TRUST FOR GOVERNMENT
CASH RESERVES
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1996
LOGO
Cusip 89833H108
0062905 (7/96)
PRESIDENT'S MESSAGE
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Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Trust for
Government Cash Reserves, which covers the six-month period from December 1,
1995 through May 31, 1996. The report contains commentary by the portfolio
manager, followed by a complete list of the fund's investments on the last day
of the period, and the financial statements.
This money market mutual fund pursues daily income with the additional
advantages of daily liquidity and stability of principal*--all through a
portfolio composed exclusively of U.S. Treasury and government agency
obligations. The fund's income may be exempt from state and local taxes.**
Because the fund does not invest in repurchase agreements, it may be suitable
for tax-sensitive investors in states that tax the income on these securities.
Dividends paid to shareholders during the period totaled $16.4 million, or $0.03
per share. At the end of the period, the fund's net assets stood at $569.8
million.
Thank you for selecting Trust for Government Cash Reserves as a daily cash
investment. We welcome your comments and suggestions.
Sincerely,
LOGO
Glen R. Johnson
President
July 15, 1996
* Although money market mutual funds seek to maintain a share value of $1.00,
there is no guarantee that they will do so. An investment in the fund is
neither insured nor guaranteed by the U.S. government.
** Shareholders should consult a tax adviser.
INVESTMENT REVIEW
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Trust for Government Cash Reserves, which is rated AAAm by Standard & Poor's
Ratings Group and Aaa by Moody's Investors Service, Inc.,* is invested in U.S.
Treasury and U.S. government agency obligations only. The fund continues to
invest in issues of the Student Loan Marketing Association, Federal Farm Credit
Bank System, and Federal Home Loan Bank System, and maintains a small Treasury
position for liquidity purposes. The fund does not invest in repurchase
agreements, and is managed to provide distributions which are exempt from state
personal income tax.
The Federal Reserve Board (the "Fed") eased monetary policy twice over the
six-month reporting period ending in May 1996. Faced with slowing economic
growth and benign inflationary pressures, the Fed lowered the federal funds
target rate from 5.75% to 5.5% in the latter part of December, and again from
5.5% to the current 5.25% at the end of January. The short end of the government
yield curve anticipated the policy moves from the Fed, and amid indications of
sluggish consumer and manufacturing sectors of the economy, looked forward to
additional eases in the not too distant future.
February and March brought a shift in market psychology regarding the extent and
direction of changes in monetary policy by the Fed. Strength in consumer
spending and housing combined with signs of a rebound in manufacturing to paint
a picture of an economy that was not on the verge of recession--as thought
earlier this year--but of one that is growing at a pace above the 2 1/2% thought
by many to be the non-inflationary potential rate of growth. Now confronted with
a much sturdier economy than previously thought, the front-end of the market
retreated from its expectations for additional easing from the Fed in the near
future, and moved to pricing in anticipation of a tightening in monetary policy
by the Fed later in 1996. Yields on short-term government securities reflected
this rather volatile mood in the markets; the yield on the three-month Treasury
bill began the reporting period in December 1995 at 5.5%, declined to 4.9% by
mid-February 1996, and ended May at close at 5.2%.
Trust for Government Cash Reserves remained targeted in a 40-50 day average
maturity target range throughout the reporting period, and moved its positioning
within that range according to the relative value opportunities offered in the
market. The portfolio continues to be barbelled in structure, which continues to
provide a competitive yield. Over one-third of the fund is invested in U.S.
government agency floating rate notes, including a position in a Student Loan
Marketing Association master note which helps to provide liquidity for the fund.
This floating rate position is combined with short-term agency discount notes to
comprise the short end of the barbell. The fund combines this short position
with Treasury and agency securities with longer maturities of 6 to 12 months.
Although a run-up in commodity prices early in the second quarter has since
subsided, tight labor market conditions in many regions have raised fears of
wage inflation. Market participants now expect that the Fed will need to tighten
monetary policy in the not-too-distant future--in spite of the Presidential
election later in the year--to ward off these pressures. Shortly after the close
of the reporting period, the fund lowered its average maturity target range from
40-50 days to 35-45 days to reflect our anticipation of higher interest rates in
the future. The fund is expected to maintain this posture in the near future,
intending to maximize its performance through ongoing relative value analysis.
However, changing economic and market developments are continuously monitored to
best serve our clients attracted to the short-term U.S. Government market.
* An AAAm rating is obtained after Standard & Poor's Ratings Group evaluates a
number of factors, including credit quality, market price exposure and
management. Standard & Poor's Ratings Group monitors the portfolio weekly for
developments that could cause changes in the ratings. Money market funds and
bond funds rated Aaa by Moody's Investors Service, Inc. are judged to be of an
investment quality similar to Aaa-rated fixed income obligations, that is,
they are judged to be of the best quality. These ratings do not remove market
risks and are subject to change.
TRUST FOR GOVERNMENT CASH RESERVES
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
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<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--86.7%
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$ 18,000,000 Federal Farm Credit Bank, 5.50%-5.74%, 6/3/1996-6/3/1997 $ 17,982,238
--------------------------------------------------------------
15,000,000 (a) Federal Farm Credit Bank, Floating Rate Note, 5.32%, 6/3/1996 14,999,396
--------------------------------------------------------------
27,000,000 Federal Home Loan Bank Notes, 5.43%-6.18%, 6/5/1996-6/21/1996 26,988,216
--------------------------------------------------------------
151,325,000 (b) Federal Home Loan Bank, Discount Notes, 5.08%-5.45%,
6/3/1996-11/12/1996 150,551,430
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28,100,000 (a) Federal Home Loan Bank, Floating Rate Notes, 6.02%-6.05%,
6/3/1996 28,100,310
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35,000,000 (b) Student Loan Marketing Association, Discount Notes,
5.35%-5.36%, 6/13/1996-6/28/1996 34,884,950
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60,600,000 (a) Student Loan Marketing Association, Floating Rate Master
Notes, 5.26%-5.31%, 6/4/1996 60,600,000
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121,105,000 (a) Student Loan Marketing Association, Floating Rate Notes,
5.31%-5.585%, 6/4/1996 121,102,321
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39,000,000 (b) Tennessee Valley Authority, Discount Notes, 5.32%-5.34%,
6/7/1996-6/13/1996 38,951,477
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TOTAL SHORT-TERM U.S. GOVERNMENT OBLIGATIONS 494,160,338
-------------------------------------------------------------- ------------
U.S. TREASURY OBLIGATIONS--13.6%
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14,000,000 (b) U.S. Treasury Bills, 4.79%-4.89%, 9/19/1996-11/14/1996 13,733,279
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63,500,000 U.S. Treasury Notes, 6.50%-8.00%, 9/30/1996-3/31/1997 64,061,535
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TOTAL U.S. TREASURY OBLIGATIONS 77,794,814
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TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $571,955,152
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</TABLE>
(a) Denotes variable rate securities which show current rate and next demand
date.
(b) The issue shows the rate of discount at time of purchase.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($569,754,549) at May 31, 1996.
(See Notes which are an integral part of the Financial Statements)
TRUST FOR GOVERNMENT CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
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<TABLE>
<S> <C> <C>
ASSETS:
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Total investments in securities, at amortized cost and value $571,955,152
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Income receivable 3,406,434
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Total assets 575,361,586
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LIABILITIES:
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Payable for investments purchased $2,995,791
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Income distribution payable 2,366,295
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Payable to Bank 199,703
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Accrued expenses 45,248
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Total liabilities 5,607,037
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Net Assets for 569,754,549 shares outstanding $569,754,549
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NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
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$569,754,549 / 569,754,549 shares outstanding $1.00
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</TABLE>
TRUST FOR GOVERNMENT CASH RESERVES
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
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<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
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Interest $17,930,632
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EXPENSES:
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Investment advisory fee $ 1,307,304
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Administrative personnel and services fee 247,080
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Custodian fees 51,605
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Transfer and dividend disbursing agent fees and expenses 17,196
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Directors'/Trustees' fees 9,211
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Auditing fees 6,954
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Legal fees 4,697
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Portfolio accounting fees 51,845
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Shareholder services fee 817,065
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Share registration costs 9,638
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Printing and postage 4,026
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Insurance premiums 5,795
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Taxes 732
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Miscellaneous 5,734
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Total expenses 2,538,882
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Waivers--
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Waiver of investment advisory fee $(387,063)
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Waiver of shareholder services fee (653,652)
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Total waivers (1,040,715)
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Net expenses 1,498,167
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Net investment income $16,432,465
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</TABLE>
(See Notes which are an integral part of the Financial Statements)
TRUST FOR GOVERNMENT CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
MAY 31, 1996 NOVEMBER, 30, 1995
------------------ -------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
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OPERATIONS--
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Net investment income $ 16,432,465 $ 49,975,604
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DISTRIBUTIONS TO SHAREHOLDERS--
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Distributions from net investment income (16,432,465) (49,975,604)
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SHARE TRANSACTIONS--
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Proceeds from sale of shares 1,367,792,600 2,760,213,745
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Net asset value of shares issued to shareholders
in payment of distributions declared 774,100 4,605,650
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Cost of shares redeemed (1,538,365,097) (3,003,957,785)
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Change in net assets resulting from share
transactions (169,798,397) (239,138,390)
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Change in net assets (169,798,397) (239,138,390)
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NET ASSETS:
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Beginning of period 739,552,946 978,691,336
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End of period $ 569,754,549 $ 739,552,946
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</TABLE>
(See Notes which are an integral part of the Financial Statements)
TRUST FOR GOVERNMENT CASH RESERVES
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED NOVEMBER 30,
MAY 31, -------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989(A)
------------ ------ ------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------
Net investment income 0.03 0.05 0.04 0.03 0.04 0.06 0.08 0.06
- -------------------------
LESS DISTRIBUTIONS
- -------------------------
Distributions from net
investment income (0.03) (0.05) (0.04) (0.03) (0.04) (0.06) (0.08) (0.06 )
- ------------------------- ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN (B) 2.53% 5.60% 3.74% 2.87% 3.58% 5.95% 7.94% 5.93% %*
- -------------------------
RATIOS TO AVERAGE NET
ASSETS
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Expenses 0.46%* 0.45% 0.45% 0.45% 0.47% 0.47% 0.45% 0.43% %*
- -------------------------
Net investment income 5.03%* 5.45% 3.68% 2.83% 3.54% 5.76% 7.65% 8.34 %*
- -------------------------
Expense waiver/
reimbursement (c) 0.32%* 0.32% 0.10% 0.03% 0.02% 0.02% 0.08% 0.19 %*
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SUPPLEMENTAL DATA
- -------------------------
Net assets, end of
period (000 omitted) $569,755 $739,553 $978,691 $1,060,355 $1,145,009 $1,251,692 $880,997 $331,860
- -------------------------
</TABLE>
*Computed on an annualized basis.
(a) Reflects operations for the period from March 30, 1989 (date of initial
public investment) to November 30, 1989.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
TRUST FOR GOVERNMENT CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
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(1) ORGANIZATION
Trust for Government Cash Reserves (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Trust's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.
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 Trust's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At May
31, 1996, capital paid-in aggregated $569,754,549.
TRUST FOR GOVERNMENT CASH RESERVES
- --------------------------------------------------------------------------------
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MAY 31, 1996 NOVEMBER 30, 1995
- --------------------------------------------------- ------------------ ------------------
<S> <C> <C>
Shares sold 1,367,792,600 2,760,213,745
- ---------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 774,100 4,605,650
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Shares redeemed (1,538,365,097) (3,003,957,785)
- --------------------------------------------------- -------------- --------------
Net change resulting from share transactions (169,798,397) (239,138,390)
- --------------------------------------------------- --------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Research, the Trust's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.40% of the Trust'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 Trust with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25%
of daily average net assets of the Trust for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Trust. The fee paid to FSSC is based on
the size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
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John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Glen R. Johnson Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and
John E. Murray, Jr. Treasurer and Secretary
Wesley W. Posvar Richard B. Fisher
Marjorie P. Smuts Vice President
Douglas L. Hein
Assistant Treasurer
S. Elliott Cohan
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
