PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Trust for
Government Cash Reserves, which covers the six-month reporting period from
December 1, 1997, through May 31, 1998. The report contains commentary by
the portfolio manager, followed by a complete listing of the trust's
investments on the last day of the reporting period, and the financial
statements.
This money market mutual fund pursues daily income with the additional
advantages of daily liquidity and stability of principal* through a
portfolio composed exclusively of U.S. Treasury and government agency
obligations. The trust's income may be exempt from state taxes.** Because
the trust does not invest in repurchase agreements, it is suitable for
tax-sensitive investors in states that tax the income on these securities.
Dividends paid to shareholders during the reporting period totaled $0.03 per
share. At the end of the reporting period, the trust's net assets stood at
$543.6 million.
Thank you for selecting Trust for Government Cash Reserves as a daily cash
investment. We welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
July 15, 1998
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no assurance that they will do so. An investment in the
trust is not insured or guaranteed by the U.S. government.
** Shareholders should consult a tax adviser.
INVESTMENT REVIEW
Trust for Government Cash Reserves, which is rated AAA by Standard & Poor's
and Aaa by Moody's Investors Service, Inc.* invests in U.S. Treasury and
U.S. government agency obligations only. The trust may invest in issues of
the Student Loan Marketing Association, the Federal Farm Credit Bank System,
the Federal Home Loan Bank System, and the Tennessee Valley Authority and
maintains a small Treasury position for liquidity purposes. The trust does
not invest in repurchase agreements, and is managed to provide distributions
that may be exempt from state taxes.
Over the six-month reporting period ended May 31, 1998, the Federal Reserve
Board (the "Fed") made no changes in monetary policy, electing to maintain
the federal funds target rate at 5.50%. Robust economic growth characterized
the period, with the Gross Domestic Product rate averaging over 3.00%.
Growth was fueled by lower long-term interest rates and strong consumer
spending. Offsetting this economic growth was the virtual absence of any
inflationary pressures and the improving federal budget deficit picture.
Inflation measures included contracting producer prices and benign consumer
prices. The federal budget deficit dropped to its lowest level in more than
two decades. This resulted in a reduction in the supply of all Treasury
securities. A tight labor market persisted throughout the period and kept
market watchers and Fed policy makers on watch for any signs of inflationary
pressures.
Overlaying U.S. economic conditions was the on-going turmoil in the Asian
markets. Concern over the deterioration in the Asian economies and equity
markets, and the impact it may ultimately have on the U.S. domestic economy,
kept the Fed on hold and created a flight-to-quality to short-term U.S.
Treasury securities. Excluding Asia, it is likely that the Fed would have
tightened monetary policy as a preemptive move against inflationary
pressures. As this reporting period ended, the Asian nations continued to
struggle. Until this situation is resolved in some way, the Fed will most
likely favor a stable U.S. monetary policy.
Technical factors, such as reduced Treasury bill auction sizes due to
stronger than expected tax receipts, and flight-to-quality issues combined
to greatly influence movements in short-term Treasury securities. Yields on
short U.S. government agency securities better reflected underlying U.S.
economic fundamentals. For example, the yield on one-year agency discount
notes opened the reporting period at 5.86%. As the Asian economic crisis
intensified in the first quarter of 1998, the yield on this security
declined sharply and hit a low of 5.32% on February 9. Market speculation
that the Fed may have to ease monetary policy in response to the crisis was
widespread. As we moved into the second quarter of 1998, the Fed maintained
a stable monetary policy, domestic economic growth remained at robust
levels, and the Asian crisis,while by no means rectified,had seemingly
stabilized. The yield on one-year agency paper then rebounded to end the
reporting period at 5.62%.
Over the reporting period, the trust targeted a 35- to 45-day average
maturity range. This represented a neutral market outlook. The specific
average maturity of the trust varied within that range according to relative
value opportunities available in the agency market. The trust's portfolio is
barbelled in structure, combining short securities like overnight agency
discount notes and floating rate securities with positions in longer, fixed
rate securities. At the end of the reporting period, 26.00% of the portfolio
was invested in government agency floating rate notes, including a position
in a Student Loan Marketing Association Master Note that helps to provide
liquidity for the trust and 7.60% of the portfolio was comprised of fixed
rate agency debentures, with the remaining assets invested in agency
discount notes of varying maturities.
Fallout from the Asian crisis is expected to ripple through the U.S. economy
as the year progresses. Reduced exports, inventory accumulation, and less
robust corporate profits may act to reduce economic growth to a more
sustainable level. This outlook, coupled with on-going benign inflation
prospects, should keep the Fed on hold in the near term. As a result, we
will maintain our neutral positioning while closely monitoring economic and
market developments.
* A AAA rating is obtained after Standard & Poor's evaluates a number of
factors, including credit quality, market price exposure, and management.
Standard & Poor's monitors the portfolio weekly for developments that could
cause changes in the ratings. Money market 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.
PORTFOLIO OF INVESTMENTS
TRUST FOR GOVERNMENT CASH RESERVES
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
GOVERNMENT AGENCIES--106.0%
$ 86,393,000 (a)Federal Farm Credit System Discount Notes, 5.170% - $ 85,905,758
5.450%, 6/1/1998 - 12/11/1998
20,000,000 (b)Federal Farm Credit System Floating Rate Notes, 5.456% - 19,984,635
5.459%, 7/1/1998 - 9/1/1998
9,000,000 Federal Farm Credit System, 5.500% - 5.700%, 9/2/1998 - 8,993,282
4/1/1999
233,700,000 (a)Federal Home Loan Bank System Discount Notes, 5.295% - 232,393,766
5.520%, 6/1/1998 - 11/12/1998
97,000,000 (b)Federal Home Loan Bank System Floating Rate Notes, 5.418% 96,963,583
- 5.650%, 6/2/1998 - 7/1/1998
20,500,000 Federal Home Loan Bank System, 5.605% - 5.820%, 6/16/1998 - 20,496,929
5/5/1999
26,000,000 (b)Student Loan Marketing Association Floating Rate Notes, 25,991,864
5.365% - 5.655%, 6/2/1998
24,500,000 Student Loan Marketing Association Master Notes, 5.455%, 24,500,000
6/2/1998
12,000,000 Student Loan Marketing Association, 5.400% - 5.830%, 11,999,082
10/29/1998 - 3/11/1999
49,500,000 (a)Tennessee Valley Authority Discount Notes, 5.370% - 49,197,104
5.390%, 6/18/1998 - 8/14/1998
TOTAL GOVERNMENT AGENCIES 576,426,003
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $ 576,426,003
</TABLE>
(a) Rates noted reflect the effective yield.
(b) Denotes variable rate securities which show current rate and next demand
date.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($543,640,433) at May 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
TRUST FOR GOVERNMENT CASH RESERVES
MAY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 576,426,003
Cash 810,831
Income receivable 1,259,190
Total assets 578,496,024
LIABILITIES:
Payable for investments purchased $ 32,473,518
Income distribution payable 2,327,668
Accrued expenses 54,405
Total liabilities 34,855,591
NET ASSETS for 543,640,433 shares outstanding $ 543,640,433
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$543,640,433 / 543,640,433 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
TRUST FOR GOVERNMENT CASH RESERVES
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 15,252,853
EXPENSES:
Investment advisory fee $ 1,092,589
Administrative personnel and services fee 205,953
Custodian fees 19,399
Transfer and dividend disbursing agent fees and expenses 9,227
Directors'/Trustees' fees 10,920
Auditing fees 7,462
Legal fees 3,276
Portfolio accounting fees 48,088
Shareholder services fee 682,868
Share registration costs 12,740
Printing and postage 3,822
Miscellaneous 5,823
Total expenses 2,102,167
Waivers and reimbursements--
Waiver of investment advisory fee $ (303,807)
Waiver of shareholder services fee (546,294)
Total waivers (850,101)
Net expenses 1,252,066
Net investment income $ 14,000,787
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
TRUST FOR GOVERNMENT CASH RESERVES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) NOVEMBER 30,
MAY 31, 1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 14,000,787 $ 32,056,703
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (14,000,787) (32,056,703)
SHARE TRANSACTIONS--
Proceeds from sale of shares 793,165,455 2,284,291,335
Net asset value of shares issued to shareholders in payment 1,419,105 3,196,694
of distributions declared
Cost of shares redeemed (813,648,339) (2,324,334,027)
Change in net assets resulting from share transactions (19,063,779) (36,845,998)
Change in net assets (19,063,779) (36,845,998)
NET ASSETS:
Beginning of period 562,704,212 599,550,210
End of period $ 543,640,433 $ 562,704,212
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
TRUST FOR GOVERNMENT CASH RESERVES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
MAY 31, YEAR ENDED NOVEMBER 30,
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05 0.05 0.04 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.05) (0.04) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.58% 5.15% 5.08% 5.60% 3.74% 2.87%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.46%* 0.46% 0.46% 0.45% 0.45% 0.45%
Net investment income 5.13%* 5.02% 4.99% 5.45% 3.68% 2.83%
Expense waiver/reimbursement(b) 0.31%* 0.31% 0.32% 0.32% 0.10% 0.03%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $543,640 $562,704 $599,550 $739,553 $978,691 $1,060,355
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
TRUST FOR GOVERNMENT CASH RESERVES
MAY 31, 1998 (UNAUDITED)
ORGANIZATION
Trust for Government Cash Reserves (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a
non-diversified, open-end management investment company. The investment
objective of the Trust is high current income consistent with stability of
principal and liquidity.
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 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.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees (the "Trustees") to
issue an unlimited number of full and fractional shares of beneficial
interest (without par value). At May 31, 1998, capital paid-in aggregated
$543,640,433.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
May 31, November 30,
1998 1997
<S> <C> <C>
Shares sold 793,165,455 2,284,291,335
Shares issued to shareholders in payment of 1,419,105 3,196,694
distributions declared
Shares redeemed (813,648,339) (2,324,334,027)
Net change resulting from share transactions (19,063,779) (36,845,998)
</TABLE>
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, Inc. for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25% of average
daily 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.
YEAR 2000
Similar to other financial organizations, the Trust could be adversely
affected if the computer systems used by the Trust's service providers do
not properly process and calculate date-related information and data from
and after January 1, 2000. The Trust'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
Trust'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 Trust.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Glen R. Johnson
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Matthew S. Hardin
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 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 trust's prospectus which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
[Graphic]Federated Investors
Trust for Government Cash Reserves
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1998
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 89833H108
0062905 (7/98)
[Graphic]
