1933 Act File No. 33-55034
1940 Act File No. 811-7364
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ..........
Post-Effective Amendment No. 12 ......... X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 17 ...........................
MONEY MARKET OBLIGATIONS TRUST II
(Formerly, LEHMAN BROTHERS INSTITUTIONAL FUNDS GROUP TRUST)
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
-
on , pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i)
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
filed the Notice required by that Rule on ; or
- -----------
X intends to file the Notice required by that Rule on or about March 15,
1997; or
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP
2101 L Street, N.W.
Washington, DC 20037
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of MONEY MARKET
OBLIGATIONS TRUST II (formerly, Lehman Brothers Institutional Funds Group
Trust), which consists of three (3) portfolios, (1) Prime Cash Obligations
Fund (formerly, Prime Money Market Fund); (2) Prime Value Obligations Fund
(formerly, Prime Value Money Market Fund); and (3) Municipal Obligations
Fund (formerly, Municipal Money Market Fund), with each porfolio having
three (3) classes of shares, (a) Institutional Shares (formerly, Class A
Shares), (b) Institutional Service Shares (formerly, Class B Shares) and
(c) Institutional Capital Shares (formerly, Class E Shares), is comprised
of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page...............(1-3) Cover Page.
Item 2. Synopsis.................(1-3) Summary of Fund Expenses; (1-3)
Financial Highlights.
Item 3. Condensed Financial
Information.............(1-3) Performance Information.
Item 4. General Description of
Registrant..............(1-3) General Information; (1-3)
Investment Information; (1-3) Investment
Objective; (1-3) Investment Policies;
(1-3) Investment Risks; (1-3) Investment
Limitations; (3)Municipal Securities
(3).
Item 5. Management of the Fund...(1-3) Fund Information; (1-3) Management
of the Fund; (1-3) Distribution of
Institutional/Institutional
Service/Institutional Capital Shares;
(1-3) Administration of the Fund.
Item 6. Capital Stock and Other
Securities..............(1-3) Dividends; (1-3) Capital Gains;
(1-3) Account and Share Information; (1-
3) Voting Rights; (1-3) Federal Income
Tax; (1-3) State and Local Taxes; (1-3)
Other Classes of Shares.
Item 7. Purchase of Securities Being
Offered.................(1-3) Net Asset Value; (1-3) How to
Purchase Shares; (1-3) Purchasing Shares
By Wire; (1-3) Purchasing Shares By
Check; (1-3) Invest-by-Phone;
Certificates and Confirmations; (1-3)
Shareholder Services.
Item 8. Redemption or Repurchase.(1-3) How to Redeem Shares;(1-3)
Redeeming Shares By Telephone; (1-3)
Redeeming Shares By Mail; (1-3) Accounts
with Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page...............(1-3) Cover Page.
Item 11. Table of Contents........(1-3) Table of Contents.
Item 12. General Information and
History.................(1-3) About Federated Investors.
Item 13. Investment Objectives and
Policies................(1-3) Investment Policies; (1-3)
Investment Limitations; (1-3) Regulatory
Compliance.
Item 14. Management of the Fund...(1-3) Money Market Obligations Trust II
Management.
Item 15. Control Persons and Principal
Holders of Securities...(1-3) Share Ownership.
Item 16. Investment Advisory and Other
Services................(1-3) Investment Advisory Services; (1-
3) Other Services; (1-3) Shareholder
Services.
Item 17. Brokerage Allocation.....(1-3) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities..............(1-3) Massachusetts Partnership Law.
Item 19. Purchase, Redemption and
Pricing of Securities
Being Offered...........(1-3) Determining Net Asset Value. (1-3)
Redemption in Kind.
Item 20. Tax Status...............(1-3) The Fund's Tax Status;.
Item 21. Underwriters.............Not Applicable.
Item 22. Calculation of Performance
Data....................(1-3) Performance Information.
Item 23. Financial Statements.....Filed in Part A.(To Be Filed By
Amendment)
PRIME CASH OBLIGATIONS FUND
(A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST II)
(formerly, Prime Money Market Fund, a Portfolio of Lehman
Brothers Institutional Funds Group Trust)
INSTITUTIONAL SHARES (FORMERLY, CLASS A SHARES)
PROSPECTUS
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 short-term money market securities to
achieve current income consistent with stability of principal and
liquidity.
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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
Summary of Fund Expenses
Financial Highlights- Institutional Shares
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 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 current income consistent with
stability of principal and liquidity. This investment objective may be
changed by the Board of 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 of
money market securities maturing in 13 months or less. The average maturity
of the securities 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 Board of Trustees without shareholder
approval. Shareholders will be notified before any material change in these
policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category
by one or more nationally recognized statistical rating organizations
(`NRSROs'') or are of comparable quality to securities having such
ratings. Examples of these instruments include, but are not limited to:
odomestic issues of corporate debt obligations, including variable
rate demand notes;
ocommercial paper (including Canadian Commercial Paper and
Europaper);
ocertificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks and
other deposit institutions (``Bank Instruments'');
oforeign securities;
oshort-term credit facilities;
oasset-backed securities;
oobligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities;
oother money market instruments; and
oobligations issued by state and local government agencies.
The Fund invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either
issued by an institution having capital, surplus and undivided profits
over $100 million, or insured by the Bank Insurance Fund (``BIF') or
the Savings Association Insurance Fund (``SAIF'). Bank Instruments may
include Eurodollar Certificates of Deposit (``ECDs'), Yankee
Certificates of Deposit (``Yankee CDs') and Eurodollar Time Deposits
(``ETDs'). The Fund will treat securities credit enhanced with a bank's
letter of credit as Bank Instruments.
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.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued
by special purpose entities whose primary assets consist of a pool of
loans or accounts receivable. The securities may take the form of
beneficial interests in special purpose trusts, limited partnership
interests, or commercial paper or other debt securities issued by a
special purpose corporation. Although the securities often have some
form of credit or liquidity enhancement, payments on the securities
depend predominantly upon collections of the loans and receivables held
by the issuer.
SHORT-TERM CREDIT FACILITIES. The Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the
borrower may reborrow funds during the term of the facility. The Fund
treats any commitments to provide such advances as a standby commitment
to purchase the borrower's notes.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments (`demand features'') to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period (usually seven days) following a demand by the Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer
in the securities, or by another third party, and may not be transferred
separately from the underlying security. The Fund uses these arrangements
to provide the Fund with liquidity and not to protect against changes in
the market value of the underlying securities. The bankruptcy,
receivership, or default by the issuer of the demand feature, or a default
on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of
credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the Fund may lend its portfolio securities on a short-term or long-term
basis, or both, to broker/dealers, banks, or other institutional borrowers
of securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees
and will receive collateral at all times equal to at least 100% of the
value of the securities loaned. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on a
timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of
the securities may be delayed pending court action.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are
subject to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholding
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may
also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks,
such as reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping, and the public availability of information. These
factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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
Institutional 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. Financial institutions may impose different minimum
investment requirements on their customers.
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. 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 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 redemptions requests received after 3:00 p.m. (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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.
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, Donnelly & Meck, 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
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.
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
Prime Cash 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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
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 March 31, 1997
CUSIP 608912705
G01881-03-IS (3/97)
Prime Cash Obligations Fund
(A Portfolio of Money Market Obligations Trust II)
(formerly, Prime Money Market Fund, a Portfolio of Lehman
Brothers Institutional Funds Group Trust)
Institutional Service Shares (formerly, Class B Shares)
Prospectus
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 short-term money market securities to
achieve current income consistent with stability of principal and
liquidity.
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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS- INSTITUTIONAL SERVICE SHARES
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 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 current income consistent with
stability of principal and liquidity. This investment objective may be
changed by the Board of 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 of
money market securities maturing in 13 months or less. The average maturity
of the securities 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 Board of Trustees without shareholder
approval. Shareholders will be notified before any material change in these
policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category
by one or more nationally recognized statistical rating organizations
(`NRSROs'') or are of comparable quality to securities having such
ratings. Examples of these instruments include, but are not limited to:
odomestic issues of corporate debt obligations, including variable
rate demand notes;
ocommercial paper (including Canadian Commercial Paper and
Europaper);
ocertificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks and
other deposit institutions (``Bank Instruments'');
oforeign securities;
oshort-term credit facilities;
oasset-backed securities;
oobligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities;
oother money market instruments; and
oobligations issued by state and local government agencies.
The Fund invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either
issued by an institution having capital, surplus and undivided profits
over $100 million, or insured by the Bank Insurance Fund (``BIF') or
the Savings Association Insurance Fund (``SAIF'). Bank Instruments may
include Eurodollar Certificates of Deposit (``ECDs'), Yankee
Certificates of Deposit (``Yankee CDs') and Eurodollar Time Deposits
(``ETDs'). The Fund will treat securities credit enhanced with a bank's
letter of credit as Bank Instruments.
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.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued
by special purpose entities whose primary assets consist of a pool of
loans or accounts receivable. The securities may take the form of
beneficial interests in special purpose trusts, limited partnership
interests, or commercial paper or other debt securities issued by a
special purpose corporation. Although the securities often have some
form of credit or liquidity enhancement, payments on the securities
depend predominantly upon collections of the loans and receivables held
by the issuer.
SHORT-TERM CREDIT FACILITIES. The Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the
borrower may reborrow funds during the term of the facility. The Fund
treats any commitments to provide such advances as a standby commitment
to purchase the borrower's notes.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments (`demand features'') to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period (usually seven days) following a demand by the Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer
in the securities, or by another third party, and may not be transferred
separately from the underlying security. The Fund uses these arrangements
to provide the Fund with liquidity and not to protect against changes in
the market value of the underlying securities. The bankruptcy,
receivership, or default by the issuer of the demand feature, or a default
on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of
credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the Fund may lend its portfolio securities on a short-term or long-term
basis, or both, to broker/dealers, banks, or other institutional borrowers
of securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees
and will receive collateral at all times equal to at least 100% of the
value of the securities loaned. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on a
timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of
the securities may be delayed pending court action.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are
subject to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholding
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may
also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks,
such as reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping, and the public availability of information. These
factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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 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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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 Institutional Service 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. Financial institutions may impose different minimum
investment requirements on their customers.
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. 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 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 redemptions requests received after 3:00 p.m. (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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.
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, Donnelly & Meck, 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
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.
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.
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
Prime Cash Obligations Fund
Institutional Service 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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
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 March 31, 1997
CUSIP 608912804
G01881-04-SS (3/97)
PRIME CASH OBLIGATIONS FUND
(A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST II)
(formerly, Prime Money Market Fund, a Portfolio of Lehman
Brothers Institutional Funds Group Trust)
INSTITUTIONAL CAPITAL SHARES (FORMERLY, CLASS E SHARES)
PROSPECTUS
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 short-term money market securities to
achieve current income consistent with stability of principal and
liquidity.
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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS- INSTITUTIONAL CAPITAL SHARES
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 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 current income consistent with
stability of principal and liquidity. This investment objective may be
changed by the Board of 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 of
money market securities maturing in 13 months or less. The average maturity
of the securities 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 Board of Trustees without shareholder
approval. Shareholders will be notified before any material change in these
policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in the highest short-term rating category
by one or more nationally recognized statistical rating organizations
(`NRSROs'') or are of comparable quality to securities having such
ratings. Examples of these instruments include, but are not limited to:
odomestic issues of corporate debt obligations, including variable
rate demand notes;
ocommercial paper (including Canadian Commercial Paper and
Europaper);
ocertificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks and
other deposit institutions (``Bank Instruments'');
oforeign securities;
oshort-term credit facilities;
oasset-backed securities;
oobligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities;
oother money market instruments; and
oobligations issued by state and local government agencies.
The Fund invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either
issued by an institution having capital, surplus and undivided profits
over $100 million, or insured by the Bank Insurance Fund (``BIF') or
the Savings Association Insurance Fund (``SAIF'). Bank Instruments may
include Eurodollar Certificates of Deposit (``ECDs'), Yankee
Certificates of Deposit (``Yankee CDs') and Eurodollar Time Deposits
(``ETDs'). The Fund will treat securities credit enhanced with a bank's
letter of credit as Bank Instruments.
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.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued
by special purpose entities whose primary assets consist of a pool of
loans or accounts receivable. The securities may take the form of
beneficial interests in special purpose trusts, limited partnership
interests, or commercial paper or other debt securities issued by a
special purpose corporation. Although the securities often have some
form of credit or liquidity enhancement, payments on the securities
depend predominantly upon collections of the loans and receivables held
by the issuer.
SHORT-TERM CREDIT FACILITIES. The Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the
borrower may reborrow funds during the term of the facility. The Fund
treats any commitments to provide such advances as a standby commitment
to purchase the borrower's notes.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments (`demand features'') to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period (usually seven days) following a demand by the Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer
in the securities, or by another third party, and may not be transferred
separately from the underlying security. The Fund uses these arrangements
to provide the Fund with liquidity and not to protect against changes in
the market value of the underlying securities. The bankruptcy,
receivership, or default by the issuer of the demand feature, or a default
on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of
credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the Fund may lend its portfolio securities on a short-term or long-term
basis, or both, to broker/dealers, banks, or other institutional borrowers
of securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees
and will receive collateral at all times equal to at least 100% of the
value of the securities loaned. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on a
timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of
the securities may be delayed pending court action.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are
subject to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholding
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may
also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks,
such as reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping, and the public availability of information. These
factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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 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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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 Institutional Capital 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. Financial institutions may impose different minimum
investment requirements on their customers.
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 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: Prime Cash Obligations Fund-
Institutional Capital Shares. 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 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 redemptions requests received after 3:00 p.m. (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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.
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, Donnelly & Meck, 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
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.
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.
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
Prime Cash Obligations Fund
Institutional Capital 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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
PRIME CASH OBLIGATIONS FUND
(FORMERLY, PRIME 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 March 31, 1997
CUSIP 608912887
G01881-08- (3/97)
PRIME CASH OBLIGATIONS FUND
(A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST II)
(FORMERLY, PRIME 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 Prime Cash Obligations Fund (formerly, Prime Money
Market Fund) (the ``Fund'), a portfolio of Money Market Obligations
Trust II (formerly, Lehman Brothers Institutional Funds Group Trust)
(the ``Trust') dated March 31, 1997. 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 March 31, 1997
Federated Securities Corp. is the distributor of the Funds
and is a subsidiary of Federated Investors.
Cusip 608912705
Cusip 608912804
Cusip 608912887
G01881-11 (3/97)
FUND HISTORY 1
INVESTMENT POLICIES 1
BROKERAGE TRANSACTIONS 11
OTHER SERVICES 11
Fund Administration 11
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Auditors 11
DETERMINING NET ASSET VALUE 12
Shareholder Services 12
REDEMPTION IN KIND 12
MASSACHUSETTS PARTNERSHIP LAW 13
THE FUND'S TAX STATUS 13
PERFORMANCE INFORMATION 13
Yield 13
Effective Yield 13
Total Return 13
Performance Comparisons 14
Economic and Market Information 14
ABOUT FEDERATED INVESTORS 14
Mutual Fund Market 15
Institutional Clients 15
Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 15
APPENDIX 16
FUND HISTORY
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 1992. On November 15, 1996, the
Board of Trustees (`Trustees'') changed the name of the Trust from
`Lehman Brothers Institutional Funds Group Trust'' to ``Money Market
Obligations Trust II''and the name of the Fund from ``Prime Money Market
Fund''to ``Prime Cash 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-referenced Shares of the Fund.
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or
any guarantor of either the security or any demand feature.
U.S. GOVERNMENT SECURITIES
The types of U.S. government securities in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the obligations.
BANK INSTRUMENTS
The instruments of banks and savings associations whose deposits are
insured by the Bank Insurance Fund (`BIF'') or the Savings Association
Insurance Fund (`SAIF''), such as certificates of deposit, demand and time
deposits, savings shares, and bankers' acceptances, are not necessarily
guaranteed by those organizations. In addition to domestic bank
instruments, the Fund may invest in: Eurodollar Certificates of Deposit
issued by foreign branches of U.S. or foreign banks; Eurodollar Time
Deposits, which are U.S. dollar-denominated deposits in foreign branches of
U.S. or foreign banks; Canadian Time Deposits, which are U.S. dollar-
denominated deposits issued by branches of major Canadian banks located in
the United States; and Yankee Certificates of Deposit, which are U.S.
dollar-denominated certificates of deposit issued by U.S. branches of
foreign banks and held in the United States.
The Fund's investments in the obligations of foreign branches of U.S. banks
and of foreign banks and other foreign issuers may subject the Fund to
investment risks that are different in some respects from those of
investment in obligations of U.S. domestic issuers. Such risk include
future political and economic developments, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such
obligations. In addition, foreign branches of U.S. banks and foreign banks
may be subject to less stringent reserve requirements and foreign issuers
generally are subject to different accounting, auditing, reporting and
recordkeeping standards than those applicable to U.S. issuers. The Fund
will acquire securities issued by foreign branches of U.S. banks or foreign
issuers only when the adviser believes that the risks associated with such
instruments are minimal.
RATINGS
An NRSRO's highest rating category is determined without regard for sub-
categories and gradations. For example, securities rated A-1 or A-1+ by
Standard & Poor's Ratings Group (`S&P''), Prime-1 by Moody's Investors
Service, Inc. (`Moody's''), or F-1 (+ or -) by Fitch Investors Service,
Inc. (`Fitch'') are all considered rated in the highest short-term rating
category. The Fund will follow applicable regulations in determining
whether a security rated by more than one NRSRO can be treated as being in
the highest short-term rating category; currently, such securities must be
rated by two NRSROs in their highest rating category. See `Regulatory
Compliance.''
MUNICIPAL SECURITIES
As stated in the Fund's Prospectus, the Fund may invest in obligations
issued by state and local government entities. Municipal securities are
issued by various public 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 issued by or on behalf of public
authorities to finance various privately operated facilities are considered
to be municipal securities and may be purchased by the Fund. Dividends
paid by the Fund that are derived from interest on such municipal
securities would be taxable to the Fund's investors for federal income tax
purposes.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund in a dollar amount sufficient to make payment for the securities to be
purchased are: segregated on the Fund`s records at the trade date; marked
to market daily; and maintained until the transaction is settled. The Fund
does not intend to engage in when-issued and delayed delivery transactions
to an extent that would cause the segregation of more than 20% of the total
value of its assets.
REPURCHASE AGREEMENTS
The Fund believes that under the regular procedures normally in effect for
custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in
return for a percentage of the instrument's market value in cash and agrees
that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus interest
at an agreed upon rate. The use of reverse repurchase agreements may enable
the Fund to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous, but does not ensure this result. However,
liquid assets of the Fund, in a dollar amount sufficient to make payment
for the securities to be purchased, are: segregated on the Fund's records
at the trade date; marked to market daily; and maintained until the
transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law, and is generally sold to institutional investors, such as
the Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) commercial 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 Section 4(2) commercial paper, thus providing liquidity. The Fund
believes that Section 4(2) commercial paper and possibly certain other
restricted securities which meet the criteria for liquidity established by
the Trustees are quite liquid. The Fund intends, therefore, to treat the
restricted securities which meet the criteria for liquidity established by
the Trustees, including Section 4(2) commercial paper, as determined by the
Fund's investment adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities.
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 diversification
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.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker.
INVESTMENT LIMITATIONS
DIVERSIFICATION OF INVESTMENTS
The Fund may not 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.
ISSUING SENIOR SECURITIES, BORROWING MONEY AND PLEDGING ASSETS
The Fund may not 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.
CONCENTRATION OF INVESTMENTS
The Fund may not 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 activivites 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.
LENDING CASH OR SECURITIES
The Fund may not 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 as described in the prospectus, and (iv) subject to specific
authorization by the SEC, lend money to other funds advised by the adviser
or an affiliate of the adviser.
UNDERWRITING
The Fund may not act as an underwriter of securities, except insofar as the
Fund may be deemed an underwriter under applicable securities laws in
selling portfolio securities.
INVESTING IN REAL ESTATE
The Fund may not 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.
INVESTING IN COMMODITIES AND MINERALS
The Fund may not purchase or sell commodities contracts, or invest in oil,
gas or mineral exploration or development programs or in mineral leases.
The above limitations cannot be changed without shareholder approval. The
following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities including repurchase agreements providing for
settlement in more than seven days after notice.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for
clearance of transactions.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not acquire more than 3% of the total outstanding securities
of other investment companies, except as part of a merger, consolidation,
or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 15% of the value of its total assets in
securities of companies (including predecessors) with less than three years
of continuous operation.
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. For example, with limited exceptions,
Rule 2a-7 prohibits the investment of more than 5% of the Fund's total
assets in the securities of any one issuer, although the Fund's investment
limitation only requires such 5% diversification with respect to 75% of its
assets. The Fund will invest more than 5% of its assets in any one issuer
only under the circumstances permitted by Rule 2a-7. 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
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
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
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 D. 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
Investment Portfolios; Federated Investment Trust; Federated Master 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
Institutional Shares.
As of March , 1997, the following shareholder(s) of record owned 5% or
--
more of the outstanding shares of the Prime Cash Obligations Fund:
TRUSTEE 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 56 other investment companies in the
Fund Complex
Thomas G. Bigley $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John T. Conroy, Jr. $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
William J. Copeland $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
J. Christopher Donahue$0 $0 for the Trust and
President and Trustee 18 other investment companies in the
Fund Complex
James E. Dowd $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D. $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr. $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Peter E. Madden $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Gregor F. Meyer $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John E. Murray, Jr., $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Wesley W. Posvar $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Marjorie P. Smuts $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
* Information is furnished for the fiscal year ended January 31, 1997.
**New Board of Trustees as of November 13, 1996, per shareholder approval.
# The aggregate compensation is provided for the Trust which is comprised
of three portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The 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. Prior to November
13, 1996, Lehman Brothers Global Asset Management (the `former adviser''),
New York, NY served as the Fund's adviser. For the fiscal years ended
January 31,1997, 1996, and 1995, the adviser earned $ , $4,452,829, and
----
$2,386,734, respectively, of which $ and $ ;, $0 and $0; and
---- ----
$1,171,734 and $0, respectively, were waived of advisory fees and
reimbursement of expenses to maintain the Fund's operating expense ratios
at certain levels.
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 year(s) ended January 31, 1997, 1996,
and 1995, 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, 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 January 31, 1997, 1996, and
1995, the administrator earned $ , $4,452,829 and $2,386,734,
--------
respectively. Waivers by the administrator of administration fees and
reimbursement of expenses to maintain the Fund's operating expense ratios
at certain levels for the fiscal years ended January 31, 1997, 1996, and
1995, amounted to $ and $ ; $3,282,923 and $0; and $1,815,227 and
------ -----
$0, 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 transfer 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.
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.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services 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 Trustees expect 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, 1997, the following service fees were paid by the Fund:
Institutional Shares, $ ; Institutional Service Shares, $ ;
------- ---------
and Institutional Capital Shares, $ . For the fiscal year ended
---------
January 31, 1996, the following service fees were paid by the Fund: Class
B Shares, $960,077; and Class E Shares, $17,459. For the fiscal year ended
January 31, 1995, the following service fees were paid by the Fund: Class
B Shares, $726,035; and Class E Shares, $5,834.
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, 1997, the yield for
Institutional Shares was %.
---
For the seven-day period ended January 31, 1997, the yield for
Institutional Service Shares was %.
---
For the seven-day period ended January 31, 1997, the yield for
Institutional Capital Shares was %.
---
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, 1997, the effective yield for
Institutional Shares was %.
---
For the seven-day period ended January 31, 1997, the effective yield for
Institutional Service Shares was %.
---
For the seven-day period ended January 31, 1997, the effective yield for
Institutional Capital Shares was [ ]%.
---
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of 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.
For the one-year period ended January 31, 1997, and for the period from
February 8, 1993 (date of initial public investment) through January 31,
1997, the average annual total returns were %, % and %,
--- --- ---
respectively, for Institutional Shares, were %, % and %,
--- --- ---
respectively, for Institutional Service Shares, were %, % and %,
--- --- ---
respectively, for Institutional Capital Shares, were %, % and ,
--- ----- ----
respectively.
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:
OLIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories based on total return, which assumes the reinvestment of
all income dividends and capital gains distributions, if any.
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.
oMONEY, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
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.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund`s returns, or 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 the Fund portfolio mangers and their views and
analysis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including 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, 1996, Federated managed more than
$50.3 billion in assets across 50 money market funds, including 18
government, 11 prime and 21 municipal with assets approximating $28.0
billion, $12.8 billion and $9.5 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
Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
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.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 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--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD AND POOR'S RATINGS GROUP 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.
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. 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.
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. 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.
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. 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.
THOMSON BANKWATCH 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. 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 described under
Commercial Paper Ratings for municipal notes.
PRIME VALUE OBLIGATIONS FUND
(A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST II)
(formerly, Prime Value Money Market Fund, a Portfolio of Lehman
Brothers Institutional Funds Group Trust)
INSTITUTIONAL SHARES (FORMERLY, CLASS A SHARES)
PROSPECTUS
The Institutional Shares (formerly, Class A Shares) of Prime Value
Obligations Fund (formerly, Prime Value 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 short-term money market securities to
achieve current income consistent with stability of principal and
liquidity.
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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS- INSTITUTIONAL SHARES
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 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 current income consistent with
stability of principal and liquidity. This investment objective may be
changed by the Board of 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 of
money market securities maturing in 13 months or less. The average maturity
of the securities 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 Board of Trustees without shareholder
approval. Shareholders will be notified before any material change in these
policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in one of the two highest short-term
rating category by one or more nationally recognized statistical rating
organizations (`NRSROs'') or are of comparable quality to securities
having such ratings. Examples of these instruments include, but are not
limited to:
odomestic issues of corporate debt obligations, including variable
rate demand notes;
ocommercial paper (including Canadian Commercial Paper and
Europaper);
ocertificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks and
other deposit institutions (``Bank Instruments'');
oforeign securities;
oshort-term credit facilities;
oasset-backed securities;
oobligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities;
oother money market instruments; and
oobligations issued by state and local government agencies.
The Fund invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either
issued by an institution having capital, surplus and undivided profits
over $100 million, or insured by the Bank Insurance Fund (``BIF') or
the Savings Association Insurance Fund (``SAIF'). Bank Instruments may
include Eurodollar Certificates of Deposit (``ECDs'), Yankee
Certificates of Deposit (``Yankee CDs') and Eurodollar Time Deposits
(``ETDs'). The Fund will treat securities credit enhanced with a bank's
letter of credit as Bank Instruments.
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.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued
by special purpose entities whose primary assets consist of a pool of
loans or accounts receivable. The securities may take the form of
beneficial interests in special purpose trusts, limited partnership
interests, or commercial paper or other debt securities issued by a
special purpose corporation. Although the securities often have some
form of credit or liquidity enhancement, payments on the securities
depend predominantly upon collections of the loans and receivables held
by the issuer.
SHORT-TERM CREDIT FACILITIES. The Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the
borrower may reborrow funds during the term of the facility. The Fund
treats any commitments to provide such advances as a standby commitment
to purchase the borrower's notes.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments (`demand features'') to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period (usually seven days) following a demand by the Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer
in the securities, or by another third party, and may not be transferred
separately from the underlying security. The Fund uses these arrangements
to provide the Fund with liquidity and not to protect against changes in
the market value of the underlying securities. The bankruptcy,
receivership, or default by the issuer of the demand feature, or a default
on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of
credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the Fund may lend its portfolio securities on a short-term or long-term
basis, or both, to broker/dealers, banks, or other institutional borrowers
of securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees
and will receive collateral at all times equal to at least 100% of the
value of the securities loaned. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on a
timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of
the securities may be delayed pending court action.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are
subject to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholding
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may
also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks,
such as reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping, and the public availability of information. These
factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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, except that the Fund intends to
invest 25% or more of the value of its total assets in obligations of
issuers in the banking industry or in obligations, such as repurchase
agreements, secured by such obligations; provided that there is no
limitation with respect to investments in U.S. government securities
or, in bank instruments issued or enhanced by approved banks.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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
Institutional 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. Financial institutions may impose different minimum
investment requirements on their customers.
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 Value 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 Value Obligations Fund-
Institutional Shares. 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 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 redemptions requests received after 3:00 p.m. (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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.
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, Donnelly & Meck, 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
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.
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
Prime Value 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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
PRIME VALUE OBLIGATIONS FUND
(FORMERLY, PRIME VALUE 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 March 31, 1997
CUSIP 608912705
G01881-03-IS (3/97)
PRIME VALUE OBLIGATIONS FUND
(A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST II)
(formerly, Prime Value Money Market Fund, a Portfolio of Lehman
Brothers Institutional Funds Group Trust)
INSTITUTIONAL SERVICE SHARES (FORMERLY, CLASS B SHARES)
PROSPECTUS
The Institutional Service Shares (formerly, Class B Shares) of Prime Value
Obligations Fund (formerly, Prime Value 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 short-term money market securities to
achieve current income consistent with stability of principal and
liquidity.
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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS- INSTITUTIONAL SERVICE SHARES
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 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 current income consistent with
stability of principal and liquidity. This investment objective may be
changed by the Board of 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 of
money market securities maturing in 13 months or less. The average maturity
of the securities 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 Board of Trustees without shareholder
approval. Shareholders will be notified before any material change in these
policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in one of the two highest short-term
rating category by one or more nationally recognized statistical rating
organizations (`NRSROs'') or are of comparable quality to securities
having such ratings. Examples of these instruments include, but are not
limited to:
odomestic issues of corporate debt obligations, including variable
rate demand notes;
ocommercial paper (including Canadian Commercial Paper and
Europaper);
ocertificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks and
other deposit institutions (``Bank Instruments'');
oforeign securities;
oshort-term credit facilities;
oasset-backed securities;
oobligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities;
oother money market instruments; and
oobligations issued by state and local government agencies.
The Fund invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either
issued by an institution having capital, surplus and undivided profits
over $100 million, or insured by the Bank Insurance Fund (``BIF') or
the Savings Association Insurance Fund (``SAIF'). Bank Instruments may
include Eurodollar Certificates of Deposit (``ECDs'), Yankee
Certificates of Deposit (``Yankee CDs') and Eurodollar Time Deposits
(``ETDs'). The Fund will treat securities credit enhanced with a bank's
letter of credit as Bank Instruments.
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.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued
by special purpose entities whose primary assets consist of a pool of
loans or accounts receivable. The securities may take the form of
beneficial interests in special purpose trusts, limited partnership
interests, or commercial paper or other debt securities issued by a
special purpose corporation. Although the securities often have some
form of credit or liquidity enhancement, payments on the securities
depend predominantly upon collections of the loans and receivables held
by the issuer.
SHORT-TERM CREDIT FACILITIES. The Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the
borrower may reborrow funds during the term of the facility. The Fund
treats any commitments to provide such advances as a standby commitment
to purchase the borrower's notes.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments (`demand features'') to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period (usually seven days) following a demand by the Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer
in the securities, or by another third party, and may not be transferred
separately from the underlying security. The Fund uses these arrangements
to provide the Fund with liquidity and not to protect against changes in
the market value of the underlying securities. The bankruptcy,
receivership, or default by the issuer of the demand feature, or a default
on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of
credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the Fund may lend its portfolio securities on a short-term or long-term
basis, or both, to broker/dealers, banks, or other institutional borrowers
of securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees
and will receive collateral at all times equal to at least 100% of the
value of the securities loaned. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on a
timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of
the securities may be delayed pending court action.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are
subject to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholding
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may
also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks,
such as reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping, and the public availability of information. These
factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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, except that the Fund intends to
invest 25% or more of the value of its total assets in obligations of
issuers in the banking industry or in obligations, such as repurchase
agreements, secured by such obligations; provided that there is no
limitation with respect to investments in U.S. government securities
or, in bank instruments issued or enhanced by approved banks.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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 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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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 Institutional Service 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. Financial institutions may impose different minimum
investment requirements on their customers.
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 Value 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 Value Obligations Fund-
Institutional Service Shares. 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 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 redemptions requests received after 3:00 p.m. (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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.
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, Donnelly & Meck, 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
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.
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.
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
Prime Value Obligations Fund
Institutional Service 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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
PRIME VALUE OBLIGATIONS FUND
(FORMERLY, PRIME VALUE 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 March 31, 1997
CUSIP 608912804
G01881-04-SS (3/97)
PRIME VALUE OBLIGATIONS FUND
(A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST II)
(formerly, Prime Value Money Market Fund, a Portfolio of Lehman
Brothers Institutional Funds Group Trust)
INSTITUTIONAL CAPITAL SHARES (FORMERLY, CLASS E SHARES)
PROSPECTUS
The Institutional Capital Shares (formerly, Class E Shares) of Prime Value
Obligations Fund (formerly, Prime Value 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 short-term money market securities to
achieve current income consistent with stability of principal and
liquidity.
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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS- INSTITUTIONAL CAPITAL SHARES
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 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 current income consistent with
stability of principal and liquidity. This investment objective may be
changed by the Board of 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 of
money market securities maturing in 13 months or less. The average maturity
of the securities 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 Board of Trustees without shareholder
approval. Shareholders will be notified before any material change in these
policies becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in high quality money market
instruments that are either rated in one of the two highest short-term
rating category by one or more nationally recognized statistical rating
organizations (`NRSROs'') or are of comparable quality to securities
having such ratings. Examples of these instruments include, but are not
limited to:
odomestic issues of corporate debt obligations, including variable
rate demand notes;
ocommercial paper (including Canadian Commercial Paper and
Europaper);
ocertificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks and
other deposit institutions (``Bank Instruments'');
oforeign securities;
oshort-term credit facilities;
oasset-backed securities;
oobligations issued or guaranteed as to payment of principal and
interest by the U.S. government or one of its agencies or
instrumentalities;
oother money market instruments; and
oobligations issued by state and local government agencies.
The Fund invests only in instruments denominated and payable in U.S.
dollars.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
BANK INSTRUMENTS. The Fund only invests in Bank Instruments either
issued by an institution having capital, surplus and undivided profits
over $100 million, or insured by the Bank Insurance Fund (``BIF') or
the Savings Association Insurance Fund (``SAIF'). Bank Instruments may
include Eurodollar Certificates of Deposit (``ECDs'), Yankee
Certificates of Deposit (``Yankee CDs') and Eurodollar Time Deposits
(``ETDs'). The Fund will treat securities credit enhanced with a bank's
letter of credit as Bank Instruments.
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.
ASSET-BACKED SECURITIES. Asset-backed securities are securities issued
by special purpose entities whose primary assets consist of a pool of
loans or accounts receivable. The securities may take the form of
beneficial interests in special purpose trusts, limited partnership
interests, or commercial paper or other debt securities issued by a
special purpose corporation. Although the securities often have some
form of credit or liquidity enhancement, payments on the securities
depend predominantly upon collections of the loans and receivables held
by the issuer.
SHORT-TERM CREDIT FACILITIES. The Fund may enter into, or acquire
participations in, short-term borrowing arrangements with corporations,
consisting of either a short-term revolving credit facility or a master
note agreement payable upon demand. Under these arrangements, the
borrower may reborrow funds during the term of the facility. The Fund
treats any commitments to provide such advances as a standby commitment
to purchase the borrower's notes.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to puts
and standby commitments (`demand features'') to purchase the securities at
their principal amount (usually with accrued interest) within a fixed
period (usually seven days) following a demand by the Fund. The demand
feature may be issued by the issuer of the underlying securities, a dealer
in the securities, or by another third party, and may not be transferred
separately from the underlying security. The Fund uses these arrangements
to provide the Fund with liquidity and not to protect against changes in
the market value of the underlying securities. The bankruptcy,
receivership, or default by the issuer of the demand feature, or a default
on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a
payment default on the underlying security may be treated as a form of
credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income,
the Fund may lend its portfolio securities on a short-term or long-term
basis, or both, to broker/dealers, banks, or other institutional borrowers
of securities. The Fund will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the adviser has
determined are creditworthy under guidelines established by the Trustees
and will receive collateral at all times equal to at least 100% of the
value of the securities loaned. There is the risk that when lending
portfolio securities, the securities may not be available to the Fund on a
timely basis and the Fund may, therefore, lose the opportunity to sell the
securities at a desirable price. In addition, in the event that a borrower
of securities would file for bankruptcy or become insolvent, disposition of
the securities may be delayed pending court action.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, Canadian Commercial Paper, and Europaper are
subject to different risks than domestic obligations of domestic banks or
corporations. Examples of these risks include international economic and
political developments, foreign governmental restrictions that may
adversely affect the payment of principal or interest, foreign withholding
or other taxes on interest income, difficulties in obtaining or enforcing a
judgment against the issuing entity, and the possible impact of
interruptions in the flow of international currency transactions. Risks may
also exist for ECDs, ETDs, and Yankee CDs because the banks issuing these
instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks,
such as reserve requirements, loan limitations, examinations, accounting,
auditing, recordkeeping, and the public availability of information. These
factors will be carefully considered by the Fund's adviser in selecting
investments for the Fund.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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, except that the Fund intends to
invest 25% or more of the value of its total assets in obligations of
issuers in the banking industry or in obligations, such as repurchase
agreements, secured by such obligations; provided that there is no
limitation with respect to investments in U.S. government securities
or, in bank instruments issued or enhanced by approved banks.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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 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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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 Institutional Capital 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. Financial institutions may impose different minimum
investment requirements on their customers.
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 Value 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: Prime Value Obligations Fund-
Institutional Capital Shares. 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 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 redemptions requests received after 3:00 p.m. (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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.
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, Donnelly & Meck, 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
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.
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.
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
Prime Value Obligations Fund
Institutional Capital 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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
PRIME VALUE OBLIGATIONS FUND
(FORMERLY, PRIME VALUE 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 March 31, 1997
CUSIP 608912887
G01881-08- (3/97)
PRIME VALUE OBLIGATIONS FUND
(A PORTFOLIO OF MONEY MARKET OBLIGATIONS TRUST II)
(FORMERLY, PRIME VALUE 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 Prime Value Obligations Fund (formerly, Prime Value
Money Market Fund) (the ``Fund'), a portfolio of Money Market
Obligations Trust II (formerly, Lehman Brothers Institutional Funds
Group Trust) (the ``Trust') dated March 31, 1997. 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 March 31, 1997
Federated Securities Corp.
is the distributor of the Fund
and is a subsidiary of Federated Investors.
Cusip 608912408
Cusip 608912507
Cusip 608912606
G01881-10 (3/97)
FUND HISTORY 1
INVESTMENT POLICIES 1
Acceptable Investments 1
U.S. Government Securities 1
Bank Instruments 1
Ratings 1
Municipal Securities 2
When-Issued and Delayed Delivery Transactions
2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Credit Enhancement 3
Lending of Portfolio Securities 3
INVESTMENT LIMITATIONS 3
Regulatory Compliance 4
MONEY MARKET OBLIGATIONS TRUST II MANAGEMENT 4
Share Ownership 8
Trustee Compensation 9
Trustee Liability 10
INVESTMENT ADVISORY SERVICES 10
Investment Adviser 10
Advisory Fees 10
BROKERAGE TRANSACTIONS 11
OTHER SERVICES 11
Fund Administration 11
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Auditors 11
DETERMINING NET ASSET VALUE 12
Shareholder Services 12
REDEMPTION IN KIND 12
MASSACHUSETTS PARTNERSHIP LAW 13
THE FUND'S TAX STATUS 13
PERFORMANCE INFORMATION 13
Yield 13
Effective Yield 13
Total Return 13
Performance Comparisons 14
Economic and Market Information 14
ABOUT FEDERATED INVESTORS 14
Mutual Fund Market 15
Institutional Clients 15
Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 15
APPENDIX 16
FUND HISTORY
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 1992. On November 15, 1996, the
Board of Trustees (`Trustees'') changed the name of the Trust from
`Lehman Brothers Institutional Funds Group Trust'' to ``Money Market
Obligations Trust II''and the name of the Fund from ``Prime Value Money
Market Fund''to ``Prime Value 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-referenced Shares of the Fund.
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or
any guarantor of either the security or any demand feature.
U.S. GOVERNMENT SECURITIES
The types of U.S. government securities in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
othe full faith and credit of the U.S. Treasury;
othe issuer's right to borrow from the U.S. Treasury;
othe discretionary authority of the U.S. government to purchase
certain obligations of agencies or instrumentalities; or
othe credit of the agency or instrumentality issuing the obligations.
BANK INSTRUMENTS
The instruments of banks and savings associations whose deposits are
insured by the Bank Insurance Fund (`BIF'') or the Savings Association
Insurance Fund (`SAIF''), such as certificates of deposit, demand and time
deposits, savings shares, and bankers' acceptances, are not necessarily
guaranteed by those organizations. In addition to domestic bank
instruments, the Fund may invest in: Eurodollar Certificates of Deposit
issued by foreign branches of U.S. or foreign banks; Eurodollar Time
Deposits, which are U.S. dollar-denominated deposits in foreign branches of
U.S. or foreign banks; Canadian Time Deposits, which are U.S. dollar-
denominated deposits issued by branches of major Canadian banks located in
the United States; and Yankee Certificates of Deposit, which are U.S.
dollar-denominated certificates of deposit issued by U.S. branches of
foreign banks and held in the United States.
The Fund's investments in the obligations of foreign branches of U.S. banks
and of foreign banks and other foreign issuers may subject the Fund to
investment risks that are different in some respects from those of
investment in obligations of U.S. domestic issuers. Such risk include
future political and economic developments, the possible seizure or
nationalization of foreign deposits, the possible establishment of exchange
controls or the adoption of other foreign governmental restrictions which
might adversely affect the payment of principal and interest on such
obligations. In addition, foreign branches of U.S. banks and foreign banks
may be subject to less stringent reserve requirements and foreign issuers
generally are subject to different accounting, auditing, reporting and
recordkeeping standards than those applicable to U.S. issuers. The Fund
will acquire securities issued by foreign branches of U.S. banks or foreign
issuers only when the adviser believes that the risks associated with such
instruments are minimal.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations (`NRSROs'') or be of comparable quality
to securities having such ratings. An NRSRO's two highest rating
categories are determined without regard for sub-categories and gradations.
For example, securities rated A-1, A-1+, or A-2 by Standard & Poor's
Ratings Group (`S&P''),Prime-1 or Prime-2 by Moody's Investors Service,
Inc. (`Moody's''), or F-1 +, F-1, or F-2 by Fitch Investors Service, Inc.
(`Fitch'') are all considered rated in one of the two highest short-term
rating categories. The Fund will follow applicable regulations in
determining whether a security rated by more than one NRSRO can be treated
as being in one of the two highest short-term rating categories; currently,
such securities must be rated by two NRSROs in one of their two highest
rating categories. See `Regulatory Compliance.''
MUNICIPAL SECURITIES
As stated in the Fund's Prospectus, the Fund may invest in obligations
issued by state and local government entities. Municipal securities are
issued by various public 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 issued by or on behalf of public
authorities to finance various privately operated facilities are considered
to be municipal securities and may be purchased by the Fund. Dividends
paid by the Fund that are derived from interest on such municipal
securities would be taxable to the Fund's investors for federal income tax
purposes.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund in a dollar amount sufficient to make payment for the securities to be
purchased are: segregated on the Fund`s records at the trade date; marked
to market daily; and maintained until the transaction is settled. The Fund
does not intend to engage in when-issued and delayed delivery transactions
to an extent that would cause the segregation of more than 20% of the total
value of its assets.
REPURCHASE AGREEMENTS
The Fund believes that under the regular procedures normally in effect for
custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in
return for a percentage of the instrument's market value in cash and agrees
that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus interest
at an agreed upon rate. The use of reverse repurchase agreements may enable
the Fund to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous, but does not ensure this result. However,
liquid assets of the Fund, in a dollar amount sufficient to make payment
for the securities to be purchased, are: segregated on the Fund's records
at the trade date; marked to market daily; and maintained until the
transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law, and is generally sold to institutional investors, such as
the Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) commercial 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 Section 4(2) commercial paper, thus providing liquidity. The Fund
believes that Section 4(2) commercial paper and possibly certain other
restricted securities which meet the criteria for liquidity established by
the Trustees are quite liquid. The Fund intends, therefore, to treat the
restricted securities which meet the criteria for liquidity established by
the Trustees, including Section 4(2) commercial paper, as determined by the
Fund's investment adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities.
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 diversification
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.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are subject
to termination at the option of the Fund or the borrower. The Fund may pay
reasonable administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash or
equivalent collateral to the borrower or placing broker.
INVESTMENT LIMITATIONS
DIVERSIFICATION OF INVESTMENTS
The Fund may not 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.
ISSUING SENIOR SECURITIES, BORROWING MONEY AND PLEDGING ASSETS
The Fund may not 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.
CONCENTRATION OF INVESTMENTS
The Fund may not 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 activivites in the same industry, except that the Fund intends to
invest 25% or more of the value of its total assets in obligations of
issuers in the banking industry or in obligations, such as repurchase
agreements, secured by such obligations; provided that there is no
limitation with respect to investments in U.S. government securities or, in
bank instruments issued or enhanced by approved banks.
LENDING CASH OR SECURITIES
The Fund may not 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 as described in the prospectus, and (iv) subject to specific
authorization by the SEC, lend money to other funds advised by the adviser
or an affiliate of the adviser.
UNDERWRITING
The Fund may not act as an underwriter of securities, except insofar as the
Fund may be deemed an underwriter under applicable securities laws in
selling portfolio securities.
INVESTING IN REAL ESTATE
The Fund may not 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.
INVESTING IN COMMODITIES AND MINERALS
The Fund may not purchase or sell commodities contracts, or invest in oil,
gas or mineral exploration or development programs or in mineral leases.
The above limitations cannot be changed without shareholder approval. The
following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities including repurchase agreements providing for
settlement in more than seven days after notice.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for
clearance of transactions.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not acquire more than 3% of the total outstanding securities
of other investment companies, except as part of a merger, consolidation,
or other acquisition.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 15% of the value of its total assets in
securities of companies (including predecessors) with less than three years
of continuous operation.
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. For example, with limited exceptions,
Rule 2a-7 prohibits the investment of more than 5% of the Fund's total
assets in the securities of any one issuer, although the Fund's investment
limitation only requires such 5% diversification with respect to 75% of its
assets. The Fund will invest more than 5% of its assets in any one issuer
only under the circumstances permitted by Rule 2a-7. 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
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
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
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 D. 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
Investment Portfolios; Federated Investment Trust; Federated Master 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
Institutional Shares.
As of March , 1997, the following shareholder(s) of record owned 5% or
--
more of the outstanding shares of the Prime Value Obligations Fund:
TRUSTEE 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 56 other investment companies in the
Fund Complex
Thomas G. Bigley $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John T. Conroy, Jr. $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
William J. Copeland $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
J. Christopher Donahue$0 $0 for the Trust and
President and Trustee 18 other investment companies in the
Fund Complex
James E. Dowd $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D. $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr. $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Peter E. Madden $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Gregor F. Meyer $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John E. Murray, Jr., $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Wesley W. Posvar $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Marjorie P. Smuts $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
* Information is furnished for the fiscal year ended January 31, 1997.
**New Board of Trustees as of November 13, 1996, per shareholder approval.
# The aggregate compensation is provided for the Trust which is comprised
of three portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The 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. Prior to November
13, 1996, Lehman Brothers Global Asset Management (the `former adviser''),
New York, NY served as the Fund's adviser. For the fiscal years ended
January 31,1997, 1996, and 1995, the adviser earned $ , $4,452,829, and
----
$2,386,734, respectively, of which $ and $ ;, $0 and $0; and
---- ----
$1,171,734 and $0, respectively, were waived of advisory fees and
reimbursement of expenses to maintain the Fund's operating expense ratios
at certain levels.
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 year(s) ended January 31, 1997, 1996,
and 1995, 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, 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 January 31, 1997, 1996, and
1995, the administrator earned $ , $4,452,829 and $2,386,734,
--------
respectively. Waivers by the administrator of administration fees and
reimbursement of expenses to maintain the Fund's operating expense ratios
at certain levels for the fiscal years ended January 31, 1997, 1996, and
1995, amounted to $ and $ ; $3,282,923 and $0; and $1,815,227 and
------ -----
$0, 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 transfer 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.
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.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services 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 Trustees expect 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, 1997, the following service fees were paid by the Fund:
Institutional Shares, $ ; Institutional Service Shares, $ ;
------- ---------
and Institutional Capital Shares, $ . For the fiscal year ended
---------
January 31, 1996, the following service fees were paid by the Fund: Class
B Shares, $960,077; and Class E Shares, $17,459. For the fiscal year ended
January 31, 1995, the following service fees were paid by the Fund: Class
B Shares, $726,035; and Class E Shares, $5,834.
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, 1997, the yield for
Institutional Shares was %.
---
For the seven-day period ended January 31, 1997, the yield for
Institutional Service Shares was %.
---
For the seven-day period ended January 31, 1997, the yield for
Institutional Capital Shares was %.
---
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, 1997, the effective yield for
Institutional Shares was %.
---
For the seven-day period ended January 31, 1997, the effective yield for
Institutional Service Shares was %.
---
For the seven-day period ended January 31, 1997, the effective yield for
Institutional Capital Shares was [ ]%.
---
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of 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.
For the one-year period ended January 31, 1997, and for the period from
February 8, 1993 (date of initial public investment) through January 31,
1997, the average annual total returns were %, % and %,
--- --- ---
respectively, for Institutional Shares, were %, % and %,
--- --- ---
respectively, for Institutional Service Shares, were %, % and %,
--- --- ---
respectively, for Institutional Capital Shares, were %, % and ,
--- ----- ----
respectively.
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:
OLIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund
categories based on total return, which assumes the reinvestment of
all income dividends and capital gains distributions, if any.
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.
oMONEY, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.
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.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund`s returns, or 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 the Fund portfolio mangers and their views and
analysis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including 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, 1996, Federated managed more than
$50.3 billion in assets across 50 money market funds, including 18
government, 11 prime and 21 municipal with assets approximating $28.0
billion, $12.8 billion and $9.5 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
Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
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.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 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--we have 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD AND POOR'S RATINGS GROUP 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.
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. 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.
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. 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.
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. 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.
THOMSON BANKWATCH 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. 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 described under
Commercial Paper Ratings for municipal notes.
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)
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 short-term municipal securities to
provide current 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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS- INSTITUTIONAL SHARES
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 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 current income exempt
from all federal regular income tax consistent with stability of principal.
This investment objective may be changed by the Board of 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 of
municipal securities maturing in 13 months or less. The average maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted
basis, will be 90 days or less. As a matter of investment policy, which
cannot be changed without shareholder approval, at least 80% of the Fund's
annual interest income will be exempt from federal regular income tax.
(Federal regular income tax does not include the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.) Unless indicated otherwise, the investment policies may be
changed by the Board of Trustees without shareholder approval. Shareholders
will be notified before any material change in these policies becomes
effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by or on behalf of states, territories, and possessions of the
United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which
is, in the opinion of qualified legal counsel, exempt from federal regular
income tax (`Municipal Securities''). Examples of Municipal Securities
include, but are not limited to:
otax and revenue anticipation notes issued to finance working capital
needs to anticipation of receiving taxes or other revenues;
obond anticipation notes that are intended to be refinanced through a
later issuance of longer-term bonds;
omunicipal commercial paper and other short-term notes;
ovariable rate demand notes;
omunicipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases; and
oparticipation, trust, and partnership interests in any of the
foregoing obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Municipal
Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in
a trust, partnership interests or any other form of indirect ownership
that allows the Fund to treat the income from the investment as exempt
from federal income tax. The Fund invests in these participation
interests in order to obtain credit enhancement or demand features that
would not be available through direct ownership of the underlying
Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an
installment purchase contract, a conditional sales contract, or a
participation interest in any of the above. Lease obligations may be
subject to periodic appropriation. Municipal leases are subject to
certain specific risks in the event of default or failure of
appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and standby commitments (`demand features'') to purchase the
securities at their principal amount (usually with accrued interest)
within a fixed period (usually seven days) following a demand by the
Fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities, or by another third party, and
may not be transferred separately from the underlying security. The
Fund uses these arrangements to provide the Fund with liquidity and not
to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand feature, or a default on the underlying security or other
event that terminates the demand feature before its exercise, will
adversely affect the liquidity of the underlying security. Demand
features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive posture,
the Fund may invest in tax-exempt or taxable securities, all of comparable
quality to the securities in which the Fund invests, such as: obligations
issued by or on behalf of municipal or corporate issuers; obligations
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; instruments issued by a U.S. branch of a domestic bank
or other deposit institutions having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment; and repurchase
agreements. Although the Fund is permitted to make taxable, temporary
investments, there is no current intention to do so.
MUNICIPAL SECURITIES
Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
contruct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of Municipal Securities are `general
obligations''and ``revenue'' bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for
the payment of principal and interest. Interest on and principal of
revenue bonds, however, are payable only from the revenue generated by the
facility financed by the bond or other specified sources of revenue.
Revenue bonds do not represent a pledge of credit or create any debt of or
charge against the general revenues of a municipality or public authority.
Industrial development bonds are typically classified as revenue bonds.
INVESTMENT RISKS
Municipal Securities depend on a variety of factors, including: the general
conditions of the short-term municipal note market and of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to
achieve its investment objective also depends on the continuing ability of
the issuers of Municipal Securities and participation interests, or the
credit enhancers of either, to meet their obligations for the payment of
interest and principal when due. In addition, from time to time, the
supply of Municipal Securities acceptable for purchase by the Fund could
become limited.
The Fund may invest in Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in
these Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress, state
legislators, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of states or municipalities to levy taxes.
There is also the possibility that, as a result of litigation or other
conditions, the power or ability of any issuer to pay, when due, the
principal of and interest on its municipal securities may be materially
affected.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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
Institutional 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. Financial institutions may impose different minimum
investment requirements on their customers.
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:
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. 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 redemptions requests received after 12:00 Noon (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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, Donnelly & Meck, 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.
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
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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
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 March 31, 1997
CUSIP 608912101
G01881-05-IS (3/97)
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 SERVICE SHARES (FORMERLY, CLASS B SHARES)
PROSPECTUS
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 short-term municipal securities to
provide current 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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS- INSTITUTIONAL SERVICE SHARES
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 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 current income exempt
from all federal regular income tax consistent with stability of principal.
This investment objective may be changed by the Board of 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 of
municipal securities maturing in 13 months or less. The average maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted
basis, will be 90 days or less. As a matter of investment policy, which
cannot be changed without shareholder approval, at least 80% of the Fund's
annual interest income will be exempt from federal regular income tax.
(Federal regular income tax does not include the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.) Unless indicated otherwise, the investment policies may be
changed by the Board of Trustees without shareholder approval. Shareholders
will be notified before any material change in these policies becomes
effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by or on behalf of states, territories, and possessions of the
United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which
is, in the opinion of qualified legal counsel, exempt from federal regular
income tax (`Municipal Securities''). Examples of Municipal Securities
include, but are not limited to:
otax and revenue anticipation notes issued to finance working capital
needs to anticipation of receiving taxes or other revenues;
obond anticipation notes that are intended to be refinanced through a
later issuance of longer-term bonds;
omunicipal commercial paper and other short-term notes;
ovariable rate demand notes;
omunicipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases; and
oparticipation, trust, and partnership interests in any of the
foregoing obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Municipal
Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in
a trust, partnership interests or any other form of indirect ownership
that allows the Fund to treat the income from the investment as exempt
from federal income tax. The Fund invests in these participation
interests in order to obtain credit enhancement or demand features that
would not be available through direct ownership of the underlying
Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an
installment purchase contract, a conditional sales contract, or a
participation interest in any of the above. Lease obligations may be
subject to periodic appropriation. Municipal leases are subject to
certain specific risks in the event of default or failure of
appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and standby commitments (`demand features'') to purchase the
securities at their principal amount (usually with accrued interest)
within a fixed period (usually seven days) following a demand by the
Fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities, or by another third party, and
may not be transferred separately from the underlying security. The
Fund uses these arrangements to provide the Fund with liquidity and not
to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand feature, or a default on the underlying security or other
event that terminates the demand feature before its exercise, will
adversely affect the liquidity of the underlying security. Demand
features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive posture,
the Fund may invest in tax-exempt or taxable securities, all of comparable
quality to the securities in which the Fund invests, such as: obligations
issued by or on behalf of municipal or corporate issuers; obligations
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; instruments issued by a U.S. branch of a domestic bank
or other deposit institutions having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment; and repurchase
agreements. Although the Fund is permitted to make taxable, temporary
investments, there is no current intention to do so.
MUNICIPAL SECURITIES
Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
contruct and equip facilities for privately or publicly owned corporations.
The availability of this financing encourages these corporations to locate
within the sponsoring communities and thereby increases local employment.
The two principal classifications of Municipal Securities are `general
obligations''and ``revenue'' bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for
the payment of principal and interest. Interest on and principal of
revenue bonds, however, are payable only from the revenue generated by the
facility financed by the bond or other specified sources of revenue.
Revenue bonds do not represent a pledge of credit or create any debt of or
charge against the general revenues of a municipality or public authority.
Industrial development bonds are typically classified as revenue bonds.
INVESTMENT RISKS
Municipal Securities depend on a variety of factors, including: the general
conditions of the short-term municipal note market and of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to
achieve its investment objective also depends on the continuing ability of
the issuers of Municipal Securities and participation interests, or the
credit enhancers of either, to meet their obligations for the payment of
interest and principal when due. In addition, from time to time, the
supply of Municipal Securities acceptable for purchase by the Fund could
become limited.
The Fund may invest in Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in
these Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress, state
legislators, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of states or municipalities to levy taxes.
There is also the possibility that, as a result of litigation or other
conditions, the power or ability of any issuer to pay, when due, the
principal of and interest on its municipal securities may be materially
affected.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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 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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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 Institutional Service 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. Financial institutions may impose different minimum
investment requirements on their customers.
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:
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. 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 redemptions requests received after 12:00 Noon (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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, Donnelly & Meck, 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 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.
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.
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
Municipal Obligations Fund
Institutional Service 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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
>
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 March 31, 1997
CUSIP 608912200
G01881-06-SS (3/97)
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 CAPITAL SHARES (FORMERLY, CLASS E SHARES)
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 short-term municipal securities to
provide current 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 the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission (`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 the Fund at the address listed in the back of this
prospectus. 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 NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated March 31, 1997
Table of contents will be inserted when document is complete.
SUMMARY OF FUND EXPENSES
FINANCIAL HIGHLIGHTS- INSTITUTIONAL CAPITAL SHARES
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 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 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 short-term municipal 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 current income exempt
from all federal regular income tax consistent with stability of principal.
This investment objective may be changed by the Board of 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 of
municipal securities maturing in 13 months or less. The average maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted
basis, will be 90 days or less. As a matter of investment policy, which
cannot be changed without shareholder approval, at least 80% of the Fund's
annual interest income will be exempt from federal regular income tax.
(Federal regular income tax does not include the federal individual
alternative minimum tax or the federal alternative minimum tax for
corporations.) Unless indicated otherwise, the investment policies may be
changed by the Board of Trustees without shareholder approval. Shareholders
will be notified before any material change in these policies becomes
effective.
ACCEPTABLE INVESTMENTS. The Fund invests primarily in debt obligations
issued by or on behalf of states, territories, and possessions of the
United States, including the District of Columbia, and any political
subdivision or financing authority of any of these, the income from which
is, in the opinion of qualified legal counsel, exempt from federal regular
income tax (`Municipal Securities''). Examples of Municipal Securities
include, but are not limited to:
otax and revenue anticipation notes issued to finance working capital
needs to anticipation of receiving taxes or other revenues;
obond anticipation notes that are intended to be refinanced through a
later issuance of longer-term bonds;
omunicipal commercial paper and other short-term notes;
ovariable rate demand notes;
omunicipal bonds (including bonds having serial maturities and pre-
refunded bonds) and leases; and
oparticipation, trust, and partnership interests in any of the
foregoing obligations.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
debt instruments that have variable or floating interest rates and
provide the Fund with the right to tender the security for repurchase
at its stated principal amount plus accrued interest. Such securities
typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted
at regular intervals (ranging from daily to annually), and is normally
based on a published interest rate or interest rate index. Most
variable rate demand notes allow the Fund to demand the repurchase of
the security on not more than seven days prior notice. Other notes only
permit the Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See ``Demand Features.''
The Fund treats variable rate demand notes as maturing on the later of
the date of the next interest rate adjustment or the date on which the
Fund may next tender the security for repurchase.
PARTICIPATION INTERESTS. The Fund may purchase interests in Municipal
Securities from financial institutions such as commercial and
investment banks, savings associations, and insurance companies. These
interests may take the form of participations, beneficial interests in
a trust, partnership interests or any other form of indirect ownership
that allows the Fund to treat the income from the investment as exempt
from federal income tax. The Fund invests in these participation
interests in order to obtain credit enhancement or demand features that
would not be available through direct ownership of the underlying
Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of
equipment and facilities. They may take the form of a lease, an
installment purchase contract, a conditional sales contract, or a
participation interest in any of the above. Lease obligations may be
subject to periodic appropriation. Municipal leases are subject to
certain specific risks in the event of default or failure of
appropriation.
CREDIT ENHANCEMENT. Certain of the Fund's acceptable investments 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.
DEMAND FEATURES. The Fund may acquire securities that are subject to
puts and standby commitments (`demand features'') to purchase the
securities at their principal amount (usually with accrued interest)
within a fixed period (usually seven days) following a demand by the
Fund. The demand feature may be issued by the issuer of the underlying
securities, a dealer in the securities, or by another third party, and
may not be transferred separately from the underlying security. The
Fund uses these arrangements to provide the Fund with liquidity and not
to protect against changes in the market value of the underlying
securities. The bankruptcy, receivership, or default by the issuer of
the demand feature, or a default on the underlying security or other
event that terminates the demand feature before its exercise, will
adversely affect the liquidity of the underlying security. Demand
features that are exercisable even after a payment default on the
underlying security may be treated as a form of credit enhancement.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions
are arrangements in which the Fund purchases securities with payment and
delivery scheduled for a future time. The seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered
to be advantageous. Settlement dates may be a month or more after entering
into these transactions, and the market values of the securities purchased
may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase
similar securities at later dates. The Fund may realize short-term profits
or losses upon the sale of such commitments.
REPURCHASE AGREEMENTS. Certain securities in which the Fund invests may be
purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell securities to the Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. To the extent
that the seller does not repurchase the securities from the Fund, the Fund
could receive less than the repurchase price on any sale of such
securities.
REVERSE REPURCHASE AGREEMENTS. The Fund may also enter into reverse
repurchase agreements. These transactions are similar to borrowing cash. In
a reverse repurchase agreement, the Fund transfers possession of a
portfolio instrument in return for a percentage of the instrument's market
value in cash and agrees that on a stipulated date in the future the Fund
will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but
does not ensure this result. However, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the securities to be
purchased, are: segregated on the Fund's records at the trade date; marked
to market daily; and maintained until the transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
invest pursuant to its investment objective and policies, but which are
subject to restrictions on resale under federal securities law. Under
criteria established by the Trustees, certain restricted securities are
determined to be liquid. To the extent that restricted securities are not
determined to be liquid the Fund will limit their purchase, together with
other illiquid securities, including non-negotiable time deposits and
repurchase agreements providing for settlement in more than seven days
after notice to 10% of its net assets.
TEMPORARY INVESTMENTS. From time to time, when the investment adviser
determines that market conditions call for a temporary defensive posture,
the Fund may invest in tax-exempt or taxable securities, all of comparable
quality to the securities in which the Fund invests, such as: obligations
issued by or on behalf of municipal or corporate issuers; obligations
issued or guaranteed by the U.S. government, its agencies, or
instrumentalities; instruments issued by a U.S. branch of a domestic bank
or other deposit institutions having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment; and repurchase
agreements. Although the Fund is permitted to make taxable, temporary
investments, there is no current intention to do so.
MUNICIPAL SECURITIES
Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation
projects, schools, streets, and water and sewer works. They are also
issued to repay outstanding obligations, to raise funds for general
operating expenses, and to make loans to other public institutions and
facilities.
Municipal Securities include industrial development bonds issued by or on
behalf of public authorities to provide financing aid to acquire sites or
construct and equip facilities for privately or publicly owned
corporations. The availability of this financing encourages these
corporations to locate within the sponsoring communities and thereby
increases local employment.
The two principal classifications of Municipal Securities are `general
obligations''and ``revenue'' bonds. General obligation bonds are secured
by the issuer's pledge of its full faith and credit and taxing power for
the payment of principal and interest. Interest on and principal of
revenue bonds, however, are payable only from the revenue generated by the
facility financed by the bond or other specified sources of revenue.
Revenue bonds do not represent a pledge of credit or create any debt of or
charge against the general revenues of a municipality or public authority.
Industrial development bonds are typically classified as revenue bonds.
INVESTMENT RISKS
Municipal Securities depend on a variety of factors, including: the general
conditions of the short-term municipal note market and of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Fund to
achieve its investment objective also depends on the continuing ability of
the issuers of Municipal Securities and participation interests, or the
credit enhancers of either, to meet their obligations for the payment of
interest and principal when due. In addition, from time to time, the
supply of Municipal Securities acceptable for purchase by the Fund could
become limited.
The Fund may invest in Municipal Securities which are repayable out of
revenue streams generated from economically related projects or facilities
and/or whose issuers are located in the same state. Sizable investments in
these Municipal Securities could involve an increased risk to the Fund
should any of these related projects or facilities experience financial
difficulties.
Obligations of issuers of Municipal Securities are subject to the
provisions of bankruptcy, insolvency, and other laws affecting the rights
and remedies of creditors. In addition, the obligations of such issuers
may become subject to laws enacted in the future by Congress, state
legislators, or referenda extending the time for payment of principal
and/or interest, or imposing other constraints upon enforcement of such
obligations or upon the ability of states or municipalities to levy taxes.
There is also the possibility that, as a result of litigation or other
conditions, the power or ability of any issuer to pay, when due, the
principal of and interest on its municipal securities may be materially
affected.
INVESTMENT LIMITATIONS
The Fund may not:
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;
or
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.
The above investment limitations cannot be changed without shareholder
approval.
FUND INFORMATION
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Fund 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
$76 billion invested across more than 338 funds under management and/or
administration by its subsidiaries, as of December 31, 1996, Federated
Investors is one of the largest mutual fund investment managers in the
United States. With more than 2,000 employees, Federated continues to
be led by the management who founded the company in 1955. Federated
funds are presently at work in and through 4,500 financial institutions
nationwide.
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 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.
ADMINISTRATION OF THE FUND
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 its shares, computed at an annual rate, to
obtain certain personal services for shareholders and to maintain
shareholder accounts. 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.
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.
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
specified below:
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
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.
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 Institutional Capital 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. Financial institutions may impose different minimum
investment requirements on their customers.
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:
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. 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 redemptions requests received after 12:00 Noon (Eastern time). 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 in any amount 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: the Fund name and the class designation;
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.
As of March , 1997, , , organized in the state
-- ---------------- ----------
of owned % of the voting securities of the Fund, and, therefore,
------- ---
may, for certain purposes, be deemed to control the Fund and be able to
affect the outcome of certain matters presented for a vote of shareholders.
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, Donnelly & Meck, 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 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.
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.
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
Municipal Obligations Fund
Institutional Capital 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
P.O. Box 8600
Boston, MA 02266-8600
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Independent Public Accountants
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 March 31, 1997
CUSIP 608912309
G01881-09- (3/97)
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 March 31, 1997. 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 March 31, 1997
[LOGO]
Federated Securities Corp. is the distributor of the Funds
and is a subsidiary of Federated Investors.
Cusip 608912101
Cusip 608912200
Cusip 608912309
G01881-12 (3/97)
FUND HISTORY 1
INVESTMENT POLICIES 1
Acceptable Investments 1
Participation Interests 1
Municipal Leases 1
Ratings 1
When-Issued and Delayed Delivery
Transactions 2
Repurchase Agreements 2
Reverse Repurchase Agreements 2
Restricted and Illiquid Securities 2
Credit Enhancement 2
INVESTMENT LIMITATIONS 2
Regulatory Compliance 4
MONEY MARKET OBLIGATIONS TRUST II MANAGEMENT
4
Share Ownership 8
Trustee Compensation 8
Trustee Liability 9
INVESTMENT ADVISORY SERVICES 10
Investment Adviser 10
Advisory Fees 10
BROKERAGE TRANSACTIONS 10
OTHER SERVICES 10
Fund Administration 10
Custodian and Portfolio Accountant 11
Transfer Agent 11
Independent Auditors 11
DETERMINING NET ASSET VALUE 11
Shareholder Services 11
REDEMPTION IN KIND 12
MASSACHUSETTS PARTNERSHIP LAW 12
THE FUND'S TAX STATUS 12
PERFORMANCE INFORMATION 12
Yield 12
Effective Yield 13
Tax-Equivalent Yield 13
Tax-Equivalency Table 13
Total Return 14
Performance Comparisons 14
Economic and Market Information 14
ABOUT FEDERATED INVESTORS 15
Mutual Fund Market 15
Institutional Clients 15
Bank Marketing 15
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 15
APPENDIX 16
FUND HISTORY
The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 16, 1992. On November 15, 1996, the
Board of Trustees (`Trustees'') changed the name of the Trust from
`Lehman Brothers Institutional Funds Group Trust'' to ``Money Market
Obligations Trust II''and the name of the Fund 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-referenced Shares of the Fund.
INVESTMENT POLICIES
Unless indicated otherwise, the policies described below may be changed by
the Board of Trustees without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or
any guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The
municipal securities subject to the participation interests are not limited
to the Fund's maximum maturity requirements so long as the participation
interests include the right to demand payment from the issuers of those
interests. By purchasing these participation interests, the Fund is buying
a security meeting the maturity and quality requirements of the Fund and
also is receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease
payments by a governmental or nonprofit entity. The lease payments and
other rights under the lease provide for and secure payments on the
certificates. Lease obligations may be limited by municipal charter or the
nature of the appropriation for the lease. Furthermore, a lease may
provide that the participants cannot accelerate lease obligations upon
default. the participants would only be able to enforce lease payments as
they became due. In the event of a default or failure of appropriation,
unless the participation interests are credit enhanced, it is unlikely that
the participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit
strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); the likelihood that the lessee will
discontinue appropriating funding for leased property because the property
is no longer deemed essential to its operations (e.g., the potential for an
`event of non-appropriation''); and any credit enhancement or legal
recourse provided upon an event of non-appropriation or other termination
of the lease.
RATINGS
The securities in which the Fund invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations (`NRSROs'') or be of comparable quality
to securities having such ratings. An NRSRO's two highest rating
categories are determined without regard for sub-categories and gradations.
For example, securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's
Ratings Group (`S&P''), MIG-1 or MIG-2 by Moody's Investors Service, Inc.
(`Moody's''), or F-1 +, F-1, or F-2 by Fitch Investors Service, Inc.
(`Fitch'') are all considered rated in one of the two highest short-term
rating categories. The Fund will follow applicable regulations in
determining whether a security rated by more than one NRSRO can be treated
as being in one of the two highest short-term rating categories; currently,
such securities must be rated by two NRSROs in one of their two highest
rating categories. See `Regulatory Compliance.''
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Fund in a dollar amount sufficient to make payment for the securities to be
purchased are: segregated on the Fund`s records at the trade date; marked
to market daily; and maintained until the transaction is settled. The Fund
does not intend to engage in when-issued and delayed delivery transactions
to an extent that would cause the segregation of more than 20% of the total
value of its assets.
REPURCHASE AGREEMENTS
The Fund believes that under the regular procedures normally in effect for
custody of the Fund's portfolio securities subject to repurchase
agreements, a court of competent jurisdiction would rule in favor of the
Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized
financial institutions, such as broker/dealers, which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines established by the
Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Fund transfers possession of a portfolio instrument in
return for a percentage of the instrument's market value in cash and agrees
that on a stipulated date in the future the Fund will repurchase the
portfolio instrument by remitting the original consideration plus interest
at an agreed upon rate. The use of reverse repurchase agreements may enable
the Fund to avoid selling portfolio instruments at a time when a sale may
be deemed to be disadvantageous, but does not ensure this result. However,
liquid assets of the Fund, in a dollar amount sufficient to make payment
for the securities to be purchased, are: segregated on the Fund's records
at the trade date; marked to market daily; and maintained until the
transaction is settled.
RESTRICTED AND ILLIQUID SECURITIES
The Fund may invest in commercial paper issued in reliance on the exemption
from registration afforded by Section 4(2) of the Securities Act of 1933.
Section 4(2) commercial paper is restricted as to disposition under federal
securities law, and is generally sold to institutional investors, such as
the Fund, who agree that they are purchasing the paper for investment
purposes and not with a view to public distribution. Any resale by the
purchaser must be in an exempt transaction. Section 4(2) commercial 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 Section 4(2) commercial paper, thus providing liquidity. The Fund
believes that Section 4(2) commercial paper and possibly certain other
restricted securities which meet the criteria for liquidity established by
the Trustees are quite liquid. The Fund intends, therefore, to treat the
restricted securities which meet the criteria for liquidity established by
the Trustees, including Section 4(2) commercial paper, as determined by the
Fund's investment adviser, as liquid and not subject to the investment
limitation applicable to illiquid securities.
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 diversification
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
DIVERSIFICATION OF INVESTMENTS
The Fund may not 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.
ISSUING SENIOR SECURITIES, BORROWING MONEY AND PLEDGING ASSETS
The Fund may not 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.
LENDING CASH OR SECURITIES
The Fund may not 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.
UNDERWRITING
The Fund may not act as an underwriter of securities, except insofar as the
Fund may be deemed an underwriter under applicable securities laws in
selling portfolio securities.
INVESTING IN REAL ESTATE
The Fund may not 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.
INVESTING IN COMMODITIES AND MINERALS
The Fund may not purchase or sell commodities contracts, or invest in oil,
gas or mineral exploration or development programs or in mineral leases.
CONCENTRATION OF INVESTMENTS
The Fund may not 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.
The above limitations cannot be changed without shareholder approval. The
following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities including repurchase agreements providing for
settlement in more than seven days after notice.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for
clearance of transactions.
INVESTING IN OPTIONS
The Fund will not invest in puts, calls, straddles, spreads, or any
combination of them.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not acquire more than 3% of the total outstanding securities
of other investment companies, except as part of a merger, consolidation,
or other acquisition.
In addition, without 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 Securities.
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. For example, with limited exceptions,
Rule 2a-7 prohibits the investment of more than 5% of the Fund's total
assets in the securities of any one issuer, although the Fund's investment
limitation only requires such 5% diversification with respect to 75% of its
assets. The Fund will invest more than 5% of its assets in any one issuer
only under the circumstances permitted by Rule 2a-7. 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 Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
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
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
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 D. 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
Investment Portfolios; Federated Investment Trust; Federated Master 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
Institutional Shares.
As of March , 1997, the following shareholder(s) of record owned 5% or
--
more of the outstanding shares of the Municipal Obligations Fund:
TRUSTEE 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 56 other investment companies in the
Fund Complex
Thomas G. Bigley $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John T. Conroy, Jr. $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
William J. Copeland $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
J. Christopher Donahue$0 $0 for the Trust and
President and Trustee 18 other investment companies in the
Fund Complex
James E. Dowd $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D. $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr. $0 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Peter E. Madden $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Gregor F. Meyer $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John E. Murray, Jr., $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Wesley W. Posvar $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Marjorie P. Smuts $0 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
* Information is furnished for the fiscal year ended January 31, 1997.
**New Board of Trustees as of November 13, 1996, per shareholder approval.
# The aggregate compensation is provided for the Trust which is comprised
of three portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The 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. Prior to November
13, 1996, Lehman Brothers Global Asset Management (the `former adviser''),
New York, NY served as the Fund's adviser. For the fiscal years ended
January 31,1997, 1996, and 1995, the adviser earned $ , $4,452,829, and
----
$2,386,734, respectively, of which $ and $ ;, $0 and $0; and
---- ----
$1,171,734 and $0, respectively, were waived of advisory fees and
reimbursement of expenses to maintain the Fund's operating expense ratios
at certain levels.
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 year(s) ended January 31, 1997, 1996,
and 1995, 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, 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 January 31, 1997, 1996, and
1995, the administrator earned $ , $4,452,829 and $2,386,734,
--------
respectively. Waivers by the administrator of administration fees and
reimbursement of expenses to maintain the Fund's operating expense ratios
at certain levels for the fiscal years ended January 31, 1997, 1996, and
1995, amounted to $ and $ ; $3,282,923 and $0; and $1,815,227 and
------ -----
$0, 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 transfer 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.
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.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder
Services 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 Trustees expect 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, 1997, the following service fees were paid by the Fund:
Institutional Shares, $ ; Institutional Service Shares, $ ;
------- ---------
and Institutional Capital Shares, $ . For the fiscal year ended
---------
January 31, 1996, the following service fees were paid by the Fund: Class
B Shares, $960,077; and Class E Shares, $17,459. For the fiscal year ended
January 31, 1995, the following service fees were paid by the Fund: Class
B Shares, $726,035; and Class E Shares, $5,834.
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, 1997, the yield for
Institutional Shares was %.
---
For the seven-day period ended January 31, 1997, the yield for
Institutional Service Shares was %.
---
For the seven-day period ended January 31, 1997, the yield for
Institutional Capital Shares was %.
---
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, 1997, the effective yield for
Institutional Shares was %.
---
For the seven-day period ended January 31, 1997, the effective yield for
Institutional Service Shares was %.
---
For the seven-day period ended January 31, 1997, the effective yield for
Institutional Capital Shares was [ ]%.
---
TAX-EQUIVALENT YIELD
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 39.60% tax rate (the maximum
effective federal rate for individuals) and assuming that the income is
100% tax exempt.
For the seven-day period ended January 31, 1997, the tax-equivalent yield
for Institutional Shares was %.
---
For the seven-day period ended January 31, 1997, the tax-equivalent yield
for Institutional Service Shares was %.
---
For the seven-day period ended January 31, 1997, the tax-equivalent yield
for Institutional Capital Shares was [ ]%.
---
TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature.
The interest earned by the municipal securities 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 can be an attractive choice for investors, particularly
in times of narrow spreads between tax-free and taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1997
MULTISTATE MUNICIPAL FUNDS
FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%
JOINT $1- $41,201- $99,601- $151,751- OVER
RETURN 41,200 99,600 151,750 271,050 $271,050
SINGLE $1- $24,651- $59,751- $124,651- OVER
RETURN 24,650 59,750 124,650 271,050 $271,050
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 the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
TOTAL RETURN
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of 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.
For the one-year period ended January 31, 1997, and for the period from
February 8, 1993 (date of initial public investment) through January 31,
1997, the average annual total returns were %, % and %,
--- --- ---
respectively, for Institutional Shares, were %, % and %,
--- --- ---
respectively, for Institutional Service Shares, were %, % and %,
--- --- ---
respectively, for Institutional Capital Shares, were %, % and ,
--- ----- ----
respectively.
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.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund`s returns, or 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 the Fund portfolio mangers and their views and
analysis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including 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 municipal sector, as of December 31, 1996, Federated Investors
managed 12 bond funds with approximately $2.0 billion in assets and 21
money market funds with approximately $9.5 billion in total assets. In
1976, Federated introduced one of the first municipal bond mutual funds in
the industry and is now one of the largest institutional buyers of
municipal securities. The Funds may quote statistics from organizations
including The Tax Foundation and the National Taxpayers Union regarding the
tax obligations of Americans.
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
Thrity-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000
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.
BANK MARKETING
Other institutional clients include close relationships with more than
1,600 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--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement. The marketing effort to these
firms is headed by James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
APPENDIX
STANDARD AND POOR'S RATINGS GROUP 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
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. 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.
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. 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.
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.
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.
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.
Fitch use the short-term ratings described under Commercial Paper Ratings
for municipal notes.
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (To be Filed in Part A by Amendment)
(b) Exhibits:
(1) (a)Copy of Declaration of Trust of the Registrant dated
November 16, 1992, as previously filed in the
Registration Statement is incorporated by reference to
Exhibit (1)(a) of Post-Effective Amendment No. 9;
(b)Amendment No. 1 to Declaration of Trust of
Registrant is incorporated by reference to Exhibit
(1)(b) of Post-Effective Amendment No. 9;
(c)Designation and establishment of Series is
incorporated by reference to Exhibit (1)(c) of Post-
Effective Amendment No. 9;
(iii)Form of Certificate pertaining to Classification
of Shares dated February 18, 1994, is incorporated by
reference to Exhibit (1)(d) of Post-Effective Amendment
No. 4;
(2) Amended and Restated By-Laws dated November 2, 1994,
are incorporated by reference to Exhibit (2)(a) of
Post-Effective Amendment No. 9;
(3) Not applicable;
(4) Specimen Share Certificate is incorporated by reference
to Exhibit (4) of Post-Effective Amendment No. 9;
(5) (a) Form of Investment Advisory Agreement dated
February 1, 1996, between Registrant and Lehman
Brothers Global Asset Management Inc. (`LBGAM''),
relating to each investment portfolio (collectively,
the `Funds'') of Registrant (10);
(b) Investment Advisory Agreement between Registrant
and Lehman Brothers Global Asset Management Inc.
(`LBGAM''), the Funds of Registrant is incorporated by
reference to Exhibit (5)(a) of Post-Effective Amendment
No. 9;
(c) Conformed copy of Investment Advisory Contract,
including Exhibit A, between Registrant and Federated
Management dated November 15, 1996;+
(6) (a)Distribution Agreement between Registrant and Lehman
Brother, a division of Shearson Lehman Brothers Inc.,
is incorporated by reference to Exhibit (6)(a) of Post-
Effective Amendment No. 9;
(b)Copy of Distributor's Contract of the Registrant;+
(c) The Registrant incorporates the conformed
copy of the specimen Mutual Funds Sales
and Service Agreement; Mutual Funds
Service Agreement; and Plan Trustee/
Mutual Funds Service Agreement from Item
24(b)(6) of the Cash Trust Series II
Registration Statement filed with the
Commission on July 24, 1995. (File Number
33-38550 and 811-2669);
(7) Not applicable;
(8) (a) Custody Agreement between Registrant and Boston
Safe Deposit and Trust Company is incorporated by
reference to Exhibit (8)(a) of Post-Effective Amendment
No. 9;
(b) Form of Amendment No. 1 to the custody Agreement
dated November 10, 1993, between Registrant and Boston
Safe Deposit and Trust Company is incorporated by
reference to Exhibit (8)(b) of Post-Effective Amendment
No. 6;
(c) Form of Amendment No. 2 to the custody Agreement
dated January 27, 1994, between Registrant and Boston
Safe Deposit and Trust Company is incorporated by
reference to Exhibit (8)(c) of Post-Effective Amendment
No. 6;
(9) ................(a) Administration Agreement between
Registrant and The Boston Advisors, Inc. is
incorporated by reference to Exhibit (9)(a) of Post-
Effective Amendment No. 9;
(b) Assignment of Administration Agreement dated April
21, 1994, between Registrant and The Boston Advisors,
Inc. to The Shareholder Services Group, Inc. is
incorporated by reference to Exhibit (9)(b) of Post-
Effective Amendment No. 5;
(c) Transfer Agency Agreement and Registrar Agreement
dated February 1, 1993, between Registrant and The
Shareholder Services Group, Inc. is incorporated by
reference to Exhibit (9)(a) of Post-Effective Amendment
No. 9;
(d) Amendment No. 1 to the Transfer Agency Agreement
dated November 10, 1993, between Registrant and The
Shareholder Services Group, Inc. is incorporated by
reference to Exhibit (9)(d) of Post-Effective Amendment
No. 6;
(e) Amendment No. 2 to the Transfer Agency Agreement
dated January 27, 1994, between Registrant and The
Shareholder Services Group, Inc. is incorporated by
reference to Exhibit (9)(e) of Post-Effective Amendment
No. 6;
(10) Not Applicable;
(11) (a) Power of Attorney for James A. Carbone (10);
(b)Powers of Attorney for Charles F. Barber, Burt N.
Dorsett, Edward J. Kaier, and S. Donald Wiley are
incorporated by reference to Exhibit 11(a) to Post-
Effective Amendment No. 10;
(c)Conformed copy of Consent of the Independent
Auditors (10);
(d) Consent of Counsel (10);
(12) Not applicable;
(13) Purchase Agreement between Registrant and Shearson
Lehman Brothers Inc. is incorporated by reference to
Exhibit (13)(a) of Post-Effective Amendment No. 9;
(14) Not applicable;
(15) (a) Shareholder Services Plan pursuant to Rule 12b-1 is
incorporated by reference to Exhibit (15)(a) of Post-
Effective Amendment No. 9;
(b) Form of Shareholder Servicing Agreement for Class E
Shares (10);
(c) Form of Shareholder Servicing Agreement for Class B
Shares is incorporated by reference to Exhibit (15)(c)
of Post-Effective Amendment No. 9;
(d) Form of Shareholder Servicing Agreement for Class C
Shares is incorporated by reference to Exhibit (15)(d)
of Post-Effective Amendment No. 9;
(16) Performance Data is incorporated by reference to
Exhibit 916) of Post-Effective Amendment No. 10;
(17) Financial Data Schedules (10);
(18) (a) Amended and Restated Multi-Class Plan dated
November 1, 1995 (10);
(b) Multi-Class Plan dated May 11, 1995, is
incorporated by reference to Exhibit (15)(k) of Post-
Effective Amendment No. 10;
(c) The Registrant hereby incorporates the conformed
copy of the specimen Multiple Class Plan from Item
24(b)(18)of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed with the
Commission on January 26, 1996. (File Nos. 33-52149 and
811-07141);
(19) Power of Attorney. +
+ All exhibits have been filed electronically.
10. Response is incorporated by reference to Registrant's Registration
Statement on Form N-1A filed March 29, 1996. (File No. 33-55034).
Item 25. Persons Controlled by or Under Common Control with Registrant:
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of January 2, 1997
Shares of Beneficial Interest
Prime Cash Obligations Fund
Institutional Shares 847
Institutional Service Shares 26
Institutional Capital Shares 6
Prime Value Obligations Fund
Institutional Shares 645
Institutional Service Shares 8
Institutional Capital Shares 6
Municipal Obligations Fund
Institutional Shares 97
Institutional Service Shares 6
Institutional Capital Shares 7
Item 27. Indemnification: (10)
Item 28. Business and Other Connections of Investment Adviser:
For a description of the other business of Federated Management,
the investment adviser for Automated Cash Management Trust,
Government Obligations Fund, Prime Obligations Fund, Tax-Free
Obligations Fund and Treasury Obligations Fund, see the section
entitled "Management of Money Market Obligations Trust" in Part
A. The affiliations with the Registrant of four of the Trustees
and two of the Officers of the Federated Management and their
business addresses are included in Part B of this Registration
Statement under "Money Market Obligations Trust Management." The
remaining Trustee of Federated Management, his principal
occupation and business address is: Mark D. Olson (Partner,
Wilson, Halbrook & Bayard), 107 West Market Street, Georgetown,
Delaware 19947.
The remaining Officers of Federated Management are: William D.
Dawson, III, Henry A. Frantzen, J. Thomas Madden, and Mark L.
Mallon, Executive Vice Presidents; Peter R. Anderson, Drew J.
Collins, Jonathan C. Conley, Mark E.Durbiano, J. Alan Minteer,
and Mary Jo Ochson, Senior Vice Presidents; J. Scott Albrecht,
Joseph M. Ballestrino, Randall A. Bauer, David F. Belton, David
A. Briggs, Kenneth J. Cody, Deborah A. Cunningham, Michael P.
Donnelly, Alexandre de Bethmann, Linda A. Duessel, Kathleen M.
Foody-Malus, Thomas M. Franks, Stephen A. Keen, Mark S. Kopinski,
Robert M. Kowit, Jeff A. Kozemchak, Marian R. Marinack, Sandra L.
McInerney, Susan M. Nason, Robert J. Ostrowski, Charles A.
Ritter, Frank Semack, William F. Stotz, Tracy P. Stouffer, Edward
J. Tiedge, Christopher H. Wiles, Jolanta M. Wysocka, Vice
Presidents; Thomas R. Donahue, Treasurer; and Stephen A. Keen,
Secretary. The business address of each of the Officers of the
investment adviser is Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. These individuals are also officers of
a majority of the investment advisers to the Funds listed in Part
B of this Registration Statement under "The Funds."
Item 29. Principal Underwriters:
Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: 111 Corcoran Funds; Annuity
Management Series; Arrow Funds; Automated Government Money Trust;
BayFunds; Blanchard Funds; Blanchard Precious Metals Fund, Inc.;
Cash Trust Series II; Cash Trust Series, Inc.; DG Investor
Series; Edward D. 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
Investment Portfolios; Federated Investment Trust; Federated
Master 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; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; Investment Series Trust; Liberty U.S. Government
Money Market Trust; Liquid Cash Trust; Managed Series Trust;
Marshall Funds, Inc.; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument
Funds; SouthTrust Vulcan Funds; Star Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Biltmore Funds; The
Biltmore Municipal Funds; The Monitor Funds; The Planters Funds;
The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Tower Mutual Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; andWorld Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter for
the following closed-end investment company: Liberty Term Trust,
Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary,
Federated Investors Tower Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joeseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Assistant Secretary,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of
the following locations:
Registrant...............Federated Investors Tower
.........................Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
Transfer Agent, Dividend.Pittsburgh, PA 15222-3779
Disbursing Agent and
Portfolio Recordkeeper
Federated Management.....Federated Investors Tower
Investment Adviser.......Pittsburgh, PA 15222-3779
State Street Bank and....P.O. Box 8600
Trust Company............Boston, Massachusetts 02266
Custodian
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to removal of Trustees
and the calling of special shareholder meetings by shareholders.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, MONEY MARKET OBLIGATIONS
TRUST II, certifies that it meets all the requirements for effectiveness of
this Registration Statement pursuant to Rule 485(a) under the Securities
Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on
the 23rd day of January, 1997.
MONEY MARKET OBLIGATIONS TRUST II
BY: /s/ S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
January 23, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/ S. Elliott Cohan
S. Elliott Cohan Attorney In Fact January 23, 1997
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John F. Donahue* Chairman and Trustee
(Chief Executive Officer)
J. Christopher Donahue* President and Trustee
John W. McGonigle* Treasurer and Executive Vice
President
(Principal Financial and
Accounting Officer)
Thomas G. Bigley* Trustee
John T. Conroy, Jr.* Trustee
William J. Copeland* Trustee
James E. Dowd* Trustee
Lawrence D. Ellis, M.D.* Trustee
Edward L. Flaherty, Jr.* Trustee
Peter E. Madden* Trustee
Gregor F. Meyer* Trustee
John E. Murray, Jr.* Trustee
Wesley W. Posvar* Trustee
Marjorie P. Smuts* Trustee
* By Power of Attorney
Exhibit 5(c)
INVESTMENT ADVISORY CONTRACT
This Contract is made this 15th day of November, 1996, between
Federated Management, a Delaware business trust having its principal place
of business in Pittsburgh, Pennsylvania (the "Adviser"), and Money Market
Obligations Trust II, a Massachusetts business trust having its principal
place of business in Pittsburgh, Pennsylvania (the `Trust'').
WHEREAS the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940, as amended, and is
registered as such with the Securities and Exchange Commission; and
WHEREAS Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of
the portfolios ("Funds") of the Trust which executes an exhibit to
this Contract, and Adviser accepts the appointments. Subject to the
direction of the Trustees, Adviser shall provide investment research
and supervision of the investments of the Funds and conduct a
continuous program of investment evaluation and of appropriate sale or
other disposition and reinvestment of each Fund's assets.
2. Adviser, in its supervision of the investments of each of the Funds
will be guided by each of the Fund's investment objective and policies
and the provisions and restrictions contained in the Declaration of
Trust and By-Laws of the Trust and as set forth in the Registration
Statements and exhibits as may be on file with the Securities and
Exchange Commission.
3. Each Fund shall pay or cause to be paid all of its own expenses and
its allocable share of Trust expenses, including, without limitation,
the expenses of organizing the Trust and continuing its existence;
fees and expenses of Trustees and officers of the Trust; fees for
investment advisory services and administrative personnel and
services; expenses incurred in the distribution of its shares
("Shares"), including expenses of administrative support services;
fees and expenses of preparing and printing its Registration
Statements under the Securities Act of 1933 and the Investment Company
Act of 1940, as amended, and any amendments thereto; expenses of
registering and qualifying the Trust, the Funds, and Shares of the
Funds under federal and state laws and regulations; expenses of
preparing, printing, and distributing prospectuses (and any amendments
thereto) to shareholders; interest expense, taxes, fees, and
commissions of every kind; expenses of issue (including cost of Share
certificates), purchase, repurchase, and redemption of Shares,
including expenses attributable to a program of periodic issue;
charges and expenses of custodians, transfer agents, dividend
disbursing agents, shareholder servicing agents, and registrars;
printing and mailing costs, auditing, accounting, and legal expenses;
reports to shareholders and governmental officers and commissions;
expenses of meetings of Trustees and shareholders and proxy
solicitations therefor; insurance expenses; association membership
dues and such nonrecurring items as may arise, including all losses
and liabilities incurred in administering the Trust and the Funds.
Each Fund will also pay its allocable share of such extraordinary
expenses as may arise including expenses incurred in connection with
litigation, proceedings, and claims and the legal obligations of the
Trust to indemnify its officers and Trustees and agents with respect
thereto.
4. Each of the Funds shall pay to Adviser, for all services rendered to
each Fund by Adviser hereunder, the fees set forth in the exhibits
attached hereto.
5. The net asset value of each Fund's Shares as used herein will be
calculated to the nearest 1/10th of one cent.
6. The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation (and, if appropriate, assume
expenses of one or more of the Funds) to the extent that any Fund's
expenses exceed such lower expense limitation as the Adviser may, by
notice to the Fund, voluntarily declare to be effective.
7. This Contract shall begin for each Fund as of the date of execution of
the applicable exhibit and shall continue in effect with respect to
each Fund presently set forth on an exhibit (and any subsequent Funds
added pursuant to an exhibit during the initial term of this Contract)
for two years from the date of this Contract set forth above and
thereafter for successive periods of one year, subject to the
provisions for termination and all of the other terms and conditions
hereof if: (a) such continuation shall be specifically approved at
least annually by the vote of a majority of the Trustees of the Trust,
including a majority of the Trustees who are not parties to this
Contract or interested persons of any such party cast in person at a
meeting called for that purpose; and (b) Adviser shall not have
notified a Fund in writing at least sixty (60) days prior to the
anniversary date of this Contract in any year thereafter that it does
not desire such continuation with respect to that Fund. If a Fund is
added after the first approval by the Trustees as described above,
this Contract will be effective as to that Fund upon execution of the
applicable exhibit and will continue in effect until the next annual
approval of this Contract by the Trustees and thereafter for
successive periods of one year, subject to approval as described
above.
8. Notwithstanding any provision in this Contract, it may be terminated
at any time with respect to any Fund, without the payment of any
penalty, by the Trustees of the Trust or by a vote of the shareholders
of that Fund on sixty (60) days' written notice to Adviser.
9. This Contract may not be assigned by Adviser and shall automatically
terminate in the event of any assignment. Adviser may employ or
contract with such other person, persons, corporation, or corporations
at its own cost and expense as it shall determine in order to assist
it in carrying out this Contract.
10. In the absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties under this Contract on
the part of Adviser, Adviser shall not be liable to the Trust or to
any of the Funds or to any shareholder for any act or omission in the
course of or connected in any way with rendering services or for any
losses that may be sustained in the purchase, holding, or sale of any
security.
11. This Contract may be amended at any time by agreement of the parties
provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust including a majority of the
Trustees who are not parties to this Contract or interested persons of
any such party to this Contract (other than as Trustees of the Trust
cast in person at a meeting called for that purpose, and, where
required by Section 15(a)(2) of the Act, on behalf of a Fund by a
majority of the outstanding voting securities of such Fund as defined
in Section 2(a)(42) of the Act.
12. The Adviser acknowledges that all sales literature for investment
companies (such as the Trust) are subject to strict regulatory
oversight. The Adviser agrees to submit any proposed sales literature
for the Trust (or any Fund) or for itself or its affiliates which
mentions the Trust (or any Fund) to the Trust's distributor for review
and filing with the appropriate regulatory authorities prior to the
public release of any such sales literature, provided, however, that
nothing herein shall be construed so as to create any obligation or
duty on the part of the Adviser to produce sales literature for the
Trust (or any Fund). The Trust agrees to cause its distributor to
promptly review all such sales literature to ensure compliance with
relevant requirements, to promptly advise Adviser of any deficiencies
contained in such sales literature, to promptly file complying sales
literature with the relevant authorities, and to cause such sales
literature to be distributed to prospective investors in the Trust.
13. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and
agrees that the obligations pursuant to this Contract of a particular
Fund and of the Trust with respect to that particular Fund be limited
solely to the assets of that particular Fund, and Adviser shall not
seek satisfaction of any such obligation from any other Fund, the
shareholders of any Fund, the Trustees, officers, employees or agents
of the Trust, or any of them.
14. The Trust and the Funds are hereby expressly put on notice of the
limitation of liability as set forth in the Declaration of Trust of
the Adviser and agree that the obligations assumed by the Adviser
pursuant to this Contract shall be limited in any case to the Adviser
and its assets and, except to the extent expressly permitted by the
Investment Company Act of 1940, as amended, the Trust and the Funds
shall not seek satisfaction of any such obligation from the
shareholders of the Adviser, the Trustees, officers, employees, or
agents of the Adviser, or any of them.
15. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
16. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
EXHIBIT A
to the
Investment Advisory Contract
MONEY MARKET OBLIGATIONS TRUST II
MUNICIPAL OBLIGATIONS FUND
For all services rendered by Adviser hereunder, the above-named Fund
of the Money Market Obligations Trust II shall pay to Adviser and Adviser
agrees to accept as full compensation for all services rendered hereunder,
an annual investment advisory fee equal to .20 of 1% of the average daily
net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .20 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: FEDERATED MANAGEMENT
/s/ Christine Ita McGonigle By:/s/ Stephen A.
Keen
Assistant Secretary Vice President
Attest: MONEY MARKET OBLIGATIONS TRUST II
/s/ John W. McGonigle By:/s/ Richard B. Fisher
Secretary Vice President
EXHIBIT B
to the
Investment Advisory Contract
MONEY MARKET OBLIGATIONS TRUST II
PRIME CASH OBLIGATIONS FUND
For all services rendered by Adviser hereunder, the above-named Fund
of the Money Market Obligations Trust II shall pay to Adviser and Adviser
agrees to accept as full compensation for all services rendered hereunder,
an annual investment advisory fee equal to .20 of 1% of the average daily
net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .20 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: FEDERATED MANAGEMENT
/s/ Christine Ita McGonigle By:/s/ Stephen A.
Keen
Assistant Secretary Vice President
Attest: MONEY MARKET OBLIGATIONS TRUST II
/s/ John W. McGonigle By:/s/ Richard B. Fisher
Secretary Vice President
EXHIBIT C
to the
Investment Advisory Contract
MONEY MARKET OBLIGATIONS TRUST II
PRIME VALUE OBLIGATIONS FUND
For all services rendered by Adviser hereunder, the above-named Fund
of the Money Market Obligations Trust II shall pay to Adviser and Adviser
agrees to accept as full compensation for all services rendered hereunder,
an annual investment advisory fee equal to .20 of 1% of the average daily
net assets of the Fund.
The portion of the fee based upon the average daily net assets of the
Fund shall be accrued daily at the rate of 1/365th of .20 of 1% applied to
the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: FEDERATED MANAGEMENT
/s/ Christine Ita McGonigle By:/s/ Stephen A.
Keen
Assistant Secretary Vice President
Attest: MONEY MARKET OBLIGATIONS TRUST II
/s/ John W. McGonigle By:/s/ Richard B. Fisher
Secretary Vice President
Exhibit 6(a)
Money Market Obligations Trust II
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 15th day of November, 1996, by and between Money
Market Obligations Trust II (the "Trust"), a Massachusetts business trust,
and FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints FSC as its agent to sell and distribute
shares of the Trust which may be offered in one or more series (the
"Funds") consisting of one or more classes (the "Classes") of shares
(the "Shares"), as described and set forth on one or more exhibits to
this Agreement, at the current offering price thereof as described and
set forth in the current Prospectuses of the Trust FSC hereby accepts
such appointment and agrees to provide such other services for the
Trust, if any, and accept such compensation from the Trust, if any, as
set forth in the applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever
in the judgment of the Trust it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Trust to give
any information or to make any representation relative to any Shares
other than those contained in the Registration Statement,
Prospectuses, or Statements of Additional Information ("SAIs") filed
with the Securities and Exchange Commission, as the same may be
amended from time to time, or in any supplemental information to said
Prospectuses or SAIs approved by the Trust. FSC agrees that any other
information or representations other than those specified above which
it or any dealer or other person who purchases Shares through FSC may
make in connection with the offer or sale of Shares, shall be made
entirely without liability on the part of the Trust. No person or
dealer, other than FSC, is authorized to act as agent for the Trust
for any purpose. FSC agrees that in offering or selling Shares as
agent of the Trust, it will, in all respects, duly conform to all
applicable state and federal laws and the rules and regulations of the
National Association of Securities Dealers, Inc., including its Rules
of Fair Practice. FSC will submit to the Trust copies of all sales
literature before using the same and will not use such sales
literature if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the date
of execution of the applicable exhibit and shall continue in effect
with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial
term of this Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such continuance is
approved at least annually by the Trustees of the Trust including a
majority of the members of the Board of Trustees of the Trust who are
not interested persons of the Trust and have no direct or indirect
financial interest in the operation of any Distribution Plan relating
to the Trust or in any related documents to such Plan ("Disinterested
Trustees") cast in person at a meeting called for that purpose. If a
Class is added after the first annual approval by the Trustees as
described above, this Agreement will be effective as to that Class
upon execution of the applicable exhibit and will continue in effect
until the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as
described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of
a majority of the Disinterested Trustees or by a majority of the
outstanding voting securities of the particular Fund or Class on not
more than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a
particular Fund or Class by FSC on sixty (60) days' written notice to
the Trust.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the
Investment Company Act of 1940, as amended, provided, however, that
FSC may employ such other person, persons, corporation or corporations
as it shall determine in order to assist it in carrying out its duties
under this Agreement.
7. FSC shall not be liable to the Trust 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 by this
Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is
approved by the Trustees of the Trust including a majority of the
Disinterested Trustees of the Trust cast in person at a meeting called
for that purpose.
9. This Agreement shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless FSC and each person, if any, who controls
FSC within the meaning of Section 15 of the Securities Act of 1933 and
Section 20 of the Securities Act of 1934, as amended, against any and
all loss, liability, claim, damage and expense whatsoever (including
but not limited to any and all expenses whatsoever reasonably incurred
in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) arising out of or
based upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any
Prospectuses or SAIs (as from time to time amended and supplemented)
or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements
therein not misleading, unless such statement or omission was made in
reliance upon and in conformity with written information furnished to
the Trust about FSC by or on behalf of FSC expressly for use in the
Registration Statement, any Prospectuses and SAIs or any amendment or
supplement thereof.
If any action is brought against FSC or any controlling person thereof
with respect to which indemnity may be sought against the Trust
pursuant to the foregoing paragraph, FSC shall promptly notify the
Trust in writing of the institution of such action and the Trust shall
assume the defense of such action, including the employment of counsel
selected by the Trust and payment of expenses. FSC or any such
controlling person thereof shall have the right to employ separate
counsel in any such case, but the fees and expenses of such counsel
shall be at the expense of FSC or such controlling person unless the
employment of such counsel shall have been authorized in writing by
the Trust in connection with the defense of such action or the Trust
shall not have employed counsel to have charge of the defense of such
action, in any of which events such fees and expenses shall be borne
by the Trust. Anything in this paragraph to the contrary
notwithstanding, the Trust shall not be liable for any settlement of
any such claim of action effected without its written consent. The
Trust agrees promptly to notify FSC of the commencement of any
litigation or proceedings against the Trust or any of its officers or
Trustees or controlling persons in connection with the issue and sale
of Shares or in connection with the Registration Statement,
Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Trust within
the meaning of Section 15 of the Securities Act of 1933, but only with
respect to statements or omissions, if any, made in the Registration
Statement or any Prospectus, SAI, or any amendment or supplement
thereof in reliance upon, and in conformity with, information
furnished to the Trust about FSC by or on behalf of FSC expressly for
use in the Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof. In case any action shall be brought
against the Trust or any other person so indemnified based on the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof, and with respect to which indemnity may be sought
against FSC, FSC shall have the rights and duties given to the Trust,
and the Trust and each other person so indemnified shall have the
rights and duties given to FSC by the provisions of subsection (a)
above.
(c) Nothing herein contained shall be deemed to protect any person against
liability to the Trust or its shareholders to which such person would
otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of the duties of such person or by
reason of the reckless disregard by such person of the obligations and
duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940, as amended, for
Trustees, officers, FSC and controlling persons of the Trust by the
Trust pursuant to this Agreement, the Trust is aware of the position
of the Securities and Exchange Commission as set forth in the
Investment Company Act Release No. IC-11330. Therefore, the Trust
undertakes that in addition to complying with the applicable
provisions of this Agreement, in the absence of a final decision on
the merits by a court or other body before which the proceeding was
brought, that an indemnification payment will not be made unless in
the absence of such a decision, a reasonable determination based upon
factual review has been made (i) by a majority vote of a quorum of
non-party Disinterested Trustees, or (ii) by independent legal counsel
in a written opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence or reckless disregard
of duties. The Trust further undertakes that advancement of expenses
incurred in the defense of a proceeding (upon undertaking for
repayment unless it is ultimately determined that indemnification is
appropriate) against an officer, Trustees, FSC or controlling person
of the Trust will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides security for
his undertaking; (ii) the Trust is insured against losses arising by
reason of any lawful advances; or (iii) a majority of a quorum of non-
party Disinterested Trustees or independent legal counsel in a written
opinion makes a factual determination that there is reason to believe
the indemnitee will be entitled to indemnification.
11. FSC is hereby expressly put on notice of the limitation of liability
as set forth in the Declaration of Trust and agrees that the
obligations assumed by the Trust pursuant to this Agreement shall be
limited in any case to the Trust and its assets and FSC shall not seek
satisfaction of any such obligation from the shareholders of the
Trust, the Trustees, officers, employees or agents of the Trust, or
any of them.
12. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class
of shares may be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.
Exhibit A
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
MUNICIPAL OBLIGATIONS FUND
INSTITUTIONAL CAPITAL SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Capital Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
Exhibit B
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
MUNICIPAL OBLIGATIONS FUND
INSTITUTIONAL SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
Exhibit C
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
MUNICIPAL OBLIGATIONS FUND
INSTITUTIONAL SERVICE SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Service Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
Exhibit D
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
PRIME CASH OBLIGATIONS FUND
INSTITUTIONAL CAPITAL SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Capital Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
Exhibit E
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
PRIME CASH OBLIGATIONS FUND
INSTITUTIONAL SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
Exhibit F
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
PRIME CASH OBLIGATIONS FUND
INSTITUTIONAL SERVICE SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Service Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
Exhibit G
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
PRIME VALUE OBLIGATIONS FUND
INSTITUTIONAL CAPITAL SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Capital Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
Exhibit H
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
PRIME VALUE OBLIGATIONS FUND
INSTITUTIONAL SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
Exhibit I
to the
Distributor's Contract
MONEY MARKET OBLIGATIONS TRUST II
PRIME VALUE OBLIGATIONS FUND
INSTITUTIONAL SERVICE SHARES
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 15, 1996 between Money Market
Obligations Trust II and Federated Securities Corp., Money Market
Obligations Trust II executes and delivers this Exhibit on behalf of
Municipal Obligations Fund, and with respect to the Institutional
Service Shares thereof, first set forth in this Exhibit.
Witness the due execution hereof this 15th day of November, 1996.
ATTEST: Money Market Obligations Trust II
/s/ John W. McGonigle By:/s/ J Christopher Donahue
Secretary President
ATTEST: FEDERATED SECURITIES CORP.
/s/ Leslie K. Platt By:/s/ Byron F. Bowman
Assistant Secretary Vice President
EXHIBIT 19
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of MONEY MARKET OBLIGATIONS
TRUST II and the Deputy General Counsel of Federated Investors, and each of
them, their true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/John F. Donahue Chairman and TrusteeJanuary 10, 1997
John F. Donahue (Chief Executive Officer)
/s/J. Christopher Donahue President and TrusteeJanuary 10, 1997
J. Christopher Donahue
/s/John W. McGonigle Treasurer, ExecutiveJanuary 10, 1997
John W. McGonigle Vice President and
Secretary (Principal
Financial and
Accounting Officer)
/s/Thomas G. Bigley Trustee January 10, 1997
Thomas G. Bigley
/s/John T. Conroy, Jr. Trustee January 10, 1997
John T. Conroy, Jr.
SIGNATURES TITLE DATE
/s/William J. Copeland Trustee January 10, 1997
William J. Copeland
/s/James E. Dowd Trustee January 10, 1997
James E. Dowd
/s/Lawrence D. Ellis, M.D. Trustee January 10, 1997
Lawrence D. Ellis, M.D.
/s/Edward L. Flaherty, Jr. Trustee January 10, 1997
Edward L. Flaherty, Jr.
/s/Peter E. Madden Trustee January 10, 1997
Peter E. Madden
/s/Gregor F. Meyer Trustee January 10, 1997
Gregor F. Meyer
/s/John E. Murray, Jr. Trustee January 10, 1997
John E. Murray, Jr.
/s/Wesley W. Posvar Trustee January 10, 1997
Wesley W. Posvar
/s/Marjorie P. Smuts Trustee January 10, 1997
Marjorie P. Smuts
/s/ Marie M. Hamm
Sworn to and subscribed before me this 10th day of January, 1997
