PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Municipal
Obligations Fund. The report covers the six-month period from February 1, 1998
to July 31, 1998. It begins with the fund's investment review, followed by a
complete list of holdings and the financial statements.
The fund continues to give you a relatively stable way to keep your cash earning
daily tax-free income,* while giving you easy access to your money.** The fund's
assets are invested in a highly diversified portfolio of short-term securities
issued by municipalities across the United States.
During the six-month reporting period, the fund paid tax-free dividends totaling
$0.02 per share to shareholders of Institutional Shares, Institutional Service
Shares, and Institutional Capital Shares. Assets in the fund reached $343
million at the period's end.
Thank you for joining other tax-sensitive shareholders who are participating
in the daily, tax-free earning power of Municipal Obligations Fund. We
welcome your questions and comments.
Sincerely,
[Graphic]
J. Christopher Donahue
President
September 15, 1998
* Income may be subject to the federal alternative minimum tax.
** Although money market funds seek to maintain a stable net asset value of
$1.00 per share, there is no assurance that they will be able to do so. An
investment in the fund is neither insured nor guaranteed by the U.S.
government.
INVESTMENT REVIEW
Municipal Obligations Fund invests in high quality, short-term tax-exempt
securities. Typical investments include, but are not limited to tax-exempt
commercial paper, variable rate demand notes ("VRDNs"), and fixed-rate notes and
bonds. For the six-month reporting period ended July 31, 1998, the net assets of
the fund increased from $277 million to $343 million, while the 7- day net yield
of the fund's Institutional Shares increased from 3.54% to 3.63%. As of July 31,
1998, the 7-day net yields for Institutional Service Shares and Institutional
Capital Shares were 3.38% and 3.51%, respectively.* The dollar-weighted
effective average maturity of the fund on July 31, 1998, was 39 days.
Interest rates in the tax-exempt money markets over the period were influenced
mostly by supply and demand factors, as the Federal Reserve Board (the "Fed")
kept the federal funds target rate unchanged at 5.50% over the reporting period.
Demand factors included individual and corporate tax payments in March, April
and June, as well as bond maturity and coupon interest inflows in early June and
July. Supply remained rather restricted over the reporting period, as new
issuance of VRDNs dropped 11% in the first half of 1998, compared to a year
earlier.
Yields on VRDNs, which comprise 50% or more of the fund's assets started
February yielding 3.50%, but fell to a period low of 2.80% by mid-February as
strong cash inflows and little supply drove yields downward. Yields traded in a
slightly expensive range of 3.00%-3.50% in March but spiked higher in April to
4.50% as tax related money fund redemptions forced remarketing agents to cheapen
yield levels to encourage increased demand from investors. In May, June and
July, yields trended steadily lower and moved back to more normal levels
relative to taxable interest rates, ending the reporting period at 3.50%.
On the economic and interest rate front, the Federal Open Market Committee
("FOMC") continues to adhere to a tightening bias toward short-term interest
rates. With a thriving U.S. domestic economy, the lack of any inflation pressure
allows the Fed to pursue a "wait and see" attitude toward interest rates,
leaving them unchanged. However, U.S. economic tensions--tight labor markets and
strong demand--are still feeding the FOMC's inflation concerns. However
continued turbulence in the Asian, Latin American, and Russian markets, as well
as the U.S. market will likely keep them on hold for the near term future as the
domestic economy is expected to slow.
Going forward, the average maturity of the fund will continue to be managed in
accordance with our expectations for stable monetary policy over the near term.
We will, of course, continue to watch with great interest, market developments,
in order to best serve our municipal clients.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary. Yields quoted for money market funds most
closely reflect the fund's current earnings.
PORTFOLIO OF INVESTMENTS
MUNICIPAL OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--99.7%
ALABAMA--2.8%
$ 3,500,000 Alabama State IDA, Revenue Bonds Weekly VRDNs (Southern Bag Corporation,
Ltd.)/(SouthTrust Bank of Alabama, Birmingham LOC) $ 3,500,000
6,000,000 Birmingham, AL IDA, (Series 1997) Weekly VRDNs (Millcraft, AL Inc.)/(Regions Bank,
Alabama LOC) 6,000,000
Total 9,500,000
ARIZONA--1.2%
3,945,000 (b) Pima County, AZ IDA, Single Family Mortgage (PA-159) Weekly VRDNs (GNMA COL)/
(Merrill Lynch Capital Services, Inc. LIQ) 3,945,000
ARKANSAS--2.3%
1,000,000 Arkadelphia, AR, Industrial Development Revenue Bonds (Series 1996) Weekly VRDNs
(Siplast, Inc.)/(Den Danske Bank A/S LOC) 1,000,000
2,000,000 Hope, AR, Solid Waste Disposal Revenue Bonds (Series 1994), 4.00% CP (Temple-Inland
Forest Products Corp.)/(Temple-Inland, Inc. GTD), Mandatory Tender 9/1/1998 2,000,000
5,000,000 Springdale, AR, IDA Weekly VRDNs (Newlywed Food)/(Mellon Bank N.A., Pittsburgh LOC) 5,000,000
Total 8,000,000
COLORADO--2.0%
7,000,000 Denver (City & County), CO, Airport System Subordinate Revenue Bonds (Series 1997A),
3.80% CP (Bayerische Landesbank Girozentrale LOC), Mandatory Tender 8/14/1998 7,000,000
CONNECTICUT--0.7%
2,450,000 Bridgeport, CT, UT GO, 4.25% BANs, 3/18/1999 2,456,732
DELAWARE--1.5%
5,000,000 Delaware EDA, (Series 1997C) Weekly VRDNs (Star Enterprise)/(Canadian Imperial Bank of
Commerce, Toronto LOC) 5,000,000
DISTRICT OF COLUMBIA--0.7%
2,500,000 District of Columbia Housing Finance Agency, (Series 1997C), 4.05% TOBs (AIG Funding,
Inc.), Mandatory Tender 9/1/1998 2,500,000
GEORGIA--11.3%
1,100,000 Bowdon, GA Development Authority Weekly VRDNs (Trintex Corp.)/(First Union National
Bank, Charlotte, NC LOC) 1,100,000
2,215,000 Burke County, GA Development Authority, (Series 1996), 3.80% TOBs (Oglethorpe Power
Corp.), Optional Tender 11/2/1998 2,215,000
</TABLE>
MUNICIPAL OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
GEORGIA--CONTINUED
$ 4,305,000 Burke County, GA Development Authority, (Series 1997C), 3.80% TOBs (Oglethorpe Power
Corp.), Optional Tender 11/28/1998 $ 4,305,000
5,585,000 Douglas County, GA Development Authority, (Series 1998A) Weekly VRDNs (Heritage
Bag)/(Wachovia Bank of NC, N.A,., Winston-Salem LOC) 5,585,000
6,000,000 Franklin County, GA Industrial Building Authority, (Series 1995) Weekly VRDNs
(Bosal Industries, Inc.)/(ABN AMRO Bank N.V., Amsterdam LOC) 6,000,000
3,630,000 LaGrange, GA Housing Authority, Multifamily Refunding Revenue Bonds (Series 1997)
Weekly VRDNs (Greenwood Park)/(Columbus Bank and Trust Co., GA LOC) 3,630,000
3,465,000 LaGrange, GA Housing Authority, Multifamily Refunding Revenue Bonds (Series 1997)
Weekly VRDNs (Meadow Terrace)/(Columbus Bank and Trust Co., GA LOC) 3,465,000
7,000,000 Richmond County, GA Development Authority, Solid Waste Disposal Revenue Bonds,
(Series 1995) Weekly VRDNs (Federal Paper Board Co.,
Inc.)/(Wachovia Bank of NC, N.A., Winston-Salem LOC) 7,000,000
5,500,000 Savannah, GA EDA, (Series 1995A) Weekly VRDNs (Home Depot, Inc.) 5,500,000
Total 38,800,000
ILLINOIS--7.1%
3,000,000 Chicago, IL, Chicago Midway Airport Special Facility Revenue Bonds (Series 1998),
3.90% TOBs (Signature Flight Support Corp.)/(Bayerische Landesbank Girozentrale LOC),
Optional Tender 12/1/1998 3,000,000
3,000,000 Chicago, IL, Gas Supply Revenue Bonds (1993 Series B), 3.90% TOBs (Peoples Gas Light &
Coke Company), Optional Tender 12/1/1998 3,000,000
6,000,000 Illinois Development Finance Authority, (Series 1997) Weekly VRDNs (Toyal America,
Inc.)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 6,000,000
1,700,000 Illinois Development Finance Authority, Industrial Development Revenue Bonds (Series
1996) Weekly VRDNs (Bimba Manufacturing Co.)/(Harris Trust & Savings Bank, Chicago
LOC) 1,700,000
4,010,000 (b) Illinois Development Finance Authority, PT-131 (Series 1995A), 3.95% TOBs
(Catholic Health Partners Services)/(Connie Lee INS)/(Credit Suisse First Boston LIQ),
Mandatory Tender 10/1/1998 4,010,000
1,000,000 Illinois Development Finance Authority, Sewerage Facility Revenue Bonds (Series 1993)
Weekly VRDNs (The NutraSweet Company)/(Monsanto Co. GTD) 1,000,000
2,725,000 Peoria, IL, (Series 1995) Weekly VRDNs (Praise and Leadership Elementary School)/
(Bank One, Illinois, N.A. LOC) 2,725,000
2,470,000 Rockford, IL, EDRB, 4.25% TOBs (Independence Village of Rockford)/(Paribas, Paris
LOC), Optional Tender 12/1/1998 2,470,000
</TABLE>
MUNICIPAL OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
ILLINOIS--CONTINUED
$ 600,000 Southwestern Illinois Development Authority, (Series 1991) Weekly VRDNs (Robinson
Steel Co.)/(American National Bank, Chicago LOC) $ 600,000
Total 24,505,000
INDIANA--7.5%
2,250,000 Clarksville, IN, (Series 1997) Weekly VRDNs (Metal Sales Manufacturing Corp)/(Star
Bank, N.A., Cincinnati LOC) 2,250,000
3,800,000 Elkhart County, IN, (Series 1997) Weekly VRDNs (Hart Housing Group, Inc.)/(KeyBank,
N.A. LOC) 3,800,000
3,500,000 Gibson County, IN, Pollution Control Revenue Bonds (Series 1997) Weekly VRDNs (Toyota
Motor Manufacturing, Indiana, Inc.)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 3,500,000
6,500,000 Jeffersonville, IN, (Series 1997A) Weekly VRDNs (Wayne Steel, Inc.)/(Bank One, Ohio,
N.A. LOC) 6,500,000
1,785,000 Richmond, IN, Economic Development Revenue Bonds (Series 1996) Weekly VRDNs (Holland
Colors Americas, Inc. Project)/(Bank One, Indianapolis, N.A. LOC) 1,785,000
4,000,000 Rushville, IN, (Series 1996) Weekly VRDNs (Fujitsu Ten Corp. of America)/(Bank of
Tokyo-Mitsubishi Ltd. LOC) 4,000,000
4,000,000 Westfield, IN IDR, (Series 1998) Weekly VRDNs (Standard Locknut, Inc.)/(Bank One,
Indianapolis, N.A. LOC) 4,000,000
Total 25,835,000
KENTUCKY--1.7%
1,000,000 Graves County, KY, School Building Revenue Bonds (Series 1988) Weekly VRDNs (Seaboard
Farms Project)/(Bank of New York, New York LOC) 1,000,000
5,000,000 Jefferson County, KY, (1997 Series A), 3.80% CP (Louisville Gas & Electric Company),
Mandatory Tender 8/14/1998 5,000,000
Total 6,000,000
LOUISIANA--2.0%
5,385,000 Louisiana PFA, (Series 1998), 3.80% Bonds (University of New Orleans Research &
Technology Foundation)/(AMBAC INS), 1/1/1999 5,385,000 1,600,000
Ouachita Parish, LA IDB, (Series 1998) Weekly VRDNs (Dixie Carbonic,
Inc.)/(Bank One,
Illinois, N.A. LOC) 1,600,000
Total 6,985,000
MAINE--1.7%
4,000,000 Jay, ME, Solid Waste Disposal Revenue Bonds, 4.00% TOBs (International Paper Co.),
Optional Tender 6/1/1999 4,000,000
1,900,000 Trenton, ME, (Series 1998) Weekly VRDNs (Hinckley Co.)/(KeyBank, N.A. LOC) 1,900,000
Total 5,900,000
</TABLE>
MUNICIPAL OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
MARYLAND--3.5%
$ 6,700,000 Harford County, MD, (Series 1989) Weekly VRDNs (Harford Commons Associates Facility)/
(First National Bank of Maryland, Baltimore LOC) $ 6,700,000
1,386,000 Harford County, MD, Variable Rate Demand/Fixed Rate Refunding Bond (1989 Issue) Weekly
VRDNs (Harford Commons Associates Facility)/(First National Bank of Maryland,
Baltimore LOC) 1,386,000
2,580,000 Maryland State Community Development Administration, (Series 1990A) Weekly VRDNs
(College Estates)/(First National Bank of Maryland, Baltimore LOC) 2,580,000
1,300,000 Montgomery County, MD Weekly VRDNs (Information Systems and Networks Corp.)/
(PNC Bank, N.A. LOC) 1,300,000
Total 11,966,000
MASSACHUSETTS--1.6%
3,400,000 Massachusetts IFA, IDRB (Series 1995) Weekly VRDNs (Dunsirn Industries, Inc. Project)/
(Bank One, Wisconsin, N.A. LOC) 3,400,000
2,250,000 Weymouth, MA, 4.25% BANs, 11/5/1998 2,251,308
Total 5,651,308
MINNESOTA--4.2%
1,550,000 Blaine, MN, (Series 1997) Weekly VRDNs (Plastic Enterprises, Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 1,550,000
6,000,000 Edgerton, MN, (Series 1998) Weekly VRDNs (Fey Industries, Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 6,000,000
2,950,000 Savage, MN, (Series 1998) Weekly VRDNs (Fabcon, Inc.)/(Norwest Bank Minnesota, N.A.
LOC) 2,950,000
2,000,000 Springfield, MN, (Series 1998) Weekly VRDNs (Ochs Brick Co.)/(Norwest Bank
Minnesota, N.A. LOC) 2,000,000
2,000,000 White Bear Lake, MN City of, Century Townhomes (Series 1997), 4.5475% TOBs
(Westdeutsche Landesbank Girozentrale), Optional Tender 5/1/1999 2,000,000
Total 14,500,000
MISSISSIPPI--1.7%
1,168,000 Greenville, MS IDA Weekly VRDNs (Mebane Packaging Corp.)/(First Union National Bank,
Charlotte, NC LOC) 1,168,000
4,640,000 Mississippi Business Finance Corp., (Series 1995) Weekly VRDNs (Mississippi Baking
Company L.L.C. Project)/(First National Bank of Maryland, Baltimore LOC) 4,640,000
Total 5,808,000
MISSOURI--0.3%
1,000,000 St. Louis, MO IDA, (Series 1997) Weekly VRDNs (Cee Kay Supply)/(Commerce Bank, Kansas
City, N.A. LOC) 1,000,000
</TABLE>
MUNICIPAL OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
MULTI STATE--14.4%
$ 4,000,000 California Student Education Loan Marketing Corp., (Series 1994A), 3.80% TOBs
(Dresdner Bank Ag, Frankfurt LOC), Mandatory Tender 6/1/1999 $ 4,000,000
20,000,000 (b)Charter Mac Floater Certificates Trust I Weekly VRDNs (MBIA INS)/(Bayerische
Landesbank Girozentrale, Commerzbank AG, Frankfurt, Credit Communal de Belgique,
Brussles and Landesbank Hessen-Thueringen, Frankfurt LIQs) 20,000,000
25,340,000 (b)Clipper Tax-Exempt Trust (AMT MultiState), (Series A) Weekly VRDNs (AMBAC
INS)/(State Street Bank and Trust Co. LIQ) 25,340,000
Total 49,340,000
NEBRASKA--0.8%
2,710,000 Nebraska Investment Finance Authority, (Series 1997) Weekly VRDNs (Transcrypt
International, Inc.)/(Norwest Bank Minnesota, N.A. LOC) 2,710,000
NEVADA--0.2%
600,000 Nevada State Department of Community & Industrial Development Weekly VRDNs (Kinplex
Company Project)/(Credit Commercial De France, Paris LOC) 600,000
NEW JERSEY--3.6%
2,812,000 Cedar Grove Township, NJ, 3.80% BANs, 3/8/1999 2,814,115
4,989,000 Galloway Township, NJ, 4.125% BANs, 3/11/1999 4,998,489
4,367,000 Haddonfield, NJ, 4.40% BANs, 6/4/1999 4,388,215
Total 12,200,819
NORTH CAROLINA--1.0%
3,500,000 Halifax County, NC Industrial Facilities & PCFA, (Series 1993)
Daily VRDNs
(Westmoreland LG&E)/(Credit Suisse First Boston LOC) 3,500,000
OHIO--1.2%
4,000,000 Brookville, OH, (Series 1988) Weekly VRDNs (Green Tokai)/(Bank of Tokyo-Mitsubishi
Ltd. LOC) 4,000,000
OKLAHOMA--2.7%
8,000,000 Broken Arrow, OK EDA Weekly VRDNs (Blue Bell Creameries)/(Banque Nationale de Paris
LOC) 8,000,000
1,145,000 (b)Tulsa, OK International Airport, Variable Rate Certificates (Series 1997 B-1)
Weekly VRDNs (MBIA INS)/(Bank of America NT and SA, San Francisco LIQ) 1,145,000
Total 9,145,000
OREGON--0.8%
2,000,000 Oregon School Boards Association, Pooled Short-Term Borrowing Program (Series 1998A),
4.00% TRANs, 6/30/1999 2,000,000
660,000 Oregon State, Economic Development Revenue Bonds (Series1988B) Weekly VRDNs (Domaine
Drouhin Oregon, Inc.)/(Wells Fargo Bank, N.A. LOC) 660,000
Total 2,660,000
</TABLE>
MUNICIPAL OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
PENNSYLVANIA--1.9%
$ 3,000,000 Clinton County, PA IDA, Solid Waste Disposal Revenue Bonds (Series 1992A), 3.95% TOBs
(International Paper Co.), Optional Tender 1/15/1999 $ 3,000,000
3,100,000 Pennsylvania EDFA, (Series B1) Weekly VRDNs (Erie Plating Co.)/(PNC Bank, N.A. LOC) 3,100,000
500,000 Pennsylvania State Higher Education Assistance Agency, Student Loan Adjustable Rate
Revenue Bonds (Series 1997A) Weekly VRDNs (Student Loan Marketing Association LOC) 500,000
Total 6,600,000
SOUTH CAROLINA--2.0%
125,000 South Carolina Job Development Authority, (Series 1988A) Weekly VRDNs (Kent
Manufacturing Co.)/(Credit Commercial De France, Paris LOC) 125,000
300,000 South Carolina Job Development Authority, (Series 1988B) Weekly VRDNs (Seacord
Corporation)/(Credit Commercial De France, Paris LOC) 300,000
550,000 South Carolina Job Development Authority, (Series 1990) Weekly VRDNs (NMFO
Associates)/(Wachovia Bank of NC, N.A., Winston-Salem LOC) 550,000
1,050,000 South Carolina Job Development Authority, (Series 1990) Weekly VRDNs (Old Claussen's
Bakery)/(Wachovia Bank of NC, N.A., Winston-Salem LOC) 1,050,000
600,000 South Carolina Job Development Authority, (Series 1990) Weekly VRDNs (Rice Street
Association)/(Wachovia Bank of NC, N.A., Winston-Salem LOC) 600,000
975,000 South Carolina Job Development Authority, (Series B) Weekly VRDNs (Osmose Wood
Preserving)/(Credit Commercial De France, Paris LOC) 975,000
3,150,000 York County, SC IDA, Industrial Development Revenue Bonds (Series1989) Weekly VRDNs
(Sediver Inc)/(Banque Nationale de Paris LOC) 3,150,000
Total 6,750,000
SOUTH DAKOTA--3.3%
3,000,000 South Dakota Housing Development Authority, (Series H), 3.95% TOBs, Mandatory Tender
8/13/1998 3,000,000
3,365,000 (b)South Dakota Housing Development Authority, CDC Municipal Products, Inc. Class A
Certificates (Series 1996C) Weekly VRDNs (CDC Municipal Products, Inc. LIQ) 3,365,000
5,000,000 South Dakota Housing Development Authority, Homeownership Mortgage Bonds (1997 Series
E) Weekly VRDNs 5,000,000
Total 11,365,000
TENNESSEE--3.0%
1,500,000 Cheatham County, TN IDB, (Series 1997B) Weekly VRDNs (Triton Boat Co.)/(First American
National Bank, Nashville, TN LOC) 1,500,000
2,000,000 Hawkins County, TN IDB, (Series 1995) Weekly VRDNs (Sekisui Ta
Industries, Inc.
Project)/(Bank of Tokyo-Mitsubishi Ltd. LOC) 2,000,000
</TABLE>
MUNICIPAL OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
TENNESSEE--CONTINUED
$ 200,000 Jackson, TN IDB, Solid Waste Facility Bonds (Series 1995) Weekly VRDNs (Florida Steel
Corp.)/(Nationsbank, N.A., Charlotte LOC) $ 200,000
2,500,000 Knox County, TN IDB, (Series 1996) Weekly VRDNs (Health Ventures,
Inc.
Project)/(SunTrust Bank, Nashville LOC) 2,500,000
3,200,000 Oak Ridge, TN IDB, Solid Waste Facility Bonds (Series 1996) Weekly VRDNs (M4
Environmental L.P. Project)/(SunTrust Bank, Atlanta LOC) 3,200,000
900,000 South Pittsburg, TN IDB, (Series 1996) Weekly VRDNs (Lodge Manufacturing Co.
Project)/(SunTrust Bank, Nashville LOC) 900,000
Total 10,300,000
TEXAS--6.0%
3,000,000 Angelina and Neches River Authority, Texas, Solid Waste Disposal
Revenue Bonds (Series 1993), 4.00% CP (Temple-Eastex
Inc.)/(Temple-Inland, Inc. GTD), Mandatory Tender 8/7/1998
3,000,000
1,200,000 Angelina and Neches River Authority, Texas, Waste Disposal Revenue Bonds (Series
1998), 4.00% CP (Temple-Inland Forest Products Corp.)/(Temple-Inland, Inc. GTD),
Mandatory Tender 8/10/1998 1,200,000
3,300,000 Brazos River Authority, TX, Revenue Refunding Bonds (Series 1997) Daily VRDNs (Houston
Light & Power Co.)/(AMBAC INS)/(Royal Bank of Canada, Montreal LIQ) 3,300,000
8,000,000 McAllen, TX IDA, (Series 1998) Weekly VRDNs (NiTek McAllen,
LLC)/(Bank of Tokyo-
Mitsubishi Ltd. LOC) 8,000,000
5,000,000 Saginaw, TX IDA, (Series 1998) Weekly VRDNs (Glad Investing Partners, Ltd.)/(Bank One,
Texas N.A. LOC) 5,000,000
Total 20,500,000
VIRGINIA--1.9%
2,000,000 Richmond, VA Redevelopment & Housing Authority, (Series B-1) Weekly VRDNs (Richmond,
VA Red Tobacco Row)/(Bayerische Landesbank Girozentrale LOC) 2,000,000
2,795,000 Richmond, VA Redevelopment & Housing Authority, Multifamily Refunding Revenue Bonds
(Series 1997) Weekly VRDNs (Newport Manor)/(Columbus Bank and Trust Co., GA LOC) 2,795,000
1,700,000 Virginia Peninsula Port Authority, (Series 1997) Daily VRDNs (Ziegler Coal Holding
Co.)/(Bank of America NT and SA, San Francisco LOC) 1,700,000
Total 6,495,000
WEST VIRGINIA--2.2%
1,100,000 Fayette County, WV, Solid Waste Disposal Facility Revenue Bonds (Series 1995) Weekly
VRDNs (Georgia-Pacific Corp.)/(Industrial Bank of Japan Ltd., Tokyo LOC) 1,100,000
3,700,000 Putnam County, WV County Commission, (1998 Series A) Weekly VRDNs (Toyota Motor
Manufacturing, West Virginia, Inc.)/(Toyota Motor Credit Corp. GTD) 3,700,000
2,700,000 West Virginia Public Energy Authority, Energy Revenue Bonds (1989 Series A), 3.75% CP
(Morgantown Energy Associates)/(Swiss Bank Corp., Basle LOC), Mandatory Tender
8/13/1998 2,700,000
Total 7,500,000
</TABLE>
MUNICIPAL OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)SHORT-TERM MUNICIPALS--CONTINUED
WISCONSIN--0.9%
$ 2,000,000 Milwaukee, WI, (Series 1997), 3.90% TOBs (Signature Flight Support Corp.)/(Bayerische
Landesbank Girozentrale LOC), Optional Tender 12/1/1998 $ 2,000,000
1,000,000 New Berlin, WI, (Series 1997A) Weekly VRDNs (Sunraider LLC/New Berlin Plastics,
Inc.)/(Bank One, Wisconsin, N.A. LOC) 1,000,000
Total 3,000,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $ 342,017,859
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 89.1% of the
portfolio as calculated based upon total portfolio market value.
(a) The fund may only invest in securities rated in one of the two highest
short-term rating categories by nationally recognized statistical rating
organizations ('NRSROs') or unrated securities of comparable quality. An NRSRO's
two highest rating categories are determined without regard for sub-categories
and gradations. For example, securities rated SP-1+, SP-1, or SP-2 by Standard &
Poor's, MIG-1, or MIG-2 by Moody's Investors Service, Inc., F-1+, F-1, and F-2
by Fitch Investors Service, Inc. are all considered rated in one of the two
highest short-term rating categories. Securities rated in the highest short-term
rating category (and unrated securities of comparable quality) are identified as
First Tier securities. Securities rated in the second highest short-term rating
category (and unrated securities of comparable quality) are unidentified as
Second Tier securities. The fund follows applicable regulations in determining
whether a security is rated and whether a security rated by multiple NRSROs in
different rating categories should be identified as a First or Second Tier
security.
At July 31, 1998, the portfolio securities were rated as follows:
First Tier Second Tier
95.42% 4.58%
(b) Denotes a restricted security which is subject to restrictions on resale
under Federal Securities laws. At July 31, 1998, these securities amounted to
$57,805,000 which represents 16.9% of net assets.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($343,020,896) at July 31, 1998.
The following acronyms are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation BANs --Bond Anticipation
Notes COL --Collateralized CP --Commercial Paper EDA --Economic Development
Authority EDFA --Economic Development Financing Authority EDRB --Economic
Development Revenue Bonds GNMA --Government National Mortgage Association GO
- --General Obligation GTD --Guaranty IDA --Industrial Development Authority IDB
- --Industrial Development Bond IDR --Industrial Development Revenue IDRB
- --Industrial Development Revenue Bond IFA --Industrial Finance Authority INS
- --Insured LIQ --Liquidity Agreement LLC --Limited Liability Corporation LOC
- --Letter of Credit MBIA --Municipal Bond Investors Assurance PCFA --Pollution
Control Finance Authority PFA --Public Facility Authority TOBs --Tender Option
Bonds TRANs--Tax and Revenue Anticipation Notes UT --Unlimited Tax
VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
MUNICIPAL OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $342,017,859
Cash 134,508
Income receivable 1,878,526
Prepaid expenses 728
Total assets 344,031,621
LIABILITIES:
Income distribution payable $958,994 Accrued expenses 51,731 Total liabilities
1,010,725 NET ASSETS for 343,020,896 shares outstanding $343,020,896 NET ASSET
VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$223,856,103 / 223,858,186 shares outstanding $1.00
INSTITUTIONAL SERVICE SHARES:
$69,130,804 / 69,128,982 shares outstanding $1.00
INSTITUTIONAL CAPITAL SHARES:
$50,033,989 / 50,033,728 shares outstanding $1.00
(See Notes which are an integral part of the Financial Statements)
</TABLE>
STATEMENT OF OPERATIONS
MUNICIPAL OBLIGATIONS FUND
SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $6,898,316
EXPENSES:
Investment advisory fee $ 372,534 Administrative personnel and services fee
140,445 Custodian fees 5,561 Transfer and dividend disbursing agent fees and
expenses 40,005 Directors'/Trustees' fees 2,506 Auditing fees 7,252 Legal fees
5,166 Portfolio accounting fees 53,769 Shareholder services fee--Institutional
Service Shares 72,657 Shareholder services fee--Institutional Capital Shares
97,534 Share registration costs 10,134 Printing and postage 15,082 Insurance
premiums 8,453 Taxes 549 Miscellaneous 925 Total expenses 832,572 Waivers --
Waiver of investment advisory fee $(311,104) Waiver of shareholder services
fee--Institutional Capital Shares (58,520) Total waivers (369,624) Net expenses
462,948 Net investment income $6,435,368
(See Notes which are an integral part of the Financial Statements)
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
MUNICIPAL OBLIGATIONS FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JULY 31, JANUARY 31,
1998 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 6,435,368 $ 7,984,661
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (4,142,945) (7,088,218)
Institutional Service Shares (964,561) (424,504)
Institutional Capital Shares (1,351,191) (472,939)
Change in net assets resulting from distributions to shareholders (6,458,697) (7,985,661)
SHARE TRANSACTIONS--
Proceeds from sale of shares 3,470,208,553 4,261,655,577
Net asset value of shares issued to shareholders in payment of distributions declared 2,224,697 2,454,015
Cost of shares redeemed (3,406,144,400) (4,146,914,995)
Change in net assets resulting from share transactions 66,288,850 117,194,597
Change in net assets 66,265,521 117,193,597
NET ASSETS:
Beginning of period 276,755,375 159,561,778
End of period $ 343,020,896 $ 276,755,375
(See Notes which are an integral part of the Financial Statements)
</TABLE>
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
MUNICIPAL OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1998 1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.04 0.04 0.04 0.03 0.02
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.04) (0.04) (0.04) (0.03) (0.02)
Distributions from net realized gains -- -- -- (0.00)** -- --
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 1.76% 3.68% 3.56% 4.03% 3.04% 2.46%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.18%* 0.18% 0.18% 0.18% 0.15% 0.13%*
Net investment income 3.48%* 3.57% 3.48% 3.95% 2.86% 2.53%*
Expense waiver/reimbursement(c) 0.17%* 0.23% 0.20% 0.12% 0.16% 0.38%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $223,856 $217,838 $159,561 $135,120 $93,595 $350,975
</TABLE>
* Computed on an annualized basis.
** Amount represents less than $0.0001 per share.
(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)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
MUNICIPAL OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1998 1998 1997(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.03 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 1.64% 3.43% 3.31%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.44%* 0.43% 0.43%
Net investment income 3.32%* 3.48% 3.08%
Expense waiver/reimbursement(c) 0.17%* 0.23% 0.21%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $69,131 $41,216 $0.30
</TABLE>
* Computed on an annualized basis.
(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)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL CAPITAL SHARES
MUNICIPAL OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1998 1998 1997(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.04 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.04) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 1.70% 3.56% 3.42%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.31%* 0.30% 0.30%
Net investment income 3.49%* 3.53% 2.90%
Expense waiver/reimbursement(c) 0.32%* 0.38% 0.35%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $50,034 $17,701 $0.30
</TABLE>
* Computed on an annualized basis.
(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)
NOTES TO FINANCIAL STATEMENTS
MUNICIPAL OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
ORGANIZATION
Money Market Obligations Trust II (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Trust consists of three portfolios. The
financial statements included herein are only those of Municipal Obligations
Fund (the "Fund"), a diversified portfolio. The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held. The investment objective of the Fund is to provide current
income exempt from federal regular income tax consistent with stability of
principal.
The Fund offers three classes of shares: Institutional Shares, Institutional
Service Shares, and Institutional Capital Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act. Investments in other open-end regulated
investment companies are valued at net asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex- dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
RESTRICTED SECURITIES
Restricted securities are securities that may only be resold upon registration
under federal securities laws or in transactions exempt from such registration.
Many restricted securities may be resold in the secondary market in transactions
exempt from registration. In some cases, the restricted securities may be resold
without registration upon exercise of a demand feature. Such restricted
securities may be determined to be liquid under criteria established by the
Board of Trustees (the "Trustees"). The Fund will not incur any registration
costs upon such resales. Restricted securities are valued at amortized cost in
accordance with Rule 2a-7 under the Act.
Additional information on each restricted security held at July 31, 1998 is as
follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Charter Mac Floater Certificates Trust I 5/21/1998-7/2/1998 $20,001,049
Clipper Tax-Exempt Trust 5/13/1998-6/15/1998 25,363,487
Illinois Development Finance Authority 10/2/1997 4,010,000
Pima County, AZ IDA 8/13/1997-7/2/1998 3,941,351
South Dakota Housing Development Authority 2/5/1998-6/2/1998 3,436,037
Tulsa, OK International Airport 3/12/1997-3/31/4997 1,134,854
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
JULY 31, JANUARY 31,
INSTITUTIONAL SHARES 1998 1998
<S> <C> <C>
Shares sold 2,731,128,264 3,591,948,985
Shares issued to shareholders in payment of distributions declared 417,984 1,979,575
Shares redeemed (2,725,503,724) (3,535,649,749)
Net change resulting from Institutional Share transactions 6,042,524 58,278,811
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
JULY 31, JANUARY 31,
INSTITUTIONAL SERVICE SHARES 1998 1998
<S> <C> <C>
Shares sold 208,499,325 251,107,687
Shares issued to shareholders in payment of distributions declared 761,958 339,358
Shares redeemed (181,348,386) (210,231,259)
Net change resulting from Institutional Service Share transactions 27,912,897 41,215,786
</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
JULY 31, JANUARY 31,
INSTITUTIONAL CAPITAL SHARES 1998 1998
<S> <C> <C>
Shares sold 530,580,964 418,598,905
Shares issued to shareholders in payment of distributions declared 1,044,755 135,082
Shares redeemed (499,292,290) (401,033,987)
Net change resulting from Institutional Capital Share transactions 32,333,429 17,700,000
Net change resulting from share transactions 66,288,850 117,194,597
</TABLE>
At July 31, 1998, capital paid-in aggregated $343,020,896.
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.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
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 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.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Trust's accounting records for which it receives a fee. The
fee is based on the level of the Trust's average daily net assets for the
period, plus out-of-pocket expenses.
INTERFUND TRANSACTIONS
During the period ended July 31, 1998, the Fund engaged in purchase and sale
transactions with funds that have a common investment adviser (or affiliated
investment advisers), common Directors/Trustees, and/or common Officers. These
purchase and sale transactions were made at current market value pursuant to
Rule 17a-7 under the Act amounting to $911,565,000 and $1,222,645,000,
respectively.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Nicholas J. Seitanakis
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
MUNICIPAL
OBLIGATIONS
FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 608912309
Cusip 608912101
Cusip 608912200
G01999-05 (9/98)
[Graphic]
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Prime Cash
Obligations Fund, a portfolio of Money Market Obligations Trust II. The report
covers the six-month period from February 1, 1998 through July 31, 1998. It
begins with the fund's investment review, followed by a complete list of
holdings, and the financial statements.
Prime Cash Obligations Fund keeps your ready cash working by pursuing daily
income and stability of principal.* And, you always have easy access to your
money. At the end of the reporting period, the fund's assets were invested in a
well-diversified portfolio of high-quality money market securities.
During the six-month reporting period, dividends paid to shareholders of the
fund's Institutional Shares, Institutional Service Shares, and Institutional
Capital Shares totaled $0.03 per share. Assets in the fund totaled
$1.9 billion at the reporting period's end.
Thank you for participating in the daily earning power of Prime Cash Obligations
Fund. We welcome your questions and comments.
Sincerely,
[Graphic]
J. Christopher Donahue
President
September 15, 1998
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no assurance that they will be able to do so. An investment
in the fund is not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
Prime Cash Obligations Fund invests in money market instruments maturing in 13
months or less. The average maturity of these securities, computed on a dollar
weighted basis, is restricted to 90 days or less. Portfolio securities must be
rated in the highest short-term rating category by one or more of the nationally
recognized statistical rating organizations or be of comparable quality to
securities having such ratings. Typical security types include, but are not
limited to, commercial paper, certificates of deposit, time deposits, variable
rate instruments, and repurchase agreements.
The first two quarters of 1998 have proven to be polar opposites in terms of
U.S. economic growth. With a Gross Domestic Product ("GDP") rate of 5.50%, the
first quarter registered above average gains in employment, production,
inventory accumulation, and consumer spending. Second quarter GDP, however, was
significantly slower at 1.40%. In addition to a domestic slowdown in production,
the Asian situation seems to have finally made its mark on the U.S. balance of
trade. On another front, the strike at General Motors is estimated to have
subtracted 0.50% from second quarter GDP.
The inflation picture however remained benign throughout the six months ending
July 31, 1998, with the consumer price index increasing just 1.70%, while the
producer price index rose a barely noticeable 0.20%, with both increases on an
annualized basis. Wages rose a bit more as the employment cost index registered
a 2.80% annualized gain in the first quarter and 3.60% gain in the second
quarter.
Thirty-day commercial paper started the reporting period at 5.51% on February 1,
1998, and then traded in the range of 5.53% - 5.58% through the end of July. The
Federal Reserve Board (the "Fed") elected to maintain the 5.50% federal funds
target rate throughout the reporting period.
The target dollar-weighted average maturity range for Prime Cash Obligations
Fund was at 35-45 days through most of the reporting period. The fund did choose
to lengthen its average maturity range to 40-50 days on July 6, 1998, reflecting
a neutral to modestly bullish position regarding Fed policy given the current
slowing economic conditions and the lack of inflationary threat. In structuring
the fund, there is continued emphasis placed on positioning 30% - 35% of the
fund's core assets in variable rate demand notes and accomplishing a modest
barbell structure.
During the six months ended July 31, 1998, the net assets of the fund decreased
from $2.16 billion to $1.96 billion while the "7-day net yield" for
Institutional Shares decreased from 5.56% to 5.53%. The 7-day net yields for
Institutional Service Shares and Institutional Capital Shares were 5.28% and
5.41%, respectively.*
* Performance quoted represents past performance and is not indicative of future
results. Yield will vary. Yields quoted for money market funds most closely
reflect the fund's current earnings.
PORTFOLIO OF INVESTMENTS
PRIME CASH OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM NOTES--11.2%
BANKING--2.4%
$ 25,000,000 BankBoston, N.A., 5.650%, 11/9/1998 $ 25,000,000
17,000,000 SALTS II Cayman Islands Corp., (Bankers Trust International, PLC), 5.737%, 6/17/1999 17,000,000
5,000,000 SALTS III Cayman Island Corp., (Bankers Trust International, PLC Swap Agreement),
5.850%, 1/23/1999 5,000,000
Total 47,000,000
BROKERAGE--2.5%
50,000,000 Goldman Sachs Group, LP, 5.687%, 10/26/1998 50,000,000
FINANCE - AUTOMOTIVE--1.4%
11,316,852 Chase Manhattan Auto Owner Trust 1998-B, Class A-1, 5.578%, 5/10/1999 11,316,852
8,347,733 Chase Manhattan Auto Owner Trust 1998-C, Class A1, 5.588%, 7/9/1999 8,346,870
7,000,000 Compass Auto Receivables Trust 1998-A, Class A-1, 5.659%, 7/15/1999 7,000,000
Total 26,663,722
FINANCE - COMMERCIAL--3.3%
65,000,000 (b)Triangle Funding Ltd., 5.687%, 11/16/1998 65,000,000
INSURANCE--1.6%
5,361,903 Arcadia Automobile Receivables Trust 1998-A, Class A-1, (Guaranteed by FSA), 5.628%,
3/15/1999 5,361,903
7,812,083 ContiMortgage Home Equity Loan Trust 1998-1, Class A-1, (Guaranteed by MBIA), 5.647%,
3/15/1999 7,812,083
8,567,152 ContiMortgage Home Equity Loan Trust 1998-2, Class A-1, (Guaranteed by MBIA), 5.648%,
6/15/1999 8,567,152
10,600,000 WFS Financial Owner Trust 1998-B, Class A-1, (Guaranteed by FSA), 5.658%, 7/20/1999 10,600,000
Total 32,341,138
TOTAL SHORT-TERM NOTES 221,004,860
CERTIFICATE OF DEPOSIT--10.0%
BANKING--10.0%
57,500,000 Bankers Trust Co., New York, 5.640% - 6.010%, 9/9/1998 - 4/30/1999 57,501,343
10,000,000 Canadian Imperial Bank of Commerce, Toronto, 5.900%, 8/27/1998 9,999,659
25,000,000 Mellon Bank, N.A., Pittsburgh, 5.680%, 12/28/1998 25,000,000
10,000,000 Morgan Guaranty Trust Co., New York, 5.870%, 8/6/1998 9,999,961
</TABLE>
PRIME CASH OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
CERTIFICATE OF DEPOSIT--CONTINUED
BANKING--CONTINUED
$ 10,000,000 Rabobank Nederland, Utrecht, 5.690%, 1/7/1999 $ 9,994,704
83,000,000 Societe Generale, Paris, 5.630% - 5.910%, 8/6/1998 - 4/27/1999 82,978,393
Total 195,474,060
TOTAL CERTIFICATES OF DEPOSIT 195,474,060
(A)COMMERCIAL PAPER--42.0%
BANKING--16.5%
45,000,000 Aspen Funding Corp., (Guaranteed by Deutsche Bank, AG), 5.550% -
5.687%,
8/3/1998-8/24/1998 44,937,333
30,000,000 Cregem North America, Inc., (Guaranteed by Credit Communal de Belgique, Brussles),
5.500%, 11/9/1998 29,541,667
102,008,000 Gotham Funding Corp., 5.690% - 5.720%, 8/5/1998 - 8/14/1998 101,864,788
66,000,000 J.P. Morgan & Co., Inc., 5.450%, 12/31/1998 64,481,267
25,000,000 Omnicom Finance, Inc., (ABN AMRO Bank N.V., Amsterdam LOC), 5.510%, 11/30/1998 24,537,007
45,000,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska Handelsbanken, Stockholm),
5.520% - 5.650%, 11/6/1998 - 11/12/1998 44,318,188
15,000,000 UBS Finance (Delaware), Inc., (Guaranteed by Union Bank of Switzerland, Zurich),
5.450%, 12/31/1998 14,654,833
Total 324,335,083
BROKERAGE--0.5%
10,000,000 Credit Suisse First Boston, Inc., 5.510%, 10/14/1998 9,886,739
CONSUMER PRODUCTS--2.2%
43,000,000 Diageo Capital PLC, 5.490%, 11/16/1998 42,298,348
FINANCE - AUTOMOTIVE--3.5%
30,000,000 Chrysler Financial Corp., 5.530%, 9/14/1998 29,797,233
40,000,000 General Motors Acceptance Corp., 5.512%, 10/27/1998 39,467,173
Total 69,264,406
FINANCE - COMMERCIAL--15.9%
38,000,000 Corporate Asset Funding Co., Inc. (CAFCO), 5.520%, 10/23/1998 37,516,387
10,000,000 Falcon Asset Securitization Corp., 5.550%, 8/21/1998 9,969,167
100,000,000 General Electric Capital Corp., 5.380% - 5.500%, 8/17/1998 - 2/4/1999 98,263,639
34,000,000 Greenwich Funding Corp., 5.520%, 8/28/1998 - 9/8/1998 33,817,073
28,000,000 PREFCO-Preferred Receivables Funding Co., 5.550% - 5.570%, 8/19/1998 - 9/3/1998 27,900,570
30,000,000 Receivables Capital Corp., 5.578% - 5.599%, 8/25/1998 - 8/26/1998 29,886,056
</TABLE>
PRIME CASH OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMERCIAL PAPER--CONTINUED
FINANCE - COMMERCIAL--CONTINUED
$ 74,500,000 Sheffield Receivables Corp., 5.525% - 5.600%, 8/3/1998 - 9/3/1998 $ 74,268,410
Total 311,621,302
FINANCE - RETAIL--2.2%
44,400,000 Island Finance, Puerto Rico, (Norwest Corp. Support Agmt.), 5.540, 8/10/1998 -
9/22/1998 44,143,883
INSURANCE--0.5%
10,000,000 CXC, Inc., 5.520%, 8/10/1998 9,986,200
TRANSPORTATION--0.7%
13,000,000 BAA PLC, 5.520%, 10/6/1998 12,868,440
Total Commercial Paper 824,404,401
LOAN PARTICIPATION--1.1%
FINANCE - EQUIPMENT--1.1%
21,000,000 Pitney Bowes Credit Corp., 5.648%, 8/10/1998 20,970,348
(C)VARIABLE RATE OBLIGATIONS--19.7%
BANKING--11.8%
2,000,000 Albuquerque, NM, Series 1997 El Canto, Inc., (Norwest Bank Minnesota, N.A. LOC),
5.930%, 8/6/1998 2,000,000
10,000,000 (b)Bankers Trust Co., New York, 5.690%, 8/1/1998 9,994,254
1,925,000 Beech Grove, IN, Series 1997, Poster Display Co., (Bank One, Indianapolis, IN LOC),
5.670%, 8/6/1998 1,925,000
2,095,000 C. W. Caldwell, Inc., Sweetbriar Assisted Living Facility, Project, (Huntington
National Bank, Columbus, OH LOC), 5.670%, 8/6/1998 2,095,000
2,895,000 Casna Limited Partnership, Series 1997, (Huntington National Bank, Columbus, OH LOC),
5.670%, 8/6/1998 2,895,000
4,545,000 Chartiers Valley Industrial & Commercial Development Authority, Woodhaven Convalescent
Center Series 1997-B, (Bank One, Ohio, N.A. LOC), 5.670%, 8/6/1998 4,545,000
5,800,000 Chestnut Hills Apartments, Ltd., (Huntington National Bank, Columbus, OH LOC),
5.720%, 8/6/1998 5,800,000
1,470,000 Children's Defense Fund, (First National Bank of Maryland, Baltimore LOC), 5.790%,
8/4/1998 1,470,000
1,000,000 County of Wood, Williams Industrial Service Inc., Project, (Huntington National Bank,
Columbus, OH LOC), 5.670%, 8/6/1998 1,000,000
1,100,000 Flowform, Inc., (Huntington National Bank, Columbus, OH LOC), 5.670%, 8/6/1998 1,100,000
6,780,000 Franklin County, OH, Series 1995, Edison Welding (Huntington National Bank, Columbus,
OH LOC), 5.670%, 8/6/1998 6,780,000
12,135,000 Georgetown, KY Educational Institution, Series 1997-A, (Bank One, Kentucky LOC),
5.670%, 8/6/1998 12,135,000
</TABLE>
PRIME CASH OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)VARIABLE RATE OBLIGATIONS--CONTINUED
BANKING--CONTINUED
$ 1,410,000 Gerald T. Thom, Trustee U.A.D., March27, 1997, (Huntington National Bank, Columbus,
OH LOC), 5.670%, 8/6/1998 $ 1,410,000
11,550,000 Heritage at the Falls Assisted Living, Ltd., Series 1997, (BankBoston, N.A. LOC),
5.740%, 8/6/1998 11,550,000
9,400,000 IT Spring Wire, LLC, Series 1997, (Fifth Third Bank, Cincinnati LOC), 5.670%, 8/6/1998 9,400,000
4,522,000 International Processing Corp., (Bank One, Kentucky LOC), 5.720%, 8/6/1998 4,522,000
2,000,000 Kit Carson County, CO, Midwest Farms Project, (Norwest Bank Minnesota, N.A. LOC),
5.750%, 8/5/1998 2,000,000
71,362,339 (b)Liquid Asset Backed Securities Trust, Series 1997-1, (Westdeutsche Landesbank
Girozentrale Swap Agreement), 5.656%, 8/17/1998 71,362,339
5,000,000 Long Lane Master Trust III, Series 1997-C, 5.748%,11/2/1998 5,000,000
13,875,000 M/S Land, LLC, (Bank One, Illinois, N.A. LOC), 5.720%, 8/6/1998 13,875,000
5,000,000 Medilodge Group, Meadowbrook Project, (KeyBank, N.A. LOC), 5.720%, 8/6/1998 5,000,000
10,000,000 Mississippi Business Finance Corp., Kohler Project, (Wachovia Bank of NC, N.A.,
Winston-Salem LOC), 5.690%, 8/6/1998 10,000,000
3,200,000 New Berlin, WI, Sunraider LLC Series 1997B, (Bank One, Wisconsin, N.A. LOC), 5.670%,
8/6/1998 3,200,000
4,700,000 New Jersey EDA, Morey Organization, Inc. Project Series 1997, (Corestates Bank N.A.,
Philadelphia, PA LOC), 5.700%, 8/5/1998 4,700,000
2,565,000 New Jersey EDA, Pheonix Realty Partners, (Corestates Bank N.A., Philadelphia, PA LOC),
5.700%, 8/5/1998 2,565,000
3,400,000 Oakwoods Master Ltd. Partnership Series 1997, (Amsouth Bank N.A., Birmingham LOC),
5.687%, 8/6/1998 3,400,000
4,800,000 Primex Funding Corp., Series 1997-A, (Bank One, Indianapolis, N.A. LOC), 5.670%,
8/6/1998 4,800,000
6,080,937 (b)Rabobank Optional Redemption Trust, Series 1997-101, 5.687%, 7/31/1998 6,080,937
3,975,000 Solon Properties, LLC, (Huntington National Bank, Columbus, OH LOC), 5.670%, 8/6/1998 3,975,000
1,205,000 TDB Realty, Ltd., (Huntington National Bank, Columbus, OH LOC), 5.670%, 8/6/1998 1,205,000
3,360,000 Team Rahal of Pittsburgh, Inc., Series 1997, (Huntington National Bank, Columbus, OH
LOC), 5.670%, 8/6/1998 3,360,000
3,290,000 Trap Rock Industries, Inc., Series 1997, (Corestates Bank N.A., Philadelphia, PA LOC),
5.700%, 8/5/1998 3,290,000
5,565,000 VLF, LLC, The Village of Lovejoy, Fountain Project, (KeyBank, N.A. LOC), 5.790%,
8/6/1998 5,565,000
3,140,000 Van Wyk Enterprises, Inc., (Huntington National Bank, Columbus, OH LOC), 5.670%,
8/6/1998 3,140,000
Total 231,139,530
FINANCE - RETAIL--0.9%
18,000,000 (b)Associates Corp. of North America, 5.710%, 8/1/1998 17,996,275
</TABLE>
PRIME CASH OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)VARIABLE RATE OBLIGATIONS--CONTINUED
INSURANCE--7.0%
$ 10,000,000 Allstate Life Insurance Co., 5.759%, 7/31/1998 $ 10,000,000
20,000,000 Jackson National Life Insurance Co., 5.730%, 9/24/1998 20,000,000
33,532,254 (b)Liquid Asset Backed Securities Trust, Series 1997-3, Senior Note, (Guaranteed by
AMBAC), 5.658%, 9/28/1998 33,532,254
15,000,000 Peoples Security Life Insurance Company, 5.780%, 8/3/1998 15,000,000
25,000,000 Security Life of Denver Insurance Co., 5.738%, 7/31/1998 25,000,000
25,000,000 Transamerica Life Insurance and Annuity Co., 5.759%, 7/31/1998 25,000,000
10,000,000 Travelers Insurance Company, 5.739%, 7/31/1998 10,000,000
Total 138,532,254
TOTAL VARIABLE RATE OBLIGATIONS 387,668,059
TIME DEPOSIT--2.5%
BANKING--2.5%
50,000,000 Royal Bank of Canada, Montreal, 5.688%, 8/3/1998 50,000,000
(D)REPURCHASE AGREEMENTS--13.5%
65,100,000 ABN AMRO Chicago Corp., 5.690%, dated 7/31/1998, due 8/3/1998 65,100,000
25,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.620%, dated 7/31/1998, due 8/3/1998 25,000,000
50,000,000 Goldman Sachs Group, LP, 5.700%, dated 7/31/1998, due 8/3/1998 50,000,000
50,000,000 HSBC Securities, Inc., 5.690%, dated 7/31/1998, due 8/3/1998 50,000,000
50,000,000 Salomon Brothers, Inc., 5.690%, dated 7/31/1998, due 8/3/1998 50,000,000
25,000,000 Societe Generale Securities Corp., 5.625%, dated 7/31/1998, due 8/3/1998 25,000,000
TOTAL REPURCHASE AGREEMENTS 265,100,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $1,964,621,728
</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 July 31, 1998, these securities amounted
to $203,966,059 which represents 10.38% 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
($1,964,760,988) at July 31, 1998.
The following acronyms are used throughout this portfolio: AMBAC--American
Municipal Bond Assurance Corporation EDA --Economic Development Authority LLC
- --Limited Liability Corporation LOC --Letter of Credit LP --Limited Partnership
MBIA --Municipal Bond Investors Assurance PLC --Public Limited Company
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
PRIME CASH OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 265,100,000
Investments in securities 1,699,521,728
Total investments in securities, at amortized cost and value $1,964,621,728
Income receivable 10,737,158
Receivable for shares sold 2,000,000
Prepaid expenses 108,697
Total assets 1,977,467,583
LIABILITIES:
Payable for shares redeemed 23,687
Income distribution payable 9,402,621
Payable to Bank 3,019,302
Accrued expenses 260,985
Total liabilities 12,706,595
NET ASSETS for 1,964,760,988 shares outstanding $1,964,760,988
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$1,044,622,059 / 1,044,622,059 shares outstanding $1.00
INSTITUTIONAL SERVICE SHARES:
$620,142,393 / 620,142,393 shares outstanding $1.00
INSTITUTIONAL CAPITAL SHARES:
$299,996,536 / 299,996,536 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
PRIME CASH OBLIGATIONS FUND
SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $58,012,352
EXPENSES:
Investment advisory fee $ 2,047,330
Administrative personnel and services fee 771,843
Custodian fees 68,586
Transfer and dividend disbursing agent fees and expenses 51,951
Directors'/Trustees' fees 7,964
Auditing fees 7,240
Legal fees 3,258
Portfolio accounting fees 105,437
Shareholder services fee--Institutional Shares 1,454,404
Shareholder services fee--Institutional Service Shares 826,453
Shareholder services fee--Institutional Capital Shares 278,305
Share registration costs 18,643
Printing and postage 13,394
Insurance premiums 57,786
Taxes 362
Miscellaneous 8,869
Total expenses 5,721,825
Waivers --
Waiver of investment advisory fee $ (1,252,761)
Waiver of shareholder services fee--Institutional Shares (1,454,404)
Waiver of shareholder services fee--Institutional Capital
Shares (166,983)
Total waivers (2,874,148)
Net expenses 2,847,677
Net investment income $55,164,675
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
PRIME CASH OBLIGATIONS FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) JANUARY 31,
JULY 31, 1998 1998
<S> <C> <C>
INCREASE (DECREASE) IN NEW ASSETS:
OPERATIONS--
Net investment income $ 55,164,675 $ 94,064,903
Change in net assets resulting from operations 55,164,675 94,064,903
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (31,914,286) (64,610,393)
Institutional Service Shares (17,344,977) (25,937,194)
Institutional Capital Shares (5,905,412) (3,517,316)
Change in net assets resulting from distributions to shareholders (55,164,675) (94,064,903)
SHARE TRANSACTIONS--
Proceeds from sale of shares 14,462,069,341 25,518,721,091
Net asset value of shares issued to shareholders in payment of distributions declared 21,441,651 45,738,378
Cost of shares redeemed (14,679,193,128) (25,438,600,121)
Change in net assets resulting from share transactions (195,682,136) 125,859,348
Change in net assets (195,682,136) 125,859,348
NET ASSETS:
Beginning of period 2,160,443,124 2,034,583,776
End of period $ 1,964,760,988 $ 2,160,443,124
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS - INSTITUTIONAL SHARES
PRIME CASH OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1998 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.06 0.05 0.06 0.04 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.06) (0.05) (0.06) (0.04) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.75% 5.61% 5.38% 6.08% 4.52% 3.14%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.18%* 0.18% 0.18% 0.17% 0.12% 0.11%*
Net investment income 5.49%* 5.44% 5.25% 5.90% 4.30% 3.16%*
Expense waiver/reimbursement(c) 0.37%* 0.12% 0.14% 0.08% 0.13% 0.22%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,044,622 $1,100,620 $1,572,912 $3,919,186 $1,538,802 $2,866,353
</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)
FINANCIAL HIGHLIGHTS - INSTITUTIONAL SERVICE SHARES
PRIME CASH OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1998 1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05 0.06 0.04 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.06) (0.04) (0.01)
NET ASSET BALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.63% 5.34% 5.11% 5.83% 4.21% 0.99 %
RATIOS TO AVERAGE NET ASSETS
Expenses 0.43%* 0.43% 0.43% 0.42% 0.37% 0.36%*
Net investment income 5.25%* 5.29% 5.02% 5.65% 4.05% 2.91%*
Expense waiver/reimbursement(c) 0.12%* 0.12% 0.14% 0.08% 0.13% 0.22%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $620,142 $668,665 $412,762 $324,474 $342,673 $350,666
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 2, 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)
FINANCIAL HIGHLIGHTS - INSTITUTIONAL CAPITAL SHARES
PRIME CASH OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1998 1998 1997 1996 1995(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05 0.06 0.02
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.06) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $1.00 $ 1.00
TOTAL RETURN(B) 2.69% 5.48% 5.23% 5.94% 1.66%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.30%* 0.30% 0.32% 0.32% 0.27%*
Net investment income 5.30%* 5.46% 5.00% 5.75% 4.15%*
Expense waiver/reimbursement(c) 0.27%* 0.26% 0.18% 0.08% 0.12%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $299,997 $391,159 $48,910 $11,811 $8,318
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from October 6, 1994 (date of initial
public investment) to January 31, 1995.
(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)
NOTES TO FINANCIAL STATEMENTS
PRIME CASH OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
ORGANIZATION
Money Market Obligation Trust II (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Trust consists of three portfolios. The
financial statements included herein are only those of Prime Cash Obligations
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is to provide a high level of current income
consistent with stability of principal and liquidity.
The Fund offers three classes of shares: Institutional Shares, Institutional
Service Shares, and Institutional Capital Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex- dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
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 Act.
Additional information on each restricted security held at July 31, 1998, is as
follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Associates Corp. of North America 12/3/1997 $17,996,275
Bankers Trust Co., New York 10/9/1997-7/7/1998 57,501,343
Liquid Asset Backed Securities Trust, Series 1997-1 2/19/1997 71,362,339
Liquid Asset Backed Securities Trust, Series 1997-3 6/27/1997 33,532,254
Rabobank Optional Redemption Trust, Series 1997-101 4/17/1997 6,080,937
Triangle Funding Ltd. 10/16/1997 65,000,000
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest ($0.001 par value) for each
class of shares. At July 31, 1998, capital paid-in aggregated $1,964,760,988.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX-MONTHS
ENDED YEAR ENDED
JULY 31, JANUARY 31,
1998 1998
INSTITUTIONAL SHARES SHARES SHARES
<S> <C> <C>
Shares sold 9,909,690,942 18,791,341,606
Shares issued to shareholders in payment of distributions declared 16,661,005 42,611,959
Shares redeemed (9,982,349,401) (19,306,246,896)
Net change resulting from Institutional Share transactions (55,997,454) (472,293,331)
<CAPTION>
SIX-MONTHS
ENDED YEAR ENDED
JULY 31, JANUARY 31,
1998 1998
INSTITUTIONAL SERVICE SHARES SHARES SHARES
<S> <C> <C>
Shares sold 3,312,411,545 5,032,974,804
Shares issued to shareholders in payment of distributions declared 1,810,745 580,621
Shares redeemed (3,362,744,645) (4,777,652,535)
Net change resulting from Institutional Service Share transactions (48,522,355) 255,902,890
<CAPTION>
SIX-MONTHS
ENDED YEAR ENDED
JULY 31, JANUARY 31,
1998 1998
INSTITUTIONAL CAPITAL SHARES SHARES SHARES
<S> <C> <C>
Shares sold 1,239,966,854 1,694,404,681
Shares issued to shareholders in payment of distributions declared 2,969,901 2,545,798
Shares redeemed (1,334,099,082) (1,354,700,690)
Net change resulting from Institutional Capital Share transactions (91,162,327) 342,249,789
Net change resulting from share transactions (195,682,136) 125,859,348
</TABLE>
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.
CAPITAL CONTRIBUTIONS
Lehman Brothers Global Asset Management, Inc., the former Adviser, made a
capital contribution to the Fund on November 15, 1996, of an amount equal to the
accumulated net realized loss on investments balance carried by the Fund.
This transaction 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, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
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's shares for the period. 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.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Nicholas J. Seitanakis
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
<GRAPHIC
>Prime Cash Obligations Fund
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 608912887
Cusip 608912705
Cusip 608912804
G01999-04 (9/98)
[Graphic]
PRESIDENT'S MESSAGE Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Prime Value
Obligations Fund, a portfolio of Money Market Obligations Trust II. The report
covers the six-month period from February 1, 1998 to July 31, 1998. It begins
with the fund's investment review, followed by a complete list of holdings and
the financial statements.
Prime Value Obligations Fund keeps your ready cash working by pursuing daily
income and stability of principal.* And, you always have easy access to your
money. At the end of the reporting period, the fund's assets were invested in a
well-diversified portfolio of high-quality money market securities.
During the six-month reporting period, dividends paid to shareholders of the
fund's Institutional Shares, Institutional Service Shares and Institutional
Capital Shares each totaled $0.03 per share. Assets in the fund surpassed
the $1.5 billion mark at the reporting period's end.
Thank you for participating in the daily earning power of Prime Value
Obligations Fund. We welcome your questions and comments.
Sincerely,
[Graphic]
J. Christopher Donahue
President
September 15, 1998
* Although money market funds seek to maintain a stable net asset value of
$1.00 per share, there is no assurance that they will be able to do so. An
investment in the fund is neither insured nor guaranteed by the U.S.
government.
INVESTMENT REVIEW
Prime Value Obligations Fund (the "Fund") invests in money market instruments
maturing in 13 months or less. The average maturity of these securities,
computed on a dollar weighted basis, is restricted to 90 days or less. Portfolio
securities must be rated in one of the two highest short-term rating categories
by one or more of the nationally recognized statistical rating organizations or
be of comparable quality to securities having such ratings. Typical security
types include, but are not limited to: commercial paper, certificates of
deposit, time deposits, variable rate instruments and repurchase agreements.
The first two quarters of 1998 have proven to be polar opposites in terms of
U.S. economic growth. With a Gross Domestic Product ("GDP") rate of 5.50%, the
first quarter registered above average gains in employment, production,
inventory accumulation, and consumer spending. Second quarter GDP, however, was
significantly slower at 1.40%. In addition to a domestic slowdown in production,
the Asian situation seems to have finally made its mark on the U.S. balance of
trade. On another front, the strike at General Motors is estimated to have
subtracted 0.50% from second quarter GDP.
The inflation picture, however, remained benign throughout the six months ending
July 31, 1998, with the consumer price index increasing just 1.70% while the
producer price index rose a barely noticeable 0.2%, with both increases on an
annualized basis. Wages rose a bit more as the employment cost index registered
a 2.80% annualized gain in the first quarter and 3.60% gain in the second
quarter.
Thirty-day commercial paper started the period at 5.51% on February 1, 1998, and
then traded in the range of 5.53%-5.58% through the end of July. The Federal
Reserve Board (the "Fed") elected to maintain the 5.50% federal funds target
throughout the reporting period.
The target dollar-weighted average maturity range for Prime Value Obligations
Fund remained at 35-45 days through most of the reporting period. The fund did
elect to lengthen its average maturity range to 40-50 days on July 6, 1998,
reflecting a neutral position regarding Fed policy given the current slowing
economic conditions and the lack of inflationary threat. In structuring the
fund, there is continued emphasis placed on positioning 30%-35% of the fund's
core assets in variable rate demand notes and accomplishing a modest barbell
structure.
During the six months ended July 31, 1998, the net assets of Prime Value
Obligations Fund increased from $1.2 billion to $1.5 billion while the "7-day
net yield" for Institutional Shares decreased from 5.58% to 5.55%. The 7-day net
yields for Institutional Service Shares and Institutional Capital Shares were
5.30% and 5.43%, respectively.* The effective average maturity of the Fund on
July 31 was 52 days.
* Performance quoted represents past performance and is not indicative of
future results. Yield will vary. Yields quoted for money market funds most
closely reflect the fund's current earnings.
PORTFOLIO OF INVESTMENTS
PRIME VALUE OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM NOTES -- 2.5%
FINANCE - AUTOMOTIVE -- 1.2%
$ 5,658,426 Chase Manhattan Auto Owner Trust 1998-B, Class A-1, 5.578%, 5/10/1999 $ 5,658,426
6,678,187 Chase Manhattan Auto Owner Trust 1998-C, Class A-1, 5.588%, 7/9/1999 6,677,496
6,000,000 Compass Auto Receivables Trust 1998-A, Class A-1, 5.659%, 7/15/1999 6,000,000
114,177 MMCA Auto Owner Trust 1997-1, Class A-1, 5.630%, 11/15/1998 114,170
Total 18,450,092
INSURANCE -- 1.3%
5,711,434 ContiMortgage Home Equity Loan Trust 1998-2, Class A-1, (Guaranteed by MBIA), 5.648%,
6/15/1999 5,711,434
6,926,987 WFS Financial 1998-A Owner Trust, Class A-1, (Guaranteed by FSA), 5.618%, 2/20/1999 6,926,987
8,400,000 WFS Financial 1998-B Owner Trust, Class A-1, (Guaranteed by FSA), 5.658%, 7/20/1999 8,400,000
Total 21,038,421
TOTAL SHORT-TERM NOTES 39,488,513
CERTIFICATE OF DEPOSIT -- 5.0%
BANKING -- 5.0%
10,000,000 Bankers Trust Co., New York, 5.645%, 2/26/1999 9,998,078
52,000,000 Societe Generale, Paris, 5.645% - 5.970%, 8/13/1998 - 2/26/1999 51,993,731
18,000,000 Svenska Handelsbanken, Stockholm, 5.705% - 5.800%, 4/6/1999 - 5/14/1999 17,999,166
TOTAL CERTIFICATES OF DEPOSIT 79,990,975
CORPORATE NOTES -- 3.0%
BANKING -- 1.3%
10,000,000 SALTS III Cayman Island Corp., (Guaranteed by Bankers Trust International, PLC), 5.819%,
12/18/1998 10,000,000
10,000,000 SALTS III Cayman Island Corp., (Guaranteed by Bankers Trust International, PLC),
5.850%, 1/23/1999 10,000,000
Total 20,000,000
BROKERAGE -- 1.3%
21,000,000 Goldman Sachs Group, LP, 5.688%, 10/26/1998 21,000,000 FINANCE -
COMMERCIAL -- 0.4%
1,000,000 Beta Finance, Inc., 6.000%, 10/30/1998 1,000,255
5,000,000 (b)Triangle Funding Ltd., 5.688%, 11/16/1998 5,000,000
Total 6,000,255
TOTAL CORPORATE NOTES 47,000,255
</TABLE>
PRIME VALUE OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMERCIAL PAPER -- 53.9%
AEROSPACE / AUTO -- 1.9%
$ 30,000,000 Johnson Controls, Inc., 5.540%, 10/15/1998 $ 29,653,750
BANKING -- 22.2%
62,000,000 Aspen Funding Corp., (Guaranteed by Deutsche Bank, AG), 5.606% -
5.660%, 8/26/1998 -
12/7/1998 61,204,994
4,000,000 Bankers Trust New York Corp., 5.606%, 12/18/1998 3,915,364
35,000,000 Commonwealth Bank of Australia, Sydney, 5.600% - 5.645%, 11/12/1998 - 12/17/1998 34,397,629
56,000,000 Cregem North America, Inc., (Guaranteed by Credit Communal de Belgique, Brussles),
5.656% - 5.671%, 11/9/1998 - 11/17/1998 55,106,428
73,211,000 Gotham Funding Corp., 5.707% - 5.748%, 8/5/1998 - 8/26/1998 73,038,572
40,000,000 Svenska Handelsbanken, Inc., (Guaranteed by Svenska Handelsbanken, Stockholm), 5.599%
- 5.677%, 8/20/1998 - 11/6/1998 39,763,867
75,000,000 UBS Finance (Delaware), Inc., (Guaranteed by Union Bank of Switzerland, Zurich),
5.598% - 5.609%, 12/31/1998 73,273,113
10,000,000 Westpac Capital Corp., (Guaranteed by Westpac Banking Corp. Ltd., Sydney), 5.598%,
12/4/1998 9,809,375
Total 350,509,342
BROKERAGE -- 5.7%
15,000,000 Credit Suisse First Boston, Inc., 5.594%, 10/14/1998 14,830,108
50,000,000 Merrill Lynch & Co., Inc., 5.608%, 9/1/1998 49,761,903
25,000,000 Morgan Stanley Group, Inc., 5.597%, 8/31/1998 24,885,000
Total 89,477,011
CHEMICALS -- 1.0%
16,647,000 IMC Global, Inc., 5.750% - 5.835%, 8/10/1998 - 10/22/1998 16,458,640
CONSUMER PRODUCTS2.2%
35,000,000 Diageo Capital PLC, 5.596% - 5.614%, 8/4/1998 - 12/29/1998 34,761,396
ELECTRIC POWER -- 0.3%
3,925,000 Southern Electric Generating Co. (SEGCO), (Guaranteed by Alabama Power Co., Guaranteed
by Georgia Power Co.), 5.794%, 8/11/1998 3,918,731
FINANCE - AUTOMOTIVE -- 4.1%
20,000,000 Chrysler Financial Corp., 5.614%, 9/14/1998 19,864,822
45,000,000 General Motors Acceptance Corp., 5.600% - 5.603%, 10/27/1998 - 11/6/1998 44,354,798
Total 64,219,620
FINANCE - COMMERCIAL -- 10.9%
8,500,000 Beta Finance, Inc., 5.599%, 8/21/1998 8,473,933
10,000,000 CIT Group Holdings, Inc., 5.598%, 8/17/1998 9,975,467
</TABLE>
PRIME VALUE OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMERCIAL PAPER -- CONTINUED
FINANCE - COMMERCIAL -- CONTINUED
$ 8,000,000 Falcon Asset Securitization Corp., 5.574%, 8/21/1998 $ 7,975,333
38,600,000 Greenwich Funding Corp., 5.599% - 5.608%, 8/28/1998 - 10/30/1998 38,238,128
17,000,000 PREFCO-Preferred Receivables Funding Co., 5.580% - 5.600%, 8/19/1998 - 9/3/1998 16,936,509
10,000,000 Receivables Capital Corp., 5.578%, 8/25/1998 9,963,000
81,000,000 Sheffield Receivables Corp., 5.576% - 5.632%, 8/13/1998 - 9/30/1998 80,683,353
Total 172,245,723
FINANCE - EQUIPMENT -- 0.3%
4,000,000 Comdisco, Inc., 5.763%, 8/5/1998 3,997,462
FINANCE - RETAIL0.8%
12,300,000 Island Finance, Puerto Rico, Norwest Corp. Support Agmt., 5.599%, 8/11/1998 12,281,140
INDUSTRIAL PRODUCTS -- 0.2%
3,835,000 Praxair, Inc., 5.757%, 10/20/1998 3,786,594
INSURANCE -- 2.0%
12,470,000 CNA Financial Corp., 5.781% - 5.795%, 9/1/1998 - 10/29/1998 12,318,521
5,000,000 CXC, Inc., 5.589%, 8/10/1998 4,993,100
15,000,000 Marsh & McLennan Cos., Inc., 5.628%, 12/14/1998 14,696,250
Total 32,007,871
OIL & OIL FINANCE -- 1.3%
5,000,000 Chevron Transport Corp., (Guaranteed by Chevron Corp.), 5.600%, 9/3/1998 4,974,746
15,291,000 Occidental Petroleum Corp., 5.755% - 5.795%, 8/7/1998 - 10/14/1998 15,256,237
Total 20,230,983
RETAIL -- 1.0%
16,091,000 Safeway, Inc., 5.798%, 10/28/1998 15,866,799
TOTAL COMMERCIAL PAPER 849,415,062
(C)NOTES - VARIABLE -- 22.2%
BANKING -- 16%
15,610,000 500 South Front St. L.P., Series A-B, (Huntington National Bank, Columbus, OH LOC),
5.670%, 8/6/1998 15,610,000
1,557,500 Alabama State IDA, (Nichols Research Corp.), (SouthTrust Bank of Alabama, Birmingham
LOC), 5.740%, 8/7/1998 1,557,500
</TABLE>
PRIME VALUE OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)NOTES - VARIABLE -- CONTINUED
BANKING -- CONTINUED
$ 3,000,000 American Seaway Foods, Inc., (KeyBank, N.A. LOC), 5.700%, 8/7/1998 $ 3,000,000
4,000,000 Associated Materials, Inc., (KeyBank, N.A. LOC), 5.700%, 8/7/1998 4,000,000
1,895,000 Athens-Clarke County, GA IDA, Barrett Project Series 1995, (Columbus Bank and Trust
Co., GA LOC), 5.840%, 8/6/1998 1,805,000
10,000,000 Bankers Trust Co., New York, 5.690%, 6/4/1999 9,994,254
16,400,000 (b)Bankers Trust New York Corp., 5.600%, 8/6/1998 16,400,000
20,000,000 (b)Bankers Trust New York Corp., 5.770%, 8/3/1998 20,000,000
16,900,000 Beverly California Corp., (PNC Bank, N.A. LOC), 5.639%, 8/3/1998 16,900,000
17,090,000 Beverly Hills Nursing Center, Inc., Medilodge Project Series 1996, (KeyBank, N.A.
LOC), 5.720%, 8/6/1998 17,090,000
1,945,000 Bissett, William K. and Sheryl B., Multi-Option Adjustable Rate Notes, (Huntington
National Bank, Columbus, OH LOC), 5.670%, 8/6/1998 1,945,000
800,000 Carmel, IN, Telamon Corp. Series 1996-C, (Huntington National Bank, Columbus, OH LOC),
5.770%, 8/6/1998 800,000
1,000,000 Carmel, IN, Telamon Corp. Series A, (Huntington National Bank, Columbus, OH LOC),
5.770%, 8/6/1998 1,000,000
1,100,000 Carmel, IN, Telamon Corp. Series B, (Huntington National Bank, Columbus, OH LOC),
5.770%, 8/6/1998 1,100,000
2,000,000 Chestnut Hills Apartments, Ltd., (Huntington National Bank, Columbus, OH LOC), 5.720%,
8/6/1998 2,000,000
970,000 Colorado Health Facilities Authority, Series B, (Bank One, Colorado LOC), 5.720%,
8/13/98 970,000
5,394,000 Congregate Care Corp., (Union Bank of California LOC), 5.760%, 8/5/1998 5,394,000
2,140,000 Continental Downtown Properties, (Huntington National Bank, Columbus, OH LOC), 5.670%,
8/6/1998 2,140,000
5,900,000 Dellridge Care Center Limited Partnership, Series 1997, (First National Bank of
Maryland, Baltimore LOC), 5.690%, 8/4/1998 5,900,000
9,910,000 ERC Real Estate LLC, (KeyBank, N.A. LOC), 5.670%, 8/6/1998 9,910,000
9,478,000 International Processing Corp., (Bank One, Kentucky LOC), 5.720%, 8/6/1998 9,478,000
2,250,000 Jeffersonville, IN, Series 1997-B Wayne Steel, Inc., (Bank One, Ohio, N.A. LOC),
5.670%, 8/6/1998 2,250,000
6,065,000 Kenny, Donald R. and Cheryl A., Series 1997, (Star Bank, N.A. Cincinnati LOC), 5.720%,
8/6/1998 6,065,000
4,000,000 Lake Sherwood Senior Living Center, LLC, (Union Planters NB, Memphis, TN LOC), 5.940%,
8/6/1998 4,000,000
2,000,000 (b)Liquid Asset Backed Securities Trust, Series 1996-3, (Westdeutsche Landesbank
Girozentrale Swap Agreement), 5.676%, 8/17/1998 2,000,000
12,593,354 (b)Liquid Asset Backed Securities Trust, Series 1997-1, (Westdeutsche Landesbank
Girozentrale Swap Agreement), 5.656%, 8/19/1998 12,593,354
</TABLE>
PRIME VALUE OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)NOTES - VARIABLECONTINUED
BANKING -- CONTINUED
$ 5,000,000 Long Lane Master Trust III, Series 1997-C, 5.749%, 8/3/1998 $ 5,000,000
4,100,000 Melberger, Clifford K. and Ruth B., (PNC Bank, N.A. LOC), 5.639%, 8/3/1998 4,100,000
6,860,000 Pine Ridge Associates, Ltd., (Mellon Bank N.A., Pittsburgh LOC), 5.650%, 8/5/1998 6,860,000
2,300,000 Poly Foam International, Inc., (National City Bank, Ohio LOC), 5.670%, 8/6/1998 2,300,000
10,000,000 Portage, IN, American Iron Oxide Co. Project (Series 1998-A), (Bank of Tokyo-
Mitsubishi Ltd. LOC), 5.920%, 8/6/1998 10,000,000
8,015,000 Rubloff- Rockford, LLC, Series 1997, (First of America Bank, N.A. LOC), 5.700%,
8/5/1998 8,015,000
17,900,000 Scranton Times, L.P., Series 1997, (PNC Bank, N.A. LOC), 5.639%, 8/3/1998 17,900,000
2,785,000 Solon, OH, Schneps, (Bank One, Ohio, N.A. LOC), 5.670%, 8/6/1998 2,785,000
885,000 Southeast Regional Holdings, LLC, Series 1995-A, (Columbus Bank and Trust Co., GA LOC),
5.890%, 8/6/1998 885,000
8,560,000 Southern Coil Processing, Inc. Notes, (Amsouth Bank N.A., Birmingham LOC), 5.740%,
8/6/1998 8,560,000
1,680,000 Team Rahal of Mechanicsburg, Inc., Series 1997, (Huntington National Bank, Columbus,
OH LOC), 5.670%, 8/6/1998 1,680,000
1,840,000 Team Rahal, Inc., Series 1997, (Huntington National Bank, Columbus, OH LOC), 5.670%,
8/6/1998 1,840,000
1,567,000 Vista Funding Corp., Series 1995-A, (Star Bank, N.A., Cincinnati LOC), 5.790%,
8/6/1998 1,567,000
6,040,000 Westcourt, (Bank One, Texas N.A. LOC), 5.720%, 8/6/1998 6,040,000
Total 251,434,108
FINANCE - EQUIPMENT -- 0.7%
10,600,000 Comdisco, Inc., 5.799%, 8/26/1998 10,600,000
FINANCE - RETAIL -- 1.4%
2,000,000 AFS Insurance Premium Receivables Trust, (Series 1994-A), 6.212%, 8/17/1998 2,000,000
20,000,000 (b)Associates Corp. of North America, 5.710%, 8/3/1998 19,995,861
Total 21,995,861
INSURANCE -- 4.1%
5,000,000 Jackson National Life Insurance Co., 5.758%, 8/3/1998 5,000,000
10,000,000 Jackson National Life Insurance Co., 5.780%, 8/3/1998 10,000,000
20,119,362 (b)Liquid Asset Backed Securities Trust, Series 1997-3 Senior Notes, (Guaranteed by
AMBAC), 5.658%, 9/28/1998 20,119,362
25,000,000 Peoples Security Life Insurance Company, 5.809%, 10/1/1998 25,000,000
5,000,000 Transamerica Life Insurance and Annuity Co., 5.759%, 10/1/1998 5,000,000
Total 65,119,362
TOTAL NOTES - VARIABLE 349,149,331
</TABLE>
PRIME VALUE OBLIGATIONS FUND
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LOAN PARTICIPATION -- 1.3%
FINANCE - EQUIPMENT -- 1.3%
$ 21,000,000 Pitney Bowes Credit Corp., 5.676%, 8/10/1998 $ 20,970,348
(D)REPURCHASE AGREEMENTS -- 13.2%
77,900,000 ABN AMRO Chicago Corp., 5.690%, dated 7/31/1998, due 8/3/1998 77,900,000
15,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.620%, dated 7/31/1998, due 8/3/1998 15,000,000
10,000,000 Fuji Government Securities, Inc., 5.650%, dated 7/31/1998, due 8/3/1998 10,000,000
40,000,000 Goldman Sachs Group, LP, 5.700%, dated 7/31/1998, due 8/3/1998 40,000,000
40,000,000 HSBC Securities, Inc., 5.690%, dated 7/31/1998, due 8/3/1998 40,000,000
10,000,000 PaineWebber Group, Inc., 5.640%, dated 7/31/1998, due 8/3/1998 10,000,000
15,000,000 Societe Generale Securities Corp., 5.625%, dated 7/31/1998, due 8/3/1998 15,000,000
TOTAL REPURCHASE AGREEMENTS 207,900,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $1,593,914,484
</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 July 31, 1998, these securities amounted to
$96,108,577 which represents 6.1% 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
($1,575,859,059) at July 31, 1998.
The following acronyms are used throughout this portfolio:
AMBAC -- American Municipal Bond Assurance Corporation FSA -- Financial Security
Assurance IDA -- Industrial Development Authority LLC -- Limited Liability
Corporation LOC -- Letter of Credit LP -- Limited Partnership MBIA -- Municipal
Bond Investors Assurance PLC -- Public Limited Company
(See Notes which are an integral part of the Financial Statements) STATEMENT OF
ASSETS AND LIABILITIES
PRIME VALUE OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 207,900,000
Investments in securities 1,386,014,484
Total investments in securities, at amortized cost and value $1,593,914,484
Income receivable 6,484,237
Prepaid expenses 68,967
Total assets 1,600,467,688
LIABILITIES:
Payable for investments purchased 16,400,000
Income distribution payable 6,331,159
Payable to Bank 1,722,959
Accrued expenses 154,511
Total liabilities 24,608,629
NET ASSETS for 1,575,859,059 shares outstanding 1,575,859,059
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$1,060,101,800 / 1,060,101,800 shares outstanding $1.00
INSTITUTIONAL SERVICE SHARES:
$355,535,336 / 355,535,336 shares outstanding $1.00
INSTITUTIONAL CAPITAL SHARES:
$160,221,923 / 160,221,923 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
PRIME VALUE OBLIGATIONS FUND
SIX MONTHS ENDED JULY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $38,078,003
EXPENSES:
Investment advisory fee $ 1,340,639
Administrative personnel and services fee 505,421
Custodian fees 34,825
Transfer and dividend disbursing agent fees and expenses 17,762
Directors'/Trustees' fees 2,896
Auditing fees 7,421
Legal fees 1,991
Portfolio accounting fees 79,768
Shareholder services fee -- Institutional Shares 1,192,439
Shareholder services fee -- Institutional Service Shares 394,590
Shareholder services fee -- Institutional Capital Shares 87,962
Share registration costs 66,789
Printing and postage 12,851
Insurance premiums 37,762
Taxes 905
Miscellaneous 13,620
Total expenses 3,797,641
Waivers
Waiver of investment advisory fee $(1,013,641)
Waiver of shareholder services fee -- Institutional Shares (1,192,439)
Waiver of shareholder services fee -- Institutional Capital Shares (52,777)
Total waivers (2,258,857)
Net expenses 1,538,784
Net investment income $36,539,219
</TABLE>
(See Notes which are an integral part of the Financial Statements) STATEMENT OF
CHANGES IN NET ASSETS
PRIME VALUE OBLIGATIONS FUND
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(UNAUDITED) ENDED
JULY 31, JANUARY 31,
1998 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment income $ 36,539,219 $ 50,489,449
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income
Institutional Shares (26,313,993) (40,931,344)
Institutional Service Shares (8,333,465) (8,059,884)
Institutional Capital Shares (1,891,761) (1,498,221)
Change in net assets resulting from distributions to shareholders (36,539,219) (50,489,449)
SHARE TRANSACTIONS
Proceeds from sale of shares 11,152,929,182 15,976,645,016
Net asset value of shares issued to shareholders in payment of
distributions declared 17,420,438 33,029,994
Cost of shares redeemed (10,852,686,514) (15,177,894,329)
Change in net assets resulting from share transactions 317,663,106 831,780,681
Change in net assets 317,663,106 831,780,681
NET ASSETS:
Beginning of period 1,258,195,953 426,415,272
End of period $ 1,575,859,059 $ 1,258,195,953
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS-INSTITUTIONAL SHARES
PRIME VALUE OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1998 1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.06 0.05 0.06 0.04 0.03
LESS DISTRIBUTIONS
Distributions from net
investment income (0.03) (0.06) (0.05) (0.06) (0.04) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.77% 5.68% 5.41% 6.10% 4.51% 3.21%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.16%* 0.14% 0.16% 0.17% 0.09% 0.07%*
Net investment income 5.51%* 5.59% 5.29% 5.93% 4.20% 3.23%*
Expense waiver/reimbursement(c) 0.40%* 0.18% 0.15% 0.08% 0.16% 0.29%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $1,060,102 $865,742 $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 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)
FINANCIAL HIGHLIGHTS-INSTITUTIONAL SERVICE SHARES
PRIME VALUE OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
JULY 31, YEAR ENDED JANUARY 31,
1998 1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05 0.06 0.04 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.06) (0.04) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.64% 5.41% 5.15% 5.84% 4.26% 1.26%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.41%* 0.39% 0.41% 0.42% 0.34% 0.32%*
Net investment income 5.28%* 5.32% 5.05% 5.68% 3.95% 2.98%*
Expense waiver/reimbursement(c) 0.15%* 0.17% 0.16% 0.08% 0.16% 0.29%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $355,535 $325,390 $18,415 $20,372 $21,739 $17,504
</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)
FINANCIAL HIGHLIGHTS-INSTITUTIONAL CAPITAL SHARES
PRIME VALUE OBLIGATIONS FUND
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
JULY 31, JANUARY 31,
1998 1998 1997(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.71% 5.55% 5.26%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.28%* 0.27% 0.28%*
Net investment income 5.38%* 5.61% 5.17%*
Expense waiver/reimbursement(c) 0.30%* 0.32% 0.31%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $160,222 $67,064 $20,006
</TABLE>
* Computed on an annualized basis.
(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)
NOTES TO FINANCIAL STATEMENTS
PRIME VALUE OBLIGATIONS FUND
JULY 31, 1998 (UNAUDITED)
ORGANIZATION
Money Market Obligations Trust II (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act") as an open-end,
management investment company. The Trust consists of three portfolios. The
financial statements included herein are only those of Prime Value Obligations
Fund (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is to provide a high level of current income
consistent with stability of principal and liquidity.
The Fund offers three classes of shares: Institutional Shares, Institutional
Service Shares, and Institutional Capital Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex- dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
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 Act.
Additional information on each restricted security held at July 31, 1998, is as
follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Associates Corp. of North America 12/3/1997 $19,989,600
Bankers Trust New York Corp. 7/30/1998 16,400,000
Bankers Trust New York Corp. 1/29/1998 2,000,000
Liquid Asset Backed Securities Trust, Series 1996-3 9/12/1997 2,000,000
Liquid Asset Backed Securities Trust, Series 1997-1 2/19/1997 12,593,354
Liquid Asset Backed Securities Trust, Series 1997-3 6/27/1997 20,119,362
Triangle Funding Ltd. 10/16/1997 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.
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.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JULY 31, JANUARY 31,
INSTITUTIONAL SHARES 1998 1998
<S> <C> <C>
Shares sold 8,665,160,275 13,256,360,968
Shares issued to shareholders in payment of distributions declared 11,136,703 26,084,298
Shares redeemed (8,481,937,347) (12,804,697,557)
Net change resulting from Institutional Share transactions 194,359,631 477,747,709
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JULY 31, JANUARY 31,
INSTITUTIONAL SERVICE SHARES 1998 1998
<S> <C> <C>
Shares sold 1,735,423,603 1,999,938,515
Shares issued to shareholders in payment of distributions declared 4,939,246 5,524,975
Shares redeemed (1,710,217,284) (1,698,488,527)
Net change resulting from Institutional Service Share transactions 30,145,565 306,974,963
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JULY 31, JANUARY 31,
INSTITUTIONAL CAPITAL SHARES 1998 1998
<S> <C> <C>
Shares sold 752,345,304 720,345,533
Shares issued to shareholders in payment of distributions declared 1,344,489 1,420,721
Shares redeemed (660,531,883) (674,708,245)
Net change resulting from Institutional Capital Share transactions 93,157,910 47,058,009
Net change resulting from share transactions 317,663,106 831,780,681
</TABLE>
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.
CAPITAL CONTRIBUTION
Lehman Brothers Global Asset Management, the Fund's 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, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
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. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntary choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company ("FSSC")
serves as transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
INTERFUND TRANSACTIONS
During the period ended July 31, 1998, the Fund engaged in purchase and sale
transactions with funds that have a common investment adviser (or affiliated
investment advisers), common Directors/Trustees, and/or common Officers. These
purchase and sale transactions were made at current market value pursuant to
Rule 17a-7 under the Act amounting to $0 and $17,900,000, respectively.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
YEAR 2000
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Nicholas J. Seitanakis
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
PRIME VALUE OBLIGATIONS FUND
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Fedeated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 608912606
Cusip 608912408
Cusip 608912507
G01999-06 (9/98)
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