LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST, 497, 1996-11-18

LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST
497, 1996-11-18

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PROSPECTUS

The Institutional Shares (formerly, Class A Shares) of Municipal Obligations
Fund (formerly, Municipal Money Market Fund) (the "Fund") offered by this
prospectus represent interests in a portfolio of Money Market Obligations Trust
II (formerly, Lehman Brothers Institutional Funds Group Trust) (the "Trust"), an
open-end management investment company (a mutual fund). The Fund invests in a
portfolio of short-term tax-exempt obligations issued by state and local
governments and other tax-exempt securities to provide dividend income exempt
from federal regular income tax consistent with stability of principal.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR 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 THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.

This prospectus contains the information you should read and know before you
invest in Institutional Shares of the Fund. Keep this prospectus for future
reference.

The Fund has also filed a Statement of Additional Information dated May 30, 1996
(Revised November 15, 1996), with the Securities and Exchange Commission (the
"SEC"). The information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of the
Statement of Additional Information or a paper copy of this prospectus, if you
have received your prospectus electronically, free of charge by calling
1-800-341-7400. To obtain other information, or make inquiries about the Fund,
contact your financial institution. The Statement of Additional Information,
material incorporated by reference into this document, and other information
regarding the Fund is maintained electronically with the SEC at Internet Web
site (http://www.sec.gov.).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus dated May 30, 1996

(Revised November 15, 1996)

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 2

- ------------------------------------------------------

GENERAL INFORMATION 3
- ------------------------------------------------------

INVESTMENT INFORMATION 3
- ------------------------------------------------------

Investment Objective 3
Investment Policies 3
Investment Limitations 9

FUND INFORMATION 10
- ------------------------------------------------------

Management of the Fund 10
Distribution of Institutional
Shares 11
Administration of the Fund 11
Expenses of the Fund and
Institutional Shares 12

NET ASSET VALUE 12
- ------------------------------------------------------

HOW TO PURCHASE SHARES 12
- ------------------------------------------------------

HOW TO REDEEM SHARES 13
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 14
- ------------------------------------------------------

TAX INFORMATION 15
- ------------------------------------------------------

Federal Income Tax 15
State and Local Taxes 16

OTHER CLASSES OF SHARES 16
- ------------------------------------------------------

PERFORMANCE INFORMATION 16
- ------------------------------------------------------

ADDRESSES Inside Back Cover
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES

- --------------------------------------------------------------------------------

INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)............................. None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................................................. None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver) (1)......................................................................... 0.00%
12b-1 Fee................................................................................................. None
Total Other Expenses (after expense reimbursement)........................................................ 0.18%
Shareholder Services Fee (2).............................................................. 0.00%
Total Operating Expenses (3).............................................................................. 0.18%
</TABLE>

(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of the management fee. The adviser can terminate this
anticipated voluntary waiver at any time at its sole discretion. The maximum
management fee is 0.20%.

(2) There is no present intention of paying or accruing the shareholder services
fee during the fiscal year ending January 31, 1997 for Institutional Shares.
If Institutional Shares were paying or accruing the shareholder services
fee, Institutional Shares would pay up to 0.25% of its average daily net
assets for the shareholder services fee. See "Fund Information."

(3) The operating expenses are estimated to be 0.42% absent the anticipated
voluntary waiver of the management fee and the anticipated voluntary
reimbursement of certain other operating expenses.

* Total Institutional Shares operating expenses are estimated based on average
expenses expected to be incurred during the period ending January 31, 1997.
During the course of this period, expenses may be more or less than the
average amount shown.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INSTITUTIONAL SHARES WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION." WIRE-TRANSFERRED REDEMPTIONS
OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period............. $2 $6 $10 $23
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE INSTITUTIONAL SHARES' FISCAL YEAR
ENDING JANUARY 31, 1997.

MUNICIPAL OBLIGATIONS FUND
(FORMERLY, MUNICIPAL MONEY MARKET FUND)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FORMERLY, CLASS A SHARES)

- --------------------------------------------------------------------------------

The following financial highlights for the fiscal year ended January 31, 1996
are derived from the Fund's financial statements audited by Ernst & Young LLP,
independent auditors, whose report thereon appears in the Trust's Annual Report
dated January 31, 1996. This information should be read in conjunction with the
financial statements and notes thereto that also appear in the Trust's Annual
Report.

<TABLE>
<CAPTION>
YEAR YEAR PERIOD
ENDED ENDED ENDED
1/31/96 1/31/95 1/31/94*
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------- --------- --------- -----------
Net investment income (1) 0.0396 0.0300 0.0243
- ----------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------------------------------------------------
Dividends from net investment income (0.0396) (0.0300) (0.0243)
- ----------------------------------------------------------------------------------
Distributions from net realized gains (0.0000)** -- --
- ---------------------------------------------------------------------------------- --------- --------- -----------
TOTAL DISTRIBUTIONS (0.0396) (0.0300) (0.0243)
- ---------------------------------------------------------------------------------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ---------------------------------------------------------------------------------- --------- --------- -----------
TOTAL RETURN (2) 4.03% 3.04% 2.46%
- ----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------
Net assets, end of period (in 000's)
$135,120
$93,595
$350,975
- ----------------------------------------------------------------------------------
Ratio of net investment income to average net assets 3.95% 2.86% 2.53%(3)
- ----------------------------------------------------------------------------------
Ratio of operating expenses to average net assets (4) 0.18% 0.15% 0.13%(3)
- ----------------------------------------------------------------------------------
</TABLE>

* The Institutional Shares commenced operations on February 8, 1993.

** Amount represents less than $0.0001 per share.

(1) Net investment income per share before waiver of fees by the Investment
Adviser, Administrator, Custodian and/or Transfer Agent and/or expenses
reimbursed by the Investment Adviser and Administrator for the Institutional
Shares was $0.0384 and $0.0283, respectively, for the years ended January
31, 1996 and 1995 and $0.0201 for the period ended January 31, 1994 for the
Municipal Obligations Fund.

(2) Total return represents aggregate total return for the periods indicated.

(3) Annualized.

(4) Annualized expense ratios before waiver of fees by the Investment Adviser,
Administrator, Custodian and/or Transfer Agent and/or expenses reimbursed by
the Investment Adviser and Administrator for Institutional Shares were 0.30%
and 0.31%, respectively, for the years ended January 31, 1996 and 1995 and
0.51% for the period ended January 31, 1994 for the Municipal Obligations
Fund.

GENERAL INFORMATION

- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 25, 1992. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Board of
Trustees ("the Trustees") has established three classes of shares known as
Institutional Shares, Institutional Service Shares and Institutional Capital
Shares. This prospectus relates only to Institutional Shares of the Fund, which
are designed primarily for entities holding shares in an agency or fiduciary
capacity, financial institutions, financial intermediaries and institutional
investors as a convenient means of accumulating an interest in a professionally
managed portfolio investing in a portfolio of short-term tax-exempt obligations
as described below. A minimum initial investment of $1,000,000 over a one-year
period is required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide dividend income exempt from
federal regular income tax consistent with stability of principal. This
investment objective may be changed by the Trustees without shareholder
approval. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by complying with the diversification and other
requirements of Rule 2a-7 under the Investment Company Act of 1940 which
regulates money market mutual funds and by following the investment policies
described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing substantially all of its
assets in a portfolio of short-term tax-exempt obligations issued by or on
behalf of states, territories and possessions of the United States, the District
of Columbia, and their respective authorities, agencies, instrumentalities and
political subdivisions and tax-exempt securities such as tender option bonds,
participations, beneficial interests in trusts and partnership interests
(collectively, "Municipal Obligations"). The Fund invests only in securities
that have (or, pursuant to regulations adopted by the SEC, will be deemed to
have) remaining maturities of thirteen months or less at the date of purchase by
the Fund. The Fund will not knowingly purchase securities the interest of which
is subject to federal regular income tax. Except during temporary defensive
periods, the Fund will invest substantially all, but in no event less than 80%
of its net assets, in Municipal Obligations. The Fund also has the ability to
enter into repurchase agreements. Certain securities held by the Fund may have
remaining maturities in excess of stated limitations discussed below if
securities provide for adjustments in their interest rates not less frequently
than such time limitations. The average maturity of the money market instruments
in the Fund's portfolio, computed on a dollar-weighted basis, will be 90

days or less. Unless indicated otherwise, the investment policies may be changed
by the Trustees without shareholder approval.

ACCEPTABLE INVESTMENTS. The Fund invests in securities rated by the "Requisite
NRSROs." "Requisite NRSROs" means (a) any two nationally-recognized statistical
rating organizations ("NRSROs") that have issued a rating with respect to a
security or class of debt obligations of an issuer, or (b) one NRSRO, if only
one NRSRO has issued such a rating at the time that the Fund acquires the
security. Currently, there are six NRSROs: Standard & Poor's Ratings Group, a
division of The McGraw-Hill Companies ("S&P"); Moody's Investors Service, Inc.
("Moody's"); Fitch Investors Services, Inc. ("Fitch"); Duff and Phelps, Inc.;
IBCA Limited and its affiliate, IBCA, Inc.; and Thomson Bankwatch. A discussion
of the ratings categories of the NRSROs is contained in the Appendix to the
Statement of Additional Information.

The Fund will purchase Municipal Obligations that present minimal credit risk as
determined by the adviser pursuant to guidelines approved by the Trustees. The
Fund invests in "Eligible Securities" at the time of acquisition by the Fund.
The term Eligible Securities includes securities rated by the Requisite NRSROs
in one of the two highest short-term rating categories, securities of issuers
that have received such rating with respect to other short-term debt securities
and comparable unrated securities. The Fund may hold uninvested cash reserves
pending investment or during temporary defensive periods, including when
suitable tax-exempt obligations are unavailable. There is no percentage
limitation on the amount of assets which may be held uninvested. Uninvested cash
reserves will not earn income.

REPURCHASE AGREEMENTS. The Fund may agree to purchase securities from financial
institutions subject to the seller's agreement to repurchase them at an agreed
upon time and price within one year from the date of acquisition ("repurchase
agreements"). The Fund will not invest more than 10% of the value of its net
assets in repurchase agreements with terms which exceed seven days. The seller
under a repurchase agreement will be required to maintain the value of the
securities subject to the agreement at not less than the repurchase price
(including accrued interest). Default by or bankruptcy of the seller would,
however, expose the Fund to possible loss because of adverse market action or
delay in connection with the disposition of the underlying obligations.

REVERSE REPURCHASE AGREEMENTS. The Fund may borrow funds for temporary purposes
by entering into reverse repurchase agreements in accordance with the investment
restrictions described below. Pursuant to such agreements, the Fund would sell
portfolio securities to financial institutions and agree to repurchase them at
an agreed upon date and price. The Fund would consider entering into reverse
repurchase agreements to avoid otherwise selling securities during unfavorable
market conditions. Reverse repurchase agreements involve the risk that the
market value of the securities sold by the Fund may decline below the price of
the securities the Fund is obligated to repurchase. The Fund may engage in
reverse repurchase agreements provided that the amount of the reverse repurchase
agreements and any other borrowings does not exceed one-third of the value of
the Fund's total assets (including the amount borrowed) less liabilities (other
than borrowings).

until they are received. Securities purchased on a when-issued basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. The Fund expects that commitments to
purchase when-issued securities will not exceed 25% of the value of its total
assets absent unusual market conditions. The Fund does not intend to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objective.

ILLIQUID SECURITIES. The Fund will not knowingly invest more than 10% of the
value of its total net assets in illiquid securities, including time deposits
and repurchase agreements having maturities longer than seven days. Securities
that have readily available market quotations are not deemed illiquid for
purposes of this limitation (irrespective of any legal or contractual
restrictions on resale). The Fund may invest in obligations issued in reliance
on the so-called "private placement" exemption from registration afforded by
Section 4(2) of the Securities Act of 1933, as amended ("Section 4(2) paper").
The Fund may also purchase securities that are not registered under the
Securities Act of 1933, as amended, but which can be sold to qualified
institutional buyers in accordance with Rule 144A under that Act ("Rule 144A
securities"). Section 4(2) paper is restricted as to disposition under the
federal securities laws, and generally is sold to institutional investors such
as the Fund who agree that it is purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper is normally resold to other institutional
investors, like the Fund, through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. Rule 144A securities generally must be sold to other qualified
institutional buyers. If a particular investment in Section 4(2) paper or Rule
144A securities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities.

VARIABLE AND FLOATING RATE SECURITIES. The interest rates payable on certain
securities in which the Fund may invest are not fixed and may fluctuate based
upon changes in market rates. A variable rate obligation has an interest rate
which is adjusted at predesignated periods. Interest on a floating rate
obligation is adjusted whenever there is a change in the market rate of interest
on which the interest rate payable is based. Tax-exempt variable or floating
rate obligations generally permit the holders of such obligations to demand
payment of principal from the issuer or a third party at stated intervals.
Variable and floating rate obligations are less effective than fixed rate
instruments at locking in a particular yield. Such obligations may fluctuate in
value in response to interest rate changes if there is a delay between changes
in market interest rates and the interest reset date for the obligation. The
Fund will take demand or reset features into consideration in determining the
average portfolio duration of the Fund and the effective maturity of individual
securities. The failure of the issuer or a third party to honor its obligations
under a demand or put feature might also require a tax-exempt variable or
floating rate obligation to be treated as illiquid for purposes of the Fund's
limitation on illiquid investments.

TAX-EXEMPT COMMERCIAL PAPER. The Fund may invest in tax-exempt commercial paper.
Issues of commercial paper typically represent short-term, unsecured, negotiable
promissory notes. These obligations are issued by state and local governments
and their agencies to finance working capital needs of municipalities or to
provide interim construction financing and are paid from general or specific
revenues of municipalities or are re-financed with long-term debt. In some
cases, tax-exempt commercial paper is backed by letters of credit, lending
agreements, note repurchase

agreements or other credit facility arrangements offered by banks or other
institutions. The Fund will invest only in tax-exempt commercial paper rated in
the top two rating catergories by an NRSRO.

CREDIT ENHANCEMENT. Certain of the Fund's Eligible Securities may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Fund and affect its share
price.

MUNICIPAL OBLIGATIONS. Municipal Obligations include bonds, notes and other
instruments issued by or on behalf of states, territories and possessions of the
United States (including the District of Columbia) and their political
subdivisions, agencies or instrumentalities, the interest on which is, in the
opinion of bond counsel, exempt from federal regular income tax (i.e., excluded
from gross income for federal income tax purposes but not necessarily exempt
from the personal income taxes of any state or from the federal alternative
minimum tax). In addition, Municipal Obligations include participation interests
in such securities the interest on which is, in the opinion of bond counsel for
the issuers or counsel selected by the adviser, exempt from regular federal
income tax. The definition of Municipal Obligations includes other types of
securities that currently exist or may be developed in the future and that are,
or will be, in the opinion of counsel, as described above, exempt from federal
regular income tax, provided that investing in such securities is consistent
with the Fund's investment objective and policies.

The two principal classifications of Municipal Obligations which may be held by
the Fund are "general obligation" securities and "revenue" securities. General
obligation securities are secured by the issuer's pledge of its full faith,
credit and taxing power for the payment of principal and interest. Revenue
securities are payable only from the revenues derived from a particular facility
or class of facilities, or in some cases, from the proceeds of a special excise
tax or other specific revenue source such as the user of the facility being
financed. Revenue securities include private activity bonds which may be held by
the Fund and which are not payable from the unrestricted revenues of the issuer.
While some private activity bonds are general obligation securities, the vast
majority are revenue securities. Consequently, the credit quality of private
activity bonds is usually directly related to the credit standing of the
corporate user of the facility involved. Each of the Municipal Obligations
described below may take the form of either general obligation or revenue
securities.

Municipal Obligations are often issued to obtain funds for various public
purposes, including the construction of a wide range of public facilities such
as bridges, highways, housing, hospitals, mass transportation, schools, streets
and water and sewer works. Other public purposes for which Municipal Obligations
may be issued include refunding outstanding obligations, obtaining funds for
general operating expenses, and obtaining funds to lend to other public
institutions and facilities. Municipal Obligations also include industrial
development bonds and private activity bonds, which are issued by or on behalf
of public authorities to obtain funds for privately-operated housing facilities,
airport, mass transit or port facilities, sewage disposal, solid waste disposal
or hazardous waste treatment or disposal facilities and certain local facilities
for water supply, gas or electricity. In addition, proceeds of certain
industrial development bonds are used for the construction, equipment, repair or
improvement of privately operated industrial or commercial facilities.

The interest income from private activity bonds may subject certain investors to
the federal alternative minimum tax.

MUNICIPAL LEASES, CERTIFICATES OF PARTICIPATION AND OTHER PARTICIPATION
INTERESTS. The Fund may invest in municipal leases and certificates of
participation in municipal leases. A municipal lease is an obligation in the
form of a lease or installment purchase which is issued by a state or local
government to acquire equipment and facilities. Income from such obligations is
generally exempt from state and local taxes in the state of issuance. Municipal
leases frequently involve special risks not normally associated with general
obligation or revenue bonds. Leases and installment purchase or conditional sale
contracts (which normally provide for title to the leased asset to pass
eventually to the governmental issuer) have evolved as a means for governmental
issuers to acquire property and equipment without meeting the constitutional and
statutory requirements for the issuance of debt. The debt issuance limitations
are deemed to be inapplicable because of the inclusion in many leases or
contracts of "non-appropriation" clauses that relieve the governmental issuer of
any obligation to make future payments under the lease or contract unless money
is appropriated for such purpose by the appropriate legislative body on a yearly
or other periodic basis. In addition, such leases or contracts may be subject to
the temporary abatement of payments in the event the issuer is prevented from
maintaining occupancy of the leased premises or utilizing the leased equipment.

Although the obligation may be secured by the leased equipment or facilities,
the disposition of the property in the event of non-appropriation or foreclosure
might prove difficult, time consuming and costly, and result in an
unsatisfactory or delayed recoupment of the Fund's original investment.

Certificates of participation represent undivided interests in municipal leases,
installment purchase agreements or other instruments. The certificates are
typically issued by a trust or other entity which has received an assignment of
the payments to be made by the state or political subdivision under such leases
or installment purchase agreements.

Certain municipal lease obligations and certificates of participation may be
deemed illiquid for the purpose of the Fund's limitation on investments in
illiquid securities. Other municipal lease obligations and certificates of
participation acquired by the Fund may be determined by the adviser, pursuant to
guidelines adopted by the Trustees, to be liquid securities for the purpose of
such limitation. In determining the liquidity of municipal lease obligations and
certificates of participation, the adviser will consider a variety of factors
including (a) the willingness of dealers to bid for the security, (b) the number
of dealers willing to purchase or sell the obligation and the number of other
potential buyers, (c) the frequency of trades or quotes for the obligation, and
(d) the nature of marketplace trades. In addition, the adviser will consider
factors unique to particular lease obligations and certificates of participation
affecting the marketability thereof. These include the general creditworthiness
of the issuer, the importance of the property covered by the lease to the issuer
and the likelihood that the marketability of the obligation will be maintained
throughout the time the obligation is held by the Fund.

provide the Fund with the right to demand payment, on not more than seven days
notice, of all or any part of the Fund's participation interest in the
underlying Municipal Obligation, plus accrued interest. These demand features
will be taken into consideration in determining the effective maturity of such
participations and the average portfolio duration of the Fund. The Fund will
only invest in such participations if, in the opinion of bond counsel for the
issuers or counsel selected by the adviser, the interest from such
participations is exempt from regular federal income tax.

MUNICIPAL NOTES. Municipal Obligations purchased by the Fund may include
fixed-rate notes or variable-rate demand notes. Such notes may not be rated by
credit rating agencies, but unrated notes purchased by the Fund will be
determined by the adviser to be of comparable quality at the time of purchase to
rated instruments purchasable by the Fund. Where necessary to determine that a
note is an Eligible Security or First Tier Eligible Security, the Fund will
require the issuer's obligation to pay the principal of the note be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
While there may be no active secondary market with respect to a particular
variable rate demand note purchased by the Fund, the Fund may, upon notice
specified in the note, demand payment of the principal of the note at any time
or during specified periods not exceeding thirteen months, depending upon the
instrument involved, and may resell the note at any time to a third party. The
absence of such an active secondary market, however, could make it difficult for
the Fund to dispose of a variable rate demand note if the issuer were to default
on its payment obligation or during periods that the Fund is not entitled to
exercise its demand rights, and the Fund could, for this or other reasons,
suffer losses to the extent of the default.

PRE-REFUNDED MUNICIPAL OBLIGATIONS. The Fund may invest in pre-refunded
Municipal Obligations. The principal of and interest on pre-refunded Municipal
Obligations are no longer paid from the original revenue source for the
Municipal Obligations. Instead, the source of such payments is typically an
escrow fund consisting of obligations issued or guaranteed by the U.S.
Government. The assets in the escrow fund are derived from the proceeds of
refunding bonds issued by the same issuer as the pre-refunded Municipal
Obligations, but usually on terms more favorable to the issuer. Issuers of
Municipal Obligations use this advance refunding technique to obtain more
favorable terms with respect to Municipal Obligations which are not yet subject
to call or redemption by the issuer. For example, advance refunding enables an
issuer to refinance debt at lower market interest rates, restructure debt to
improve cash flow, or eliminate restrictive covenants in the indenture or other
governing instrument for the pre-refunded Municipal Obligations. However, except
for a change in the revenue source from which principal and interest payments
are made, the pre-refunded Municipal Obligations remain outstanding on their
original terms until they mature or are redeemed by the issuer. The effective
maturity of pre-refunded Municipal Obligations will be the redemption date if
the issuer has assumed an obligation or indicated its intention to redeem such
obligations on the redemption date. Pre-refunded Municipal Obligations are often
purchased at a price which represents a premium over their face value.

dealer or other financial institution, pursuant to which such institution grants
the security holders the option, at periodic intervals, to tender their
securities to the institution and receive the face value thereof. As
consideration for providing the option, the financial institution receives
periodic fees equal to the difference between the Municipal Obligation's fixed
coupon rate and the rate, as determined by a remarketing or similar agent at or
near the commencement of such period, that would cause the securities, coupled
with the tender option, to trade at or near par on the date of such
determination. Thus, after payment of this fee, the security holder effectively
holds a demand obligation that bears interest at the prevailing short-term
tax-exempt rate. The adviser will consider on an ongoing basis the
creditworthiness of the issuer of the underlying Municipal Obligation, of any
custodian and of the third party provider of the tender option. In certain
instances and for certain tender option bonds the option may be terminable in
the event of a default in payment of principal or interest on the underlying
Municipal Obligations and for other reasons. Additionally, the above description
of tender option bonds is meant only to provide an example of one possible
structure of such obligations, and the Fund may purchase tender option bonds
with different types of ownership, payment, credit and/or liquidity
arrangements.

INVESTMENT LIMITATIONS

The Fund's investment objective and policies described above are not fundamental
and may be changed by the Trustees without the approval of shareholders. If
there is a change in the investment objective of the Fund, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial position and needs. The Fund's investment limitations
described below may not be changed without the affirmative vote of the holders
of a majority of its outstanding shares. There can be no assurance that the Fund
will achieve its investment objective. (A complete list of the investment
limitations that cannot be changed without the approval of shareholders is
contained in the Statement of Additional Information under "Investment Objective
and Policies.")

The Fund may not:

1. Borrow money, except that the Fund may (i) borrow money for temporary or
emergency purposes (not for leveraging or investment) from banks, or subject to
specific authorization by the SEC, from funds advised by the adviser or an
affiliate of the adviser, and (ii) engage in reverse repurchase agreements;
provided that (i) and (ii) in combination do not exceed one-third of the value
of the Fund's total assets (including the amount borrowed) less liabilities
(other than borrowings). The Fund may not mortgage, pledge or hypothecate any
assets except in connection with such borrowings and reverse repurchase
agreements and then only in amounts not exceeding one-third of the value of the
Fund's total assets at the time of such borrowing.

2. Purchase any securities which would cause 25% or more of the value of its
total assets at the time of such purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, or in industrial development bonds or other securities, the interest
upon which is paid from revenues of similar types of projects (unless the Fund
is in a temporary defensive position); provided that there is no limitation with

respect to investments in U.S. Government securities.

FUND INFORMATION

- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Fund's business affairs and for exercising all the
Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.

INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.

ADVISORY FEES. The adviser receives an annual investment advisory fee
-
equal to 0.20% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund, but reserves the right to terminate such waiver or
reimbursement at any time at its sole discretion.

ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. With over $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 employees, Federated continues to be led by the management who
founded the company in 1955. Federated funds are presently at work in and
through 4,000 financial institutions nationwide. More than 100,000
investment professionals have selected Federated funds for their clients.

Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.

DISTRIBUTION OF INSTITUTIONAL SHARES

Federated Securities Corp. is the principal distributor for Institutional Shares
of the Fund. It is a Pennsylvania corporation organized on November 14, 1969,
and is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.

SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25% of the average daily net asset
value of the Institutional Shares, computed at an annual rate, to obtain
personal services for shareholders and to maintain shareholder accounts
("shareholder services"). From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily.

Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

Currently, Institutional Shares are accruing no shareholder services fees.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments made
pursuant to the Shareholder Services Agreement, Federated Securities Corp. and
Federated Shareholder Services, from their own assets, may pay financial
institutions supplemental fees for the performance of substantial sales
services, distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Fund's investment adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund at an
annual rate which relates to the average aggregate daily net assets of all funds
advised by affiliates of Federated Investors as specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.

Federated Services Company may choose voluntarily to waive a portion of its fee.

EXPENSES OF THE FUND AND INSTITUTIONAL SHARES

Holders of Institutional Shares pay their allocable portion of Trust and Fund
expenses.

The Fund pays all of its own expense and its allocable share of Trust expenses.
These expenses include, but are not limited to the cost of: organizing the Trust
and continuing its existence; registering the Trust and its shares; Trustees
fees; meetings of Trustees and shareholders and proxy solicitations therefor;
auditing, accounting and legal services; investment advisory and administrative
services; custodians, transfer agents, dividend disbursing agents, shareholder
servicing agents, and registrars; issuing, purchasing, repurchasing, and
redeeming shares; reports to government agencies; preparing, printing and
mailing documents to shareholders such as financial statements, prospectuses and
proxies; taxes and commissions; insurance premiums; association membership dues;
and such non-recurring and extraordinary items as may arise. Certain expenses
may be allocated to each class as deemed appropriate. At present, the only
expenses allocated to any class are expenses under a Shareholder Services
Agreement which relate to that class.

NET ASSET VALUE

- --------------------------------------------------------------------------------

The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to Institutional
Shares from the value of Fund assets attributable to Institutional Shares, and
dividing the remainder by the number of shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per share.

The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.

HOW TO PURCHASE SHARES

- --------------------------------------------------------------------------------

Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Fund reserves the right to reject any purchase request.

To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $1,000,000. However, an account may be opened with
a smaller amount as long as the minimum is reached within one year of opening
the account. Minimum investments will be calculated by combining all accounts
maintained with the Fund. Financial institutions may impose different minimum
investment requirements on their customers.

funds should be wired as follows: Federated Shareholder Services Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit
to: Municipal Obligations Fund--Institutional Shares; Fund Number (this number
can be found on the account statement or by contacting the Fund); Group Number
or Order Number; Nominee or Institution Name; and ABA Number 011000028. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to Municipal Obligations Fund--Institutional
Shares. Please include an account number on the check. Orders by mail are
considered received when payment by check is converted into federal funds
(normally the business day after the check is received), and shares begin
earning dividends the next day.

INVEST-BY-PHONE. Once an account has been opened, a shareholder may use
invest-by-phone for investments if an authorization form has been filed with
Federated Shareholder Services Company, the transfer agent for shares of the
Fund. Approximately two weeks after sending the form to Federated Shareholder
Services Company, the shareholder may call Federated Shareholder Services
Company to purchase shares. Federated Shareholder Services Company will send a
request for monies to the shareholder's commercial bank, savings bank, or credit
union ("bank") via the Automated Clearing House. The shareholder's bank, which
must be an Automated Clearing House member, will then forward the monies to
Federated Shareholder Services Company. The purchase is normally entered the
next business day after the initial phone request. For further information and
an application, call the Fund.

HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------

Shares are redeemed at their net asset value next determined after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Fund computes its net asset value. Redemption
requests must be received in proper form and can be made as described below.

REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by calling
the Fund provided the Fund has a properly completed authorization form. These
forms can be obtained from Federated Securities Corp. Proceeds from redemption
requests received before 12:00 Noon (Eastern time) will be wired the same day to
the shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Under limited circumstances,
arrangements may be made with the distributor for same-day payment of proceeds,
without that day's dividend, for redemption requests received after 12:00 Noon
(Eastern time). Proceeds from redeemed shares purchased by check or through ACH
will not be wired until that method of payment has cleared. Proceeds from
redemption requests on holidays when wire transfers are restricted will be wired
the following business day. Questions about telephone redemptions on days when
wire transfers are restricted should be

directed to your shareholder services representative at the telephone number
listed on your account statement.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares By Mail"
should be considered. If at any time the Fund shall determine it necessary to
terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.

REDEEMING SHARES BY MAIL. Shares may be redeemed by mailing a written request
to: Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.

The written request should state: Municipal Obligations Fund--Institutional
Shares; the account name as registered with the Fund; the account number; and
the number of shares to be redeemed or the dollar amount requested. All owners
of the account must sign the request exactly as the shares are registered.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after the receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.

ACCOUNT AND SHARE INFORMATION
- --------------------------------------------------------------------------------

DIVIDENDS. Dividends are declared daily and paid monthly. Dividends are
automatically reinvested on payment dates in additional shares of the Fund
unless cash payments are requested by writing to the Fund. Shares purchased by
wire before 3:00 p.m. (Eastern time) begin earning dividends that day. Shares
purchased by check begin earning dividends the day after the check is converted
into federal funds.

CAPITAL GAINS. The Fund does not expect to realize any capital gains or losses.
If capital gains or losses were to occur, they could result in an increase or
decrease in dividends. The Fund will distribute in cash or additional shares any
realized net long-term capital gains at least once every 12 months.

CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Fund, Federated
Shareholder Services Company maintains a share account for each shareholder.
Share certificates are not issued unless

requested by contacting the Fund or Federated Shareholder Services Company in
writing. Monthly confirmations are sent to report all transactions as well as
dividends paid during the month.

ACCOUNTS WITH LOW BALANCES. Due to the high cost of maintaining accounts with
low balances, the Fund may redeem shares in any account, except accounts
maintained by retirement plans, and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $1,000,000 due to
shareholder redemptions. Before shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase additional
shares to meet the minimum requirement.

VOTING RIGHTS. Each share of the Trust owned by a shareholder gives that
shareholder one vote in Trustee elections and other matters submitted to
shareholders for vote. All shares of all classes of each portfolio in the Trust
have equal voting rights, except that in matters affecting only a particular
portfolio or class, only shareholders of that portfolio or class are entitled to
vote. The Trust is not required to hold annual shareholder meetings. Shareholder
approval will be sought only for certain changes in the Trust's or the Fund's
operation and for election of Trustees under certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.

TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies. The Fund will be
treated as a single, separate entity for federal income tax purposes so that
income (including capital gains) and losses realized by the Trust's other
portfolios will not be combined for tax purposes with those realized by the
Fund.

Shareholders are not required to pay the federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Fund may purchase, within the limits of its investment policies, all types
of municipal bonds, including private activity bonds.

The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.

Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares.

STATE AND LOCAL TAXES
In the opinion of Houston, Houston & Donnelly, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.

Because interest received by the Fund may not be exempt from all state and local
income taxes, shareholders may be required to pay state and local taxes on
dividends received from the Fund. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund also offers other classes. Institutional Service Shares are sold at net
asset value primarily to financial institutions, financial intermediaries and
institutional investors and are subject to a minimum initial investment of
$1,000,000. Institutional Capital Shares are sold at net asset value primarily
to financial institutions, financial intermediaries and institutional investors
and are subject to a minimum initial investment of $1,000,000.

All classes are subject to certain of the same expenses.

Neither Institutional Service Shares nor Institutional Capital Shares are
distributed with a 12b-1 Plan, but both are subject to shareholder services
fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-341-7400.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund advertises its yield, effective yield, and total
return. The performance figures will be calculated separately for each class of
shares.

Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.

Advertisements and sales literature may also refer to total return. Total return
represents the change, over a specified period of time, in the value of an
investment in the shares after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Municipal Obligations Fund
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank and Trust Company c/o Federated Services Company
P.O. Box 8600
Boston, MA 02266-8600
- ---------------------------------------------------------------------------------------------------------------------

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, MA 02266-8600
- ---------------------------------------------------------------------------------------------------------------------

Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
- ---------------------------------------------------------------------------------------------------------------------

MUNICIPAL OBLIGATIONS
FUND
(FORMERLY, MUNICIPAL MONEY
MARKET FUND)
INSTITUTIONAL SHARES
(FORMERLY, CLASS A SHARES)
PROSPECTUS
A Portfolio of Money Market
Obligations Trust II (formerly, Lehman
Brothers
Institutional Funds Group Trust), an
Open-End
Management Investment Company

Prospectus dated May 30, 1996
(Revised November 15, 1996)

[LOGO OF FEDERATED INVESTORS]

Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the fund
and a subsidiary of Federated Investors.
Cusip 608912101
G01881-05-IS (11/96)

The Institutional Service Shares (formerly, Class B Shares) of Municipal
Obligations Fund (formerly, Municipal Money Market Fund) (the "Fund") offered by
this prospectus represent interests in a portfolio of Money Market Obligations
Trust II (formerly, Lehman Brothers Institutional Funds Group Trust) (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in a portfolio of short-term tax-exempt obligations issued by state and
local governments and other tax-exempt securities to provide dividend income
exempt from federal regular income tax consistent with stability of principal.

This prospectus contains the information you should read and know before you
invest in Institutional Service Shares of the Fund. Keep this prospectus for
future reference.

Prospectus dated May 30, 1996
(Revised November 15, 1996)

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2
Investment Limitations 8

FUND INFORMATION 9
- ------------------------------------------------------

Management of the Fund 9
Distribution of Institutional
Service Shares 10
Administration of the Fund 10
Expenses of the Fund and
Institutional Service Shares 11

NET ASSET VALUE 11
- ------------------------------------------------------

HOW TO PURCHASE SHARES 11
- ------------------------------------------------------

HOW TO REDEEM SHARES 12
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 13
- ------------------------------------------------------

TAX INFORMATION 14
- ------------------------------------------------------

Federal Income Tax 14
State and Local Taxes 15

OTHER CLASSES OF SHARES 15
- ------------------------------------------------------

PERFORMANCE INFORMATION 15
- ------------------------------------------------------

ADDRESSES Inside Back Cover
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES

</TABLE>
<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)............................. None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................................................. None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(1).......................................................................... 0.00%
12b-1 Fee................................................................................................. None
Total Other Expenses (after expense reimbursement)........................................................ 0.43%
Shareholder Services Fee.................................................................. 0.25%
Total Operating Expenses (2).............................................................................. 0.43%
</TABLE>

(2) The operating expenses are estimated to be 0.67% absent the anticipated
voluntary waivers of the management fee and the anticipated voluntary
reimbursement of certain other operating expenses.

* Total Institutional Service Shares operating expenses are estimated based on
average expenses expected to be incurred during the period ending January 31,
1997. During the course of this period, expenses may be more or less than the
average amount shown.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INSTITUTIONAL SERVICE
SHARES WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS
OF THE VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION." WIRE-TRANSFERRED
REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.

<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period............. $4 $14 $24 $54
</TABLE>

GENERAL INFORMATION

- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 25, 1992. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Board of
Trustees (the "Trustees") has established three classes of shares known as
Institutional Shares, Institutional Service Shares and Institutional Capital
Shares. This prospectus relates only to Institutional Service Shares of the
Fund, which are designed primarily for financial institutions, financial
intermediaries and institutional investors as a convenient means of accumulating
an interest in a professionally managed portfolio investing in a portfolio of
short-term tax-exempt obligations as described below. A minimum initial
investment of $1,000,000 over a one-year period is required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

Trustees without shareholder approval.

WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when issued"
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield. The Fund will generally not
pay for such securities or start earning interest on them until they are
received. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in value based upon changes in the general level of
interest rates. The Fund expects that commitments to purchase when-issued
securities will not exceed 25% of the value of its

total assets absent unusual market conditions. The Fund does not intend to
purchase when-issued securities for speculative purposes but only in furtherance
of its investment objective.

The Fund may also purchase participations in Municipal Obligations held by a
commercial bank or other financial institution. Such participations provide the
Fund with the right to a pro rata undivided interest in the underlying Municipal
Obligations. In addition, such participations generally provide the Fund with
the right to demand payment, on not more than seven days notice, of all or any
part of the Fund's participation interest in the underlying Municipal
Obligation, plus accrued interest. These demand features will be taken into
consideration in determining the effective

maturity of such participations and the average portfolio duration of the Fund.
The Fund will only invest in such participations if, in the opinion of bond
counsel for the issuers or counsel selected by the adviser, the interest from
such participations is exempt from regular federal income tax.

TENDER OPTION BONDS. The Fund may purchase tender option bonds. A tender option
bond is a Municipal Obligation (generally held pursuant to a custodial
arrangement) having a relatively long maturity and bearing interest at a fixed
rate substantially higher than prevailing short-term tax-exempt rates, that has
been coupled with the agreement of a third party, such as a bank, broker-dealer
or other financial institution, pursuant to which such institution grants the
security holders the option, at periodic intervals, to tender their securities
to the institution and receive the face value thereof. As consideration for
providing the option, the financial institution receives periodic

fees equal to the difference between the Municipal Obligation's fixed coupon
rate and the rate, as determined by a remarketing or similar agent at or near
the commencement of such period, that would cause the securities, coupled with
the tender option, to trade at or near par on the date of such determination.
Thus, after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate. The
adviser will consider on an ongoing basis the creditworthiness of the issuer of
the underlying Municipal Obligation, of any custodian and of the third party
provider of the tender option. In certain instances and for certain tender
option bonds the option may be terminable in the event of a default in payment
of principal or interest on the underlying Municipal Obligations and for other
reasons. Additionally, the above description of tender option bonds is meant
only to provide an example of one possible structure of such obligations, and
the Fund may purchase tender option bonds with different types of ownership,
payment, credit and/or liquidity arrangements.

INVESTMENT LIMITATIONS

The Fund may not:

respect to investments in U.S. Government securities.

FUND INFORMATION

- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

ADVISORY FEES. The adviser receives an annual investment advisory fee
equal to 0.20% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund, but reserves the right to terminate such waiver or
reimbursement at any time at its sole discretion.

result in severe penalties.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

Federated Securities Corp. is the principal distributor for Institutional
Service Shares of the Fund. It is a Pennsylvania corporation organized on
November 14, 1969, and is the principal distributor for a number of investment
companies. Federated Securities Corp. is a subsidiary of Federated Investors.

SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25% of the average daily net asset
value of the Institutional Service Shares, computed at an annual rate, to obtain
personal services for shareholders and to maintain shareholder accounts
("shareholder services"). From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily.

ADMINISTRATION OF THE FUND

<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.

Federated Services Company may choose voluntarily to waive a portion of its fee.

EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES

Holders of Institutional Service Shares pay their allocable portion of Trust and
Fund expenses.

NET ASSET VALUE

- --------------------------------------------------------------------------------

The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to Institutional
Service Shares from the value of Fund assets attributable to Institutional
Service Shares, and dividing the remainder by the number of shares outstanding.
The Fund cannot guarantee that its net asset value will always remain at $1.00
per share.

HOW TO PURCHASE SHARES

- --------------------------------------------------------------------------------

funds should be wired as follows: Federated Shareholder Services Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit
to: Municipal Obligations Fund--Institutional Service Shares; Fund Number (this
number can be found on the account statement or by contacting the Fund); Group
Number or Order Number; Nominee or Institution Name; and ABA Number 011000028.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted. Questions on wire purchases should be directed to your shareholder
services representative at the telephone number listed on your account
statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to Municipal Obligations Fund--Institutional
Service Shares. Please include an account number on the check. Orders by mail
are considered received when payment by check is converted into federal funds
(normally the business day after the check is received), and shares begin
earning dividends the next day.

HOW TO REDEEM SHARES

- --------------------------------------------------------------------------------

directed to your shareholder services representative at the telephone number
listed on your account statement.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

The written request should state: Municipal Obligations Fund--Institutional
Service Shares; the account name as registered with the Fund; the account
number; and the number of shares to be redeemed or the dollar amount requested.
All owners of the account must sign the request exactly as the shares are
registered. Normally, a check for the proceeds is mailed within one business
day, but in no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.

ACCOUNT AND SHARE INFORMATION

- --------------------------------------------------------------------------------

CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Fund, Federated
Shareholder Services Company maintains a share account for each shareholder.
Share certificates are not issued unless

requested by contacting the Fund or Federated Shareholder Services Company in
writing. Monthly confirmations are sent to report all transactions as well as
dividends paid during the month.

TAX INFORMATION

- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

Dividends of the Fund representing net interest income earned on some temporary

investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares.

STATE AND LOCAL TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.

OTHER CLASSES OF SHARES

- --------------------------------------------------------------------------------

The Fund also offers other classes. Institutional Shares are sold at net asset
value primarily to entities holding shares in an agency or fiduciary capacity,
financial institutions, financial intermediaries and institutional investors and
are subject to a minimum initial investment of $1,000,000. Institutional Capital
Shares are sold at net asset value primarily to , financial institutions,
financial intermediaries and institutional investors and are subject to a
minimum initial investment of $1,000,000.

All classes are subject to certain of the same expenses.

Neither Institutional Shares nor Institutional Capital Shares are distributed
with a 12b-1 Plan, but both are subject to shareholder services fees. Currently,
Institutional Shares are accruing no shareholder services fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-341-7400.

PERFORMANCE INFORMATION

- --------------------------------------------------------------------------------

From time to time, the Fund advertises its yield, effective yield, and total
return. The performance figures will be calculated separately for each class of
shares.

a percentage.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Municipal Obligations Fund
Institutional Service Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

MUNICIPAL OBLIGATIONS
FUND
(FORMERLY, MUNICIPAL MONEY
MARKET FUND)
INSTITUTIONAL SERVICE SHARES
(FORMERLY, CLASS B SHARES)

PROSPECTUS
A Portfolio of Money Market
Obligations Trust II (formerly, Lehman
Brothers
Institutional Funds Group Trust), an
Open-End
Management Investment Company

Prospectus dated May 30, 1996
(Revised November 15, 1996)

[LOGO OF FEDERATED INVESTORS]

Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the fund
and a subsidiary of Federated Investors.

Cusip 608912200
G01881-06-SS (11/96)

PROSPECTUS

The Institutional Capital Shares (formerly, Class E Shares) of Municipal
Obligations Fund (formerly, Municipal Money Market Fund) (the "Fund") offered by
this prospectus represent interests in a portfolio of Money Market Obligations
Trust II (formerly, Lehman Brothers Institutional Funds Group Trust) (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in a portfolio of short-term tax-exempt obligations issued by state and
local governments and other tax-exempt securities to provide dividend income
exempt from federal regular income tax consistent with stability of principal.

This prospectus contains the information you should read and know before you
invest in Institutional Capital Shares of the Fund. Keep this prospectus for
future reference.

Prospectus dated May 30, 1996

(Revised November 15, 1996)

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 2]
Investment Limitations 8

FUND INFORMATION 9
- ------------------------------------------------------

Management of the Fund 9
Distribution of Institutional
Capital Shares 10
Administration of the Fund 10
Expenses of the Fund and
Institutional Capital Shares 11

NET ASSET VALUE 11
- ------------------------------------------------------

HOW TO PURCHASE SHARES 11
- ------------------------------------------------------

HOW TO REDEEM SHARES 12
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 13
- ------------------------------------------------------

TAX INFORMATION 14
- ------------------------------------------------------

Federal Income Tax 14
State and Local Taxes 15

OTHER CLASSES OF SHARES 15
- ------------------------------------------------------

PERFORMANCE INFORMATION 15
- ------------------------------------------------------

ADDRESSES Inside Back Cover
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

INSTITUTIONAL CAPITAL SHARES
SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)............................. None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................................................. None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver) (1)......................................................................... 0.00%
12b-1 Fee................................................................................................. None
Total Other Expenses (after expense reimbursement)........................................................ 0.30%
Shareholder Services Fee (after waiver) (2)............................................... 0.10%
Total Operating Expenses (3).............................................................................. 0.30%
</TABLE>

(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee is 0.25%

(3) The operating expenses are estimated to be 0.69% absent the anticipated
voluntary waiver of the management fee, the anticipated voluntary waiver of
a portion of the shareholder services fee, and the anticipated voluntary
reimbursement of certain other operating expenses.

* Total Institutional Capital Shares operating expenses are estimated based on
average expenses expected to be incurred during the period ending January 31,
1997. During the course of this period, expenses may be more or less than the
average amount shown.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INSTITUTIONAL CAPITAL
SHARES WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS
OF THE VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION." WIRE-TRANSFERRED
REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<S> <C> <C> <C> <C>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period............. $3 $10 $17 $38
</TABLE>

GENERAL INFORMATION

- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 25, 1992. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Board of
Trustees (the "Trustees") has established three classes of shares known as
Institutional Shares, Institutional Service Shares and Institutional Capital
Shares. This prospectus relates only to Institutional Capital Shares of the
Fund, which are designed primarily for financial institutions, financial
intermediaries and institutional investors as a convenient means of accumulating
an interest in a professionally managed portfolio investing in a portfolio of
short-term tax-exempt obligations as described below. A minimum initial
investment of $1,000,000 over a one-year period is required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

Trustees without shareholder approval.

total assets absent unusual market conditions. The Fund does not intend to
purchase when-issued securities for speculative purposes but only in furtherance
of its investment objective.

fees equal to the difference between the Municipal Obligation's fixed coupon
rate and the rate, as determined by a remarketing or similar agent at or near
the commencement of such period, that would cause the securities, coupled with
the tender option, to trade at or near par on the date of such determination.
Thus, after payment of this fee, the security holder effectively holds a demand
obligation that bears interest at the prevailing short-term tax-exempt rate. The
adviser will consider on an ongoing basis the creditworthiness of the issuer of
the underlying Municipal Obligation, of
any custodian and of the third party provider of the tender option. In certain
instances and for certain tender option bonds the option may be terminable in
the event of a default in payment of principal or interest on the underlying
Municipal Obligations and for other reasons. Additionally, the above description
of tender option bonds is meant only to provide an example of one possible
structure of such obligations, and the Fund may purchase tender option bonds
with different types of ownership, payment, credit and/or liquidity
arrangements.

INVESTMENT LIMITATIONS

The Fund may not:

respect to investments in U.S. Government securities.

FUND INFORMATION

- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

ADVISER'S BACKGROUND. Federated Management, a Delaware business trust,
-
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

result in severe penalties.

DISTRIBUTION OF INSTITUTIONAL CAPITAL SHARES

Federated Securities Corp. is the principal distributor for Institutional
Capital Shares of the Fund. It is a Pennsylvania corporation organized on
November 14, 1969, and is the principal distributor for a number of investment
companies. Federated Securities Corp. is a subsidiary of Federated Investors.

SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25% of the average daily net asset
value of the Institutional Capital Shares, computed at an annual rate, to obtain
personal services for shareholders and to maintain shareholder accounts
("shareholder services"). From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily.

ADMINISTRATION OF THE FUND

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.

Federated Services Company may choose voluntarily to waive a portion of its fee.

EXPENSES OF THE FUND AND INSTITUTIONAL CAPITAL SHARES

Holders of Institutional Capital Shares pay their allocable portion of Trust and
Fund expenses.

NET ASSET VALUE

- --------------------------------------------------------------------------------

The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to Institutional
Capital Shares from the value of Fund assets attributable to Institutional
Capital Shares, and dividing the remainder by the number of shares outstanding.
The Fund cannot guarantee that its net asset value will always remain at $1.00
per share.

HOW TO PURCHASE SHARES

- --------------------------------------------------------------------------------

funds should be wired as follows: Federated Shareholder Services Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit
to: Municipal Obligations Fund--Institutional Capital Shares; Fund Number (this
number can be found on the account statement or by contacting the Fund); Group
Number or Order Number; Nominee or Institution Name; and ABA Number 011000028.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted. Questions on wire purchases should be directed to your shareholder
services representative at the telephone number listed on your account
statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to Municipal Obligations Fund--Institutional
Capital Shares. Please include an account number on the check. Orders by mail
are considered received when payment by check is converted into federal funds
(normally the business day after the check is received), and shares begin
earning dividends the next day.

HOW TO REDEEM SHARES

- --------------------------------------------------------------------------------

directed to your shareholder services representative at the telephone number
listed on your account statement.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

The written request should state: Municipal Obligations Fund--Institutional
Capital Shares; the account name as registered with the Fund; the account
number; and the number of shares to be redeemed or the dollar amount requested.
All owners of the account must sign the request exactly as the shares are
registered. Normally, a check for the proceeds is mailed within one business
day, but in no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.

ACCOUNT AND SHARE INFORMATION

- --------------------------------------------------------------------------------

CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Fund, Federated
Shareholder Services Company maintains a share account for each shareholder.
Share certificates are not issued unless

requested by contacting the Fund or Federated Shareholder Services Company in
writing. Monthly confirmations are sent to report all transactions as well as
dividends paid during the month.

TAX INFORMATION

- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

Dividends of the Fund representing net interest income earned on some temporary

investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares.

STATE AND LOCAL TAXES

OTHER CLASSES OF SHARES

- --------------------------------------------------------------------------------

The Fund also offers other classes. Institutional Shares are sold at net asset
value primarily to entities holding shares in an agency or fiduciary capacity,
financial institutions, financial intermediaries and institutional investors and
are subject to a minimum initial investment of $1,000,000. Institutional Service
Shares are sold at net asset value primarily to financial institutions,
financial intermediaries and institutional investors and are subject to a
minimum initial investment of $1,000,000.

All classes are subject to certain of the same expenses.

Neither Institutional Shares nor Institutional Service Shares are distributed
with a 12b-1 Plan, but both are subject to shareholder services fees. Currently,
Institutional Shares are accruing no shareholder services fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-341-7400.

PERFORMANCE INFORMATION

- --------------------------------------------------------------------------------

From time to time, the Fund advertises its yield, effective yield, and total
return. The performance figures will be calculated separately for each class of
shares.

a percentage.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Municipal Obligations Fund
Institutional Capital Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
- ---------------------------------------------------------------------------------------------------------------------

MUNICIPAL OBLIGATIONS
FUND
(FORMERLY, MUNICIPAL MONEY
MARKET FUND)
INSTITUTIONAL CAPITAL SHARES
(FORMERLY, CLASS E SHARES)
PROSPECTUS
A Portfolio of Money Market
Obligations Trust II (formerly, Lehman
Brothers
Institutional Funds Group Trust), an
Open-End
Management Investment Company

Prospectus dated May 30, 1996
(Revised November 15, 1996)

[LOGO OF FEDERATED INVESTORS]

Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the fund
and a subsidiary of Federated Investors.

Cusip 608912309
G01881-09 (11/96)

MUNICIPAL OBLIGATIONS FUND
(A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST II)
(FORMERLY, MUNICIPAL MONEY MARKET FUND, A PORTFOLIO OF
LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST)
INSTITUTIONAL SHARES (FORMERLY, CLASS A SHARES)
INSTITUTIONAL SERVICE SHARES (FORMERLY, CLASS B SHARES)
INSTITUTIONAL CAPITAL SHARES (FORMERLY, CLASS E SHARES)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus(es) of Municipal Obligations Fund (formerly, Municipal Money
Market Fund) (the ``Fund'), a portfolio of Money Market Obligations
Trust II (formerly, Lehman Brothers Institutional Funds Group Trust)
(the ``Trust') dated May 30, 1996 (Revised November 15, 1996). This
Statement is not a prospectus. You may request a copy of a prospectus
or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-341-7400.
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
Statement dated May 30, 1996
(Revised November 15, 1996)

FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the Funds
and is a subsidiary of Federated Investors.
Cusip 608912101
Cusip 608912200
Cusip 608912309
G01881-12 (11/96)

TABLE OF CONTENTS

GENERAL INFORMATION ABOUT THE TRUST 1

INVESTMENT OBJECTIVE AND POLICIES 1

Portfolio Transactions 1
Additional Information on Portfolio
Instruments 1
Credit Enhancement 5
INVESTMENT LIMITATIONS 5

Regulatory Compliance 6
MONEY MARKET OBLIGATIONS TRUST II MANAGEMENT
6

Share Ownership 10
Trustees Compensation 10
Trustee Liability 11
INVESTMENT ADVISORY SERVICES 12

Investment Adviser 12
Advisory Fees 12
BROKERAGE TRANSACTIONS 12

OTHER SERVICES 13

Fund Administration 13
Custodian and Portfolio Accountant 13
Transfer Agent 13
Independent Auditors 13
SHAREHOLDER SERVICES AGREEMENT 13

DETERMINING NET ASSET VALUE 13

REDEMPTION IN KIND 14

MASSACHUSETTS PARTNERSHIP LAW 14

THE FUND'S TAX STATUS 14

PERFORMANCE INFORMATION 14

YIELD 14

EFFECTIVE YIELD 15

TOTAL RETURN 15

TAX-EQUIVALENT YIELD 15

PERFORMANCE COMPARISONS 17

Economic and Market Information 17
ABOUT FEDERATED INVESTORS 17

FINANCIAL STATEMENTS 18

APPENDIX 19

GENERAL INFORMATION ABOUT THE TRUST

The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 25, 1992. On November 15, 1996, the
name of the Trust was changed from `Lehman Brothers Institutional Funds
Group Trust''to ``Money Market Obligations Trust II'' and the name of the
Fund was changed from `Municipal Money Market Fund'' to ``Municipal
Obligations Fund.''
Shares of the Fund are offered in three classes, known as Institutional
Shares, Institutional Service Shares and Institutional Capital Shares
(individually and collectively referred to as `Shares,'' as the context
may require). This Statement of Additional Information relates to the
above-mentioned Shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is to provide dividend income exempt
from federal regular income tax consistent with stability of principal.
Unless indicated otherwise, the investment objective and the policies
described below may be changed by the Board of Trustees (`Trustees'')
without shareholder approval. Shareholders will be notified before any
material change in these policies becomes effective.

PORTFOLIO TRANSACTIONS

Subject to the general control of the Trustees, the adviser is responsible
for, makes decisions with respect to, and places orders for all purchases
and sales of portfolio securities for the Fund. Purchases of portfolio
securities are usually without brokerage commissions. In making portfolio

investments, the adviser seeks to obtain the best net price and the most
favorable execution of orders. To the extent that the execution and price
offered by more than one dealer are comparable, the adviser may, in its
discretion, effect transactions in portfolio securities with dealers who
provide the Trust with research advice or other services.

Transactions in the over-the-counter market are generally principal
transactions with dealers, and the costs of such transactions involve
dealer spreads rather than brokerage commissions. With respect to over-
the-counter transactions, the Fund, where possible, will deal directly
with the dealers who make a market in the securities involved except in
those circumstances where better prices and execution are available
elsewhere.
Investment decisions for the Fund are made independently from those for
the Trust's other portfolios or of other investment company portfolios or
accounts managed by the adviser. Such other portfolios may invest in the
same securities as the Fund. When purchases or sales of the same security
are made at substantially the same time on behalf of such other
portfolios, transactions are averaged as to price, and available
investments allocated as to amount, in a manner which the adviser believes
to be equitable to each portfolio, including the Fund. In some instances,
this investment procedure may adversely affect the price paid or received
by the Fund or the size of the position obtained for the Fund. To the
extent permitted by law, the adviser may aggregate the securities to be
sold or purchased for the Fund with those to be sold or purchased for such
other portfolios in order to obtain best execution.
The Fund may participate, if and when practicable, in bidding for the
purchase of Municipal Obligations directly from an issuer in order to take

advantage of the lower purchase price available to members of a bidding
group. The Fund will engage in this practice, however, only when the
adviser, in its sole discretion, believes such practice to be in the
Fund's interest.

The Fund may seek profits through short-term trading. The Fund's annual
portfolio turnover will be relatively high, but brokerage commissions are
normally not paid on money market instruments. The Fund's portfolio
turnover is not expected to have a material effect on its net income of
the Fund. The Fund's portfolio turnover rate is expected to be zero for
regulatory reporting purposes.

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS
VARIABLE AND FLOATING RATE INSTRUMENT. Municipal Obligations purchased by
the Fund may include variable and floating rate instruments, which provide
for adjustment in the interest rate on certain reset dates or whenever a
specified interest rate index changes, respectively. Variable and
floating rate instruments are subject to the credit quality standards
described in the Prospectus. In some cases the Fund may require that the
obligation to pay the principal of the instrument be backed by a letter or
line of credit or guarantee. Such instruments may carry stated maturities
in excess of 397 days provided that the maturity-shortening provisions
stated in Rule 2a-7 under the Investment Company Act of 1940 (the `1940
Act') are satisfied. Although a particular variable or floating rate
demand instrument may not be actively traded in a secondary market, in
some cases the Fund may be entitled to principal on demand and may be able
to resell such notes in the dealer market.

Variable and floating rate demand instruments held by the Fund may have
maturities of more than thirteen months provided (i) the Fund is entitled
to the payment of principal at any time, or during specified intervals not
exceeding 13 months, upon giving the prescribed notice (which may not
exceed 30 days), and (ii) the rate of interest on such instruments is
adjusted at periodic intervals which may extend up to 13 months (397
days). Variable and floating rate notes that do not provide for payment
within seven days may be deemed illiquid and subject to the 10% limitation
on such investments.
In determining the Fund's average weighted portfolio maturity and whether
a variable or floating rate demand instrument has a remaining maturity of
thirteen months or less, each instrument will be deemed by the Fund to
have a maturity equal to the longer of the period remaining until its next
interest rate adjustment or the period remaining until the principal
amount can be recovered through demand. In determining whether an unrated
variable or floating rate demand instrument is of comparable quality at
the time of purchase to securities in which the Fund may invest, the
adviser will follow guidelines adopted by the Trustees.
TENDER OPTION BONDS. The Fund may invest up to 10% of the value of its
assets in tender option bonds. The Fund will not purchase tender option
bonds unless (a) the demand feature applicable thereto is exercisable by
the Fund within 13 months of the date of such purchase upon no more than
30 days' notice and thereafter is exercisable by the Fund no less
frequently than annually upon no more than 30 days' notice and (b) at the
time of such purchase, the adviser reasonable expects that (i) based upon
its assessment of current and historical interest rate trends, the
prevailing short-term tax-exempt rates will not exceed the stated interest
rate on the underlying Municipal Obligations at the time of the next

tender fee adjustment and (ii) the circumstances which might entitle the
grantor of a tender option to terminate the tender option would not occur
prior to the time of the next tender opportunity. At the time of each
tender opportunity, the Fund will exercise the tender option with respect
to any tender option bonds unless the adviser reasonably expects that (a)
based upon its assessment of current and historical interest rate trends,
the prevailing short-term tax-exempt rates will not exceed the stated
interest rate on the underlying Municipal Obligations at the time of the
next tender fee adjustment and (b) the circumstances which might entitle
the grantor of a tender option to terminate the tender option would not
occur prior to the time of the next tender opportunity. The Fund will
exercise the tender feature with respect to tender option bonds, or
otherwise dispose of their tender option bonds, prior to the time the
tender option is scheduled to expire pursuant to the terms of the
agreement under which the tender option is granted. The Fund otherwise
will comply with the provisions of Rule 2a-7 under the 1940 Act in
connection with the purchase of tender option bonds including, without
limitation, the requisite determination by the Trustees that the tender
option bonds in question meet the quality standards described in Rule 2a-
7. In the event of a default of the Municipal Obligation underlying a
tender option bond or the termination of the tender option agreement, the
Fund would look to the maturity date of the underlying security for
purposes of compliance with Rule 2a-7 and, if its remaining maturity was
greater than 13 months, the Fund would sell the security as soon as would
be practicable. The Fund will purchase tender option bonds only when it
is satisfied that (a) the custodial and tender option arrangements,
including the fee payment arrangements, will not adversely affect the tax-
exempt status of the underlying Municipal Obligations and (b) the payment

of any tender fees will not have the effect of creating taxable income for
the Fund. Based on the tender option bond arrangement, the Fund expects
to value the tender option bond at par; however, the value of the
instrument will be monitored to assure that it is valued at fair value.
WHEN-ISSUED SECURITIES. As stated in the Fund's Prospectus, the Fund may
purchase Municipal Obligations on a "when-issued" basis (i.e., for
delivery beyond the normal settlement date at a stated price and yield).
When the Fund agrees to purchase when-issued securities, the custodian
will set aside cash or liquid portfolio securities equal to the amount of
the commitment in a separate account. Normally, the custodian will set
aside portfolio securities to satisfy a purchase commitment, and in such a
case, the Fund subsequently may be required to place additional assets in
the separate account in order to ensure that the value of the account
remains equal to the amount of the Fund's commitment. It may be expected
that the Fund's net assets will fluctuate to a greater degree when it sets
aside portfolio securities to cover such purchase commitments than when it
sets aside cash. Because the Fund will set aside cash or liquid assets to
satisfy its purchase commitments in the manner described, the Fund's
liquidity and ability to manage its portfolio might be affected in the
event its commitments to purchase when-issued securities ever exceeded 25%
of the value of its assets. When the Fund engages in when-issued
transactions, it relies on the seller to consummate the trade. Failure of
the seller to do so may result in the Fund's incurring a loss or missing
an opportunity to obtain a price considered to be advantageous. The Fund
does not intend to purchase when-issued securities for speculative
purposes but only in furtherance of its investment objective. The Fund
reserves the right to sell the securities before the settlement date if it
is deemed advisable.

STAND-BY COMMITMENTS. The Fund may acquire "stand-by commitments" with
respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a dealer would agree to purchase the Fund's option specified
Municipal Obligations at their amortized cost value to the Fund plus
accrued interest, if any. (Stand-by commitments acquired by the Fund may
also be referred to as "put" options.) Stand-by commitments may be
exercisable by the Fund at any time before the maturity of the underlying
Municipal Obligations and may be sold, transferred or assigned only with
the instruments involved. The Fund's right to exercise stand-by
commitments will be unconditional and unqualified.
The amount payable to the Fund upon its exercise of a stand-by commitment
will normally be (i) the Fund's acquisition cost of the Municipal
Obligations (excluding any accrued interest which the Fund paid on its
acquisition), less any amortized market premium or plus any amortized
market or original issue discount during the period the Fund owned the
securities, plus (ii) all interest accrued on the securities since the
last interest payment date during that period.
The Fund expects that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The total amount
paid in either manner for outstanding stand-by commitments held by the
Fund will not exceed 1/2 of 1% of the value of the Fund's total assets
calculated immediately after each stand-by commitment is acquired.
The Fund intends to enter into stand-by commitments only with dealers,
banks and broker-dealers which, in the opinion of the adviser, present

minimal credit risks. The Fund's reliance upon the credit of these
dealers, banks and broker-dealers will be secured by the value of the
underlying Municipal Obligations that are subject to the commitment.
The Fund would acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not
affect the valuation or assumed maturity of the underlying Municipal
Obligations, which would continue to be valued in accordance with the
amortized cost method. Stand-by commitments acquired by the Fund would be
valued at zero in determining net asset value. Where the Fund paid any
consideration directly or indirectly for a stand-by commitment, its cost
would be reflected as unrealized depreciation for the period during which
the commitment was held by the Fund.
PARTICIPATIONS. The Fund may purchase from financial institutions tax-
exempt participation interests in Municipal Obligations. A participation
interest gives the Fund an undivided interest in the Municipal Obligation
in the proportion that the Fund's participation interest bears to the
total amount of the Municipal Obligation. These instruments may have
floating or variable rates of interest. If the participation interest is
unrated, it will be backed by an irrevocable letter of credit or guarantee
of a bank that the Trustees has determined meets certain quality standards
or the payment obligation otherwise will be collaterlized by obligations
of the U.S. government and its agencies and instrumentalities ("U.S.
Government securities"). The Fund will have the right, with respect to
certain participation interests, to demand payment, on a specified number
of days' notice, for all or any part of the Fund's interest in the
Municipal Obligations, plus accrued interest. The Fund will invest no
more than 5% of its total assets in participation interests.

ILLIQUID SECURITIES. The Fund may not invest more than 10% of its total
assets in illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market or legal or
contractual restrictions on resale. Securities that have legal or
contractual restrictions on resale but have a readily available market are
not considered illiquid for purposes of this limitation.
The SEC has adopted Rule 144A under the Securities Act of 1933, as amended
(the "1933 Act") which allows for a broader institutional trading market
for securities otherwise subject to restriction on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration
requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. The adviser anticipates that the market
for certain restricted securities such as institutional municipal
securities will expand further as a result of this regulation and the
development of automated systems for the trading, clearance and settlement
of unregistered securities of domestic and foreign issuers, such as the
PORTAL system sponsored by the National Association of Securities Dealers.
The adviser will monitor on an ongoing basis the liquidity of restricted
securities under the supervision of the Trustees. In reaching liquidity
decisions with respect to Rule 144A securities, the adviser will consider,
inter alia, the following factors: (1) the unregistered nature of a Rule
144A security, (2) the frequency of trades and quotes for a Rule 144A
security, (3) the number of dealers willing to purchase or sell the Rule
144A security and the number of other potential purchasers, (4) the dealer
undertakings to make a market in the Rule 144A security, (5) the trading
markets for the Rule 144 A security, and (6) the nature of the Rule 144A
security and the nature of marketplace trades (including the time needed

to dispose of the Rule 144A security, methods of soliciting offers, and
mechanics of transfer).
The Appendix to this Statement of Additional Information contains a
description of the relevant rating symbols used by nationally-recognized
statistical rating organizations ("NRSROs") for Municipal Obligations that
may be purchased by the Fund.
MUNICIPAL OBLIGATIONS. Municipal Obligations include debt obligations
issued by governmental entities to obtain funds for various public
purposes, including the construction of a wide range of public facilities,
the refunding of outstanding obligations, the payment of general operating
expenses, and the extension of loans to public institutions and
facilities. Private activity bonds that are or were issued by or on
behalf of public authorities to finance various privately operated
facilities are included within the term Municipal Obligations if the
interest paid thereon is exempt from federal income tax. Opinions
relating to the validity of Municipal Obligations and to the exemption of
interest thereon from federal income taxes are rendered by counsel to the
issuers or by bond counsel to the respective issuing authorities at the
time of issuance. Neither the Fund nor the adviser will review
independently the underlying proceedings relating to the issuance of
Municipal Obligations or the bases for such opinions.
The Fund may hold tax-exempt derivatives which may be in the form of
tender option bonds, participations, beneficial interests in a trust,
partnership interests, or other forms. A number of different structures
have been used. For example, interests in long-term fixed rate Municipal
Obligations held by a bank or trustee or custodian are coupled with tender
option, demand, and other features when tax-exempt derivatives are
created. Together, these features entitle the holder of the interest to

tender (or put) the underlying Municipal Obligation to a third party at
periodic intervals and to receive the principal amount thereof. In some
cases, Municipal Obligations are represented by custodial receipts
evidencing rights to receive specific future interest payments, principal
payments or both, on the underlying municipal securities held by the
custodian. Under such arrangement, the holder of the custodial receipt
has the option to tender the underlying municipal securities at its face
value to the sponsor (usually a bank or broker-dealer or other financial
institution), which is paid periodic fees equal to the difference between
the bond's fixed coupon rate and the rate that would cause the bond,
coupled with the tender option, to trade at par on the date of a rate
adjustment. The Fund may hold tax-exempt derivatives, such as
participation interests and custodial receipts, for Municipal Obligations
which give the holder the right to receive payment of principal subject to
the conditions described above. The Internal Revenue Service has not
ruled on whether the interest received on tax-exempt derivatives in the
form of participation interests or custodial receipts is tax-exempt, and
accordingly, purchases of any such interests or receipts are based on the
opinion of counsel to the sponsors of such derivative securities. Neither
the Fund nor the adviser will review independently the underlying
proceedings related to the creation of any tax-exempt derivatives or the
bases for such opinions.
As described in the Fund's Prospectus, the two principal classifications
of Municipal Obligations consist of "general obligation" and "revenue"
issues, and the Fund's portfolio may include "moral obligation" issues,
which are normally issued by special purposes authorities. There are, of
course, variations in the quality of Municipal Obligations both within a
particular classification and between classifications, and the yields on

Municipal Obligations depend upon a variety of factors, including general
money market conditions, the financial condition of the issuer, general
conditions of the municipal bond market, the size of a particular
offering, the maturity of the obligation, and the rating of the issue.
The ratings of NRSROs represent their opinions as the quality of Municipal
Obligations. It should be recognized, however, that ratings are general
and are not absolute standards of quality, and Municipal Obligations with
the same maturity, interest rate, and rating may have different yields
while Municipal Obligations of the same maturity and interest rate with
different ratings may have the same yield. Subsequent to its purchase by
the Fund, an issue of Municipal Obligations may cease to be rated or its
rating may be reduced below the minimum rating required for purchase by
the Fund. The adviser will consider such an event in determining whether
the Fund should continue to hold the obligation.
An issuer's obligations under its Municipal Obligations are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors, such as the federal Bankruptcy Code, and laws,
if any, which may be enacted by federal or state legislatures extending
the time for payment of principal or interest or both, or imposing other
constraints upon enforcement of such obligations or upon the ability of
municipalities to levy taxes. The power or ability of an issuer to meet
its obligations for the payment of interest on and principal of its
Municipal Obligations may be materially adversely affected by litigation
or other conditions.
Among other instruments, the Fund may purchase short-term General
Obligation Notes, Tax Anticipation Notes, Bond Anticipation Notes, Revenue
Anticipation Notes, Tax-Exempt Commercial Paper, Construction Loan Notes,
and other forms of short-term loans. Such notes are issued with a short-

term maturity in anticipation of the receipt of tax funds, the proceeds of
bond placements, or other revenues. In addition, the Fund may invest in
other types of tax-exempt instruments such as municipal bonds, private
activity bonds, and pollution control bonds, provided they have remaining
maturities of 13 months or less at the time of purchase.
The payment of principal and interest on most securities purchased by the
Fund will depend upon the ability of the issuers to meet their
obligations. The District of Columbia, each state, each of their
political subdivisions, agencies, instrumentalities, and authorities, and
each multi-state agency of which a state is a member is a separate
"issuer" as that term is used in this Statement of Additional Information
and the Fund's Prospectus. The non-governmental user of facilities
financed by private activity bonds is also considered to be an "issuer."

CREDIT ENHANCEMENT
The Fund typically evaluates the credit quality and ratings of credit-
enhanced securities based upon the financial condition and ratings of the
party providing the credit enhancement (the `credit enhancer''), rather
than the issuer. Generally, the Fund will not treat credit-enhanced
securities as being issued by the credit enhancer for diverification
purposes. However, under certain circumstances applicable regulations may
require the Fund to treat securities as having been issued by both the
issuer and the credit enhancer.

INVESTMENT LIMITATIONS

The Fund's Prospectus summarizes certain investment limitations that may
not be changed without the approval of the holders of a majority of the

Fund's outstanding shares. Investment limitations numbered 1 through 7
may not be changed without the approval of shareholders; investment
limitations 8 through 13 may be changed by the Trustees without
shareholder approval at any time.
The Fund may not:
1. Purchase securities of any one issuer if, as a result, more than 5%
of the value of the Fund's assets would be invested in the securities of
such issuer, except that up to 25% of the value of the Fund's total assets
may be invested without regard to such 5% limitation and provided that
there is no limitation with respect to investments in U.S. Government
securities.
2. Borrow money, except that the Fund may (i) borrow money for temporary
or emergency purposes (not for leveraging or investment) from banks or,
subject to specific authorization by the SEC, from funds advised by the
adviser or an affiliate of the adviser, and (ii) engage in reverse
repurchase agreements; provided that (i) and (ii) in combination do not
exceed one-third of the value of the Fund's total assets (including the
amount borrowed) less liabilities (other than borrowings). The Fund may
not mortgage, pledge, or hypothecate its assets except in connection with
such borrowings and reverse repurchase agreements and then only in amounts
not exceeding one-third of the value of the Fund's total assets.
Additional investments will not be made when borrowings exceed 5% of the
Fund's assets.
3. Make loans, except that the Fund may (i) purchase or hold debt
obligations in accordance with its investment objective and policies, (ii)
enter into repurchase agreements for securities, (iii) lend portfolio
securities, and (iv) subject to specific authorization by the SEC, lend

money to other funds advised by the adviser or an affiliate of the
adviser.
4. Act as an underwriter of securities, except insofar as the Fund may
be deemed an underwriter under applicable securities laws in selling
portfolio securities.
5. Purchase or sell real estate or real estate limited partnerships,
provided that the Fund may purchase securities of issuers which invest in
real estate or interests therein.
6. Purchase or sell commodities contracts, or invest in oil, gas or
mineral exploration or development programs or in mineral leases.
7. Purchase any securities which would cause 25% or more of the value of
its total assets at the time of such purchase to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry or in industrial development bonds or
other securities, the interest upon which is paid from revenues of similar
types of projects, (unless the Fund is in a temporary defensive position);
provided that there is no limitation with respect to investments in U.S.
Government securities.
8. Knowingly invest more than 10% of the value of the Fund's assets in
securities that may be illiquid because of legal or contractual
restrictions on resale or securities for which there are no readily
available market quotations.
9. Purchase securities on margin, make short sales of securities, or
maintain a short position.
10. Write or sell puts, calls, straddles, spreads, or combinations
thereof.

In addition, without the approval of the holders of a majority of the
Fund's outstanding shares, the Fund may not change its policy of investing
at least 80% of its total assets (except during temporary defensive
periods) in Municipal Obligations.

REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
the prospectus and this Statement of Additional Information, in order to
comply with applicable laws and regulations, including the provisions of
and regulations under the Investment Company Act of 1940. In particular,
the Fund will comply with the various requirements of Rule 2a-7, which
regulates money market mutual funds. The Fund will also determine the
effective maturity of its investments , as well as its ability to consider
a security as having received the requisite short-term ratings by NRSROs,
according to Rule 2a-7. The Fund may change these operational policies to
reflect changes in the laws and regulations without the approval of its
shareholders.

MONEY MARKET OBLIGATIONS TRUST II MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Money Market Obligations Trust II, and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, President and
Trustee of the Trust.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee,
University of Pittsburgh; Director or Trustee of the Funds.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director
or Trustee of the Funds.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
formerly, Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.;
Director, Ryan Homes, Inc.; Director or Trustee of the Funds.

J. Christopher Donahue*
Federated Investors Tower

Pittsburgh, PA
Birthdate: April 11, 1949
President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Trustee of the
Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of

Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street
Boston Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner,
Mollica, Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee

Professor, International Politics; Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., National Defense University, U.S. Space
Foundation and Czech Management Center; President Emeritus, University of
Pittsburgh; Founding Chairman, National Advisory Council for Environmental
Policy and Technology, Federal Emergency Management Advisory Board and
Czech Management Center; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director or
Trustee of the Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., Federated Global Research Corp. and Passport
Research, Ltd.; Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder Services Company; Trustee
or Director of some of the Funds; President, Executive Vice President and
Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President and
Secretary of the Funds; Treasurer of some of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

*This Trustee is deemed to be an ``interested person'' as defined in
the Investment Company Act of 1940.
@Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board between
meetings of the Board.
As referred to in the list of Trustees and Officers, `Funds'' includes
the following investment companies:
111 Corcoran Funds; Annuity Management Series; Arrow Funds; Automated
Government Money Trust; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor Series;
Edward Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate
U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Investment Portfolios; Federated
Investment Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-

Free Trust; Federated Total Return Series, Inc.; Federated U.S. Government
Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated
U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority
Funds; Fixed Income Securities, Inc.; High Yield Cash Trust; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds,
Inc.; Investment Series Trust; Liberty Term Trust, Inc. - 1999; Liberty
U.S. Government Money Market Trust; Liquid Cash Trust; Managed Series
Trust; Money Market Management, Inc.; Money Market Obligations Trust;
Money Market Trust; Municipal Securities Income Trust; Newpoint Funds;
Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; The Planters Funds; The Starburst Funds; The Starburst
Funds II; The Virtus Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; and World Investment Series, Inc.

SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s
outstanding shares.
As of March 15, 1996, the following shareholders of record owned 5% or
more of the outstanding Class A Shares of the Fund: Society Asset
Management, Inc., Cleveland, OH, owned approximately 18.78% shares held of
record; Synopsys Inc., Mountian View, CA, owned approximately 15.00%
shares held of record; Van Kampen Merritt Investment Advisory Corp.,
Boston, MA, owned approximately 13.49% shares held of record; Deposit
Guaranty National Bank, Jackson, MS, owned approximately 7.33% shares held
of record; Employers Reinsurance Corporation, Overland Park, KS, owned
approximately 6.97% shares held of record; Publix Supermarket, Lakeland,

FL, owned approximately 6.69% shares held of record; The Gap, Inc., San
Bruno, CA, owned approximately 6.41% shares held of record; and Oracle
Corporation, Redwood Shore, CA, owned approximately 5.22% shares held of
record.
As of March 15, 1996, no following shareholder of record owned 5% or more
of the outstanding Class B Shares of the Fund.
As of March 15, 1996, no following shareholder of record owned 5% or more
of the outstanding Class E Shares of the Fund.
TRUSTEES COMPENSATION

BOARD OF TRUSTEES - LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST FROM FUND COMPLEX *

James A. Carbone, $0 $0 for the Trust and
Co-Chairman and Trustee Fund Complex(2)
Andrew Gordon, $0 $0 for the Trust and
Co-Chariman, Trustee and President Fund Complex(2)
Charles Barber, $25,000 $25,000 for the Trust and
Trustee Fund Complex(1)
Burt N. Dorsett, $25,000 $52,500 for the Trust and
Trustee Fund Complex(2)
Edward J. Kaier, $25,000 $25,000 for the Trust and
Trustee Fund Complex(1)
S. Donald Wiley, $25,000 $25,000 for the Trust and

Trustee Fund Complex(1)

* Represents the total compensation paid to such persons by all
investment companies (including the Trust) from which such person received
compensation during the fiscal year ended January 31, 1996 that are
considered part of the same `fund complex'' as the Trust because they
have common or affiliated investment advisers. The parenthetical number
represents the number of such investment companies, including the Trust.

BOARD OF TRUSTEES - MONEY MARKET OBLIGATIONS TRUST II

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST** TRUST*# FROM FUND COMPLEX +

John F. Donahue $0 $0 for the Trust and
Chairman and Trustee 54 other investment companies in the
Fund Complex
Thomas G. Bigley $0 $86,331 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
John T. Conroy, Jr. $0 $115,760 for the Trust and

Trustee 54 other investment companies in the
Fund Complex
William J. Copeland $0 $115,760 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
J. Christopher Donahue $0 $0 for the Trust and
President and Trustee 16 other investment companies in the
Fund Complex
James E. Dowd $0 $115,760 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D. $0 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr. $0 $115,760 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Peter E. Madden $0 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Gregor F. Meyer $0 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
John E. Murray, Jr., $0 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Wesley W. Posvar $0 $104,898 for the Trust and

Trustee 54 other investment companies in the
Fund Complex
Marjorie P. Smuts $0 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex

TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISER
The Fund's investment adviser is Federated Management. It is a subsidiary
of Federated Investors. All the voting securities of Federated Investors
are owned by a trust, the trustees of which are John F. Donahue, his wife
and his son, J. Christopher Donahue.
The adviser shall not be liable to the Trust, the Fund, or any shareholder
of the Fund for any losses that may be sustained in the purchase, holding,
or sale of any security or for anything done or omitted by it, except acts

or omissions involving willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties imposed upon it by its contract with
the Trust.
Prior to November 13, 1996, Lehman Brothers Global Asset Management, New
York, NY, was the investment adviser for the Fund.
ADVISORY FEES
For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectus. During the fiscal
year ended January 31, 1996, Lehman Brothers Global Asset Management (the
`former adviser''), New York, NY, served as the Fund's adviser. For the
fiscal years ended 1996 and 1995, and for the fiscal period ended Janaury
31, 1994, the Fund paid the former adviser $172,515, $223,512 and
$103,318, respectively. Waivers by the former adviser of advisory fees
and reimbursement of expenses to maintain the Fund's operating expense
ratios at certain levels for the fiscal years ended 1996 and 1995, and for
the fiscal period ended Janaury 31, 1994, amounted to $44,040 and $0,
$150,715 and $0, and $103,318 and $133,212, respectively.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
Trustees. The adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the

Fund or to the adviser and may include: advice as to the advisability of
investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and
similar services. Research services provided by brokers and dealers may be
used by the adviser or its affiliates in advising the Fund and other
accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have
paid, it would tend to reduce their expenses. The adviser and its
affiliates exercise reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons are
reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended January 31, 1996, 1995
and 1994 the Fund paid no brokerage commissions.
Although investment decisions for the Fund are made independently from
those of the other accounts managed by the adviser, investments of the
type the Fund may make may also be made by those other accounts. When the
Fund and one or more other accounts managed by the adviser are prepared to
invest in, or desire to dispose of, the same security, available
investments or opportunities for sales will be allocated in a manner
believed by the adviser to be equitable to each. In some cases, this
procedure may adversely affect the price paid or received by the Fund or
the size of the position obtained or disposed of by the Fund. In other
cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, Pittsburgh, PA, a subsidiary of Federated
Investors, provides administrative personnel and services to the Fund for
a fee as described in the prospectus. FDISG (the `former
administrator'), a subsidiary of First Data Corporation, Boston, MA,
served as the Fund's administrator prior to November 13, 1996. For the
fiscal years ended 1996 and 1995, and for the fiscal period ended Janaury
31, 1994, the Fund paid the former administrator $172,515, $223,512, and
$103,318, respectively. Waivers by the former administrator of
administration fees and reimbursement of expenses to maintain the Fund's
operating expense ratios at certain levels for the fiscal years ended 1996
and 1995, and for the fiscal period ended Janaury 31, 1994 amounted to
$127,184 and $0; $171,438 and $0; and $103,318 and $28,669, respectively.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh,
PA, provides certain accounting and recordkeeping services with respect to
the Fund's portfolio investments. The fee paid for this service is based
upon the level of the Fund's average net assets for the period plus out-
of-pocket expenses. Prior to November 13, 1996, Boston Safe, Boston, MA,
a wholly-owned subsidiary of Mellon Bank Corporation, served as the
custodian for the Fund.

TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary
shareholder records. For its services, the transfer agent receives a fee
based on the size, type and number of accounts and transactions made by
shareholders. Prior to November 13, 1996, FDISG served as the Fund's
tranfer agent.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
PA. Prior to November 13, 1996, Ernst & Young LLP, Boston, MA were the
independent auditors for the Fund.
SHAREHOLDER SERVICES AGREEMENT

This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided which
are necessary for the maintenance of shareholder accounts and to encourage
personal services to shareholders by a representative who has knowledge of
the shareholder's particular circumstances and goals. These activities and
services may include, but are not limited to: providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By
adopting the Shareholder Services Agreement, the Board of Trustees expects
that the Fund will benefit by: (1) providing personal services to
shareholders; (2) investing shareholder assets with a minimum of delay and

administrative detail; (3) enhancing shareholder recordkeeping systems;
and (4) responding promptly to shareholders' requests and inquiries
concerning their accounts.
Prior to November 13, 1996, the Fund entered into agreements with Service
Organizations whose customers are the beneficial owners of what were
formerly called Class B Shares and Class E Shares. For the fiscal year
ended January 31, 1996, the following service fees were paid by the Fund:
Class B Shares, $0; and Class E Shares, $0. For the fiscal year ended
January 31, 1995, and the fiscal period ended January 31, 1994, the Fund
did not pay any service fees.
DETERMINING NET ASSET VALUE

The Trustees have decided that the best method for determining the value
of portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at current
market value. Accordingly, neither the amount of daily income nor the net
asset value is affected by any unrealized appreciation or depreciation of
the portfolio. In periods of declining interest rates, the indicated daily
yield on shares of the Fund computed by dividing the annualized daily
income on the Fund's portfolio by the net asset value computed as above
may tend to be higher than a similar computation made by using a method of
valuation based upon market prices and estimates. In periods of rising
interest rates, the opposite may be true.
The Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in Rule 2a-7
(the `Rule'') promulgated by the Securities and Exchange Commission under
the Investment Company Act of 1940. Under the Rule, the Trustees must

establish procedures reasonably designed to stabilize the net asset value
per share, as computed for purposes of distribution and redemption, at
$1.00 per share, taking into account current market conditions and the
Fund's investment objective. The procedures include monitoring the
relationship between the amortized cost value per share and the net asset
value per share based upon available indications of market value. The
Trustees will decide what, if any, steps should be taken if there is a
difference of more than 0.5 of 1% between the two values. The Trustees
will take any steps they consider appropriate (such as redemption in kind
or shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the two
methods of determining net asset value.
REDEMPTION IN KIND

The Fund is obligated to redeem shares solely in cash up to $250,000 or 1%
of the Fund's net asset value, whichever is less, for any one shareholder
within a 90-day period. Any redemption beyond this amount will also be in
cash unless the Trustees determine that further payments should be in
kind. In such cases, the Fund will pay all or a portion of the remainder
of the redemption in portfolio instruments valued in the same way as the
Fund determines net asset value. The portfolio instruments will be
selected in a manner that the Trustees deem fair and equitable. Redemption
in kind is not as liquid as a cash redemption. If redemption is made in
kind, shareholders who sell these securities could receive less than the
redemption value and could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect

its shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for acts or
obligations of the Trust. These documents require notice of this
disclaimer to be given in each agreement, obligation, or instrument the
Trust or its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the
Trust's obligations, the Trust is required by the Declaration of Trust to
use its property to protect or compensate the shareholder. On request, the
Trust will defend any claim made and pay any judgment against a
shareholder for any act or obligation of the Trust. Therefore, financial
loss resulting from liability as a shareholder will occur only if the
Trust itself cannot meet its obligations to indemnify shareholders and pay
judgments against them.
THE FUND'S TAX STATUS

To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90%
of its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within
certain statutory limits; and distribute to its shareholders at least 90%
of its net income earned during the year.
PERFORMANCE INFORMATION

Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is
invested; changes in interest rates; changes in expenses; and the relative
amount of cash flow. To the extent that financial institutions and
broker/dealers charge fees in connection with services provided in

conjunction with an investment in shares of the Fund, the performance will
be reduced for those shareholders paying those fees.
YIELD

The yield is calculated based upon the seven days ending on the day of the
calculation, called the `base period.'' This yield is computed by:
determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net
change excluding capital changes but including the value of any additional
shares purchased with dividends earned from the original one share and all
dividends declared on the original and any purchased shares; dividing the
net change in the account's value by the value of the account at the
beginning of the base period to determine the base period return; and
multiplying the base period return by 365/7.

For the seven-day period ended January 31, 1996, the yield for
Institutional Shares was 3.51%.
For the seven-day period ended January 31, 1996, the yield for
Institutional Shares was 3.40%.*
For the seven-day period ended January 31, 1996, the yield for
Institutional Service Shares was 3.26%.
For the seven-day period ended January 31, 1996, the yield for
Institutional Service Shares was 3.15%.*
For the seven-day period ended January 31, 1996, the yield for
Institutional Capital Shares was 3.36%.
For the seven-day period ended January 31, 1996, the yield for
Institutional Capital Shares was 3.25%.*
* Estimated yield without fee waivers and/or expense reimbursements.

EFFECTIVE YIELD

The effective yield is calculated by compounding the unannualized base
period return by: adding 1 to the base period return; raising the sum to
the 365/7th power; and subtracting 1 from the result.

For the seven-day period ended January 31, 1996, the effective yield for
Institutional Shares was 3.57%.
For the seven-day period ended January 31, 1996, the effective yield for
Institutional Shares was 3.45%.*
For the seven-day period ended January 31, 1996, the effective yield for
Institutional Service Shares was 3.31%.
For the seven-day period ended January 31, 1996, the effective yield for
Institutional Service Shares was 3.20%.*
For the seven-day period ended January 31, 1996, the effective yield for
Institutional Capital Shares was 3.41%.
For the seven-day period ended January 31, 1996, the effective yield for
Institutional Capital Shares was 3.30%.*
* Estimated yield without fee waivers and/or expense reimbursements.

TOTAL RETURN

shares purchased at the beginning of the period with $1,000, adjusted over
the period by any additional shares, assuming the monthly reinvestment of
all dividends and distributions.

TAX-EQUIVALENT YIELD

The Fund's tax-equivalent yield for Institutional Shares for the thirty-
day period ended January 31, 1996, was 5.09%.
The Fund's tax-equivalent yield for Institutional Shares for the thirty-
day period ended January 31, 1996, was 4.93%.*
The Fund's tax-equivalent yield for Institutional Service Shares for the
thirty-day period ended January 31, 1996, was 4.72%.
The Fund's tax-equivalent yield for Institutional Service Shares for the
thirty-day period ended January 31, 1996, was 4.57%.*
The Fund's tax-equivalent yield for Institutional Capital Shares for the
thirty-day period ended January 31, 1996, was 4.87%.
The Fund's tax-equivalent yield for Institutional Capital Shares for the
thirty-day period ended January 31, 1996, was 4.71%.*
* Estimated yield without fee waivers and/or expense reimbursements.

The tax-equivalent yield of the Fund is calculated similarly to the yield,
but is adjusted to reflect the taxable yield that the Fund would have had
to earn to equal its actual yield, assuming a 39.6% tax rate and assuming
that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and
sales literature. The interest earned by the municipal bonds in the
Fund's portfolio generally remains free from federal regular income

tax,* and is often free from state and local taxes as well. As the
table below indicates, a "tax-free" investment is an attractive
choice for investors, particularly in times of narrow spreads between
tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1996
MULTISTATE MUNICIPAL FUNDS

FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%

JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750

SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750

Tax-Exempt
Yield Taxable Yield Equivalent

1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%

4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%

Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional
state and local taxes paid on comparable taxable investments were not
used to increase federal deductions.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Fund shares.
* Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.
PERFORMANCE COMPARISONS

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
oIBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of
money market funds weekly. Donoghue's Money Market Insight

publication reports monthly and 12-month-to-date investment results
for the same money funds.
O BANK RATE MONITOR(C) NATIONAL INDEX, Miami Beach, Florida,
published weekly, is an average of the interest rates of personal
money market deposit accounts at ten of the largest banks and
thrifts in each of the five largest Standard Metropolitan
Statistical Areas. If more than one rate is offered, the lowest
rate is used. Account minimums and compounding methods may vary.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These total
returns represent the historic change in the value of an investment in the
Fund based on monthly reinvestment of dividends over a specified period of
time.
Advertising and other promotional literature may include charts, graphs
and other illustrations using the Fund's returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by Fund portfolio managers and their views and analysis
on how such developments could affect the Fund. In addition, advertising
and sales literature may quote statistics and give general information

about the mutual fund industry, including the growth of the industry, from
sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is
reflected in its investment decision making-structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.
Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors. These traders
handle trillions of dollars in annual trading volume.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market
funds, a principal means used by money managers today to value money
market fund shares. Other innovations include the first institutional tax-
free money market fund. As of December 31, 1995, Federated Investors
managed more than $40.2 billion in assets across approximately 47 money
market funds, including 17 government, 10 prime and 20 municipal with
assets approximating $20.9 billion, $11.5 billion and $7.8 billion,
respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed

income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' international portfolios.

MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds
for a variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and mutual
funds for a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust divisions
of the top 100 bank holding companies use Federated funds in their
clients' portfolios. The marketing effort to trust clients is headed by
Mark R. Gensheimer, Executive Vice President, Bank Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. Federated's service to
financial professionals and institutions has earned its high rankings in
several DALBAR Surveys. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.

FINANCIAL STATEMENTS

The Trust's Annual Report for the fiscal year ended January 31, 1996, is
incorporated into this Statement of Additional Information by reference in
its entirety.

*Source: Investment Company Institute

APPENDIX

STANDARD AND POOR'S RATINGS GROUP MUNICIPAL LONG-TERM DEBT RATINGS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.

BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB--Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which
could lead to inadequate capacity to meet timely interest and principal
payments. The BB rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBB- rating.
B--Debt rated B has greater vulnerability to default but currently has the
capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual
or implied BB or BB- rating.
CCC--Debt rated CCC has currently identifiable vulnerability to default
and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal.
In the event of adverse business, financial, or economic conditions, it is
not likely to have the capacity to pay interest and repay principal. The
CCC rating category is also used for debt subordinated to senior debt that
is assigned an actual or implied B or B- rating.
CC--The rating CC typically is applied to debt subordinated to senior debt
that is assigned an actual or implied CCC debt rating.

C--The rating C typically is applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed,
but debt service payments are continued.
CI--The rating CI is reserved for income bonds on which no interest is
being paid.
D--Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that
such payments will be made during such grace period. The D rating also
will be used upon the filing of a bankruptcy petition if debt service
payments are jeopardized.
PLUS (+) or MINUS (-)The rating of "AA" may be modified by the addition of
a plus or minus sign to show relative standing within this rating
category.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL LONG-TERM DEBT RATINGS
AAA--Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
AA--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there

may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment some time in
the future.
BAA--Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics
as well.
BA--Bonds which are Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance
of other terms of the contract over any long period of time may be small.
CAA--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.
CA--Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C--Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Con. (---) - Municipal Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience,
(c) rentals which begin when facilities are completed, or (d) payments to
which some other limiting condition attaches. Parenthetical rating
denotes probable credit stature upon completion of construction or
elimination of basis of condition.
Moody's applies numerical modifiers 1, 2 and 3 in generic classification
of "Aa" in its corporate bond rating system. The modifier 1 indicates
that the company ranks in the higher end of its generic rating category,
the modifier 2 indicates a mid-range ranking, and the modifier 3 indicates
that the company ranks at the lower end of its generic rating category.
Those municipal bonds in the `Aa'' to ``B'' groups which Moody's believes
possess the strongest investment attributes are designated by the symbols
`Aa1,'' ``A1,'' `Baa1,'' ``Ba1,'' and `B1.''
FITCH INVESTORS SERVICE, INC. MUNICIPAL LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high quality. The
obligor's ability to pay interest and repay principal is very strong,
although not quite as strong as bonds rated AAA. Because bonds rated in
the AAA and AA categories are not significantly vulnerable to foreseeable

future developments, short-term debt of these issuers is generally rated
F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds and, therefore, impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
BB--Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service
requirements.
B--Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued
timely payment of principal and interest reflects the obligor's limited
margin of safety and the need for reasonable business and economic
activity throughout the life of the issue.
CCC--Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
CC--Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.

C--Bonds are in imminent default in payment of interest or principal.
DDD, DD, AND D--Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued on the
basis of their ultimate recovery value in liquidation or reorganization of
the obligor. DDD represents the highest potential for recovery on these
bonds, and D represents the lowest potential for recovery.
NR--NR indicates that Fitch does not rate the specific issue.
PLUS (+) OR MINUS (-): Plus or minus signs are used with a rating symbol
to indicate the relative position of a credit within the rating category.
Plus and minus signs, however, are not used in the AAA category.
To provide more detailed indications of credit quality, the Fitch ratings
from and including "AA" or "C" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
DUFF & PHELPS CREDIT RATING CO. MUNICIPAL LONG-TERM DEBT RATINGS
AAA--Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- --High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A+, A, A- --Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, BBB- --Below-average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk
during economic cycles.
BB+, BB, BB- --Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection factors

fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
B+, B, B- --Below investment grade and possessing risk that obligation
will not be met when due. Financial protection factors will fluctuate
widely according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC--Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company
developments.
DD--Defaulted debt obligations. Issuer failed to meet scheduled principal
and/or interest payments.
DP-Preferred stock with dividend arrearages.
THOMSON BANKWATCH MUNICIPAL LONG-TERM DEBT RATINGS
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long-term debt and
preferred stock which are issued by United States commercial banks,
thrifts and non-bank banks; non-United States banks; and broker-dealers.
The following summarizes the two highest rating categories used by Thomson
BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to
repay principal and interest on a timely basis is very high
"AA" - This designation indicates a superior ability to repay principal
and interest on a timely basis with limited incremental risk versus issues
rated in the highest category.

"A" - This designation indicates the ability to repay principal and
interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher
ratings.
PLUS (+) OR MINUS (-) -The ratings may include a plus or minus sign
designation which indicates where within the respective category the issue
is placed.

IBCA, INC. MUNICIPAL LONG-TERM DEBT RATINGS
IBCA assesses the investment quality of unsecured debt with an original
maturity of more than one year which is issued by bank holding companies
and their principal bank subsidiaries. The following summarizes the two
highest categories used by IBCA for long-term debt ratings:
"AAA" - Obligations for which there is the lowest expectation of
investment risk. Capacity for timely repayment of principal and interest
is substantial such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
significantly.
"AA" - Obligations for which there is a very low expectation of
investment risk. Capacity for timely repayment of principal and interest
is substantial. Adverse changes in business, economic or financial
conditions may increase investment risk albeit not very significantly.
"A" - Obligations for which there is a low expectation of investment
risk. Capacity for timely repayment of principal and interest is strong,
although adverse changes in business economic or financial conditions may
lead to increased investment risk.

IBCA may append a rating of plus (+) or minus (-) to a rating to denote
relative status within these rating categories.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations.
Prime-1 repayment capacity will normally be evidenced by the following
characteristics:
o Leading market positions in well established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
o Broad margins in earning coverage of fixed financial charges and high
internal cash generation.
o Well established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2--Issuers rated Prime-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
STANDARD AND POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong
safety characteristics are denoted with a plus sign (+) designation.

A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded
as having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than the
strongest issues.
Fitch may also use the symbol "LOC" with its short-term ratings to
indicate that the rating is based upon a letter of credit issued by a
commercial bank.
DUFF & PHELPS CREDIT RATING CO. COMMERCIAL PAPER RATING DEFINITIONS
The two highest rating categories of Duff & Phelps for investment grade
commercial paper are `D-1'' and ``D-2.'' Duff & Phelps employs three
designations, `D-1+,'' ``D-1'' and `D-1-,'' within the highest rating
category. The following summarizes the two highest rating categories used
by Duff & Phelps for commercial paper:
"D-1+" - Debt possesses highest certainty of timely payment. Short-
term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below
risk-free U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental
protection factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors.
Risk factors are very small.

"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to capital markets
is good. Risk factors are small.
THOMSON BANKWATCH COMMERCIAL PAPER RATING DEFINITIONS
Thomson BankWatch short-term ratings assess the likelihood of an untimely
payment of principal or interest of debt having a maturity of one year or
less. The following summarizes the two highest ratings used by Thomson
BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest rating
category and indicates a very high degree of likelihood that principal and
interest will be paid on a timely basis.
`TBW-2" - This designation indicates that while the degree of safety
regarding timely payment of principal and interest is strong, the relative
degree of safety is not as high a for issues rated "TBW-1."
IBCA, INC. COMMERCIAL PAPER RATING DEFINITIONS
IBCA assesses the investment quality of unsecured debt with an original
maturity of less than one year which is issued by bank holding companies
and their principal bank subsidiaries. The highest rating category or
IBCA for short-term debt is "A." IBCA employs two designations, "A1+" and
"A1," within the highest rating category. The following summarizes the
two highest rating categories used by IBCA for short-term debt ratings:
"A1" - Obligations are supported by the highest capacity for timely
repayment. Where issues possess a particularly strong credit feature, a
rating of "A1+" is assigned.
"A2" - Obligations are supported by a good capacity for timely
repayment.
STANDARD AND POOR'S RATINGS GROUP MUNICIPAL NOTE RATINGS

A Standard & Poor's rating reflects the liquidity factors and market
access risks unique to notes due in the three years or less. The
following summarizes the two highest rating categories used by Standard &
Poor's Corporation for municipal notes:
"SP-1" - The issuers of these municipal notes exhibit strong capacity
to pay principal and interest. Those issues determined to possess a very
strong capacity to pay are given a plus (+) designation.
`SP-2'' - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL NOTE RATINGS
Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG"). Such ratings recognize
the differences between short-term credit risk and long-term risk. A
short-term rating may also be assigned on an issue having a demand
feature. Such ratings will be designated as "VMIG." The following
summarizes the two highest ratings used by Moody's Investors Service, Inc.
for short-term notes:
"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
Duff & Phelps and Fitch use the short-term ratings describedunder
Commercial Paper Ratings for municipal notes.

- --------------------------------------------------------------------------------

The Institutional Shares (formerly, Class A Shares) of Prime Cash Obligations
Fund (formerly, Prime Money Market Fund) (the "Fund") offered by this prospectus
represent interests in a portfolio of Money Market Obligations Trust II
(formerly, Lehman Brothers Institutional Funds Group Trust) (the "Trust"), an
open-end management investment company (a mutual fund). The Fund invests in a
broad range of short-term money market securities to provide a high level of
current income consistent with stability of principal and liquidity.

This prospectus contains the information you should read and know before you
invest in Institutional Shares of the Fund. Keep this prospectus for future
reference.

Prospectus dated May 30, 1996

(Revised November 15, 1996)

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES 2
- ------------------------------------------------------

GENERAL INFORMATION 3
- ------------------------------------------------------

INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3
Investment Limitations 7

FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Shares 8
Expenses of the Fund and Institutional
Shares 9
NET ASSET VALUE 10
- ------------------------------------------------------

HOW TO PURCHASE SHARES 10
- ------------------------------------------------------

HOW TO REDEEM SHARES 11
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------

TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13

OTHER CLASSES OF SHARES 13
- ------------------------------------------------------

PERFORMANCE INFORMATION 14

- ------------------------------------------------------

ADDRESSES 15
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

</TABLE>
<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)......... None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of
offering price)..................................................................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)................................................. None
Redemption Fee (as a percentage of amount redeemed, if applicable).................... None
Exchange Fee.......................................................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(1)...................................................... 0.06%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.12%
Shareholder Services Fee(2)............................................. 0.00%
Total Operating Expenses(3)........................................................... 0.18%

</TABLE>

(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of a portion of the management fee. The adviser can terminate
this anticipated voluntary waiver at any time at its sole discretion. The
maximum management fee is 0.20%.

(2) There is no present intention of paying or accruing the shareholder services
fee during the fiscal year ending January 31, 1997 for Institutional Shares. If
Institutional Shares were paying or accruing the shareholder services fee,
Institutional Shares would pay up to 0.25% of its average daily net assets for
the shareholder services fee. See "Fund Information."

(3) The total operating expenses are estimated to be 0.32% absent the
anticipated voluntary waiver of a portion of the management fee.

*Total Institutional Shares operating expenses are estimated based on average
expenses expected to be incurred during the fiscal year ending January 31, 1997.
During the course of this period, expenses may be more or less than the average
amount shown.

VARIOUS COSTS AND EXPENSES, SEE "FUND INFORMATION." WIRE-TRANSFERRED REDEMPTIONS
OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ----------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period................ $2 $ 6 $10 $ 23
</TABLE>

PRIME CASH OBLIGATIONS FUND
(FORMERLY, PRIME MONEY MARKET FUND)

FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FORMERLY, CLASS A SHARES)
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
PRIME CASH OBLIGATIONS FUND
----------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
1/31/96 1/31/95 1/31/94*
------- ------- ------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- ----------------------------------------------------- ------- ------- ----------
Net investment income (1) 0.0592 0.0442 0.0310
- -----------------------------------------------------
Dividends from net investment income (0.0592) (0.0442) (0.0310)
- ----------------------------------------------------- ------- ------- ----------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- ----------------------------------------------------- ------- ------- ----------
TOTAL RETURN (2) 6.08% 4.52% 3.14%
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
- -----------------------------------------------------
Net assets, end of period (in 000's) $3,919,186 $1,538,802 $2,866,353
- -----------------------------------------------------
Ratio of net investment income to average net
assets 5.90% 4.30% 3.16%(3)
- -----------------------------------------------------
Ratio of operating expenses to average net assets
(4) 0.17% 0.12% 0.11%(3)

- -----------------------------------------------------
</TABLE>

* The Institutional Shares commenced operations on February 8, 1993.

(1) Net investment income per share before waiver of fees by the Investment
Adviser, Administrator, Custodian and/or Transfer Agent and/or expenses
reimbursed by the Investment Adviser and Administrator for the Institutional
Shares was $0.0583 and $0.0428, respectively, for the years ended January
31, 1996 and 1995 and $0.0289 for the period ended January 31, 1994 for the
Prime Cash Obligations Fund.

(2) Total return represents aggregate total return for the periods indicated.

(3) Annualized.

(4) Annualized expense ratios before waiver of fees by the Investment Adviser,
Administrator, Custodian and/or Transfer Agent and/or expenses reimbursed by
the Investment Adviser and Administrator for Institutional Shares were 0.25%
and 0.25%, respectively, for the years ended January 31, 1996 and 1995 and
0.33% for the period ended January 31, 1994 for the Prime Cash Obligations
Fund.

GENERAL INFORMATION

- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 25, 1992. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Board of
Trustees (the "Trustees") has established three classes of shares known as
Institutional Shares, Institutional Service Shares and Institutional Capital
Shares. This prospectus relates only to Institutional Shares of the Fund, which
are designed primarily for entities holding shares in an agency or fiduciary
capacity, financial institutions, financial intermediaries and institutional
investors as a convenient means of accumulating an interest in a professionally
managed portfolio investing in a broad range of short-term money market
securities. A minimum initial investment of $1,000,000 over a one-year period is
required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide a high level of current
income consistent with stability of principal and liquidity. This investment
objective may be changed by the Trustees without shareholder approval. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by complying with the diversification and other requirements
of Rule 2a-7 under the Investment Company Act of 1940 which regulates money
market mutual funds and by following the investment policies described in this
prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing in a portfolio consisting
of a broad range of short-term money market securities, including U.S.
government and U.S. bank and commercial obligations and repurchase agreements
relating to such obligations. The Fund may also invest in securities of foreign
issuers. The Fund only invests in securities that are payable in U.S. dollars
and that have (or, pursuant to regulations adopted by the SEC will be deemed to
have) remaining maturities of thirteen months or less at the date of purchase by
the Fund. Certain securities held by the Fund may have remaining maturities in
excess of stated limitations discussed below if securities provide for
adjustments in their interest rates not less frequently than such time
limitations. The average maturity of the money market instruments in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Trustees
without shareholder approval.

NRSRO, if only one NRSRO has issued such a rating at the time that the Fund
acquires the security. Currently, there are six NRSROs: Standard & Poor's
Ratings Group, a division of The McGraw-Hill Companies ("S&P"); Moody's
Investors Service, Inc. ("Moody's"); Fitch Investors Services, Inc. ("Fitch");
Duff and Phelps, Inc.; IBCA Limited and its affiliate, IBCA, Inc.; and Thomson
Bankwatch. A discussion of the ratings categories of the NRSROs is contained in
the Appendix to the Statement of Additional Information.

The Fund will limit its portfolio investments to securities that the Trustees
determine present minimal credit risks and which are "First Tier Eligible
Securities" at the time of acquisition by the Fund. The term "First Tier
Eligible Securities" includes securities rated by the Requisite NRSROs in the
highest short-term rating categories, securities of issuers that have received
such rating with respect to other short-term debt securities and comparable
unrated securities. Certain of the Fund's Eligible Securities may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Fund and affect its share

price.

The Fund generally may not invest more than 5% of its total assets in the
securities of any one issuer, except for U.S. government securities. The Fund
may invest more than 5% (but no more than 25%) of the Fund's total assets in the
securities of a single issuer for a period of up to three business days,
provided that (a) the securities either are rated by the Requisite NRSROs in the
highest short-term rating category or are securities of issuers that have
received such rating with respect to other short-term debt securities or are
comparable unrated securities, and (b) the Fund does not make more than one such
investment at any one time.

The Fund may purchase obligations of issuers in the banking industry, such as
commercial paper, notes, certificates of deposit, bankers' acceptances and time
deposits and U.S. dollar-denominated instruments issued or supported by the
credit of U.S. or foreign banks or savings institutions having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of investment.

The Fund may also invest in obligations issued by state and local government
agencies.

U.S. GOVERNMENT OBLIGATIONS. The Fund may purchase obligations issued or
guaranteed by the U.S. government and U.S. government agencies and

instrumentalities. Securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities include U.S. Treasury securities, which differ in
interest rates, maturities and times of issuance. Treasury bills have initial
maturities of one year or less; Treasury notes have initial maturities of one to
ten years; and Treasury bonds generally have initial maturities of greater than
ten years. Some obligations issued or guaranteed by U.S. government agencies or
instrumentalities, such as Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S. Treasury;
others, such as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. government to purchase certain obligations
of the agency or instrumentality; and others, such as those issued by the
Student Loan Marketing Association, only by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable rates of
interest. While the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given

that it will always do so, since it is not so obligated by law. The Fund will
invest in such securities only when it is satisfied that the credit risk with
respect to the issuer is minimal.

Securities issued or guaranteed by the U.S. government, its agencies or
instrumentalities have historically involved little risk of loss of principal if
held to maturity. However, due to fluctuations in interest rates, the market
value of the securities may vary during the period an investor owns shares of
the Fund.

WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued"
basis. When-issued securities are securities purchased for delivery beyond the

normal settlement date at a stated price and yield. The Fund will generally not
pay for such securities or start earning interest on them until they are
received. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in value based upon changes in the general level of
interest rates. The Fund expects that commitments to purchase when-issued
securities will not exceed 25% of the value of its total assets absent unusual
market conditions. The Fund does not intend to purchase when-issued securities
for speculative purposes but only in furtherance of its investment objective.

investors, like the Fund, through or with the assistance of the issuer or
investment dealers who make a market in the Section 4(2) paper, thus providing
liquidity. Rule 144A securities generally must be sold to other qualified
institutional buyers. If a particular investment in Section 4(2) paper or Rule
144A securities is not determined to be liquid, that investment will be included
within the percentage limitation on investment in illiquid securities.

FOREIGN SECURITIES. The Fund may invest substantially in securities of foreign
issuers, including obligations of foreign banks or foreign branches of U.S.
banks, and debt securities of foreign issuers, where the adviser deems the
instrument to present minimal credit risks. Investments in foreign banks or
foreign issuers present certain risks, including those resulting from
fluctuations in currency exchange rates, revaluation of currencies, future
political and economic developments and the possible imposition of currency
exchange blockages or other foreign governmental laws or restrictions and
reduced availability of public information. Foreign issuers are not generally
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements applicable to domestic issuers.

interest components are separately issued by the U.S. Treasury at the request of
depository financial institutions, which then trade the component parts
separately. Under the stripped bond rules of the Internal Revenue Code of 1986,
as amended (the "Code"), investments by the Fund in STRIPS will result in the
accrual of interest income on such investments in advance of the receipt of the
cash corresponding to such income. The interest component of STRIPS may be more
volatile than that of U.S. Treasury bills with comparable maturities. In
accordance with Rule 2a-7, the Fund's investments in STRIPS are limited to those
with maturity components not exceeding thirteen months.

LENDING OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities up to
one-third of the value of its total assets to U.S. and foreign broker/dealers,
banks or other institutional borrowers of securities that the adviser has
determined are creditworthy under guidelines established by the Trustees. The
Fund will receive collateral in the form of cash, letters of credit, or
securities of the U.S. government or its agencies equal to at least 100% of the
value of the securities owned.

interest rate changes if there is a delay between changes in market interest
rates and the interest reset date for the obligation. The Fund will take demand
or reset features into consideration in determining the average

portfolio duration of the Fund and the effective maturity of individual
securities. The failure of the issuer or a third party to honor its obligations
under a demand or put feature might also require a variable or floating rate
obligation to be treated as illiquid for purposes of the Fund's limitation on
illiquid investments.

INVESTMENT LIMITATIONS

The Fund may not:

2. Purchase any securities which would cause 25% or more of the value of its
total assets at the time of such purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, (unless the Fund is in a temporary defensive position); provided that
there is no limitation with respect to investments in U.S. government securities
or, in bank instruments issued by domestic banks.

FUND INFORMATION

- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Fund's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.

trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.

offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.

DISTRIBUTION OF INSTITUTIONAL SHARES

SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to 0.25% of the average
daily net asset value of the Institutional Shares, computed at an annual rate,
to obtain personal services for shareholders and to maintain shareholder
accounts ("shareholder services"). From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily.

Under the Shareholder Services Agreement, Federated Shareholder Services will

either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon shares owned by their clients or customers. The

schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

Currently, Institutional Shares are accruing no shareholder services fees.

<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- ------------ ------------------------------------
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

EXPENSES OF THE FUND AND INSTITUTIONAL SHARES

Holders of Institutional Shares pay their allocable portion of Trust and Fund
expenses.

proxies; taxes and commissions; insurance premiums; association membership dues;
and such non-recurring and extraordinary items as may arise. Certain expenses
may be allocated to each class as deemed

appropriate. At present, the only expenses allocated to any class are expenses
under a Shareholder Services Agreement which relate to that class.

NET ASSET VALUE

- --------------------------------------------------------------------------------

The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York

Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.

HOW TO PURCHASE SHARES

- --------------------------------------------------------------------------------

PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Fund before 3:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) that day. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank and Trust
Company, Boston, MA; Attention: EDGEWIRE; For Credit to: Prime Cash Obligations
Fund-Institutional Shares; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee or
Institution Name; and ABA Number 011000028. Shares cannot be purchased by wire
on holidays when wire transfers are restricted. Questions on wire purchases
should be directed to your shareholder services representative at the telephone
number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to Prime Cash Obligations Fund--Institutional
Shares. Please include an account number on the check. Orders by mail are
considered received when payment by check is converted into federal

funds (normally the business day after the check is received), and shares begin
earning dividends the next day.

HOW TO REDEEM SHARES

- --------------------------------------------------------------------------------

REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by calling
the Fund provided the Fund has a properly completed authorization form. These
forms can be obtained from Federated Securities Corp. Proceeds from redemption
requests received before 3:00 p.m. (Eastern time) will be wired the same day to
the shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Under limited circumstances,
arrangements may be made with the distributor for same-day payment of proceeds,
without that day's dividend, for redemption requests received after 3:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or through ACH
will not be wired until that method of payment has cleared. Proceeds from
redemption requests on holidays when wire transfers are restricted will be wired
the following business day. Questions about telephone redemptions on days when
wire transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.

REDEEMING SHARES BY MAIL. Shares may be redeemed by mailing a written request
to: Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been

issued, they should be sent unendorsed with the written request by registered or
certified mail to the address noted above.

The written request should state: Prime Cash Obligations Fund--Institutional
Shares; the account name as registered with the Fund; the account number; and
the number of shares to be redeemed or the dollar amount requested. All owners
of the account must sign the request exactly as the shares are registered.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after the receipt of a proper written redemption
request. Dividends are paid up to and including the day that a redemption
request is processed.

ACCOUNT AND SHARE INFORMATION

- --------------------------------------------------------------------------------

realized net long-term capital gains at least once every 12 months.

CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Fund, Federated
Shareholder Services Company maintains a share account for each shareholder.
Share certificates are not issued unless requested by contacting the Fund or
Federated Shareholder Services Company in writing. Monthly confirmations are
sent to report all transactions as well as dividends paid during the month.

required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust's or the Fund's operation and for
election of Trustees under certain circumstances.

TAX INFORMATION

- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

treated as a single, separate entity for federal income tax purposes so that
income (including capital gains) and losses realized by the Trust's other
portfolios will not be combined for tax purposes with those realized by the
Fund.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.

STATE AND LOCAL TAXES

In the opinion of Houston, Houston, & Donnelly, counsel to the Trust, Fund
shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent that the
portfolio securities in the Fund would be subject to such taxes if owned
directly by residents of those jurisdictions.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

OTHER CLASSES OF SHARES

- --------------------------------------------------------------------------------

All classes are subject to certain of the same expenses.

Neither Institutional Service Shares nor Institutional Capital Shares are
distributed with a 12b-1 Plan, but both are subject to shareholder services
fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-341-7400.

PERFORMANCE INFORMATION

- --------------------------------------------------------------------------------

From time to time, the Fund advertises its yield, effective yield, and total
return. The performance figures will be calculated separately for each class of
shares.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Prime Cash Obligations Fund
Institutional Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment
Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company c/o Federated Services Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------

</TABLE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PRIME CASH OBLIGATIONS
FUND
(FORMERLY, PRIME MONEY MARKET FUND)
INSTITUTIONAL SHARES
(FORMERLY, CLASS A SHARES)

PROSPECTUS

A Portfolio of Money Market
Obligations Trust II (formerly,
Lehman Brothers
Institutional Funds Group Trust), an
Open-End
Management Investment Company

Prospectus dated May 30, 1996

(Revised November 15, 1996)

LOGO
Cusip
G01881-03-IS (11/96)

The Institutional Service Shares (formerly, Class B Shares) of Prime Cash
Obligations Fund (formerly, Prime Money Market Fund) (the "Fund") offered by
this prospectus represent interests in a portfolio of Money Market Obligations
Trust II (formerly, Lehman Brothers Institutional Funds Group Trust) (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in a broad range of short-term money market securities to provide a high
level of current income consistent with stability of principal and liquidity.

This prospectus contains the information you should read and know before you
invest in Institutional Service Shares of the Fund. Keep this prospectus for
future reference.

Prospectus dated May 30, 1996

(Revised November 15, 1996)

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES 2
- ------------------------------------------------------

GENERAL INFORMATION 3
- ------------------------------------------------------

INVESTMENT INFORMATION 3
- ------------------------------------------------------
Investment Objective 3
Investment Policies 3

Investment Limitations 7

FUND INFORMATION 7
- ------------------------------------------------------
Management of the Fund 7
Distribution of Institutional Service Shares 8
Administration of the Fund 9
Expenses of the Fund and Institutional
Service Shares 9

NET ASSET VALUE 10
- ------------------------------------------------------

HOW TO PURCHASE SHARES 10
- ------------------------------------------------------

HOW TO REDEEM SHARES 11
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 12
- ------------------------------------------------------

TAX INFORMATION 13
- ------------------------------------------------------
Federal Income Tax 13
State and Local Taxes 13

OTHER CLASSES OF SHARES 13

- ------------------------------------------------------

PERFORMANCE INFORMATION 14
- ------------------------------------------------------

ADDRESSES 15
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)................................................. None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if applicable).................... None
Exchange Fee.......................................................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of projected average net assets)*
Management Fee (after waiver)(1)...................................................... 0.06%
12b-1 Fee............................................................................. None
Total Other Expenses.................................................................. 0.37%
Shareholder Services Fee................................................ 0.25%
Total Operating Expenses(2)........................................................... 0.43%
</TABLE>

(2) The total operating expenses are estimated to be 0.57% absent the
anticipated voluntary waiver of a portion of the management fee.

*Total Institutional Service Shares operating expenses are estimated based on
average expenses expected to be incurred during the fiscal year ending January
31, 1997. During the course of this period, expenses may be more or less than
the average amount shown.

PRIME CASH OBLIGATIONS FUND

(FORMERLY, PRIME MONEY MARKET FUND)

FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FORMERLY, CLASS B SHARES)
- --------------------------------------------------------------------------------

The following financial highlights for the fiscal year ended January 31, 1996,
are derived from the Fund's financial statements audited by Ernst & Young LLP,
independent auditors, whose report thereon appears in the Trust's Annual Report
dated January 31, 1996. This information should be read in conjunction with the
financial statements and notes thereto that also appear in the Trust's Annual
Report.

<TABLE>
<CAPTION>
PRIME CASH OBLIGATIONS FUND
------------------------------------
YEAR YEAR PERIOD
ENDED ENDED ENDED
1/31/96 1/31/95 1/31/94*
------- ------- --------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
- -------------------------------------------------------- ------ ------ --------
Net investment income (1) 0.0567 0.0417 0.0110
- --------------------------------------------------------
Dividends from net investment income (0.0567) (0.0417) (0.0110 )
- -------------------------------------------------------- ------ ------ --------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
- -------------------------------------------------------- ------ ------ --------
TOTAL RETURN (2) 5.83 % 4.21 % 0.99 %
- --------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
- --------------------------------------------------------
Net assets, end of period (in 000's) $324,474 $342,673 $350,666
- --------------------------------------------------------
Ratio of net investment income to average net assets 5.65 % 4.05 % 2.91 %(3)
- --------------------------------------------------------
Ratio of operating expenses to average net assets (4) 0.42 % 0.37 % 0.36 %(3)
- --------------------------------------------------------
</TABLE>

* The Institutional Service Shares commenced operations on September 2, 1993
with respect to Prime Cash Obligations Fund.

(1) Net investment income per share before waiver of fees by the Investment
Adviser, Administrator, Custodian and/or Transfer Agent and/or expenses
reimbursed by the Investment Adviser and Administrator for the Institutional
Service Shares was $0.0558 and $0.0403, respectively, for the years ended
January 31, 1996 and 1995 and $0.0102 for the period ended January 31, 1994
for the Prime Cash Obligations Fund.

(2) Total return represents aggregate total return for the periods indicated.

(3) Annualized.

(4) Annualized expense ratios before waiver of fees by the Investment Adviser,
Administrator, Custodian and/or Transfer Agent and/or expenses reimbursed by
the Investment Adviser and Administrator for Institutional Service Shares
were 0.50% and 0.50%, respectively, for the years ended January 31, 1996 and
1995 and 0.58% for the period ended January 31, 1994 for the Prime Cash
Obligations Fund.

GENERAL INFORMATION

- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 25, 1992. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Board of
Trustees (the "Trustees") has established three classes of shares known as
Institutional Shares, Institutional Service Shares and Institutional Capital
Shares. This prospectus relates only to Institutional Service Shares of the
Fund, which are designed primarily for financial institutions, financial
intermediaries and institutional investors as a convenient means of accumulating
an interest in a professionally managed portfolio investing in a broad range of
short-term money market securities. A minimum initial investment of $1,000,000
over a one-year period is required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are

currently sold and redeemed at that price.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT POLICIES

have) remaining maturities of thirteen months or less at the date of purchase by
the Fund. Certain securities held by the Fund may have remaining maturities in
excess of stated limitations discussed below if securities provide for
adjustments in their interest rates not less frequently than such time
limitations. The average maturity of the money market instruments in the Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less. Unless
indicated otherwise, the investment policies may be changed by the Trustees
without shareholder approval.

Currently, there are six NRSROs: Standard & Poor's Ratings Group, a division of
The McGraw-Hill Companies ("S&P"); Moody's Investors Service, Inc. ("Moody's");
Fitch Investors Services, Inc. ("Fitch"); Duff and Phelps, Inc.; IBCA Limited
and its affiliate, IBCA, Inc.; and Thomson Bankwatch. A discussion of the
ratings categories of the NRSROs is contained in the Appendix to the Statement
of Additional Information.

The Fund will limit its portfolio investments to securities that the Trustees
determine present minimal credit risks and which are "First Tier Eligible

Securities" at the time of acquisition by the Fund. The term "First Tier
Eligible Securities" includes securities rated by the Requisite NRSROs in the
highest short-term rating categories, securities of issuers that have received
such rating with respect to other short-term debt securities and comparable
unrated securities. Certain of the Fund's Eligible Securities may be
credit-enhanced by a guaranty, letter of credit, or insurance. Any bankruptcy,
receivership, default, or change in the credit quality of the party providing
the credit enhancement will adversely affect the quality and marketability of
the underlying security and could cause losses to the Fund and affect its share
price.

The Fund may also invest in obligations issued by state and local government
agencies.

U.S. GOVERNMENT OBLIGATIONS. The Fund may purchase obligations issued or
guaranteed by the U.S. government and U.S. government agencies and
instrumentalities. Securities issued or guaranteed by the U.S. government or its
agencies or instrumentalities include U.S. Treasury securities, which differ in
interest rates, maturities and times of issuance. Treasury bills have initial
maturities of one year or less; Treasury notes have initial maturities of one to
ten years; and Treasury bonds generally have initial maturities of greater than
ten years. Some obligations issued or guaranteed by U.S. government agencies or
instrumentalities, such as Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S. Treasury;
others, such as those issued by the Federal National Mortgage Association, by
discretionary authority of the U.S. government to purchase certain obligations
of the agency or instrumentality; and others, such as those issued by the
Student Loan Marketing Association, only by the credit of the agency or
instrumentality. These securities bear fixed, floating or variable rates of
interest. While the U.S. government provides financial support to such U.S.
government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law. The Fund will
invest in such securities only when it is satisfied that the credit risk with
respect to the issuer is minimal.

agreements and any other borrowings does not exceed one-third of the value of
the Fund's total assets (including the amount borrowed) less liabilities (other
than borrowings).

WHEN-ISSUED SECURITIES. The Fund may purchase securities on a "when-issued"
basis. When-issued securities are securities purchased for delivery beyond the
normal settlement date at a stated price and yield. The Fund will generally not
pay for such securities or start earning interest on them until they are
received. Securities purchased on a when-issued basis are recorded as an asset
and are subject to changes in value based upon changes in the general level of
interest rates. The Fund expects that commitments to purchase when-issued
securities will not exceed 25% of the value of its total assets absent unusual
market conditions. The Fund does not intend to purchase when-issued securities
for speculative purposes but only in furtherance of its investment objective.

as the Fund who agree that it is purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper is normally resold to other institutional

U.S. TREASURY STRIPS. The Fund may invest in separately traded principal and

interest components of securities backed by the full faith and credit of the
U.S. Treasury. The principal and interest components of U.S. Treasury bonds with
remaining maturities of longer than ten years are eligible to be traded
independently under the Separate Trading of Registered Interest and Principal of
Securities ("STRIPS") program. Under the STRIPS program, the principal and
interest components are separately issued by the U.S. Treasury at the request of
depository financial institutions, which then trade the component parts
separately. Under the stripped bond rules of the Internal Revenue Code of 1986,
as amended (the "Code"), investments by the Fund in STRIPS will result in the
accrual of interest income on such investments in advance of the receipt of the
cash corresponding to such income. The interest component of STRIPS may be more
volatile than that of U.S. Treasury bills with comparable maturities. In
accordance with Rule 2a-7, the Fund's investments in STRIPS are limited to those
with maturity components not exceeding thirteen months.

which is adjusted at predesignated periods. Interest on a floating rate
obligation is adjusted whenever there is a change in the market rate of interest
on which the interest rate payable is based. Variable and floating rate
obligations are less effective than fixed rate instruments at locking in a
particular yield. Such obligations may fluctuate in value in response to
interest rate changes if there is a delay between changes in market interest
rates and the interest reset date for the obligation. The Fund will take demand
or reset features into consideration in determining the average portfolio
duration of the Fund and the effective maturity of individual securities. The
failure of the issuer or a third party to honor its obligations under a demand
or put feature might also require a

variable or floating rate obligation to be treated as illiquid for purposes of
the Fund's limitation on illiquid investments.

INVESTMENT LIMITATIONS

contained in the Statement of Additional Information under "Investment Objective
and Policies.")

The Fund may not:

2. Purchase any securities which would cause 25% or more of the value of its
total assets at the time of such purchase to be invested in the securities of
one or more issuers conducting their principal business activities in the same
industry, (unless the Fund is in a temporary defensive position); provided that
there is no limitation with respect to investments in U.S. government securities
or, in bank instruments issued by domestic banks.

FUND INFORMATION

- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to 0.20% of the Fund's average daily net assets. The adviser may
voluntarily choose to waive a portion of its fee or reimburse other
expenses of the Fund, but reserves the right to terminate such waiver or
reimbursement at any time at its sole discretion.

shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors, under
which the Fund may make payments up to 0.25% of the average daily net asset
value of the Institutional Service Shares, computed at an annual rate, to obtain
personal services for shareholders and to maintain shareholder accounts
("shareholder services"). From time to time and for such periods as deemed

appropriate, the amount stated above may be reduced voluntarily.

schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

reimbursed by the Fund 's investment adviser or its affiliates.

ADMINISTRATION OF THE FUND

EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES

Holders of Institutional Service Shares pay their allocable portion of Trust and
Fund expenses.

proxies; taxes and commissions; insurance premiums; association membership dues;
and such non-recurring and extraordinary items as may arise. Certain expenses
may be allocated to each class as deemed appropriate. At present, the only
expenses allocated to any class are expenses under a Shareholder Services
Agreement which relate to that class.

NET ASSET VALUE

- --------------------------------------------------------------------------------

The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to Institutional
Service Shares from the value of Fund assets attributable to Institutional
Service Shares, and dividing the remainder by the number of shares outstanding.
The Fund cannot guarantee that its net asset value will always remain at $1.00
per share.

The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York

Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.

HOW TO PURCHASE SHARES

- --------------------------------------------------------------------------------

PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Fund before 3:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) that day. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank and Trust
Company, Boston, MA; Attention: EDGEWIRE; For Credit to: Prime Cash Obligations
Fund-Institutional Service Shares; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to Prime Cash Obligations Fund--Institutional
Service Shares. Please include an account number on the check. Orders by mail
are considered received when payment by check is converted into federal funds
(normally the business day after the check is received), and shares begin
earning dividends the next day.

HOW TO REDEEM SHARES

- --------------------------------------------------------------------------------

REDEEMING SHARES BY TELEPHONE. Redemptions in any amount may be made by calling
the Fund provided the Fund has a properly completed authorization form. These
forms can be obtained from Federated Securities Corp. Proceeds from redemption
requests received before 3:00 p.m. (Eastern time) will be wired the same day to
the shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Under limited circumstances,
arrangements may be made with the distributor for same-day payment of proceeds,
without that day's dividend, for redemption requests received after 3:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or through ACH
will not be wired until that method of payment has cleared. Proceeds from
redemption requests on holidays when wire transfers are restricted will be wired
the following business day. Questions about telephone redemptions on days when
wire transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares By Mail"

should be considered. If at any time the Fund shall determine it necessary to
terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.

The written request should state: Prime Cash Obligations Fund--Institutional
Service Shares; the account name as registered with the Fund; the account
number; and the number of shares to be redeemed or the dollar amount requested.
All owners of the account must sign the request exactly as the shares are
registered. Normally, a check for the proceeds is mailed within one business
day, but in no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to

the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.

ACCOUNT AND SHARE INFORMATION

- --------------------------------------------------------------------------------

TAX INFORMATION

- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

OTHER CLASSES OF SHARES

- --------------------------------------------------------------------------------

The Fund also offers other classes. Institutional Shares are sold at net asset
value primarily to entities holding shares in an agency or fiduciary capacity,
financial institutions, financial intermediaries and institutional investors and
are subject to a minimum initial investment of $1,000,000. Institutional Capital
Shares are sold at net asset value primarily to financial institutions,
financial intermediaries and institutional investors and are subject to a
minimum initial investment of $1,000,000.

All classes are subject to certain of the same expenses.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may

call 1-800-341-7400.

PERFORMANCE INFORMATION

- --------------------------------------------------------------------------------

From time to time, the Fund advertises its yield, effective yield, and total
return. The performance figures will be calculated separately for each class of
shares.

Advertisements and sales literature may also refer to total return. Total return
represents the change, over a specified period of time, in the value of an

investment in the shares after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
Prime Cash Obligations Fund
Institutional Service Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company c/o Federated Services Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder P.O. Box 8600
Services Company Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PRIME CASH OBLIGATIONS
FUND
(FORMERLY, PRIME MONEY MARKET FUND)
INSTITUTIONAL SERVICE SHARES
(FORMERLY, CLASS B SHARES)

PROSPECTUS

A Portfolio of Money Market
Obligations Trust II (formerly,
Lehman Brothers
Institutional Funds Group Trust), an
Open-End
Management Investment Company

Prospectus dated May 30, 1996

(Revised November 15, 1996)

LOGO

Cusip
G01881-04-SS (11/96)

The Institutional Capital Shares (formerly, Class E Shares) of Prime Cash
Obligations Fund (formerly, Prime Money Market Fund) (the "Fund") offered by
this prospectus represent interests in a portfolio of Money Market Obligations
Trust II (formerly, Lehman Brothers Institutional Funds Group Trust) (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in a broad range of short-term money market securities to provide a high
level of current income consistent with stability of principal and liquidity.

This prospectus contains the information you should read and know before you
invest in Institutional Capital Shares of the Fund. Keep this prospectus for
future reference.

Prospectus dated May 30, 1996

(Revised November 15, 1996)

TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS--INSTITUTIONAL
CAPITAL SHARES 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Investment Limitations 7

FUND INFORMATION 7
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Management of the Fund 7
Distribution of Institutional Capital Shares 8
Administration of the Fund 9
Expenses of the Fund and Institutional
Capital Shares 9