economic crises in Asia had become apparent--
particularly in the manufacturing sector--over the second quarter of 1998. This
slowdown lent comfort to investors that economic growth would not be so robust
as to ignite inflationary pressures.
By the third quarter of 1998, however, a dramatic shift in market sentiment was
evident. Uncertainty in the world economies resulted in vulnerability in our
domestic equity market, and led to a substantial flight to quality to U.S.
Treasury securities across the yield curve. Economic trouble spread to include
Russia and Latin America, and what had been perceived to have been a fairly
modest drag on the U.S. economies, as a result of the remote Asian crisis, now
became an overpowering influence on the market and expectations regarding future
U.S. growth. Although economic fundamentals still remained fairly positive in
this environment, fear dominated market sentiment over this reporting period.
Expectations regarding the direction of the next change in monetary policy did
an abrupt about-face over the reporting period. The Fed had adopted a tightening
bias in March, a reflection of their underlying concern about inflationary
pressures. By August, the Fed had removed it's tightening bias as Fed officials
perceived that the risks to the economy had become more balanced. By late
August, however, market expectations that the Fed might eventually need to ease
monetary policy to help the U.S. economy along, as a result of the world
economic struggles, had begun to grow. This expectation intensified throughout
September, and at the September 29,1998, Federal Open Market Committee ("FOMC")
meeting, the Fed voted to ease monetary policy by a modest 25 basis points. The
Fed followed that move with another 25 basis point ease on October 15, 1998,
which brought the Federal Funds Target Rate down to 5.00%. The Fed also voted to
cut the discount rate by the same magnitude, from 5.00% to 4.75%, at that time.
And finally, in mid-November, the Fed voted once again at its November 17, 1998
FOMC meeting to reduce the Federal Funds Target Rate and the discount rate by 25
basis points. These moves were a reflection of concern over the potential
economic impact that the crises in foreign economies would have on U.S. domestic
growth, as well as with the liquidity/credit crisis evident in the fixed-income
markets.
Short-term interest rates reflected the turmoil and shift in monetary policy
over the reporting period. From June through August, the yield on the three-
month Treasury bill traded within a range of 5.00% - 5.25%, driven by technical
supply factors rather than market sentiment. By mid-August, however, the trouble
in the Asian economies had broadened to include Russia and Latin America, and a
flight to quality to U.S. Treasury securities from investors seeking a safe
haven became evident. The three-month bill declined steadily in ensuing weeks to
3.60% in mid-October, around the time of the second easing step by the Fed. The
yield decline was exacerbated by the overall decline in issuance of Treasury
securities due to the improving federal budget picture. The sudden inter-meeting
move by the Fed in October, coupled with the added insurance of the ease in
November, had the desired affect of calming the turbulent financial markets,
however, and the three-month bill retraced some of the flight to quality
influence to end the reporting period at 4.50%.
Over the reporting period, the fund was targeted in a 35 to 45 day average
maturity range, reflecting the relatively expensive nature of the short-term
Treasury yield curve. The average maturity of the fund varied within that range
according to relative value opportunities available in the Treasury market. The
fund remained barbelled in structure, combining a significant position in
overnight and term repurchase agreements with purchases of Treasury securities--
predominantly Treasury notes--with 6 to 13 month maturities. We believe the 75
basis point cumulative easing in monetary policy by the Fed should be
sufficient, for now, to provide comfort to the market that the economy will be
able to withstand the drag from overseas. As a result, the Fed should remain on
the sidelines in the near term until additional light is shed on the health of
the economy and its longer term prospects for growth.
* This rating is obtained after S&P evaluates a number of factors including
credit quality, market price exposure and management. S&P monitors the
portfolio weekly for development that could cause changes in the ratings.
Ratings are subject to change, and do not remove market risks.
** Money market 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, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Short-Term U.S. Treasury Obligations--22.0%
(a)U.S. Treasury Bills--5.2%
$11,000,000 4.410% - 4.860%, 12/15/1998 - 1/21/1999 $ 10,974,853
U.S. Treasury Notes--16.8%
35,650,000 5.625% - 7.000%, 3/31/1999 - 11/30/1999 35,899,216
Total Short-Term U.S. Treasury Obligations 46,874,069
(b)Repurchase Agreements--85.6%
9,000,000 ABN AMRO Chicago Corp., 5.300%, dated 11/30/1998, due 12/1/1998 9,000,000
10,000,000 Barclays de Zoete Wedd Securities, Inc., 5.300%, dated 11/30/1998, due 12/1/1998 10,000,000
10,000,000 Bear, Stearns and Co., 5.380%, dated 11/30/1998, due 12/1/1998 10,000,000
10,000,000 CIBC Wood Gundy Securities Corp., 5.300%, dated 11/30/1998, due 12/1/1998 10,000,000
3,500,000 (c)Deutsche Bank Government Securities, Inc., 4.800%, dated 10/29/1998, due 12/8/1999 3,500,000
16,900,000 Deutsche Bank Government Securities, Inc., 5.320%, dated 11/30/1998, due 12/1/1998 16,900,000
10,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.350%, dated 11/30/1998, due 12/1/1998 10,000,000
10,000,000 First Union Capital Markets, 5.350%, dated 11/30/1998, due 12/1/1998 10,000,000
5,000,000 (c)Goldman Sachs Group, LP, 4.88%, dated 11/30/1998, due 2/3/1999 5,000,000
8,000,000 (c)Goldman Sachs Group, LP, 5.100%, dated 10/8/1998, due 1/6/1999 8,000,000
10,000,000 Greenwich Capital Markets, Inc., 5.350%, dated 11/30/1998, due 12/1/1998 10,000,000
5,000,000 (c)J.P. Morgan & Co., Inc., 4.740%, dated 11/17/1998, due 2/17/1999 5,000,000
10,000,000 Paribas Corp., 5.350%, dated 11/30/1998, due 12/1/1998 10,000,000
10,000,000 Salomon Brothers, Inc., 5.350%, dated 11/30/1998, due 12/1/1998 10,000,000
10,000,000 Societe Generale Securities Corp., 5.350%, dated 11/30/1998, due 12/1/1998 10,000,000
10,000,000 Toronto Dominion Securities (USA) Inc., 5.350%, dated 11/30/1998, due 12/1/1998 10,000,000
5,000,000 (c)Warburg Dillon Reed LLC, 4.740%, dated 11/19/1998, due 2/18/1999 5,000,000
30,000,000 Warburg Dillon Reed LLC, 5.370%, dated 11/30/1998, due 12/1/1998 30,000,000
Total Repurchase Agreements 182,400,000
Total Investments (at amortized cost)(d) $229,274,069
</TABLE>
(a) Each issue shows the rate of discount at the 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
($213,165,761) at November 30, 1998.
The following acronyms are used throughout this portfolio:
LLC--Limited Liability Corporation
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, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Assets:
Investments in repurchase agreements $182,400,000
Investments in securities 46,874,069
Total investments in securities, at amortized cost and value $229,274,069
Cash 11,512
Income receivable 504,817
Total assets 229,790,398
Liabilities:
Payable for investments purchased $ 15,990,395
Income distribution payable 579,169
Accrued expenses 55,073
Total liabilities 16,624,637
Net Assets for 213,165,761 shares outstanding $213,165,761
Net Asset Value, Offering Price, and Redemption Proceeds Per
Share:
$213,165,761 / 213,165,761 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, 1998 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income:
Interest $5,395,098
Expenses:
Investment advisory fee $500,099
Administrative personnel and services fee 75,415
Custodian fees 21,496
Transfer and dividend disbursing agent fees and expenses 24,517
Directors'/Trustees' fees 2,825
Auditing fees 6,590
Legal fees 2,472
Portfolio accounting fees 35,475
Distribution services fee 193,038
Share registration costs 12,418
Printing and postage 5,031
Insurance premiums 1,892
Miscellaneous 633
Total expenses 881,901
Waivers --
Waiver of investment advisory fee (51,736)
Net expenses 830,165
Net investment income $4,564,933
</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, 1998 May 31, 1998
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 4,564,933 $ 12,532,262
Distributions to Shareholders--
Distributions from net investment income (4,564,933) (12,532,262)
Share Transactions--
Proceeds from sale of shares 459,770,872 755,859,593
Net asset value of shares issued to shareholders in
payment of distributions declared 2,026,572 7,918,633
Cost of shares redeemed (475,298,710) (880,182,180)
Change in net assets resulting from share transactions (13,501,266) (116,403,954)
Change in net assets (13,501,266) (116,403,954)
Net Assets:
Beginning of period 226,667,027 343,070,981
End of period $ 213,165,761 $ 226,667,027
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
Treasury Cash Series II
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited)
November 30, Year Ended May 31,
1998 1998 1997 1996 1995 1994
<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 0.05 0.04 0.02
Less distributions
Distributions from net investment income (0.02) 0.05) (0.05) (0.05) (0.04) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return(a) 2.32% 4.88% 4.65% 4.97% 4.47% 2.47%
Ratios to average net assets
Expenses 0.83%* 0.83% 0.85% 0.86% 0.88% 0.89%
Net investment income 4.56%* 4.76% 4.55% 4.83% 4.40% 2.42%
Expense waiver/reimbursement(b) 0.05%* 0.02% 0.01% 0.01% 0.00% 0.05%
Supplemental data
Net assets, end of period (000 omitted) $213,166 $226,667 $343,071 $402,378 $243,651 $229,882
</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, 1998 (unaudited)
Organization
Cash Trust Series II (the "Corporation") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Corporation consists of 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 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"). Dividend income and 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 revisions 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 financial fractional shares of beneficial interest (without par value).
At November 30, 1998, capital paid-in aggregated $213,165,761. Transactions in
capital stock were as follows:
<TABLE>
<CAPTION>
Six Months
Ended November 30,
1998 1997
<S> <C> <C>
Shares sold 459,770,872 755,859,593
Shares issued to shareholders in payment of 2,026,572 7,918,633
distributions declared
Shares redeemed (475,298,710) (880,182,180)
Net change resulting from share transactions (13,501,266) (116,403,954)
</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, Inc. 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. The
distributor may voluntarily choose to waive any portion of its fee. The
distributor 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 Directors of the Corporation are Officers and
Directors or Trustees of the above companies.
Year 2000 (Unaudited)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
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
and Secretary
Richard J. Thomas
Treasurer
Nicholas J. Seitanakis
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.
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.
[LOGO] FEDERATED INVESTORS
Treasury Cash Series II
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Semi-Annual Report
to Shareholders
November 30, 1998
Cusip 147552301
1121606 (1/99)
[LOGO]
RECYCLED
PAPER
