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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
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Investment Risks 6
Investment Limitations 6
FUND INFORMATION 7
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Management of the Fund 7
Distribution of Institutional Service Shares 8
Administration of the Fund 8
NET ASSET VALUE 9
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HOW TO PURCHASE SHARES 9
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HOW TO REDEEM SHARES 10
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ACCOUNT AND SHARE INFORMATION 11
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TAX INFORMATION 12
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Federal Income Tax 12
State and Local Taxes 12
OTHER CLASSES OF SHARES 12
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PERFORMANCE INFORMATION 13
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LAST MEETING OF SHAREHOLDERS 14
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FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 15
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FINANCIAL HIGHLIGHTS--
INSTITUTIONAL CAPITAL SHARES 16
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FINANCIAL STATEMENTS 17
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REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 31
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ADDRESSES 32
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SUMMARY OF FUND EXPENSES
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INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)........ None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)................................................ None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable)................................................ None
Redemption Fee (as a percentage of amount redeemed, if applicable)................... None
Exchange Fee......................................................................... None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)..................................................... 0.05%
12b-1 Fee............................................................................ None
Total Other Expenses................................................................. 0.38%
Shareholder Services Fee................................................... 0.25%
Total Operating Expenses(2).......................................................... 0.43%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary
waiver of a portion of the management fee. The adviser can terminate
this voluntary waiver at any time at its sole discretion. The maximum
management fee is 0.20%.
(2) The total operating expenses in the table above are based on
expenses expected during the fiscal year ending January 31, 1998. The
total Institutional Service Shares operating expenses were 0.41% for
fiscal year ended January 31, 1997 and would have been 0.57% absent
the voluntary waiver of a portion of the management fee.
The purpose of this table is to assist an investor in understanding
the various costs and expenses that a shareholder of Institutional
Service Shares of the Fund will bear, either directly or indirectly.
For more complete descriptions of the various costs and expenses, see
"Fund Information." Wire-transferred redemptions of less than $5,000
may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- -------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period............. $4 $14 $24 $ 54
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
PRIME VALUE OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent
Auditors on page 31.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
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1997 1996 1995 1994(a)
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<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
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INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.05 0.06 0.04 0.01
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LESS DISTRIBUTIONS
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Distributions from net investment income (0.05) (0.06) (0.04) (0.01)
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NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------- ------ ------ ------ -------
TOTAL RETURN (B) 5.15% 5.84% 4.26% 1.26%
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RATIOS TO AVERAGE NET ASSETS
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Expenses 0.41% 0.42% 0.34% 0.32% *
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Net investment income 5.05% 5.68% 3.95% 2.98% *
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Expense waiver/reimbursement (c) 0.16% 0.08% 0.16% 0.29% *
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SUPPLEMENTAL DATA
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Net assets, end of period (000 omitted) $18,415 $20,372 $21,739 $17,504
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</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 1, 1993 (date of
initial public offering) to January 31, 1994.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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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
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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:
- domestic issues of corporate debt obligations, including variable rate
demand notes;
- commercial paper (including Canadian Commercial Paper and Europaper);
- certificates of deposit, demand and time deposits, bankers'
acceptances and other instruments of domestic and foreign banks
and other deposit institutions ("Bank Instruments");
- short-term credit facilities;
- asset-backed securities;
- obligations issued or guaranteed as to payment of principal and interest
by the U.S. government or one of its agencies or instrumentalities;
- other money market instruments; and
- obligations 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.
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
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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 $110 billion invested across over 300 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:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
- ------------ ------------------------------------
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at
least $125,000 per portfolio and $30,000 per each additional class of
shares. Federated Services Company may choose voluntarily to waive a
portion of its fee.
NET ASSET VALUE
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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
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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
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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. 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 10, 1997, Hare & Co., New York, organized in the state of
New York owned 56.48% and Benchmark Cable Acquis Fund VII, Palm Coast,
organized in the state of Florida owned 32.26% 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.
LAST MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Prime Value Money Market Fund, a portfolio of
Lehman Brothers Institutional Funds Group Trust was held on November
13, 1996. On October 11, 1996, the record date for shareholders voting
at the meeting, there were 642,034,343 total outstanding shares. The
following items were considered by shareholders and the results of
their voting were as follows:
<TABLE>
<CAPTION>
WITHHELD
AGENDA ITEM FOR AGAINST ABSTAIN AUTHORITY TO VOTE
- ------------------------------- --------------- -------------- --------- -----------------
<S> <C> <C> <C> <C>
1. Approval of the Investment
Advisory Agreement between
Federated Management and the
Trust with respect to the Fund 387,845,946 18,056,722 -0- -0-
2. Election of Trustees
John F. Donahue 402,628,122 -0- -0- 3,274,546
Thomas G. Bigley 402,628,122 -0- -0- 3,274,546
John T. Conroy, Jr. 402,628,122 -0- -0- 3,274,546
William J. Copeland 402,628,122 -0- -0- 3,274,546
J. Christopher Donahue 402,628,122 -0- -0- 3,274,546
James E. Dowd 402,628,122 -0- -0- 3,274,546
Lawrence D. Ellis, M.D. 402,628,122 -0- -0- 3,274,546
Edward L. Flaherty, Jr. 402,628,122 -0- -0- 3,274,546
Peter E. Madden 402,628,122 -0- -0- 3,274,546
Gregor F. Meyer 402,628,122 -0- -0- 3,274,546
John E. Murray, Jr. 402,628,122 -0- -0- 3,274,546
Wesley W. Posvar 402,628,122 -0- -0- 3,274,546
Marjorie P. Smuts 402,628,122 -0- -0- 3,274,546
3. Approval of a change to a
fundamental investment
limitation concerning
industry concentration of
investment 402,609,351 3,285,526 7,790 -0-
</TABLE>
PRIME VALUE OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------------------
1997 1996 1995 1994(a)
------ ------ ------ -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------
Net investment income 0.05 0.06 0.04 0.03
- -----------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------
Distributions from net investment income (0.05) (0.06) (0.04) (0.03)
- ----------------------------------------------- ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------- ------ ------ ------ -------
TOTAL RETURN (B) 5.41% 6.10% 4.51% 3.21%
- -----------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------
Expenses 0.16% 0.17% 0.09% 0.07% *
- -----------------------------------------------
Net investment income 5.29% 5.93% 4.20% 3.23% *
- -----------------------------------------------
Expense waiver/reimbursement (c) 0.15% 0.08% 0.16% 0.29% *
- -----------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------
Net assets, end of period (000 omitted) $387,994 $2,754,390 $1,470,317 $3,981,184
- -----------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from February 8, 1993 (date of
initial public investment) to January 31, 1994.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PRIME VALUE OBLIGATIONS FUND
FINANCIAL HIGHLIGHTS--INSTITUTIONAL CAPITAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
JANUARY 31,
1997(a)
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00
- -------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------
Net investment income 0.05
- -------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------
Distributions from net investment income (0.05)
- ------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00
- ------------------------------------------------------------------------- -------
TOTAL RETURN (B) 5.26%
- -------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------
Expenses 0.28%
- -------------------------------------------------------------------------
Net investment income 5.17%
- -------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.31%
- -------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------
Net assets, end of period (000 omitted) $20,006
- -------------------------------------------------------------------------
</TABLE>
(a) Reflects operations for the period from February 1, 1996 (date of
initial public offering) to January 31, 1997.
(b) Based on net asset value, which does not reflect the sales charge
or contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense
and net investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
PRIME VALUE OBLIGATIONS FUND
PORTFOLIO OF INVESTMENTS
JANUARY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
ASSET-BACKED SECURITIES--0.5%
- ----------------------------------------------------------------------------------
FINANCE--AUTOMOTIVE--0.5%
--------------------------------------------------------------
$ 2,232,251 Nationsbank Auto Owner Trust 1996-A, 5.776%, 8/15/1997 $ 2,233,270
-------------------------------------------------------------- ------------
CERTIFICATES OF DEPOSIT--7.0%
- ----------------------------------------------------------------------------------
BANKING--7.0%
--------------------------------------------------------------
5,000,000 Bank of Scotland, Edinburgh, 5.480%, 6/13/1997 5,000,178
--------------------------------------------------------------
5,000,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska
Handelsbanken, Stockholm), 5.430%, 5/5/1997 5,000,222
--------------------------------------------------------------
20,000,000 Toronto-Dominion Bank, 5.467%, 3/27/1997 20,003,020
-------------------------------------------------------------- ------------
TOTAL CERTIFICATES OF DEPOSIT 30,003,420
-------------------------------------------------------------- ------------
CORPORATE NOTES--5.0%
- ----------------------------------------------------------------------------------
BANKING--0.4%
--------------------------------------------------------------
2,000,000 (b) SALTS III Cayman Island Corp., (Bankers Trust International,
PLC Swap Agreement), 5.788%, 7/23/1997 2,000,000
-------------------------------------------------------------- ------------
BROKERAGE--1.2%
--------------------------------------------------------------
5,000,000 (b) Goldman Sachs Group, LP, 5.563%, 4/28/1997 5,000,000
-------------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--3.4%
--------------------------------------------------------------
10,000,000 Ford Credit Auto Lease Trust 1996-1, 5.451%, 11/15/1997 9,999,213
--------------------------------------------------------------
4,405,129 Olympic Automobile Receivables Trust 1996-D, 5.430%,
12/15/1997 4,405,129
-------------------------------------------------------------- ------------
Total 14,404,342
-------------------------------------------------------------- ------------
TOTAL CORPORATE NOTES 21,404,342
-------------------------------------------------------------- ------------
(A) COMMERCIAL PAPER--54.5%
- ----------------------------------------------------------------------------------
BANKING--11.0%
--------------------------------------------------------------
2,000,000 Bank of Nova Scotia, Toronto, 5.439%, 3/13/1997 1,988,089
--------------------------------------------------------------
5,000,000 Commonwealth Bank of Australia, Sydney, 5.520%-5.540%,
7/21/1997-7/24/1997 4,872,030
--------------------------------------------------------------
30,000,000 Den Danske Bank A/S, 5.398%, 2/11/1997 29,955,750
--------------------------------------------------------------
</TABLE>
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A) COMMERCIAL PAPER--CONTINUED
- ----------------------------------------------------------------------------------
BANKING--CONTINUED
--------------------------------------------------------------
$ 5,000,000 Deutsche Bank Financial, Inc., (Guaranteed by Deutsche Bank,
AG), 5.404%, 3/12/1997 $ 4,971,129
--------------------------------------------------------------
5,000,000 Toronto Dominion Holdings (USA), Inc., (Guaranteed by Toronto-
Dominion Bank), 5.457%, 6/13/1997 4,902,650
-------------------------------------------------------------- ------------
Total 46,689,648
-------------------------------------------------------------- ------------
BROKERAGE--1.2%
--------------------------------------------------------------
5,000,000 Merrill Lynch & Co., Inc., 5.382%, 3/5/1997 4,976,400
-------------------------------------------------------------- ------------
CHEMICALS--1.2%
--------------------------------------------------------------
5,000,000 Du Pont (E.I.) de Nemours & Co., 5.446%, 2/19/1997 4,986,625
-------------------------------------------------------------- ------------
ELECTRICAL EQUIPMENT--5.1%
--------------------------------------------------------------
5,000,000 Whirlpool Corp., 5.474%, 3/11/1997 4,971,500
--------------------------------------------------------------
17,000,000 Whirlpool Financial Corp., (Whirlpool Corp. Support
Agreement), 5.474%-5.476%, 2/18/1997-2/25/1997 16,946,900
-------------------------------------------------------------- ------------
Total 21,918,400
-------------------------------------------------------------- ------------
FINANCE--AUTOMOTIVE--8.8%
--------------------------------------------------------------
15,000,000 Ford Motor Credit Corp., 5.393%, 2/4/1997 14,993,363
--------------------------------------------------------------
23,000,000 General Motors Acceptance Corp., 5.453%-5.569%,
4/7/1997-5/23/1997 22,722,695
-------------------------------------------------------------- ------------
Total 37,716,058
-------------------------------------------------------------- ------------
FINANCE--COMMERCIAL--21.4%
--------------------------------------------------------------
23,000,000 Asset Securitization Cooperative Corp., 5.359%-5.418%,
2/14/1997-3/18/1997 22,904,037
--------------------------------------------------------------
12,000,000 Beta Finance, Inc., 5.373%-5.444%, 2/19/1997-5/19/1997 11,913,562
--------------------------------------------------------------
5,000,000 CIESCO, Inc., 5.575%, 4/1/1997 4,955,422
--------------------------------------------------------------
10,000,000 CIT Group Holdings, Inc., 5.381%, 3/4/1997 9,954,275
--------------------------------------------------------------
10,000,000 Falcon Asset Securitization Corp., 5.373%, 2/19/1997 9,973,500
--------------------------------------------------------------
10,000,000 General Electric Capital Corp., 5.432%-5.442%,
5/30/1997-6/6/1997 9,821,289
--------------------------------------------------------------
15,000,000 Greenwich Funding Corp., 5.378%-5.446%, 2/26/1997-6/12/1997 14,857,674
--------------------------------------------------------------
</TABLE>
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
(A) COMMERCIAL PAPER--CONTINUED
- ----------------------------------------------------------------------------------
FINANCE--COMMERCIAL--CONTINUED
--------------------------------------------------------------
$ 7,000,000 PREFCO-Preferred Receivables Funding Co., 5.390%-5.412%,
2/28/1997-4/17/1997 $ 6,950,665
-------------------------------------------------------------- ------------
Total 91,330,424
-------------------------------------------------------------- ------------
FINANCE--RETAIL--3.5%
--------------------------------------------------------------
5,000,000 Household Finance Corp., 5.412%, 3/11/1997 4,971,817
--------------------------------------------------------------
10,000,000 McKenna Triangle National Corp., 5.374%, 2/21/1997 9,970,556
-------------------------------------------------------------- ------------
Total 14,942,373
-------------------------------------------------------------- ------------
PHARMACEUTICALS AND HEALTH CARE--2.3%
--------------------------------------------------------------
10,000,000 Glaxo Wellcome PLC, 5.373%, 2/25/1997 9,964,667
-------------------------------------------------------------- ------------
TOTAL COMMERCIAL PAPER 232,524,595
-------------------------------------------------------------- ------------
(C) NOTES--VARIABLE--20.9%
- ----------------------------------------------------------------------------------
BANKING--14.8%
--------------------------------------------------------------
13,620,000 500 South Front St. L.P., Series A, (Huntington National Bank,
Columbus, OH LOC), 5.530%, 2/6/1997 13,620,000
--------------------------------------------------------------
1,780,000 Alabama State IDA, (Nichols Research Corp.), (SouthTrust Bank
of Alabama, Birmingham LOC), 5.580%, 2/28/1997 1,780,000
--------------------------------------------------------------
1,975,000 Athens-Clarke County, GA IDA, Barrett Project (Series 1995),
(Columbus Bank and Trust Co., GA LOC), 5.730%, 2/6/1997 1,975,000
--------------------------------------------------------------
3,400,000 Blackwell Investments, Inc., (Bank One, Louisiana, LOC),
5.580%, 2/6/1997 3,400,000
--------------------------------------------------------------
2,500,000 Carmel, IN, Telamon Corp Series A, (Huntington National Bank,
Columbus, OH LOC), 5.630%, 2/6/1997 2,500,000
--------------------------------------------------------------
1,100,000 Carmel, IN, Telamon Corp Series B, (Huntington National Bank,
Columbus, OH LOC), 5.630%, 2/6/1997 1,100,000
--------------------------------------------------------------
2,060,000 Congregate Care Corp., (Union Bank of California LOC), 5.688%,
2/5/1997 2,060,000
--------------------------------------------------------------
6,000,000 Dellridge Care Center Limited Partnership, Series 1997, (First
National Bank of Maryland, Baltimore LOC), 5.480%, 2/5/1997 6,000,000
--------------------------------------------------------------
</TABLE>
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
(C) NOTES--VARIABLE--CONTINUED
- ----------------------------------------------------------------------------------
BANKING--CONTINUED
--------------------------------------------------------------
$ 5,000,000 International Processing Corp, (Bank One, Kentucky, Louisville
LOC), 5.580%, 2/6/1997 $ 5,000,000
--------------------------------------------------------------
4,500,000 Melberger, Clifford K. and Ruth B., (PNC Bank, N.A. LOC),
5.492%, 2/3/1997 4,500,000
--------------------------------------------------------------
850,000 Pelham City, IDB, (Columbus Bank and Trust Co., GA LOC),
5.730%, 2/6/1997 850,000
--------------------------------------------------------------
1,315,000 Pelham City, IDB, (Columbus Bank and Trust Co., GA LOC),
5.730%, 2/6/1997 1,315,000
--------------------------------------------------------------
15,000,000 SMM Trust, Series 1996-U, (Morgan Guaranty Trust Co., New York
Swap Agreement), 5.425%, 2/20/1997 15,000,000
--------------------------------------------------------------
1,235,000 Southeast Regional Holdings, LLC, (Series 1995-A), (Columbus
Bank and Trust Co., GA LOC), 5.730%, 2/6/1997 1,235,000
--------------------------------------------------------------
1,650,000 Sylacuaga, AL IDB, Parker Fertilizer Project Series 1992,
(SouthTrust Bank of Alabama, Birmingham LOC), 5.580%, 2/4/1997 1,650,000
--------------------------------------------------------------
1,132,000 Westcourt, (Bank One, Texas N.A. LOC), 5.580%, 2/6/1997 1,132,000
-------------------------------------------------------------- ------------
Total 63,117,000
-------------------------------------------------------------- ------------
FINANCE--EQUIPMENT--1.2%
--------------------------------------------------------------
5,000,000 Comdisco, Inc., 144A Notes, 5.600%, 2/26/1997 5,000,000
--------------------------------------------------------------
INSURANCE--4.9%
--------------------------------------------------------------
21,000,000 General American Life Insurance Co., 5.638%, 2/21/1997 21,000,000
-------------------------------------------------------------- ------------
TOTAL NOTES--VARIABLE 89,117,000
-------------------------------------------------------------- ------------
SHORT-TERM MUNICIPAL--0.2%
- ----------------------------------------------------------------------------------
1,000,000 Colorado Health Facilities Authority, Series B, (Bank One,
Colorado LOC), 5.580%, 2/1/1997 1,000,000
-------------------------------------------------------------- ------------
(D) REPURCHASE AGREEMENTS--11.7%
- ----------------------------------------------------------------------------------
10,000,000 Bear, Stearns and Co., 5.580%, dated 1/31/1997, due 2/3/1997 10,000,000
--------------------------------------------------------------
4,800,000 Daiwa Securities America, Inc., 5.580%, dated 1/31/1997, due
2/3/1997 4,800,000
--------------------------------------------------------------
</TABLE>
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- -------------------------------------------------------------- ------------
<C> <C> <S> <C>
(D) REPURCHASE AGREEMENTS--CONTINUED
- ----------------------------------------------------------------------------------
$10,000,000 Fuji Government Securities, Inc., 5.590%, dated 1/31/1997, due
2/3/1997 $ 10,000,000
--------------------------------------------------------------
10,000,000 PaineWebber Group, Inc., 5.570%, dated 1/31/1997, due 2/3/1997 10,000,000
--------------------------------------------------------------
15,000,000 UBS Securities, Inc., 5.530%, dated 1/31/1997, due 2/3/1997 15,000,000
-------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 49,800,000
-------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $426,082,627
-------------------------------------------------------------- ------------
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase for
discount issues, or the coupon for interest bearing issues.
(b) Denotes a restricted security which is subject to restrictions on
resale under Federal Securities laws. At January 31, 1997, these
securities amounted to $7,000,000 which represents 1.6% of net
assets.
(c) Current rate and next reset date shown.
(d) The repurchase agreements are fully collateralized by U.S.
government and/or agency obligations based on market prices at the
date of the portfolio. The investments in the repurchase
agreements are through participation in joint accounts with other
Federated funds.
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($426,415,272) at January 31, 1997.
The following acronyms are used throughout this portfolio:
<TABLE>
<S> <C>
IDA -- Industrial Development Authority IDB -- Industrial Development
Bond LOC -- Letter of Credit LLC -- Limited Liability Corporation LP
- -- Limited Partnership PLC -- Public Limited Company </TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME VALUE OBLIGATIONS FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements $ 49,800,000
- -----------------------------------------------------------------
Investments in securities 376,282,627
- ----------------------------------------------------------------- ------------
Total investments in securities, at amortized cost and value $426,082,627
- --------------------------------------------------------------------------------
Cash 17,538,737
- --------------------------------------------------------------------------------
Income receivable 957,254
- --------------------------------------------------------------------------------
Receivable for shares sold 11,940,174
- -------------------------------------------------------------------------------- ------------
Total assets 456,518,792
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for shares redeemed 29,491,686
- -----------------------------------------------------------------
Income distribution payable 556,694
- -----------------------------------------------------------------
Accrued expenses 55,140
- ----------------------------------------------------------------- ------------
Total liabilities 30,103,520
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 426,415,272 shares outstanding $426,415,272
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
$387,994,460 / 387,994,460 shares outstanding $1.00
- -------------------------------------------------------------------------------- ------------
INSTITUTIONAL SERVICE SHARES:
$18,414,808 / 18,414,808 shares outstanding $1.00
- -------------------------------------------------------------------------------- ------------
INSTITUTIONAL CAPITAL SHARES:
$20,006,004 / 20,006,004 shares outstanding $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME VALUE OBLIGATIONS FUND
STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------
Interest $59,108,397
- ----------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee $ 2,168,544
- -------------------------------------------------------------------------
Administrative personnel and services fee 836,561
- -------------------------------------------------------------------------
Custodian fees 122,910
- -------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 170,442
- -------------------------------------------------------------------------
Directors'/Trustees' fees 23,877
- -------------------------------------------------------------------------
Auditing fees 12,574
- -------------------------------------------------------------------------
Legal fees 12,320
- -------------------------------------------------------------------------
Portfolio accounting fees 33,950
- -------------------------------------------------------------------------
Distribution services fee--Institutional Service Shares 40,369
- -------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 13,283
- -------------------------------------------------------------------------
Shareholder services fee--Institutional Capital Shares 137
- -------------------------------------------------------------------------
Printing and postage 9,030
- -------------------------------------------------------------------------
Miscellaneous 45,315
- ------------------------------------------------------------------------- -----------
Total expenses 3,489,312
- -------------------------------------------------------------------------
Waivers and reimbursements--
- -------------------------------------------------------------------------
Waiver of investment advisory fee $(899,781)
- -------------------------------------------------------------
Waiver of administrative personnel and services fee (684,170)
- -------------------------------------------------------------
Waiver of custodian fees (95,495)
- -------------------------------------------------------------
Waiver of shareholder services fee--Institutional Capital
Shares (82)
- ------------------------------------------------------------- ---------
Total waivers (1,679,528)
- ------------------------------------------------------------------------- -----------
Net expenses 1,809,784
- ---------------------------------------------------------------------------------------- -----------
Net investment income 57,298,613
- ---------------------------------------------------------------------------------------- -----------
Net realized loss on investments (1,090,952)
- ---------------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $56,207,661
- ---------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME VALUE OBLIGATIONS FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------------
OPERATIONS--
- ----------------------------------------------------------
Net investment income $ 57,298,613 $ 171,047,983
- ----------------------------------------------------------
Net realized gain (loss) on investments (1,090,952) 85,517
- ---------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from operations 56,207,661 171,133,500
- ---------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------------
Distributions from net investment income:
- ----------------------------------------------------------
Institutional Shares (56,210,350) (169,378,776)
- ----------------------------------------------------------
Institutional Service Shares (1,082,127) (1,669,207)
- ----------------------------------------------------------
Institutional Capital Shares (6,136) --
- ---------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from distributions to
shareholders (57,298,613) (171,047,983)
- ---------------------------------------------------------- ---------------- ----------------
CAPITAL CONTRIBUTION 1,330,378 --
- ---------------------------------------------------------- ---------------- ----------------
SHARE TRANSACTIONS--
- ----------------------------------------------------------
Proceeds from sale of shares 19,361,183,773 48,234,564,251
- ----------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 26,082,775 59,367,107
- ----------------------------------------------------------
Cost of shares redeemed (21,735,853,130) (47,011,310,081)
- ---------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from share
transactions (2,348,586,582) 1,282,621,277
- ---------------------------------------------------------- ---------------- ----------------
Change in net assets (2,348,347,156) 1,282,706,794
- ----------------------------------------------------------
NET ASSETS:
- ----------------------------------------------------------
Beginning of period 2,774,762,428 1,492,055,634
- ---------------------------------------------------------- ---------------- ----------------
End of period $ 426,415,272 $ 2,774,762,428
- ---------------------------------------------------------- ---------------- ----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
PRIME VALUE OBLIGATIONS FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Money Market Obligations Trust II (the "Trust"), (formerly Lehman
Brothers Institutional Funds Group Trust) is registered under the
Investment Company Act of 1940, as amended (the "Act"), as an
open-end, management investment company. The Trust consists of three
portfolios. The financial statements included herein are only those of
Prime Value Obligations Fund (the "Fund"), (formerly Prime Value Money
Market Fund). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and
a shareholder's interest is limited to the portfolio in which shares
are held.
The Fund offers three classes of shares: Institutional Shares
(formerly, Class A Shares), Institutional Service Shares (formerly,
Class B Shares) and Institutional Capital Shares (formerly, Class E
Shares).
As of November 15, 1996, the Fund's Class C Shares were no longer
operational.
The investment objective of the Fund is to provide a high level of
current income consistent with stability of principal and liquidity.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. These policies are in conformity with generally accepted
accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost
method to value its portfolio securities is in accordance with
Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require
the custodian bank to take possession, to have legally segregated
in the Federal Reserve Book Entry System, or to have segregated
within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally,
procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals
the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks
and other recognized financial institutions, such as
broker/dealers, which are deemed by the Fund's adviser to be
creditworthy pursuant to the guidelines and/or standards reviewed
or established by the Board of Trustees (the "Trustees"). Risks
may arise from the potential inability of counterparties to honor
the terms of the repurchase agreement. Accordingly, the Fund
could receive less than the repurchase price on the sale of
collateral securities.
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income
and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue
Code, as amended (the "Code"). Distributions to shareholders are
recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the
provisions of the Code applicable to regulated investment
companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for
federal tax are necessary.
RESTRICTED SECURITIES--Restricted securities are securities that
may only be resold upon registration under federal securities
laws or in transactions exempt from such registration. Many
restricted securities may be resold in the secondary market in
transactions exempt from registration. In some cases, the
restricted securities may be resold without registration upon
exercise of a demand feature. Such restricted securities may be
determined to be liquid under criteria established by the
Trustees. The Fund will not incur any registration costs upon
such resales. Restricted Securities are valued at amortized cost
in accordance with Rule 2a-7 under the Investment Company Act of
1940.
Additional information on each restricted security held at
January 31, 1997 is as follows:
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
SECURITY DATE COST
------------------------------------------------------------- ----------- -----------
<S> <C> <C>
SALTS III Cayman Island Corp. 1/21/97 $2,000,000
Goldman Sachs Group, LP 1/27/97 $5,000,000
</TABLE>
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may
engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains
security positions such that sufficient liquid assets will be
available to make payment for the securities purchased.
Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES--The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts of assets, liabilities, expenses and revenues reported in
the financial statements. Actual results could differ from those
estimated.
OTHER--Investment transactions are accounted for on the trade
date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest ($0.001
par value) for each class of shares.
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------
1997 1996
--------------- ---------------
INSTITUTIONAL SHARES
- ----------------------------------------------------------
<S> <C> <C>
Shares sold 19,036,179,355 47,981,427,671
- ----------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 26,074,950 59,366,207
- ----------------------------------------------------------
Shares redeemed (21,428,886,085) (46,756,804,775)
- ---------------------------------------------------------- --------------- ---------------
Net change resulting from Institutional Share
transactions (2,366,631,780) 1,283,989,103
- ---------------------------------------------------------- --------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
-----------------------------------
1997 1996
--------------- ---------------
INSTITUTIONAL SERVICE SHARES
- ----------------------------------------------------------
<S> <C> <C>
Shares sold 305,004,232 253,136,580
- ----------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 2,107 900
- ----------------------------------------------------------
Shares redeemed (306,966,945) (254,505,306)
- ---------------------------------------------------------- --------------- ---------------
Net change resulting from Institutional Service Share
transactions (1,960,606) (1,367,826)
- ---------------------------------------------------------- --------------- ---------------
</TABLE>
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------
1997 1996
----------- ----------
INSTITUTIONAL CAPITAL SHARES
- ------------------------------------------------------------------
<S> <C> <C>
Shares sold 20,000,186 --
- ------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 5,718 --
- ------------------------------------------------------------------
Shares redeemed -- --
- ------------------------------------------------------------------ ----------- ----------
Net change resulting from Institutional Capital Shares
transactions 20,005,904 --
- ------------------------------------------------------------------ ----------- ----------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------
1997(A) 1996
-------------- -------------
CLASS C SHARES
- -------------------------------------------------------------
<S> <C> <C>
Shares sold -- --
- -------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared -- --
- -------------------------------------------------------------
Shares redeemed (100) --
- ------------------------------------------------------------- -------------- -------------
Net change resulting from Class C Share transactions (100) --
- ------------------------------------------------------------- -------------- -------------
Net change resulting from Fund share transactions (2,348,586,582) 1,282,621,277
- ------------------------------------------------------------- -------------- -------------
</TABLE>
(a) As of November 15, 1996, the Fund's Class C Shares were no longer
operational.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment
adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.20% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive any portion of its
fee. The Adviser can modify or terminate this voluntary waiver at any
time at its sole discretion.
Federated Management became the Fund's investment adviser on November
15, 1996. Prior to November 15, 1996, Lehman Brothers Global Asset
Management (the "former Adviser") served as the Fund's investment
adviser.
For the period ended January 31, 1997 the advisers earned fees as
follows:
<TABLE>
<CAPTION>
AMOUNT OF AMOUNT OF
ADVISERS FEE EARNED FEE WAIVED
- ---------------------------- ----------- -----------
<S> <C> <C>
Federated Management $ 202,835 $ 166,441
Lehman Brothers Global Asset
Management $1,965,709 $ 733,340
</TABLE>
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
CAPITAL CONTRIBUTION--The former Adviser made a capital contribution
to the Fund, during the period ended November 15, 1996, of an amount
equal to the accumulated net realized loss on investments balance
carried by the Fund.
These transactions resulted in a permanent book and tax difference. As
such, the paid-in-capital and accumulated net realized gain/loss
accounts have been adjusted accordingly. This adjustment did not
affect net investment income, net realized gains/losses, or net
assets.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with
administrative personnel and services. The fee paid to FServ is based
on the level of average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares. FServ became the Fund's
administrator on November 15, 1996. Prior to November 15, 1996, First
Data Investors Services Group ("FDISG") served as the Fund's
administrator. For the period ended January 31, 1997 the
administrators earned fees as follows:
<TABLE>
<CAPTION>
AMOUNT OF FEE AMOUNT OF FEE
ADMINISTRATORS EARNED WAIVED
- ---------------- -------------- --------------
<S> <C> <C>
FServ $ 78,894 $ 0
FDISG $757,667 $684,170
</TABLE>
DISTRIBUTION SERVICES FEE--Pursuant to Rule 12b-1 under the Act, as
amended, the Fund, had adopted Distribution Agreements (the "Plans")
to compensate certain institutional investors who provided services to
the Fund's shareholders. All such Plans were terminated effective
November 15, 1996. Prior to November 15, 1996, Lehman Brothers Inc.,
acted as the Fund's distributor.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will
pay FSS up to 0.25% of average daily net assets of the Fund shares for
the period. There is no present intention of paying or accruing the
Shareholder Services Fee for the Institutional Shares. The fee paid to
FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver
at any time at its sole discretion. FSS became the Fund's shareholder
servicing agent on November 15, 1996.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ,
through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders. FSSC became the Fund's
transfer and dividend disbursing agent on November 15, 1996. Prior to
November 15, 1996, FDISG served as the Fund's transfer and dividend
disbursing agent.
PRIME VALUE OBLIGATIONS FUND
- --------------------------------------------------------------------------------
For the period ended January 31, 1997 the transfer and dividend
disbursing agents earned fees as follows:
<TABLE>
<CAPTION>
TRANSFER AND DIVIDEND
DISBURSING AGENTS AMOUNT OF FEE EARNED
- ------------------------ ---------------------
<S> <C>
FSSC $ 7,436
FDISG $ 163,006
</TABLE>
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket
expenses. FServ became the Fund's portfolio accountant on November 15,
1996.
GENERAL--Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of
PRIME VALUE OBLIGATIONS FUND:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Prime Value Obligations
Fund, formerly Prime Value Money Market Fund (a portfolio of Money
Market Obligations Trust II, formerly a Portfolio of Lehman Brothers
Institutional Funds Group Trust) as of January 31, 1997, and the
related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the periods indicated
therein. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of January 31, 1997, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Prime Value Obligations Fund at January 31,
1997, and the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then
ended, and financial highlights for each of the periods indicated
therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
March 14, 1997
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Prime Value Obligations Fund
Institutional Service Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Advisor
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
LOGO
Cusip 608912804
G01881-04-SS (3/97)
