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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). The Fund invests in short-term
U.S. government securities to achieve current income consistent with
stability of principal and liquidity.
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 OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. 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.
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, 1995, 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, which is in paper form
only, or a paper copy of this prospectus, if you have received it
electronically, free of charge by calling 1-800-235-4669. To obtain
other information, or make inquiries about the Trust, contact the
Trust at the address listed in the back of this prospectus.
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, 1995
TABLE OF CONTENTS
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<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- ---------------------------------------------------
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
Investment Limitations 4
Regulatory Compliance 5
FUND INFORMATION 5
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Management of the Fund 5
Distribution of Shares 6
Administration of the Trust 6
NET ASSET VALUE 7
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INVESTING IN THE FUND 7
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Share Purchases 7
Minimum Investment Required 8
Subaccounting Services 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
REDEEMING SHARES 9
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By Mail 9
Telephone Redemption 9
Accounts with Low Balances 10
SHAREHOLDER INFORMATION 10
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Voting Rights 10
Massachusetts Partnership Law 10
TAX INFORMATION 11
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Federal Income Tax 11
Pennsylvania Corporate and Personal
Property Taxes 11
PERFORMANCE INFORMATION 11
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FINANCIAL STATEMENTS 12
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REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS 18
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ADDRESSES 19
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</TABLE>
I
SUMMARY OF FUND EXPENSES
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<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
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
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
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%
<FN>
(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 would have been 0.90% absent the
voluntary waiver of a portion of the management fee.
</TABLE>
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 "Fund 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.
1
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 LLP, Independent Auditors, on
page 18.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
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1995 1994 1993 1992 1991 1990 (a)
- ------------------------------------------------------------ -------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
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Net investment income 0.05 0.03 0.03 0.05 0.07 0.02
- ------------------------------------------------------------ -------- -------- -------- -------- -------- -------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Distributions from net investment income (0.05) (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 $1.00
- ------------------------------------------------------------ -------- -------- -------- -------- -------- -------
-------- -------- -------- -------- -------- -------
TOTAL RETURN (b) 4.68% 2.77% 2.92% 4.79% 7.20% 1.93%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.58% 0.57% 0.57% 0.58% 0.55% 0.32%(c)
- ------------------------------------------------------------
Net investment income 4.70% 2.75% 2.87% 4.58% 6.70% 8.02%(c)
- ------------------------------------------------------------
Expense waiver/reimbursement (d) 0.32% 0.09% 0.08% 0.14% 0.30% 0.89%(c)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $603,849 $457,944 $396,370 $308,625 $206,694 $34,053
- ------------------------------------------------------------
<FN>
(a) Reflects operations for the period from February 15, 1990 (date of initial
public investment) to April 30, 1990.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
2
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 representing interests in separate portfolios of
securities. The Fund is designed primarily for institutional investors, such as
corporations, unions, hospitals, insurance companies, and municipalities as a
convenient means of accumulating an interest in a professionally managed,
diversified portfolio investing only in short-term U.S. government securities. A
minimum initial investment of $25,000 within a 90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. 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
shareholder approval. 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 only in a portfolio of
short-term U.S. government securities maturing in thirteen months or less. The
average maturity of the 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 shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
ACCEPTABLE INVESTMENTS. The Fund invests in U.S. government securities that 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: Farm Credit System, including the National
Bank for Cooperatives, Farm Credit Banks, and Banks for Cooperatives;
Farmers Home Administration; Federal Home Loan Banks; Federal Home Loan
Mortgage Corporation; Federal National Mortgage Association; Government
National Mortgage Association; and Student Loan Marketing Association.
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
3
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These 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.
AGENCY MASTER DEMAND NOTES. The Fund may enter into master demand notes with
various federal agencies and instrumentalities. Under a master demand note, the
Fund has the right to increase or decrease the amount of the note on a daily
basis within specified maximum and minimum amounts. Master demand notes also
normally provide for full or partial repayment upon seven or more days notice by
either the Fund or the borrower and bear interest at a variable rate. The Fund
relies on master demand notes, in part, to provide daily liquidity. To the
extent that the Fund cannot obtain liquidity through master demand notes, it may
be required to maintain a larger cash position, invest more assets in securities
with current maturities or dispose of assets at a gain or loss to maintain
sufficient liquidity.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase 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 seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. 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.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
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 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 agency master demand notes, the demand for full or partial prepayment of
which may not occur within seven days of notice.
4
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.
FUND INFORMATION
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MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Fund's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
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 has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain states.
The adviser also may voluntarily choose to waive a portion of its fee or
reimburse other expenses of the Fund, but reserves the right to terminate
such waiver or reimbursement at any time at its sole discretion.
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. With over $72 billion invested across more than 260 funds
under management and/or administration by its subsidiaries, as of December 31,
1994, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,750 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions
5
nationwide. More than 100,000 investment professionals have selected Federated
funds for their clients.
DISTRIBUTION OF 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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it will pay Federated Shareholder Services, a
subsidiary of Federated Investors, an amount not exceeding .25 of 1% of the
average daily net asset value of the Fund to provide personal services and/or
maintenance of shareholder accounts to the Fund and its shareholders. From time
to time and for such periods as deemed appropriate, the amount stated above may
be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions fees
based upon shares owned by their clients or customers for services provided to
those 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 Federated
Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide certain services to shareholders. These
services may include, but are not limited to, distributing prospectuses and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for these
services by the distributor will be reimbursed by the adviser and not the Fund.
ADMINISTRATION OF THE TRUST
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 as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.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. Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
6
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, MA, is transfer agent for the shares of, and dividend disbursing agent
for, the Fund. Federated Services Company is a subsidiary of Federated
Investors.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, PA.
NET ASSET VALUE
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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 cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange each day the New York Stock Exchange is open.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased either by wire or mail. The Fund reserves the right to reject any
purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase 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 1:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, MA; 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; and ABA Number 011000028.
BY MAIL. To purchase by mail, send a check made payable to Automated Government
Cash Reserves to: Federated Services Company, Automated Government Cash
Reserves, P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are considered
received when payment by check is converted into federal funds. This is normally
the next business day after the check is received.
7
AUTOMATIC INVESTMENTS. Investors may establish accounts with their
financial institutions to have cash accumulations automatically invested in
the Fund. The investments may be made on predetermined dates or when the
investor's account reaches a certain level. Participating financial
institutions are responsible for prompt transmission of orders relating to
the program, and they may charge for their services. Investors should read
this prospectus along with the financial institution's agreement or
literature describing these services and fees.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial 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. Financial institutions 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 financial 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 or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
8
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company 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 as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Automated Government
Cash Reserves, P.O. Box 8600, Boston, MA 02266-8600. The written request should
state: Automated Government Cash Reserves; shareholder's name; the account
number; and the share or dollar amount requested. Sign the request exactly as
the shares are registered. Shareholders should call the Fund for assistance in
redeeming by mail.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request to
Federated Services Company, 500 Victory Road - 2nd Floor, Quincy, MA 02171.
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 their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, 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 the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
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. Dividends are paid up to and including the day that a redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. An
authorization form permitting the Fund to accept telephone
9
requests must first be completed. Authorization forms and information on this
service are available from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. 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.
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 "By Mail", should be considered. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio, only shares of that portfolio are entitled to vote. 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 for this purpose 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. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for 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 by the Declaration of Trust to use its
property to protect or compensate the shareholder. On
10
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.
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
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston, & Donnelly, counsel to the Trust, 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.
OTHER STATE AND LOCAL TAXES. Shareholders are urged to consult their own tax
advisers regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield and effective yield.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
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 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 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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare its
performance to certain indices.
11
AUTOMATED GOVERNMENT CASH RESERVES
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------------- ------------------------------------------------------ ------------
<C> <S> <C>
SHORT-TERM GOVERNMENT AND AGENCY OBLIGATIONS--100.1%
- ------------------------------------------------------------------------
$ 82,750,000(a) Federal Farm Credit Bank, Discount Notes, 5.59%-6.91%,
5/10/1995-2/22/1996 $ 81,833,785
------------------------------------------------------ ------------
4,000,000 Federal Home Loan Bank Note, 6.85%, 2/28/1996 4,007,455
------------------------------------------------------ ------------
245,475,000(a) Federal Home Loan Bank, Discount Notes, 5.32%-6.69%,
5/2/1995-1/5/1996 243,160,259
------------------------------------------------------ ------------
29,000,000(b) Federal Home Loan Bank, Floating Rate Notes,
5.80%-6.08%, 6/5/1995-10/6/1995 28,996,828
------------------------------------------------------ ------------
3,000,000 Student Loan Marketing Association Note, 6.94%,
2/21/1996 3,004,223
------------------------------------------------------ ------------
10,000,000(a) Student Loan Marketing Association, Discount Notes,
6.10%, 5/24/1995 9,962,114
------------------------------------------------------ ------------
95,550,000(b) Student Loan Marketing Association, Floating Rate
Notes, 5.99%-6.27%, 5/2/1995 95,652,783
------------------------------------------------------ ------------
67,600,000(b) Student Loan Marketing Association, Floating Rate
Master Notes, 5.79%, 5/2/1995 67,600,000
------------------------------------------------------ ------------
59,400,000(a) Tennessee Valley Authority, Discount Notes,
5.96%-6.08%, 5/2/1995-6/21/1995 59,213,357
------------------------------------------------------ ------------
11,500,000(a) U.S. Treasury Bills, 5.43%-6.13%, 5/4/1995-1/11/1996 11,267,498
------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (C) $604,698,302
------------------------------------------------------ ------------
------------
<FN>
(a) Each issue shows the rate of discount at the time of purchase.
(b) Current rate and next reset date shown.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($603,849,062) at April 30, 1995.
</TABLE>
(See Notes which are an integral part of the Financial Statements.)
12
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $604,698,302
- ----------------------------------------------------------------------------------------------
Income receivable 1,776,276
- ----------------------------------------------------------------------------------------------
Receivable for shares sold 477
- ----------------------------------------------------------------------------------------------
Deferred expenses 615
- ---------------------------------------------------------------------------------------------- ------------
Total assets 606,475,670
- ----------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------
Income distribution payable $2,264,522
- ---------------------------------------------------------------------------------
Accrued expenses 200,136
- ---------------------------------------------------------------------------------
Payable to bank 161,950
- --------------------------------------------------------------------------------- ----------
Total liabilities 2,626,608
- ---------------------------------------------------------------------------------------------- ------------
NET ASSETS for 603,849,062 shares outstanding $603,849,062
- ---------------------------------------------------------------------------------------------- ------------
------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share: ($603,849,062
/ 603,849,062 shares outstanding) $ 1.00
- ---------------------------------------------------------------------------------------------- ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
13
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------
Interest $26,404,064
- ----------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------
Investment advisory fee $ 2,501,388
- --------------------------------------------------------------------------------
Administrative personnel and services fee 378,710
- --------------------------------------------------------------------------------
Custodian fees 125,965
- --------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 28,086
- --------------------------------------------------------------------------------
Directors'/Trustees' fees 7,155
- --------------------------------------------------------------------------------
Auditing fees 12,629
- --------------------------------------------------------------------------------
Legal fees 12,125
- --------------------------------------------------------------------------------
Portfolio accounting fees 45,792
- --------------------------------------------------------------------------------
Shareholder services fee 1,250,694
- --------------------------------------------------------------------------------
Share registration costs 102,420
- --------------------------------------------------------------------------------
Printing and postage 6,630
- --------------------------------------------------------------------------------
Insurance premiums 10,507
- --------------------------------------------------------------------------------
Taxes 83
- --------------------------------------------------------------------------------
Miscellaneous 3,372
- -------------------------------------------------------------------------------- -----------
Total expenses 4,485,556
- --------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 1,583,947
- -------------------------------------------------------------------------------- -----------
Net expenses 2,901,609
- ---------------------------------------------------------------------------------------------- -----------
Net investment income $23,502,455
- ---------------------------------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
14
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 23,502,455 $ 12,247,939
- --------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------
Distributions from net investment income (23,502,455) (12,247,939)
- --------------------------------------------------------------------------- --------------- ---------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------------
Proceeds from sale of Shares 1,984,550,122 1,616,918,441
- ---------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 4,439,144 2,166,619
- ---------------------------------------------------------------------------
Cost of Shares redeemed (1,843,084,556) (1,557,510,495)
- --------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from Share transactions 145,904,710 61,574,565
- --------------------------------------------------------------------------- --------------- ---------------
Change in net assets 145,904,710 61,574,565
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 457,944,352 396,369,787
- --------------------------------------------------------------------------- --------------- ---------------
End of period $ 603,849,062 $ 457,944,352
- --------------------------------------------------------------------------- --------------- ---------------
--------------- ---------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
15
AUTOMATED GOVERNMENT CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of three 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.
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 Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
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 its shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
16
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, 1995, capital paid-in aggregated $603,849,062. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Shares sold 1,984,550,122 1,616,918,441
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 4,439,144 2,166,619
- --------------------------------------------------
Shares redeemed (1,843,084,556) (1,557,510,495)
- -------------------------------------------------- -------------- --------------
Net change resulting from Share transactions 145,904,710 61,574,565
- -------------------------------------------------- -------------- --------------
-------------- --------------
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS 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 the period
of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to .25 of 1% of average daily net assets of the Fund for the period. This
fee is to obtain certain services for shareholders and to maintain
shareholder accounts.
TRANSFER AGENT AND DIVIDEND DISTRIBUTING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Fund. This fee is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of the
Fund's average daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Fund are Officers and
Directors or Trustees of the above companies.
17
REPORT OF ERNST & YOUNG LLP, 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, 1995, 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 periods presented
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1995, 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, 1995, 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 periods presented therein, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
June 9, 1995
18
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federated Government Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
- -------------------------------------------------------------------------------------------
</TABLE>
19
- --------------------------------------------------------------------------------
AUTOMATED GOVERNMENT
CASH RESERVES
PROSPECTUS
A Diversified Portfolio of
Federated Government Trust,
an Open-End Management
Investment Company
Prospectus dated June 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314186107
0011606X (6/95) [RECYCLED PAPER LOGO]
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 of Automated Government Cash Reserves (the "Fund"), a
portfolio of Federated Government Trust (the "Trust") dated June 30,
1995. This Statement is not a prospectus. To receive a copy of a
prospectus, write or call the Trust.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Statement dated June 30, 1995.
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
When-Issued And Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 1
Investment Limitations 1
Federated Government Trust
Management 2
Share Ownership 6
Directors Compensation 7
Trustee Liability 7
Investment Advisory Services 7
Investment Adviser 7
Advisory Fees 8
Brokerage Transactions 8
Shareholder Services Plan 9
Determining Net Asset Value 9
Redemption in Kind 9
The Fund's Tax Status 10
Performance Information 10
Yield 10
Effective Yield 10
Total Return 10
Performance Comparisons 10
About Federated Investors 11
Mutual Fund Market 11
Investment Policies
Unless indicated otherwise, the policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
Acceptable Investments
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 will reduce the 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
that 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 or yield for the Fund. 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 on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. This transaction
is similar to borrowing cash. In a reverse repurchase agreement the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These assets are marked to market daily and
are maintained until the transaction is settled.
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 are 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 (including participation in reverse repurchase agreements)
in amounts up to one-third of the value of its total assets, including
the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather 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 the value 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 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 securities of issuers
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 limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these 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 Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it may
purchase the securities of issuers which invest in or sponsor such
programs.
Investing in Warrants
The Fund will not invest in warrants.
For purposes of the above limitations, the Fund considers instruments issued
by a U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items". 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 limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
Federated Government Trust Management
Officers and Trustees are listed with their addresses, present positions with
Federated Government Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Vice President of the Trust.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Ce
Center, Inc., and 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.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
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.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; 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
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Vice President and Secretary
V
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Cash Management Trust; Automated Government Money
Trust; California Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; 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 Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S,
Government Securities Fund: 3-5 Years; 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;; 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 U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid
Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; RIMCO Monument Funds; The Shawmut 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; The Virtus Funds; World Investment Series, Inc.
Share Ownership
Officers and Trustees as a group own less than 1% of the Fund's outstanding
shares.
As of June 6, 1995, the following shareholders of record owned 5% or more of
the outstanding shares of the Automated Government Cash Reserves: U.S. Trust
Co., New York, NY, owned approximately 41,675,240 shares (7.04%); Fiduciary
Trust Company International, New York, NY, owned approximately 124,374,900
shares (21.01%); State Street Bank and Trust, North Quincy, MA, owned
approximately 144,485,812 shares (24.41%); Wheeler & Company, Boston, MA,
owned approximately 38,249,798 shares (6.46%).
Directors Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST FUND* FROM FUND COMPLEX +
John F. Donahue, $ 0 $0 for the Trust and
Chairman and Trustee 68 other investment companies
in the Fund Complex
Glen R. Johnson $ 0 $0 for the Trust and
President and Trustee 8 other investment companies
in the Fund Complex
John T. Conroy, Jr., $ 887 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
William J. Copeland, $ 887 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
James E. Dowd, $ 887 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Lawrence D. Ellis, M.D., $ 807 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Edward L. Flaherty, Jr., $ 887 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Peter E. Madden, $ 692 $90,563 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Gregor F. Meyer, $ 807 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
John E. Murray, Jr., $ 283 $0.00 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Wesley W. Posvar, $ 807 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Marjorie P. Smuts, $ 807 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
*Information is furnished for the fiscal year ended March 31, 1995.
+The information is provided for the last calendar year.
Trustee Liability
The 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
Investment Adviser
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and his
son, J. Christopher Donahue.
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, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended April
30, 1995, 1994, and 1993, the adviser earned $2,501,388, $2,227,794, and
$1,881,577, respectively, of which $1,583,947, $389,870, and $289,375,
respectively, were voluntarily waived to limit the Fund's expenses.
State Expense Limitations
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 fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
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 guidelines established 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.
Research services provided by brokers and dealers may be used by the adviser
or its affiliates in advising the Trust 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. 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. During the fiscal
years ended April 30, 1995, 1994, and 1993, the Trust paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
Fund Administration
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 year ended April 30, 1995, Federated Administrative Services earned
$378,710. For the fiscal year ended April 30, 1994, the Administrators earned
$348,312. For the fiscal year ended April 30, 1993, Federated Administrative
Services, Inc., earned $290,780. Dr. Henry J. Gailliot, an officer of
Federated Management, the adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are
necessary for the maintenance of shareholder accounts and to encourage
personal services 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 balance;
answering routine client inquiries; and assisting clients in changing dividend
options, account designations, and addresses. By adopting the Shareholder
Services Plan, the Board of Trustees expects that the Fund will benefit by:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts. For the
fiscal period ending April 30, 1995, payments in the amount of $1,250,694 were
made pursuant to the Shareholder Services Plan, all of which was paid to
financial institutions.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company,
Boston, MA, is custodian for the securities and cash of the Fund. Federated
Services Company, Pittsburgh, PA, provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives
a fee based on size, type and number of accounts and transactions made by
shareholders.
Determining Net Asset Value
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.
Accordingly, 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 opposite may be
true.
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. 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. The
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 0.5 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.
Redemption in Kind
The Fund 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 payments should be in kind. In
such cases, the Fund 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
who sell these securities could receive less than the redemption value and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated investment
companies, 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.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. 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.
Yield
The yield is calculated 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.
The Fund's yield for the seven-day period ended April 30, 1995, was 5.48%.
Effective Yield
The effective yield is calculated 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.
The Fund's effective yield for the seven-day period ended April 30, 1995, was
5.63%.
Total Return
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
Performance Comparisons
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:
o Lipper Analytical Services, Inc., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o Donoghue's Money Fund Report publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
o 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.
o Discount Corporation of New York 30-Day Federal Agencies is a weekly
quote of the average daily offering price for selected federal agency
issues maturing in 30 days.
About Federated Investors
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors. In the money market sector,
Federated gained prominence in the mutual fund industry in 1974 with the
creation of the first institutional money market fund. Simultaneously, the
company pioneered the use of the amortized cost method of accounting for
valuing shares of money market funds, a principal means used by money managers
today to value money market fund shares. Other innovations include the first
institutional tax-free money market fund. As of December 31, 1994, Federated
managed more than $31 billion in assets across approximately 43 money market
funds, including 17 government, 8 prime and 18 municipal with assets
approximating $17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and
high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
Institutional
Federated meets the needs of more than 4,000 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
applications, including defined benefit and defined contribution programs,
cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
Trust Organizations
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
Broker/dealers and bank broker/dealer subsidiaries
Federated mutual funds are available to consumers through major brokerage
firms nationwide--including 200 New York Stock Exchange firms--supported by
more wholesalers than any other mutual fund distributor. The marketing effort
to these firms is headed by James F. Getz, President, Broker/Dealer Division.
*source: Investment Company Institute
314186107
0011606B(6/95)
- --------------------------------------------------------------------------------
U.S. TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
INSTITUTIONAL SHARES
PROSPECTUS
The Institutional 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). The Fund invests in
short-term U.S. Treasury securities to achieve current income
consistent with stability of principal and liquidity.
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 OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. 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.
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, 1995, 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, which is in paper form
only, or a paper copy of this prospectus, if you have received it
electronically, free of charge by calling 1-800-235-4669. To obtain
other information, or make inquiries about the Trust, contact the
Trust at the address listed in the back of this prospectus.
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, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- ---------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SHARES 2
- ---------------------------------------------------
GENERAL INFORMATION 3
- ---------------------------------------------------
INVESTMENT INFORMATION 3
- ---------------------------------------------------
Investment Objective 3
Investment Policies 3
Investment Limitations 4
Regulatory Compliance 4
FUND INFORMATION 4
- ---------------------------------------------------
Management of the Fund 4
Distribution of Shares 5
Administration of the Trust 6
Expenses of the Fund and Institutional
Shares 6
NET ASSET VALUE 7
- ---------------------------------------------------
INVESTING IN THE FUND 7
- ---------------------------------------------------
Share Purchases 7
Minimum Investment Required 8
Subaccounting Services 8
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
REDEEMING SHARES 9
- ---------------------------------------------------
By Mail 9
Telephone Redemption 9
Accounts with Low Balances 10
SHAREHOLDER INFORMATION 10
- ---------------------------------------------------
Voting Rights 10
Massachusetts Partnership Law 11
TAX INFORMATION 11
- ---------------------------------------------------
Federal Income Tax 11
Pennsylvania Corporate and Personal
Property Taxes 11
PERFORMANCE INFORMATION 11
- ---------------------------------------------------
OTHER CLASSES OF SHARES 12
- ---------------------------------------------------
FINANCIAL STATEMENTS 13
- ---------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS 20
- ---------------------------------------------------
ADDRESSES 21
- ---------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
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
<CAPTION>
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................. 0.00%
12b-1 Fee......................................................................................... None
Total Other Expenses.............................................................................. 0.20%
Shareholder Services Fee (after waiver) (2).......................................... 0.00%
Total Institutional Shares Operating Expenses (3)......................................... 0.20%
<FN>
(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 Institutional Shares operating expenses in the table above are
based on expenses expected during the fiscal year ending April 30, 1996.
The total Institutional Shares operating expenses were 0.20% for the fiscal
year ended April 30, 1995 and were 0.59% absent the voluntary waiver of a
portion of the management fee.
</TABLE>
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Trust Information" and "Investing in
Institutional Shares." 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.
1
U.S. TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 20.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------------
1995 1994 1993 1992(a)
- ---------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00 $1.00 $1.00 $1.00
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.05 0.03 0.03 0.04
- ----------------------------------------
LESS DISTRIBUTIONS
- ----------------------------------------
Distributions from net investment
income (0.05) (0.03) (0.03) (0.04)
- ---------------------------------------- -------- -------- -------- -------
NET ASSET VALUE, END OF PERIOD $1.00 $1.00 $1.00 $1.00
- ---------------------------------------- -------- -------- -------- -------
-------- -------- -------- -------
TOTAL RETURN (b) 4.75% 2.95% 3.13% 4.24%
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 0.20% 0.20% 0.20% 0.16%(c)
- ----------------------------------------
Net investment income 4.85% 2.93% 3.03% 4.42%(c)
- ----------------------------------------
Expense waiver/reimbursement (d) 0.39% 0.43% 0.50% 0.62%(c)
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000
omitted) $609,233 $265,030 $177,471 $83,244
- ----------------------------------------
<FN>
(a) Reflects operations for the period from June 11, 1991 (date of initial
public investment) to April 30, 1992.
(b) Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
2
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 representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Shares and
Institutional Service Shares. This prospectus relates only to Institutional
Shares ("Shares") of the Fund, which are 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 accumulating an interest
in a professionally managed, diversified portfolio investing only in short-term
U.S. Treasury securities. A minimum initial investment of $25,000 within a
90-day period is required.
The Fund attempts to stabilize the value of a share at $1.00. 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
shareholder approval. 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 only in a portfolio of
short-term U.S. Treasury securities maturing in thirteen months or less. The
average maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies set forth below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
The Fund will limit its investments to investments which, if owned directly, pay
interest exempt from state personal income tax. Therefore, dividends paid by the
Fund may be exempt from state personal income tax.
ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury securities,
which are fully guaranteed as to principal and interest by the United States.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase 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 seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. Settlement dates
may be a month or more after entering into these transactions, and the market
values of
3
the securities purchased may vary from the purchase prices. Accordingly, the
Fund may pay more or less than the market value of the securities on the
settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
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 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.
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.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Fund's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
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 has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain
4
states. The adviser also may voluntarily choose to waive a portion of its
fee or reimburse other expenses of the Fund, but reserves the right to
terminate such waiver or reimbursement at any time at its sole discretion.
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. With over $72 billion invested across more
than 260 funds under management and/or administration by its subsidiaries,
as of December 31, 1994, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,750
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for Institutional 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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it will pay Federated Shareholder Services, a
subsidiary of Federated Investors, an amount not exceeding .25 of 1% of the
average daily net asset value of the Institutional Shares to provide personal
services and/or maintenance of shareholder accounts to the Fund and its
shareholders. From time to time and for such periods as deemed appropriate, the
amount stated above may be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions fees
based upon shares owned by their clients or customers for services provided to
those 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 Federated
Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide certain services to shareholders. These
services may include, but are not limited to, distributing prospectuses and
other information, providing accounting assistance, and communicating or
facilitating
5
purchases and redemptions of shares. Any fees paid for these services by the
distributor will be reimbursed by the adviser and not the Fund.
ADMINISTRATION OF THE TRUST
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 as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.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. Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, MA, is transfer agent for the shares of, and dividend disbursing agent
for, the Fund. Federated Services Company is a subsidiary of Federated
Investors.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, PA.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to the cost of: organizing the Trust and continuing
its existence; registering the Trust with federal and state authorities;
Trustees' fees; auditors' fees; meetings of Trustees; legal fees of the Trust;
association membership dues; and such non-recurring and extraordinary items as
may arise.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
At present, no expenses are allocated to the Shares as a class. However, the
Board of Trustees reserves the right to allocate certain other expenses to
holders of Shares as it deems appropriate ("Class Expenses"). In any case, Class
Expenses would be limited to: transfer agent fees as identified by the transfer
agent as attributable to holders of Shares; printing and postage expenses
related to preparing
6
and distributing materials such as shareholder reports, prospectuses and proxies
to current shareholders; registration fees paid to the Securities and Exchange
Commission and registration fees paid to state securities commissions; expenses
related to administrative personnel and services as required to support holders
of Shares; legal fees relating solely to Shares; and Trustees' fees incurred as
a result of issues relating solely to Shares.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to shares from
the value of Fund assets attributable to shares, and dividing the remainder by
the number of shares outstanding. The Fund cannot guarantee that its net asset
value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange each day the New York Stock Exchange is open.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased either by wire or mail. The Fund reserves the right to reject any
purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase 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 1:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit
to: U.S. Treasury Cash Reserves--Institutional Shares; 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; and ABA Number 011000028.
BY MAIL. To purchase by mail, send a check made payable to U.S. Treasury Cash
Reserves--Institutional Shares to: Federated Services Company, U.S. Treasury
Cash Reserves, P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are
considered received when payment by check is converted into federal funds. This
is normally the next business day after the check is received.
AUTOMATIC INVESTMENTS. Investors may establish accounts with their
financial institutions to have cash accumulations automatically invested in
the Fund. The investments may be made on
7
predetermined dates or when the investor's account reaches a certain level.
Participating financial institutions are responsible for prompt transmission
of orders relating to the program, and they may charge for their services.
Investors should read this prospectus along with the financial institution's
agreement or literature describing these services and fees.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial 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. Financial institutions 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 financial 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 or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
8
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company 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 as described below.
BY MAIL
Shares may be redeemed by sending a written request to: U.S. Treasury Cash
Reserves, P.O. Box, 8600 Boston, MA 02266-8600. The written request should
state: U.S. Treasury Cash Reserves--Institutional Shares; shareholder's name;
the account number; and the share or dollar amount requested. Sign the request
exactly as the shares are registered. Shareholders should call the Fund for
assistance in redeeming by mail.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request to
Federated Services Company, 500 Victory Road - 2nd Floor, Quincy, MA 02171.
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 their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, 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 the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
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. Dividends are paid up to and including the day that a redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. An
authorization form permitting the Fund to accept telephone
9
requests must first be completed. Authorization forms and information on this
service are available from Federated Securities Corp.
If the redemption request is received before 12:00 noon (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. 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.
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 "By Mail", should be considered. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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 for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust.
As of June 5, 1995, United States Trust Co., New York, NY, owned approximately
24,312,700 shares (30.73%) of voting securities of Institutional Service Shares
of the Fund, and, therefore, may, for certain purposes, be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a vote
of shareholders.
As of June 5, 1995, Central Carolina Bank & Trust, Durham, NC, owned
approximately 36,837,817 shares (46.56%) of voting securities of Institutional
Shares of the Fund, and, therefore, may, for certain purposes, be deemed to
control the Fund and be able to affect the outcome of certain matters presented
for a vote of shareholders.
10
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for 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 by the Declaration of Trust to use its
property 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.
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
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston, & Donnelly, counsel to the Trust, 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.
OTHER STATE AND LOCAL TAXES. The Fund will limit its investments to those
which, if owned directly, pay interest 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. Shareholders are urged to consult their
own tax advisers regarding the status of their accounts under state and local
tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield, effective yield, and
tax-equivalent yield for shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the
11
investment. The effective yield is calculated similarly to the yield, but when
annualized, the income earned by an investment 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. The tax-equivalent yield is
calculated similarly to the yield, but is adjusted to reflect the taxable yield
that would have to be earned to equal the shares' tax-exempt yield, assuming a
specific tax rate.
Advertisements and 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 shares after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
The performance figures will be calculated separately for each class of shares.
Because each class of shares is subject to different expenses, the yield,
effective yield, and tax-equivalent yield of Shares will exceed the yield,
effective yield, and tax-equivalent yield of Institutional Service Shares for
the same period.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare its
performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold primarily to accounts for which
financial institutions act in an agency or fiduciary capacity and are subject to
a 12b-1 Plan, a Shareholder Services Plan, and a minimum initial investment of
$25,000 over a 90-day period.
Shares and Institutional Service Shares are subject to certain of the same
expenses. Expense differences, however, between Shares and Institutional Service
Shares may affect the performance of each class.
To obtain more information and a prospectus for Institutional Service Shares
investors may call 1-800-235-4669.
12
U.S. TREASURY CASH RESERVES
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ ---------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--94.9%
- ------------------------------------------------------------------
(a) U.S. TREASURY BILLS--77.8%
----------------------------------------------------
$ 62,800,000 5.55%-5.56%, 6/29/1995 $ 62,227,962
----------------------------------------------------
43,100,000 5.55%-5.77%, 6/15/1995 42,794,641
----------------------------------------------------
23,500,000 5.57%-5.61%, 7/20/1995 23,208,628
----------------------------------------------------
61,300,000 5.58%-5.62%, 7/13/1995 60,605,321
----------------------------------------------------
4,700,000 5.62%, 8/3/1995 4,630,969
----------------------------------------------------
22,500,000 5.65%-5.66%, 7/6/1995 22,266,617
----------------------------------------------------
41,500,000 5.65%-5.72%, 5/18/1995 41,388,232
----------------------------------------------------
20,000,000 5.67%, 10/12/1995 19,482,944
----------------------------------------------------
62,900,000 5.67%-5.74%, 5/11/1995 62,800,405
----------------------------------------------------
64,500,000 5.67%-5.86%, 5/4/1995 64,468,826
----------------------------------------------------
62,800,000 5.68%-5.70%, 7/27/1995 61,936,298
----------------------------------------------------
35,000,000 5.71%-5.74%, 6/1/1995 34,827,003
----------------------------------------------------
20,300,000 5.72%-5.74%, 6/8/1995 20,177,244
---------------------------------------------------- ------------
Total 520,815,090
---------------------------------------------------- ------------
U.S. TREASURY NOTES--17.1%
----------------------------------------------------
82,000,000 5.70%-5.90%, 5/15/1995 82,048,537
----------------------------------------------------
32,000,000 6.02%, 7/15/1995 32,178,125
---------------------------------------------------- ------------
Total 114,226,662
---------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (b) $635,041,752
---------------------------------------------------- ------------
------------
<FN>
(a) Each issue shows the rate of discount at time of purchase.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($669,740,923) at April 30, 1995.
</TABLE>
(See Notes which are an integral part of the Financial Statements.)
13
U.S. TREASURY CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $635,041,752
- ----------------------------------------------------------------------------------------------
Cash 105,221
- ----------------------------------------------------------------------------------------------
Income receivable 5,650,313
- ----------------------------------------------------------------------------------------------
Receivable for investments sold 101,500,000
- ----------------------------------------------------------------------------------------------
Receivable for shares sold 15,009
- ---------------------------------------------------------------------------------------------- ------------
Total assets 742,312,295
- ----------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------
Payable for investments purchased $69,684,457
- --------------------------------------------------------------------------------
Payable for shares redeemed 14,025
- --------------------------------------------------------------------------------
Income distribution payable 2,712,166
- --------------------------------------------------------------------------------
Accrued expenses 160,724
- -------------------------------------------------------------------------------- -----------
Total liabilities 72,571,372
- ---------------------------------------------------------------------------------------------- ------------
NET ASSETS for 669,740,923 shares of beneficial interest outstanding $669,740,923
- ---------------------------------------------------------------------------------------------- ------------
------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- ----------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ----------------------------------------------------------------------------------------------
($609,233,145 DIVIDED BY 609,233,145 shares outstanding) $ 1.00
- ---------------------------------------------------------------------------------------------- ------------
INSTITUTIONAL SERVICE SHARES:
- ----------------------------------------------------------------------------------------------
($60,507,778 DIVIDED BY 60,507,778 shares outstanding) $ 1.00
- ---------------------------------------------------------------------------------------------- ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
14
U.S. TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------
Interest $20,007,531
- ---------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------
Investment advisory fee $1,572,822
- --------------------------------------------------------------------------------
Administrative personnel and services fee 302,477
- --------------------------------------------------------------------------------
Custodian fees 90,790
- --------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 28,532
- --------------------------------------------------------------------------------
Directors'/Trustees' fees 6,825
- --------------------------------------------------------------------------------
Auditing fees 13,703
- --------------------------------------------------------------------------------
Legal fees 6,887
- --------------------------------------------------------------------------------
Portfolio accounting fees 46,093
- --------------------------------------------------------------------------------
Shareholder services fee--Institutional Shares 72,264
- --------------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 46,275
- --------------------------------------------------------------------------------
Share registration costs 137,144
- --------------------------------------------------------------------------------
Printing and postage 12,578
- --------------------------------------------------------------------------------
Insurance premiums 7,896
- --------------------------------------------------------------------------------
Miscellaneous 14,036
- -------------------------------------------------------------------------------- ----------
Total expenses 2,358,322
- --------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 1,525,643
- -------------------------------------------------------------------------------- ----------
Net expenses 832,679
- --------------------------------------------------------------------------------------------- -----------
Net investment income $19,174,852
- --------------------------------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
15
U.S. TREASURY CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $ 19,174,852 $ 7,174,727
- -------------------------------------------------------------------------------- --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------------
Distributions from net investment income:
- --------------------------------------------------------------------------------
Institutional Shares (18,188,542) (7,147,727)
- --------------------------------------------------------------------------------
Institutional Service Shares (986,310) --
- -------------------------------------------------------------------------------- --------------- -------------
Change in net assets resulting from distributions to shareholders (19,174,852) (7,147,727)
- -------------------------------------------------------------------------------- --------------- -------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------------
Proceeds from sale of Shares 1,756,823,729 885,678,265
- --------------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of distributions
declared 1,510,042 163,079
- --------------------------------------------------------------------------------
Cost of Shares redeemed (1,353,622,888) (798,282,485)
- -------------------------------------------------------------------------------- --------------- -------------
Change in net assets resulting from Share transactions 404,710,883 87,558,859
- -------------------------------------------------------------------------------- --------------- -------------
Change in net assets 404,710,883 87,558,859
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 265,030,040 177,471,181
- -------------------------------------------------------------------------------- --------------- -------------
End of period $ 669,740,923 $ 265,030,040
- -------------------------------------------------------------------------------- --------------- -------------
--------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
16
U.S. TREASURY CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of three 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.
Effective October 30, 1994 (effective date of Institutional Service Shares) the
Fund provides two classes of shares: Institutional Shares and Institutional
Service Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund's in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
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 Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its taxable income. Accordingly,
no provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
17
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, 1995, capital paid-in aggregated $669,740,923. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
1995 1994
-------------- --------------
INSTITUTIONAL SHARES SHARES SHARES
- ------------------------------------------------ -------------- --------------
<S> <C> <C>
Shares sold 1,652,377,627 885,678,265
- ------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 1,509,906 163,079
- ------------------------------------------------
Shares redeemed (1,309,684,428) (798,282,485)
- ------------------------------------------------ -------------- --------------
Net change resulting from Institutional Share
transactions 344,203,105 87,558,859
- ------------------------------------------------ -------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
1995* 1994
-------------- --------------
INSTITUTIONAL SERVICE SHARES SHARES SHARES
- ------------------------------------------------ -------------- --------------
<S> <C> <C>
Shares sold 104,446,102 --
- ------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 136 --
- ------------------------------------------------
Shares redeemed (43,938,460) --
- ------------------------------------------------ -------------- --------------
Net change resulting from Institutional
Service Shares transactions 60,507,778 --
- ------------------------------------------------ -------------- --------------
-------------- --------------
Net change resulting from Share transactions 404,710,883 87,558,859
- ------------------------------------------------ -------------- --------------
-------------- --------------
<FN>
* Reflects operations from the period from December 15, 1994 (date of initial
public investment), to April 30, 1995.
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.40 of 1% of the Fund's average daily net assets. Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify
or terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS 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 the period
of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
18
U.S. TREASURY CASH RESERVES
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to 0.25 of 1% of average daily net assets of the fund for the period.
This fee is to obtain certain services for shareholders and to maintain the
shareholder accounts.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Fund. This fee is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of the
Fund's average daily net assets for the period plus, out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
19
REPORT OF ERNST & YOUNG LLP, 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, 1995, and the related statement of
operations for the year then ended, 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 periods presented therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1995, 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 U.S.
Treasury Cash Reserves at April 30, 1995, 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 periods
presented therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
June 9, 1995
20
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federated Government Trust
Institutional Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
- -------------------------------------------------------------------------------------------
</TABLE>
21
- --------------------------------------------------------------------------------
U.S. TREASURY CASH
RESERVES
INSTITUTIONAL SHARES
PROSPECTUS
A Diversified Portfolio of
Federated Government Trust,
an Open-End Management
Investment Company
Prospectus dated June 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314186305
1022103A-IS (6/95) [RECYCLED PAPER LOGO]
- --------------------------------------------------------------------------------
U.S. TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
The Institutional Service 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). The Fund
invests in short-term U.S. Treasury securities to achieve current
income consistent with stability of principal and liquidity.
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 OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. 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.
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, 1995, 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, which is in paper form
only, or a paper copy of this prospectus, if you have received it
electronically, free of charge by calling 1-800-235-4669. To obtain
other information, or make inquiries about the Trust, contact the
Trust at the address listed in the back of this prospectus.
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, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- ---------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL
SERVICE SHARES 2
- ---------------------------------------------------
GENERAL INFORMATION 3
- ---------------------------------------------------
INVESTMENT INFORMATION 3
- ---------------------------------------------------
Investment Objective 3
Investment Policies 3
Investment Limitations 4
Regulatory Compliance 4
FUND INFORMATION 4
- ---------------------------------------------------
Management of the Fund 4
Distribution of Shares 5
Administration of the Trust 6
Expenses of the Fund and Institutional
Service Shares 7
NET ASSET VALUE 7
- ---------------------------------------------------
INVESTING IN THE FUND 7
- ---------------------------------------------------
Share Purchases 7
Minimum Investment Required 8
Subaccounting Services 8
Certificates and Confirmations 8
Dividends 9
Capital Gains 9
REDEEMING SHARES 9
- ---------------------------------------------------
By Mail 9
Telephone Redemption 10
Accounts with Low Balances 10
SHAREHOLDER INFORMATION 10
- ---------------------------------------------------
Voting Rights 10
Massachusetts Partnership Law 11
TAX INFORMATION 11
- ---------------------------------------------------
Federal Income Tax 11
Pennsylvania Corporate and Personal
Property Taxes 11
PERFORMANCE INFORMATION 12
- ---------------------------------------------------
OTHER CLASSES OF SHARES 12
- ---------------------------------------------------
FINANCIAL STATEMENTS 13
- ---------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS 20
- ---------------------------------------------------
ADDRESSES 21
- ---------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
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
</TABLE>
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver) (1)................................................................. 0.00%
12b-1 Fee (2)..................................................................................... 0.00%
Total Other Expenses.............................................................................. 0.45%
Shareholder Services Fee............................................................. 0.25%
Total Institutional Service Shares Operating Expenses (3)................................. 0.45%
<FN>
(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 Institutional Service Shares have no present intention of paying or
accruing the 12b-1 fee during the period ending April 30, 1996. If the
Institutional Service Shares were paying or accruing the 12b-1 fee, the
Class would be able to pay up to 0.25% of its average daily net assets for
the 12b-1 fee. See "Trust Information."
(3) The total Institutional Service Shares operating expenses in the table
above are based on expenses expected during the fiscal year ending April
30, 1996. The total Institutional Service Shares operating expenses were
0.45% for the fiscal year ended April 30, 1995 and would have been 0.84%
absent the voluntary waiver of a portion of the management fee.
</TABLE>
The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Service Shares of
the Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Trust Information" and
"Investing in Institutional Service Shares." Wire-transferred redemptions of
less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
- ------------------------------------------------------------------------------------- --------- ---------
<S> <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............................. $5 $14
</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.
1
U.S. TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 20.
<TABLE>
<CAPTION>
PERIOD
ENDED
APRIL
30,
1995(a)
-------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.03
- ------------------------------------------------------------ -------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Distributions from net investment income (0.03)
- ------------------------------------------------------------ -------
NET ASSET VALUE, END OF PERIOD $1.00
- ------------------------------------------------------------ -------
-------
TOTAL RETURN (b) 2.60%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.45%(c)
- ------------------------------------------------------------
Net investment income 5.33%(c)
- ------------------------------------------------------------
Expense waiver/reimbursement (d) 0.39%(c)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $60,508
- ------------------------------------------------------------
<FN>
(a) Reflects operations for the period from December 15, 1994 (date of initial
public investment) to April 30, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
2
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 representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Trustees have
established two classes of shares known as Institutional Service Shares and
Institutional Shares. This prospectus relates only to Institutional Service
Shares ("Shares") of the Fund, which are 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 accumulating an interest
in a professionally managed, diversified portfolio investing only in short-term
U.S. Treasury securities. The Fund is also designed for customers of
institutional investors. A minimum initial investment of $25,000 within a 90-day
period is required.
The Fund attempts to stabilize the value of a share at $1.00. 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
shareholder approval. 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 only in a portfolio of
short-term U.S. Treasury securities maturing in thirteen months or less. The
average maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies set forth below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
The Fund will limit its investments to investments which, if owned directly, pay
interest exempt from state personal income tax. Therefore, dividends paid by the
Fund may be exempt from state personal income tax.
ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury securities,
which are fully guaranteed as to principal and interest by the United States.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase 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 seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous.
3
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. Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
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 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.
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.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Fund's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
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 has
undertaken to reimburse the Fund up to the
4
amount of the advisory fee for operating expenses in excess of limitations
established by certain states. The adviser also may voluntarily choose to
waive a portion of its fee or reimburse other expenses of the Fund, but
reserves the right to terminate such waiver or reimbursement at any time at
its sole discretion.
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. With over $72 billion invested across more
than 260 funds under management and/or administration by its subsidiaries,
as of December 31, 1994, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,750
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for Institutional
Service 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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of .25
of up to 1% of the average daily net asset value of the Institutional Service
Shares to finance any activity which is principally intended to result in the
sale of shares subject to the Distribution Plan. The distributor may select
financial institutions such as banks, fiduciaries, custodians for public funds,
investment advisers, and broker/dealers to provide sales support services as
agents for their clients or customers. In addition, the Fund has adopted a
Shareholder Services Plan (the "Services Plan") under which it will pay
financial institutions an amount not exceeding .25 of 1% of the average daily
net asset value of the Institutional Service Shares to provide administrative
support services to their customers who own shares of the Fund. From time to
time and for such periods as deemed appropriate, the amounts stated above may be
reduced voluntarily. Activities and services under these arrangements may
include, but are not limited to, providing advertising and marketing materials
to prospective shareholders, providing personal services to shareholders, and
maintaining shareholder accounts.
5
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 or the
distributor, as appropriate.
The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Distribution Plan.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide certain services to shareholders. These
services may include, but are not limited to, distributing prospectuses and
other information, providing accounting assistance, and communicating or
facilitating purchases and redemptions of shares. Any fees paid for these
services by the distributor will be reimbursed by the adviser and not the Fund.
ADMINISTRATION OF THE TRUST
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 as specified
below:
<TABLE>
<CAPTION>
MAXIMUM
FEE AVERAGE AGGREGATE DAILY NET ASSETS
---------- ----------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.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. Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, MA is transfer agent for the shares of, and dividend disbursing agent
for, the Fund. Federated Services Company is a subsidiary of Federated
Investors.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, PA.
6
EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES
Holders of Shares pay their allocable portion of Fund and Trust expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to the cost of: organizing the Trust and continuing
its existence; registering the Trust with federal and state authorities;
Trustees' fees; auditors' fees; meetings of Trustees; legal fees of the Trust;
association membership dues; and such non-recurring and extraordinary items as
may arise.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise.
At present, the only expenses allocated to the Shares as a class are expenses
under the Fund's Rule 12b-1 Plan which relate to the Shares. However, the Board
of Trustees reserves the right to allocate certain other expenses to holders of
Shares as it deems appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; printing and postage expenses related to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and registration fees paid to state securities
commissions; expenses related to administrative personnel and services as
required to support holders of Shares; legal fees relating solely to Shares; and
Trustees' fees incurred as a result of issues relating solely to Shares.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to shares from
the value of Fund assets attributable to shares, and dividing the remainder by
the number of shares outstanding. The Fund cannot guarantee that its net asset
value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange each day the New York Stock Exchange is open.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased either by wire or mail. The Fund reserves the right to reject any
purchase request.
7
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase 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 1:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit
to: U.S. Treasury Cash Reserves--Institutional Service Shares; 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; and ABA Number 011000028.
BY MAIL. To purchase by mail, send a check made payable to U.S. Treasury Cash
Reserves-- Institutional Service Shares to: Federated Services Company, U.S.
Treasury Cash Reserves, P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are
considered received when payment by check is converted into federal funds. This
is normally the next business day after the check is received.
AUTOMATIC INVESTMENTS. Investors may establish accounts with their
financial institutions to have cash accumulations automatically invested in
the Fund. The investments may be made on predetermined dates or when the
investor's account reaches a certain level. Participating financial
institutions are responsible for prompt transmission of orders relating to
the program, and they may charge for their services. Investors should read
this prospectus along with the financial institution's agreement or
literature describing these services and fees.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial 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. Financial institutions 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 financial 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 or Federated Services Company in writing.
8
Monthly confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company 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 as described below.
BY MAIL
Shares may be redeemed by sending a written request to: U.S. Treasury Cash
Reserves, P.O. Box 8600, Boston, MA 02266-8600. The written request should
state: U.S. Treasury Cash Reserves--Institutional Service Shares; shareholder's
name; the account number; and the share or dollar amount requested. Sign the
request exactly as the shares are registered. Shareholders should call the Fund
for assistance in redeeming by mail.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request to
Federated Services Company, 500 Victory Road - 2nd Floor, Quincy, MA 02171.
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 their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, 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.
9
The Fund and the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
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. Dividends are paid up to and including the day that a redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. 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.
If the redemption request is received before 12:00 noon (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. 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.
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 "By Mail", should be considered. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in the Trust have equal voting rights, except that in matters
affecting only a particular portfolio or class, only shares of that portfolio or
class are entitled to vote. 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.
10
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust.
As of June 5, 1995, United States Trust Co., New York, NY, owned approximately
24,312,700 shares (30.73%) of voting securities of Institutional Service Shares
of the Fund, and, therefore, may, for certain purposes, be deemed to control the
Fund and be able to affect the outcome of certain matters presented for a vote
of shareholders.
As of June 5, 1995, Central Carolina Bank & Trust, Durham, NC, owned
approximately 36,837,817 shares (46.56%) of voting securities of Institutional
Service Shares of the Fund, and, therefore, may, for certain purposes, be deemed
to control the Fund and be able to affect the outcome of certain matters
presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for 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 by the Declaration of Trust to use its
property 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.
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
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston, & Donnelly, counsel to the Trust, Fund
shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to
11
the extent that the portfolio securities in the Fund would be subject to such
taxes if owned directly by residents of those jurisdictions.
OTHER STATE AND LOCAL TAXES. The Fund will limit its investments to those
which, if owned directly, pay interest 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. Shareholders are urged to consult their
own tax advisers regarding the status of their accounts under state and local
tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield and effective yield for shares.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
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 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 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 shares after reinvesting all income distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
Performance figures will be calculated separately for each class of shares.
Because each class of shares is subject to different expenses, the performance
of Institutional Shares will exceed the yield and effective yield of Shares for
the same period.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare its
performance to certain indices.
OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------
The Fund also offers another class of shares called Institutional Shares.
Institutional Shares are sold primarily to accounts for which financial
institutions act in an agency or fiduciary capacity and are subject to a
Shareholder Services Plan and a minimum initial investment of $25,000 over a
90-day period.
Shares and Institutional Shares are subject to certain of the same expenses.
Expense differences, however, between Shares and Institutional Shares may affect
the performance of each class.
To obtain more information and a prospectus for Institutional Shares investors
may call 1-800-235-4669.
12
U.S. TREASURY CASH RESERVES
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ -------------------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--94.9%
- ----------------------------------------------------------------------------
(a) U.S. TREASURY BILLS--77.8%
--------------------------------------------------------------
$ 62,800,000 5.55%-5.56%, 6/29/1995 $ 62,227,962
--------------------------------------------------------------
43,100,000 5.55%-5.77%, 6/15/1995 42,794,641
--------------------------------------------------------------
23,500,000 5.57%-5.61%, 7/20/1995 23,208,628
--------------------------------------------------------------
61,300,000 5.58%-5.62%, 7/13/1995 60,605,321
--------------------------------------------------------------
4,700,000 5.62%, 8/3/1995 4,630,969
--------------------------------------------------------------
22,500,000 5.65%-5.66%, 7/6/1995 22,266,617
--------------------------------------------------------------
41,500,000 5.65%-5.72%, 5/18/1995 41,388,232
--------------------------------------------------------------
20,000,000 5.67%, 10/12/1995 19,482,944
--------------------------------------------------------------
62,900,000 5.67%-5.74%, 5/11/1995 62,800,405
--------------------------------------------------------------
64,500,000 5.67%-5.86%, 5/4/1995 64,468,826
--------------------------------------------------------------
62,800,000 5.68%-5.70%, 7/27/1995 61,936,298
--------------------------------------------------------------
35,000,000 5.71%-5.74%, 6/1/1995 34,827,003
--------------------------------------------------------------
20,300,000 5.72%-5.74%, 6/8/1995 20,177,244
-------------------------------------------------------------- ------------
Total 520,815,090
-------------------------------------------------------------- ------------
U.S. TREASURY NOTES--17.1%
--------------------------------------------------------------
82,000,000 5.70%-5.90%, 5/15/1995 82,048,537
--------------------------------------------------------------
32,000,000 6.02%, 7/15/1995 32,178,125
-------------------------------------------------------------- ------------
Total 114,226,662
-------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (b) $635,041,752
-------------------------------------------------------------- ------------
------------
<FN>
(a) Each issue shows the rate of discount at time of purchase.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($669,740,923) at April 30, 1995.
</TABLE>
(See Notes which are an integral part of the Financial Statements.)
13
U.S. TREASURY CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $635,041,752
- ----------------------------------------------------------------------------------------------
Cash 105,221
- ----------------------------------------------------------------------------------------------
Income receivable 5,650,313
- ----------------------------------------------------------------------------------------------
Receivable for investments sold 101,500,000
- ----------------------------------------------------------------------------------------------
Receivable for shares sold 15,009
- ---------------------------------------------------------------------------------------------- ------------
Total assets 742,312,295
- ----------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------
Payable for investments purchased $69,684,457
- --------------------------------------------------------------------------------
Payable for shares redeemed 14,025
- --------------------------------------------------------------------------------
Income distribution payable 2,712,166
- --------------------------------------------------------------------------------
Accrued expenses 160,724
- -------------------------------------------------------------------------------- -----------
Total liabilities 72,571,372
- ---------------------------------------------------------------------------------------------- ------------
NET ASSETS for 669,740,923 shares of beneficial interest outstanding $669,740,923
- ---------------------------------------------------------------------------------------------- ------------
------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- ----------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ----------------------------------------------------------------------------------------------
($609,233,145 DIVIDED BY 609,233,145 shares outstanding) $ 1.00
- ---------------------------------------------------------------------------------------------- ------------
------------
INSTITUTIONAL SERVICE SHARES:
- ----------------------------------------------------------------------------------------------
($60,507,778 DIVIDED BY 60,507,778 shares outstanding) $ 1.00
- ---------------------------------------------------------------------------------------------- ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
14
U.S. TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------
Interest $20,007,531
- ---------------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------------
Investment advisory fee $1,572,822
- --------------------------------------------------------------------------------
Administrative personnel and services fee 302,477
- --------------------------------------------------------------------------------
Custodian fees 90,790
- --------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 28,532
- --------------------------------------------------------------------------------
Directors'/Trustees' fees 6,825
- --------------------------------------------------------------------------------
Auditing fees 13,703
- --------------------------------------------------------------------------------
Legal fees 6,887
- --------------------------------------------------------------------------------
Portfolio accounting fees 46,093
- --------------------------------------------------------------------------------
Shareholder services fee--Institutional Shares 72,264
- --------------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 46,275
- --------------------------------------------------------------------------------
Share registration costs 137,144
- --------------------------------------------------------------------------------
Printing and postage 12,578
- --------------------------------------------------------------------------------
Insurance premiums 7,896
- --------------------------------------------------------------------------------
Miscellaneous 14,036
- -------------------------------------------------------------------------------- ----------
Total expenses 2,358,322
- --------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 1,525,643
- -------------------------------------------------------------------------------- ----------
Net expenses 832,679
- --------------------------------------------------------------------------------------------- -----------
Net investment income $19,174,852
- --------------------------------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
15
U.S. TREASURY CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
1995 1994
--------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $ 19,174,852 $ 7,174,727
- -------------------------------------------------------------------------------- --------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------------
Distributions from net investment income:
- --------------------------------------------------------------------------------
Institutional Shares (18,188,542) (7,147,727)
- --------------------------------------------------------------------------------
Institutional Service Shares (986,310) --
- -------------------------------------------------------------------------------- --------------- -------------
Change in net assets resulting from distributions to shareholders (19,174,852) (7,147,727)
- -------------------------------------------------------------------------------- --------------- -------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------------
Proceeds from sale of Shares 1,756,823,729 885,678,265
- --------------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of distributions
declared 1,510,042 163,079
- --------------------------------------------------------------------------------
Cost of Shares redeemed (1,353,622,888) (798,282,485)
- -------------------------------------------------------------------------------- --------------- -------------
Change in net assets resulting from Share transactions 404,710,883 87,558,859
- -------------------------------------------------------------------------------- --------------- -------------
Change in net assets 404,710,883 87,558,859
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 265,030,040 177,471,181
- -------------------------------------------------------------------------------- --------------- -------------
End of period $ 669,740,923 $ 265,030,040
- -------------------------------------------------------------------------------- --------------- -------------
--------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
16
U.S. TREASURY CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of three 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.
Effective October 30, 1994 (effective date of Institutional Service Shares) the
Fund provides two classes of shares: Institutional Shares and Institutional
Service Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund's in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
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 Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
17
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, 1995, capital paid-in aggregated $669,740,923. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
1995 1994
-------------- --------------
INSTITUTIONAL SHARES SHARES SHARES
- ------------------------------------------------ -------------- --------------
<S> <C> <C>
Shares sold 1,652,377,627 885,678,265
- ------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 1,509,906 163,079
- ------------------------------------------------
Shares redeemed (1,309,684,428) (798,282,485)
- ------------------------------------------------ -------------- --------------
Net change resulting from Institutional Share
transactions 344,203,105 87,558,859
- ------------------------------------------------ -------------- --------------
-------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
1995* 1994
-------------- --------------
INSTITUTIONAL SERVICE SHARES SHARES SHARES
- ------------------------------------------------ -------------- --------------
<S> <C> <C>
Shares sold 104,446,102 --
- ------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 136 --
- ------------------------------------------------
Shares redeemed (43,938,460) --
- ------------------------------------------------ -------------- --------------
Net change resulting from Institutional
Service Shares transactions 60,507,778 --
- ------------------------------------------------ -------------- --------------
-------------- --------------
Net change resulting from Share transactions 404,710,883 87,558,859
- ------------------------------------------------ -------------- --------------
-------------- --------------
<FN>
* Reflects operations from the period from December 15, 1994 (date of initial
public investment), to April 30, 1995.
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.40 of 1% of the Fund's average daily net assets. Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify
or terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS 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 the period
of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
18
U.S. TREASURY CASH RESERVES
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to 0.25 of 1% of average daily net assets of the fund for the period.
This fee is to obtain certain services for shareholders and to maintain the
shareholder accounts.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Fund. This fee is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of the
Fund's average daily net assets for the period plus, out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
19
REPORT OF ERNST & YOUNG LLP, 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, 1995, and the related statement of
operations for the year then ended, 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 periods presented therein. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1995, 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
U.S. Treasury Cash Reserves at April 30, 1995, 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 periods
presented therein, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
June 9, 1995
20
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federated Government Trust
Institutional Service Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
- -------------------------------------------------------------------------------------------
</TABLE>
21
- --------------------------------------------------------------------------------
U.S. TREASURY CASH
RESERVES
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
A Diversified Portfolio of
Federated Government Trust,
an Open-End Management
Investment Company
Prospectus dated June 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
485043205
1022103A-SS (6/95) [RECYCLED PAPER LOGO]
U.S. Treasury Cash Reserves
(A Portfolio of Federated Government Trust)
Institutional Shares
Institutional Service Shares
Combined Statement of Additional Information
This Combined Statement of Additional Information should be read with
the prospectuses of U.S. Treasury Cash Reserves (the "Fund"), a
portfolio of Federated Government Trust (the "Trust") dated June 30,
1995. This Statement is not a prospectus. To receive a copy of a
prospectus, write or call the Trust.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Statement dated June 30, 1995
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
When-Issued And Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 1
Investment Limitations 1
Federated Government Trust
Management 2
Share Ownership 6
Directors Compensation 7
Trustee Liability 7
Investment Advisory Services 7
Investment Adviser 7
Advisory Fees 8
Brokerage Transactions 8
Fund Administration 8
Determining Net Asset Value 9
Redemption in Kind 10
The Fund's Tax Status 10
Performance Information 10
Yield 10
Effective Yield 10
Total Return 10
Performance Comparisons 10
About Federated Investors 11
Mutual Fund Market 11
Investment Policies
Unless indicated otherwise, the policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
When-Issued And Delayed Delivery Transactions
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. 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 on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. This transaction
is similar to borrowing cash. In a reverse repurchase agreement the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These assets are marked to market daily and
are maintained until the transaction is settled.
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 (including participation in reverse repurchase agreements)
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, as 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 or real estate or
in securities which are secured by real estate or which represent
interests n real estate.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these 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 interests in oil, gas, or other
mineral exploration or development programs or leases, although it may
purchase the securities of issuers which invest in or sponsor such
programs.
For purposes of the above limitations, the Fund considers instruments issued
by a U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items". 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 limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
Federated Government Trust Management
Officers and Trustees are listed with their addresses, present positions with
Federated Government Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Vice President of the Trust.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
st
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, Foreign Policy and Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., and 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.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
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.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; 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
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Vice President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Cash Management Trust; Automated Government Money
Trust; California Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; 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 Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S,
Government Securities Fund: 3-5 Years; 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;; 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 U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid
Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; RIMCO Monument Funds; The Shawmut 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; The Virtus Funds; World Investment Series, Inc.
Share Ownership
Officers and Trustees as a group own less than 1% of the Fund's outstanding
shares.
As of June 6, 1995, the following shareholders of record owned 5% or more of
the outstanding Institutional Shares of the U.S. Treasury Cash Reserves:
Trans Financial Bank, Bowling Green, KY, owned approximately 42,129,304 shares
(6.52%); BARHEMCO, Boston, MA, owned approximately 50,279,324 shares (7.78%);
WESCO, Schenectady, NY, owned approximately 57,490,407 shares (8.89%).
As of June 6, 1995, the following shareholders of record owned 5% or more of
the outstanding Institutional Service Shares of the U.S. Treasury Cash
Reserves: WEBAT & Co, Westport, CT, owned approximately 6,210,400 shares
(7.85%); Stockyards Bank & Trust, Louisville, KY, owned approximately
11,067,977 shares (13.99%).
Directors Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST FUND FROM FUND COMPLEX +
John F. Donahue, $ 0 $0 for the Trust and
Chairman and Trustee 68 other investment companies
in the Fund Complex
Glen R. Johnson $ 0 $0 for the Trust and
President and Trustee 8 other investment companies
in the Fund Complex
John T. Conroy, Jr., $ 703 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
William J. Copeland, $ 703 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
James E. Dowd, $ 703 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Lawrence D. Ellis, M.D., $ 643 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Edward L. Flaherty, Jr., $ 703 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Peter E. Madden, $ 553 $90,563 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Gregor F. Meyer, $ 643 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
John E. Murray, Jr., $ 243 $0.00 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Wesley W. Posvar, $ 643 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Marjorie P. Smuts, $ 643 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
*Information is furnished for the fiscal year ended March 31, 1995.
+The information is provided for the last calendar year.
Trustee Liability
The 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
Investment Adviser
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and his
son, J. Christopher Donahue.
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, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended April
30, 1995, 1994, and 1993, the adviser earned $1,572,822, $981,067, and
$538,993, respectively, of which $1,525,643, $981,067, and $538,993,
respectively, were waived.
State Expense Limitations
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 fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
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 guidelines established 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.
Research services provided by brokers and dealers may be used by the adviser
or its affiliates in advising the Trust 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. 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. During the fiscal
years ended April 30, 1995, 1994, and 1993, the Trust paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
Fund Administration
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 year ended April 30, 1995, Federated Administrative Services earned
$302,477. For the fiscal year ended April 30, 1994, the Administrators earned
$295,386. For the fiscal year ended April 30, 1993, Federated Administrative
Services, Inc., earned $228,288. Dr. Henry J. Gailliot, an officer of
Federated Management, the adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services.
Distribution and Shareholder Services Plans
With respect to Institutional Service Shares, the Fund had adopted a
Distribution Plan pursuant to Rule 12b-1 which was promulgated by the
Securities and Exchange Commission pursuant to the Investment Company Act of
1940. Additionally, the Fund has adopted a Shareholder Services Plan with
respect to both the Institutional Shares and Institutional Service Shares.
These arrangements permit the payment of fees to financial institutions to
stimulate distribution activities and services to shareholders provided 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,
marketing efforts; 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.
By adopting the Distribution Plan, the Board of Trustees expects that the Fund
will be able to achieve a more predictable flow of cash for investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by the
Fund's objectives, and properly servicing these accounts, it may be possible
to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal period ending April 30, 1995, payments in the amount of $0 were
made pursuant to the Distribution Plan. In addition, for this period,
payments in the amount of $118,539 were made pursuant to the Shareholder
Services Plan, all of which was paid to financial institutions.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company,
Boston, MA, is custodian for the securities and cash of the Fund. Federated
Services Company, Pittsburgh, PA, provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives
a fee based on size, type and number of accounts and transactions made by
shareholders.
Determining Net Asset Value
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.
Accordingly, 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 opposite may be
true.
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. 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. The
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 0.5 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.
Redemption in Kind
The Fund 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 payments should be in kind. In
such cases, the Fund 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
who sell these securities could receive less than the redemption value and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated investment
companies, 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.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. 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.
Yield
The yield is calculated 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.
For the seven-day period ended April 30, 1995, the yields for Institutional
Shares and Institutional Service Shares were 5.66% and 5.41%, respectively.
Effective Yield
The effective yield is calculated 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.
For the seven-day period ended April 30, 1995, the effective yields for
Institutional Shares and Institutional Service Shares were 5.82% and 5.56%,
respectively.
Total Return
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
Performance Comparisons
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:
o Lipper Analytical Services, Inc., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o Donoghue's Money Fund Report publishes annualized yields of money market
funds weekly. Donoghue's MONEY MARKET INSIGHT publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
o 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.
About Federated Investors
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors. In the money market sector,
Federated gained prominence in the mutual fund industry in 1974 with the
creation of the first institutional money market fund. Simultaneously, the
company pioneered the use of the amortized cost method of accounting for
valuing shares of money market funds, a principal means used by money managers
today to value money market fund shares. Other innovations include the first
institutional tax-free money market fund. As of December 31, 1994, Federated
managed more than $31 billion in assets across approximately 43 money market
funds, including 17 government, 8 prime and 18 municipal with assets
approximating $17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and
high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available. *
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
Institutional
Federated meets the needs of more than 4,000 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
applications, including defined benefit and defined contribution programs,
cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
Trust Organizations
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
*source: Investment Company Institute
Broker/dealers and bank broker/dealer subsidiaries
Federated mutual funds are available to consumers through major brokerage
firms nationwide--including 200 New York Stock Exchange firms--supported by
more wholesalers than any other mutual fund distributor. The marketing effort
to these firms is headed by James F. Getz, President, Broker/Dealer Division.
314186305
458043205
1022103B (6/95)
- --------------------------------------------------------------------------------
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). The Fund invests in short-term
U.S. Treasury securities to achieve current income consistent with
stability of principal and liquidity.
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 OR GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. 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.
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, 1995, 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, which is in paper form
only, or a paper copy of this prospectus, if you have received it
electronically, free of charge by calling 1-800-235-4669. To obtain
other information, or make inquiries about the Trust, contact the
Trust at the address listed in the back of this prospectus.
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, 1995
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SUMMARY OF FUND EXPENSES 1
- ---------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ---------------------------------------------------
GENERAL INFORMATION 3
- ---------------------------------------------------
INVESTMENT INFORMATION 3
- ---------------------------------------------------
Investment Objective 3
Investment Policies 3
Investment Limitations 4
Regulatory Compliance 4
FUND INFORMATION 4
- ---------------------------------------------------
Management of the Fund 4
Distribution of Shares 5
Administration of the Trust 6
NET ASSET VALUE 6
- ---------------------------------------------------
INVESTING IN THE FUND 7
- ---------------------------------------------------
Share Purchases 7
Minimum Investment Required 7
Subaccounting Services 7
Certificates and Confirmations 8
Dividends 8
Capital Gains 8
REDEEMING SHARES 8
- ---------------------------------------------------
By Mail 8
Telephone Redemption 9
Accounts with Low Balances 9
SHAREHOLDER INFORMATION 10
- ---------------------------------------------------
Voting Rights 10
Massachusetts Partnership Law 10
TAX INFORMATION 10
- ---------------------------------------------------
Federal Income Tax 10
Pennsylvania Corporate and Personal
Property Taxes 11
PERFORMANCE INFORMATION 11
- ---------------------------------------------------
FINANCIAL STATEMENTS 12
- ---------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT
AUDITORS 18
- ---------------------------------------------------
ADDRESSES 19
- ---------------------------------------------------
</TABLE>
I
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
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
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................................................. 0.16%
12b-1 Fee......................................................................................... None
Total Other Expenses.............................................................................. 0.41%
Shareholder Services Fee (after waiver) (2).......................................... 0.24%
Total Fund Operating Expenses (3)......................................................... 0.57%
<FN>
(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, 1996. The total Fund
operating expenses were 0.56% for the fiscal year ended April 30, 1995 and
were 0.88% absent the voluntary waiver of a portion of the management fee.
</TABLE>
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 $32 $71
</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.
1
AUTOMATED TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 18.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------------------------
1995 1994 1993 1992(a)
------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.04 0.03 0.03 0.03
- ------------------------------------------------------------ ------ ------ ------ ----------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Distributions from net investment income (0.04) (0.03) (0.03) (0.03)
- ------------------------------------------------------------ ------ ------ ------ ----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------------------ ------ ------ ------ ----------
TOTAL RETURN (B) 4.37% 2.58% 2.88% 3.07%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.56% 0.57% 0.39% 0.51%(c)
- ------------------------------------------------------------
Net investment income 4.29% 2.55% 2.79% 3.84%(c)
- ------------------------------------------------------------
Expense waiver/reimbursement (d) 0.32% 0.13% 0.53% 0.30%(c)
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $167,508 $190,840 $252,955 $36,803
- ------------------------------------------------------------
<FN>
(a) Reflects operations for the period from August 9, 1991 (date of initial
public investment) to April 30, 1992.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
2
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 representing interests in separate portfolios of
securities. 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 accumulating an interest in a
professionally managed, diversified portfolio investing only in short-term U.S.
Treasury securities. The Fund is also designed for customers of institutional
investors. A minimum initial investment of $25,000 within a 90-day period is
required
The Fund attempts to stabilize the value of a share at $1.00. 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
shareholder approval. 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 only in a portfolio of
short-term U.S. Treasury securities maturing in thirteen months or less. The
average maturity of the securities in the Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less. Unless indicated otherwise, the
investment policies set forth below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
The Fund will limit its investments to investments which, if owned directly, pay
interest exempt from state personal income tax. Therefore, dividends paid by the
Fund may be exempt from state personal income tax.
ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury securities,
which are fully guaranteed as to principal and interest by the United States.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase 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 seller's failure to complete these transactions may cause the
Fund to miss a price or yield considered to be advantageous. 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.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
3
The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
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 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 agency master demand notes, the demand for full or partial prepayment of
which may not occur within seven 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.
FUND INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE FUND
BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees
are responsible for managing the Fund's business affairs and for exercising all
the Trust's powers except those reserved for the shareholders. An Executive
Committee of the Board of Trustees handles the Board's responsibilities between
meetings of the Board.
INVESTMENT ADVISER. Investment decisions for the Fund are made by Federated
Management, the Fund's investment adviser, subject to direction by the Trustees.
The adviser continually conducts investment research and supervision for the
Fund and is responsible for the purchase and sale of portfolio instruments.
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 has
undertaken to reimburse the Fund up to the amount of the advisory fee for
operating expenses in excess of limitations established by certain
4
states. The adviser also may voluntarily choose to waive a portion of its
fee or reimburse other expenses of the Fund, but reserves the right to
terminate such waiver or reimbursement at any time at its sole discretion.
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. With over $72 billion invested across more
than 260 funds under management and/or administration by its subsidiaries,
as of December 31, 1994, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 1,750
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,000
financial institutions nationwide. More than 100,000 investment
professionals have selected Federated funds for their clients.
DISTRIBUTION OF 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.
State securities laws may require certain financial institutions such as
depository institutions to register as dealers.
SHAREHOLDER SERVICES PLAN. The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it will pay Federated Shareholder Services, a
subsidiary of Federated Investors, an amount not exceeding .25 of 1% of the
average daily net asset value of the Fund to provide personal services and/or
maintenance of shareholder accounts to the Fund and its shareholders. From time
to time and for such periods as deemed appropriate, the amount stated above may
be reduced voluntarily.
Federated Shareholder Services may elect to pay financial institutions fees
based upon shares owned by their clients or customers for services provided to
those 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 Federated
Shareholder Services.
OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. The distributor may pay financial
institutions such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers to provide certain services to shareholders. These
services may include, but are not limited to, distributing prospectuses and
other information, providing accounting assistance, and communicating or
facilitating
5
purchases and redemptions of shares. Any fees paid for these services by the
distributor will be reimbursed by the adviser and not the Fund.
ADMINISTRATION OF THE TRUST
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 as specified
below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
-------------------- ------------------------------------
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.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. Average
aggregate daily net assets include those of all mutual funds advised by
affiliates of Federated Investors. Federated Administrative Services may choose
voluntarily to waive a portion of its fee.
CUSTODIAN. State Street Bank and Trust Company, Boston, MA, is custodian for
the securities and cash of the Fund.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Boston, MA, is transfer agent for the shares of, and dividend disbursing agent
for, the Fund. Federated Services Company is a subsidiary of Federated
Investors.
INDEPENDENT AUDITORS. The independent auditors for the Fund are Ernst & Young
LLP, Pittsburgh, PA.
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 cannot
guarantee that its net asset value will always remain at $1.00 per share.
The net asset value is determined at 12:00 noon, 1:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange each day the New York Stock Exchange is open.
6
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange and the Federal Reserve Wire System are open for business. Shares may
be purchased either by wire or mail. The Fund reserves the right to reject any
purchase request.
To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone.
BY WIRE. To purchase 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 1:00 p.m. (Eastern time) that
day. Federal funds should be wired as follows: Federated Services Company, c/o
State Street Bank and Trust Company, Boston, MA; 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; and ABA Number 011000028.
BY MAIL. To purchase by mail, send a check made payable to Automated Treasury
Cash Reserves to: Federated Services Company, Automated Treasury Cash Reserves,
P.O. Box 8600, Boston, MA 02266-8600. Orders by mail are considered received
when payment by check is converted into federal funds. This is normally the next
business day after the check is received.
AUTOMATIC INVESTMENTS. Investors may establish accounts with their
financial institutions to have cash accumulations automatically invested in
the Fund. The investments may be made on predetermined dates or when the
investor's account reaches a certain level. Participating financial
institutions are responsible for prompt transmission of orders relating to
the program, and they may charge for their services. Investors should read
this prospectus along with the financial institution's agreement or
literature describing these services and fees.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment is $25,000. However, an account may be opened
with a smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.
SUBACCOUNTING SERVICES
Financial institutions are encouraged to open single master accounts. However,
certain financial 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. Financial institutions 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,
7
be read together with any agreement between the customer and the financial
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 or Federated Services Company in writing.
Monthly confirmations are sent to report transactions such as all purchases and
redemptions as well as dividends paid during the month.
DIVIDENDS
Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire before
1:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.
CAPITAL GAINS
The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.
REDEEMING SHARES
- --------------------------------------------------------------------------------
Shares are redeemed at their net asset value next determined after Federated
Services Company 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 as described below.
BY MAIL
Shares may be redeemed by sending a written request to: Automated Treasury Cash
Reserves, P.O. Box 8600, Boston, MA 02266-8600. The written request should
state: Automated Treasury Cash Reserves; shareholder's name; the account number;
and the share or dollar amount requested. Sign the request exactly as the shares
are registered. Shareholders should call the Fund for assistance in redeeming by
mail.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request to
Federated Services Company, 500 Victory Road - 2nd Floor, Quincy, MA 02171.
8
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 their
signatures guaranteed by:
- a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
- a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
- a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund, 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 the transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of the
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
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. Dividends are paid up to and including the day that a redemption
request is processed.
TELEPHONE REDEMPTION
Shares may be redeemed by telephoning the Fund. Telephone instructions may be
recorded and if reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions. 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.
If the redemption request is received before 12:00 noon (Eastern time), the
proceeds will be wired the same day to the shareholder's account at a domestic
commercial bank which is a member of the Federal Reserve System, and those
shares redeemed will not be entitled to that day's dividend. 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.
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 "By Mail", should be considered. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
and pay the proceeds to the shareholder if the account balance falls below a
required minimum value of $25,000 due to shareholder redemptions.
9
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.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights, except that in matters affecting only a
particular portfolio, only shares of that portfolio are entitled to vote. 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 for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust.
As of June 5, 1995, United States Trust Co., New York, NY, owned approximately
54,619,547 shares (31.34%) of voting securities of the Fund, and, therefore,
may, for certain purposes, be deemed to control the Fund and be able to affect
the outcome of certain matters presented for a vote of shareholders.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for 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 by the Declaration of Trust to use its
property 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.
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
10
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
and distributions are received in cash or as additional shares.
PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES
In the opinion of Houston, Houston, & Donnelly, counsel to the Trust, 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.
OTHER STATE AND LOCAL TAXES. The Fund will limit its investments to those
which, if owned directly, pay interest 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. Shareholders are urged to consult their
own tax advisers regarding the status of their accounts under state and local
tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time, the Fund advertises its yield, effective yield, and
tax-equivalent yield.
Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
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 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. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the Fund's tax exempt yield, assuming a specific tax rate.
Advertisements and 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, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare its
performance to certain indices.
11
AUTOMATED TREASURY CASH RESERVES
PORTFOLIO OF INVESTMENTS
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------------------------------------------------------ ------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--95.0%
- ---------------------------------------------------------------------------
(a) U.S. TREASURY BILLS--76.8%
------------------------------------------------------------
$ 9,400,000 5.82% - 6.00%, 5/4/95 $ 9,395,488
------------------------------------------------------------
21,100,000 5.83% - 5.90%, 5/11/95 21,066,592
------------------------------------------------------------
15,500,000 5.78% - 5.86%, 5/18/95 15,458,487
------------------------------------------------------------
12,500,000 5.84% - 5.86%, 6/1/95 12,438,555
------------------------------------------------------------
16,300,000 5.68% - 5.94%, 6/15/95 16,185,361
------------------------------------------------------------
10,100,000 5.82%, 7/6/9 9,995,242
------------------------------------------------------------
16,700,000 5.74% - 5.77%, 7/13/95 16,510,750
------------------------------------------------------------
1,000,000 5.77%, 7/20/95 987,533
------------------------------------------------------------
17,800,000 5.84% - 5.87%, 7/27/95 17,555,218
------------------------------------------------------------
4,200,000 5.80%, 8/3/95 4,138,313
------------------------------------------------------------
5,000,000 5.92%, 10/12/95 4,870,736
------------------------------------------------------------ ------------
Total 128,602,275
------------------------------------------------------------ ------------
U.S. TREASURY NOTES--18.2%
------------------------------------------------------------
22,500,000 8.50%, 5/15/95 22,522,254
------------------------------------------------------------
8,000,000 8.875%, 7/15/95 8,044,531
------------------------------------------------------------ ------------
Total 30,566,785
------------------------------------------------------------ ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (b) $159,169,060
------------------------------------------------------------ ------------
------------
<FN>
(a) Each issue shows the rate of discount at time of purchase.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($167,508,106) at April 30, 1995.
</TABLE>
(See Notes which are an integral part of the Financial Statements.)
12
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------------------------------------
Investments in securities, at amortized cost and value $159,169,060
- ----------------------------------------------------------------------------------------------
Cash 12,308
- ----------------------------------------------------------------------------------------------
Income receivable 1,704,374
- ----------------------------------------------------------------------------------------------
Receivable for investments sold 31,700,000
- ----------------------------------------------------------------------------------------------
Deferred expenses 5,742
- ---------------------------------------------------------------------------------------------- ------------
Total assets 192,591,484
- ----------------------------------------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------------------------------------------------
Payable for investments purchased $24,567,619
- --------------------------------------------------------------------------------
Income distribution payable 459,167
- --------------------------------------------------------------------------------
Accrued expenses 56,592
- -------------------------------------------------------------------------------- -----------
Total liabilities 25,083,378
- ---------------------------------------------------------------------------------------------- ------------
NET ASSETS for 167,508,106 shares outstanding $167,508,106
- ---------------------------------------------------------------------------------------------- ------------
------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share: ($167,508,106
/ 167,508,106 shares outstanding) $ 1.00
- ---------------------------------------------------------------------------------------------- ------------
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
13
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------
Interest $ 8,894,695
- ----------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------------
Investment advisory fee $ 916,195
- --------------------------------------------------------------------------------
Administrative personnel and services fee 138,717
- --------------------------------------------------------------------------------
Custodian fees 44,424
- --------------------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 18,052
- --------------------------------------------------------------------------------
Directors'/Trustees' fees 4,713
- --------------------------------------------------------------------------------
Auditing fees 13,702
- --------------------------------------------------------------------------------
Legal fees 14,039
- --------------------------------------------------------------------------------
Portfolio accounting fees 23,617
- --------------------------------------------------------------------------------
Shareholder services fee 395,539
- --------------------------------------------------------------------------------
Share registration costs 16,286
- --------------------------------------------------------------------------------
Printing and postage 5,813
- --------------------------------------------------------------------------------
Insurance premiums 5,758
- --------------------------------------------------------------------------------
Taxes 25
- --------------------------------------------------------------------------------
Miscellaneous 21,323
- -------------------------------------------------------------------------------- -----------
Total expenses 1,618,203
- --------------------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 587,578
- -------------------------------------------------------------------------------- -----------
Net expenses 1,030,625
- ---------------------------------------------------------------------------------------------- -----------
Net investment income $ 7,864,070
- ---------------------------------------------------------------------------------------------- -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
14
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------------------------------
OPERATIONS--
- ---------------------------------------------------------------------------
Net investment income $ 7,864,070 $ 6,862,541
- --------------------------------------------------------------------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------------------------------
Distributions from net investment income (7,864,070) (6,862,541)
- --------------------------------------------------------------------------- ------------- -------------
SHARE TRANSACTIONS--
- ---------------------------------------------------------------------------
Proceeds from sale of Shares 676,882,602 1,219,200,090
- ---------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of
distributions declared 4,267,547 6,163,198
- ---------------------------------------------------------------------------
Cost of Shares redeemed (704,481,817) (1,287,478,391)
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets resulting from Share transactions (23,331,668) (62,115,103)
- --------------------------------------------------------------------------- ------------- -------------
Change in net assets (23,331,668) (62,115,103)
- ---------------------------------------------------------------------------
NET ASSETS:
- ---------------------------------------------------------------------------
Beginning of period 190,839,774 252,954,877
- --------------------------------------------------------------------------- ------------- -------------
End of period $ 167,508,106 $ 190,839,774
- --------------------------------------------------------------------------- ------------- -------------
------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
15
AUTOMATED TREASURY CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1995
- --------------------------------------------------------------------------------
1. ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of three 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. These
policies are in conformity with generally accepted accounting principles.
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 Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
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 its shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
16
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, 1995, capital paid-in aggregated $167,508,106. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------
1995 1994
------------ --------------
<S> <C> <C>
Shares sold 676,882,602 1,219,200,090
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 4,267,547 6,163,198
- --------------------------------------------------
Shares redeemed (704,481,817) (1,287,478,391)
- -------------------------------------------------- ------------ --------------
Net change resulting from Share transactions (23,331,668) (62,115,103)
- -------------------------------------------------- ------------ --------------
------------ --------------
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .50 of 1% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The FAS 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 the period
of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to .25 of 1% of average daily net assets of the Fund for the period. This
fee is to obtain certain services for shareholders and to maintain
shareholder accounts.
TRANSFER AGENT AND DIVIDEND DISTRIBUTING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Fund. This fee is based on the size, type, and number of accounts
and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting
records for which it receives a fee. The fee is based on the level of the
Fund's average daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Fund are Officers and
Directors or Trustees of the above companies.
17
REPORT OF ERNST & YOUNG LLP, 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, 1995, and the related
statement of operations for the year then ended, 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 periods presented
therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1995, 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, 1995, 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 periods presented therein, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
June 9, 1995
18
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federated Government Trust
Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- -------------------------------------------------------------------------------------------
Custodian
State Street Bank and Trust Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Services Company P.O. Box 8600
Boston, MA 02266-8600
- -------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
- -------------------------------------------------------------------------------------------
</TABLE>
19
- --------------------------------------------------------------------------------
AUTOMATED TREASURY
CASH RESERVES
PROSPECTUS
A Diversified Portfolio of
Federated Government Trust,
an Open-End Management
Investment Company
Prospectus dated June 30, 1995
[LOGO] FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314186404
1052101A (6/95) [RECYCLED PAPER LOGO]
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 of Automated Government Cash Reserves (the "Fund"), a
portfolio of Federated Government Trust (the "Trust") dated June 30,
1995. This Statement is not a prospectus. To receive a copy of a
prospectus, write or call the Trust.
Federated Investors Tower
Pittsburgh, PA 15222-3779
Statement dated June 30, 1995.
Federated Securities Corp.
Distributor
A subsidiary of Federated
Investors
Investment Policies 1
Acceptable Investments 1
When-Issued And Delayed Delivery
Transactions 1
Reverse Repurchase Agreements 1
Investment Limitations 1
Federated Government Trust
Management 2
Share Ownership 6
Directors Compensation 7
Trustee Liability 7
Investment Advisory Services 7
Investment Adviser 7
Advisory Fees 8
Brokerage Transactions 8
Shareholder Services Plan 9
Determining Net Asset Value 9
Redemption in Kind 9
The Fund's Tax Status 10
Performance Information 10
Yield 10
Effective Yield 10
Total Return 10
Performance Comparisons 10
About Federated Investors 11
Mutual Fund Market 11
Investment Policies
Unless indicated otherwise, the policies described below may be changed by the
Trustees without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
Acceptable Investments
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 will reduce the 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
that 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 or yield for the Fund. 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 on the
Fund's records at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled. The Fund does not
intend to engage in when-issued and delayed delivery transactions to an extent
that would cause the segregation of more than 20% of the total value of its
assets.
Reverse Repurchase Agreements
The Fund may also enter into reverse repurchase agreements. This transaction
is similar to borrowing cash. In a reverse repurchase agreement the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of
reverse repurchase agreements may enable the Fund to avoid selling portfolio
instruments at a time when a sale may be deemed to be disadvantageous, but the
ability to enter into reverse repurchase agreements does not ensure that the
Fund will be able to avoid selling portfolio instruments at a disadvantageous
time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These assets are marked to market daily and
are maintained until the transaction is settled.
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 are 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 (including participation in reverse repurchase agreements)
in amounts up to one-third of the value of its total assets, including
the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather 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 the value 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 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 securities of issuers
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 limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these 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 Minerals
The Fund will not purchase or sell interests in oil, gas, or other
mineral exploration or development programs or leases, although it may
purchase the securities of issuers which invest in or sponsor such
programs.
Investing in Warrants
The Fund will not invest in warrants.
For purposes of the above limitations, the Fund considers instruments issued
by a U.S. branch of a domestic bank or savings and loan having capital,
surplus, and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items". 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 limitation.
The Fund did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present intent
to do so during the coming fiscal year.
Federated Government Trust Management
Officers and Trustees are listed with their addresses, present positions with
Federated Government Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp.; Chairman, Passport Research, Ltd.; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or Managing General
Partner of the Funds. Mr. Donahue is the father of J. Christopher Donahue,
Vice President of the Trust.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; President, Northgate Village Development
Corporation; Partner or Trustee in private real estate ventures in Southwest
Florida; Director, Trustee, or Managing General Partner of the Funds;
formerly, President, Naples Property Management, Inc.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Vice Chairman and
Director, PNC Bank, N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director, Trustee,
or Managing General Partner of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of Pittsburgh;
Medical Director, University of Pittsburgh Medical Center - Downtown; Member,
Board of Directors, University of Pittsburgh Medical Center; formerly,
Hematologist, Oncologist, and Internist, Presbyterian and Montefiore
Hospitals; Director, Trustee, or Managing General Partner of the Funds.
Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Director, Eat'N
Park Restaurants, Inc., and Statewide Settlement Agency, Inc.; Director,
Trustee, or Managing General Partner of the Funds; formerly, Counsel, Horizon
Financial, F.A., Western Region.
Glen R. Johnson *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President and Trustee
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.
Peter E. Madden
70 Westcliff Road
Westin, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President, State
Street Bank and Trust Company and State Street Boston Corporation.
Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Partner, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee, or
Managing General Partner of the Funds; formerly, Vice Chairman, Horizon
Financial, F.A.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Ce
Center, Inc., and 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.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.
J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated Administrative
Services, Federated Services Company, and Federated Shareholder Services;
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.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Director, Federated
Research Corp.; Chairman and Director, Federated Securities Corp.; President
or Vice President of some of the Funds; Director or Trustee of some of the
Funds.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Vice President and Treasurer
Vice President, Treasurer, and Trustee, Federated Investors; Vice President
and Treasurer, Federated Advisers, Federated Management, Federated Research,
Federated Research Corp., and Passport Research, Ltd.; Executive Vice
President, Treasurer, and Director, Federated Securities Corp.; Trustee,
Federated Services Company and Federated Shareholder Services; 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
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Vice President and Secretary
V
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Vice President and Secretary, Federated
Research Corp. and Passport Research, Ltd.; Trustee, Federated Services
Company; Executive Vice President, Secretary, and Trustee, Federated
Administrative Services; Secretary and Trustee, Federated Shareholder
Services; Executive Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board of
Trustees between meetings of the Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: American Leaders Fund, Inc.; Annuity Management Series;
Arrow Funds; Automated Cash Management Trust; Automated Government Money
Trust; California Municipal Cash Trust; Cash Trust Series II; Cash Trust
Series, Inc.; 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 Institutional Trust; Federated Master Trust;
Federated Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock Trust; Federated Tax-Free
Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S,
Government Securities Fund: 3-5 Years; 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;; 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 U.S. Government Money Market
Trust; Liberty Term Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid
Cash Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; New York Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; RIMCO Monument Funds; The Shawmut 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; The Virtus Funds; World Investment Series, Inc.
Share Ownership
Officers and Trustees as a group own less than 1% of the Fund's outstanding
shares.
As of June 6, 1995, the following shareholders of record owned 5% or more of
the outstanding shares of the Automated Government Cash Reserves: U.S. Trust
Co., New York, NY, owned approximately 41,675,240 shares (7.04%); Fiduciary
Trust Company International, New York, NY, owned approximately 124,374,900
shares (21.01%); State Street Bank and Trust, North Quincy, MA, owned
approximately 144,485,812 shares (24.41%); Wheeler & Company, Boston, MA,
owned approximately 38,249,798 shares (6.46%).
Directors Compensation
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST FUND* FROM FUND COMPLEX +
John F. Donahue, $ 0 $0 for the Trust and
Chairman and Trustee 68 other investment companies
in the Fund Complex
Glen R. Johnson $ 0 $0 for the Trust and
President and Trustee 8 other investment companies
in the Fund Complex
John T. Conroy, Jr., $ 887 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
William J. Copeland, $ 887 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
James E. Dowd, $ 887 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Lawrence D. Ellis, M.D., $ 807 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Edward L. Flaherty, Jr., $ 887 $117,202 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Peter E. Madden, $ 692 $90,563 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Gregor F. Meyer, $ 807 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
John E. Murray, Jr., $ 283 $0.00 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Wesley W. Posvar, $ 807 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
Marjorie P. Smuts, $ 807 $106,460 for the Trust and
Trustee 64 other investment companies
in the Fund Complex
*Information is furnished for the fiscal year ended March 31, 1995.
+The information is provided for the last calendar year.
Trustee Liability
The 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
Investment Adviser
The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and his
son, J. Christopher Donahue.
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, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended April
30, 1995, 1994, and 1993, the adviser earned $2,501,388, $2,227,794, and
$1,881,577, respectively, of which $1,583,947, $389,870, and $289,375,
respectively, were voluntarily waived to limit the Fund's expenses.
State Expense Limitations
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 fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
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 guidelines established 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.
Research services provided by brokers and dealers may be used by the adviser
or its affiliates in advising the Trust 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. 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. During the fiscal
years ended April 30, 1995, 1994, and 1993, the Trust paid no brokerage
commissions.
Although investment decisions for the Fund are made independently from those
of the other accounts managed by the adviser, investments of the type the Fund
may make may also be made by those other accounts. When the Fund and one or
more other accounts managed by the adviser are prepared to invest in, or
desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtained or
disposed of by the Fund. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Fund.
Fund Administration
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 year ended April 30, 1995, Federated Administrative Services earned
$378,710. For the fiscal year ended April 30, 1994, the Administrators earned
$348,312. For the fiscal year ended April 30, 1993, Federated Administrative
Services, Inc., earned $290,780. Dr. Henry J. Gailliot, an officer of
Federated Management, the adviser to the Fund, holds approximately 20% of the
outstanding common stock and serves as a director of Commercial Data Services,
Inc., a company which provides computer processing services to Federated
Administrative Services.
Shareholder Services Plan
This arrangement permits the payment of fees to Federated Shareholder Services
and financial institutions to cause services to be provided which are
necessary for the maintenance of shareholder accounts and to encourage
personal services 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 balance;
answering routine client inquiries; and assisting clients in changing dividend
options, account designations, and addresses. By adopting the Shareholder
Services Plan, the Board of Trustees expects that the Fund will benefit by:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts. For the
fiscal period ending April 30, 1995, payments in the amount of $1,250,694 were
made pursuant to the Shareholder Services Plan, all of which was paid to
financial institutions.
Custodian and Portfolio Recordkeeper. State Street Bank and Trust Company,
Boston, MA, is custodian for the securities and cash of the Fund. Federated
Services Company, Pittsburgh, PA, provides certain accounting and
recordkeeping services with respect to the Fund's portfolio investments.
Transfer Agent. As transfer agent, Federated Services Company maintains all
necessary shareholder records. For its services, the transfer agent receives
a fee based on size, type and number of accounts and transactions made by
shareholders.
Determining Net Asset Value
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.
Accordingly, 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 opposite may be
true.
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. 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. The
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 0.5 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.
Redemption in Kind
The Fund 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 payments should be in kind. In
such cases, the Fund 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
who sell these securities could receive less than the redemption value and
could incur certain transaction costs.
The Fund's Tax Status
To qualify for the special tax treatment afforded to regulated investment
companies, 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.
Performance Information
Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. 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.
Yield
The yield is calculated 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.
The Fund's yield for the seven-day period ended April 30, 1995, was 5.48%.
Effective Yield
The effective yield is calculated 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.
The Fund's effective yield for the seven-day period ended April 30, 1995, was
5.63%.
Total Return
Average annual total return is the average compounded rate of return for a
given period that would equate a $1,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed
by multiplying the number of shares owned at the end of the period by the net
asset value per share at the end of the period. The number of shares owned at
the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
Performance Comparisons
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:
o Lipper Analytical Services, Inc., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o Donoghue's Money Fund Report publishes annualized yields of money market
funds weekly. Donoghue's MONEY MARKET INSIGHT publication reports
monthly and 12-month-to-date investment results for the same money
funds.
o Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
o 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.
o Discount Corporation of New York 30-Day Federal Agencies is a weekly
quote of the average daily offering price for selected federal agency
issues maturing in 30 days.
About Federated Investors
Federated is dedicated to meeting investor needs which is reflected in its
investment decision making structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands
of clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors. In the money market sector,
Federated gained prominence in the mutual fund industry in 1974 with the
creation of the first institutional money market fund. Simultaneously, the
company pioneered the use of the amortized cost method of accounting for
valuing shares of money market funds, a principal means used by money managers
today to value money market fund shares. Other innovations include the first
institutional tax-free money market fund. As of December 31, 1994, Federated
managed more than $31 billion in assets across approximately 43 money market
funds, including 17 government, 8 prime and 18 municipal with assets
approximating $17 billion, $7.4 billion and $6.6 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated's equity and
high yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated's domestic fixed income management. Henry A.
Frantzen, Executive Vice President, oversees the management of Federated's
international portfolios.
Mutual Fund Market
Twenty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $2 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
Institutional
Federated meets the needs of more than 4,000 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
applications, including defined benefit and defined contribution programs,
cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by
John B. Fisher, President, Institutional Sales Division.
Trust Organizations
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the
top 100 bank holding companies use Federated funds in their clients'
portfolios. The marketing effort to trust clients is headed by Mark R.
Gensheimer, Executive Vice President, Bank Marketing & Sales.
Broker/dealers and bank broker/dealer subsidiaries
Federated mutual funds are available to consumers through major brokerage
firms nationwide--including 200 New York Stock Exchange firms--supported by
more wholesalers than any other mutual fund distributor. The marketing effort
to these firms is headed by James F. Getz, President, Broker/Dealer Division.
*source: Investment Company Institute
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