ANNUAL REPORT
President's Message
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Prime Cash
Obligations Fund, a portfolio of Money Market Obligations Trust II, which covers
the six-month period from February 1, 1999 through July 31, 1999. 1 The report
begins with the fund's investment review, followed by a complete list of its
holdings and its financial statements.
Prime Cash Obligations Fund keeps your ready cash working by pursuing current
income consistent with stability of principal and liquidity. 2 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
Institutional Shares, Institutional Service Shares and Institutional Capital
Shares each totaled $0.02 per share. Net assets in the fund passed the $3
billion level at the end of the reporting period.
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, 1999
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
Investment Review
Prime Cash Obligations Fund invests in money market instruments maturing in 397
days 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.
Although economic growth of the first half of 1999 was slower than the torrid
pace set in the second half of 1998, it still remained slightly above target.
The gross domestic product ("GDP") for the first quarter registered 4.30%, while
second quarter GDP abated a bit to 2.30%. The consumer sector remained the
dominant growth engine, although recoveries in the emerging market economies had
positively impacted the manufacturing sector as well as the export sector. The
employment situation in the U.S. continued to add stability to the economy as
the most recent employment report of July 1999 reflected an unemployment rate of
just 4.30%.
An inflation scare was introduced into the market with the release of the April
producer price index ("PPI"). The PPI increased at an annualized pace of 6.20%
followed by the April consumer price index ("CPI") which increased 8.70%. For
the entire reporting period, the CPI increased just 2.60% while the PPI rose
1.40%, both on an annualized basis. Wages provided the third inflationary threat
for the reporting period, as the employment cost index registered a mild 1.70%
gain in the first quarter followed by a huge 4.00% annualized gain in the second
quarter.
The Federal Reserve Board (the "Fed") chose to act preemptively to quell these
inflationary threats and raised the target rate for federal funds from 4.75% to
5.00% on June 30, 1999. The rest of the market had already anticipated such an
action, resulting in a much steeper money market yield curve from the middle of
April. Thirty-day commercial paper started the reporting period at 4.82% on
February 1, 1999, held around that level through mid-June, then began rising
into the 5.00% range. Thirty-day commercial paper ended the reporting period at
5.11%.
The target average maturity for Prime Cash Obligations Fund remained in the
45-55 day range for the entire reporting period, reflecting a neutral to
positive position regarding the money market yield curve. In structuring the
fund, there was 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, 1999, the net assets of Prime Cash
Obligations Fund increased from $2,950.3 million to $3,133.7 million, while the
7-day net yield increased as follows: Institutional Shares increased from 4.94%
to 4.96%, Institutional Service Shares increased from 4.69% to 4.71%, and
Institutional Capital Shares increased from 4.82% to 4.84%. 1 The
dollar-weighted effective average maturity of the fund on July 31, 1999, was 52
days.
1 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
JULY 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM NOTES-9.4%
BANKING-0.8%
$ 25,000,000 Abbey National Treasury
Services, PLC, 4.990%,
1/10/2000 $ 24,996,789
FINANCE - AUTOMOTIVE-1.7%
20,000,000 Honda Auto Lease Trust
1999-A, Class A1, 5.445%,
8/15/2000 20,000,000
3,048,746 Honda Auto Receivables
1999-1 Owner Trust, Class
A-1, 4.974%, 2/15/2000 3,048,746
30,000,000 Toyota Auto Receivables
1999-A Owner Trust, Class
1, 5.365%, 8/11/2000 30,000,000
TOTAL 53,048,746
FINANCE - COMMERCIAL-5.7%
178,500,000 Beta Finance, Inc., 5.100%
- 5.520%, 1/18/2000 -
6/12/2000 178,507,784
FINANCE - EQUIPMENT-0.8%
15,000,000 Caterpillar Financial
Asset Trust 1999-A, Class
1, 5.365%, 7/25/2000 15,000,000
7,214,507 Navistar Financial 1999-A
Owner Trust, Class A-1,
5.003%, 6/15/2000 7,214,507
3,074,053 Newcourt Equipment Trust
Securities 1998-2, Class
A-1, 5.195%, 1/15/2000 3,074,053
TOTAL 25,288,560
INSURANCE-0.4%
475,093 Americredit Automobile
Receivables Trust 1998-D,
Class A1, (Insured by FSA),
5.199%, 11/12/1999 475,093
4,501,121 Americredit Automobile
Receivables Trust 1999-A,
Class A1, (Insured by FSA),
4.980%, 3/12/2000 4,501,121
7,903,841 Americredit Automobile
Receivables Trust 1999-B,
Class A1, (Insured by FSA),
4.917%, 6/12/2000 7,903,841
TOTAL 12,880,055
TOTAL SHORT-TERM NOTES 294,721,934
CERTIFICATES OF DEPOSIT-
6.4%
BANKING-6.4%
27,000,000 Bank of Montreal, 5.250%,
5/12/2000 26,989,854
75,000,000 Barclays Bank of Canada,
(Guaranteed by Barclays
Bank PLC, London), 5.016% -
5.020%, 1/10/2000 -
1/13/2000 74,988,169
26,000,000 Bayerische Landesbank
Girozentrale, 5.150% -
5.230%, 3/21/2000 25,986,223
39,000,000 Canadian Imperial Bank of
Commerce, 4.987% - 5.160%,
2/7/2000 - 2/23/2000 38,991,852
25,000,000 Commerzbank AG, Frankfurt,
5.200% - 5.290%, 4/7/2000 -
5/15/2000 24,992,247
10,000,000 Royal Bank of Canada,
Montreal, 5.020%,
1/24/2000 9,998,143
TOTAL CERTIFICATES OF
DEPOSIT 201,946,488
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
COMMERCIAL PAPER-34.5% 3
BANKING-10.5%
$ 41,600,000 ABN AMRO Bank N.V.,
Amsterdam, 4.857%,
12/1/1999 $ 40,915,271
25,000,000 Abbey National N.A. Corp.,
(Guaranteed by Abbey
National Bank PLC,
London), 4.950%,
11/26/1999 24,597,813
7,320,000 Fountain Square Commercial
Funding Corp., (Fifth
Third Bank, Cincinnati
Support Agreement), 4.850%
- 5.130%, 8/3/1999 -
8/23/1999 7,312,242
85,000,000 Greenwich Funding Corp.,
4.930% - 5.130%, 8/16/1999
- 2/1/2000 84,187,760
76,541,000 Park Avenue Receivables
Corp., 5.120%, 8/6/1999 -
8/19/1999 76,404,962
80,261,000 Three Rivers Funding
Corp., 4.890% - 5.120%,
8/10/1999 - 8/25/1999 80,067,660
14,650,000 Wood Street Funding Corp.,
4.890%, 8/24/1999 14,604,231
TOTAL 328,089,939
CONSUMER PRODUCTS-1.3%
40,000,000 Diageo Capital PLC,
(Guaranteed by Diageo
PLC), 4.820%, 8/20/1999 39,898,244
FINANCE - AUTOMOTIVE-1.9%
30,000,000 DaimlerChrysler North
America Holding Corp.,
4.840%, 8/13/1999 29,951,600
30,000,000 General Motors Acceptance
Corp., 5.250% - 5.360%,
1/31/2000 - 3/6/2000 29,091,700
TOTAL 59,043,300
FINANCE - COMMERCIAL-11.3%
45,000,000 Corporate Asset Funding
Co., Inc. (CAFCO), 4.930% -
4.970%, 8/2/1999 -
8/5/1999 44,983,456
10,000,000 Falcon Asset
Securitization Corp.,
5.130%, 8/16/1999 9,978,625
35,000,000 GE Capital International
Funding, Inc., (Guaranteed
by General Electric
Capital Corp.), 5.290% -
5.310%, 1/24/2000 -
1/26/2000 34,083,039
50,000,000 General Electric Capital
Corp., 5.130%, 8/2/1999 49,992,875
80,000,000 PREFCO-Preferred
Receivables Funding Co.,
4.930% - 4.940%, 8/2/1999 -
8/4/1999 79,977,390
40,000,000 Receivables Capital Corp.,
4.930% - 4.980%, 8/3/1999 -
8/6/1999 39,980,689
80,000,000 Sheffield Receivables
Corp., 5.120% - 5.140%,
8/9/1999 - 9/16/1999 79,757,711
17,000,000 Sigma Finance, Corp.,
5.200% - 5.550%, 10/4/1999
- 2/4/2000 16,640,497
TOTAL 355,394,282
FINANCE - RETAIL-6.7%
12,000,000 Associates First Capital
B.V., (Guaranteed by
Associates First Capital
Corp.), 5.470%, 1/24/2000 11,679,093
50,000,000 Household Finance Corp.,
5.130%, 8/2/1999 49,992,875
75,000,000 New Center Asset Trust,
Series A1+/P1, 5.130%,
8/2/1999 74,989,313
75,000,000 New Center Asset Trust,
Series A1/P1, 4.830% -
4.908%, 8/9/1999 -
8/12/1999 74,909,438
TOTAL 211,570,719
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
COMMERCIAL PAPER-continued
3
INSURANCE-2.8%
$ 33,000,000 Aspen Funding Corp.,
(Insured by MBIA), 5.120%,
8/16/1999 - 8/25/1999 $ 32,916,800
35,000,000 CXC, Inc., 5.050% - 5.120%,
8/10/1999 - 9/3/1999 34,921,504
20,000,000 Marsh USA Inc., 5.520%,
1/28/2000 19,448,000
TOTAL 87,286,304
TOTAL COMMERCIAL PAPER 1,081,282,788
LOAN PARTICIPATION-2.9%
BROKERAGE-0.8%
25,000,000 Goldman Sachs Group, Inc.,
5.023%, 8/2/1999 25,000,000
ELECTRICAL EQUIPMENT-0.5%
16,700,000 Mt. Vernon Phenol Plant
Partnership, (Guaranteed
by General Electric Co.),
5.050%, 5/17/2000 16,700,000
FINANCE - EQUIPMENT-1.6%
50,000,000 Pitney Bowes Credit Corp.,
5.204%, 8/10/1999 49,935,250
TOTAL LOAN PARTICIPATION 91,635,250
VARIABLE RATE OBLIGATIONS-
30.5% 4
BANKING-14.1%
2,000,000 Albuquerque, NM, Series
1997, El Canto, Inc.,
(Norwest Bank Minnesota,
N.A. LOC), 5.560%,
8/5/1999 2,000,000
1,600,000 Beech Grove, IN, Series
1997, Poster Display Co,
(Bank One, Indiana, N.A.
LOC), 5.270%, 8/5/1999 1,600,000
1,925,000 C. W. Caldwell, Inc.,
Sweetbriar Assisted Living
Facility, Project,
(Huntington National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 1,925,000
6,700,000 Capital One Funding Corp.,
Series 1993-A, (Bank One,
Ohio, N.A. LOC), 5.270%,
8/5/1999 6,700,000
21,489,000 Capital One Funding Corp.,
Series 1999-A, (Bank One,
Kentucky LOC), 5.270%,
8/5/1999 21,489,000
2,845,000 Casna Limited Partnership,
Series 1997, (Huntington
National Bank, Columbus,
OH LOC), 5.270%, 8/5/1999 2,845,000
10,290,000 Cedarville College, Series
1998, (KeyBank, N.A. LOC),
5.250%, 8/5/1999 10,294,233
4,525,000 Chartiers Valley PA
Industrial & Commercial
Development Authority,
Woodhaven Convalescent
Center, Series 1997-B,
(Bank One, Ohio, N.A. LOC),
5.270%, 8/5/1999 4,525,000
1,440,000 Children's Defense Fund,
(Allfirst LOC), 5.320%,
8/3/1999 1,440,000
6,000,000 Colonie, NY IDA,
Mechanical Technology,
Inc. Project, Series 1998
A, (KeyBank, N.A. LOC),
5.250%, 8/5/1999 6,000,000
10,150,000 Cuyahoga County, OH,
Gateway Arena Project,
Series 1992-B, (Canadian
Imperial Bank of Commerce
LOC), 5.320%, 8/5/1999 10,150,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
VARIABLE RATE OBLIGATIONS-
continued 4
BANKING-CONTINUED
$ 8,650,000 Elsinore Properties, L.P.,
Series 1998, (Fifth Third
Bank, Cincinnati LOC),
5.200%, 8/5/1999 $ 8,650,000
25,000,000 First Union National Bank,
Charlotte, NC, 5.240%,
8/11/1999 25,000,000
1,020,000 Flowform, Inc.,
(Huntington National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 1,020,000
6,580,000 Franklin County, OH,
Edison Welding, Series
1995, (Huntington National
Bank, Columbus, OH LOC),
5.270%, 8/5/1999 6,580,000
11,730,000 Georgetown, KY Educational
Institution, Series 1997-
A, (Bank One, Kentucky
LOC), 5.270%, 8/5/1999 11,730,000
4,130,000 Georgia Ports Authority,
Colonel's Island Terminal
Project, Series 1996-A,
Revenue Bonds, (SunTrust
Bank, Atlanta LOC),
5.200%, 8/4/1999 4,130,000
1,410,000 Gerald T. Thom, Trustee
U.A.D., March 27, 1997,
(Huntington National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 1,410,000
1,600,000 Gettysburg Area IDA,
Hanover Lantern, Inc.
Project, Series 1998-B,
(Allfirst LOC), 5.220%,
8/4/1999 1,600,000
11,400,000 Healthcare Network
Properties, LLC, Series A,
(National City Bank,
Michigan/Illinois LOC),
5.160%, 8/5/1999 11,400,000
11,550,000 Heritage at the Falls
Assisted Living, Ltd.,
Series 1997, (BankBoston,
N.A. LOC), 5.360%,
8/5/1999 11,550,000
9,000,000 IT Spring Wire, LLC, Series
1997, (Fifth Third Bank,
Cincinnati LOC), 5.190%,
8/5/1999 9,000,000
4,119,000 International Processing
Corp., (Bank One, Kentucky
LOC), 5.320%, 8/5/1999 4,119,000
2,000,000 Kit Carson County, CO,
Midwest Farms Project,
(Norwest Bank Minnesota,
N.A. LOC), 5.450%,
8/4/1999 2,000,000
6,000,000 Laverne City, IDA, Mobile
Tool Intl, Inc. Project,
Series 1998-B, (Fleet Bank
N.A. LOC), 5.250%,
8/5/1999 6,000,000
59,577,394 1,2 Liquid Asset Backed
Securities Trust, Series
1997-1, (Westdeutsche
Landesbank Girozentrale
Swap Agreement), 5.180%,
8/16/1999 59,577,394
19,136,120 1,2 Liquid Asset Backed
Securities Trust, Series
1997-3, Senior Notes,
(Guaranteed by AMBAC),
5.298%, 9/28/1999 19,136,120
19,509,675 1,2 Liquid Asset Backed
Securities Trust, Sr.
Notes, Series 1998-1,
(Guaranteed by AMBAC),
5.164%, 8/9/1999 19,509,675
32,915,000 M/S Land, LLC, (Bank One,
Illinois, N.A. LOC),
5.320%, 8/5/1999 32,915,000
5,900,000 MMR Funding I, Series A,
(Bayerische Hypotheken-und
Vereinsbank AG LOC),
5.270%, 8/5/1999 5,900,000
4,890,000 Medilodge Group,
Meadowbrook Project,
(KeyBank, N.A. LOC),
5.320%, 8/5/1999 4,890,000
10,000,000 Mississippi Business
Finance Corp., Kohler
Project, (Wachovia Bank of
NC, N.A., Winston-Salem
LOC), 5.200%, 8/5/1999 10,000,000
3,100,000 New Berlin, WI, Sunraider
LLC, Series 1997B, (Bank
One, Wisconsin, N.A. LOC),
5.270%, 8/5/1999 3,100,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
VARIABLE RATE OBLIGATIONS-
continued 4
BANKING-CONTINUED
$ 4,400,000 New Jersey EDA, Morey
Organization, Inc.
Project, Series 1997,
(First Union National
Bank, Charlotte, NC LOC),
5.250%, 8/4/1999 $ 4,400,000
2,565,000 New Jersey EDA, Pheonix
Realty Partners, (First
Union National Bank,
Charlotte, NC LOC),
5.250%, 8/4/1999 2,565,000
9,600,000 O.K.I. Supply Co., Series
1998, (Fifth Third Bank,
Cincinnati LOC), 5.200%,
8/5/1999 9,600,000
3,365,000 Oakwoods Master Ltd.
Partnership, Series 1997,
(Amsouth Bank N.A.,
Birmingham LOC), 5.313%,
8/5/1999 3,365,000
3,525,000 Olszeski Properties, Inc.,
Series 1988, (Bank One,
Ohio, N.A. LOC), 5.320%,
8/5/1999 3,525,000
4,300,000 Primex Funding Corp.,
Series 1997-A, (Bank One,
Indiana, N.A. LOC),
5.270%, 8/5/1999 4,300,000
2,449,243 1,2 Rabobank Optional
Redemption Trust, Series
1997-101, 5.310%,
10/20/1999 2,449,243
9,820,000 Royal Wine Corp. and KFP
International Ltd., Series
1998, (KeyBank, N.A. LOC),
5.250%, 8/5/1999 9,820,000
7,000,000 Sandridge Food Corp.,
(Bank One, Ohio, N.A. LOC),
5.320%, 8/5/1999 7,000,000
9,600,000 Smith Land Improvement
Corp., Series 1999,
(Allfirst LOC), 5.220%,
8/3/1999 9,600,000
22,000,000 Societe Generale, Paris,
5.203%, 8/11/1999 21,999,603
3,810,000 Solon Properties, LLC,
(Huntington National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 3,810,000
2,175,000 Spitzer Group, Series
1998-C, (Bank One, Ohio,
N.A. LOC), 5.270%,
8/5/1999 2,175,000
1,155,000 TDB Realty, Ltd.,
(Huntington National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 1,155,000
2,160,000 Tallahassee-Leon County
Civic Center Authority,
Series 1998-C, (SunTrust
Bank, Central Florida
LOC), 5.200%, 8/4/1999 2,160,000
3,280,000 Team Rahal of Pittsburgh,
Inc., Series 1997,
(Huntington National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 3,280,000
2,255,000 Trap Rock Industries,
Inc., Series 1997, (First
Union National Bank,
Charlotte, NC LOC),
5.250%, 8/4/1999 2,255,000
885,000 Triple O, LLC, Series 1999,
(Huntington National Bank,
Columbus, OH LOC), 5.320%,
8/5/1999 885,000
5,565,000 VLF, LLC, The Village of
Lovejoy, Fountain Project,
(KeyBank, N.A. LOC),
5.390%, 8/5/1999 5,565,000
2,715,000 Van Wyk Enterprises, Inc.,
(Huntington National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 2,715,000
10,000,000 Wildcat Management Co.,
Inc., Series 1999,
(Firstar Bank, N.A.,
Cincinnati LOC), 5.230%,
8/5/1999 10,000,000
TOTAL 440,809,268
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
VARIABLE RATE OBLIGATIONS-
continued 4
BROKERAGE-3.7%
$ 117,600,000 Morgan Stanley, Dean
Witter & Co., 5.230% -
5.420%, 8/2/1999 $ 117,600,000
FINANCE - AUTOMOTIVE-2.5%
53,800,000 General Motors Acceptance
Corp., 5.370%, 8/2/1999 53,800,000
25,000,000 General Motors Acceptance
Corp., Mortgage of PA,
(Guaranteed by General
Motors Acceptance Corp.)
5.190%, 10/1/1999 24,775,570
TOTAL 78,575,570
FINANCE - COMMERCIAL-1.1%
33,000,000 Sigma Finance, Inc.,
5.23%, 8/2/1999 33,000,000
FINANCE - RETAIL-0.3%
8,800,000 1 Bishop's Gate Residential
Mortgage Trust, Series
1998-2, Class A-1, 5.420%,
8/10/1999 8,800,000
INSURANCE-8.8%
24,000,000 Allstate Life Insurance
Co., 5.075% - 5.370%,
8/2/1999 24,000,000
30,000,000 Aspen Funding Corp.,
(Insured by MBIA), 5.038%,
1/18/2000 30,000,000
27,000,000 First Allmerica Financial
Life Insurance Co.,
5.140%, 9/1/1999 27,000,000
15,000,000 GE Life and Annuity
Assurance Co., 5.141%,
9/1/1999 15,000,000
62,400,000 Jackson National Life
Insurance Co., 5.120% -
5.510%, 8/2/1999 -
8/23/1999 62,400,000
19,000,000 Monumental Life Insurance
Co., 5.290% - 5.430%,
8/2/1999 19,000,000
20,000,000 Principal Life Insurance
Co., 5.200%, 9/1/1999 20,000,000
15,000,000 Protective Life Insurance
Co., 5.145%, 8/2/1999 15,000,000
10,000,000 Security Life of Denver
Insurance Co., 5.371%,
8/2/1999 10,000,000
35,000,000 Transamerica Life
Insurance and Annuity Co.,
5.399% - 5.439%, 8/9/1999 -
10/1/1999 35,000,000
10,000,000 Transamerica Occidental
Life Insurance Co.,
5.599%, 9/6/1999 10,000,000
10,000,000 Travelers Insurance
Company, 5.393%, 8/2/1999 10,000,000
TOTAL 277,400,000
TOTAL VARIABLE RATE
OBLIGATIONS 956,184,838
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
TIME DEPOSIT-3.2%
BANKING-3.2%
$ 100,000,000 SunTrust Bank, Atlanta,
5.125%, 8/2/1999 $ 100,000,000
REPURCHASE AGREEMENTS-
12.8% 5
150,000,000 Bank of America, 5.130%,
dated 7/30/1999, due
8/2/1999 150,000,000
194,700,000 Bear, Stearns and Co.,
5.130%, dated 7/30/1999,
due 8/2/1999 194,700,000
50,000,000 Goldman Sachs Group, LP,
5.130%, dated 7/30/1999,
due 8/2/1999 50,000,000
5,300,000 Societe Generale
Securities Corp., 5.070%,
dated 7/30/1999, due
8/2/1999 5,300,000
TOTAL 400,000,000
TOTAL INVESTMENTS (AT
AMORTIZED COST) 6 $ 3,125,771,298
</TABLE>
1 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. At July 31, 1999, these securities amounted to
$109,472,432 which represents 3.5% of net assets. Included in these amounts,
securities which have been deemed liquid amounted to $100,672,432 which
represents 3.2% of net assets.
2 Denotes a restricted security that has been deemed liquid by criteria approved
by the fund's Board of Trustees.
3 Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
4 Current rate and next reset date shown.
5 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.
6 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($3,133,700,648) at July 31, 1999.
The following acronyms are used throughout this portfolio:
AMBAC -American Municipal Bond Assurance Corporation
EDA -Economic Development Authority
FSA -Financial Security Assurance
IDA -Industrial Development Authority
LOC -Letter of Credit
MBIA -Municipal Bond Investors Assurance
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
JULY 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in repurchase
agreements $ 400,000,000
Investments in securities 2,725,771,298
Total investments in
securities, at amortized
cost and value $ 3,125,771,298
Cash 13,760
Income receivable 13,367,466
TOTAL ASSETS 3,139,152,524
LIABILITIES:
Income distribution
payable 5,152,952
Payable for shareholder
services fee 226,932
Accrued expenses 71,992
TOTAL LIABILITIES 5,451,876
Net assets for
3,133,700,648 shares
outstanding $ 3,133,700,648
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
INSTITUTIONAL SHARES:
$1,929,887,367 /
1,929,887,367 shares
outstanding $1.00
INSTITUTIONAL SERVICE
SHARES:
$957,998,052 / 957,998,052
shares outstanding $1.00
INSTITUTIONAL CAPITAL
SHARES:
$245,815,229 / 245,815,229
shares outstanding $1.00
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
PERIOD ENDED JULY 31, 1999 1
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 90,666,293
EXPENSES:
Investment advisory fee $ 3,622,592
Administrative personnel
and services fee 1,365,717
Custodian fees 122,213
Transfer and dividend
disbursing agent fees and
expenses 99,536
Directors'/Trustees' fees 15,241
Auditing fees 14,135
Legal fees 14,643
Portfolio accounting fees 157,523
Shareholder services fee-
Institutional Service
Shares 1,144,130
Shareholder services fee-
Institutional Capital
Shares 629,946
Share registration costs 24,273
Printing and postage 17,842
Insurance premiums 186,335
Miscellaneous 10,843
TOTAL EXPENSES 7,424,969
WAIVERS:
Waiver of investment
advisory fee $ (2,260,468)
Waiver of shareholder
services fee-Institutional
Capital Shares (377,967)
TOTAL WAIVERS (2,638,435)
Net expenses 4,786,534
Net investment income $ 85,879,759
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 128,409,170
EXPENSES:
Investment advisory fee $ 4,676,382
Administrative personnel
and services fee 1,762,996
Custodian fees 151,496
Transfer and dividend
disbursing agent fees and
expenses 114,299
Directors'/Trustees' fees 15,781
Auditing fees 14,192
Legal fees 11,165
Portfolio accounting fees 232,807
Shareholder services fee-
Institutional Shares 3,449,515
Shareholder services fee-
Institutional Service
Shares 1,803,553
Shareholder services fee-
Institutional Capital
Shares 592,410
Share registration costs 36,193
Printing and postage 21,921
Insurance premiums 166,534
Miscellaneous 9,204
TOTAL EXPENSES 13,058,448
WAIVERS:
Waiver of investment
advisory fee $ (2,853,923)
Waiver of shareholder
services fee-Institutional
Shares (3,449,515)
Waiver of shareholder
services fee-Institutional
Capital Shares 355,446)
TOTAL WAIVERS (6,658,884)
Net expenses 6,399,564
Net investment income $ 122,009,606
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1999 1998
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 85,879,759 $ 122,009,606 $ 94,064,903
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Institutional Shares (52,994,564) (73,059,518) (64,610,393)
Institutional Service
Shares (21,202,105) (36,684,622) (25,937,194)
Institutional Capital
Shares (11,683,090) (12,265,466) (3,517,316)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS TO
SHAREHOLDERS (85,879,759) (122,009,606) (94,064,903)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 24,795,354,445 33,162,916,740 25,518,721,091
Net asset value of shares
issued to shareholders in
payment of distributions
declared 35,271,569 55,512,391 45,738,378
Cost of shares redeemed (24,647,235,068) (32,428,562,553) (25,438,600,121)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 183,390,946 789,866,578 125,859,348
Change in net assets 183,390,946 789,866,578 125,859,348
NET ASSETS:
Beginning of period 2,950,309,702 2,160,443,124 2,034,583,776
End of period $ 3,133,700,648 $ 2,950,309,702 $ 2,160,443,124
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2 1996 1995
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.06 0.05 0.06 0.04
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.02) (0.05) (0.06) (0.05) (0.06) (0.04)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3 2.42% 5.50% 5.61% 5.38% 6.08% 4.52%
RATIOS TO AVERAGE NET ASSETS:
Expenses 4 0.31% 5 0.55% 0.30% 0.32% 0.25% 0.25%
Net Investment income 4 4.68% 5 4.92% 5.32% 5.11% 5.82% 4.17%
Expenses (after waivers) 0.18% 5 0.18% 0.18% 0.18% 0.17% 0.12%
Net investment income
(after waivers) 4.81% 5.29% 5.44% 5.25% 5.90% 4.30%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $1,929,887 $1,825,266 $1,100,620 $1,572,912 $3,919,186 $1,538,802
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
5 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2 1996 1995
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.05 0.05 0.06 0.04
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.02) (0.05) (0.05) (0.05) (0.06) (0.04)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3 2.29% 5.23% 5.34% 5.11% 5.83% 4.21%
RATIOS TO AVERAGE NET ASSETS:
Expenses 4 0.56% 5 0.55% 0.55% 0.57% 0.50% 0.50%
Net investment income 4 4.50% 5 4.97% 5.17% 4.88% 5.57% 3.92%
Expenses (after waivers) 0.43% 5 0.43% 0.43% 0.43% 0.42% 0.37%
Net investment income (after waivers) 4.63% 5 5.09% 5.29% 5.02% 5.65% 4.05%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $957,998 $894,851 $668,665 $412,762 $324,474 $342,673
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
5 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Capital Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2 1996 1995 3
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.05 0.05 0.06 0.02
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.02) (0.05) (0.05) (0.05) (0.06) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 1.00 $ 1.00
TOTAL RETURN 4 2.36% 5.37% 5.48% 5.23% 5.94% 1.66%
RATIOS TO AVERAGE NET ASSETS:
Expenses 5 0.58% 6 0.57% 0.56% 0.50% 0.40% 0.39% 6
Net investment income 5 4.36% 6 4.91% 5.20% 4.82% 5.67% 4.03% 6
Expenses (after waivers) 0.30% 6 0.30% 0.30% 0.32% 0.32% 0.27% 6
Net investment income (after waivers) 4.64% 6 5.18% 5.46% 5.00% 5.75% 4.15% 6
SUPPLEMENTAL DATA:
Net assets, end of period $245,815 $230,193 $391,159 $48,910 $11,811 $8,318
(000 ommitted)
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Reflects operations for the period from October 6, 1994 (date of initial
public investment) to January 31, 1995.
4 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
5 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
6 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
JULY 31, 1999
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 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 provision for federal tax is
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, 1999 is as
follows:
<TABLE>
<CAPTION>
SECURITY ACQUISITION DATE ACQUISITION COST
<S> <C> <C>
Bishop's Gate Residential
Mortgage Trust, Series
1998-2,
Class A-1, 5.420%,
8/10/1999 12/11/1998 $8,800,000
</TABLE>
CHANGE IN FISCAL YEAR
The Trust has changed its fiscal year-end from January 31 to July 31.
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, 1999, capital paid-in aggregated $3,133,700,648.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL SHARES:
Shares sold 18,081,938,275 23,532,773,371 18,791,341,606
Shares issued to
shareholders in payment of
distributions declared 26,581,479 44,134,116 42,611,959
Shares redeemed (18,003,898,560) (22,852,260,827) (19,306,246,896 )
NET CHANGE RESULTING FROM
INSTITUTIONAL SHARE
TRANSACTIONS 104,621,194 724,646,660 (472,293,331)
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL SERVICE
SHARES:
Shares sold 4,467,896,195 7,290,975,466 5,032,974,804
Shares issued to
shareholders in payment of
distributions declared 3,350,044 5,275,668 580,621
Shares redeemed (4,408,099,082) (7,070,064,987) (4,777,652,535)
NET CHANGE RESULTING FROM
INSTITUTIONAL SERVICE
SHARE TRANSACTIONS 63,147,157 226,186,147 255,902,890
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL CAPITAL
SHARES:
Shares sold 2,245,519,975 2,339,167,903 1,694,404,681
Shares issued to
shareholders in payment of
distributions declared 5,340,046 6,102,607 2,545,798
Shares redeemed (2,235,237,426) (2,506,236,739) (1,354,700,690)
NET CHANGE RESULTING FROM
INSTITUTIONAL CAPITAL
SHARE TRANSACTIONS 15,622,595 (160,966,229) 342,249,789
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 183,390,946 789,866,578 125,859,348
</TABLE>
1 The Fund has changed its fiscal year-end from January 31 to July 31.
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Investment Management Company, 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC 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 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 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
Report of Ernst & Young LLP, Independent Auditors
TO THE TRUSTEES AND SHAREHOLDERS OF
MONEY MARKET OBLIGATIONS TRUST II:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Prime Cash Obligations Fund (one of the
portfolios constituting the Money Market Obligations Trust II) as of July 31,
1999, and the related statements of operations for the period from February 1,
1999 to July 31, 1999 and for the year ended January 31, 1999, the statements of
changes in net assets for the period from February 1, 1999 to July 31, 1999 and
for each of the two years in the period ended January 31, 1999, and the
financial highlights for each of the periods presented therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1999 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Prime Cash Obligations Fund of the Money Market Obligations Trust II at July 31,
1999, and the results of its operations for the period from February 1, 1999 to
July 31, 1999 and for the year ended January 31, 1999, the changes in its net
assets for the period from February 1, 1999 to July 31, 1999 and for each of the
two years in the period ended January 31, 1999, and the financial highlights for
each of the periods presented therein, in conformity with generally accepted
accounting principles.
[Graphic]
Boston, Massachusetts
September 17, 1999
Trustees
JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
JOHN F. CUNNINGHAM
J. CHRISTOPHER DONAHUE
LAWRENCE D. ELLIS, M.D.
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
JOHN E. MURRAY, JR., J.D., S.J.D.
MARJORIE P. SMUTS
JOHN S. WALSH
Officers
JOHN F. DONAHUE
Chairman
J. CHRISTOPHER DONAHUE
President
WILLIAM D. DAWSON, III
Chief Investment Officer
EDWARD C. GONZALES
Executive Vice President
JOHN W. MCGONIGLE
Executive Vice President and Secretary
RICHARD B. FISHER
Vice President
RICHARD J. THOMAS
Treasurer
LESLIE K. ROSS
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 the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated
World-Class Investment Manager
ANNUAL REPORT
Prime Cash Obligations Fund
ANNUAL REPORT TO SHAREHOLDERS
JULY 31, 1999
[Graphic]
Federated
Prime Cash Obligations Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 608912887
Cusip 608912705
Cusip 608912804
G01999-02 (9/99)
[Graphic]
ANNUAL REPORT
President's Message
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Prime Value
Obligations Fund, a portfolio of Money Market Obligations Trust II, which covers
the six-month period from February 1, 1999 through July 31, 1999. 1 The report
begins with the fund's investment review, followed by a complete list of its
holdings and its financial statements.
Prime Value Obligations Fund keeps your ready cash working by pursuing current
income consistent with stability of principal and liquidity. 2 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
Institutional Shares, Institutional Service Shares and Institutional Capital
Shares each totaled $0.02 per share. Net assets in the fund reached
$2.1 billion at the end of the reporting period.
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, 1999
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
Investment Review
Prime Value Obligations Fund invests in money market instruments maturing in 397
days 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.
Although economic growth of the first half of 1999 was slower than the torrid
pace set in the second half of 1998, it still remained slightly above target.
Gross domestic product ("GDP") for the first quarter registered 4.30%, while
second quarter GDP abated a bit to 2.30%. The consumer sector remained the
dominant growth engine, although recoveries in the emerging market economies had
positively impacted the manufacturing sector as well as the export sector. The
employment situation in the U.S. continued to add stability to the economy as
the most recent employment report of July 1999 reflected an unemployment rate of
just 4.30%.
An inflation scare was introduced into the market with the release of the April
producer price index ("PPI"). The PPI increased at an annualized pace of 6.20%
followed by the April consumer price index ("CPI") which increased 8.70%. For
the entire reporting period, the CPI increased just 2.60% while the PPI rose
1.40%, both on an annualized basis. Wages provided the third inflationary threat
for the reporting period, as the employment cost index registered a mild 1.70%
gain in the first quarter followed by a huge 4.00% annualized gain in the second
quarter.
The Federal Reserve Board (the "Fed") chose to act preemptively to quell these
inflationary threats and raised the target rate for federal funds from 4.75% to
5.00% on June 30, 1999. The rest of the market had already anticipated such an
action, resulting in a much steeper money market yield curve from the middle of
the month of April. Thirty-day commercial paper started the reporting period at
4.82% on February 1, 1999, held around that level through mid-June, then began
rising into the 5.00% range. Thirty-day commercial paper ended the reporting
period at 5.11%.
The target average maturity range for Prime Value Obligations Fund started the
reporting period at 45-55 days and was subsequently lengthened on March 1, 1999
to the 50-60 day range, reflecting a neutral to positive position on the money
market yield curve. In structuring the fund, there was 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, 1999, the net assets of Prime Value
Obligations Fund decreased from $2,169.4 million to $2,131.2 million, while the
7-day net yield increased as follows: Institutional Shares increased from 4.97%
to 4.99%, Institutional Service Shares increased from 4.72% to 4.74% and
Institutional Capital Shares increased from 4.85% to 4.87%. 1 The
dollar-weighted effective average maturity of the Fund on July 31, 1999, was 57
days.
1 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
JULY 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM NOTES-8.5%
BANKING-2.1%
$ 45,000,000 Abbey National Treasury
Services, PLC, 4.990 -
5.075%, 1/10/2000 -
1/13/2000 $ 44,994,318
FINANCE - AUTOMOTIVE-0.1%
2,518,530 Honda Auto Receivables
1999-1 Owner Trust, Class
A-1, 4.974%, 2/15/2000 2,518,530
FINANCE - COMMERCIAL-5.8%
115,500,000 Beta Finance, Inc., 5.000%
- 5.700%, 1/25/2000 -
6/28/2000 115,497,255
9,000,000 FINOVA Capital Corp.,
5.150% - 6.450%, 6/1/2000 -
6/12/2000 9,016,283
TOTAL 124,513,538
FINANCE - EQUIPMENT-0.3%
3,790,656 Heller Equipment Asset
Receivables Trust, Series
1999-1, Class A1,
4.947%, 5/13/2000 3,790,656
2,305,540 Newcourt Equipment Trust
Securities, Series 1998-2,
Class A-1,
5.195%, 1/15/2000 2,305,540
TOTAL 6,096,196
FINANCE - RETAIL-0.1%
2,328,766 Greentree Recreational,
Equipment & Consumer
Trust, Series 1999-A,
Class A1, 5.096%,
6/15/2000 2,328,766
INSURANCE-0.1%
1,017,799 WFS Financial 1998-C Owner
Trust, Class A1, (Insured
by FSA),
5.395%, 11/20/1999 1,017,799
TOTAL SHORT-TERM NOTES 181,469,147
CERTIFICATES OF DEPOSIT-
10.8%
BANKING-10.8%
10,000,000 Allfirst, 5.020%,
1/25/2000 9,998,596
15,000,000 Bank of Nova Scotia,
Toronto, 5.250%, 3/9/2000 14,996,505
10,000,000 Bayerische Landesbank
Girozentrale, 5.115%,
3/21/2000 9,997,856
50,000,000 Canadian Imperial Bank of
Commerce, 5.000% - 5.270%,
1/27/2000 - 3/3/2000 49,989,224
20,000,000 Commerzbank AG, Frankfurt,
5.240%, 5/15/2000 19,992,409
50,000,000 Svenska Handelsbanken,
Stockholm, 5.150%,
3/20/2000 49,990,818
75,000,000 Toronto-Dominion Bank,
4.980%, 1/10/2000 74,987,157
TOTAL CERTIFICATES OF
DEPOSIT 229,952,565
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMERCIAL PAPER-33.2% 3
BANKING-8.5%
$ 20,000,000 Abbey National N.A. Corp.,
(Guaranteed by Abbey
National Bank PLC,
London), 4.865%, 12/1/1999 $ 19,670,261
65,948,000 Gotham Funding Corp.,
5.200%, 8/10/1999 -
8/30/1999 65,790,196
35,000,000 Greenwich Funding Corp.,
5.120% - 5.130%, 8/16/1999
- 8/17/1999 34,923,133
20,000,000 PNC Funding Corp.,
(Guaranteed by PNC Bank
Corp.), 4.970%, 8/4/1999 19,991,717
20,000,000 Park Avenue Receivables
Corp., 5.120%, 8/17/1999 19,954,489
20,000,000 Three Rivers Funding
Corp., 5.120%, 8/20/1999 19,945,956
TOTAL 180,275,752
CHEMICALS-1.4%
29,114,000 IMC Global, Inc., 5.050% -
5.300%, 8/17/1999 -
9/13/1999 29,031,845
CONTAINER\PACKAGING-0.6%
13,000,000 Crown Cork & Seal Co.,
Inc., 5.140% - 5.280%,
8/3/1999 12,996,249
FINANCE - AUTOMOTIVE-4.3%
50,000,000 DaimlerChrysler North
America Holding Corp.,
4.840%, 8/13/1999 49,919,333
43,100,000 General Motors Acceptance
Corp., 5.330% - 5.360%,
1/26/2000 - 1/31/2000 41,939,060
TOTAL 91,858,393
FINANCE - COMMERCIAL-11.0%
34,000,000 Beta Finance, Inc.,
5.000%, 9/9/1999 33,815,833
40,000,000 Corporate Asset Funding
Co., Inc. (CAFCO), 4.970% -
5.140%,
8/2/1999 - 8/5/1999 39,986,217
40,000,000 GE Capital International
Funding, Inc., (Guaranteed
by General Electric
Capital Corp.), 5.290% -
5.310%, 1/24/2000 -
1/26/2000 38,951,764
12,305,000 PREFCO-Preferred
Receivables Funding Co.,
4.930%, 8/2/1999 12,303,315
15,000,000 Receivables Capital Corp.,
4.980%, 8/6/1999 14,989,625
94,600,000 Sheffield Receivables
Corp., 4.950% - 5.140%,
8/6/1999 - 9/16/1999 94,348,450
TOTAL 234,395,204
FINANCE - RETAIL-3.9%
50,000,000 Household Finance Corp.,
5.130%, 8/2/1999 49,992,875
34,000,000 New Center Asset Trust,
Series A1/P1, 4.830%,
8/9/1999- 8/12/1999 33,953,444
TOTAL 83,946,319
INDUSTRIAL PRODUCTS-0.8%
17,600,000 Praxair, Inc., 4.960%,
8/12/1999 17,573,326
INSURANCE-0.3%
7,000,000 CNA Financial Corp.,
5.030%, 8/6/1999 6,995,110
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
COMMERCIAL PAPER-continued 3
MACHINERY, EQUIPMENT,
AUTO-1.5%
$ 31,500,000 Eaton Corp., 4.840%,
8/3/1999 - 8/9/1999 $ 31,469,750
RETAIL-0.1%
3,089,000 Safeway, Inc., 4.980%,
8/11/1999 3,084,727
TELECOMMUNICATIONS-0.8%
16,753,000 MCI Worldcom, Inc.,
5.000%, 8/2/1999 16,750,673
TOTAL COMMERCIAL PAPER 708,377,348
NOTES - VARIABLE-28.5% 4
BANKING-12.1%
9,580,000 500 South Front St. L.P.,
Series A, (Huntington
National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 9,580,000
5,370,000 500 South Front St. L.P.,
Series B, (Huntington
National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 5,370,000
1,335,000 Alabama State IDA,
(Nichols Research Corp.),
(SouthTrust Bank of
Alabama, Birmingham LOC),
5.360%, 8/6/1999 1,335,000
16,400,000 Bankers Trust Corp.,
5.280%, 8/2/1999 16,400,000
16,900,000 Beverly California Corp.,
(PNC Bank, N.A. LOC),
5.163%, 8/2/1999 16,900,000
16,630,000 Beverly Hills Nursing
Center, Inc., Medilodge
Project, Series 1996,
(KeyBank, N.A. LOC),
5.320%, 8/5/1999 16,630,000
1,945,000 Bissett, William K. and
Sheryl B., Multi-Option
Adjustable Rate Notes,
(Huntington National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 1,945,000
6,000,000 Bond Holdings, L.P.,
(SouthTrust Bank of
Alabama, Birmingham LOC),
5.280%, 8/6/1999 6,000,000
6,715,000 Briarwood Limited
Partnership, Briarwood
Ltd. Partnership Project,
Series 1999, (Bank One,
Ohio, N.A. LOC), 5.310%,
8/5/1999 6,715,000
10,000,000 Capital One Funding Corp.,
Series 1999-B, (Bank One,
Ohio, N.A. LOC),
5.230%, 8/5/1999 10,000,000
640,000 Carmel, IN, Telamon Corp.,
Series 1996-C, (Huntington
National Bank, Columbus,
OH LOC), 5.370%, 8/5/1999 640,000
965,000 Carmel, IN, Telamon Corp.,
Series A, (Huntington
National Bank,
Columbus, OH LOC), 5.370%,
8/5/1999 965,000
1,055,000 Carmel, IN, Telamon Corp.,
Series B, (Huntington
National Bank,
Columbus, OH LOC), 5.370%,
8/5/1999 1,055,000
2,020,000 Continental Downtown
Properties, (Huntington
National Bank,
Columbus, OH LOC), 5.270%,
8/5/1999 2,020,000
5,795,000 Dellridge Care Center
Limited Partnership,
Series 1997, (Allfirst
LOC), 5.220%, 8/4/1999 5,795,000
3,605,000 Denver Urban Renewal
Authority, Series 1992-B,
(Paribas, Paris LOC),
5.300%, 8/5/1999 3,608,720
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
NOTES - VARIABLE-continued 4
BANKING-CONTINUED
$ 9,635,000 ERC Real Estate LLC,
(KeyBank, N.A. LOC),
5.250%, 8/5/1999 $ 9,635,000
5,000,000 Greene County Development
Authority, Reynolds
Lodges, LLC, Series 1999-
A, (Firstar Bank, N.A.,
Cincinnati LOC), 5.250%,
8/4/1999 5,000,000
5,000,000 Industrial Dimensions,
Inc., Series 1999, (Fifth
Third Bank of
Northwestern OH LOC),
5.200%, 8/5/1999 5,000,000
8,631,000 International Processing
Corp., (Bank One, Kentucky
LOC), 5.320%, 8/5/1999 8,631,000
2,000,000 Jeffersonville, IN, Series
1997-B, Wayne Steel, Inc.,
(Bank One, Ohio, N.A. LOC),
5.270%, 8/5/1999 2,000,000
5,500,000 Kenwood Country Club,
Inc., Series 1999,
(Firstar Bank, N.A.,
Cincinnati LOC), 5.230%,
8/5/1999 5,500,000
4,000,000 Lake Sherwood Senior
Living Center, LLC, (Union
Planters NB,
Memphis, TN LOC), 5.560%,
8/5/1999 4,000,000
2,000,000 Liquid Asset Backed
Securities Trust, Series
1996-3, (Westdeutsche
Landesbank Girozentrale
Swap Agreement), 5.200%,
8/16/1999 2,000,000
11,481,681 1, 2 Liquid Asset Backed
Securities Trust, Series
1997-3, Senior Notes,
(Insured by AMBAC),
5.298%, 9/28/1999 11,481,681
8,237,418 1, 2 Liquid Asset Backed
Securities Trust, Sr.
Notes, Series 1998-1,
(Insured by AMBAC),
5.164%, 8/9/1999 8,237,418
10,513,658 1, 2 Liquid Asset Backed
Securities Trust, Series
1997-1, (Westdeutsche
Landesbank Girozentrale
Swap Agreement), 5.180%,
8/16/1999 10,513,658
5,000,000 Maryland Industrial
Development Financing
Authority, Gen-Vec, Inc.
Facility, Series 1999,
(Allfirst LOC), 5.230%,
8/6/1999 5,000,000
4,100,000 Melberger, Clifford K. and
Ruth B., (PNC Bank, N.A.
LOC), 5.163%, 8/2/1999 4,100,000
6,860,000 Pine Ridge Associates,
Ltd., (Mellon Bank N.A.,
Pittsburgh LOC),
5.300%, 8/4/1999 6,860,000
7,055,000 Rubloff- Rockford, LLC,
Series 1997, (National
City Bank,
Michigan/Illinois LOC),
5.230%, 8/4/1999 7,055,000
16,420,000 Scranton Times, L.P.,
Series 1997, (PNC Bank,
N.A. LOC), 5.163%,
8/2/1999 16,420,000
17,000,000 Societe Generale, Paris,
5.203%, 8/11/1999 16,999,692
2,690,000 Solon, OH, Schneps, (Bank
One, Ohio, N.A. LOC),
5.270%, 8/5/1999 2,690,000
7,520,000 Southern Coil Processing,
Inc. Notes, (Amsouth Bank
N.A., Birmingham LOC),
5.270%, 8/5/1999 7,520,000
1,640,000 Team Rahal of
Mechanicsburg, Inc.,
Series 1997, (Huntington
National Bank, Columbus,
OH LOC), 5.270%, 8/5/1999 1,640,000
1,795,000 Team Rahal, Inc., Series
1997, (Huntington National
Bank, Columbus, OH LOC),
5.270%, 8/5/1999 1,795,000
7,300,000 Tift County, GA
Development Authority,
Chickasha of Georgia
Project, Series 1997,
(Bank of Tokyo-Mitsubishi
Ltd. LOC), 5.280%,
8/4/1999 7,300,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
NOTES - VARIABLE-continued 4
BANKING-CONTINUED
$ 1,700,000 Village Green Finance Co.,
LLC, Series 1997,
(Wachovia Bank of NC, N.A.,
Winston-Salem LOC),
5.180%, 8/4/1999 $ 1,700,000
1,354,000 Vista Funding Corp.,
Series 1995-A, (Firstar
Bank, N.A., Cincinnati
LOC), 5.390%, 8/5/1999 1,354,000
TOTAL 257,391,169
BROKERAGE-4.0%
84,000,000 Morgan Stanley, Dean
Witter & Co., 4.930% -
5.200%, 2/4/2000 84,000,000
FINANCE - AUTOMOTIVE-2.4%
42,000,000 General Motors Acceptance
Corp., 5.040%, 3/7/2000 42,000,000
10,000,000 General Motors Acceptance
Corp., Mortgage of PA,
(Guaranteed by General
Motors Acceptance Corp.),
5.370%, 8/2/1999 9,910,228
TOTAL 51,910,228
FINANCE - EQUIPMENT-0.5%
10,000,000 Comdisco, Inc., Series A,
5.148%, 8/6/1999 10,000,000
FINANCE - RETAIL-0.6%
7,000,000 AFS Insurance Premium
Receivables Trust, Series
1994-A, 5.454%, 8/16/1999 7,000,000
6,000,000 1 Bishop's Gate Residential
Mortgage Trust, Series
1998-2, Class A-1,
5.420%, 8/10/1999 6,000,000
TOTAL 13,000,000
HOMEBUILDING-0.4%
8,900,000 Centex Corp., 5.810%,
10/27/1999 8,900,000
INSURANCE-8.5%
12,000,000 Allstate Life Insurance
Co., 5.370%, 8/2/1999 12,000,000
29,000,000 Aspen Funding Corp.,
(Insured by MBIA), 5.038%,
1/18/2000 29,000,000
22,500,000 First Allmerica Financial
Life Insurance Co.,
5.140%, 8/3/1999 22,500,000
5,000,000 GE Life and Annuity
Assurance Co., 5.141%,
9/1/1999 5,000,000
30,000,000 Jackson National Life
Insurance Co., 5.108% -
5.400%, 8/2/1999 -
8/23/1999 30,000,000
25,000,000 People's Security Life
Insurance Co., 5.110%,
8/13/1999 25,000,000
15,000,000 Principal Life Insurance
Co., 5.200%, 9/1/1999 15,000,000
13,000,000 Protective Life Insurance
Co., 5.145%, 8/2/1999 13,000,000
15,000,000 Security Life of Denver
Insurance Co., 5.371%,
8/1/1999 15,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
NOTES - VARIABLE-continued 4
INSURANCE-CONTINUED
$ 10,000,000 Transamerica Life
Insurance and Annuity Co.,
5.399% - 5.439%,
8/9/1999 - 10/1/1999 $ 10,000,000
5,000,000 Transamerica Occidental
Life Insurance Co.,
5.599%, 9/6/1999 5,000,000
TOTAL 181,500,000
TOTAL NOTES - VARIABLE 606,701,397
LOAN PARTICIPATION-2.9%
BROKERAGE-2.3%
50,000,000 Goldman Sachs Group, Inc.,
5.022%, 8/2/1999 50,000,000
ELECTRICAL EQUIPMENT-0.6%
12,100,000 Mt. Vernon Phenol Plant
Partnership, (Guaranteed
by General Electric Co.),
5.050%, 5/17/2000 12,100,000
TOTAL LOAN PARTICIPATION 62,100,000
MUNICIPALS-0.0%
BANKING-0.0%
935,000 Colorado Health Facilities
Authority, Series B, (Bank
One, Colorado LOC),
5.320%, 8/5/1999 935,000
TIME DEPOSIT-2.4%
BANKING-2.4%
50,000,000 Dresdner Bank AG,
Frankfurt, 5.125%,
8/2/1999 50,000,000
REPURCHASE AGREEMENTS-
13.6% 5
50,000,000 Morgan Stanley Group,
Inc., 5.100%, dated
7/30/1999, due 8/2/1999 50,000,000
100,000,000 Bank of America, 5.130%,
dated 7/30/1999, due
8/2/1999 100,000,000
125,200,000 Bear, Stearns and Co.,
5.130%, dated 7/30/1999,
due 8/2/1999 125,200,000
14,200,000 Societe Generale
Securities Corp., 5.070%,
dated 7/30/1999, due
8/2/1999 14,200,000
TOTAL REPURCHASE
AGREEMENTS 289,400,000
TOTAL INVESTMENTS (AT
AMORTIZED COST) 6 $ 2,128,935,457
</TABLE>
1 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. At July 31, 1999, these securities amounted to
$36,232,757 which represents 1.7% of net assets. Included in these amounts,
securities which have been deemed liquid amounted to $30,232,757 which
represents 1.4% of net assets.
2 Denotes a restricted security that has been deemed liquid by criteria approved
by the fund's Board of Trustees.
3 Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
4 Current rate and next reset date shown.
5 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.
6 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($2,131,209,733) at July 31, 1999.
The following acronyms are used throughout this portfolio:
AMBAC -American Municipal Bond Assurance Corporation
FSA -Financial Security Assurance
IDA -Industrial Development Authority
LOC -Letter of Credit
MBIA -Municipal Bond Investors Assurance
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
JULY 31, 1999
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase
agreements $ 289,400,000
Investments in securities 1,839,535,457
Total investments in
securities, at amortized
cost and value $ 2,128,935,457
Cash 66,200
Income receivable 12,649,895
Receivable for shares sold 98,833
TOTAL ASSETS 2,141,750,385
LIABILITIES:
Payable for shares
redeemed 8,099,997
Income distribution
payable 2,113,095
Accrued expenses 327,560
TOTAL LIABILITIES 10,540,652
Net assets for
2,131,209,733 shares
outstanding $ 2,131,209,733
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
INSTITUTIONAL SHARES:
$1,147,717,056 /
1,147,717,056 shares
outstanding $1.00
INSTITUTIONAL SERVICE
SHARES:
$707,737,050 / 707,737,050
shares outstanding $1.00
INSTITUTIONAL CAPITAL
SHARES:
$275,755,627 / 275,755,627
shares outstanding $1.00
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
PERIOD ENDED JULY 31, 1999 1
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 59,976,157
EXPENSES:
Investment advisory fee $ 2,380,186
Administrative personnel
and services fee 897,330
Custodian fees 77,235
Transfer and dividend
disbursing agent fees and
expenses 64,825
Directors'/Trustees' fees 9,656
Auditing fees 14,134
Legal fees 6,150
Portfolio accounting fees 112,865
Shareholder services fee-
Institutional Service
Shares 676,637
Shareholder services fee-
Institutional Capital
Shares 302,436
Share registration costs 31,611
Printing and postage 18,880
Insurance premiums 123,402
Miscellaneous 14,149
TOTAL EXPENSES 4,729,496
WAIVERS:
Waiver of investment
advisory fee $ (1,769,715)
Waiver of shareholder
services fee-Institutional
Capital Shares (181,461)
TOTAL WAIVERS (1,951,176)
Net expenses 2,778,320
Net investment income $ 57,197,837
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED JANUARY 31, 1999
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 90,324,831
EXPENSES:
Investment advisory fee $ 3,264,534
Administrative personnel
and services fee 1,230,729
Custodian fees 117,892
Transfer and dividend
disbursing agent fees and
expenses 113,679
Directors'/Trustees' fees 11,486
Auditing fees 14,192
Legal fees 11,491
Portfolio accounting fees 184,121
Shareholder services fee-
Institutional Shares 2,826,910
Shareholder services fee-
Institutional Service
Shares 960,721
Shareholder services fee-
Institutional Capital
Shares 292,774
Share registration costs 40,925
Printing and postage 18,818
Insurance premiums 107,792
Miscellaneous 11,466
TOTAL EXPENSES 9,207,530
WAIVERS:
Waiver of investment
advisory fee $ (2,420,288)
Waiver of shareholder
services fee-Institutional
Shares (2,826,910)
Waiver of shareholder
services fee-Institutional
Capital Shares (175,665)
TOTAL WAIVERS (5,422,863)
Net expenses 3,784,667
Net investment income $ 86,540,164
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 57,197,837 $ 86,540,164 $ 50,489,449
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Institutional Shares (38,874,779) (60,707,164) (40,931,344)
Institutional Service
Shares (12,570,275) (19,716,305) (8,059,884)
Institutional Capital
Shares (5,752,783) (6,116,695) (1,498,221)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS TO
SHAREHOLDERS (57,197,837) (86,540,164) (50,489,449)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 17,356,187,248 26,516,611,802 15,976,645,016
Net asset value of shares
issued to shareholders in
payment of distributions
declared 39,241,753 51,764,190 33,029,994
Cost of shares redeemed (17,433,612,169) (25,657,179,044) (15,177,894,329)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS (38,183,168) 911,196,948 831,780,681
Change in net assets (38,183,168) 911,196,948 831,780,681
NET ASSETS:
Beginning of period 2,169,392,901 1,258,195,953 426,415,272
End of period $ 2,131,209,733 $ 2,169,392,901 $ 1,258,195,953
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2 1996 1995
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.06 0.05 0.06 0.04
LESS DISTRIBUTIONS:
Distributions from net investment income (0.02) (0.05) (0.06) (0.05) (0.06) (0.04)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3 2.44% 5.53% 5.68% 5.41% 6.10% 4.51%
RATIOS TO AVERAGE NET ASSETS:
Expenses 4 0.31% 5 0.56% 0.32% 0.31% 0.25% 0.25%
Net investment income 4 4.72% 5 4.97% 5.41% 5.14% 5.85% 4.04%
Expenses (after waivers) 0.16% 5 0.16% 0.14% 0.16% 0.17% 0.09%
Net investment income (after waivers) 4.87% 5 5.37% 5.59% 5.29% 5.93% 4.20%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,147,717 $1,474,123 $865,742 $387,994 $2,754,390 $1,470,317
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
5 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2 1996 1995
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.05 0.05 0.06 0.04
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.02) (0.05) (0.05) (0.05) (0.06) (0.04)
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3 2.31% 5.27% 5.41% 5.15% 5.84% 4.26%
RATIOS TO AVERAGE
NET ASSETS:
Expenses 4 0.56% 5 0.56% 0.56% 0.57% 0.50% 0.50%
Net investment income 4 4.49% 5 4.98% 5.15% 4.89% 5.60% 3.79%
Expenses (after waivers) 0.41% 5 0.41% 0.39% 0.41% 0.42% 0.34%
Net investment income
(after waivers) 4.64% 5 5.13% 5.32% 5.05% 5.68% 3.95%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $707,737 $495,172 $325,390 $18,415 $20,372 $21,739
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
5 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Capital Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.05 0.05 0.05
LESS DISTRIBUTIONS:
Distributions from net investment income (0.02) (0.05) (0.05) (0.05)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3 2.38% 5.40% 5.55% 5.26%
RATIOS TO AVERAGE NET ASSETS:
Expenses 4 0.58% 5 0.58% 0.59% 0.59%
Net investment income 4 4.46% 5 4.93% 5.29% 4.86%
Expenses (after waivers) 0.28% 5 0.28% 0.27% 0.28%
Net investment income (after waivers) 4.76% 5 5.23% 5.61% 5.17%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $275,756 $200,098 $67,064 $20,006
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
5 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
JULY 31, 1999
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 provision for federal tax is
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, 1999 is as
follows:
ACQUISITION ACQUISITION
SECURITY DATE COST
Bishop's Gate Residential
Mortgage Trust, Series
1998-2, Class A-1, 5.420%,
8/10/1999 12/11/1998 $6,000,000
CHANGE IN FISCAL YEAR
The Trust has changed its fiscal year-end from January 31 to July 31.
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. At July 31, 1999, capital paid-in aggregated $2,131,209,733.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL SHARES:
Shares sold 11,553,124,074 19,781,464,858 13,256,360,968
Shares issued to
shareholders in payment of
distributions declared 27,134,621 34,346,178 26,084,298
Shares redeemed (11,906,664,823) (19,207,430,021) (12,804,697,557)
NET CHANGE RESULTING FROM
INSTITUTIONAL
SHARE TRANSACTIONS (326,406,128) 608,381,015 477,747,709
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL SERVICE
SHARES:
Shares sold 4,750,407,849 5,129,107,787 1,999,938,515
Shares issued to
shareholders in payment of
distributions declared 8,335,094 12,725,748 5,524,975
Shares redeemed (4,546,178,066) (4,972,051,133) (1,698,488,527)
NET CHANGE RESULTING FROM
INSTITUTIONAL SERVICES
SHARE TRANSACTIONS 212,564,877 169,782,402 306,974,963
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL CAPITAL
SHARES:
Shares sold 1,052,655,325 1,606,039,157 720,345,533
Shares issued to
shareholders in payment of
distributions declared 3,772,038 4,692,264 1,420,721
Shares redeemed (980,769,280) (1,477,697,890) (674,708,245)
NET CHANGE RESULTING FROM
CAPITAL SHARE TRANSACTIONS 75,658,083 133,033,531 47,058,009
NET CHANGE RESULTING FROM
SHARES TRANSACTIONS (38,183,168) 911,196,948 831,780,681
</TABLE>
1 The Fund has changed its fiscal year-end from January 31 to July 31.
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Investment Management Company, 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC 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 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 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
Report of Ernst & Young LLP, Independent Auditors
TO THE TRUSTEES AND SHAREHOLDERS OF
MONEY MARKET OBLIGATIONS TRUST II:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Prime Value Obligations Fund (one of the
portfolios constituting the Money Market Obligations Trust II) as of July 31,
1999, and the related statements of operations for the period from February 1,
1999 to July 31, 1999 and for the year ended January 31, 1999, the statements of
changes in net assets for the period from February 1, 1999 to July 31, 1999 and
for each of the two years in the period ended January 31, 1999, and the
financial highlights for each of the periods presented therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1999 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Prime Value Obligations Fund of the Money Market Obligations Trust II at July
31, 1999, and the results of its operations for the period from February 1, 1999
to July 31, 1999 and for the year ended January 31, 1999, the changes in its net
assets for the period from February 1, 1999 to July 31, 1999 and for each of the
two years in the period ended January 31, 1999, and the financial highlights for
each of the periods presented therein, in conformity with generally accepted
accounting principles.
[Graphic]
Ernst & Young LLP
Boston, Massachusetts
September 17, 1999
Trustees
JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
JOHN F. CUNNINGHAM
J. CHRISTOPHER DONAHUE
LAWRENCE D. ELLIS, M.D.
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
JOHN E. MURRAY, JR., J.D., S.J.D.
MARJORIE P. SMUTS
JOHN S. WALSH
Officers
JOHN F. DONAHUE
Chairman
J. CHRISTOPHER DONAHUE
President
WILLIAM D. DAWSON, III
Chief Investment Officer
EDWARD C. GONZALES
Executive Vice President
JOHN W. MCGONIGLE
Executive Vice President and Secretary
RICHARD B. FISHER
Vice President
RICHARD J. THOMAS
Treasurer
LESLIE K. ROSS
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 the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated
World-Class Investment Manager
ANNUAL REPORT
Prime Value Obligations Fund
ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1999
[Graphic]
Federated
Prime Value Obligations Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 608912606
Cusip 608912408
Cusip 608912507
G01999-03 (9/99)
[Graphic]
ANNUAL REPORT
President's Message
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for Municipal
Obligations Fund, a portfolio of Money Market Obligations Trust II, which covers
the six-month period from February 1, 1999 to July 31, 1999. 1 The report begins
with the fund's investment review, followed by a complete list of its holdings
and its financial statements.
The fund continues to give you a relatively stable way to keep your cash earning
daily tax-free income, 2 while giving you easy access to your money.3 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 and Institutional
Capital Shares, and $0.01 per share to shareholders of Institutional Service
Shares. Net assets in the fund totaled over $535 million at the end of the
reporting period.
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, 1999
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Income may be subject to the federal alternative minimum tax and state and
local taxes.
3 An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek to preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the fund.
Investment Review
Municipal Obligations Fund invests in high quality, short-term tax-exempt
securities. Typical investments include, but are not limited to variable rate
demand notes ("VRDNs"), commercial paper equivalents, and fixed-rate notes and
bonds. For the six-months ended July 31, 1999, the net assets of the fund
increased from $486 million to $535 million, while the seven-day net yield of
the fund increased as follows: Institutional Shares increased from 3.03% to
3.22%, Institutional Service Shares increased from 2.78% to 2.97%, and
Institutional Capital Shares increased from 2.91% to 3.10%. 1 The
dollar-weighted effective average maturity of the fund on July 31, 1999, was 46
days.
The reporting period brought a dramatic shift in investor sentiment regarding
the direction of the next move by the Federal Reserve Board (the "Fed"), and
culminated in a 25 basis point tightening by the Fed on June 30, 1999. The
economy entered 1999 with considerable momentum. Lingering fears about the
economic crises overseas were replaced by concern that the robust pace of growth
of the domestic economy would ignite inflationary pressures. First quarter gross
domestic product was recorded at 4.30%, driven by consumer demand and housing.
The second quarter brought continued evidence of growth that the market and the
Fed could no longer ignore. In spite of a benign inflation picture, interest
rates rose across the yield curve as expectations mounted that the Fed would
need to tighten monetary policy in the face of growth that exceeded traditional
measures of non-inflationary potential. Fed commentary reinforced this
perception even while acknowledging that productivity gains continued to rein in
inflationary pressures. By the time of Fed Chairman Greenspan's testimony before
the Joint Economic Committee in late June (where he intimated that it may be
appropriate for the Fed to take back some of the liquidity that had been infused
into the market in the fourth quarter of 1998), market expectations reflected
the inevitable near-term tightening with more to follow. As a result, when the
Fed opted to tighten interest rates by 25 basis points on June 30, 1999, but
announced a neutral intermeeting policy stance, the market took this as a sign
that additional tightenings may not be forthcoming. This relief was short-lived,
however, as Chairman Greenspan indicated in his Humphrey Hawkins testimony
before Congress later in July that the Fed was prepared to continue to act
preemptively against the threat of inflation.
1 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.
Interest rates in the tax-exempt money markets over the reporting period were
influenced by the Fed's tightening as well as expectation of future tightenings.
Supply and demand factors also played a large role in the absolute level of
interest rates, as demand was relatively strong early in the year and prior to
the income tax payment season in April. Supply remained restricted as new
issuance of fixed-rate notes was virtually non-existent over the first four
months of the reporting period. However, conditions eased in June and July as
the summer note issuance season began.
Yields on VRDNs, which comprise over 60% of the fund's assets, started the
period at a low of 2.35%, but corrected rather quickly and moved up to over
4.00% by late April. This correction was due to net redemptions in the money
markets as investors made record income tax payments to governments. From May
1999 though July 1999, VRDN yields remained in a range bound between 3.00% and
3.50%, as demand stabilized and supply became more plentiful.
Going forward, the average maturity of the fund will continue to be managed in
accordance with our expectations of a continued Fed bias toward a more
restrictive monetary policy (higher rates). Therefore, we will continue to keep
the average maturity targeted in a neutral range while evaluating attractive
investment opportunities to enhance the fund's yield. We will continue to watch,
with great interest, market developments in order to best serve our municipal
clients.
Portfolio of Investments
JULY 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
100.5% 1
ALABAMA--0.9%
$ 5,000,000 Hoover, AL Board of
Education, Series 1999 C,
3.80% BANs, 8/1/2000 $ 5,000,000
ARIZONA--0.1%
715,000 Maricopa County, AZ, IDA,
3.20% CP (Citizens
Utilities Co.), Mandatory
Tender 8/13/1999 715,000
ARKANSAS--2.2%
1,000,000 Arkadelphia, AR, IDRBs, Series 1996, Weekly VRDNs (Siplast,
Inc.)/(Den
Danske Bank A/S LOC) 1,000,000
9,000,000 Arkansas Development
Finance Authority, Series
1995, Weekly VRDNs (Paco
Steel & Engineering
Corporation
Project)/(Union Bank of
California LOC) 9,000,000
1,800,000 Hope, AR, Solid Waste
Disposal Revenue Bonds,
Series 1994, 3.70% CP
(Temple-Inland Forest
Products Corp.)/(Temple-
Inland, Inc. GTD),
Mandatory Tender 9/7/1999 1,800,000
TOTAL 11,800,000
COLORADO--0.9%
5,000,000 2 Denver, CO City & County
Airport Authority, CDC
Class A Certificates,
Series 1997 K, 3.45% TOBs
(MBIA INS)/(CDC Municipal
Products, Inc. LIQ),
Optional Tender 5/11/2000 5,000,000
DISTRICT OF COLUMBIA--3.3%
5,000,000 District of Columbia
Housing Finance Agency,
Series 1999 B, 3.30% BANs
(CDC Municipal Products,
Inc.), 6/15/2000 5,000,000
12,655,000 District of Columbia
Housing Finance Agency,
Flatiron Certificates,
Series 1999-2, Weekly
VRDNs (GNMA COL)/(Bank of
New York, New York LIQ) 12,655,000
TOTAL 17,655,000
FLORIDA--9.7%
4,000,000 Clay County, FL HFA,
Variable Rate
Certificates, Series 1999
O, Weekly VRDNs (GNMA
COL)/(Bank of America NT
and SA, San Francisco LIQ) 4,000,000
10,695,000 Clipper, FL Tax-Exempt
Trust, Class A
Certificates of
Participation, Series
1996-3B, Weekly VRDNs
(Escambia County, FL
HFA)/(State Street Bank
and Trust Co. LOC) 10,695,000
9,500,000 Escambia County, FL HFA,
PT-1017 Weekly VRDNs (GNMA
COL)/(Merrill Lynch
Capital Services, Inc.
LIQ) 9,500,000
8,675,000 Escambia County, FL HFA,
PT-121 Weekly VRDNs (GNMA
COL)/(Banco Santander
Central Hispano, SA LIQ) 8,675,000
1,000,000 Jacksonville, FL IDA,
IDRBs, Series 1996, Weekly
VRDNs (Portion Pac,
Inc.)/(Heinz (H.J.) Co.
GTD) 1,000,000
5,893,000 Orange County, FL HFA,
Series 1997 A, Weekly VRDNs
(Regal Pointe Apartments
Project)/(Nationsbank,
N.A., Charlotte LOC) 5,893,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
FLORIDA--CONTINUED
$ 4,000,000 Orange County, FL HFA,
Series 1998 D, Weekly VRDNs
(Falcon Trace
Apartments)/(Amsouth Bank
N.A., Birmingham LOC) $ 4,000,000
5,500,000 Osceola County, FL HFA,
Multifamily Housing
Revenue Bonds, Series 1998
A, Weekly VRDNs (Arrow
Ridge Apartments)/(Amsouth
Bank N.A., Birmingham LOC) 5,500,000
2,500,000 Pinellas County Industry
Council, FL, IDRB, Series
1994, Weekly VRDNs (Genca
Corporation Project)/(PNC
Bank, N.A. LOC) 2,500,000
TOTAL 51,763,000
GEORGIA--2.7%
9,500,000 Clayton County, GA
Development Authority,
Series 1994, Weekly VRDNs
(Lear Seating
Corp.)/(Chase Manhattan
Bank N.A., New York LOC) 9,500,000
2,800,000 Gainesville, GA
Redevelopment Authority,
Downtown Developments,
Ltd., Series 1987, Weekly
VRDNs (Downtown
Developments,
Ltd.)/(Regions Bank,
Alabama LOC) 2,800,000
2,170,000 McDuffie County, GA
Development Authority
Weekly VRDNs (Thomson
Plastics)/(SouthTrust Bank
of Alabama, Birmingham
LOC) 2,170,000
TOTAL 14,470,000
ILLINOIS--7.8%
10,500,000 Chicago, IL, Chicago
Midway Airport Special
Facility Revenue Bonds,
Series 1998, 3.35% TOBs
(Signature Flight Support
Corp.)/(Bayerische
Landesbank Girozentrale
LOC), Optional Tender
12/1/1999 10,500,000
5,000,000 Chicago, IL,
Collateralized Single
Family Mortgage Revenue
Bonds, Series B, 3.25% BANs
(Trinity Funding Co. INV),
4/1/2000 5,000,000
3,000,000 Chicago, IL, Gas Supply
Revenue Bonds, 1993 Series
B, 3.20% TOBs (Peoples Gas
Light & Coke Co.), Optional
Tender 12/1/1999 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
3,200,000 Illinois Development
Finance Authority, IDRB,
Series 1995, Weekly VRDNs
(Dickson Weatherproof Nail
Co. Project)/(Bank of
America NT and SA, San
Francisco LOC) 3,200,000
8,555,000 2 Illinois Housing
Development Authority, PT-
7, 3.375% TOBs (AMBAC
INS)/(Merrill Lynch
Capital Services, Inc.
LIQ), Optional Tender
5/11/2000 8,555,000
2,575,000 Peoria, IL, Series 1995,
Weekly VRDNs (Praise and
Leadership Elementary
School)/(Bank One,
Illinois, N.A. LOC) 2,575,000
2,360,000 Rockford, IL, EDRB, 3.80%
TOBs (Independence Village
of Rockford)/(Paribas,
Paris LOC), Optional
Tender 12/1/1999 2,360,000
TOTAL 41,190,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
INDIANA--3.5%
$ 2,000,000 Clarksville, IN, Series
1997, Weekly VRDNs (Metal
Sales Manufacturing
Corp.)/(Firstar Bank,
N.A., Cincinnati LOC) $ 2,000,000
3,625,000 Elkhart County, IN, Series
1997, Weekly VRDNs (Hart
Housing Group,
Inc.)/(KeyBank, N.A. LOC) 3,625,000
1,570,000 Richmond, IN, EDRBs,
Series 1996, Weekly VRDNs
(Holland Colors Americas,
Inc. Project)/(Bank One,
Indiana, N.A. LOC) 1,570,000
4,000,000 Rushville, IN, Series
1996, Weekly VRDNs
(Fujitsu Ten Corp. of
America)/(Bank of Tokyo-
Mitsubishi Ltd. LOC) 4,000,000
3,350,000 Wayne Township, IN Metro
School District, 3.55%
TANs, 12/31/1999 3,353,384
4,000,000 Westfield, IN IDR, Series
1998, Weekly VRDNs
(Standard Locknut,
Inc.)/(Bank One, Indiana,
N.A. LOC) 4,000,000
TOTAL 18,548,384
IOWA--1.7%
8,840,000 Iowa Falls, IA, Series
1998, Weekly VRDNs
(Heartland Pork
Enterprises, Inc.)/(Bank
of Nova Scotia, Toronto
LOC) 8,840,000
KENTUCKY--2.6%
4,500,000 Kentucky Housing Corp.,
Series C, 3.20% TOBs
12/31/1999 4,500,000
5,000,000 Louisville & Jefferson
County, KY Regional
Airport Authority, Series
1996-A, Weekly VRDNs
(National City Bank,
Kentucky LOC) 5,000,000
4,280,000 Paris, KY Weekly VRDNs
(Monessen Holdings,
LLC)/(Bank One, Kentucky
LOC) 4,280,000
TOTAL 13,780,000
LOUISIANA--0.3%
1,600,000 Ouachita Parish, LA IDB,
Series 1998, Weekly VRDNs
(Dixie Carbonic,
Inc.)/(Bank One, Illinois,
N.A. LOC) 1,600,000
MAINE--1.1%
4,000,000 Jay, ME, Solid Waste
Disposal Revenue Bonds,
3.95% TOBs (International
Paper Co.), Optional
Tender 6/1/2000 4,000,000
1,880,000 Trenton, ME, Series 1998,
Weekly VRDNs (Hinckley
Co.)/(KeyBank, N.A. LOC) 1,880,000
TOTAL 5,880,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
MARYLAND--3.9%
$ 2,468,000 Frederick County, MD,
Series 1998 A, Weekly VRDNs
(Thogar, LLC)/(Allfirst
LOC) $ 2,468,000
6,600,000 Harford County, MD, Series
1989, Weekly VRDNs
(Harford Commons
Associates
Facility)/(Allfirst LOC) 6,600,000
1,386,000 Harford County, MD,
Variable Rate Demand/Fixed
Rate Refunding Bond (1989
Issue) Weekly VRDNs
(Harford Commons
Associates
Facility)/(Allfirst LOC) 1,386,000
2,560,000 Maryland State Community
Development
Administration, Series
1990 A, Weekly VRDNs
(College
Estates)/(Allfirst LOC) 2,560,000
3,000,000 Maryland State Community
Development
Administration, Series
1990 B, Weekly VRDNs
(Cherry Hill Apartment
Ltd.)/(Nationsbank, N.A.,
Charlotte LOC) 3,000,000
3,000,000 Maryland State Energy
Financing Administration,
IDRB, Series 1988, Weekly
VRDNs (Morningstar Foods,
Inc.)/(First Union
National Bank, Charlotte,
NC LOC) 3,000,000
2,000,000 Wicomico County, MD, EDRB,
Series 1994, Weekly VRDNs
(Field Container Co.
L.P.)/(Northern Trust Co.,
Chicago, IL LOC) 2,000,000
TOTAL 21,014,000
MASSACHUSETTS--0.6%
3,000,000 Massachusetts IFA, IDRB,
Series 1995, Weekly VRDNs
(Dunsirn Industries, Inc.
Project)/(Firstar Bank,
Milwaukee LOC) 3,000,000
MINNESOTA--8.8%
1,450,000 Blaine, MN, Series 1997,
Weekly VRDNs (Plastic
Enterprises,
Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 1,450,000
3,600,000 Brooklyn Center, MN,
Shingle Creek Tower,
Series 1999, 4.495% TOBs
(Nationsbank, N.A.,
Charlotte) 4/1/2000 3,600,000
4,000,000 Coon Rapids, MN, Series
1999, Weekly VRDNs
(Assurance Mfg. Co.,
Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 4,000,000
10,195,000 2 Dakota County & Washington
County MN Housing &
Redevelopment Authority,
MERLOTS, Series J, 3.15%
TOBs (United States
Treasury COL)/(First Union
National Bank, Charlotte,
NC LIQ), Optional Tender
9/1/1999 10,195,000
5,000,000 2 Dakota County, Washington County & Anoka City, MN Housing &
Redevelopment Authority, MERLOTS, Series H, 3.15% TOBs (United
States Treasury COL)/(First Union National Bank, Charlotte, NC
LIQ),
Optional Tender 9/1/1999 5,000,000
5,200,000 Edgerton, MN, Series 1998,
Weekly VRDNs (Fey
Industries, Inc.)/(Norwest
Bank Minnesota, N.A. LOC) 5,200,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
MINNESOTA--CONTINUED
$ 2,600,000 Minneapolis, MN IDA,
Series 1999, Weekly VRDNs
(Viking Materials,
Inc.)/(Norwest Bank
Minnesota, N.A. LOC) $ 2,600,000
6,000,000 Rockford, MN, Series 1999,
Weekly VRDNs (Minnesota
Diversified Products,
Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 6,000,000
2,755,000 Savage, MN, Series 1998,
Weekly VRDNs (Fabcon,
Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 2,755,000
1,870,000 Springfield, MN, Series
1998, Weekly VRDNs (Ochs
Brick Co.)/(Norwest Bank
Minnesota, N.A. LOC) 1,870,000
2,250,000 White Bear Lake, MN, Series
1999, Weekly VRDNs (Taylor
Corp.)/(Norwest Bank
Minnesota, N.A. LOC) 2,250,000
2,000,000 White Bear Lake, MN,
Century Townhomes, Series
1997, 4.28% TOBs
(Westdeutsche Landesbank
Girozentrale), Optional
Tender 5/1/2000 2,000,000
TOTAL 46,920,000
MISSISSIPPI--4.6%
1,168,000 Greenville, MS IDA, Weekly
VRDNs (Mebane Packaging
Corp.)/(First Union
National Bank, Charlotte,
NC LOC) 1,168,000
4,035,000 Mississippi Business
Finance Corp., Series
1995, Weekly VRDNs
(Mississippi Baking
Company LLC
Project)/(Allfirst LOC) 4,035,000
9,805,000 2 Mississippi Home Corp.,
PT-218B, 3.65% TOBs (GNMA
COL)/(Bayerische
Hypotheken-und Vereinsbank
AG LIQ), Optional Tender
7/6/2000 9,805,000
9,790,000 Mississippi Regional
Housing Authorithy No. II,
Series 1998, 3.60% TOBs
(Bradford Park
Apartments)/(Amsouth Bank
N.A., Birmingham LOC),
Mandatory Tender 10/1/1999 9,790,000
TOTAL 24,798,000
MISSOURI--0.5%
1,600,000 Springfield, MO IDA,
Series 1999, Weekly VRDNs
(Dabryan Coach Builders,
Inc.)/(Norwest Bank
Minnesota, N.A. LOC) 1,600,000
1,000,000 St. Louis, MO IDA, Series
1997, Weekly VRDNs (Cee Kay
Supply)/(Commerce Bank,
Kansas City, N.A. LOC) 1,000,000
TOTAL 2,600,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
MULTI STATE--8.2%
$ 24,000,000 Charter Mac Floater
Certificates Trust I,
(First Tranche) Weekly
VRDNs (MBIA
INS)/(Bayerische
Landesbank Girozentrale,
Commerzbank AG, Frankfurt
and Credit Communal de
Belgique, Brussles LIQs) $ 24,000,000
14,000,000 Charter Mac Floater
Certificates Trust I,
(Third Tranche) Weekly
VRDNs (MBIA
INS)/(Bayerische
Landesbank Girozentrale,
Commerzbank AG, Frankfurt
and Credit Communal de
Belgique, Brussles LIQs) 14,000,000
5,968,000 Clipper Tax-Exempt Trust
(AMT MultiState), Series
A, Weekly VRDNs (State
Street Bank and Trust Co.
LIQ) 5,968,000
TOTAL 43,968,000
NEBRASKA--1.3%
6,995,000 Nebraska Investment
Finance Authority,
MERLOTS, Series 1999 A,
Weekly VRDNs (First Union
National Bank, Charlotte,
NC LIQ) 6,995,000
NEVADA--0.1%
550,000 Nevada State Department of
Community & Industrial
Development Weekly VRDNs
(Kinplex Company
Project)/(Credit
Commercial de France,
Paris LOC) 550,000
NEW HAMPSHIRE--0.7%
3,895,000 New Hampshire Business
Finance Authority, IDRB,
Series A, Weekly VRDNs
(Upper Valley
Press)/(KeyBank, N.A. LOC) 3,895,000
NEW JERSEY--0.5%
2,709,487 Sussex, NJ, 3.75% BANs,
1/21/2000 2,716,306
NEW MEXICO--1.9%
5,045,000 Albuquerque, NM, Series
1996, Weekly VRDNs (Rose's
Southwest Papers, Inc.
Project)/(Norwest Bank
Minnesota, N.A. LOC) 5,045,000
5,000,000 Los Lunas Village, NM,
Series 1998, Weekly VRDNs
(Wall Colmonoy
Corp.)/(Michigan National
Bank, Farmington Hills
LOC) 5,000,000
TOTAL 10,045,000
NEW YORK--2.3%
11,000,000 New York State Energy
Research & Development
Authority, PCR Bonds 1987,
Series B, Daily VRDNs
(Niagara Mohawk Power
Corp.)/(Morgan Guaranty
Trust Co., New York LOC) 11,000,000
1,400,000 New York State Energy
Research & Development
Authority, PCR Adj Rate
Bonds 1988, Series A, Daily
VRDNs (Niagara Mohawk
Power Corp.)/(Morgan
Guaranty Trust Co., New
York LOC) 1,400,000
TOTAL 12,400,000
NORTH CAROLINA--0.5%
2,800,000 Wake County, NC Industrial
Facilities & PCFA, Daily
VRDNs (Carolina Power &
Light Co.)/(First Union
National Bank, Charlotte,
NC LOC) 2,800,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
OHIO--1.4%
$ 1,890,000 Hilliard, OH, Adjustable
Rate IDRBs, Series 1996,
Weekly VRDNs (Medex,
Inc.)/(Bank One, Ohio,
N.A. LOC) $ 1,890,000
3,300,000 Ohio HFA, Trust Receipts,
Series 1997 FR/RI-14,
Weekly VRDNs (GNMA
GTD)/(Bank of New York, New
York LIQ) 3,300,000
2,500,000 Wadsworth, OH School
District, 3.47% BANs,
8/10/1999 2,500,287
TOTAL 7,690,287
OKLAHOMA--2.8%
4,000,000 Broken Arrow, OK EDA,
Weekly VRDNs (Blue Bell
Creameries)/(Banque
Nationale de Paris LOC) 4,000,000
3,250,000 Oklahoma HFA, CDC
Municipal Products, Inc.,
Series 1996 G, Weekly VRDNs
(GNMA COL)/(CDC Municipal
Products, Inc. LIQ) 3,250,000
820,000 Tulsa County, OK HFA, CDC
Municipal Products, Inc.
Class A Certificates,
Series 1996 E, Weekly
VRDNs (GNMA COL)/(CDC
Municipal Products, Inc.
LIQ) 820,000
6,985,000 Tulsa, OK International Airport, Variable Rate Certificates,
Series 1997 B-1, Weekly VRDNs (MBIA INS)/(Bank of America NT
and SA, San Francisco LIQ) 6,985,000
TOTAL 15,055,000
OREGON--0.1%
495,000 Oregon State, EDRBs,
Series 1988 B, Weekly VRDNs
(Domaine Drouhin Oregon,
Inc.)/(Wells Fargo Bank,
N.A. LOC) 495,000
PENNSYLVANIA--1.8%
3,000,000 Clinton County, PA IDA,
Solid Waste Disposal
Revenue Bonds, Series 1992
A, 3.95% TOBs
(International Paper Co.),
Optional Tender 1/15/2000 3,000,000
6,745,000 2 Philadelphia, PA IDA,
Variable Rate Certificates, Series 1998 P-1, 3.75% TOBs
(Philadelphia Airport System)/(FGIC INS)/(Bank of America NT
and SA, San Francisco LIQ), Optional
Tender 8/4/1999 6,745,000
TOTAL 9,745,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
SOUTH CAROLINA--2.2%
$ 2,025,000 Berkeley County, SC IDB,
Series 1989, Weekly VRDNs
(W.W. Williams Co.
Project)/(Bank One, Ohio,
N.A. LOC) $ 2,025,000
4,000,000 South Carolina Job
Development Authority
Weekly VRDNs (Boozer
Lumber Co.)/(SouthTrust
Bank of Alabama,
Birmingham LOC) 4,000,000
250,000 South Carolina Job
Development Authority,
Series 1988 B, Weekly VRDNs
(Seacord Corp.)/(Credit
Commercial de France,
Paris LOC) 250,000
500,000 South Carolina Job
Development Authority,
Series 1990, Weekly VRDNs
(NMFO
Associates)/(Wachovia Bank
of NC, N.A., Winston-Salem
LOC) 500,000
950,000 South Carolina Job
Development Authority,
Series 1990, Weekly VRDNs
(Old Claussen's
Bakery)/(Wachovia Bank of
NC, N.A., Winston-Salem
LOC) 950,000
550,000 South Carolina Job
Development Authority,
Series 1990, Weekly VRDNs
(Rice Street
Association)/(Wachovia
Bank of NC, N.A., Winston-
Salem LOC) 550,000
825,000 South Carolina Job
Development Authority,
Series B, Weekly VRDNs
(Osmose Wood
Preserving)/(Credit
Commercial de France,
Paris LOC) 825,000
2,885,000 York County, SC IDA, IDRBs,
Series 1989, Weekly VRDNs
(Sediver Inc.)/(Banque
Nationale de Paris LOC) 2,885,000
TOTAL 11,985,000
SOUTH DAKOTA--0.7%
3,000,000 South Dakota Housing
Development Authority,
1998 Series B, 3.75% BANs,
8/5/1999 3,000,000
515,000 South Dakota Housing
Development Authority,
Homeownership Mortgage
Bonds 1997, Series E,
Weekly VRDNs 515,000
TOTAL 3,515,000
TENNESSEE--3.4%
4,000,000 Carter County, TN IDB,
Series 1983, Monthly VRDNs
(Inland Container
Corp.)/(Temple-Inland,
Inc. GTD) 4,000,000
1,500,000 Cheatham County, TN IDB,
Series 1997 B, Weekly VRDNs
(Triton Boat Co.)/(First
American National Bank,
Nashville, TN LOC) 1,500,000
1,755,000 Hawkins County, TN IDB,
Series 1995, Weekly VRDNs
(Sekisui Ta Industries,
Inc. Project)/(Bank of
Tokyo-Mitsubishi Ltd. LOC) 1,755,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
TENNESSEE--CONTINUED
$ 500,000 Knox County, TN IDB, Series
1996, Weekly VRDNs (Health
Ventures, Inc.
Project)/(SunTrust Bank,
Nashville LOC) $ 500,000
2,530,000 Morristown, TN IDB Weekly
VRDNs (Tuff Torq
Corp.)/(Bank of Tokyo-
Mitsubishi Ltd. LOC) 2,530,000
800,000 South Pittsburg, TN IDB,
Series 1996, Weekly VRDNs
(Lodge Manufacturing Co.
Project)/(SunTrust Bank,
Nashville LOC) 800,000
5,000,000 Tennessee Housing
Development Agency, Series
1997 K, Weekly VRDNs (Bank
of America NT and SA, San
Francisco LIQ) 5,000,000
2,000,000 Union City, TN IDB, Series
1995, Weekly VRDNs (Kohler
Co.)/(Wachovia Bank of NC,
N.A., Winston-Salem LOC) 2,000,000
TOTAL 18,085,000
TEXAS--7.8%
4,000,000 Angelina and Neches River
Authority, Texas, Solid
Waste Disposal Revenue
Bonds, Series 1993, 3.70%
CP (Temple-Eastex,
Inc.)/(Temple-Inland, Inc.
GTD), Mandatory Tender
9/8/1999 4,000,000
1,600,000 Angelina and Neches River
Authority, Texas, Waste
Disposal Revenue Bonds,
Series 1998, 3.70% CP
(Temple-Inland Forest
Products Corp.)/(Temple-
Inland, Inc. GTD),
Mandatory Tender 9/7/1999 1,600,000
10,000,000 Brazos River Authority,
TX, Series 1996 B, Daily
VRDNs (Texas Utilities
Electric Co.)/(AMBAC
INS)/(Bank of New York, New
York LIQ) 10,000,000
8,000,000 McAllen, TX IDA, Series
1998, Weekly VRDNs (NiTek
McAllen, LLC)/(Bank of
Tokyo-Mitsubishi Ltd. LOC) 8,000,000
4,780,000 Saginaw, TX IDA, Series
1998, Weekly VRDNs (Glad
Investing Partners,
Ltd.)/(Bank One, Texas
N.A. LOC) 4,780,000
5,000,000 San Antonio, TX, Special
Facilities Airport Revenue
Bonds, Series 1995, Weekly
VRDNs (Cessna Aircraft
Company
Project)/(Nationsbank,
N.A., Charlotte LOC) 5,000,000
8,500,000 Tarrant County, TX IDC,
Series 1997, Weekly VRDNs
(Lear Operations
Corp.)/(Chase Manhattan
Bank N.A., New York LOC) 8,500,000
TOTAL 41,880,000
UTAH--0.7%
3,810,000 Utah County, UT, IDRBs,
Series 1992, Weekly VRDNs
(McWane, Inc.
Project)/(Amsouth Bank
N.A., Birmingham LOC) 3,810,000
VIRGINIA--5.4%
23,000,000 2 Fairfax County, VA EDA, Trust Receipt, FR/RI-A15, Series
1999, 3.30% TOBs (AMBAC INS)/(National Westminster Bank, PLC,
London LIQ), Mandatory
Tender 8/2/1999 23,000,000
6,000,000 Halifax, VA IDA, MMMs, PCR,
3.25% CP (Virginia
Electric Power Co.),
Mandatory Tender 8/9/1999 6,000,000
TOTAL 29,000,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
SHORT-TERM MUNICIPALS--
continued 1
WISCONSIN--3.5%
$ 2,000,000 Milwaukee, WI, Series
1997, 3.35% TOBs
(Signature Flight Support
Corp.)/(Bayerische
Landesbank Girozentrale
LOC), Optional Tender
12/1/1999 $ 2,000,000
1,000,000 New Berlin, WI, Series 1997
A, Weekly VRDNs (Sunraider
LLC/New Berlin Plastics,
Inc.)/(Bank One,
Wisconsin, N.A. LOC) 1,000,000
7,535,000 2 Wisconsin Housing & EDA,
PT-90, Series 1996 F,
3.175% TOBs (Banque
Nationale de Paris LIQ),
Optional Tender 2/17/2000 7,535,000
8,000,000 Wisconsin Housing & EDA,
Trust Receipts, Series
1997, Weekly VRDNs
(Commerzbank AG, Frankfurt
LIQ) 8,000,000
TOTAL 18,535,000
TOTAL INVESTMENTS
(AMORTIZED COST) 3 $537,737,977
</TABLE>
Securities that are subject to Alternative Minimum Tax represent 96.7% of the
portfolio as calculated based upon total portfolio market value.
1 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., or F-1+, F-1 or F-2
by Fitch IBCA, Inc. are all considered rated in one of the two highest
short-term rating categories. Securities rated in the highest short-term rating
category (and unrated securities of comparable quality) are identified as First
Tier securities. Securities rated in the second highest short-term rating
category (and unrated securities of comparable quality) are identified as Second
Tier securities. The fund follows applicable regulations in determining whether
a security is rated and whether a security rated by multiple NRSROs in different
rating categories should be identified as a First or Second Tier security. At
July 31, 1999, the portfolio securities were rated as follows:
Tier Rating based on Total Market Value (unaudited)
<TABLE>
<CAPTION>
FIRST TIER SECOND TIER
<S> <C>
96.1% 3.9%
</TABLE>
2 Denotes a restricted security which is subject to restrictions on resale under
federal securities laws. These securities have been deemed liquid based upon
criteria approved by the fund's Board of Trustees. At July 31, 1999, these
securities amounted to $75,835,000 which represents 14.2% of net assets.
3 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($535,326,079) at July 31, 1999.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation AMT --Alternative Minimum
Tax BANs --Bond Anticipation Notes COL --Collateralized CP --Commercial Paper
EDA --Economic Development Authority EDRB(s) --Economic Development Revenue
Bond(s) FGIC --Financial Guaranty Insurance Company GNMA --Government National
Mortgage Association GTD --Guaranty HFA --Housing Finance Authority IDA
- --Industrial Development Authority IDB --Industrial Development Bond IDC
- --Industrial Development Corporation IDR --Industrial Development Revenue
IDRB(s) --Industrial Development Revenue Bond(s) IFA --Industrial Finance
Authority INS --Insured INV --Investment Agreement LIQ(s) --Liquidity
Agreement(s) LOC --Letter of Credit MBIA --Municipal Bond Investors Assurance
MERLOTS --Municipal Exempt Receipts -- Liquidity Optional Tender Series MMMs
- --Money Market Municipals PCR --Pollution Control Revenue PCFA --Pollution
Control Finance Authority TANs --Tax Anticipation Notes TOBs --Tender Option
Bonds VRDNs --Variable Rate Demand Notes
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
JULY 31, 1999
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in
securities, at amortized
cost and value $ 537,737,977
Cash 648,853
Income receivable 2,934,559
TOTAL ASSETS 541,321,389
LIABILITIES:
Payable for investments
purchased $ 5,000,528
Payable for shares
redeemed 220
Income distribution
payable 927,331
Accrued expenses 67,231
TOTAL LIABILITIES 5,995,310
Net assets for 535,326,079
shares outstanding $ 535,326,079
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
INSTITUTIONAL SHARES:
$354,033,627 / 354,033,627
shares outstanding $1.00
INSTITUTIONAL SERVICE
SHARES:
$106,683,558 / 106,683,558
shares outstanding $1.00
INSTITUTIONAL CAPITAL
SHARES:
$74,608,894 / 74,608,894
shares outstanding $1.00
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
PERIOD ENDED JULY 31, 1999 1
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 8,668,797
EXPENSES:
Investment advisory fee $ 516,311
Administrative personnel
and services fee 194,649
Custodian fees 13,226
Transfer and dividend
disbursing agent fees and
expenses 54,311
Directors'/Trustees' fees 3,313
Auditing fees 14,134
Legal fees 6,277
Portfolio accounting fees 58,865
Shareholder services fee--
Institutional Service
Shares 101,418
Shareholder services fee--
Institutional Capital
Shares 94,200
Share registration costs 16,073
Printing and postage 19,911
Insurance premiums 27,245
Miscellaneous 5,289
TOTAL EXPENSES 1,125,222
WAIVERS:
Waiver of investment
advisory fee $ (446,031 )
Waiver of shareholder
services fee--Institutional
Capital Shares (56,520 )
TOTAL WAIVERS (502,551 )
Net expenses 622,671
Net investment income $ 8,046,126
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED JANUARY 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 14,557,221
EXPENSES:
Investment advisory fee $ 803,037
Administrative personnel
and services fee 302,822
Custodian fees 6,697
Transfer and dividend
disbursing agent fees and
expenses 61,219
Directors'/Trustees' fees 6,315
Auditing fees 14,192
Legal fees 20,325
Portfolio accounting fees 106,414
Shareholder services fee--
Institutional Shares 672,157
Shareholder services fee--
Institutional Service
Shares 157,723
Shareholder services fee--
Institutional Capital
Shares 175,081
Share registration costs 23,701
Printing and postage 15,386
Insurance premiums 29,162
Miscellaneous 1,505
TOTAL EXPENSES 2,395,736
WAIVERS:
Waiver of investment
advisory fee $ (636,478 )
Waiver of shareholder
services fee--Institutional
Shares (672,157 )
Waiver of shareholder
services fee--Institutional
Capital Shares (105,514 )
TOTAL WAIVERS (1,414,149 )
Net expenses 981,587
Net investment income $ 13,575,634
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 8,046,126 $ 13,575,634 $ 7,984,661
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Institutional Shares (5,706,072 ) (9,176,860 ) (7,088,218 )
Institutional Service
Shares (1,210,234 ) (2,031,566 ) (424,504 )
Institutional Capital
Shares (1,129,820 ) (2,367,208 ) (472,939 )
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS TO
SHAREHOLDERS (8,046,126 ) (13,575,634 ) (7,985,661 )
SHARE TRANSACTIONS:
Proceeds from sale of
shares 3,686,794,227 6,671,442,391 4,261,655,577
Net asset value of shares
issued to shareholders in
payment of distributions
declared 2,790,181 4,797,681 2,454,015
Cost of shares redeemed (3,640,523,643 ) (6,466,730,133 ) (4,146,914,995 )
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 49,060,765 209,509,939 117,194,597
Change in net assets 49,060,765 209,509,939 117,193,597
NET ASSETS:
Beginning of period 486,265,314 276,755,375 159,561,778
End of period $ 535,326,079 $ 486,265,314 $ 276,755,375
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2 1996 1995
<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 0.03 0.04 0.04 0.04 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.02 ) (0.03 ) (0.04 ) (0.04) (0.04 ) (0.03 )
Distributions from net realized gains on investments -- -- -- -- (0.00 )3 --
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 4 1.59 % 3.53 % 3.68 % 3.56 % 4.03 % 3.04 %
RATIOS TO AVERAGE NET ASSETS:
Expenses 5 0.36 %6 0.59 % 0.41 % 0.38 % 0.30 % 0.31 %
Net investment income 5 2.99 %6 3.00 % 3.34 % 3.28 % 3.83 % 2.70 %
Expenses (after waivers) 0.18 %6 0.18 % 0.18 % 0.18 % 0.18 % 0.15 %
Net investment income (after waivers) 3.17 %6 3.41 % 3.57 % 3.48 % 3.95 % 2.86 %
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $354,034 $303,899 $217,838 $159,561 $135,120 $93,595
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Amount represents less than ($0.01) per share.
4 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
5 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
6 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.01 0.03 0.03 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.01 ) (0.03 ) (0.03 ) (0.03 )
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3 1.47 % 3.27 % 3.43 % 3.31 %
RATIOS TO AVERAGE NET ASSETS:
Expenses 4 0.61 %5 0.59 % 0.66% 0.64 %
Net investment income 4 2.80 %5 3.06 % 3.25 % 2.87 %
Expenses (after waivers) 0.43 %5 0.43 % 0.43 % 0.43 %
Net investment income (after waivers) 2.98 %5 3.22 % 3.48 % 3.08 %
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $106,684 $67,832 $41,216 $0.30
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
5 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Capital Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998 1997 2
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.02 0.03 0.04 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.02 ) (0.03 ) (0.04) (0.03 )
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 3 1.53 % 3.40 % 3.56% 3.42 %
RATIOS TO AVERAGE NET ASSETS:
Expenses 4 0.63 %5 0.61 % 0.68% 0.65 %
Net investment income 4 2.67 %5 3.09 % 3.15% 2.55 %
Expenses (after waivers) 0.30 %5 0.30 % 0.30% 0.30 %
Net investment income (after waivers) 3.00 %5 3.40 % 3.53% 2.90 %
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $74,609 $114,535 $17,701 $0.30
</TABLE>
1 The fund has changed its fiscal year-end from January 31 to July 31.
2 Federated Investment Management Company, formerly Federated Management, became
the fund's investment adviser on November 15, 1996. Prior to November 15, 1996,
Lehman Brothers Global Asset Management served as the
fund's investment adviser.
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
5 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
JULY 31, 1999
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 provision for federal tax is
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.
CHANGE IN FISCAL YEAR
The Trust has changed its fiscal year-end from January 31 to July 31.
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, 1999, capital paid-in aggregated $535,326,079.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL SHARES:
Shares sold 3,220,798,056 5,212,142,622 3,591,948,985
Shares issued to
shareholders in payment of
distributions declared 1,004,656 1,302,615 1,979,575
Shares redeemed (3,171,653,273 ) (5,127,376,711 ) (3,535,649,749)
NET CHANGE RESULTING FROM
INSTITUTIONAL
SHARE TRANSACTIONS 50,149,439 86,068,526 58,278,811
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL SERVICE
SHARES:
Shares sold 217,446,882 422,524,378 251,107,687
Shares issued to
shareholders in payment of
distributions declared 1,080,682 1,503,612 339,358
Shares redeemed (179,672,680 ) (397,415,401 ) (210,231,259 )
NET CHANGE RESULTING FROM
INSTITUTIONAL SERVICE
SHARE TRANSACTIONS 38,854,884 26,612,589 41,215,786
<CAPTION>
PERIOD ENDED
JULY 31, YEAR ENDED JANUARY 31,
1999 1 1999 1998
<S> <C> <C> <C>
INSTITUTIONAL CAPITAL
SHARES:
Shares sold 248,572,618 1,036,775,391 418,598,905
Shares issued to
shareholders in payment of
distributions declared 704,843 1,991,454 135,082
Shares redeemed (289,197,690 ) (941,938,021 ) (401,033,987)
NET CHANGE RESULTING FROM
INSTITUTIONAL CAPITAL
SHARE TRANSACTIONS (39,920,229 ) 96,828,824 17,700,000
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 49,084,094 209,509,939 117,194,597
</TABLE>
1 The Fund has changed its fiscal year-end from January 31 to July 31.
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Investment Management Company, 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC 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 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, 1999, 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 $894,443,000 and $1,237,891,000,
respectively.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
Report of Ernst & Young LLP, Independent Auditors
TO THE TRUSTEES AND SHAREHOLDERS OF
MONEY MARKET OBLIGATIONS TRUST II:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the Municipal Obligations Fund (one of the
portfolios constituting the Money Market Obligations Trust II) as of July 31,
1999, and the related statements of operations for the period from February 1,
1999 to July 31, 1999 and for the year ended January 31, 1999, the statements of
changes in net assets for the period from February 1, 1999 to July 31, 1999 and
for each of the two years in the period ended January 31, 1999, and the
financial highlights for each of the periods presented therein. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of July
31, 1999, by correspondence with the custodian and brokers or other appropriate
auditing procedures where replies from brokers were not received. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Municipal Obligations Fund of the Money Market Obligations Trust II at July 31,
1999, and the results of its operations for the period from February 1, 1999 to
July 31, 1999 and for the year ended January 31, 1999, the changes in its net
assets for the period from February 1, 1999 to July 31, 1999 and for each of the
two years in the period ended January 31, 1999, and the financial highlights for
each of the periods presented therein, in conformity with generally accepted
accounting principles.
[Graphic]
Boston, Massachusetts
September 17, 1999
Trustees
JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
JOHN F. CUNNINGHAM
J. CHRISTOPHER DONAHUE
LAWRENCE D. ELLIS, M.D.
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
JOHN E. MURRAY, JR., J.D., S.J.D.
MARJORIE P. SMUTS
JOHN S. WALSH
Officers
JOHN F. DONAHUE
Chairman
J. CHRISTOPHER DONAHUE
President
WILLIAM D. DAWSON, III
Chief Investment Officer
EDWARD C. GONZALES
Executive Vice President
JOHN W. MCGONIGLE
Executive Vice President and Secretary
RICHARD B. FISHER
Vice President
RICHARD J. THOMAS
Treasurer
LESLIE K. ROSS
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 the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
[Graphic]
Federated
World-Class Investment Manager
ANNUAL REPORT
Municipal Obligations Fund
ANNUAL REPORT TO SHAREHOLDERS
JULY 31, 1999
[Graphic]
Federated
Municipal Obligations Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 608912309
Cusip 608912101
Cusip 608912200
G01999-01 (9/99)
[Graphic]
