AUTOMATED GOVERNMENT CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
PROSPECTUS
The shares of Automated Government Cash Reserves (the "Fund") offered by this
prospectus represent interests in a diversified portfolio of Federated
Government Trust (the "Trust"), an open-end management investment company (a
mutual fund) investing in short-term U.S. government securities to achieve
current income consistent with stability of principal and liquidity.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated June 30,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information or make
inquiries about the Fund, contact the Fund at the address listed on the back of
this prospectus.
The Fund aims to provide investors with a cost-effective, administratively
convenient, highly liquid, cash equivalent vehicle that can be integrated into
an existing or contemplated cash management system. The Fund will report changes
in principal balances and monthly income distributions in a format that is
compatible with all major trust operations systems presently in use.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated June 30, 1994
TABLE OF CONTENTS
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SUMMARY OF FUND EXPENSES 1
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FINANCIAL HIGHLIGHTS 2
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GENERAL INFORMATION 3
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INVESTMENT INFORMATION 3
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Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Demand Master Notes 4
When-Issued and Delayed
Delivery Transactions 4
Investment Limitations 4
Regulatory Compliance 4
TRUST INFORMATION 5
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Management of the Trust 5
Board of Trustees 5
Investment Adviser 5
Advisory Fees 5
Adviser's Background 5
Distribution of Fund Shares 6
Administration of the Fund 6
Administrative Services 6
Shareholder Services Plan 6
Other Payments to Financial
Institutions 6
Custodian 6
Transfer Agent and Dividend
Disbursing Agent 6
Legal Counsel 7
Independent Auditors 7
NET ASSET VALUE 7
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INVESTING IN THE FUND 7
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Share Purchases 7
By Wire 7
By Mail 7
Minimum Investment Required 7
Cash Sweep Program 8
Participating Depository Institutions 8
What Shares Cost 8
Subaccounting Services 8
Certificates and Confirmations 8
Dividends 9
Capital Gains 9
REDEEMING SHARES 9
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Telephone Redemption 9
Written Requests 10
Signatures 10
Receiving Payment 10
Accounts with Low Balances 10
Redemption in Kind 10
SHAREHOLDER INFORMATION 11
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Voting Rights 11
Massachusetts Partnership Law 11
TAX INFORMATION 11
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Federal Income Tax 11
State and Local Taxes 12
Pennsylvania Corporate and
Personal Property Taxes 12
PERFORMANCE INFORMATION 12
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FINANCIAL STATEMENTS 13
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REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS 19
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ADDRESSES Inside Back Cover
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SUMMARY OF FUND EXPENSES
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<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable)....................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.18%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.40%
Shareholder Services Fee................................................ 0.25%
Total Fund Operating Expenses(2)................................... 0.58%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The Total Fund Operating Expenses in the table above are based on expenses
expected during the fiscal year ending April 30, 1995. The total Fund operating
expenses were 0.57% for the fiscal year ended April 30, 1994 and were 0.66%
absent the voluntary waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND" AND "TRUST INFORMATION." WIRE-TRANSFERRED
REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period ................ $6 $19 $32 $ 73
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
AUTOMATED GOVERNMENT CASH RESERVES
FINANCIAL HIGHLIGHTS
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(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors on page
19.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------------------
1994 1993 1992 1991 1990**
----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
---------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------
Net investment income 0.03 0.03 0.05 0.07 0.02
--------------------------------------------- ----- ----- ----- ----- -----
LESS DISTRIBUTIONS
---------------------------------------------
Dividends to shareholders from net
investment income (0.03) (0.03) (0.05) (0.07) (0.02 )
--------------------------------------------- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00
--------------------------------------------- ----- ----- ----- ----- -----
TOTAL RETURN* 2.77% 2.92% 4.79% 7.20% 1.93 %
---------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------
Expenses 0.57% 0.57% 0.58% 0.55% 0.32 %(a)
---------------------------------------------
Net investment income 2.75% 2.87% 4.58% 6.70% 8.02 %(a)
---------------------------------------------
Expense waiver/reimbursement(b) 0.09% 0.08% 0.14% 0.30% 0.89 %(a)
---------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------
Net assets, end of period (000 omitted) $457,944 $396,370 $308,625 $206,694 $34,053
---------------------------------------------
</TABLE>
* Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from February 15, 1990 (date of initial
public investment) to April 30, 1990.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
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The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. This prospectus relates only to the Trust's U.S.
government money market portfolio, known as Automated Government Cash Reserves
(the "Fund"). The Fund is designed primarily for institutional investors, such
as corporations, unions, hospitals, insurance companies, and municipalities as a
convenient means of participating in a professionally managed, diversified
portfolio limited to short-term U.S. government securities. A minimum initial
investment of $25,000 over a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. Fund shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with stability
of principal and liquidity. This investment objective cannot be changed without
approval of shareholders. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of only
short-term U.S. government securities which mature in thirteen months or less.
The average maturity of U.S. government securities in the Fund's portfolio,
computed on a dollar-weighted basis, will be 90 days or less. Unless indicated
otherwise, the investment policies may be changed by the Trustees without
approval of shareholders. Shareholders will be notified before any material
changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The U.S. government securities in which the Fund invests
are either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities include, but are not limited to:
- direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and
- notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the Federal Farm Credit System, Federal Home
Loan Banks, Federal National Mortgage Association, Student Loan Marketing
Association, and Federal Home Loan Mortgage Corporation.
Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial
support to other agencies or instrumentalities, since it is not obligated to do
so. These agencies and instrumentalities are supported by:
- the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;
- discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
- the credit of the agency or instrumentality.
The Fund will limit its investments to those U.S. government securities whose
interest is exempt from personal income tax in the various states if owned
directly.
DEMAND MASTER NOTES. Demand master notes represent a borrowing arrangement
between a governmental agency (borrower) and an institutional lender such as the
Fund (lender). These notes are payable upon demand. The lender typically has the
right to increase or decrease the principal amount under the note at any time up
to a stated percentage of the original principal amount. Both the lender and the
borrower have the right to demand full or partial prepayment of the note,
usually upon seven days' prior notice, based upon a government interest index or
other published government rates. Demand master notes usually provide for
floating or variable rates of interest.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase short-term
U.S. government securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 10% of the value of its total assets to secure such
borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not invest more than 10% of its net assets in illiquid obligations
such as demand master notes, the demand for full or partial prepayment of which
may not occur within 7 days of notice.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The
Fund will determine the effective maturity of its investments according to Rule
2a-7. The Fund may change these operational policies to reflect changes in the
laws and regulations without approval of its shareholders.
TRUST INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the "Trustees").
The Trustees are responsible for managing the business affairs of the Trust and
for exercising all the powers of the Trust except those reserved for the
shareholders. The Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Management, the Fund's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The Adviser can terminate this voluntary waiver
of its advisory fee at any time at its sole discretion. This does not
include reimbursement to the Fund of any expenses incurred by shareholders
who use the transfer agent's subaccounting facilities. The Adviser has also
undertaken to reimburse the Fund for operating expenses in excess of
limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors (the "Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET ASSETS
ADMINISTRATIVE FEE OF THE FEDERATED FUNDS
-------------------------------------------- --------------------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan (the
"Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the Fund to obtain certain personal services
for shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Shareholder Services Plan, certain financial
institutions may be compensated by the Adviser or its affiliates for the
continuing investment of customers' assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly by the
distributor or Adviser from their assets, and will not be made from the assets
of the Fund or by the assessment of a sales charge on shares.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund, and
dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.
NET ASSET VALUE
--------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Fund, of
course, cannot guarantee that its net asset value will always remain at $1.00
per share.
INVESTING IN THE FUND
--------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.
To purchase shares of the Fund, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone. The Fund reserves the right to reject any purchase request.
BY WIRE. To purchase shares of the Fund by Federal Reserve wire, call the
Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. (Eastern time) that same day. Federal funds should be
wired as follows: State Street Bank and Trust Company, Boston,
Massachusetts; Attention: EDGEWIRE; For Credit to: Automated Government
Cash Reserves; Fund Number (this number can be found on the account
statement or by contacting the Fund); Group Number or Order Number; Nominee
or Institution Name; ABA Number 011000028. Shares cannot be purchased by
Federal Reserve wire on Columbus Day, Veteran's Day, or Martin Luther King
Day.
BY MAIL. To purchase shares of the Fund by mail, send a check made payable
to Automated Government Cash Reserves to the Fund's transfer agent
Federated Services Company, c/o State Street Bank and Trust Company, P.O.
Box 8602, Boston, Massachusetts 02266-8602. Orders by mail are considered
received after payment by check is converted by the transfer agent's bank,
State Street Bank, into federal funds. This is normally the next business
day after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund.
Accounts established through a non-affiliated bank or broker may be subject to a
smaller minimum investment.
CASH SWEEP PROGRAM
Cash accumulations in demand deposit accounts with depository institutions such
as banks and savings and loan associations may be automatically invested in
shares of the Fund on a day selected by the depository institution and its
customer, or when the demand deposit account reaches a predetermined dollar
amount (e.g., $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS. Participating depository
institutions are responsible for prompt transmission of orders relating to
the program. These depository institutions are the record owners of the
shares of the Fund. Depository institutions participating in this program
may charge their customers for their services relating to the program. This
prospectus should, therefore, be read together with any agreement between
the customer and the depository institution with regard to the services
provided, the fees charged for those services, and any restrictions and
limitations imposed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by The Fund. Investors who purchase
Fund shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 12:00 noon (Eastern time), 1:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; or (iii) the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Fund shares in a fiduciary, agency, custodial, or similar capacity may charge or
pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Fund shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends on the day after the check is converted, upon
instruction by the transfer agent, into federal funds. Dividends are
automatically reinvested on payment dates in additional shares of the Fund
unless cash payments are requested by contacting the Fund.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If, for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Fund before 12:00 noon
(Eastern time). The proceeds will be wired the same day to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System. If at any time, the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 12:00 noon (Eastern time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00 noon
(Eastern time) will be paid the same day but will not be entitled to that day's
dividend.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as Written Requests, should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantees to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
as the Fund determines net asset value. The portfolio instruments will be
selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of the portfolios
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust on behalf of the
Fund. To protect shareholders of the Fund, the Trust has filed legal documents
with Massachusetts that expressly disclaim the liability of its shareholders of
the Fund for such acts or obligations of the Trust. These documents require
notice of this disclaimer to be given in each agreement, obligation, or
instrument the Trust or its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use property of the Fund to protect or
compensate the shareholder. On request, the Trust will defend any claim made and
pay any judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
--------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
are received in cash or as additional shares.
STATE AND LOCAL TAXES
The Fund intends to limit its investments to U.S. government securities paying
interest which, if owned directly by shareholders of the Fund, would be exempt
from state personal income tax. However, under the laws of some states, the net
investment income distributed by the Fund may be taxable to shareholders. State
laws differ on this issue, and shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES. In the opinion of Houston,
Houston & Donnelly, counsel to the Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
From time to time the Fund advertises its yield and effective yield.
The yield of the Fund represents the annualized rate of income earned on an
investment in the Fund over a seven-day period. It is the annualized dividends
earned during the period on the investment shown as a percentage of the
investment. The effective yield is calculated similarly to the yield but, when
annualized, the income earned by an investment in the Fund is assumed to be
reinvested daily. The effective yield will be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
AUTOMATED GOVERNMENT CASH RESERVES
PORTFOLIO OF INVESTMENTS
APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
------------
SHORT-TERM U.S. GOVERNMENT AND AGENCY OBLIGATIONS--98.7% VALUE
------------
<C> <C> <S> <C>
-----------------------------------------------------------------------------------
$177,000,000 * Federal Farm Credit Bank, Discount Notes, 3.20%-3.76%,
5/2/94-8/10/94 $176,680,556
--------------------------------------------------------------- ------------
34,335,000 * Federal Home Loan Bank, Discount Notes, 3.17%-3.93%,
5/16/94-9/9/94 34,071,348
--------------------------------------------------------------- ------------
3,500,000 Federal Home Loan Bank Note, 8.625%, 6/27/94 3,528,109
--------------------------------------------------------------- ------------
64,400,000 ** Student Loan Marketing Association, Floating Rate Notes,
4.13%-4.54%, 5/3/94-5/6/94 64,502,773
--------------------------------------------------------------- ------------
91,700,000 ** Student Loan Marketing Association, Floating Rate Master Note,
3.94%, 5/3/94 91,700,000
--------------------------------------------------------------- ------------
20,000,000 * Tennessee Valley Authority, Discount Notes, 3.54%-3.85%,
5/18/94-6/3/94 19,947,992
--------------------------------------------------------------- ------------
23,000,000 * U.S. Treasury Bills, 3.16%-3.60%, 8/4/94-2/9/95 22,700,732
--------------------------------------------------------------- ------------
38,500,000 U.S. Treasury Notes, 4.25%-9.50%, 5/15/94-2/15/95 38,875,918
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $452,007,428+
--------------------------------------------------------------- ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase.
** Current rate and next reset date shown.
+ Also represents cost for federal tax purposes.
Note: The category of investments is shown as a percentage of net assets
($457,944,352) at April 30, 1994.
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
--------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A) $452,007,428
--------------------------------------------------------------------------------
Cash 28,743
--------------------------------------------------------------------------------
Receivable for investments sold 4,000,000
--------------------------------------------------------------------------------
Interest receivable 1,601,374
--------------------------------------------------------------------------------
Receivable for Fund shares sold 1,441,444
--------------------------------------------------------------------------------
Deferred expenses (Note 2E) 2,459
-------------------------------------------------------------------------------- ------------
Total assets 459,081,448
--------------------------------------------------------------------------------
LIABILITIES:
--------------------------------------------------------------------------------
Dividends payable $1,025,882
-------------------------------------------------------------------
Payable to shareholder services agent (Note 4) 39,923
-------------------------------------------------------------------
Payable to transfer and dividend disbursing agent (Note 4) 11,842
-------------------------------------------------------------------
Accrued expenses 59,449
------------------------------------------------------------------- ----------
Total liabilities 1,137,096
-------------------------------------------------------------------------------- ------------
NET ASSETS for 457,944,352 shares of beneficial interest outstanding $457,944,352
-------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share
($457,944,352 / 457,944,352 shares of beneficial interest outstanding) $1.00
-------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
---------------------------------------------------------------------------------
Interest income (Note 2B) $14,780,736
---------------------------------------------------------------------------------
EXPENSES:
--------------------------------------------------------------------
Investment advisory fee (Note 4) $2,227,794
--------------------------------------------------------------------
Trustees' fees 6,905
--------------------------------------------------------------------
Administrative personnel and services (Note 4) 348,312
--------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 152,210
--------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 33,603
--------------------------------------------------------------------
Fund share registration costs 46,049
--------------------------------------------------------------------
Legal fees 34,855
--------------------------------------------------------------------
Auditing fees 11,600
--------------------------------------------------------------------
Printing and postage 5,259
--------------------------------------------------------------------
Shareholder services fees (Note 4) 39,923
--------------------------------------------------------------------
Taxes 35
--------------------------------------------------------------------
Insurance premiums 11,915
--------------------------------------------------------------------
Miscellaneous 4,207
-------------------------------------------------------------------- ----------
Total expenses 2,922,667
--------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 389,870
-------------------------------------------------------------------- ----------
Net expenses 2,532,797
--------------------------------------------------------------------------------- -----------
Net investment income $12,247,939
--------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
1994 1993
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
------------------------------------------------------------
OPERATIONS--
------------------------------------------------------------
Net investment income $ 12,247,939 $ 10,785,703
------------------------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
------------------------------------------------------------
Dividends to shareholders from net investment income (12,247,939) (10,785,703)
------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
------------------------------------------------------------
Proceeds from sale of shares 1,616,918,441 1,371,972,505
------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of dividends declared 2,166,619 2,671,141
------------------------------------------------------------
Cost of shares redeemed (1,557,510,495) (1,286,898,427)
------------------------------------------------------------ --------------- ---------------
Change in net assets from Fund share transactions 61,574,565 87,745,219
------------------------------------------------------------ --------------- ---------------
Change in net assets 61,574,565 87,745,219
------------------------------------------------------------
NET ASSETS:
------------------------------------------------------------
Beginning of period 396,369,787 308,624,568
------------------------------------------------------------ --------------- ---------------
End of period $ 457,944,352 $ 396,369,787
------------------------------------------------------------ --------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1994
--------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Trust consists of three, diversified, portfolios. The financial statements
included herein present only those of Automated Government Cash Reserves (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.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Investment Company Act of 1940.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount are amortized as required by the Internal Revenue Code,
as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal income
tax are necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities 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.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement.
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
AUTOMATED GOVERNMENT CASH RESERVES
--------------------------------------------------------------------------------
(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 April
30, 1994, capital paid in aggregated $457,944,352. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------
1994 1993
------------------------------------------------------------ -------------- --------------
<S> <C> <C>
Shares sold 1,616,918,441 1,371,972,505
------------------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 2,166,619 2,671,141
------------------------------------------------------------
Shares redeemed (1,557,510,495) (1,286,898,427)
------------------------------------------------------------ -------------- --------------
Net change resulting from Funds share transactions 61,574,565 87,745,219
------------------------------------------------------------ -------------- --------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.50 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Fund. Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services and Federated
Administrative Services, Inc. collectively provided the Fund administrative and
personnel services. Prior to March 1, 1994, these services were provided at
approximate cost. Effective March 1, 1994, the fee 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 any
fiscal year shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average net assets of the Fund for the period. This fee is to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEE--Federated Services Company ("FServ")
serves as transfer and dividend disbursing agent for the Fund. The fee is based
on the size, type and number of accounts and transactions made by shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Directors of
the above companies.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
AUTOMATED GOVERNMENT CASH RESERVES:
We have audited the accompanying statement of assets and liabilities of
Automated Government Cash Reserves (a portfolio of Federated Government Trust),
including the portfolio of investments, as of April 30, 1994, and the related
statement of operations for the year then ended, the statements of changes in
net assets for each of the two years in the period then ended, and the financial
highlights (see page 2 of this Prospectus) for each of the five years in the
period then ended. 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 April
30, 1994, 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
Automated Government Cash Reserves at April 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
June 9, 1994
ADDRESSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Automated Government Cash Reserves Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
------------------------------------------------------------------------------------------------
</TABLE>
AUTOMATED GOVERNMENT
CASH RESERVES
PROSPECTUS
A Diversified Portfolio of Federated
Government Trust, An Open-End
Management Investment Company
June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
0011606A (6/94)
AUTOMATED GOVERNMENT CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus for
Automated Government Cash Reserves (the "Fund") dated June 30, 1994. This
Statement is not a prospectus itself. To receive a copy of the prospectus, write
or call Automated Government Cash Reserves.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
--------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
---------------------------------------------------------------
Types of Investments 1
When-Issued and
Delayed Delivery Transactions 1
Investment Limitations 1
FEDERATED GOVERNMENT TRUST MANAGEMENT 2
---------------------------------------------------------------
Officers and Trustees 2
The Funds 4
Trust Ownership 4
Trustee Liability 5
INVESTMENT ADVISORY SERVICES 5
---------------------------------------------------------------
Adviser to the Fund 5
Advisory Fees 5
Other Advisory Services 5
ADMINISTRATIVE SERVICES 5
---------------------------------------------------------------
SHAREHOLDER SERVICES PLAN 6
---------------------------------------------------------------
BROKERAGE TRANSACTIONS 6
---------------------------------------------------------------
PURCHASING SHARES 6
---------------------------------------------------------------
Conversion to Federal Funds 6
DETERMINING NET ASSET VALUE 7
---------------------------------------------------------------
Use of the Amortized Cost Method 7
REDEEMING SHARES 7
---------------------------------------------------------------
Redemption in Kind 8
TAX STATUS 8
---------------------------------------------------------------
The Fund's Tax Status 8
Shareholders' Tax Status 8
YIELD 8
---------------------------------------------------------------
EFFECTIVE YIELD 8
---------------------------------------------------------------
PERFORMANCE COMPARISONS 9
---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
--------------------------------------------------------------------------------
The Fund is a portfolio in Federated Government Trust (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust dated
December 7, 1989.
INVESTMENT OBJECTIVE AND POLICIES
--------------------------------------------------------------------------------
The Fund's investment objective is to provide current income consistent with
stability of principal and liquidity. The investment objective cannot be changed
without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests only in short-term U.S. government securities.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Fund may purchase
carry variable interest rates. These securities have a rate of interest
subject to adjustment at least annually. This adjusted interest rate is
ordinarily tied to some objective standard, such as the 91-day U.S.
Treasury bill rate.
Variable interest rates generally reduce changes in the market value of
such securities from their original purchase prices. Accordingly, the
potential for capital appreciation or capital depreciation should not be
greater than the potential for capital appreciation or capital
depreciation of fixed interest rate U.S. government securities having
maturities equal to the interest rate adjustment dates of the variable
rate U.S. government securities.
The Fund may purchase variable rate U.S. government securities upon the
determination by the Board of Trustees that the interest rate as adjusted
will cause the instrument to have a current market value that
approximates its par value on the adjustment date.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of the total value of its assets.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money except as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold U.S. government securities, permitted by its investment objective,
policies and limitations or its Declaration of Trust.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate including limited
partnership interests, although it may invest in the securities of
companies whose business involves the purchase or sale of real estate or
in securities which are secured by real estate or which represent
interests in real estate.
--------------------------------------------------------------------------------
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in those limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, or other acquisition.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities, such as demand master notes, the demand for full or
partial prepayment of which may not occur within 7 days of notice.
INVESTING IN WARRANTS
The Fund will not invest in warrants.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral exploration or
development programs, or leases.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
FEDERATED GOVERNMENT TRUST MANAGEMENT
--------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Services Company, and
Federated Administrative Services, or the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Trustee Advisers, Federated Management, and
Tower Federated Research; Director, AEtna Life and Casualty Company; Chief
Pittsburgh, PA Executive Officer and Director, Trustee, or Managing General Partner of the
Funds; formerly, Director, The Standard Fire Insurance Company. Mr. Donahue
is the father of
J. Christopher Donahue, Vice President of the Trust.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice-President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village
Department Development Corporation; General Partner or Trustee in private real estate
John R. Wood and ventures in Southwest Florida; Director, Trustee, or Managing General
Associates, Inc., Realtors Partner of the Funds; formerly, President, Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
--------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza- Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan
Pittsburgh, PA Homes, Inc.
--------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
--------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat 'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
--------------------------------------------------------------------------------------------------------------------------------
Glen R. Johnson* President and Trustee, Federated Investors; President and/or Trustee of some of the Funds;
Federated Investors Trustee staff member, Federated Securities Corp. and Federated Administrative
Tower Services.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly, President,
Boston, MA State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
--------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat 'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
--------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
--------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV* Vice President and Vice President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Trustee Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management and Federated Research; Vice President of the Funds;
Pittsburgh, PA Director, Trustee, or Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire Insurance Company and President
of its Federated Research Division.
--------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management and Federated Research; Trustee, Federated
Tower Administrative Services; Trustee, Federated Services Company; President or
Pittsburgh, PA Vice President of the Funds; Director, Trustee or Managing General Partner
of some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman
and Trustee of the Trust.
--------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Trustee, Federated Services Company; Chairman, Treasurer,
and Trustee, Federated Administrative Services, Trustee or Director of some
of the Funds; Vice President and Treasurer of the Funds.
--------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Tower Federated Management and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Trustees between
meetings of the Trustees.
THE FUNDS
"The Funds," and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Services Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty Term Trust, Inc.-1999; Liberty U.S. Government Money Market Trust;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of June 9, 1994, the following shareholders of record owned 5% or more of the
outstanding shares of the Fund: State Street Bank and Trust Company of North
Quincy, Massachusetts owned approximately 102,388,981 shares (23.11%); Fiduciary
Trust Company International of New York, New York owned (as record holder owning
shares for its clients) approximately 121,706,600 shares (27.47%); Key Trust
Company of Albany, New York owned approximately 24,008,857 shares (5.42%);
Hutchins Wheeler & Dittmar, PC of Boston, Massachusetts owned approximately
34,577,276 shares (7.80%); Cambridge Trust Company of Cambridge, Massachusetts
owned approximately 23,705,180 shares (5.35%) and Bancfirst of Oklahoma City,
Oklahoma owned approximately 24,358,395 shares (5.50%).
--------------------------------------------------------------------------------
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
--------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, Mr.
Donahue's son, J. Christopher Donahue, who is President and Trustee of Federated
Investors. John F. Donahue, Chairman and Trustee of the Adviser, is Chairman and
Trustee of the Trust. John A. Staley, IV, President and Trustee of the Adviser,
is Vice President and Trustee of Federated Investors, Executive Vice President
of Federated Securities Corp., and Vice President and Trustee of the Trust. J.
Christopher Donahue, Trustee of the Adviser, is President and Trustee of
Federated Investors, Trustee, Federated Services Company, Trustee of Federated
Administrative Services, and Vice President of the Trust. John W. McGonigle,
Trustee of the Adviser, is Trustee, Vice President, Secretary, and General
Counsel of Federated Investors, Trustee, Executive Vice President, and Secretary
of Federated Administrative Services, Executive Vice President and Director of
Federated Securities Corp., and Vice President and Secretary of the Trust.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. During the fiscal years ended April 30,
1994, 1993, and 1992, the Adviser earned $2,227,794, $1,881,577, and $1,306,613,
of which $389,870, $289,375, and $361,276, respectively, was voluntarily waived
by the Adviser.
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with the expense limitation
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes,
and extraordinary expenses) exceed 2 1/2% per year of the first $30
million of average net assets, 2% per year
of the next $70 million of average net assets, and 1 1/2% per year of the
remaining average net assets, the
Adviser will reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
OTHER ADVISORY SERVICES
Federated Research Corp., a subsidiary of Federated Investors, receives fees
from certain depository institutions for providing consulting and portfolio
advisory services relating to each institution's program of asset management.
Federated Research Corp. may advise such clients to purchase or redeem shares of
investment companies which are managed, for a fee, by Federated Research Corp.
or other affiliates of Federated Investors, such as the Adviser, and may advise
such clients to purchase and sell securities in the direct markets.
ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc., may
hereinafter collectively be referred to as the "Administrators.") For the fiscal
years ended April 30, 1994, 1993, and 1992, the Administrators collectively
earned $348,312, $290,780, and $291,955, respectively. John A. Staley, IV, an
officer of the Trust, and Dr. Henry J. Gailliot, an officer of the Adviser, each
hold approximately 15% and 20%,
--------------------------------------------------------------------------------
respectively, of the outstanding common stock and serve as directors of
Commercial Data Services, Inc., a company which provides computer processing
services to the Administrators.
SHAREHOLDER SERVICES PLAN
--------------------------------------------------------------------------------
This arrangement permits the payment of fees to Federated Shareholder Services
and, indirectly, to financial institutions to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to, providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
For the fiscal period ending April 30, 1994, payments in the amount of $39,923
were made pursuant to the Shareholder Services Plan.
BROKERAGE TRANSACTIONS
--------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
- advice as to the advisability of investing in securities;
- security analysis and reports;
- economic studies;
- industry studies;
- receipt of quotations for portfolio evaluations; and
- similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
PURCHASING SHARES
--------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and Federal Reserve Wire System are open for business. The
procedure for purchasing shares of the Fund is explained in the prospectus under
"Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
--------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended. Under the Rule, the Trustees must establish
procedures reasonably designed to stabilize the net asset value per share, as
computed for purposes of distribution and redemption, at $1.00 per share, taking
into account current market conditions and the Fund's investment objective.
Under the Rule, the Fund is permitted to purchase instruments which are subject
to demand features or standby commitments. As defined by the Rule, a demand
feature entitles the Fund to receive the principal amount of the instrument from
the issuer or a third party on (1) no more than 30 days' notice or (2) at
specified intervals not exceeding one year on no more than 30 days' notice. A
standby commitment entitles the Fund to achieve same day settlement and to
receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
.5% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that the Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
have received the requisite rating from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires the Fund to maintain a dollar weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instrument with a remaining maturity of more than thirteen months can be
purchased by the Fund.
Should the disposition of a portfolio security result in a dollar
weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by any
unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not charge
for telephone redemptions it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
--------------------------------------------------------------------------------
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940, as amended, under which the Trust is obligated to redeem Shares for any
one shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period.
TAX STATUS
--------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
- derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- derive less than 30% of its gross income from the sale of securities held less
than three months;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them once every 12 months.
YIELD
--------------------------------------------------------------------------------
The Fund's yield for the seven-day period ended April 30, 1994, was 3.17%.
The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
- determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
- dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.
EFFECTIVE YIELD
--------------------------------------------------------------------------------
The Fund's effective yield for the seven-day period ended April 30, 1994, was
3.22%.
The Fund's effective yield is computed by compounding the unannualized base
period return by:
- adding 1 to the base period return;
- raising the sum to the 365/7th power; and
- subtracting 1 from the result.
PERFORMANCE COMPARISONS
--------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates on money market instruments;
- changes in Fund expenses; and
- the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- DISCOUNT CORPORATION OF NEW YORK 30-DAY FEDERAL AGENCIES, for example, is a
weekly quote of the average daily offering price for selected federal agency
issues maturing in 30 days.
- SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.
- LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends, and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in advertising and
sales literature.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
0011606B (6/94)
U.S. TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
PROSPECTUS
The shares of U.S. Treasury Cash Reserves (the "Fund") offered by this
prospectus represent interests in a diversified portfolio of Federated
Government Trust (the "Trust"), an open-end management investment company (a
mutual fund) investing in short-term U.S. Treasury obligations to achieve
current income consistent with stability of principal and liquidity.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated June 30,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information or make
inquiries about the Fund, contact the Fund at the address listed on the back of
this prospectus.
The Fund aims to provide institutional investors with a cost-effective,
administratively convenient, highly liquid, cash equivalent vehicle that can be
integrated into an existing or contemplated cash management system. The Fund
will report changes in principal balances and monthly income distributions in a
format that is compatible with all major trust operations systems presently in
use.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated June 30, 1994
TABLE OF CONTENTS
--------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
------------------------------------------------------
GENERAL INFORMATION 3
------------------------------------------------------
INVESTMENT INFORMATION 3
------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
When-Issued and Delayed
Delivery Transactions 3
Investment Limitations 4
Regulatory Compliance 4
TRUST INFORMATION 4
------------------------------------------------------
Management of the Trust 4
Board of Trustees 4
Investment Adviser 4
Advisory Fees 4
Adviser's Background 5
Distribution of Fund Shares 5
Administration of the Fund 5
Administrative Services 5
Shareholder Services Plan 5
Other Payments to Financial
Institutions 6
Custodian 6
Transfer Agent and Dividend
Disbursing Agent 6
Legal Counsel 6
Independent Auditors 6
NET ASSET VALUE 6
------------------------------------------------------
INVESTING IN THE FUND 6
------------------------------------------------------
Share Purchases 6
By Wire 6
By Mail 7
Minimum Investment Required 7
Cash Sweep Program 7
Participating Depository Institutions 7
What Shares Cost 7
Subaccounting Services 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
REDEEMING SHARES 8
------------------------------------------------------
Telephone Redemption 8
Written Requests 9
Signatures 9
Receiving Payment 9
Accounts with Low Balances 10
Redemption in Kind 10
SHAREHOLDER INFORMATION 10
------------------------------------------------------
Voting Rights 10
Massachusetts Partnership Law 10
TAX INFORMATION 11
------------------------------------------------------
Federal Income Tax 11
State and Local Taxes 11
Pennsylvania Corporate and
Personal Property Taxes 11
PERFORMANCE INFORMATION 12
------------------------------------------------------
FINANCIAL STATEMENTS 13
------------------------------------------------------
REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS 19
------------------------------------------------------
ADDRESSES Inside Back Cover
------------------------------------------------------
SUMMARY OF FUND EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering
price)..................................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable)....................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.00%
12b-1 Fee.................................................................... None
Total Other Expenses (after expense reimbursement)........................... 0.20%
Shareholder Services Fee(2)............................................. 0.05%
Total Fund Operating Expenses(3)................................... 0.20%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of the
management fee. The adviser can terminate this voluntary waiver at any time at
its sole discretion. The maximum management fee is 0.40%.
(2) The maximum Shareholder Services Fee is 0.25%.
(3) The Total Fund Operating Expenses in the table above are based on expenses
expected during the fiscal year ending April 30, 1995. The total Fund operating
expenses were 0.20% for the fiscal year ended April 30, 1994 and were 0.63%
absent the voluntary waiver of the management fee and the voluntary
reimbursement of certain other operating expenses.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND" AND "TRUST INFORMATION." WIRE-TRANSFERRED
REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
---------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period................. $2 $ 6 $11 $ 26
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
U.S. TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors on page
19.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------
1994 1993 1992**
---------------------------------------------------- -------- -------- -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
----------------------------------------------------
Net investment income 0.03 0.03 0.04
---------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
----------------------------------------------------
Dividends to shareholders from
net investment income (0.03) (0.03) (0.04)
---------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
---------------------------------------------------- ----- ----- -----
TOTAL RETURN* 2.95% 3.13% 4.24%
----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
----------------------------------------------------
Expenses 0.20% 0.20% 0.16%(a)
----------------------------------------------------
Net investment income 2.93% 3.03% 4.42%(a)
----------------------------------------------------
Expense waiver/reimbursement(b) 0.43% 0.50% 0.62%(a)
----------------------------------------------------
SUPPLEMENTAL DATA
----------------------------------------------------
Net assets, end of period (000 omitted) $265,030 $177,471 $83,244
----------------------------------------------------
</TABLE>
* Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from June 11, 1991 (date of initial public
investment) to April 30, 1992.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
--------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. This prospectus relates only to the portfolio known
as U.S. Treasury Cash Reserves (the "Fund"). The Fund is designed primarily for
institutional investors, such as banks, fiduciaries, custodians of public funds,
and similar institutional investors, such as corporations, unions, hospitals,
insurance companies, and municipalities, as a convenient means of participating
in a professionally managed, diversified portfolio limited to short-term U.S.
Treasury obligations. The Fund is also designed for customers of institutional
investors. A minimum initial investment of $25,000 over a 90-day period is
required.
The Fund attempts to stabilize the value of a share at $1.00. Fund shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with stability
of principal and liquidity. This investment objective cannot be changed without
approval of shareholders. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of only
short-term U.S. Treasury obligations which are issued by the U.S. government and
are fully guaranteed as to payment of principal and interest by the United
States. Unless indicated otherwise, the investment policies may be changed by
the Trustees without approval of shareholders. Shareholders will be notified
before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury obligations
maturing in thirteen months or less. The average maturity of the U.S. Treasury
obligations in the Fund's portfolio, computed on a dollar-weighted basis, will
be 90 days or less.
The Fund will limit its investments to U.S. Treasury obligations, the interest
on which is exempt from personal income tax in the various states if owned
directly.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
Treasury obligations on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 10% of the value of its total assets to secure such
borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not invest more than 10% of its net assets in illiquid obligations
such as demand master notes, the demand for full or partial prepayment of which
may not occur within 7 days of notice.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments according to Rule 2a-7. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
TRUST INFORMATION
--------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the "Trustees").
The Trustees are responsible for managing the business affairs of the Trust and
for exercising all the powers of the Trust, except those reserved for the
shareholders. The Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Management, the Fund's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to .40 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The Adviser can terminate this voluntary waiver
of its advisory fee at any time at its sole discretion. This does not
include reimbursement to the Fund of any expenses incurred by shareholders
who use the transfer agent's subaccounting
facilities. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor of shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors (the "Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET
FEE ----------------------- ASSETS OF THE FEDERATED FUNDS
-----------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan (the
"Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the
Fund to obtain certain personal services for shareholders and the maintenance of
shareholder accounts ("shareholder services"). The Fund has entered into a
Shareholder Services Agreement with Federated Shareholder Services, a subsidiary
of Federated Investors, under which Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Shareholder Services Plan, certain financial
institutions may be compensated by the Adviser or its affiliates for the
continuing investment of customers' assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly by the
distributor or Adviser from their assets, and will not be made from the assets
of the Fund or by the assessment of a sales charge on shares.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for the shares of the Fund, and
dividend disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.
NET ASSET VALUE
--------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total
assets, and dividing the remainder by the total number of shares outstanding.
The Fund, of course, cannot guarantee that its net asset value will always
remain at $1.00 per share.
INVESTING IN THE FUND
--------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.
To purchase shares of the Fund, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone. The Fund reserves the right to reject any purchase request.
BY WIRE. To purchase shares of the Fund by Federal Reserve wire, call the
Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by
federal funds must be received before 3:00 p.m. (Eastern time) that same
day. Federal funds should be wired as follows: State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: U.S.
Treasury Cash Reserves; Fund Number (this number can be found on the
account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; ABA Number 011000028. Shares cannot be
purchased by Federal Reserve wire on Columbus Day, Veteran's Day, or Martin
Luther King Day.
BY MAIL. To purchase shares of the Fund by mail, send a check made payable
to U.S. Treasury Cash Reserves to the Fund's transfer agent Federated
Services Company, c/o State Street Bank and Trust Company, P.O. Box 8602,
Boston, Massachusetts 02266-8602. Orders by mail are considered received
after payment by check is converted by the transfer agent's bank, State
Street Bank, into federal funds. This is normally the next business day
after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
CASH SWEEP PROGRAM
Cash accumulations in demand deposit accounts with depository institutions such
as banks and savings and loan associations may be automatically invested in
shares of the Fund on a day selected by the depository institution and its
customer, or when the demand deposit account reaches a predetermined dollar
amount (e.g., $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS. Participating depository
institutions are responsible for prompt transmission of orders relating to
the program. These depository institutions are the record owners of the
shares of the Fund. Depository institutions participating in this program
may charge their customers for their services relating to the program. This
prospectus should, therefore, be read together with any agreement between
the customer and the depository institution with regard to the services
provided, the fees charged for those services, and any restrictions and
limitations imposed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Fund shares through a non-affiliated bank or broker may be charged an additional
service fee by that bank or broker.
The net asset value is determined at 12:00 noon (Eastern time), 1:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; or (iii) the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Fund shares in a fiduciary, agency, custodial, or similar capacity may charge or
pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Fund shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends on the day after the check is converted, upon
instruction by the transfer agent, into federal funds. Dividends are
automatically reinvested on payment dates in additional shares of the Fund
unless cash payments are requested by contacting the Fund.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If, for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Fund before 12:00 noon
(Eastern time). The proceeds will be wired the same day to the shareholder's
account at a domestic commercial bank that is a member of the Federal Reserve
System. If, at any time, the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 12:00 noon (Eastern time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00 noon
(Eastern time) will be paid the same day but will not be entitled to that day's
dividend.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as Written Requests, should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantees to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net assets, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
as the Fund determines net asset value. The portfolio instruments will be
selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of the portfolios
of the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust on behalf of the
Fund. To protect shareholders of the Fund, the Trust has filed legal documents
with Massachusetts that expressly disclaim the liability of its shareholders of
the Fund for such acts or obligations of the Trust. These documents require
notice of this disclaimer to be given in each agreement, obligation, or
instrument the Trust or its Trustees enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use property of the Fund to protect or
compensate the shareholder. On request, the Trust will defend any claim made and
pay any judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
--------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
are received in cash or as additional shares.
STATE AND LOCAL TAXES
The Fund intends to limit its investments to U.S. Treasury obligations paying
interest which, if owned directly by shareholders of the Fund, would be exempt
from state personal income tax. However, under the laws of some states, the net
investment income distributed by the Fund may be taxable to shareholders. State
laws differ on this issue, and shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES. In the opinion of Houston,
Houston & Donnelly, counsel to the Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
From time to time the Fund advertises its yield and effective yield.
The yield represents the annualized rate of income earned on an investment in
the Fund over a seven-day period. It is the annualized dividends earned during
the period on the investment shown as a percentage of the investment. The
effective yield is calculated similarly to the yield but, when annualized, the
income earned by an investment in the Fund is assumed to be reinvested daily.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
U.S. TREASURY CASH RESERVES
PORTFOLIO OF INVESTMENTS
APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS -- 89.9%
---------------------------------------------------------------------------------
* U.S. TREASURY BILLS -- 71.0%
------------------------------------------------------------------
$31,000,000 3.14% - 3.32%, 5/5/94 $ 30,989,023
------------------------------------------------------------------
9,750,000 3.25%, 5/12/94 9,740,318
------------------------------------------------------------------
6,450,000 3.36%, 5/26/94 6,434,972
------------------------------------------------------------------
14,900,000 3.47% - 3.59%, 6/2/94 14,853,777
------------------------------------------------------------------
14,400,000 3.41% - 3.49%, 6/9/94 14,346,358
------------------------------------------------------------------
17,200,000 3.65%, 6/16/94 17,119,781
------------------------------------------------------------------
24,650,000 3.44% - 3.50%, 6/23/94 24,524,912
------------------------------------------------------------------
10,000,000 3.64%, 6/30/94 9,939,417
------------------------------------------------------------------
35,400,000 3.53% - 3.55%, 7/7/94 35,167,705
------------------------------------------------------------------
19,050,000 3.55% - 3.79%, 7/14/94 18,908,997
------------------------------------------------------------------
6,250,000 3.74%, 7/21/94 6,197,476
------------------------------------------------------------------ ------------
Total 188,222,736
------------------------------------------------------------------ ------------
U.S. TREASURY NOTES -- 18.9%
------------------------------------------------------------------
20,000,000 9.50%, 5/15/94 20,043,750
------------------------------------------------------------------
30,000,000 5.125%, 5/31/94 30,032,227
------------------------------------------------------------------ ------------
Total 50,075,977
------------------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $238,298,713+
------------------------------------------------------------------ ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($265,030,040) at
April 30, 1994.
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
--------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A) $238,298,713
--------------------------------------------------------------------------------
Cash 23,262
--------------------------------------------------------------------------------
Receivable for investments sold 40,250,000
--------------------------------------------------------------------------------
Interest receivable 2,599,618
--------------------------------------------------------------------------------
Deferred expenses (Note 2E) 19,444
-------------------------------------------------------------------------------- ------------
Total assets 281,191,037
--------------------------------------------------------------------------------
LIABILITIES:
------------------------------------------------------------------
Payable for investments purchased $15,338,949
------------------------------------------------------------------
Dividends payable 709,985
------------------------------------------------------------------
Payable to administrator (Note 4) 4,910
------------------------------------------------------------------
Payable to transfer and dividend disbursing agent (Note 4) 5,262
------------------------------------------------------------------
Payable for Fund shares redeemed 56
------------------------------------------------------------------
Accrued expenses and other liabilities 101,835
------------------------------------------------------------------ -----------
Total liabilities 16,160,997
-------------------------------------------------------------------------------- ------------
NET ASSETS FOR 265,030,040 shares of beneficial interest outstanding $265,030,040
-------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Price Per Share
($265,030,040 / 265,030,040 shares of beneficial interest outstanding) $1.00
-------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
------------------------------------------------------------------------------------
Interest income (Note 2B) $7,665,260
------------------------------------------------------------------------------------
EXPENSES:
----------------------------------------------------------------------
Investment advisory fee (Note 4) $ 981,067
----------------------------------------------------------------------
Trustees' fees 5,113
----------------------------------------------------------------------
Administrative personnel and service fee (Note 4) 295,386
----------------------------------------------------------------------
Custodian and record keeping fees and expenses 108,127
----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 21,498
----------------------------------------------------------------------
Fund share registration costs 66,035
----------------------------------------------------------------------
Legal fees 8,879
----------------------------------------------------------------------
Auditing fees 14,933
----------------------------------------------------------------------
Printing and postage 6,788
----------------------------------------------------------------------
Insurance premiums 8,587
----------------------------------------------------------------------
Taxes 35
----------------------------------------------------------------------
Shareholder services fee (Note 4) 23,515
----------------------------------------------------------------------
Miscellaneous 14,158
---------------------------------------------------------------------- ----------
Total expenses 1,554,121
----------------------------------------------------------------------
Deduct--
----------------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $981,067
-----------------------------------------------------------
Reimbursement of other operating expenses (Note 4) 82,521 1,063,588
----------------------------------------------------------- -------- ----------
Net expenses 490,533
------------------------------------------------------------------------------------ ----------
Net investment income $7,174,727
------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
1994 1993
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
---------------------------------------------------------------
OPERATIONS--
---------------------------------------------------------------
Net investment income $ 7,174,727 $ 4,087,405
--------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
---------------------------------------------------------------
Dividends to shareholders from net investment income (7,174,727) (4,087,405)
--------------------------------------------------------------- ------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
---------------------------------------------------------------
Proceeds from sale of shares 885,678,265 415,811,738
---------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of dividends declared 163,079 87,318
---------------------------------------------------------------
Cost of shares redeemed (798,282,485) (321,671,827)
--------------------------------------------------------------- ------------- -------------
Change in net assets from Fund share transactions 87,558,859 94,227,229
--------------------------------------------------------------- ------------- -------------
Change in net assets 87,558,859 94,227,229
---------------------------------------------------------------
NET ASSETS:
---------------------------------------------------------------
Beginning of period 177,471,181 83,243,952
--------------------------------------------------------------- ------------- -------------
End of period $ 265,030,040 $ 177,471,181
--------------------------------------------------------------- ------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1994
--------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Trust consists of three, diversified portfolios. The financial statements
included herein present only those of U.S. Treasury Cash Reserves (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.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles (GAAP).
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Investment Company Act of 1940.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount are amortized as required by the Internal Revenue Code,
as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
C. 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
all of its taxable income. Accordingly, no provision for federal tax is necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities 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.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
U.S. TREASURY CASH RESERVES
--------------------------------------------------------------------------------
(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 April
30, 1994, capital paid in aggregated $265,030,040. Transactions in Fund shares
were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------
1994 1993
----------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Shares sold 885,678,265 415,811,738
-----------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 163,079 87,318
-----------------------------------------------------------------
Shares redeemed (798,282,485) (321,671,827)
----------------------------------------------------------------- ------------ ------------
Net change resulting from Fund share transactions 87,558,859 94,227,229
----------------------------------------------------------------- ------------ ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.40 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Fund. Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services and Federated
Administrative Services, Inc. collectively provided the Fund administrative and
personnel services. Prior to March 1, 1994, these services were provided at
approximate cost. Effective March 1, 1994, the fee 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 any
fiscal year shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average net assets of the Fund for the period. This fee is to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEE--Federated Services Company ("FServ")
serves as transfer and dividend disbursing agent for the Fund. The fee is based
on the size, type and number of accounts and transactions made by shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Directors of
the above companies.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
U.S. TREASURY CASH RESERVES:
We have audited the accompanying statement of assets and liabilities of U.S.
Treasury Cash Reserves (a portfolio of Federated Government Trust), including
the portfolio of investments, as of April 30, 1994, and the related statement of
operations for the year then ended and the statement of changes in net assets
for each of the two years in the period then ended, and the financial highlights
(see page 2 of the Prospectus) for each of the three years in the period then
ended. 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 April
30, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of U.S.
Treasury Cash Reserves at April 30, 1994, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the three years in
the period then ended, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
June 9, 1994
ADDRESSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
U.S. Treasury Cash Reserves Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
------------------------------------------------------------------------------------------------
</TABLE>
U.S. TREASURY
CASH RESERVES
PROSPECTUS
A Diversified Portfolio of Federated
Government Trust, An Open-End,
Management Investment Company
June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
1022103A (6/94)
U.S. TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus for
U.S. Treasury Cash Reserves (the "Fund") dated June 30, 1994. This Statement is
not a prospectus itself. To receive a copy of the prospectus, write or call the
Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
--------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
--------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
---------------------------------------------------------------
Types of Investments 1
When-Issued and
Delayed Delivery Transactions 1
Investment Limitations 1
FEDERATED GOVERNMENT TRUST MANAGEMENT 2
---------------------------------------------------------------
Officers and Trustees 2
The Funds 3
Trust Ownership 4
Trustee Liability 4
INVESTMENT ADVISORY SERVICES 4
---------------------------------------------------------------
Adviser to the Fund 4
Advisory Fees 4
Other Advisory Services 5
ADMINISTRATIVE SERVICES 5
---------------------------------------------------------------
SHAREHOLDER SERVICES PLAN 5
---------------------------------------------------------------
BROKERAGE TRANSACTIONS 5
---------------------------------------------------------------
PURCHASING SHARES 6
---------------------------------------------------------------
Conversion to Federal Funds 6
DETERMINING NET ASSET VALUE 6
---------------------------------------------------------------
Use of the Amortized Cost Method 6
REDEEMING SHARES 7
---------------------------------------------------------------
Redemption in Kind 7
TAX STATUS 7
---------------------------------------------------------------
The Fund's Tax Status 7
Shareholders' Tax Status 7
YIELD 8
---------------------------------------------------------------
EFFECTIVE YIELD 8
---------------------------------------------------------------
PERFORMANCE COMPARISONS 8
---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
--------------------------------------------------------------------------------
The Fund is a portfolio in Federated Government Trust (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust dated
December 7, 1989.
INVESTMENT OBJECTIVE AND POLICIES
--------------------------------------------------------------------------------
The Fund's investment objective is to provide current income consistent with
stability of principal and liquidity. The investment objective cannot be changed
without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests only in short-term U.S. Treasury obligations.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of the total value of its assets.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money except as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold U.S. Treasury obligations, permitted by its investment objective,
policies and limitations or its Declaration of Trust.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate including limited
partnership interests, although it may invest in the securities of
companies whose business involves the purchase or sale of real estate or
in securities which are secured by real estate or which represent
interests in real estate.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in those limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, or other acquisition.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities.
INVESTING IN WARRANTS
The Fund will not invest in warrants.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral exploration
or development programs, or leases.
--------------------------------------------------------------------------------
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
FEDERATED GOVERNMENT TRUST MANAGEMENT
--------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Services Company, and
Federated Administrative Services, or the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors; Chairman and Trustee, Federated
Federated Investors Trustee Advisers, Federated Management, and
Tower Federated Research; Director, AEtna Life and Casualty Company; Chief
Pittsburgh, PA Executive Officer and Director, Trustee, or Managing General Partner of the
Funds; formerly, Director, The Standard Fire Insurance Company. Mr. Donahue
is the father of
J. Christopher Donahue, Vice President of the Trust.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
John T. Conroy, Jr. Trustee President, Investment Properties Corporation; Senior Vice President, John R.
Wood/IPC Commercial Wood and Associates, Inc., Realtors; President, Northgate Village
Department Development Corporation; General Partner or Trustee in private real estate
John R. Wood and ventures in Southwest Florida; Director, Trustee, or Managing General
Associates, Inc., Realtors Partner of the Funds; formerly, President, Naples Property Management, Inc.
3255 Tamiami Trail North
Naples, FL
--------------------------------------------------------------------------------------------------------------------------------
William J. Copeland Trustee Director and Member of the Executive Committee, Michael Baker, Inc.;
One PNC Plaza Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
23rd Floor Chairman and Director, PNC Bank, N.A. and PNC Bank Corp. and Director, Ryan
Pittsburgh, PA Homes, Inc.
--------------------------------------------------------------------------------------------------------------------------------
James E. Dowd Trustee Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
571 Hayward Mill Road Trustee, or Managing General Partner of the Funds; formerly, Director, Blue
Concord, MA Cross of Massachusetts, Inc.
--------------------------------------------------------------------------------------------------------------------------------
Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
3471 Fifth Avenue Hospitals; Clinical Professor of Medicine and Trustee, University of
Suite 1111 Pittsburgh; Director, Trustee, or Managing General Partner of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and Flaherty; Director, Eat'N Park
5916 Penn Mall Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director, Trustee,
Pittsburgh, PA or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
--------------------------------------------------------------------------------------------------------------------------------
Glen R. Johnson* President and Trustee, Federated Investors; President and/or Trustee of some of the Funds;
Federated Investors Trustee staff member, Federated Securities Corp. and Federated Administrative
Tower Services.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Peter E. Madden Trustee Consultant; State Representative, Commonwealth of Massachusetts; Director,
225 Franklin Street Trustee, or Managing General Partner of the Funds; formerly, President,
Boston, MA State Street Bank and Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.
--------------------------------------------------------------------------------------------------------------------------------
Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and Flaherty; Chairman, Meritcare, Inc.;
5916 Penn Mall Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or Managing
Pittsburgh, PA General Partner of the Funds; formerly, Vice Chairman, Horizon Financial,
F.A.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------------------
Wesley W. Posvar Trustee Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
1202 Cathedral of Endowment for International Peace, RAND Corporation, Online Computer Library
Learning Center, Inc., and U.S. Space Foundation; Chairman, Czecho Slovak Management
University of Pittsburgh Center; Director, Trustee, or Managing General Partner of the Funds;
Pittsburgh, PA President Emeritus, University of Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy and Technology.
--------------------------------------------------------------------------------------------------------------------------------
Marjorie P. Smuts Trustee Public relations/marketing consultant; Director, Trustee, or Managing
4905 Bayard Street General Partner of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
John A. Staley, IV* Vice President and President and Trustee, Federated Investors; Executive Vice President,
Federated Investors Trustee Federated Securities Corp.; President and Trustee, Federated Advisers,
Tower Federated Management, and Federated
Pittsburgh, PA Research; Vice President of the Funds; Director, Trustee, or Managing
General Partner of some of the Funds; formerly, Vice President, The Standard
Fire Insurance Company and President of its Federated Research Division.
--------------------------------------------------------------------------------------------------------------------------------
J. Christopher Donahue Vice President President and Trustee, Federated Investors; Trustee, Federated Advisers,
Federated Investors Federated Management, and Federated Research; Trustee, Federated
Tower Administrative Services; Trustee, Federated Services Company; President or
Pittsburgh, PA Vice President of the Funds; Director, Trustee, or Managing General Partner
of some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman
and Trustee of the Trust.
--------------------------------------------------------------------------------------------------------------------------------
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors; Chairman and
Federated Investors Director, Federated Securities Corp.; President or Vice President of the
Tower Funds; Director or Trustee of some of the Funds.
Pittsburgh, PA
--------------------------------------------------------------------------------------------------------------------------------
Edward C. Gonzales Vice President Vice President, Treasurer, and Trustee, Federated Investors; Vice President
Federated Investors and Treasurer and Treasurer, Federated Advisers, Federated Management, and Federated
Tower Research; Executive Vice President, Treasurer, and Director, Federated
Pittsburgh, PA Securities Corp.; Trustee, Federated Services Company; Chairman, Treasurer,
and Trustee, Federated Administrative Services; Trustee or Director of some
of the Funds; Vice President and Treasurer of the Funds.
--------------------------------------------------------------------------------------------------------------------------------
John W. McGonigle Vice President Vice President, Secretary, General Counsel, and Trustee, Federated
Federated Investors and Secretary Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Tower Federated Management, and Federated Research; Trustee, Federated Services
Pittsburgh, PA Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Executive Vice President and Director, Federated
Securities Corp.; Vice President and Secretary of the Funds.
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of Trustees
between meetings of the Board.
THE FUNDS
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government
--------------------------------------------------------------------------------
Trust; Federated Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Intermediate Government Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Intermediate Government Trust; Federated Short-Term U.S.
Government Trust; Federated Stock Trust; Federated Tax-Free Trust; Federated
U.S. Government Bond Fund; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Adjustable Rate U.S. Government Fund, Inc.; Fortress Municipal Income
Fund, Inc.; Fortress Utility Fund, Inc.; Fund for U.S. Government Securities,
Inc.; Government Income Securities, Inc.; High Yield Cash Trust; Insight
Institutional Series, Inc.; Insurance Management Series; Intermediate Municipal
Trust; International Series, Inc.; Investment Series Funds, Inc.; Investment
Series Trust; Liberty Equity Income Fund, Inc.; Liberty High Income Bond Fund,
Inc.; Liberty Municipal Securities Fund, Inc.; Liberty Term Trust, Inc.-1999;
Liberty U.S. Government Money Market Trust; Liberty Utility Fund, Inc.; Liquid
Cash Trust; Managed Series Trust; Mark Twain Funds; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; Portage Funds; RIMCO Monument Funds; The Shawmut
Funds; Short-Term Municipal Trust; Signet Select Funds; Star Funds; The
Starburst Funds; The Starburst Funds II; Stock and Bond Fund, Inc.; Sunburst
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; Trademark Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations; and
World Investment Series, Inc.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of June 9, 1994, the following shareholders of record owned 5% or more of the
outstanding shares of the Fund: First Security Bank of Utah, NA of Salt Lake
City, Utah owned approximately 28,693,625 shares (10.83%); Old Stone Trust
Company of Providence, Rhode Island owned approximately 18,925,128 shares
(7.15%); National City Bank Minneapolis of Minneapolis, Minnesota owned
approximately 24,939,515 shares (9.42%); and Trans Financial Bank of Bowling
Green, Kentucky owned approximately 46,524,102 shares (17.57%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
--------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue who is President and Trustee of
Federated Investors. John F. Donahue, Chairman and Trustee of the Adviser, is
Chairman and Trustee of the Trust. John A. Staley, IV, President and Trustee of
the Adviser, is President and Trustee of Federated Investors, Executive Vice
President of Federated Securities Corp., and Vice President and Trustee of the
Trust. J. Christopher Donahue, Trustee of the Adviser, is Vice President and
Trustee of Federated Investors, Trustee, Federated Services Company, Trustee of
Federated Administrative Services, and Vice President of the Trust. John W.
McGonigle, Trustee of the Adviser, is Trustee, Vice President, Secretary, and
General Counsel of Federated Investors, Trustee, Executive Vice President, and
Secretary of Federated Administrative Services, Executive Vice President and
Director of Federated Securities Corp., and Vice President and Secretary of the
Trust.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. During the fiscal years ended April 30,
1994, 1993, and the period from June 11, 1991 (date of initial public
investment) to April 30, 1992, the Adviser earned $981,067, $538,993, and
$166,536, respectively, all of which was voluntarily waived because of
undertakings to limit the Fund's expenses. In addition, the Fund's Adviser
reimbursed $82,521, $138,240, and $90,200, respectively, of other operating
expenses.
--------------------------------------------------------------------------------
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes,
and extraordinary expenses) exceed 2 1/2% per year of the first $30
million of average net assets, 2% per year
of the next $70 million of average net assets, and 1 1/2% per year of the
remaining average net assets, the
Adviser will reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
OTHER ADVISORY SERVICES
Federated Research Corp., a subsidiary of Federated Investors, receives fees
from certain depository institutions for providing consulting and portfolio
advisory services relating to each institution's program of asset management.
Federated Research Corp. may advise such clients to purchase or redeem shares of
investment companies which are managed, for a fee, by Federated Research Corp.
or other affiliates of Federated Investors, such as the Adviser, and may advise
such clients to purchase and sell securities in the direct markets.
ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc., may
hereinafter collectively be referred to as the "Administrators.") For the fiscal
years ended April 30, 1994, 1993, and the period from June 11, 1991 (date of
initial public investment) to April 30, 1992, the Administrators collectively
earned $295,386, $228,288 and $105,653, respectively. John A. Staley, IV, an
officer of the Trust, and Dr. Henry J. Gailliot, an officer of the Adviser, each
hold approximately 15% and 20%, respectively, of the outstanding common stock
and serve as directors of Commercial Data Services, Inc., a company which
provides computer processing services to the Administrators.
SHAREHOLDER SERVICES PLAN
--------------------------------------------------------------------------------
This arrangement permits the payment of fees to Federated Shareholder Services
and, indirectly, to financial institutions to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may include,
but are not limited to, providing office space, equipment, telephone facilities,
and various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses. For
the fiscal period ended April 30, 1994, payments in the amount of $23,515 were
made pursuant to the Shareholder Services Plan.
BROKERAGE TRANSACTIONS
--------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
- advice as to the advisability of investing in securities;
- security analysis and reports;
- economic studies;
- industry studies;
--------------------------------------------------------------------------------
- receipt of quotations for portfolio evaluations; and
- similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising The Funds and other accounts. To
the extent that receipt of these services may supplant services for which the
Adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses.
PURCHASING SHARES
--------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and the Federal Reserve Wire System are open for business.
The procedure for purchasing shares of the Fund is explained in the prospectus
under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
--------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended. Under the Rule, the Trustees must establish
procedures reasonably designed to stabilize the net asset value per share, as
computed for purposes of distribution and redemption, at $1.00 per share, taking
into account current market conditions and the Fund's investment objective.
Under the Rule, a fund is permitted to purchase instruments which are subject to
demand features or standby commitments. As defined by the Rule, a demand feature
entitles a fund to receive the principal amount of the instrument from the
issuer or a third party on (1) no more than 30 days' notice or (2) at specified
intervals not exceeding one year on no more than 30 days' notice. A standby
commitment entitles a fund to achieve same day settlement and to receive an
exercise price equal to the amortized cost of the underlying instrument plus
accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
.5 of 1% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that a fund limit its investments to instruments that,
in the opinion of the Trustees, present minimal credit risk and have
received the requisite ratings from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires a fund to maintain a dollar weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per share. In addition, no
instrument with a remaining maturity of more than thirteen months can be
purchased by a fund.
--------------------------------------------------------------------------------
Should the disposition of a portfolio security result in a dollar
weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by any
unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not charge
for telephone redemptions it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940, as amended, under which the Trust is obligated to redeem shares for any
one shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period.
TAX STATUS
--------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
- derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- derive less than 30% of its gross income from the sale of securities held less
than three months;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them once every 12 months.
YIELD
--------------------------------------------------------------------------------
The Fund's yield for the seven-day period ended April 30, 1994, was 3.28%.
The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
- determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
- dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.
EFFECTIVE YIELD
--------------------------------------------------------------------------------
The Fund's effective yield for the seven-day period ended April 30, 1994, was
3.33%.
The Fund's effective yield is computed by compounding the unannualized base
period return by:
- adding 1 to the base period return;
- raising the sum to the 365/7th power; and
- subtracting 1 from the result.
PERFORMANCE COMPARISONS
--------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates on money market instruments;
- changes in Fund expenses; and
- the relative amount of Fund cash flow.
Investors may use financial publications, and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.
- LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends, and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "U.S.
government funds" category in advertising and sales literature.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
1022103B (6/94)
AUTOMATED TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
PROSPECTUS
The shares of Automated Treasury Cash Reserves (the "Fund") offered by this
prospectus represent interests in a diversified portfolio of Federated
Government Trust (the "Trust"), an open-end management investment company (a
mutual fund) investing in short-term U.S. Treasury obligations to achieve
current income consistent with stability of principal and liquidity.
AN INVESTMENT IN THE FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY.
This prospectus contains the information you should read and know before you
invest in shares of the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated June 30,
1994, with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge by calling 1-800-235-4669. To obtain other information or make
inquiries about the Fund, contact the Fund at the address listed on the back of
this prospectus.
The Fund aims to provide institutional investors with a cost-effective,
administratively convenient, highly liquid, cash equivalent vehicle that can be
integrated into an existing or contemplated cash management system. The Fund
will report changes in principal balances and monthly income distributions in a
format that is compatible with all major trust operations systems presently in
use.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated June 30, 1994
TABLE OF CONTENTS
--------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
------------------------------------------------------
FINANCIAL HIGHLIGHTS 2
------------------------------------------------------
GENERAL INFORMATION 3
------------------------------------------------------
INVESTMENT INFORMATION 3
------------------------------------------------------
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
When-Issued and Delayed
Delivery Transactions 3
Investment Limitations 4
Regulatory Compliance 4
TRUST INFORMATION 4
------------------------------------------------------
Management of the Trust 4
Board of Trustees 4
Investment Adviser 4
Advisory Fees 4
Adviser's Background 5
Distribution of Fund Shares 5
Administration of the Fund 5
Administrative Services 5
Shareholder Services Plan 5
Other Payments to Financial
Institutions 6
Custodian 6
Transfer Agent and Dividend
Disbursing Agent 6
Legal Counsel 6
Independent Auditors 6
NET ASSET VALUE 6
------------------------------------------------------
INVESTING IN THE FUND 6
------------------------------------------------------
Share Purchases 6
By Wire 6
By Mail 7
Minimum Investment Required 7
Cash Sweep Program 7
Participating Depository Institutions 7
What Shares Cost 7
Subaccounting Services 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
REDEEMING SHARES 8
------------------------------------------------------
Telephone Redemption 8
Written Requests 9
Signatures 9
Receiving Payment 9
Accounts with Low Balances 10
Redemption in Kind 10
SHAREHOLDER INFORMATION 10
------------------------------------------------------
Voting Rights 10
Massachusetts Partnership Law 10
TAX INFORMATION 11
------------------------------------------------------
Federal Income Tax 11
State and Local Taxes 11
Pennsylvania Corporate and
Personal Property Taxes 11
PERFORMANCE INFORMATION 12
------------------------------------------------------
FINANCIAL STATEMENTS 13
------------------------------------------------------
REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS 19
------------------------------------------------------
ADDRESSES Inside Back Cover
------------------------------------------------------
SUMMARY OF FUND EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable)....................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.19%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.37%
Shareholder Services Fee(2)............................................. 0.22%
Total Fund Operating Expenses(3)................................... 0.56%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%.
(2) The maximum Shareholder Services Fee is 0.25%
(3) The Total Fund Operating Expenses in the table above are based on expenses
expected during the fiscal year ending April 30, 1995. The total Fund operating
expenses were 0.57% for the fiscal year ended April 30, 1994 and were 0.70%
absent the voluntary waiver of a portion of the management fee.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "INVESTING IN THE FUND." AND "TRUST INFORMATION." WIRE-TRANSFERRED
REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO ADDITIONAL FEES.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
----------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment
assuming (1) 5% annual return and (2) redemption at the end
of each time period ....................................... $6 $18 $31 $ 70
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
AUTOMATED TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors on page
19.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------
1994 1993 1992**
-------- -------- -------
<S> <C> <C> <C>
--------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00
--------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
--------------------------------------------------
Net investment income 0.03 0.03 0.03
-------------------------------------------------- ----- ----- -----
LESS DISTRIBUTIONS
--------------------------------------------------
Dividends to shareholders from
net investment income (0.03) (0.03) (0.03)
-------------------------------------------------- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00
-------------------------------------------------- ----- ----- -----
TOTAL RETURN* 2.58% 2.88% 3.07%
--------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
--------------------------------------------------
Expenses 0.57% 0.39% 0.51%(a)
--------------------------------------------------
Net investment income 2.55% 2.79% 3.84%(a)
--------------------------------------------------
Expense waiver/reimbursement(b) 0.13% 0.53% 0.30%(a)
--------------------------------------------------
SUPPLEMENTAL DATA
--------------------------------------------------
Net assets, end of period (000 omitted) $190,840 $252,955 $36,803
--------------------------------------------------
</TABLE>
* Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
** Reflects operations for the period from August 9, 1991 (date of initial
public investment) to April 30, 1992.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
--------------------------------------------------------------------------------
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. This prospectus relates only to the portfolio known
as Automated Treasury Cash Reserves (the "Fund"). The Fund is designed primarily
for institutional investors, such as banks, fiduciaries, custodians of public
funds, and similar institutional investors, such as corporations, unions,
hospitals, insurance companies, and municipalities, as a convenient means of
participating in a professionally managed, diversified portfolio limited to
short-term U.S. Treasury obligations. The Fund is also designed for customers of
institutional investors. A minimum initial investment of $25,000 over a 90-day
period is required.
The Fund attempts to stabilize the value of a share at $1.00. Fund shares are
currently sold and redeemed at that price.
INVESTMENT INFORMATION
--------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income consistent with stability
of principal and liquidity. This investment objective cannot be changed without
approval of shareholders. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a portfolio of only
short-term U.S. Treasury obligations which are issued by the U.S. government and
are fully guaranteed as to payment of principal and interest by the United
States. Unless indicated otherwise, the investment policies may be changed by
the Trustees without approval of shareholders. Shareholders will be notified
before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury obligations
maturing in thirteen months or less. The average maturity of the U.S. Treasury
obligations in the Fund's portfolio, computed on a dollar-weighted basis, will
be 90 days or less.
The Fund will limit its investments to those U.S. Treasury obligations, the
interest on which is exempt from personal income tax in the various states if
owned directly.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase U.S.
Treasury obligations on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the
transaction. The seller's failure to complete the transaction may cause the Fund
to miss a price or yield considered to be advantageous.
INVESTMENT LIMITATIONS
The Fund will not borrow money or pledge securities except, under certain
circumstances, the Fund may borrow up to one-third of the value of its total
assets and pledge up to 10% of the value of its total assets to secure such
borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Fund will not invest more than 10% of its net assets in illiquid obligations
such as demand master notes, the demand for full or partial prepayment of which
may not occur within 7 days of notice.
REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in this
prospectus and its Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940, as amended. In particular, the Fund
will comply with the various requirements of Rule 2a-7, which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments according to Rule 2a-7. The Fund may change these operational
policies to reflect changes in the laws and regulations without the approval of
its shareholders.
TRUST INFORMATION
--------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees (the "Trustees").
The Trustees are responsible for managing the business affairs of the Trust and
for exercising all the powers of the Trust, except those reserved for the
shareholders. The Executive Committee of the Board of Trustees handles the
Board's responsibilities between meetings of the Board.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Fund are made by Federated Management, the Fund's
investment adviser (the "Adviser"), subject to direction by the Trustees. The
Adviser continually conducts investment research and supervision for the Fund
and is responsible for the purchase or sale of portfolio instruments, for which
it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee or reimburse the Fund for
certain operating expenses. The Adviser can terminate this voluntary waiver
of its advisory fee at at any time at its sole discretion. This does not
include reimbursement to the Fund of any expenses incurred by shareholders
who use the transfer agent's subaccounting
facilities. The Adviser has also undertaken to reimburse the Fund for
operating expenses in excess of limitations established by certain states.
ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors.
All of the Class A (voting) shares of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, Chairman and Trustee of
Federated Investors, Mr. Donahue's wife, and Mr. Donahue's son, J.
Christopher Donahue, who is President and Trustee of Federated Investors.
Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor of shares of the Fund.
It is a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides administrative personnel and services (including
certain legal and financial reporting services) necessary to operate the Fund.
Federated Administrative Services provides these at an annual rate which relates
to the average aggregate daily net assets of all funds advised by subsidiaries
of Federated Investors (the "Federated Funds") as specified below:
<TABLE>
<CAPTION>
MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET
FEE ----------------------- ASSETS OF THE FEDERATED FUNDS
-----------------------------------
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Administrative Services may choose voluntarily to waive a portion of
its fee.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan (the
"Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the
Fund to obtain certain personal services for shareholders and the maintenance of
shareholder accounts ("shareholder services"). The Fund has entered into a
Shareholder Services Agreement with Federated Shareholder Services, a subsidiary
of Federated Investors, under which Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to periodic payments to
financial institutions under the Shareholder Services Plan, certain financial
institutions may be compensated by the Adviser or its affiliates for the
continuing investment of customers' assets in certain funds, including the Fund,
advised by those entities. These payments will be made directly by the
distributor or Adviser from their assets, and will not be made from the assets
of the Fund or by the assessment of a sales charge on shares.
CUSTODIAN. State Street Bank and Trust Company ("State Street Bank"), Boston,
Massachusetts, is custodian for the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for shares of the Fund, and dividend
disbursing agent for the Fund.
LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly,
Pittsburgh, Pennsylvania, and Dickstein, Shapiro & Morin, L.L.P., Washington,
D.C.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young,
Pittsburgh, Pennsylvania.
NET ASSET VALUE
--------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the total number of shares outstanding. The Fund,
of course, cannot guarantee that its net asset value will always remain at $1.00
per share.
INVESTING IN THE FUND
--------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.
To purchase shares of the Fund, open an account by calling Federated Securities
Corp. Information needed to establish the account will be taken over the
telephone. The Fund reserves the right to reject any purchase request.
BY WIRE. To purchase shares of the Fund by Federal Reserve wire, call the
Fund before 1:00 p.m. (Eastern time) to place an order. The order is
considered received immediately. Payment by
federal funds must be received before 3:00 p.m. (Eastern time) that same
day. Federal funds should be wired as follows: State Street Bank and Trust
Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to:
Automated Treasury Cash Reserves; Fund Number (this number can be found on
the account statement or by contacting the Fund); Group Number or Order
Number; Nominee or Institution Name; ABA Number 011000028. Shares cannot be
purchased by Federal Reserve wire on Columbus Day, Veteran's Day, or Martin
Luther King Day.
BY MAIL. To purchase shares of the Fund by mail, send a check made payable
to Automated Treasury Cash Reserves to the Fund's transfer agent Federated
Services Company, c/o State Street Bank and Trust Company, P.O. Box 8602,
Boston, Massachusetts 02266-8602. Orders by mail are considered received
after payment by check is converted by the transfer agent's bank, State
Street Bank, into federal funds. This is normally the next business day
after State Street Bank receives the check.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An institutional investor's minimum investment will be calculated by
combining all accounts it maintains with the Fund. Accounts established through
a non-affiliated bank or broker may be subject to a smaller minimum investment.
CASH SWEEP PROGRAM
Cash accumulations in demand deposit accounts with depository institutions such
as banks and savings and loan associations may be automatically invested in
shares of the Fund on a day selected by the depository institution and its
customer, or when the demand deposit account reaches a predetermined dollar
amount (e.g., $5,000).
PARTICIPATING DEPOSITORY INSTITUTIONS. Participating depository
institutions are responsible for prompt transmission of orders relating to
the program. These depository institutions are the record owners of the
shares of the Fund. Depository institutions participating in this program
may charge their customers for their services relating to the program. This
prospectus should, therefore, be read together with any agreement between
the customer and the depository institution with regard to the services
provided, the fees charged for those services, and any restrictions and
limitations imposed.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Fund shares through a non-affiliated bank or broker may be charged a service fee
by that bank or broker.
The net asset value is determined at 12:00 noon (Eastern time), 1:00 p.m.
(Eastern time), and 4:00 p.m. (Eastern time), Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are
received; or (iii) the following holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
SUBACCOUNTING SERVICES
Institutions are encouraged to open single master accounts. However, certain
institutions may wish to use the transfer agent's subaccounting system to
minimize their internal recordkeeping requirements. The transfer agent charges a
fee based on the level of subaccounting services rendered. Institutions holding
Fund shares in a fiduciary, agency, custodial, or similar capacity may charge or
pass through subaccounting fees as part of or in addition to normal trust or
agency account fees. They may also charge fees for other services provided which
may be related to the ownership of Fund shares. This prospectus should,
therefore, be read together with any agreement between the customer and the
institution with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
by contacting the Fund.
Monthly confirmations are sent to report transactions such as purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Shares purchased by wire before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends on the day after the check is converted, upon
instruction by the transfer agent, into federal funds. Dividends are
automatically reinvested on payment dates in additional shares of the Fund
unless cash payments are requested by contacting the Fund.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If, for some extraordinary reason, the
Fund realizes net long-term capital gains, it will distribute them at least once
every 12 months.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Fund before 12:00 noon
(Eastern time). The proceeds will be wired the same day to the shareholder's
account at a domestic commercial bank that is
a member of the Federal Reserve System. If, at any time, the Fund shall
determine it necessary to terminate or modify this method of redemption,
shareholders would be promptly notified.
A daily dividend will be paid on shares redeemed if the redemption request is
received after 12:00 noon (Eastern time). However, the proceeds are not wired
until the following business day. Redemption requests received before 12:00 noon
(Eastern time) will be paid the same day but will not be entitled to that day's
dividend.
An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. Telephone redemption instructions may
be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as Written Requests, should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. If share certificates have been
issued, they must be properly endorsed and should be sent by registered or
certified mail with the written request.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or
- any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantees to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a proper
written redemption request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000 due to
shareholder redemptions.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that further cash payments will have a material adverse effect on
remaining shareholders. In such a case, the Trust will pay all or a portion of
the remainder of the redemption in portfolio instruments, valued in the same way
as the Fund determines net asset value. The portfolio instruments will be
selected in a manner that the Trustees deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of the portfolios
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
the Trust.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust on behalf of the
Fund. To protect shareholders of the Fund, the Trust has filed legal documents
with Massachusetts that expressly disclaim the liability of its shareholders of
the Fund for such acts or obligations of the Trust. These documents require
notice of this disclaimer to be given in each agreement, obligation, or
instrument the Trust or its Trustees enter into or sign.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required to use property of the Fund to protect or
compensate the shareholder. On request, the Trust will defend any claim made and
pay any judgment against a shareholder for any act or obligation of the Trust.
Therefore, financial loss resulting from liability as a shareholder will occur
only if the Trust itself cannot meet its obligations to indemnify shareholders
and pay judgments against them from its assets.
TAX INFORMATION
--------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
are received in cash or as additional shares.
STATE AND LOCAL TAXES
The Fund intends to limit its investments to U.S. Treasury obligations paying
interest which, if owned directly by shareholders of the Fund, would be exempt
from state personal income tax. However, under the laws of some states, the net
investment income distributed by the Fund may be taxable to shareholders. State
laws differ on this issue, and shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES. In the opinion of Houston,
Houston & Donnelly, counsel to the Fund:
- the Fund is not subject to Pennsylvania corporate or personal property
taxes; and
- Fund shares may be subject to personal property taxes imposed by
counties, municipalities, and school districts in Pennsylvania to the
extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
From time to time the Fund advertises its yield and effective yield.
The yield represents the annualized rate of income earned on an investment in
the Fund over a seven-day period. It is the annualized dividends earned during
the period on the investment shown as a percentage of the investment. The
effective yield is calculated similarly to the yield but, when annualized, the
income earned by an investment in the Fund is assumed to be reinvested daily.
The effective yield will be slightly higher than the yield because of the
compounding effect of this assumed reinvestment.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in the Fund after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
AUTOMATED TREASURY CASH RESERVES
PORTFOLIO OF INVESTMENTS
APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
----------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--89.1%
----------------------------------------------------------------------------------
* U.S. TREASURY BILLS--65.5%
----------------------------------------------------------------
$ 6,300,000 3.10%, 5/5/94 $ 6,297,830
----------------------------------------------------------------
10,600,000 3.25%, 5/12/94 10,589,474
----------------------------------------------------------------
2,900,000 3.30%, 5/19/94 2,895,099
----------------------------------------------------------------
3,850,000 3.355% - 3.36%, 5/26/94 3,841,030
----------------------------------------------------------------
18,450,000 3.47% - 3.515%, 6/2/94 18,392,854
----------------------------------------------------------------
30,150,000 3.41% - 3.50%, 6/9/94 30,036,372
----------------------------------------------------------------
16,400,000 3.44% - 3.50%, 6/23/94 16,316,166
----------------------------------------------------------------
10,850,000 3.54% - 3.64%, 6/30/94 10,784,402
----------------------------------------------------------------
20,100,000 3.53%, 7/7/94 19,968,136
----------------------------------------------------------------
2,450,000 3.70% - 3.76%, 7/14/94 2,431,231
----------------------------------------------------------------
3,550,000 3.735% - 3.74%, 7/21/94 3,520,159
---------------------------------------------------------------- ------------
Total 125,072,753
---------------------------------------------------------------- ------------
U.S. TREASURY NOTES--23.6%
----------------------------------------------------------------
15,000,000 9.50%, 5/15/94 15,032,812
----------------------------------------------------------------
30,000,000 5.125%, 5/31/94 30,033,806
---------------------------------------------------------------- ------------
Total 45,066,618
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST $170,139,371+
---------------------------------------------------------------- ------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase.
+ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($190,839,774) at April 30, 1994.
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
--------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A) $170,139,371
--------------------------------------------------------------------------------
Cash 69,870
--------------------------------------------------------------------------------
Receivable for investments sold 33,900,000
--------------------------------------------------------------------------------
Interest receivable 2,206,800
--------------------------------------------------------------------------------
Deferred expenses (Note 2E) 9,928
-------------------------------------------------------------------------------- ------------
Total assets 206,325,969
--------------------------------------------------------------------------------
LIABILITIES:
------------------------------------------------------------------
Payable for investments purchased $15,338,949
------------------------------------------------------------------
Dividends payable 65,209
------------------------------------------------------------------
Payable to administrator (Note 4) 4,595
------------------------------------------------------------------
Payable to transfer and dividend disbursing agent (Note 4) 4,807
------------------------------------------------------------------
Payable for Fund shares redeemed 8,886
------------------------------------------------------------------
Accrued expenses 63,749
------------------------------------------------------------------ -----------
Total liabilities 15,486,195
-------------------------------------------------------------------------------- ------------
NET ASSETS FOR 190,839,774 shares of beneficial interest outstanding $190,839,774
-------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Price Per Share
($190,839,774 / 190,839,774 shares of beneficial interest outstanding) $1.00
-------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
----------------------------------------------------------------------------------
Interest income (Note 2B) $8,390,233
----------------------------------------------------------------------------------
EXPENSES:
----------------------------------------------------------------------------------
Investment advisory fee (Note 4) $1,347,324
---------------------------------------------------------------------
Trustees' fees 4,522
---------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 316,918
---------------------------------------------------------------------
Custodian and recordkeeping fees and expenses 94,269
---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 21,603
---------------------------------------------------------------------
Fund share registration costs 35,224
---------------------------------------------------------------------
Legal fees 9,204
---------------------------------------------------------------------
Auditing fees 14,933
---------------------------------------------------------------------
Shareholder services fees (Note 4) 21,203
---------------------------------------------------------------------
Taxes 35
---------------------------------------------------------------------
Printing and postage 4,875
---------------------------------------------------------------------
Insurance premiums 10,412
---------------------------------------------------------------------
Miscellaneous 12,790
--------------------------------------------------------------------- ----------
Total expenses 1,893,312
---------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (Note 4) 365,620
--------------------------------------------------------------------- ----------
Net expenses 1,527,692
---------------------------------------------------------------------------------- ----------
Net investment income $6,862,541
---------------------------------------------------------------------------------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------
1994 1993
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
------------------------------------------------------------
OPERATIONS--
------------------------------------------------------------
Net investment income $ 6,862,541 $ 2,799,520
------------------------------------------------------------ --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2B)--
------------------------------------------------------------
Dividends to shareholders from net investment income (6,862,541) (2,799,520)
------------------------------------------------------------ --------------- -------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
------------------------------------------------------------
Proceeds from sale of shares 1,219,200,090 702,487,230
------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of dividends declared 6,163,198 2,185,822
------------------------------------------------------------
Cost of shares redeemed (1,287,478,391) (488,521,657)
------------------------------------------------------------ --------------- -------------
Change in net assets from Fund share transactions (62,115,103) 216,151,395
------------------------------------------------------------ --------------- -------------
Change in net assets (62,115,103) 216,151,395
------------------------------------------------------------
NET ASSETS:
------------------------------------------------------------
Beginning of period 252,954,877 36,803,482
------------------------------------------------------------ --------------- -------------
End of period $ 190,839,774 $ 252,954,877
------------------------------------------------------------ --------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1994
--------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Trust consists of three, diversified portfolios. The financial statements
included herein present only those of Automated Treasury Cash Reserves (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.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles (GAAP).
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value its portfolio
securities is in accordance with Rule 2a-7 under the Investment Company Act of 1940.
B. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses are accrued
daily. Bond premium and discount are amortized as required by the Internal Revenue Code,
as amended (the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the Code
applicable to regulated investment companies and distribute to shareholders each year
substantially all of its taxable income. Accordingly, no provisions for federal tax are
necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-issued or
delayed delivery transactions. The Fund records when-issued securities 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.
E. DEFERRED EXPENSES--The costs incurred by the Fund with respect to registration of its
shares in its first fiscal year, excluding the initial expense of registering the shares,
have been deferred and are being amortized using the straight-line method over a period
of five years from the Fund's commencement date.
F. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
AUTOMATED TREASURY CASH RESERVES
--------------------------------------------------------------------------------
(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 April
30, 1994, capital paid in aggregated $190,839,774.
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
1994 1993
-------------- ------------
<S> <C> <C>
--------------------------------------------------------------
Shares sold 1,219,200,090 702,487,230
--------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared 6,163,198 2,185,822
--------------------------------------------------------------
Shares redeemed (1,287,478,391) (488,521,657)
-------------------------------------------------------------- -------------- ------------
Net change resulting from Fund share transactions (62,115,103) 216,151,395
-------------------------------------------------------------- -------------- ------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.50 of 1% of the Fund's average daily net assets. Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Fund. Adviser can modify or terminate this voluntary waiver at any time at
its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services and Federated
Administrative Services, Inc. collectively provided the Fund administrative and
personnel services. Prior to March 1, 1994, these services were provided at
approximate cost. Effective March 1, 1994, the fee 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 any
fiscal year shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of average net assets of the Fund for the period. This fee is to obtain
certain personal services for shareholders and the maintenance of shareholder
accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEE--Federated Services Company ("FServ")
serves as transfer and dividend disbursing agent for the Fund. The fee is based
on the size, type and number of accounts and transactions made by shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Directors of
the above companies.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
AUTOMATED TREASURY CASH RESERVES:
We have audited the accompanying statement of assets and liabilities of
Automated Treasury Cash Reserves (a portfolio of Federated Government Trust),
including the portfolio of investments, as of April 30, 1994, and the related
statement of operations for the year then ended and the statement of changes in
net assets for each of the two years in the period then ended, and the financial
highlights (see page 2 of this Prospectus) for each of the three years in the
period then ended. 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 April
30, 1994, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Automated Treasury Cash Reserves at April 30, 1994, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each of
the three years in the period then ended, in conformity with generally accepted
accounting principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
June 9, 1994
ADDRESSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Automated Treasury Cash Reserves Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Custodian
State Street Bank and P.O. Box 8602
Trust Company Boston, Massachusetts 02266-8602
------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
------------------------------------------------------------------------------------------------
Legal Counsel
Houston, Houston & Donnelly 2510 Centre City Tower
Pittsburgh, Pennsylvania 15222
------------------------------------------------------------------------------------------------
Legal Counsel
Dickstein, Shapiro & Morin, L.L.P. 2101 L Street, N.W.
Washington, D.C. 20037
------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
------------------------------------------------------------------------------------------------
</TABLE>
AUTOMATED TREASURY
CASH RESERVES
PROSPECTUS
A Diversified Portfolio of Federated
Government Trust, An Open-End,
Management Investment Company
June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
1052101A (6/94)
AUTOMATED TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus for
Automated Treasury Cash Reserves (the "Fund") dated June 30, 1994. This
Statement is not a prospectus itself. To receive a copy of the prospectus, write
or call the Fund.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated June 30, 1994
FEDERATED SECURITIES CORP.
(LOGO)
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
--------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
---------------------------------------------------------------
Types of Investments 1
When-Issued and
Delayed Delivery Transactions 1
Investment Limitations 1
FEDERATED GOVERNMENT TRUST MANAGEMENT 2
---------------------------------------------------------------
Officers and Trustees 2
The Funds 4
Trust Ownership 4
Trustee Liability 4
INVESTMENT ADVISORY SERVICES 4
---------------------------------------------------------------
Adviser to the Fund 4
Advisory Fees 4
Other Advisory Services 5
ADMINISTRATIVE SERVICES 5
---------------------------------------------------------------
SHAREHOLDER SERVICES PLAN 5
---------------------------------------------------------------
BROKERAGE TRANSACTIONS 5
---------------------------------------------------------------
PURCHASING SHARES 6
---------------------------------------------------------------
Conversion to Federal Funds 6
DETERMINING NET ASSET VALUE 6
---------------------------------------------------------------
Use of the Amortized Cost Method 6
REDEEMING SHARES 7
---------------------------------------------------------------
Redemption in Kind 7
TAX STATUS 7
---------------------------------------------------------------
The Fund's Tax Status 7
Shareholders' Tax Status 7
YIELD 8
---------------------------------------------------------------
EFFECTIVE YIELD 8
---------------------------------------------------------------
PERFORMANCE COMPARISONS 8
---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
--------------------------------------------------------------------------------
The Fund is a portfolio in Federated Government Trust (the "Trust"), which was
established as a Massachusetts business trust under a Declaration of Trust dated
December 7, 1989.
INVESTMENT OBJECTIVE AND POLICIES
--------------------------------------------------------------------------------
The Fund's investment objective is to provide current income consistent with
stability of principal and liquidity. The investment objective cannot be changed
without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests only in short-term U.S. Treasury obligations.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These securities are marked to
market daily and are maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of the total value of its assets.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money except as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
its total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having
a market value not exceeding the lesser of the dollar amounts borrowed or
10% of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold U.S. Treasury obligations, permitted by its investment objective,
policies and limitations or its Declaration of Trust.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate including limited
partnership interests.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in those limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies
except as part of a merger, consolidation, or other acquisition.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
illiquid securities such as demand master notes, the demand for full or
partial prepayment of which may not occur within 7 days of notice.
INVESTING IN WARRANTS
The Fund will not invest in warrants.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral exploration
or development programs, or leases.
--------------------------------------------------------------------------------
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
FEDERATED GOVERNMENT TRUST MANAGEMENT
--------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions, including any affiliation with Federated Management,
Federated Investors, Federated Securities Corp., Federated Services Company, and
Federated Administrative Services, or the Funds (as defined below).
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
-------------------------------------------------------------------------------------------------
John F. Donahue*+ Chairman and Chairman and Trustee, Federated Investors;
Federated Investors Trustee Chairman and Trustee, Federated Advisers,
Tower Federated Management, and Federated
Pittsburgh, PA Research; Director, AEtna Life and Casualty
Company; Chief Executive Officer and
Director, Trustee, or Managing General
Partner of the Funds; formerly, Director,
The Standard Fire Insurance Company. Mr.
Donahue is the father of J. Christopher
Donahue, Vice President of the Trust.
-------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
John T. Conroy, Jr. Trustee President, Investment Properties
Wood/IPC Commercial Corporation; Senior Vice-President, John R.
Department Wood and Associates, Inc., Realtors;
John R. Wood and President, Northgate Village Development
Associates, Inc., Corporation; General Partner or Trustee in
Realtors private real estate ventures in Southwest
3255 Tamiami Trail North Florida; Director, Trustee, or Managing
Naples, FL General Partner of the Funds; formerly
President, Naples Property Management, Inc.
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William J. Copeland Trustee Director and Member of the Executive
One PNC Plaza- Committee, Michael Baker, Inc.; Director,
23rd Floor Trustee, or Managing General Partner of the
Pittsburgh, PA Funds; formerly, Vice Chairman and Director,
PNC Bank, N.A. and PNC Bank Corp. and
Director, Ryan Homes, Inc.
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James E. Dowd Trustee Attorney-at-law; Director, The Emerging
571 Hayward Mill Road Germany Fund, Inc.; Director, Trustee, or
Concord, MA Managing General Partner of the Funds;
formerly, Director, Blue Cross of
Massachusetts, Inc.
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Lawrence D. Ellis, M.D. Trustee Hematologist, Oncologist, and Internist,
3471 Fifth Avenue Presbyterian and Montefiore Hospitals;
Suite 1111 Clinical Professor of Medicine and Trustee,
Pittsburgh, PA University of Pittsburgh; Director, Trustee,
or Managing General Partner of the Funds.
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Edward L. Flaherty, Jr.+ Trustee Attorney-at-law; Partner, Meyer and
5916 Penn Mall Flaherty; Director, Eat'N Park Restaurants,
Pittsburgh, PA Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General
Partner of the Funds; formerly, Counsel,
Horizon Financial, F.A., Western Region.
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Glen R. Johnson* President and Trustee, Federated Investors; President
Federated Investors Trustee and/or Trustee of some of the Funds; staff
Tower member, Federated Securities Corp. and
Pittsburgh, PA Federated Administrative Services.
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Peter E. Madden Trustee Consultant; State Representative,
225 Franklin Street Commonwealth of Massachusetts; Director,
Boston, MA Trustee, or Managing General Partner of the
Funds; formerly, President, State Street
Bank and Trust Company and State Street
Boston Corporation and Trustee, Lahey Clinic
Foundation, Inc.
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</TABLE>
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<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME AND ADDRESS THE TRUST DURING PAST FIVE YEARS
<S> <C> <C> <C>
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Gregor F. Meyer Trustee Attorney-at-law; Partner, Meyer and
5916 Penn Mall Flaherty; Chairman, Meritcare, Inc.;
Pittsburgh, PA Director, Eat'N Park Restaurants, Inc.;
Director, Trustee, or Managing General
Partner of the Funds; formerly, Vice
Chairman, Horizon Financial, F.A.
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Wesley W. Posvar Trustee Professor, Foreign Policy and Management
1202 Cathedral of Consultant; Trustee, Carnegie Endowment for
Learning International Peace, RAND Corporation,
University of Pittsburgh Online Computer Library Center, Inc., and
Pittsburgh, PA U.S. Space Foundation; Chairman, Czecho
Slovak Management Center; Director, Trustee,
or Managing General Partner of the Funds;
President Emeritus, University of
Pittsburgh; formerly, Chairman, National
Advisory Council for Environmental Policy
and Technology.
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Marjorie P. Smuts Trustee Public relations/marketing consultant;
4905 Bayard Street Director, Trustee, or Managing General
Pittsburgh, PA Partner of the Funds.
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John A. Staley, IV* Vice President Vice President and Trustee, Federated
Federated Investors and Trustee Investors; Executive Vice President,
Tower Federated Securities Corp.; President and
Pittsburgh, PA Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice
President of the Funds; Director, Trustee,
or Managing General Partner of some of the
Funds; formerly, Vice President, The
Standard Fire Insurance Company and
President of its Federated Research
Division.
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J. Christopher Donahue Vice President President and Trustee, Federated Investors;
Federated Investors Trustee, Federated Advisers, Federated
Tower Management, and Federated Research; Trustee,
Pittsburgh, PA Federated Administrative Services; Trustee,
Federated Services Company; President or
Vice President of the Funds; Director,
Trustee or Managing General Partner of some
of the Funds. Mr. Donahue is the son of John
F. Donahue, Chairman and Trustee of the
Trust.
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Richard B. Fisher Vice President Executive Vice President and Trustee,
Federated Investors Federated Investors; Chairman and Director,
Tower Federated Securities Corp.; President or
Pittsburgh, PA Vice President of the Funds; Director or
Trustee of some of the Funds.
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Edward C. Gonzales Vice President Vice President, Treasurer and Trustee,
Federated Investors and Treasurer Federated Investors; Vice President and
Tower Treasurer, Federated Advisers, Federated
Pittsburgh, PA Management, and Federated Research;
Executive Vice President, Treasurer, and
Director, Federated Securities Corp.;
Trustee, Federated Services Company;
Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee or Director
of some of the Funds; Vice President and
Treasurer of the Funds.
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John W. McGonigle Vice President Vice President, Secretary, General Counsel,
Federated Investors and Secretary and Trustee, Federated Investors; Vice
Tower President, Secretary, and Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, and
Federated Research; Trustee, Federated
Services Company; Executive Vice President,
Secretary, and Trustee, Federated
Administrative Services; Executive Vice
President and Director, Federated Securities
Corp.; Vice President and Secretary of the
Funds.
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</TABLE>
* This Trustee is deemed to be an "interested person" of the Trust as defined in
the Investment Company Act of 1940.
+ Members of the Trust's Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Trustees between
meetings of the Trustees.
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THE FUNDS
"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series, Inc.; Cash Trust Series II; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priority
Funds; Fixed Income Securities, Inc; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc., Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investments
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty Term Trust, Inc.-1999; Liberty U.S. Government Money Market Trust;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.
TRUST OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of June 9, 1994, the following shareholders of record owned 5% or more of the
outstanding shares of the Fund: United States Trust Co NY of New York, New York
owned approximately 13,603,835 shares (8.71%), State Street Bank and Trust of
North Quincy, Massachusetts owned approximately 11,593,457 shares (7.43%),
Warner & Stockpole of Boston, Massachusetts owned approximately 12,362,964
shares (7.92%) and BHC Securities, Inc. of Philadelphia, Pennsylvania owned (as
record holder owning shares for its clients) approximately 89,844,302 shares
(57.56%).
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
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ADVISER TO THE FUND
The Fund's investment adviser is Federated Management (the "Adviser"). It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. John F. Donahue, Chairman and Trustee of the Adviser, is
Chairman and Trustee of the Trust. John A. Staley, IV, President and Trustee of
the Adviser, is Vice President and Trustee of Federated Investors, Executive
Vice President of Federated Securities Corp., and Vice President and Trustee of
the Trust. J. Christopher Donahue, Trustee of the Adviser, is President and
Trustee of Federated Investors, Trustee, Federated Services Company, Trustee of
Federated Administrative Services, and Vice President of the Trust. John W.
McGonigle, Trustee of the Adviser, is Trustee, Vice President, Secretary, and
General Counsel of Federated Investors, Trustee, Executive Vice President, and
Secretary of Federated Administrative Services, Executive Vice President and
Director of Federated Securities Corp., and Vice President and Secretary of the
Trust.
The Adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. During the fiscal years ended April 30,
1994, 1993 and the period from August 9, 1991 (date of initial public
--------------------------------------------------------------------------------
investment) to April 30, 1992, the Adviser earned $1,347,324, $501,091, and
$100,444, respectively, of which $365,620, $501,091 and $60,443, respectively,
was voluntarily waived because of undertakings to limit the Fund's expenses.
STATE EXPENSE LIMITATION
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes,
and extraordinary expenses) exceed 2 1/2% per year of the first $30
million of average net assets, 2% per year
of the next $70 million of average net assets, and 1 1/2% per year of the
remaining average net assets, the
Adviser will reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
OTHER ADVISORY SERVICES
Federated Research Corp., a subsidiary of Federated Investors, receives fees
from certain depository institutions for providing consulting and portfolio
advisory services relating to each institution's program of asset management.
Federated Research Corp. may advise such clients to purchase or redeem shares of
investment companies which are managed, for a fee, by Federated Research Corp.
or other affiliates of Federated Investors, such as the Adviser, and may advise
such clients to purchase and sell securities in the direct markets.
ADMINISTRATIVE SERVICES
--------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
(For purposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc., may
hereinafter collectively be referred to as the "Administrators.") For the fiscal
years ended April 30, 1994, 1993, and the period from August 9, 1991 (date of
initial public investment) to April 30, 1992, the Administrators collectively
earned $316,918, $229,752 and $32,595, respectively. John A. Staley, IV, an
officer of the Trust, and Dr. Henry J. Gailliot, an officer of the Adviser, each
hold approximately 15% and 20%, respectively, of the outstanding common stock
and serve as directors of Commercial Data Services, Inc., a company which
provides computer processing services to the Administrators.
SHAREHOLDER SERVICES PLAN
--------------------------------------------------------------------------------
This arrangement permits the payment of fees to Federated Shareholder Services
and, indirectly, to financial institutions to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities include, but are not
limited to, providing office space, equipment, telephone facilities, and various
clerical, supervisory, computer, and other personnel as necessary or beneficial
to establish and maintain shareholder accounts and records; processing purchase
and redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
For the fiscal period ending April 30, 1994, payments in the amount of $21,203
were made pursuant to the Shareholder Services Plan.
BROKERAGE TRANSACTIONS
--------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Trustees.
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
- advice as to the advisability of investing in securities;
--------------------------------------------------------------------------------
- security analysis and reports;
- economic studies;
- industry studies;
- receipt of quotations for portfolio evaluations; and
- similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the Adviser or by
affiliates of Federated Investors in advising The Funds and other accounts. To
the extent that receipt of these services may supplant services for which the
Adviser or its affiliates might otherwise have paid, it would tend to reduce
their expenses.
PURCHASING SHARES
--------------------------------------------------------------------------------
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange and the Federal Reserve Wire System are open for business.
The procedure for purchasing shares of the Fund is explained in the prospectus
under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
--------------------------------------------------------------------------------
The Fund attempts to stabilize the value of a share at $1.00. The days on which
net asset value is calculated by the Fund are described in the prospectus.
USE OF THE AMORTIZED COST METHOD
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended. Under the Rule, the Trustees must establish
procedures reasonably designed to stabilize the net asset value per share, as
computed for purposes of distribution and redemption, at $1.00 per share, taking
into account current market conditions and the Fund's investment objective.
Under the Rule, a fund is permitted to purchase instruments which are subject to
demand features or standby commitments. As defined by the Rule, a demand feature
entitles a fund to receive the principal amount of the instrument from the
issuer or a third party on (1) no more than 30 days' notice or (2) at specified
intervals not exceeding one year on no more than 30 days' notice. A standby
commitment entitles a fund to achieve same day settlement and to receive an
exercise price equal to the amortized cost of the underlying instrument plus
accrued interest at the time of exercise.
MONITORING PROCEDURES
The Trustees' procedures include monitoring the relationship between the
amortized cost value per share and the net asset value per share based
upon available indications of market value. The Trustees will decide
what, if any, steps should be taken if there is a difference of more than
.5 of 1% between the two values. The Trustees will take any steps they
consider appropriate (such as redemption in kind or shortening the
average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of
determining net asset value.
INVESTMENT RESTRICTIONS
The Rule requires that a fund limit its investments to instruments that,
in the opinion of the Trustees, present minimal credit risk and have
received the requisite ratings from one or more nationally recognized
statistical rating organizations. If the instruments are not rated, the
Trustees must determine that they are of comparable quality. The Rule
also requires a fund to maintain a dollar weighted average portfolio
maturity (not more than 90 days) appropriate to the objective of
maintaining a stable net asset value of $1.00 per
--------------------------------------------------------------------------------
share. In addition, no instrument with a remaining maturity of more than
397 days can be purchased by a fund.
Should the disposition of a portfolio security result in a dollar
weighted average portfolio maturity of more than 90 days, the Fund will
invest its available cash to reduce the average maturity to 90 days or
less as soon as possible.
The Fund may attempt to increase yield by trading portfolio securities to take
advantage of short-term market variations. This policy may, from time to time,
result in high portfolio turnover. Under the amortized cost method of valuation,
neither the amount of daily income nor the net asset value is affected by any
unrealized appreciation or depreciation of the portfolio.
In periods of declining interest rates, the indicated daily yield on shares of
the Fund computed by dividing the annualized daily income on the Fund's
portfolio by the net asset value computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon market prices
and estimates.
In periods of rising interest rates, the indicated daily yield on shares of the
Fund computed the same way may tend to be lower than a similar computation made
by using a method of calculation based upon market prices and estimates.
REDEEMING SHARES
--------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although State Street Bank does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940, as amended, under which the Trust is obligated to redeem shares for any
one shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's
net asset value during any 90-day period.
TAX STATUS
--------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
- derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
- derive less than 30% of its gross income from the sale of securities held less
than three months;
- invest in securities within certain statutory limits; and
- distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in
dividends. Capital losses could result in a decrease in dividends. If,
for some extraordinary reason, the Fund realizes net long-term capital
gains, it will distribute them once every 12 months.
YIELD
--------------------------------------------------------------------------------
The Fund's yield for the seven-day period ended April 30, 1994, was 2.95%.
The Fund calculates its yield daily, based upon the seven days ending on the day
of the calculation, called the "base period." This yield is computed by:
- determining the net change in the value of a hypothetical account with a
balance of one share at the beginning of the base period, with the net change
excluding capital changes but including the value of any additional shares
purchased with dividends earned from the original one share and all dividends
declared on the original and any purchased shares;
- dividing the net change in the account's value by the value of the account at
the beginning of the base period to determine the base period return; and
- multiplying the base period return by (365/7).
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.
EFFECTIVE YIELD
--------------------------------------------------------------------------------
The Fund's effective yield for the seven-day period ended April 30, 1994, was
2.99%.
The Fund's effective yield is computed by compounding the unannualized base
period return by:
- adding 1 to the base period return;
- raising the sum to the 365/7th power; and
- subtracting 1 from the result.
PERFORMANCE COMPARISONS
--------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
- portfolio quality;
- average portfolio maturity;
- type of instruments in which the portfolio is invested;
- changes in interest rates on money market instruments;
- changes in Fund expenses; and
- the relative amount of Fund cash flow.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
- SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.
- LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all income dividends, and capital gains distributions, if any.
From time to time, the Fund will quote its Lipper ranking in the "U.S.
government funds" category in advertising and sales literature.
Advertisements and other sales literature for the Fund may refer to total
return. Total return is the historic change in the value of an investment in the
Fund based on the monthly reinvestment of dividends over a specified period of
time.
1052101B (6/94)
