FEDERATED GOVERNMENT TRUST/PA, 485BPOS, 1996-06-25

FEDERATED GOVERNMENT TRUST/PA
485BPOS, 1996-06-25

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1933 Act File No. 33-32755
1940 Act File No. 811-5981

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. ..........

Post-Effective Amendment No. 16 ........... X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 17 .......................... X

FEDERATED GOVERNMENT TRUST

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
X on June 30, 1996, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and:

X filed the Notice required by that Rule on June 15, 1996; or
intends to file the Notice required by that Rule on or about
; or
------------
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of FEDERATED GOVERNMENT
TRUST, which consists of three portfolios, (1) Automated Government Cash
Reserves, (2) U.S. Treasury Cash Reserves (Institutional Shares (IS) and
Institutional Service Shares (ISS)), and (3) Automated Treasury Cash
Reserves, is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page (1-3) Cover Page.
Item 2. Synopsis (1-3) Summary of Fund Expenses.
Item 3. Condensed Financial
Information (1-3) Financial Highlights;
(1-3) Performance Information.
Item 4. General Description of
Registrant (1-3) General Information, Investment
Information, Investment Objective,
Investment Policies, Investment
Limitations.

Item 5. Management of the Trust (1-3) Trust Information, Management of
the Trust, Administration of the Fund,
Voting Rights; (1&3) Distribution of
Shares;(2) Distribution of Institutional
Shares, Distribution of Institutional
Service Shares.
Item 6. Capital Stock and Other
Securities (1-3) Dividends, Capital Gains,
Shareholder Informaton, Voting Rights,
Account and Share Information; (2) Other
Classes of Shares; (1-3) Tax Information,
Federal Income Tax, State and Local
Taxes.

Item 7. Purchase of Securities Being
Offered (1-3) Net Asset Value, How To Purchase
Shares, Purchasing Shares By Wire,
Purchasing Shares By Check, Automatic
Investments, Certificates and
Confirmations.

Item 8. Redemption or Repurchase (1-3) How To Redeem Shares, Redeeming
Shares By Telephone, Redeeming Shares By
Mail,Accounts With Low Balances.

Item 9. Pending Legal Proceedings None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page (1-3) Cover Page.
Item 11. Table of Contents (1-3) Table of Contents.
Item 12. General Information and
History (1-3) About Federated Investors, Economic
and Market Information.
Item 13. Investment Objectives and
Policies (1-3) Investment Policies, Investment
Limitations, Regulatory Compliance.
Item 14. Management of the Fund (1-3) Federated Government Trust
Management,Trustee Compensation, Trustee
Liability.
Item 15. Control Persons and Principal
Holders of Securities (1-3) Share Ownership
Item 16. Investment Advisory and Other
Services (1-3) Investment Advisory Services, Other
Services, Fund Administration,
Shareholder Services, Custodian and
Portfolio Accountant, Transfer Agent,
Independent Auditors.

Item 17. Brokerage Allocation (1-3) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities (1-3) Massachusetts Partnership Law
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered (1-3) Determining Net Asset Value,
Redemption in Kind.
Item 20. Tax Status (1-3) The Fund's Tax Status.
Item 21. Underwriters Not Applicable
Item 22. Calculation of Performance
Data (1-3) Yield, Effective Yield, Total
Return, Performance Comparisons.

Item 23. Financial Statements Included in Part A.

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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,
1996, with the Securities and Exchange Commission ("SEC"). 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 or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-235-4669. To
obtain other information, or make inquiries about the Fund, contact the Fund at
the address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).

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, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------

GENERAL INFORMATION 3
- ------------------------------------------------------

INVESTMENT INFORMATION 3
- ------------------------------------------------------

Investment Objective 3
Investment Policies 3
Investment Limitations 4

TRUST INFORMATION 5
- ------------------------------------------------------

Management of the Trust 5
Distribution of Shares 6
Administration of the Fund 6

NET ASSET VALUE 7
- ------------------------------------------------------

HOW TO PURCHASE SHARES 7
- ------------------------------------------------------

HOW TO REDEEM SHARES 8
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 9
- ------------------------------------------------------

TAX INFORMATION 10
- ------------------------------------------------------

Federal Income Tax 10
State and Local Taxes 10

PERFORMANCE INFORMATION 10
- ------------------------------------------------------

FINANCIAL STATEMENTS 11
- ------------------------------------------------------

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 17
- ------------------------------------------------------

ADDRESSES 18
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price)..................................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable)............................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.20%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.38%
Shareholder Services Fee................................................ 0.25%
Total Operating Expenses(2)........................................ 0.58%
</TABLE>

(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.50%.

(2) The total operating expenses would have been 0.88% absent the voluntary
waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Trust Information". Wire-transferred redemptions of less than
$5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2)
redemption at the end of each time period .............. $6 $19 $32 $ 73
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

AUTOMATED GOVERNMENT CASH RESERVES

FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 17.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990(A)
------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $1.00
- --------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- --------------------------------
Net investment income 0.05 0.05 0.03 0.03 0.05 0.07 0.02
- -------------------------------- ------ ------ ------ ------ ------ ------ -----
LESS DISTRIBUTIONS
- --------------------------------
Distributions from net
investment income (0.05) (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 $1.00
- -------------------------------- ------ ------ ------ ------ ------ ------ -----
TOTAL RETURN(B) 5.24% 4.68% 2.77% 2.92% 4.79% 7.20% 1.93 %
- --------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------
Expenses 0.58% 0.58% 0.57% 0.57% 0.58% 0.55% 0.32 %*
- --------------------------------
Net investment income 5.12% 4.70% 2.75% 2.87% 4.58% 6.70% 8.02 %*
- --------------------------------
Expense waiver/
reimbursement(c) 0.30% 0.32% 0.09% 0.08% 0.14% 0.30% 0.89 %*
- --------------------------------
SUPPLEMENTAL DATA
- --------------------------------
Net assets, end of period (000
omitted) $603,136 $603,849 $457,944 $396,370 $308,625 $206,694 $34,053
- --------------------------------
</TABLE>

* Computed on an annualized basis.

(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 charge or
contingent deferred sales charge, if applicable.

(See Notes which are an integral part of the Financial Statements)

GENERAL INFORMATION
- --------------------------------------------------------------------------------

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 complying with the
diversification and other requirements of Rule 2a-7 under the Investment Company
Act of 1940 which regulates money market mutual funds and 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 13 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 Board of 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. government securities.
These instruments 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 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 up to 10% of the value of its total assets to secure such
borrowings.

The above investment limitations 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 securities.

TRUST INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES. The Trust is managed by a Board of Trustees. The Trustees are
responsible for managing the Trust'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 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. Also, the
adviser 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 $80 billion invested across
more than 250 funds under management and/or administration by its
subsidiaries, as of December 31, 1995, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more
than 1,800 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.

Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.

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. The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Trust may make payments up to .25% of the average
daily net asset value of its shares, computed at an annual rate, to obtain
certain personal services for shareholders and to maintain shareholder accounts.
From time to time and for such periods as deemed appropriate, the amount stated
above may be reduced voluntarily. Under the Shareholder Services Agreement,
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Trust and Federated Shareholder
Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments made
pursuant to the Shareholder Services Agreement, Federated Securities Corp. and
Federated Shareholder Services, from their own assets, may pay financial
institutions supplemental fees for the performance of substantial sales
services, distribution-related support services, or shareholder services. The
support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Trust. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support furnished by
the financial institution. Any payments made by the distributor may be
reimbursed by the Trust's investment adviser or its affiliates.

ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund at an
annual rate which relates to the average aggregate daily net assets of all funds
advised by affiliates of Federated Investors as specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
- --------------------------- -----------------------------------
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

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, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

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 is open for business. Shares may be purchased either by wire or by
check. 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. 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.

PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire
by calling the Fund before 1:00 p.m. Eastern time to place an order. The
order is considered received immediately. Payment by federal funds must be
received before 3:00 p.m. Eastern time that day. Federal funds should be
wired as follows: Federated Shareholder 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. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. The check should be made payable to Automated Government Cash
Reserves. Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received), and shares begin earning dividends the next day.

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.

HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------

Shares are redeemed at their net asset value next determined after Federated
Shareholder 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.

REDEEMING SHARES BY TELEPHONE. Redemptions may be made by calling the Fund
provided the Fund has a properly completed authorization form. These forms can
be obtained from Federated Securities Corp. Proceeds from redemption requests
received before 12:00 noon Eastern time 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, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Proceeds from redemption requests on
holidays when wire transfers are restricted will be wired the following business
day. Questions about telephone redemptions on days when wire transfers are
restricted should be directed to your shareholder services representative at the
telephone number listed on your account statement. 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.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares By Mail"
should be considered. If at any time the Fund shall determine it necessary to
terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.
REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Federated Shareholder Services Company, P.O. Box 8600,
Boston, MA 02266-8600. If share certificates have been issued, they should be
sent unendorsed with the written request by registered or certified mail to the
address noted above.

The written request should state: the Fund name; the account name as registered
with the Fund; the account number; and the number of shares to be redeemed or
the dollar amount requested. All owners of the account must sign the request
exactly as the shares are registered. Normally, a check for the proceeds is
mailed within one business day, but in no event more than seven days, after the
receipt of a proper written redemption request. Dividends are paid up to and
including the day that a redemption request is processed.

Shareholders requesting 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 commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; 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.

ACCOUNT AND SHARE INFORMATION
- --------------------------------------------------------------------------------

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.

CERTIFICATES AND CONFIRMATIONS. As transfer agent for the Fund, Federated
Shareholder Services Company maintains a share account for each shareholder.
Share certificates are not issued unless requested by contacting the Fund or
Federated Shareholder Services Company in writing. Monthly confirmations are
sent to report all transactions as well as dividends paid during the month.

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.

VOTING RIGHTS. Each share of the Fund owned by a shareholder gives that
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 shareholders of that portfolio are entitled to vote. 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
election of Trustees under certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting 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 May 31, 1996, State Street Bank and Trust, North Quincy, MA owned 26.99%
of the 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.

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.

STATE AND LOCAL 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.

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 total return, 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.

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 the
Fund's performance to certain indices.

AUTOMATED GOVERNMENT CASH RESERVES

PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ------------
SHORT-TERM GOVERNMENT AND AGENCY OBLIGATIONS--103.3% VALUE
------------
<C> <C> <S> <C>
- ----------------------------------------------------------------------------------
$ 3,000,000 Federal Farm Credit Bank Note, 5.40%, 12/2/1996 $ 2,997,077
-------------------------------------------------------------- ------------
21,890,000 (a) Federal Farm Credit Bank, Discount Notes, 5.22%-5.37%,
5/6/1996-9/13/1996 21,746,083
-------------------------------------------------------------- ------------
10,000,000 (b) Federal Farm Credit Bank, Floating Rate Note, 5.23%, 5/1/1996 9,998,940
-------------------------------------------------------------- ------------
23,800,000 Federal Home Loan Bank Notes, 6.01%-6.05%,
5/15/1996-6/13/1996 23,802,438
-------------------------------------------------------------- ------------
214,925,000 (a) Federal Home Loan Bank, Discount Notes, 5.06%-5.38%,
5/1/1996-7/30/1996 214,040,616
-------------------------------------------------------------- ------------
26,400,000 (b) Federal Home Loan Bank, Floating Rate Notes, 5.195%-5.27%,
5/1/1996 26,395,839
-------------------------------------------------------------- ------------
55,300,000 Student Loan Marketing Association Master Notes, 5.33%,
5/7/1996 55,300,000
-------------------------------------------------------------- ------------
62,605,000 (a) Student Loan Marketing Association, Discount Notes,
5.32%-5.36%, 6/13/1996-6/28/1996 62,148,245
-------------------------------------------------------------- ------------
105,550,000 (b) Student Loan Marketing Association, Floating Rate Notes,
5.28%-5.555%, 5/7/1996 105,568,196
-------------------------------------------------------------- ------------
31,000,000 (a) Tennessee Valley Authority, 5.25%-5.34%, 6/7/1996-6/13/1996 30,822,968
-------------------------------------------------------------- ------------
16,000,000 (a) U.S. Treasury Bills, 5.09%, 9/19/1996-11/14/1996 15,614,774
-------------------------------------------------------------- ------------
54,000,000 U.S. Treasury Notes, 6.50%-8.00%, 9/30/1996-12/31/1996 54,443,342
-------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $622,878,518
-------------------------------------------------------------- ------------
</TABLE>

(a) The issue shows the rate of discount at time of purchase.

(b) Floating rate note with current rate and next reset date shown.

Note: The categories of investments are shown as a percentage of net assets
($603,135,860) at April 30, 1996.

(See Notes which are an integral part of the Financial Statements)

AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $622,878,518
- --------------------------------------------------------------------------------
Cash 199,363
- --------------------------------------------------------------------------------
Income receivable 2,485,461
- --------------------------------------------------------------------------------
Receivable for investments sold 5,169,531
- --------------------------------------------------------------------------------
Receivable for shares sold 255,678
- -------------------------------------------------------------------------------- ------------
Total assets 630,988,551
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $25,823,893
- ------------------------------------------------------------------
Payable for shares redeemed 5,001
- ------------------------------------------------------------------
Income distribution payable 1,861,817
- ------------------------------------------------------------------
Accrued expenses 161,980
- ------------------------------------------------------------------ -----------
Total liabilities 27,852,691
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 603,135,860 shares outstanding $603,135,860
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
$603,135,860 / 603,135,860 shares outstanding $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

AUTOMATED GOVERNMENT CASH RESERVES

STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------
Interest $31,513,653
- ---------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------
Investment advisory fee $2,764,784
- --------------------------------------------------------------------
Administrative personnel and services fee 418,364
- --------------------------------------------------------------------
Custodian fees 84,743
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 37,507
- --------------------------------------------------------------------
Directors'/Trustees' fees 8,509
- --------------------------------------------------------------------
Auditing fees 13,061
- --------------------------------------------------------------------
Legal fees 13,785
- --------------------------------------------------------------------
Portfolio accounting fees 98,356
- --------------------------------------------------------------------
Shareholder services fee 1,382,392
- --------------------------------------------------------------------
Share registration costs 10,820
- --------------------------------------------------------------------
Printing and postage 7,384
- --------------------------------------------------------------------
Insurance premiums 9,894
- --------------------------------------------------------------------
Miscellaneous 13,785
- -------------------------------------------------------------------- ----------
Total expenses 4,863,384
- --------------------------------------------------------------------
Deduct--Waiver of investment advisory fee (1,634,559)
- -------------------------------------------------------------------- ----------
Net expenses 3,228,825
- --------------------------------------------------------------------------------- -----------
Net investment income $28,284,828
- --------------------------------------------------------------------------------- -----------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

AUTOMATED GOVERNMENT CASH RESERVES

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 28,284,828 $ 23,502,455
- ------------------------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income (28,284,828) (23,502,455)
- ------------------------------------------------------------ --------------- ---------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 2,822,902,273 1,984,550,122
- ------------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 5,461,926 4,439,144
- ------------------------------------------------------------
Cost of shares redeemed (2,829,077,401) (1,843,084,556)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets resulting from share transactions (713,202) 145,904,710
- ------------------------------------------------------------ --------------- ---------------
Change in net assets (713,202) 145,904,710
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 603,849,062 457,944,352
- ------------------------------------------------------------ --------------- ---------------
End of period $ 603,135,860 $ 603,849,062
- ------------------------------------------------------------ --------------- ---------------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

AUTOMATED GOVERNMENT CASH RESERVES

NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 portfolios. The financial
statements included herein are only those of Automated Government Cash Reserves
(the "Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is current income consistent with
stability of principal and liquidity.

(2) SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.

INVESTMENT VALUATIONS--The Trust's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Distributions
to shareholders are recorded on the ex-dividend date.

FEDERAL TAXES--It is the 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.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ
from those estimated.

OTHER--Investment transactions are accounted for on the trade date.

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, 1996, capital paid-in aggregated $603,135,860.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------
1996 1995
- ------------------------------------------------------------ -------------- --------------
<S> <C> <C>
Shares sold 2,822,902,273 1,984,550,122
- ------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 5,461,926 4,439,144
- ------------------------------------------------------------
Shares redeemed (2,829,077,401) (1,843,084,556)
- ------------------------------------------------------------ -------------- --------------
Net change resulting from share transactions (713,202) 145,904,710
- ------------------------------------------------------------ -------------- --------------
</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 0.50% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.

ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors 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.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company serves as transfer and
dividend disbursing agent for the Fund. The fee paid to FServ is based on the
size, type, and number of accounts and transactions made by shareholders.

PORTFOLIO ACCOUNTING FEES--FServ maintains the Trust's accounting records for
which it receives a fee. The fee is based on the level of the Trust's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.

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, 1996, 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 for 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, 1996, 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 Government Cash Reserves at April 30, 1996, 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 the
periods presented therein, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 14, 1996

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Government Trust
Automated Government Cash Reserves Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and c/o Federated Shareholder Services
Trust Company Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services P.O. Box 8600
Company Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
AUTOMATED GOVERNMENT
CASH RESERVES
PROSPECTUS

A Diversified Portfolio of Federated
Government Trust, an Open-End
Management Investment Company

Prospectus dated June 30, 1996

LOGO
CUSIP 314186107
0011606X (6/96)

- --------------------------------------------------------------------------------

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.

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.

Prospectus dated June 30, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS 2
- ------------------------------------------------------

GENERAL INFORMATION 3
- ------------------------------------------------------

INVESTMENT INFORMATION 3
- ------------------------------------------------------

Investment Objective 3
Investment Policies 3
Investment Limitations 4

TRUST INFORMATION 4
- ------------------------------------------------------

Management of the Trust 4
Distribution of Shares 5
Administration of the Fund 6

NET ASSET VALUE 6
- ------------------------------------------------------
HOW TO PURCHASE SHARES 6
- ------------------------------------------------------

HOW TO REDEEM SHARES 7
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 8
- ------------------------------------------------------

TAX INFORMATION 9
- ------------------------------------------------------

Federal Income Tax 9
State and Local Taxes 9
- ------------------------------------------------------

PERFORMANCE INFORMATION 9
- ------------------------------------------------------

FINANCIAL STATEMENTS 10
- ------------------------------------------------------

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 17
- ------------------------------------------------------

ADDRESSES 18
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price)........................................ None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)...................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.15%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.42%
Shareholder Services Fee (after waiver)(2).............................. 0.23%
Total Operating Expenses(3)........................................ 0.57%
</TABLE>

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 0.94% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "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.

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 17.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------------------------------
1996 1995 1994 1993 1992(A)
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------
Net investment income 0.05 0.04 0.03 0.03 0.03
- ------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.00 -- -- -- --
- ------------------------------------------------ ------ ------ ------ ------ ------
Total from investment operations 0.05 0.04 0.03 0.03 0.03
- ------------------------------------------------ ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- ------------------------------------------------
Distributions from net investment income (0.05) (0.04) (0.03) (0.03) (0.03)
- ------------------------------------------------
Distributions from net realized gain on
investment transactions (0.00) -- -- -- --
- ------------------------------------------------ ------ ------ ------ ------ ------
Total distributions (0.05) (0.04) (0.03) (0.03) (0.03)
- ------------------------------------------------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------------ ------ ------ ------ ------ ------
TOTAL RETURN(B) 5.04% 4.37% 2.58% 2.88% 3.07%
- ------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------
Expenses 0.57% 0.56% 0.57% 0.39% 0.51%*
- ------------------------------------------------
Net investment income 4.92% 4.29% 2.55% 2.79% 3.84%*
- ------------------------------------------------
Expense waiver/reimbursement(c) 0.37% 0.32% 0.13% 0.53% 0.30%*
- ------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------
Net assets, end of period (000 omitted) $260,668 $167,508 $190,840 $252,955 $36,803
- ------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(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 charge or
contingent deferred sales charge, if applicable.

(See Notes which are an integral part of the Financial Statements)

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares 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 to provide 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 complying with
the diversification and other requirements of Rule 2a-7 under the Investment
Company Act of 1940 which regulates money market mutual funds and 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 13 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 Board of Trustees without shareholder
approval. Shareholders will be notified before any material change in these
policies becomes effective.

ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury securities, which
are fully guaranteed as to principal and interest by the United States.

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.

INVESTMENT LIMITATIONS

The Fund will not invest more than 10% of its net assets in illiquid securities.

TRUST INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

DISTRIBUTION OF SHARES

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

type and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Trust's investment adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund at an
annual rate which relates to the average aggregate daily net assets of all funds
advised by affiliates of Federated Investors as specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
--------------------- -----------------------------------
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

NET ASSET VALUE
- --------------------------------------------------------------------------------

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire
by calling the Fund before 1:00 p.m. Eastern time to place an order. The
order is considered received immediately. Payment by federal funds must be
received before 3:00 p.m. Eastern time that day. Federal funds should be
wired as follows: Federated Shareholder 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. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. The check should be made payable to Automated Treasury Cash
Reserves . Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received), and shares begin earning dividends the next day.

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.

HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares By Mail"
should be considered. If at any

time the Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.

REDEEMING SHARES BY MAIL. Shares may be redeemed in any amount by mailing a
written request to: Federated Shareholder Services Company, P.O. Box 8600,
Boston, MA 02266-8600. If share certificates have been issued, they should be
sent unendorsed with the written request by registered or certified mail to the
address noted above.

ACCOUNT AND SHARE INFORMATION
- --------------------------------------------------------------------------------

meetings. Shareholder approval will be sought only for certain changes in the
Trust's or the Fund's operation and for election of Trustees under certain
circumstances.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

From time to time, the Fund advertises its total return, yield, and effective
yield.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

AUTOMATED TREASURY CASH RESERVES

PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--99.6%
- ---------------------------------------------------------------------------------
(A) U.S. TREASURY BILLS--75.0%
---------------------------------------------------------------
$ 7,500,000 4.900%, 5/2/1996 $ 7,498,979
---------------------------------------------------------------
23,000,000 4.780% - 4.785%, 5/9/1996 22,975,553
---------------------------------------------------------------
27,000,000 4.785% - 4.880%, 5/16/1996 26,945,496
---------------------------------------------------------------
14,000,000 4.830% - 5.015%, 5/23/1996 13,957,998
---------------------------------------------------------------
25,000,000 4.860% - 4.935%, 5/30/1996 24,901,823
---------------------------------------------------------------
25,000,000 4.895% - 4.930%, 6/6/1996 24,877,100
---------------------------------------------------------------
10,000,000 4.975%, 6/20/1996 9,930,903
---------------------------------------------------------------
19,000,000 4.890% - 4.930%, 6/27/1996 18,852,323
---------------------------------------------------------------
25,000,000 4.945% - 5.010%, 7/5/1996 24,775,822
---------------------------------------------------------------
11,000,000 4.960% - 4.975%, 7/11/1996 10,892,169
---------------------------------------------------------------
4,000,000 4.820%, 8/29/1996 3,935,733
---------------------------------------------------------------
6,000,000 5.175%, 10/10/1996 5,860,275
--------------------------------------------------------------- ------------
Total 195,404,174
--------------------------------------------------------------- ------------
U.S. TREASURY NOTES--24.6%
---------------------------------------------------------------
10,000,000 7.375%, 5/15/1996 10,008,917
---------------------------------------------------------------
25,000,000 5.875% - 7.625%, 5/31/1996 25,028,897
---------------------------------------------------------------
5,000,000 7.875%, 7/15/1996 5,029,297
---------------------------------------------------------------
17,000,000 6.125% - 7.875%, 7/31/1996 17,064,491
---------------------------------------------------------------
7,000,000 4.375%, 8/15/1996 6,982,308
--------------------------------------------------------------- ------------
Total 64,113,910
--------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $259,518,084
--------------------------------------------------------------- ------------
</TABLE>

(a) Each issue shows the rate of discount at the time of purchase.

(b) Also represents cost for federal tax purposes.

Note: The categories of investments are shown as a percentage of net assets
($260,668,207) at April 30, 1996.

(See Notes which are an integral part of the Financial Statements)

AUTOMATED TREASURY CASH RESERVES

STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $259,518,084
- --------------------------------------------------------------------------------
Cash 471,744
- --------------------------------------------------------------------------------
Income receivable 1,498,151
- --------------------------------------------------------------------------------
Receivable for investments sold 10,252,235
- --------------------------------------------------------------------------------
Receivable for shares sold 64,643
- --------------------------------------------------------------------------------
Deferred expenses 1,176
- -------------------------------------------------------------------------------- ------------
Total assets 271,806,033
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $10,339,063
- ------------------------------------------------------------------
Payable for shares redeemed 599
- ------------------------------------------------------------------
Income distribution payable 700,043
- ------------------------------------------------------------------
Accrued expenses 98,121
- ------------------------------------------------------------------ -----------
Total liabilities 11,137,826
- -------------------------------------------------------------------------------- ------------
NET ASSETS FOR 260,668,207 shares outstanding $260,668,207
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------
$260,668,207 / 260,668,207 shares outstanding $1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

AUTOMATED TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $11,472,581
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $1,059,678
- ---------------------------------------------------------------------
Administrative personnel and services fee 160,338
- ---------------------------------------------------------------------
Custodian fees 29,757
- ---------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 24,422
- ---------------------------------------------------------------------
Directors'/Trustees' fees 5,617
- ---------------------------------------------------------------------
Auditing fees 13,061
- ---------------------------------------------------------------------
Legal fees 6,831
- ---------------------------------------------------------------------
Portfolio accounting fees 55,906
- ---------------------------------------------------------------------
Shareholder services fee 529,839
- ---------------------------------------------------------------------
Share registration costs 46,492
- ---------------------------------------------------------------------
Printing and postage 5,903
- ---------------------------------------------------------------------
Insurance premiums 6,115
- ---------------------------------------------------------------------
Miscellaneous 30,605
- --------------------------------------------------------------------- ----------
Total expenses 1,974,564
- ---------------------------------------------------------------------
Waivers--
- ---------------------------------------------------------------------
Waiver of investment advisory fee $(734,005)
- ---------------------------------------------------------
Waiver of shareholder services fee (32,731)
- --------------------------------------------------------- ---------
Total waivers (766,736)
- --------------------------------------------------------------------- ----------
Net expenses 1,207,828
- ----------------------------------------------------------------------------------- -----------
Net investment income $10,264,753
- ----------------------------------------------------------------------------------- -----------
REALIZED GAIN ON INVESTMENTS:
- -----------------------------------------------------------------------------------
Net realized gain on investments 155,205
- ----------------------------------------------------------------------------------- -----------
Change in net assets resulting from operations $10,419,958
- ----------------------------------------------------------------------------------- -----------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

AUTOMATED TREASURY CASH RESERVES

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-------------------------------
1996 1995
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 10,264,753 $ 7,864,070
- --------------------------------------------------------------
Net realized gain on investments 155,205 --
- -------------------------------------------------------------- ------------- -------------
Change in net assets resulting from operations 10,419,958 7,864,070
- --------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------
Distributions from net investment income (10,264,753) (7,864,070)
- --------------------------------------------------------------
Distributions from net realized gains (155,205) --
- -------------------------------------------------------------- ------------- -------------
Change in net assets from distributions to shareholders (10,419,958) (7,864,070)
- --------------------------------------------------------------
SHARE TRANSACTIONS--
- --------------------------------------------------------------
Proceeds from sale of shares 871,777,363 676,882,602
- --------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 3,362,478 4,267,547
- --------------------------------------------------------------
Cost of shares redeemed (781,979,740) (704,481,817)
- -------------------------------------------------------------- ------------- -------------
Change in net assets resulting from share transactions 93,160,101 (23,331,668)
- -------------------------------------------------------------- ------------- -------------
Change in net assets 93,160,101 (23,331,668)
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 167,508,106 190,839,774
- -------------------------------------------------------------- ------------- -------------
End of period $ 260,668,207 $ 167,508,106
- -------------------------------------------------------------- ------------- -------------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

AUTOMATED TREASURY CASH RESERVES

NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
(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 portfolios. The financial
statements included herein are only those of Automated Treasury Cash Reserves
(the "Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is to provide current income
consistent with stability of principal and liquidity.

(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.

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 over a period of five years from
the Fund's commencement date.

USE OF ESTIMATES--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that

AUTOMATED TREASURY CASH RESERVES
- --------------------------------------------------------------------------------

affect the amounts of assets, liabilities, expenses and revenues reported
in the financial statements. Actual results could differ from those
estimated.

OTHER--Investment transactions are accounted for on the trade date.

(3) SHARES OF BENEFICIAL INTEREST

Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
-----------------------------
1996 1995
------------ ------------
<S> <C> <C>
- ---------------------------------------------------------------
Shares sold 871,777,363 676,882,602
- ---------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 3,362,478 4,267,547
- ---------------------------------------------------------------
Shares redeemed (781,979,740) (704,481,817)
- --------------------------------------------------------------- ------------ ------------
Net change resulting from share transactions 93,160,101 (23,331,668)
- --------------------------------------------------------------- ------------ ------------
</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 0.50% of the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.

SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services, the Fund will pay Federated Shareholder
Services up to 0.25% of average daily net assets of the Fund for the period. The
fee paid to Federated Shareholder Services is used to finance certain services
for shareholders and to maintain shareholder accounts. Federated Shareholder
Services may voluntarily choose to waive any portion of its fee. Federated
Shareholder Services can modify or terminate this voluntary waiver at any time
at its sole discretion.

AUTOMATED TREASURY CASH RESERVES
- --------------------------------------------------------------------------------

PORTFOLIO ACCOUNTING FEES--Federated Services Company 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.

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, 1996, 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 for 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 audits 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, 1996, 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, 1996, 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 the
periods presented therein, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 14, 1996

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Government Trust
Automated Treasury Federated Investors Tower
Cash Reserves Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
c/o Federated Shareholder Services
Custodian Company
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services P.O. Box 8600
Company Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
AUTOMATED TREASURY
CASH RESERVES
PROSPECTUS

A Diversified Portfolio of Federated
Government Trust, an Open-End
Management Investment Company

Prospectus dated June 30, 1996

LOGO
CUSIP 314186404
1052101A (6/96)

- --------------------------------------------------------------------------------

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 provide current income consistent with stability of principal and liquidity.

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.

Prospectus dated June 30, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

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

TRUST INFORMATION 4
- ------------------------------------------------------

Management of the Trust 4
Distribution of Institutional
Service Shares 5
Administration of the Fund 6
NET ASSET VALUE 6
- ------------------------------------------------------

HOW TO PURCHASE SHARES 7
- ------------------------------------------------------

HOW TO REDEEM SHARES 8
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 9
- ------------------------------------------------------

TAX INFORMATION 10
- ------------------------------------------------------

Federal Income Tax 10
State and Local Taxes 10

OTHER CLASSES OF SHARES 10
- ------------------------------------------------------

PERFORMANCE INFORMATION 10
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 12
- ------------------------------------------------------

FINANCIAL STATEMENTS 13
- ------------------------------------------------------

REPORT OF ERNST & YOUNG, LLP
INDEPENDENT AUDITORS 20
- ------------------------------------------------------

ADDRESSES 21
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price)..................................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)...................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.06%
12b-1 Fee(2)................................................................. 0.00%
Total Other Expenses......................................................... 0.39%
Shareholder Services Fee................................................ 0.25%
Total Operating Expenses(3)........................................ 0.45%
</TABLE>

(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The advisor can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.

(2) The Institutional Service Shares has no present intention of paying or
accruing the 12b-1 fee during the fiscal year ending April 30, 1997. If the
Institutional Service Shares were paying or accruing the 12b-1 fee, the
Institutional Service Shares 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 operating expenses would have been 0.79% absent the voluntary
waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of 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." 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................. $5 $14 $25 $ 57
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

U.S. TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE 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,
----------------------
1996 1995(A)
- ------------------------------------------------------------- -------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------
Net investment income 0.05 0.03
- ------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Distributions from net investment income (0.05) (0.03)
- ------------------------------------------------------------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
- ------------------------------------------------------------- ------ ------
TOTAL RETURN(B) 5.17% 2.60%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses 0.45% 0.45%*
- -------------------------------------------------------------
Net investment income 4.97% 5.33%*
- -------------------------------------------------------------
Expense waiver/reimbursement(c) 0.34% 0.39%*
- -------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------
Net assets, end of period (000 omitted) $277,099 $60,508
- -------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(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 charge or
contingent deferred sales charge, if applicable.

(See Notes which are an integral part of the Financial Statements)

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares 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 Board of
Trustees has established two classes of shares known as Institutional Service
Shares and Institutional Shares. This prospectus relates only to Institutional
Service Shares of the Fund, which are designed primarily for accounts for which
financial institutions act in an agency or fiduciary capacity 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. Institutional
Service Shares are also distributed under a 12b-1 Plan adopted by the Trust and
are subject to shareholder services fees.

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

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS. The Fund invests only in U.S. Treasury securities, which
are fully guaranteed as to principal and interest by the United States.

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.

INVESTMENT LIMITATIONS

The Fund will not borrow money directly or pledge securities except, under
certain circumstances, the Fund may borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of its total assets to secure
such borrowings.

The Fund will not invest more than 10% of its net assets in illiquid securities.

TRUST INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

ADVISORY FEES. The adviser receives an annual investment advisory fee equal
to .40% 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. Also, the
adviser 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.

Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher
Donahue, who is President and Trustee of Federated Investors.

DISTRIBUTION OF INSTITUTIONAL SERVICE 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 PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940 (the
"Plan"), the distributor may be paid a fee by the Fund in an amount computed at
an annual rate of up to .25% of the average daily net asset value of the Fund.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to provide
sales services or distribution-related support services as agents for their
clients or customers.

The 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 Plan.

In addition, the Trust has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Trust may make payments up to .25% of the average daily net asset value of
its shares to obtain certain personal services for shareholders and to

maintain shareholder accounts. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily. Under the
Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Trust and Federated Shareholder Services.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund at an
annual rate which relates to the average aggregate daily net assets of all funds
advised by affiliates of Federated Investors as specified below:
<TABLE>
<CAPTION>
MAXIMUM FEE AVERAGE AGGREGATE DAILY NET ASSETS
- --------------------------- -----------------------------------
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares Federated
Services Company may choose voluntarily to waive a portion of its fee.

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 Institutional
Service Shares from the value of Fund assets attributable to Institutional
Service 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.

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is open for business. Shares may be purchased as described below, either through
a financial institution (such as a bank or broker/dealer) or by wire or by check
directly from the Fund, with a minimum initial investment of $25,000 or more
within a 90-day period. Financial institutions may impose different minimum
investment requirements on their customers.

In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Fund
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Fund before shares can be purchased.

PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION. Investors may purchase shares
through a financial institution which has a sales agreement with the
distributor. Orders are considered received when the Fund receives payment by
wire or converts payment by check from the financial institution into federal
funds. It is the financial institution's responsibility to transmit orders
promptly. Financial institutions may charge additional fees for their services.

PURCHASING SHARES BY WIRE. Shares may be purchased by wire by calling the Fund
before 1:00 p.m. Eastern time to place an order. The order is considered
received immediately. Payment by federal funds must be received before 3:00 p.m.
Eastern time in order to begin earning dividends that same day. Federal funds
should be wired as follows: Federated Shareholder 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.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted. Questions on wire purchases should be directed to your shareholder
services representative at the telephone number listed on your account
statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to U.S. Treasury Cash Reserves--Institutional
Service Shares. Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received), and shares begin earning dividends the next day.

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.

HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------

REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION. Shares may be redeemed by
contacting the shareholder's financial institution. Shares will be redeemed at
the net asset value next determined after Federated Shareholder Services Company
receives the redemption request. According to the shareholder's instructions,
redemption proceeds can be sent to the financial institution or to the
shareholder by check or by wire. The financial institution is responsible for
promptly submitting redemption requests and providing proper written redemption
instructions. Customary fees and commissions may be charged by the financial
institution for this service.

REDEEMING SHARES BY TELEPHONE. Redemptions may be made by calling the Fund
provided the Fund has a properly completed authorization form. These forms can
be obtained from Federated Securities Corp. Proceeds from redemption requests
received before 12:00 noon (Eastern time) 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, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Under limited circumstances,
arrangements may be made with the distributor for same-day payment of proceeds,
without that day's dividend, for redemption requests received before 2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or through ACH
will not be wired until that method of payment has cleared. Proceeds from
redemption requests on holidays when wire transfers are restricted will be wired
the following business day. Questions about telephone redemptions on days when
wire transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement.

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.

The written request should state: the Fund name and the class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven

days, after the receipt of a proper written redemption request. Dividends are
paid up to and including the day that a redemption request is processed.

ACCOUNT AND SHARE INFORMATION
- --------------------------------------------------------------------------------

VOTING RIGHTS. Each share of the Trust owned by a shareholder gives that
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 shareholders of that portfolio or class are entitled to
vote. 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 election of Trustees under certain circumstances.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund also offers another class of shares called Institutional Shares.
Institutional Shares are sold at net asset value primarily to institutional
investors, such as banks, fiduciaries, custodians of public funds and similar
institutional investors, such as corporations, unions, hospitals, insurance
companies and municipalities and are subject to a minimum initial investment of
$25,000 within a 90-day period.
All classes are subject to certain of the same expenses, however, Institutional
Shares are distributed with no 12b-1 Plan but are subject to shareholder
services fees.

Other expense differences between classes may affect the performance of each
class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund advertises its total return, yield, and effective
yield. The performance figures will be calculated separately for each class of
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.

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.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

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,
---------------------------------------------------
1996 1995 1994 1993 1992(A)
- ----------------------------------------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------
Net investment income 0.05 0.05 0.03 0.03 0.04
- ----------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- -----------------------------------------
Distributions from net investment
income (0.05) (0.05) (0.03) (0.03) (0.04)
- ----------------------------------------- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------- ------ ------ ------ ------ ------
TOTAL RETURN(B) 5.43% 4.75% 2.95% 3.13% 4.24%
- -----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------
Expenses 0.20% 0.20% 0.20% 0.20% 0.16%*
- -----------------------------------------
Net investment income 5.29% 4.85% 2.93% 3.03% 4.42%*
- -----------------------------------------
Expense waiver/reimbursement(c) 0.59% 0.39% 0.43% 0.50% 0.62%*
- -----------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------
Net assets, end of period (000
omitted) $937,662 $609,233 $265,030 $177,471 $83,244
- -----------------------------------------
</TABLE>

* Computed on an annualized basis.

(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 charge or
contingent deferred sales charge, if applicable.

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES

PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ ------------------------------------------------------------------------ --------------
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--99.7%
- -----------------------------------------------------------------------------------------
(A) U.S. TREASURY BILLS--72.8%
------------------------------------------------------------------------
$125,000,000 4.76% - 4.79%, 5/16/1996 $ 124,751,457
------------------------------------------------------------------------
74,000,000 4.78% - 4.84%, 5/9/1996 73,921,010
------------------------------------------------------------------------
16,000,000 4.82%, 8/29/1996 15,742,933
------------------------------------------------------------------------
114,000,000 4.82% - 5.02%, 5/23/1996 113,657,894
------------------------------------------------------------------------
85,000,000 4.84% - 4.94%, 5/30/1996 84,664,708
------------------------------------------------------------------------
86,000,000 4.89% - 4.94%, 6/27/1996 85,331,691
------------------------------------------------------------------------
87,500,000 4.89% - 5.04%, 6/6/1996 87,068,645
------------------------------------------------------------------------
7,500,000 4.90%, 5/2/1996 7,498,979
------------------------------------------------------------------------
147,000,000 4.91% - 5.01%, 7/5/1996 145,684,454
------------------------------------------------------------------------
27,000,000 4.94%, 8/15/1996 26,607,270
------------------------------------------------------------------------
27,000,000 4.96%, 6/13/1996 26,840,040
------------------------------------------------------------------------
30,000,000 4.98%, 6/20/1996 29,792,708
------------------------------------------------------------------------
45,000,000 4.98%, 7/11/1996 44,558,469
------------------------------------------------------------------------
19,000,000 5.18%, 10/10/1996 18,557,538
------------------------------------------------------------------------ --------------
Total 884,677,796
------------------------------------------------------------------------ --------------
U.S. TREASURY NOTES--26.9%
------------------------------------------------------------------------
33,000,000 4.38%, 8/15/1996 32,916,596
------------------------------------------------------------------------
130,000,000 5.88% - 7.63%, 5/31/1996 130,147,378
------------------------------------------------------------------------
73,000,000 6.13% - 7.88%, 7/31/1996 73,247,265
------------------------------------------------------------------------
70,000,000 7.38%, 5/15/1996 70,059,982
------------------------------------------------------------------------
20,000,000 7.88%, 7/15/1996 20,117,188
------------------------------------------------------------------------ --------------
Total 326,488,409
------------------------------------------------------------------------ --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $1,211,166,205
------------------------------------------------------------------------ --------------
</TABLE>

(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
($1,214,760,873) at
April 30, 1996.

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $1,211,166,205
- ------------------------------------------------------------------------------
Cash 434,842
- ------------------------------------------------------------------------------
Income receivable 7,923,507
- ------------------------------------------------------------------------------
Receivable for investments sold 51,261,174
- ------------------------------------------------------------------------------ --------------
Total assets 1,270,785,728
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Payable for investments purchased $51,695,313
- ----------------------------------------------------------------
Income distribution payable 4,040,954
- ----------------------------------------------------------------
Accrued expenses 288,588
- ---------------------------------------------------------------- -----------
Total liabilities 56,024,855
- ------------------------------------------------------------------------------ --------------
NET ASSETS for 1,214,760,873 shares outstanding $1,214,760,873
- ------------------------------------------------------------------------------ --------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ------------------------------------------------------------------------------
$937,661,503 / 937,661,503 shares outstanding $1.00
- ------------------------------------------------------------------------------ --------------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------------------
$277,099,370 / 277,099,370 shares outstanding $1.00
- ------------------------------------------------------------------------------ --------------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $49,987,998
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $ 3,645,164
- --------------------------------------------------------------------
Administrative personnel and services fee 689,421
- --------------------------------------------------------------------
Custodian fees 104,967
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 89,110
- --------------------------------------------------------------------
Directors'/Trustees' fees 10,293
- --------------------------------------------------------------------
Auditing fees 13,468
- --------------------------------------------------------------------
Legal fees 4,487
- --------------------------------------------------------------------
Portfolio accounting fees 131,524
- --------------------------------------------------------------------
Shareholder services fee--Institutional Shares 1,906,454
- --------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 371,773
- --------------------------------------------------------------------
Share registration costs 233,608
- --------------------------------------------------------------------
Printing and postage 11,387
- --------------------------------------------------------------------
Insurance premiums 13,149
- --------------------------------------------------------------------
Miscellaneous 4,756
- -------------------------------------------------------------------- -----------
Total expenses 7,229,561
- --------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------
Waiver of investment advisory fee $(3,091,301)
- ------------------------------------------------------
Waiver of shareholder services fee--Institutional
Shares (1,906,454)
- ------------------------------------------------------ -----------
Total waivers (4,997,755)
- -------------------------------------------------------------------- -----------
Net expenses 2,231,806
- ----------------------------------------------------------------------------------- -----------
Net investment income $47,756,192
- ----------------------------------------------------------------------------------- -----------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 47,756,192 $ 19,174,852
- ------------------------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income
- ------------------------------------------------------------
Institutional Shares (40,360,730) (18,188,542)
- ------------------------------------------------------------
Institutional Service Shares (7,395,462) (986,310)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets resulting from distributions to
shareholders (47,756,192) (19,174,852)
- ------------------------------------------------------------ --------------- ---------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 3,934,548,103 1,756,823,729
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 5,240,359 1,510,042
- ------------------------------------------------------------
Cost of shares redeemed (3,394,768,512) (1,353,622,888)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets resulting from share transactions 545,019,950 404,710,883
- ------------------------------------------------------------ --------------- ---------------
Change in net assets 545,019,950 404,710,883
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 669,740,923 265,030,040
- ------------------------------------------------------------ --------------- ---------------
End of period $ 1,214,760,873 $ 669,740,923
- ------------------------------------------------------------ --------------- ---------------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES

NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------

(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 portfolios. The financial
statements included herein are only those of U.S. Treasury Cash Reserves (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is current income consistent with
stability of principal and liquidity.

The Fund offers two classes of shares: Institutional Shares and Institutional
Service Shares.

(2) SIGNIFICANT ACCOUNTING POLICIES

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.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.

OTHER--Investment transactions are accounted for on the trade date.

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) for each
class of shares. At April 30, 1996, capital paid-in aggregated $1,214,760,873.

Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
INSTITUTIONAL SHARES 1996 1995
- -------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 3,218,643,175 1,652,377,627
- --------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 4,028,759 1,509,906
- --------------------------------------------------------------
Shares redeemed (2,894,243,576) (1,309,684,428)
- -------------------------------------------------------------- -------------- --------------
Net change resulting from Institutional share transactions 328,428,358 344,203,105
- -------------------------------------------------------------- -------------- --------------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
INSTITUTIONAL SERVICE SHARES 1996 1995(A)
- -------------------------------------------------------------- -------------- --------------
<S> <C> <C>
Shares sold 715,904,928 104,446,102
- --------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,211,600 136
- --------------------------------------------------------------
Shares redeemed (500,524,936) (43,938,460)
- -------------------------------------------------------------- -------------- --------------
Net change resulting from Institutional Service share
transactions 216,591,592 60,507,778
- -------------------------------------------------------------- -------------- --------------
Net change resulting from share transactions 545,019,950 404,710,883
- -------------------------------------------------------------- -------------- --------------
</TABLE>

(a) Reflects operations for the period from December 15, 1994 (date of initial
public investment) to April 30, 1995.

(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 the Fund's average daily net assets. The Adviser may
voluntarily choose to waive any portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.

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 average daily net assets of the Fund for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. For the
fiscal year ended April 30, 1996, Institutional Shares fully waived its
shareholder service fee. FSS can modify or terminate this voluntary waiver at
any time at its sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSE--FServ, through its
subsidiary, Federated Shareholder Services Company serves as transfer and
dividend disbursing agent for the Fund. The fee paid to FServ is based on the
size, type, and number of accounts and transactions made by shareholders.

PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.

GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.

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, 1996, 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 financial highlights for the
periods presented therein. These financial statements and the 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.

In our opinion, this 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, 1996, 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 the periods presented
therein, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 14, 1996

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
U.S. Treasury Cash Reserves
Institutional Service Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Custodian
State Street Bank and c/o Federated Shareholder Services
Trust Company Company
P.O. Box 8600
Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services P.O. Box 8600
Company Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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, 1996

LOGO
CUSIP 314186503
1022103A-SS (6/96)

- --------------------------------------------------------------------------------

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 provide
current income consistent with stability of principal and liquidity.

This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.

Prospectus dated June 30, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

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

TRUST INFORMATION 4
- ------------------------------------------------------

Management of the Trust 4
Distribution of Institutional Shares 5
Administration of the Fund 6
NET ASSET VALUE 6
- ------------------------------------------------------

HOW TO PURCHASE SHARES 6
- ------------------------------------------------------

HOW TO REDEEM SHARES 7
- ------------------------------------------------------

ACCOUNT AND SHARE INFORMATION 8
- ------------------------------------------------------

TAX INFORMATION 9
- ------------------------------------------------------

Federal Income Tax 9
State and Local Taxes 9

OTHER CLASSES OF SHARES 9
- ------------------------------------------------------

PERFORMANCE INFORMATION 10
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SERVICE SHARES 11
- ------------------------------------------------------

FINANCIAL STATEMENTS 12
- ------------------------------------------------------

REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 19
- ------------------------------------------------------

ADDRESSES 20
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price)..................................................................... None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price)........................................ None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)...................... None
Redemption Fee (as a percentage of amount redeemed, if applicable)........... None
Exchange Fee................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1)............................................. 0.06%
12b-1 Fee.................................................................... None
Total Other Expenses......................................................... 0.14%
Shareholder Services Fee (after waiver)(2).............................. 0.00%
Total Operating Expenses(3)........................................ 0.20%
</TABLE>

(2) The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 0.79% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.

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." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ---------------------------------------------------------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment assuming (1) 5% annual return and (2)
redemption at the end of each time period................. $2 $ 6 $11 $ 26
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

U.S. TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 19.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
---------------------------------------------------
1996 1995 1994 1993 1992(A)
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------
Net investment income 0.05 0.05 0.03 0.03 0.04
- ------------------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS
- -------------------------------------------
Distributions from net investment income (0.05) (0.05) (0.03) (0.03) (0.04)
- ------------------------------------------- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------------------- ------ ------ ------ ------ ------
TOTAL RETURN(B) 5.43% 4.75% 2.95% 3.13% 4.24%
- -------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------
Expenses 0.20% 0.20% 0.20% 0.20% 0.16%*
- -------------------------------------------
Net investment income 5.29% 4.85% 2.93% 3.03% 4.42%*
- -------------------------------------------
Expense waiver/reimbursement(c) 0.59% 0.39% 0.43% 0.50% 0.62%*
- -------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------
Net assets, end of period (000 omitted) $937,662 $609,233 $265,030 $177,471 $83,244
- -------------------------------------------
</TABLE>

* Computed on an annualized basis.

(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 charge or
contingent deferred sales charge, if applicable.

(See Notes which are an integral part of the Financial Statements)

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares 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 Board of
Trustees has established two classes of shares known as Institutional Shares and
Institutional Service Shares. This prospectus relates only to Institutional
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

INVESTMENT POLICIES

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 U.S.
Treasury 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.

INVESTMENT LIMITATIONS

TRUST INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST

Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher
Donahue, who is President and Trustee of Federated Investors.

DISTRIBUTION OF INSTITUTIONAL 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.

engineering computer software programs that emphasize the attributes of the
Trust. Such assistance will be predicated upon the amount of shares the
financial institution sells or may sell, and/or upon the type and nature of
sales or marketing support furnished by the financial institution. Any payments
made by the distributor may be reimbursed by the Trust's investment adviser or
its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES. Federated Services Company, a subsidiary of Federated
Investors, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Fund at an
annual rate which relates to the average aggregate daily net assets of all funds
advised by affiliates of Federated Investors as specified below:
<TABLE>
<CAPTION>
MAXIMUM ADMINISTRATIVE
FEE ----------------------- AVERAGE AGGREGATE DAILY NET ASSETS
-----------------------------------
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

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 Institutional
Shares from the value of Fund assets attributable to Institutional 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.

HOW TO PURCHASE SHARES
- --------------------------------------------------------------------------------

Minimum investments will be calculated by combining all accounts maintained with
the Fund. Financial institutions may impose different minimum investment
requirements on their customers.

PURCHASING SHARES BY WIRE. Shares may be purchased by Federal Reserve wire by
calling the Fund before 1:00 p.m. Eastern time to place an order. The order is
considered received immediately. Payment by federal funds must be received
before 3:00 p.m. Eastern time that day. Federal funds should be wired as
follows: Federated Shareholder 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. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK. Shares may be purchased by sending a check to
Federated Shareholder Services Company, P.O. Box 8600, Boston, MA 02266-8600.
The check should be made payable to U.S. Treasury Cash Reserves-Institutional
Shares. Orders by mail are considered received when payment by check is
converted into federal funds (normally the business day after the check is
received), and shares begin earning dividends the next day.

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.

HOW TO REDEEM SHARES
- --------------------------------------------------------------------------------

not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

ACCOUNT AND SHARE INFORMATION
- --------------------------------------------------------------------------------

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.

TAX INFORMATION
- --------------------------------------------------------------------------------

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold at net asset value primarily to
accounts for which financial institutions act in an agency or fiduciary capacity
and are subject to a minimum initial investment of $25,000 within a 90-day
period.

All classes are subject to certain of the same expenses, however, Institutional
Service Shares are distributed under a 12b-1 Plan adopted by the Trust and also
are subject to shareholder services fees.

Other expense differences between classes may affect the performance of each
class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-235-4669.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund advertises its total return, yield, and effective
yield. The performance figures will be calculated separately for each class of
shares.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

U.S. TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 19.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------
1996 1995(A)
- ------------------------------------------------------------- -------- -------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
- -------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------
Net investment income 0.05 0.03
- ------------------------------------------------------------- ------ ------
LESS DISTRIBUTIONS
- -------------------------------------------------------------
Distributions from net investment income (0.05) (0.03)
- ------------------------------------------------------------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
- ------------------------------------------------------------- ------ ------
TOTAL RETURN(B) 5.17% 2.60%
- -------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------
Expenses 0.45% 0.45%*
- -------------------------------------------------------------
Net investment income 4.97% 5.33%*
- -------------------------------------------------------------
Expense waiver/reimbursement(c) 0.34% 0.39%*
- -------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------
Net assets, end of period (000 omitted) $277,099 $60,508
- -------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(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 charge or
contingent deferred sales charge, if applicable.

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES

PORTFOLIO OF INVESTMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ ------------------------------------------------------------- --------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--99.7%
- --------------------------------------------------------------------------------
(A) U.S. TREASURY BILLS--72.8%
-------------------------------------------------------------
$125,000,000 4.76% - 4.79%, 5/16/1996 $ 124,751,457
-------------------------------------------------------------
74,000,000 4.78% - 4.84%, 5/9/1996 73,921,010
-------------------------------------------------------------
16,000,000 4.82%, 8/29/1996 15,742,933
-------------------------------------------------------------
114,000,000 4.82% - 5.02%, 5/23/1996 113,657,894
-------------------------------------------------------------
85,000,000 4.84% - 4.94%, 5/30/1996 84,664,708
-------------------------------------------------------------
86,000,000 4.89% - 4.94%, 6/27/1996 85,331,691
-------------------------------------------------------------
87,500,000 4.89% - 5.04%, 6/6/1996 87,068,645
-------------------------------------------------------------
7,500,000 4.90%, 5/2/1996 7,498,979
-------------------------------------------------------------
147,000,000 4.91% - 5.01%, 7/5/1996 145,684,454
-------------------------------------------------------------
27,000,000 4.94%, 8/15/1996 26,607,270
-------------------------------------------------------------
27,000,000 4.96%, 6/13/1996 26,840,040
-------------------------------------------------------------
30,000,000 4.98%, 6/20/1996 29,792,708
-------------------------------------------------------------
45,000,000 4.98%, 7/11/1996 44,558,469
-------------------------------------------------------------
19,000,000 5.18%, 10/10/1996 18,557,538
------------------------------------------------------------- --------------
Total 884,677,796
------------------------------------------------------------- --------------
U.S. TREASURY NOTES--26.9%
-------------------------------------------------------------
33,000,000 4.38%, 8/15/1996 32,916,596
-------------------------------------------------------------
130,000,000 5.88% - 7.63%, 5/31/1996 130,147,378
-------------------------------------------------------------
73,000,000 6.13% - 7.88%, 7/31/1996 73,247,265
-------------------------------------------------------------
70,000,000 7.38%, 5/15/1996 70,059,982
-------------------------------------------------------------
20,000,000 7.88%, 7/15/1996 20,117,188
------------------------------------------------------------- --------------
Total 326,488,409
------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $1,211,166,205
------------------------------------------------------------- --------------
</TABLE>

(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
($1,214,760,873) at April 30, 1996.

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
YEAR ENDED APRIL 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $49,987,998
- -----------------------------------------------------------------------------------
EXPENSES:
- --------------------------------------------------------------------
Investment advisory fee $ 3,645,164
- --------------------------------------------------------------------
Administrative personnel and services fee 689,421
- --------------------------------------------------------------------
Custodian fees 104,967
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 89,110
- --------------------------------------------------------------------
Directors'/Trustees' fees 10,293
- --------------------------------------------------------------------
Auditing fees 13,468
- --------------------------------------------------------------------
Legal fees 4,487
- --------------------------------------------------------------------
Portfolio accounting fees 131,524
- --------------------------------------------------------------------
Shareholder services fee--Institutional Shares 1,906,454
- --------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 371,773
- --------------------------------------------------------------------
Share registration costs 233,608
- --------------------------------------------------------------------
Printing and postage 11,387
- --------------------------------------------------------------------
Insurance premiums 13,149
- --------------------------------------------------------------------
Miscellaneous 4,756
- -------------------------------------------------------------------- -----------
Total expenses 7,229,561
- --------------------------------------------------------------------
Waivers--
- --------------------------------------------------------------------
Waiver of investment advisory fee $(3,091,301)
- ------------------------------------------------------
Waiver of shareholder services fee--Institutional
Shares (1,906,454)
- ------------------------------------------------------ -----------
Total waivers (4,997,755)
- -------------------------------------------------------------------- -----------
Net expenses 2,231,806
- ----------------------------------------------------------------------------------- -----------
Net investment income $47,756,192
- ----------------------------------------------------------------------------------- -----------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES

STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
----------------------------------
1996 1995
--------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ------------------------------------------------------------
OPERATIONS--
- ------------------------------------------------------------
Net investment income $ 47,756,192 $ 19,174,852
- ------------------------------------------------------------ --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ------------------------------------------------------------
Distributions from net investment income
- ------------------------------------------------------------
Institutional Shares (40,360,730) (18,188,542)
- ------------------------------------------------------------
Institutional Service Shares (7,395,462) (986,310)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets resulting from distributions
to shareholders (47,756,192) (19,174,852)
- ------------------------------------------------------------ --------------- ---------------
SHARE TRANSACTIONS--
- ------------------------------------------------------------
Proceeds from sale of shares 3,934,548,103 1,756,823,729
- ------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 5,240,359 1,510,042
- ------------------------------------------------------------
Cost of shares redeemed (3,394,768,512) (1,353,622,888)
- ------------------------------------------------------------ --------------- ---------------
Change in net assets resulting from share transactions 545,019,950 404,710,883
- ------------------------------------------------------------ --------------- ---------------
Change in net assets 545,019,950 404,710,883
- ------------------------------------------------------------
NET ASSETS:
- ------------------------------------------------------------
Beginning of period 669,740,923 265,030,040
- ------------------------------------------------------------ --------------- ---------------
End of period $ 1,214,760,873 $ 669,740,923
- ------------------------------------------------------------ --------------- ---------------
</TABLE>

(See Notes which are an integral part of the Financial Statements)

U.S. TREASURY CASH RESERVES

NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1996
- --------------------------------------------------------------------------------

(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 portfolios. The financial
statements included herein are only those of U.S. Treasury Cash Reserves (the
"Fund"), a diversified portfolio. The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held. The investment objective of the Fund is current income consistent with
stability of principal and liquidity.

The Fund offers two classes of shares: Institutional Shares and Institutional
Service Shares.

(2) SIGNIFICANT ACCOUNTING POLICIES

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.

USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.

OTHER--Investment transactions are accounted for on the trade date.

U.S. TREASURY CASH RESERVES
- --------------------------------------------------------------------------------

Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
1996
--------------
INSTITUTIONAL SHARES
- -------------------------------------------------------------- 1995
--------------
<S> <C> <C>
Shares sold 3,218,643,175 1,652,377,627
- --------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 4,028,759 1,509,906
- --------------------------------------------------------------
Shares redeemed (2,894,243,576) (1,309,684,428)
- -------------------------------------------------------------- -------------- --------------
Net change resulting from Institutional share transactions 328,428,358 344,203,105
- -------------------------------------------------------------- -------------- --------------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
--------------------------------
1996
--------------
INSTITUTIONAL SERVICE SHARES
- -------------------------------------------------------------- 1995(A)
--------------
<S> <C> <C>
Shares sold 715,904,928 104,446,102
- --------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,211,600 136
- --------------------------------------------------------------
Shares redeemed (500,524,936) (43,938,460)
- -------------------------------------------------------------- -------------- --------------
Net change resulting from Institutional Service share
transactions 216,591,592 60,507,778
- -------------------------------------------------------------- -------------- --------------
Net change resulting from share transactions 545,019,950 404,710,883
- -------------------------------------------------------------- -------------- --------------
</TABLE>

(a) Reflects operations for the period from December 15, 1994 (date of initial
public investment) to April 30, 1995.

(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

U.S. TREASURY CASH RESERVES
- --------------------------------------------------------------------------------

GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.

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, 1996, 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 for
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.

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, 1996, 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 the periods presented
therein, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 14, 1996

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
U.S. Treasury Cash Reserves
Institutional Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------------------------
c/o Federated Shareholder
Custodian Services Company
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services P.O. Box 8600
Company Boston, Massachusetts 02266-8600
- ------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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, 1996

LOGO
CUSIP 314186305
1022103A-IS (6/96)

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,
1996. This Statement is not a prospectus. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp is the distributor of the Fund and is a
subsidiary of Federated Investors
Cusip 31486107
0011606B (6/96)
Statement dated June 30, 1996

INVESTMENT POLICIES 3

Acceptable Investments 3
When-Issued and Delayed Delivery
Transactions 3
INVESTMENT LIMITATIONS 4

Regulatory Compliance 6
FEDERATED GOVERNMENT TRUST MANAGEMENT7

The Funds 14
Share Ownership 15
Trustee Compensation 16
Trustee Liability 18
INVESTMENT ADVISORY SERVICES 18

Investment Adviser 18
Advisory Fees 18
State Expense Limitations 19
BROKERAGE TRANSACTIONS 19

OTHER SERVICES 21

Fund Administration 21
Custodian and Portfolio Accountant
21
Transfer Agent 22
Independent Auditors 22
SHAREHOLDER SERVICES 22

DETERMINING NET ASSET VALUE 23

REDEMPTION IN KIND 24

MASSACHUSETTS PARTNERSHIP LAW 24

THE FUND'S TAX STATUS 25

PERFORMANCE INFORMATION 25

Yield 26
Effective Yield 26
Total Return 26
Performance Comparisons 27
Economic and Market Information28
ABOUT FEDERATED INVESTORS 28

Mutual Fund Market 29
Institutional Clients 30
Trust Organizations 30
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 30

INVESTMENT POLICIES

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 in a dollar amount sufficient to make payment for the securities to be

purchased are: segregated on the Fund`s records at the trade date; marked
to market daily; and maintained until the transaction is 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.

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 necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money except as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Fund will
not purchase any securities while borrowings in excess of 5% of its total
assets are outstanding.

PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 10%
of the value of total assets at the time of the pledge.

LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold U.S. government securities permitted by its investment objective,
policies, and limitations or Declaration of Trust.
INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, or limited partnership
interests in real estate, although it may invest in securities of companies
whose business involves the purchase or sale of real estate or in
securities which are secured by real estate or which represent interests in
real estate.

The above limitations cannot be changed without shareholder approval. The
following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material
change in those limitations becomes effective.

INVESTING IN 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 notice.
INVESTING IN WARRANTS
The Fund will not invest in warrants.
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 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 certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association 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.

REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in
the prospectus and this 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. 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.
FEDERATED GOVERNMENT TRUST
MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, 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. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Trust.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee

Chairman of the Board, Children's Hospital of Pittsburgh; Director or
Trustee of the Funds; formerly, Senior Partner, Ernst & Young LLP.

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 or Trustee 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 or Trustee 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 or
Trustee 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 or Trustee 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; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;

Director or Trustee 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.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director
or Trustee 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; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.

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 or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director or Trustee of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management
Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director or Trustee of the Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930

Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors;
Trustee, Federated Advisers, Federated Management, and Federated Research;
Director, Federated Research Corp. and Federated Global Research Corp.;
Trustee, Federated Shareholder Services Company; Director, Federated
Services Company; President and Trustee, Federated Shareholder Services;
Director, Federated Securities Corp.; Executive Vice President, Secretary
and Treasurer of the Funds.

Richard B. Fisher
Federated Investors Tower

Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the
Board of Trustees handles the responsibilities of the Board between
meetings of the Board.
THE FUNDS
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:
111 Corcoran Funds; Annuity Management Series; Arrow Funds; Automated
Government Money Trust; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate
U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Insurance Series; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated

Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; 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: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Utility Fund, Inc.; High
Yield Cash Trust; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds;
The Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.
As of May 31, 1996, the following shareholders of record owned 5% or more
of the outstanding shares of the Automated Government Cash Reserves: The
Chase Manhattan Bank, NA, New York, NY, owned 5.49%; Fiduciary Trust
Company International, New York, NY, owned 18.82%; Bancfirst, Oklahoma
City, OK, owned 7.19%; State Street Bank and Trust, North Quincy, MA, owned
26.99%%; Wheeler & Co., Boston, MA, owned 7.85%.

TRUSTEE COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue, $ 0 $-0- for the Trust and
Chairman and Trustee 54 other investment companies in the Fund
Complex

Thomas G. Bigley,++ $489.82 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John T. Conroy, $901.31 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
William J. Copeland, $901.31 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
James E. Dowd, $901.31 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D., $841.82 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr., $901.31 $115,760 for the Trust and

Trustee 54 other investment companies in the Fund
Complex
Glen R. Johnson, $ 0 $-0- for the Trust and
President and Trustee 9 other investment companies in the Fund
Complex

Peter E. Madden, $841.82 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer, $841.82 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $841.82 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar,$841.82 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts, $841.82 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex

++ Mr. Bigley served on 39 investment companies in the Federated Funds
Complex from January 1 through September 30, 1995. On October 1, 1995, he
was appointed a Trustee on 15 additional Federated Funds.

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

$2,501,388, and $2,227,794, respectively, of which $1,634,559, $1,583,947,
and $389,870, 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

elsewhere. The adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to guidelines established by the
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 Fund 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 year(s) ended April 30, 1996, 1995 and
1994, the Fund 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.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From March 1, 1994 to March 1, 1996, Federated
Administrative Services served as the Fund's Administrator. Prior to March
1, 1994, Federated Aministrative Services, Inc. served as the Fund's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information,
Federated Services Company, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred to
as the "Administrators." For the fiscal years ended April 30, 1996, 1995,
and 1994, the Administrators earned $418,364, $378,710, and $348,312,
respectively. 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 Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
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. The fee paid for this service is based
upon the level of the Fund's average net assets for the period plus out-of-
pocket expenses.

TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based on size,
type, number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP , Pittsburgh,
PA.
SHAREHOLDER SERVICES

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
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses. By adopting
the Shareholder Services Agreement, the Trustees expect that the Trust 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 year ending April 30, 1996, payments in the amount of

$1,382,392 were made pursuant to the Shareholder Services Agreement, all of
which was paid to financial institutions.

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% 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.

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.

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, 1996 was 4.74%.

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, 1996, was 4.85%.

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.

The Fund's average annual total returns for the one-year and five-year
periods ended April 30, 1996 and for the period from February 15, 1990
(date of initial public investment) through April 30, 1996 were 5.24% ,
4.08% and 4.72%, respectively.

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.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deffered compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in
which it invests, to a variety of other invstments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on
these developments by the Fund portfolio managers and their views and
anaylsis on how such developments could affect the Funds. In addition,
advertising and sales literature may quote statistics and give general
information about the mutual fund industry, including the growth of the
industry, from sources such as the Investment Company Institute.
ABOUT FEDERATED INVESTORS

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. These traders
handle trillions of dollars in annual trading volume.

In the money market sector, Federated Investors 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, 1995, Federated Investors managed
more than $40.2 billion in assets across approximately 47 money market
funds, including 17 government, 10 prime and 20 municipal with assets
approximating $20.9 billion, $11.5 billion and $7.8 billion, respectively.

J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investors' 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 $3 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 CLIENTS
Federated Investors 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 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. Federated's service to
financial professionals and institutions has earned it high ranking in
several DALBAR Surveys. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
CUSIP 314186107
0011606B (6/96)

AUTOMATED TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Automated Treasury Cash reserves (the "Fund"), a
portfolio of Federated Government Trust (the "Trust") dated June 30,
1996. This Statement is not a prospectus. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated June 30, 1996

FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779

Federated Securities Corp. is the distributor
of the Fund and is a subsidiary of Federated
Investors.

Cusip 31486404
1052101B (6/96)

INVESTMENT POLICIES 3

When-Issued and Delayed Delivery
Transactions 3
INVESTMENT LIMITATIONS 3

Regulatory Compliance 5
FEDERATED GOVERNMENT TRUST MANAGEMENT 6

The Funds 13
Share Ownership 14
Trustee Compensation 15
Trustee Liability 17
INVESTMENT ADVISORY SERVICES 17

Investment Adviser 17
Advisory Fees 18
State Expense Limitations 18
BROKERAGE TRANSACTIONS 18

OTHER SERVICES 20

Fund Administration 20
Custodian and Portfolio Accountant 20
Transfer Agent 21
Independent Auditors 21
SHAREHOLDER SERVICES 21

DETERMINING NET ASSET VALUE 22

REDEMPTION IN KIND 23

MASSACHUSETTS PARTNERSHIP LAW 23

THE FUND'S TAX STATUS 24

PERFORMANCE INFORMATION 24

Yield 25
Effective Yield 25
Total Return 25
Performance Comparisons 26
Economic and Market Information 27
ABOUT FEDERATED INVESTORS 27

Mutual Fund Market 28
Institutional Clients 29
Trust Organizations 29
Broker/Dealers and Bank Broker/Dealer
Subsidiaries 29

INVESTMENT POLICIES

Unless indicated otherwise, the policies described below may be changed by
the Board of 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 in a dollar amount sufficient to make payment for the securities to be
purchased are: segregated on the Fund`s records at the trade date; marked
to market daily; and maintained until the transaction is 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.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund may borrow
money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.

The Fund will not borrow money except as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Fund will
not purchase any securities while borrowings in excess of 5% of its total
assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 10%
of the value of total assets at the time of the pledge.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except that it may purchase or
hold U. S. Treasury obligations, as 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.

INVESTING IN WARRANTS
The Fund will not invest in warrants.

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 notice.
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 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.

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.

REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in

the prospectus and this 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. 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 investmentsaccording 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.
FEDERATED GOVERNMENT TRUST
MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Government Trust , and principal occupations.

Thomas G. Bigley
28th Floor, One Oxford Centre

Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; Director or
Trustee of the Funds; formerly, Senior Partner, Ernst & Young LLP.

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 or Trustee 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 or
Trustee 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; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director or Trustee of the Funds; formerly, Counsel, Horizon Financial,
F.A., Western Region.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or
Trustee of the Funds.

Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director or Trustee of the Funds; President Emeritus,
University of Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency Management
Advisory Board.

some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Trust.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Trustee or Director of
some of the Funds; President, Executive Vice President and Treasurer of
some of the Funds.

Director, Federated Securities Corp.; Executive Vice President, Secretary
and Treasurer of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Insurance Series; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Short-Term U.S. Government Trust;
Federated Stock and Bond Fund, Inc.; 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: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Utility Fund, Inc.; High
Yield Cash Trust; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration
Trust; Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds;
The Starburst Funds II; The Virtus Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World Investment
Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s outstanding
shares.

As of May 31, 1996, the following shareholders of record owned 5% or more
of the outstanding shares of the Automated Treasury Cash Reserves: The
Chase Manhattan Bank,NA, New York, NY, owned 24.89%; HUBCO, Birmingham, AL,
owned 6.52%; State Street Bank and Trust, North Quincy, MA, owned 5.34%;
Capital Bank, Miami, FLA, owned 7.97%; Var & Co., St. Paul , MN, owned
19.36%; BHC Securities, Inc., Philadelphia, PA, owned 13.10%.

TRUSTEE COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue, $ 0 $-0- for the Trust and
Chairman and Trustee 54 other investment companies in the Fund
Complex

Thomas G. Bigley,++ $326.84 $86,331 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John T. Conroy, $580.63 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
William J. Copeland, $580.63 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex

James E. Dowd, $580.63 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Lawrence D. Ellis, M.D., $536.84 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Edward L. Flaherty, Jr., $580.63 $115,760 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Glen R. Johnson, $ 0 $-0- for the Trust and
President and Trustee 9 other investment companies in the Fund
Complex

Peter E. Madden, $536.84 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Gregor F. Meyer, $536.84 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
John E. Murray, Jr., $536.84 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Wesley W. Posvar,$536.84 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex
Marjorie P. Smuts, $536.84 $104,898 for the Trust and
Trustee 54 other investment companies in the Fund
Complex

*Information is furnished for the fiscal year ended April 30, 1996.
#The aggregate compensation is provided for the Trust which is comprised of
three portfolios.
+The information is provided for the last calendar year.
++ Mr. Bigley served on 39 investment companies in the Federated Funds
Complex from January 1 through September 30, 1995. On October 1, 1995, he
was appointed a Trustee on 15 additional Federated Funds.

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, 1996, 1995, and 1994, the adviser earned $1,059,678,
$916,195, and $1,347,324, respectively, of which $734,005, $587,578, and
$365,620, respectively, were waived.

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
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 Fund 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 year(s) ended April 30, 1996, 1995 and
1994, the Fund paid no brokerage commissions.

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.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in
the prospectus. From March 1, 1994 to March 1, 1996, Federated
Administrative Services served as the Fund's Administrator. Prior to March
1, 1994, Federated Aministrative Services, Inc. served as the Fund's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information,
Federated Services Company, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be referred to
as the "Administrators." For the fiscal years ended April 30, 1996, 1995,
and 1994, the Administrators earned $160,338, $138,717, and $316,918,
respectively. 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 Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
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. The fee paid for this service is based
upon the level of the Fund's average net assets for the period plus out-of-
pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent,
Federated Shareholder Services Company, maintains all necessary shareholder
records. For its services, the transfer agent receives a fee based on size,
type, number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
PA.
SHAREHOLDER SERVICES

(3) enhancing shareholder recordkeeping systems; and (4) responding
promptly to shareholders' requests and inquiries concerning their accounts.
For the fiscal year ending April 30, 1996, payments in the amount of
$497,108 were made pursuant to the Shareholder Services Agreement, all of
which was paid to financial institutions.

DETERMINING NET ASSET VALUE

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% 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

MASSACHUSETTS PARTNERSHIP LAW

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.

THE FUND'S TAX STATUS

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, 1996, was 4.45%.

EFFECTIVE YIELD

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.

The Fund's average annual total returns for the one-year period ended April
30, 1996 and for the period from August 9, 1991 (date of initial public
investment) through April 30, 1996 were 5.04% and 3.79%, respectively.

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

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 $3 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:

Federated 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. Federated's service to
financial professionals and institutions has earned it high ranking in

several DALBAR Surveys. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
CUSIP 314186404
1052101B (6/96)

U.S. TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
INSTITUTIONAL SERVICE SHARES
INSTITUTIONAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
This 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, 1996. This
Statement is not a prospectus. You may request a copy of a prospectus
or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp is
the distributor of the Funds
and is a subsidiary of
Federated Investors
Cusip 314186305
Cusip 314186503
1022103B (6/96)
Statement dated June 30, 1996

INVESTMENT POLICIES 3

When-Issued and Delayed Delivery
Transactions 3
INVESTMENT LIMITATIONS 3

Regulatory Compliance 6
FEDERATED GOVERNMENT TRUST MANAGEMENT6

The Funds 14
Share Ownership 16
Trustee Compensation 16
Trustee Liability 18
INVESTMENT ADVISORY SERVICES 19

Investment Adviser 19
Advisory Fees 19
State Expense Limitations 19
BROKERAGE TRANSACTIONS 20

OTHER SERVICES 22

Fund Administration 22
Custodian and Portfolio Accountant 22
Transfer Agent 23
Independent Auditors 23

DISTRIBUTION PLAN (INSTITUTIONAL SERVICE
SHARES) AND SHAREHOLDER SERVICES 23

DETERMINING NET ASSET VALUE 25

REDEMPTION IN KIND 26

MASSACHUSETTS PARTNERSHIP LAW 26

THE FUND'S TAX STATUS 27

PERFORMANCE INFORMATION 27

Yield 28
Effective Yield 28
Total Return 29
Performance Comparisons 29
Economic and Market Information 31
ABOUT FEDERATED INVESTORS 31

Mutual Fund Market 32
Institutional Clients 32
Trust Organizations 33
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 33

INVESTMENT POLICIES

Unless indicated otherwise, the policies described below may be
changed by the Board of 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 in a dollar amount sufficient
to make payment for the securities to be purchased are:
segregated on the Fund`s records at the trade date; marked to
market daily; and maintained until the transaction is 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.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as
may be necessary for clearance of transactions.
ISSUING SENIOR SECURITIES AND BORROWING MONEY

The Fund will not issue senior securities except that the Fund
may borrow money in amounts up to one-third of the value of its
total assets, including the amounts borrowed.

The Fund will not borrow money except as a temporary,
extraordinary, or emergency measure or to facilitate management
of the portfolio by enabling the Fund to meet redemption requests
when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of the value of its
total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets
except as necessary 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 Declaration of
Trust.

INVESTING IN REAL ESTATE
The Fund will not purchase or sell real estate, including limited
partnership interests, although it may invest in the securities
of companies whose business involves the purchase or sale of real

estate or in securities which are secured by real estate or which
represent interests in real estate.

The above limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by
the Trustees without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes
effective.

INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net
assets in illiquid securities.
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 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.

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.

REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are
more restrictive than its fundamental investment limitations, as
set forth in each prospectus and this 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. 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.

FEDERATED GOVERNMENT TRUST MANAGEMENT

Officers and Trustees are listed with their addresses,
birthdates, 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. and Federated Global Research
Corp.; Chairman, Passport Research, Ltd.; Chief Executive Officer
and Director or Trustee of the Funds. Mr. Donahue is the father
of J. Christopher Donahue, Executive Vice President of the Trust.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh;
Director or Trustee of the Funds; formerly, Senior Partner, Ernst
& Young LLP.

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 or Trustee 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 or Trustee 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 or Trustee 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 or
Trustee 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; Shareholder, Henny, Kochuba, Meyer and Flaherty;
Director, Eat'N Park Restaurants, Inc., and Statewide Settlement
Agency, Inc.; Director or Trustee 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.

Peter E. Madden
Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts;
Director or Trustee 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; Shareholder, Henny, Kochuba, Meyer and Flaherty;
Chairman, Meritcare, Inc.; Director, Eat'N Park Restaurants,
Inc.; Director or Trustee of the Funds.

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 or Trustee of the
Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant;
Trustee, Carnegie Endowment for International Peace, RAND
Corporation, Online Computer Library Center, Inc., and U.S. Space
Foundation; Chairman, Czecho Management Center; Director or
Trustee of the Funds; President Emeritus, University of
Pittsburgh; founding Chairman, National Advisory Council for
Environmental Policy and Technology and Federal Emergency
Management Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator,
Non-profit entities; Director or Trustee of the Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers,
Federated Management, and Federated Research; President and
Director, Federated Research Corp. and Federated Global Research
Corp.; President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company, and Federated Shareholder Services;
Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee of some of the Funds.
Mr. Donahue is the son of John F. Donahue, Chairman and Trustee
of the Trust.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice
President, Federated Advisers, Federated Management, Federated
Research, Federated Research Corp., Federated Global Research
Corp. and Passport Research, Ltd.; Executive Vice President and
Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the
Funds; President, Executive Vice President and Treasurer of some
of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated
Investors; Trustee, Federated Advisers, Federated Management, and
Federated Research; Director, Federated Research Corp. and
Federated Global Research Corp.; Trustee, Federated Shareholder
Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated
Securities Corp.; Executive Vice President, Secretary and
Treasurer of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors;
Chairman and Director, Federated Securities Corp.; President or
Vice President of some of the Funds; Director or Trustee of some
of the Funds.

GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund,
Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated Master
Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; 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: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Utility Fund,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Term Trust, Inc. - 1999;
Liberty U.S. Government Money Market Trust; Liquid Cash Trust;
Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government
Securities; Trust for U.S. Treasury Obligations; and World
Investment Series, Inc.

SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Fund`s
outstanding Institutional Service Shares.
As of May 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of the U.S. Treasury Cash
Reserves-Institutional Shares: The Chase Mahattan Bank,New York,
NY, owned 10.49%; Barhemco, Boston, MA, owned 5.91%.
As of May 31, 1996, the following shareholders of record owned 5%
or more of the outstanding shares of the U.S. Treasury Cash
Reserves-Institutional Service Shares: The Chase Mahattan
Bank,New York, NY, owned 23.21%; Seaway National Bank of Chicago,
Chicago, IL, owned 12.62%; Central Carolina Bank & Trust, Durham,
NC, owned 11.90%; Warner & Stackpole, Boston, MA, owned 5.56%;
Voice Control Systems Inc., Dallas, TX, owned 5.66%.
TRUSTEE COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue, $ 0 $-0- for the Trust and
Chairman and Trustee 54 other investment companies in
the Fund Complex

Thomas G. Bigley,++ $683.51 $86,331 for the Trust and

Trustee 54 other investment companies in the
Fund Complex
John T. Conroy, $1,112.77 $115,760 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
William J. Copeland, $1,112.77 $115,760 for the Trust
and
Trustee 54 other investment companies in the
Fund Complex
James E. Dowd, $1,112.77 $115,760 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $1,038.51 $104,898 for the Trust
and
Trustee 54 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $1,112.77 $115,760 for the Trust
and
Trustee 54 other investment companies in the
Fund Complex
Glen R. Johnson, $ 0 $-0- for the Trust and
President and Trustee 9 other investment companies in the
Fund Complex

Peter E. Madden, $1,038.51 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Gregor F. Meyer, $1,038.51 $104,898 for the Trust and

Trustee 54 other investment companies in the
Fund Complex
John E. Murray, Jr., $1,038.51 $104,898 for the Trust
and
Trustee 54 other investment companies in the
Fund Complex
Wesley W. Posvar,$1,038.51 $104,898 for the Trust and
Trustee 54 other investment companies in the
Fund Complex
Marjorie P. Smuts, $1,038.51 $104,898 for the Trust
and
Trustee 54 other investment companies in the
Fund Complex

*Information is furnished for the fiscal year ended April 30,
1996.
#The aggregate compensation is provided for the Trust which is
comprised of three portfolios.
+The information is provided for the last calendar year.
++ Mr. Bigley served on 39 investment companies in the Federated
Funds Complex from January 1 through September 30, 1995. On
October 1, 1995, he was appointed a Trustee on 15 additional
Federated Funds.

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, 1996, 1995, and 1994, the
adviser earned $3,645,164, $1,572,822, and $981,067,
respectively, of which $3,091,301, $1,525,643, and $981,067,
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

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 Fund 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 year April 30, 1996, 1995 and 1994,
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.

OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for a
fee as described in each prospectus. From March 1, 1994 to March
1, 1996, Federated Administrative Services served as the Fund's
Administrator. Prior to March 1, 1994, Federated Aministrative
Services, Inc. served as the Fund's Administrator. Both former
Administrators are subsidiaries of Federated Investors. For
purposes of this Statement of Additional Information, Federated
Services Company, Federated Administrative Services and Federated
Administrative Services, Inc. may hereinafter collectively be
referred to as the "Administrators." For the fiscal years ended
April 30, 1996, 1995, and 1994, the Administrators earned
$689,421, $302,477, and $295,386, respectively.
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 Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
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. The
fee paid for this service is based upon the level of the Fund's
average net assets for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer
agent, Federated Shareholder Services Company, maintains all
necessary shareholder records. For its services, the transfer
agent receives a fee based on size, type, number of accounts and
transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP ,
Pittsburgh, PA.
DISTRIBUTION PLAN (INSTITUTIONAL SERVICE SHARES) AND SHAREHOLDER
SERVICES

These arrangements permit the payment of fees to financial
institutions, the distributor, and Federated Shareholder
Services, to stimulate distribution activities and to cause
services to be provided to shareholders by a representative who
has knowledge of the shareholder's particular circumstances and
goals. These activities and services may include, but are not
limited to: 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 Plan on behalf of the Institutional Service
Shares, the Trustees expect 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 year ended April 30, 1996, the Fund incurred no
distribution services fees on behalf of Institutional Service
Shares. In addition, for the fiscal year ended April 30, 1996,
the Fund paid shareholder service fees in the amount of $371,773
on behalf of Institutional Service Shares. For the fiscal year
ended April 30, 1996, the Fund incurred shareholder services fees
in the amount of $1,906,454, on behalf of Institutional Shares,
all of which were waived.

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% 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.

MASSACHUSETTS PARTNERSHIP LAW

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.

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, 1996, the yield for
Institutional Service Shares was 4.58%, and Institutional Shares
was 4.83%.

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, 1996, the effective
yield for Institutional Service Shares was 4.70%, and
Institutional Shares was 4.95%.

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.

For the one-year period ended April 30, 1996 and for the period
from December 15, 1994 (date of initial public investment)
through April 30, 1996, the average annual total returns were
5.11%, and 5.15%, respectively, for Institutional Service Shares.
For the one-year period ended April 30, 1996 and for the period
from June 11, 1991 (date of initial public investment) through
April 30, 1996 the average annual total returns and were 5.43%
and 4.19%, respectively, for Institutional Shares.

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.

it invests, to a variety of other invstments, such as bank
savings accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include
discussions of economic, financial and political developments and
their effect on the securities market. Such discussions may take
the form of commentary on these developments by the Fund
portfolio managers and their views and anaylsis on how such
developments could affect the Funds. In addition, advertising and
sales literature may quote statistics and give general
information about the mutual fund industry, including the growth
of the industry, from sources such as the Investment Company
Institute.
ABOUT FEDERATED INVESTORS

Federated Investors 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. These traders handle trillions of dollars in
annual trading volume.
In the money market sector, Federated Investors 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, 1995, Federated
Investors managed more than $40.2 billion in assets across
approximately 47 money market funds, including 17 government, 10
prime and 20 municipal with assets approximating $20.9 billion,
$11.5 billion and $7.8 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated
Investors' equity and high yield corporate bond management while
William D. Dawson, Executive Vice President, oversees Federated
Investors' domestic fixed income management. Henry A. Frantzen,
Executive Vice President, oversees the management of Federated
Investors' 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 CLIENTS
Federated Investors 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 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. Federated's service to financial professionals and
institutions has earned it high ranking in several DALBAR
Surveys. The marketing effort to these firms is headed by James
F. Getz, President, Broker/Dealer Division.
*Source: Investment Company Institute
Cusip 314186305
Cusip 314186503
1022103B (6/96)

PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) (i)Conformed Copy of Declaration of Trust
of the Registrant (1.);
(ii) Conformed Copy of Amendment No. 1 to
the Declaration of Trust (6.);
(iii) Conformed Copy of Amendment No. 2 to
the Declaration of Trust (9.);
(iv) Conformed Copy of Amendment No. 3 to
the Declaration of Trust (11);
(v) Conformed Copy of Amendment No. 4 to
the Declaration of Trust (15);
(2) Conformed Copy of By-Laws of the Registrant (1.);
(3) Not applicable;
(4) (i)Copy of Specimen Certificate for Shares
of Beneficial Interest of Automated
Treasury Cash Reserves (7.);

(ii) Copy of Specimen Certificate for Shares
of Beneficial Interest of U.S. Treasury Cash Reserves-
Institutional Shares (15);
(iii) Copy of Specimen Certificate for
Shares of Beneficial Interest of U.S.
Treasury Cash
Reserves-Institutional Service
Shares (15);
(iv) Copy of Specimen Certificate for
Shares of Beneficial Interest of
Automated Government Cash Reserves;+
(5) (i)Conformed Copy of Investment Advisory
Contract of the Registrant (13.);
(ii) Conformed copy of Exhibit A to Advisory
Contract (4.);
(iii) Conformed copy of Exhibit B to Advisory
Contract (5.);
(iv) Conformed copy of Exhibit C to Advisory
Contract (7.);
All exhibits have been filed electronically.

Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed December 21, 1989.
(File Nos. 33-32755 and 811-5981.)
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 on Form N-1A filed on March 14, 1991.
(File Nos. 33-32755 and 811-5981).

Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 4 on Form N-1A filed on April 11, 1991.
(File Nos. 33-32755 and 811-5981).
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 5 on Form N-1A filed on May 14, 1991.
(File Nos. 33-32755 and 811-5981)
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 6 on Form N-1A filed on June 5, 1991.
(File Nos. 33-32755 and 811-5981).
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 8 on Form N-1A filed on November 29,
1991. (File Nos. 33-32755 and 811-5981).
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 10 on Form N-1A filed on April 27, 1992.
(File Nos. 33-32755 and 811-5981)
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 12 on Form N-1A filed on June 25, 1993.
(File Nos. 33-32755 and 811-5981)
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 14 on Form N-1A filed on August 31, 1994.
(File Nos. 33-32755 and 811-5981).

(6) (i)Conformed copy of Distributor's Contract of the
Registrant (10.);
(ii) Conformed copy of Exhibit E to Distributor's
Contract (16);

(iii) The Registrant hereby incorporates the
conformed copy of the specimen Mutual Funds Sales and Service
Agreement; Mutual Funds Service Agreement; and Plan
Trustee/Mutual Funds Service Agreement from Item 4(b)(6) of the
Cash Trust Series II Registration Statement on Form N-1A, filed
with the Commission on July 24, 1995. (File Nos. 33-38550 and
811-6269)
(7) Not applicable;
(8) Conformed copy of Custodian Contract of the
Registrant (16);
(9) (i) Conformed copy of Agreement for Fund
Accounting Services, Administrative Services, Transfer Agency
Services and Custody Services Procurement; +
(ii) The responses described in Item 24(b)
(6) are hereby incorporated by reference.
(10) Conformed copy of Opinion and Consent of Counsel
as to legality of shares being registered; (16)
(11) Conformed copy of Consent of Independent Auditors;
+
(12) Not applicable;
(13) Conformed copy of Initial Capital
Understanding (2.);
(14) Not applicable;
(15) (i)Conformed copy of Rule 12b-1
Agreement; (15)
(ii) Conformed copy of Distribution Plan
(including Exhibit A); (16)

(16) Copy of Schedule for Computation of Performance
Data (10.);
(17) Copy of Financial Data Schedules; +
(18)............The Registrant hereby
incorporates the conformed copy of the
specimen Multiple Class Plan from Item 24(b)
(18) of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed
with the Commission on January 26, 1996.
(File Nos. 33-52149 and 811-07141)
(19) Conformed copy of Power of Attorney; +

Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed on February 1, 1990.
(File Nos. 33-32755 and 811-5981).
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 9 on Form N-1A filed on December 23,
1991. (File Nos. 33-32755 and 811-5981).
Response if incorporated by reference to Registrant's Post-
Effective Amendment No. 13 on Form N-1A filed on June 23, 1994.
(File Nos. 33-32755 and 811-5981).
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 14 on Form N-1A filed on August 31, 1994.
(File Nos. 33-32755 and 811-5981).
Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 16 on Form N-1A filed on June 21, 1995.
(File Nos. 33-32755 and 811-5981).

Persons Controlled by or Under Common Control with Registrant:

None

Number of Holders of Securities:

Number of Record Holders
Title of Class as of May 31, 1996

Shares of beneficial
interest (no par value)

Automated Government Cash Reserves 1,281
U.S. Treasury Cash Reserves
Institutional Shares 4,829
Institutional Service Shares 2,002
Automated Treasury Cash Reserves 593

Indemnification: (2.)

Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed on February 1, 1990.
(File Nos. 33-32755 and 811-5981).

Business and Other Connections of Investment Adviser:

For a description of the other business of the investment
adviser, see the section entitled "Trust Information - Management
of the Trust" in Part A. The affiliations with the Registrant of
four of the Trustees and one of the Officers of the investment
adviser are included in Part B of this Registration Statement
under "Federated Government Trust Management - Officers and
Trustees." The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson, (Partner, Wilson,
Halbrook & Bayard), 107 W. Market Street, Georgetown, Delaware
19947.

The remaining Officers of the investment adviser are: William D.
Dawson, III, Henry A. Frantzen, J. Thomas Madden, and Mark L.
Mallon, Executive Vice Presidents; Henry J. Gailliot, Senior Vice
President-Economist; Peter R. Anderson Drew J. Collins, Jonathan
C. Conley, Mark E. Durbiano, J. Alan Minteer and Mary Jo Ochson,
Senior Vice Presidents; J. Scott Albrecht, Joseph M. Balestrino,
Randall S. Bauer, David F. Belton, David A. Briggs, Kenneth J.
Cody, Deborah A. Cunningham, Michael P. Donnelly, Linda A.
Duessel, Kathleen M. Foody-Malus, Thomas M. Franks, Edward C.
Gonzales, Timothy E. Keefe, Stephen A. Keen, Mark S Kopinski,

Jeff A. Kozemchak, Marian R. Marinack, Susan M. Nason, Robert J.
Ostrowski, Frederick L. Plautz, Jr., Charles A. Ritter, James D.
Roberge, Frank Semack, William F. Stotz, Edward J. Tiedge, Sandra
L. Weber and Christopher H. Wiles, Vice Presidents; Thomas R.
Donahue, Treasurer; and Stephen A. Keen, Secretary. The business
address of each of the Officers of the investment adviser is
Federated Investors Tower, Pittsburgh, PA 15222-3779. These
individuals are also officers of a majority of the investment
advisers to the Funds listed in Part B of this Registration
Statement under "The Funds."

Principal Underwriters:

(a) Federated Securities Corp., the Distributor for shares of
the Registrant, also acts as principal underwriter for the
following open-end investment companies:

111 Corcoran Funds; Annuity Management Series; Arrow Funds;
Automated Government Money Trust; BayFunds; Blanchard Funds;
Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash
Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity
Income Fund, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income

Securities, Inc.; Federated Government Trust; Federated High
Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund,
Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Trust; Federated Short-Term Municipal Trust; Federated
Short-Term U.S. Government Trust; Federated Stock and Bond Fund,
Inc.; 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: 2-5 Years; Federated U.S.
Government Securities Fund: 5-10 Years; Federated Utility Fund,
Inc.; First Priority Funds; Fixed Income Securities, Inc.;
Fortress Utility Fund, Inc.; High Yield Cash Trust; Independence
One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series
Trust; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money Market
Management, Inc.; Money Market Obligations Trust; Money Market
Trust; Municipal Securities Income Trust; Newpoint Funds;
Peachtree Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds;
Star Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
The Biltmore Funds; The Biltmore Municipal Funds; The Monitor
Funds; The Planters Funds; The Starburst Funds; The Starburst
Funds II; The Virtus Funds; Tower Mutual Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves; Trust
for Short-Term U.S. Government Securities; Trust for U.S.

Treasury Obligations; Vision Group of Funds, Inc.; andWorld
Investment Series, Inc.

Federated Securities Corp. also acts as principal underwriter for
the following closed-end investment company: Liberty Term Trust,
Inc.- 1999.

(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant

Richard B. Fisher Director, Chairman, Chief Vice
President Federated Investors Tower Executive
Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.

John W. McGonigle Director, Federated Executive Vice
Federated Investors Tower Securities Corp. President and
Pittsburgh, PA 15222-3779 Secretary

(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant

Jane E. Broeren-Lambesis Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779

Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joeseph Kenedy Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices
Business Address With Underwriter With
Registrant

Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and
Offices

Business Address With Underwriter With
Registrant

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.

Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor Assistant Secretary, Treasurer

Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Location of Accounts and Records:

All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of the
following locations:

Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Shareholder Services
Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and
Portfolio Recordkeeper")

Federated Administrative
Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779

Federated Management Federated Investors Tower
("Adviser") Pittsburgh, PA 15222-3779

State Street Bank and Trustc/o Federated Shareholder
Company Services Company
("Custodian") P.O. Box 8600
Boston, MA 12266-8600

Management Services: Not applicable.

Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.

Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant, FEDERATED
GOVERNMENT TRUST, certifies that it meets all of the requirements
for effectiveness of the Amendment to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has

duly caused this Amendment to its Registration Statement to be
signed on its behalf by the undersigned, thereto duly authorized,
in the City of Pittsburgh and Commonwealth of Pennsylvania, on
the 25th day of June, 1996.

FEDERATED GOVERNMENT TRUST

BY: /s/S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
June 25, 1996

Pursuant to the requirements of the Securities Act of 1933,
this Amendment to its Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:

NAME TITLE DATE

By:/s/ S. Elliott Cohan
S. Elliott Cohan Attorney In Fact June 25, 1996
ASSISTANT SECRETARY For the Persons
Listed Below

NAME
TITLE

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

Glen R. Johnson* President and Trustee

John W. McGonigle* Executive Vice President, Secretary
and Treasurer
(Principal Financial and
Accounting Officer)

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

James E. Dowd* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr.* Trustee

Peter E. Madden* Trustee

Gregor F. Meyer* Trustee

John E. Murray, Jr. * Trustee

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the use of our report dated
June 14, 1996, in Post-Effective Amendment Number 16 to the Registration
Statement (Form N-1A No. 33-32755) and the related Prospectuses of FEDERATED
GOVERNMENT TRUST (comprising respectively, Automated Government Cash
Reserves, Automated Treasury Cash Reserves, and U.S. Treasury Cash Reserves)
dated June 30, 1996.

By:ERNST & YOUNG
Ernst & Young
Pitsburgh, Pennsylvania

Exhibit 9(I) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

AGREEMENT
FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES
AND
CUSTODY SERVICES PROCUREMENT

AGREEMENT made as of March 1, 1996, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having
their principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the "Investment Company"), on behalf of the
portfolios (individually referred to herein as a "Fund" and collectively as
"Funds") of the Investment Company, and FEDERATED SERVICES COMPANY, a
Pennsylvania corporation, having its principal office and place of business
at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 on behalf
of itself and its subsidiaries (the "Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), with authorized and issued shares of capital stock or
beneficial interest ("Shares");
WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined)
including certain pricing, accounting and recordkeeping services for each
of the Funds, including any classes of shares issued by any Fund
("Classes") if so indicated on Exhibit 1, and the Company desires to accept
such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein
defined), if so indicated on Exhibit, and the Company desires to accept
such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer
agency services (as herein defined) if so indicated on Exhibit 1, and agent
in connection with certain other activities, and the Company desires to
accept such appointment; and
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the
Company desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the
period and on the terms set forth in this Agreement. The Company accepts
such appointment and agrees to furnish the services herein set forth in
return for the compensation as provided in Article 3 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's Board
of Trustees or Directors ("Board"), the Company will assist the Investment
Company with regard to fund accounting for the Investment Company, and/or
the Funds, and/or the Classes, and in connection therewith undertakes to
perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide
a price for a security which the Company believes should be
available by market quotation, the Company may obtain a price by
calling brokers designated by the investment adviser of the fund
holding the security, or if the adviser does not supply the names of
such brokers, the Company will attempt on its own to find brokers to
price those securities; thirdly, for securities for which no market
price is available, the Pricing Committee of the Board will
determine a fair value in good faith. Consistent with Rule 2a-4 of
the 40 Act, estimates may be used where necessary or appropriate.
The Company's obligations with regard to the prices received from
outside pricing services and designated brokers or other outside
sources, is to exercise reasonable care in the supervision of the
pricing agent. The Company is not the guarantor of the securities
prices received from such agents and the Company is not liable to
the Fund for potential errors in valuing a Fund's assets or
calculating the net asset value per share of such Fund or Class when
the calculations are based upon such prices. All of the above
sources of prices used as described are deemed by the Company to be
authorized sources of security prices. The Company provides daily to
the adviser the securities prices used in calculating the net asset
value of the fund, for its use in preparing exception reports for
those prices on which the adviser has comment. Further, upon receipt
of the exception reports generated by the adviser, the Company
diligently pursues communication regarding exception reports with
the designated pricing agents;
B. Determine the net asset value per share of each Fund and/or Class,
at the time and in the manner from time to time determined by the
Board and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate realized capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Investment
Company are the property of the Investment Company and further
agrees to surrender promptly to the Investment Company such records
upon the Investment Company's request;
G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section
One, shall hereafter be referred to as "Fund Accounting Services."
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for Fund Accounting Services
in accordance with the fees agreed upon from time to time between
the parties hereto. Such fees do not include out-of-pocket
disbursements of the Company for which the Funds shall reimburse the
Company. Out-of-pocket disbursements shall include, but shall not be
limited to, the items agreed upon between the parties from time to
time.
B. The Fund and/or the Class, and not the Company, shall bear the cost
of: custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes
and fees payable to federal, state and other governmental agencies;
fees of Trustees or Directors of the Investment Company; independent
auditors expenses; legal and audit department expenses billed to the
Company for work performed related to the Investment Company, the
Funds, or the Classes; law firm expenses; organizational expenses;
or other expenses not specified in this Article 3 which may be
properly payable by the Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no
less frequently than monthly, and shall be paid daily upon request
of the Company. The Company will maintain detailed information about
the compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement
with respect to a Fund or a Class to the end of the initial month
shall be prorated according to the proportion that such period bears
to the full month period. Upon any termination of this Agreement
before the end of any month, the fee for such period shall be
prorated according to the proportion which such period bears to the
full month period. For purposes of determining fees payable to the
Company, the value of the Fund's net assets shall be computed at the
time and in the manner specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited to
assist it in performing Fund Accounting Services. Such person or
persons may be affiliates of the Company, third-party service
providers, or they may be officers and employees who are employed by
both the Company and the Investment Company; provided, however, that
the Company shall be as fully responsible to each Fund for the acts
and omissions of any such subcontractor as it is for its own acts
and omissions. The compensation of such person or persons shall be
paid by the Company and no obligation shall be incurred on behalf of
the Investment Company, the Funds, or the Classes in such respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
ARTICLE 4. APPOINTMENT.
The Investment Company hereby appoints the Company as Administrator for
the period on the terms and conditions set forth in this Agreement. The
Company hereby accepts such appointment and agrees to furnish the services
set forth in Article 5 of this Agreement in return for the compensation set
forth in Article 9 of this Agreement.
ARTICLE 5. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the
Board and in accordance with Proper Instructions (as defined hereafter)
from the Investment Company the Company will provide facilities, equipment,
and personnel to carry out the following administrative services for
operation of the business and affairs of the Investment Company and each of
its portfolios:
A. prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the Charter (which
has already been prepared and filed), the By-laws and minutes of
meetings of the Board and Shareholders;
B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements
for the Investment Company and the Investment Company's shares and
all amendments thereto, reports to regulatory authorities and
shareholders, prospectuses, proxy statements, and such other
documents all as may be necessary to enable the Investment Company
to make a continuous offering of its shares;
C. prepare, negotiate, and administer contracts (if any) on behalf of
the Investment Company with, among others, the Investment Company's
investment advisers and distributors, subject to any applicable
restrictions of the Board or the 1940 Act;
D. calculate performance data of the Investment Company for
dissemination to information services covering the investment
company industry;
E. prepare and file the Investment Company's tax returns;
F. coordinate the layout and printing of publicly disseminated
prospectuses and reports;
G. perform internal audit examinations in accordance with a charter to
be adopted by the Company and the Investment Company;
H. assist with the design, development, and operation of the Investment
Company and the Funds;
I. provide individuals reasonably acceptable to the Board for
nomination, appointment, or election as officers of the Investment
Company, who will be responsible for the management of certain of
the Investment Company's affairs as determined by the Investment
Company's Board; and
J. consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section
4, shall hereafter be referred to as "Administrative Services."
ARTICLE 6. RECORDS.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but
not limited to records required by Section 31(a) of the Investment Company
act of 1940 and the rules thereunder, as the same may be amended from time
to time, pertaining to the Administrative Services performed by it and not
otherwise created and maintained by another party pursuant to contract with
the Investment Company. Where applicable, such records shall be maintained
by the Company for the periods and in the places required by Rule 31a-2
under the 1940 Act. The books and records pertaining to the Investment
Company which are in the possession of the Company shall be the property of
the Investment Company. The Investment Company, or the Investment
Company's authorized representatives, shall have access to such books and
records at all times during the Company's normal business hours. Upon the
reasonable request of the Investment Company, copies of any such books and
records shall be provided promptly by the Company to the Investment Company
or the Investment Company's authorized representatives.
ARTICLE 7. DUTIES OF THE FUND.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all
applicable requirements the 1940 Act, the Internal Revenue Code, and any
other laws, rules and regulations of government authorities having
jurisdiction.
ARTICLE 8. EXPENSES.
The Company shall be responsible for expenses incurred in providing
office space, equipment, and personnel as may be necessary or convenient to
provide the Administrative Services to the Investment Company, including
the compensation of the Company employees who serve as trustees or
directors or officers of the Investment Company. The Investment Company
shall be responsible for all other expenses incurred by the Company on
behalf of the Investment Company, including without limitation postage and
courier expenses, printing expenses, travel expenses, registration fees,
filing fees, fees of outside counsel and independent auditors, or other
professional services, organizational expenses, insurance premiums, fees
payable to persons who are not the Company's employees, trade association
dues, and other expenses properly payable by the Funds and/or the Classes.
ARTICLE 9. COMPENSATION.
For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation
for its services rendered hereunder an administrative fee at an annual rate
per Fund, as specified below.
The compensation and out of pocket expenses attributable to the Fund
shall be accrued by the Fund and paid to the Company no less frequently
than monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation and out
of pocket expenses by the Fund.
MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUNDS
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
(Average Daily Net Asset break-points are on a complex-wide basis)

However, in no event shall the administrative fee received during any
year of the Agreement be less than, or be paid at a rate less than would
aggregate $125,000 per Fund and $30,000 per Class. The minimum fee set
forth above in this Article 9 may increase annually upon each March 1
anniversary of this Agreement over the minimum fee during the prior 12
months, as calculated under this agreement, in an amount equal to the
increase in Pennsylvania Consumer Price Index (not to exceed 6% annually)
as last reported by the U.S. Bureau of Labor Statistics for the twelve
months immediately preceding such anniversary.
ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.
A. The Company shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Investment Company in
connection with the matters to which this Agreement relates, except
a loss resulting from willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this
Agreement. The Company shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Investment
Company) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any
person, even though also an officer, director, trustee, partner,
employee or agent of the Company, who may be or become an officer,
director, trustee, partner, employee or agent of the Investment
Company, shall be deemed, when rendering services to the Investment
Company or acting on any business of the Investment Company (other
than services or business in connection with the duties of the
Company hereunder) to be rendering such services to or acting solely
for the Investment Company and not as an officer, director, trustee,
partner, employee or agent or one under the control or direction of
the Company even though paid by the Company.
B. The Company shall be kept indemnified by the Investment Company and
be without liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the above
standards. In order that the indemnification provisions contained
in this Article 10 shall apply, however, it is understood that if in
any case the Investment Company may be asked to indemnify or hold
the Company harmless, the Investment Company shall be fully and
promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Company will use all
reasonable care to identify and notify the Investment Company
promptly concerning any situation which presents or appears likely
to present the probability of such a claim for indemnification
against the Investment Company. The Investment Company shall have
the option to defend the Company against any claim which may be the
subject of this indemnification. In the event that the Investment
Company so elects, it will so notify the Company and thereupon the
Investment Company shall take over complete defense of the claim,
and the Company shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this
Article. the Company shall in no case confess any claim or make any
compromise in any case in which the Investment Company will be asked
to indemnify the Company except with the Investment Company's
written consent.
SECTION THREE: TRANSFER AGENCY SERVICES.
ARTICLE 11. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company
agrees to act as, transfer agent and dividend disbursing agent for each
Fund's Shares, and agent in connection with any accumulation, open-account
or similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic investment
plan or periodic withdrawal program.
ARTICLE 12. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Investment
Company as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase
of shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the "Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate
to the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the
provisions of its governing document and the then-current
Prospectus of the Fund. The Company shall prepare and mail or
credit income, capital gain, or any other payments to
Shareholders. As the Dividend Disbursing Agent, the Company
shall, on or before the payment date of any such distribution,
notify the Custodian of the estimated amount required to pay
any portion of said distribution which is payable in cash and
request the Custodian to make available sufficient funds for
the cash amount to be paid out. The Company shall reconcile the
amounts so requested and the amounts actually received with the
Custodian on a daily basis. If a Shareholder is entitled to
receive additional Shares by virtue of any such distribution or
dividend, appropriate credits shall be made to the
Shareholder's account, for certificated Funds and/or Classes,
delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class
and its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by
the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to
procedures described in the then-current Prospectus of the
Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor,
and shall effect such redemption at the price applicable to the
date and time of receipt of documents complying with said
procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the
total number of Shares of the Fund and/or Class which are
authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Company shall also provide the Fund
on a regular basis or upon reasonable request with the total
number of Shares which are authorized and issued and
outstanding, but shall have no obligation when recording the
issuance of Shares, except as otherwise set forth herein, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall forthwith
upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created
and maintained by the Company pursuant to this Agreement, which
are no longer needed by the Company in performance of its
services or for its protection. If not so turned over to the
Fund, such records and documents will be retained by the
Company for six years from the year of creation, during the
first two of which such documents will be in readily accessible
form. At the end of the six year period, such records and
documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies,
and, if required, mail to Shareholders, such notices for
reporting dividends and distributions paid as are required to
be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state
income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other conformable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund (and/or Class) sold in
each state ("blue sky reporting"). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's (and/or Class's) state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in
connection with Shareholder meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
ARTICLE 13. DUTIES OF THE INVESTMENT COMPANY.
A. Compliance
The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their
classes' Prospectus and for complying with all applicable
requirements of the Securities Act of 1933, as amended (the "1933
Act"), the 1940 Act and any laws, rules and regulations of
government authorities having jurisdiction.
B. Share Certificates
The Investment Company shall supply the Company with a sufficient
supply of blank Share certificates and from time to time shall renew
such supply upon request of the Company. Such blank Share
certificates shall be properly signed, manually or by facsimile, if
authorized by the Investment Company and shall bear the seal of the
Investment Company or facsimile thereof; and notwithstanding the
death, resignation or removal of any officer of the Investment
Company authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Investment
Company.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
ARTICLE 14. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company and/or the Fund agree to pay the
Company an annual maintenance fee for each Shareholder account as
agreed upon between the parties and as may be added to or amended
from time to time. Such fees may be changed from time to time
subject to written agreement between the Investment Company and the
Company. Pursuant to information in the Fund Prospectus or other
information or instructions from the Fund, the Company may sub-
divide any Fund into Classes or other sub-components for
recordkeeping purposes. The Company will charge the Fund the same
fees for each such Class or sub-component the same as if each were a
Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed
upon between the parties, as may be added to or amended from time to
time. In addition, any other expenses incurred by the Company at the
request or with the consent of the Investment Company and/or the
Fund, will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
SECTION FOUR: CUSTODY SERVICES PROCUREMENT.
ARTICLE 15. APPOINTMENT.
The Investment Company hereby appoints Company as its agent to evaluate
and obtain custody services from a financial institution that (i) meets the
criteria established in Section 17(f) of the 1940 Act and (ii) has been
approved by the Board as eligible for selection by the Company as a
custodian (the "Eligible Custodian"). The Company accepts such appointment.
ARTICLE 16. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution
that meets the criteria established in Section 17(f) of the 1940 Act
and has been approved by the Board as being eligible for selection by
the Company as an Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a
party to each such agreement. The Company may, as paying agent, be a
party to any agreement with any such Eligible Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services provided
by Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports
on the activities and services of Eligible Custodians; (ii) the
nature and amount of disbursements made on account of the each Fund
with respect to each custodial agreement; and (iii) such other
information as the Board shall reasonably request to enable it to
fulfill its duties and obligations under Sections 17(f) and 36(b) of
the 1940 Act and other duties and obligations thereof;
F. periodically provide recommendations to the Board to enhance
Eligible Custodian's customer services capabilities and improve upon
fees being charged to the Fund by Eligible Custodian; and
The foregoing, along with any additional services that Company shall
agree in writing to perform for the Fund under this Section Four, shall
hereafter be referred to as "Custody Services Procurement."
ARTICLE 17. FEES AND EXPENSES.
A. Annual Fee
For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with
the fees agreed upon from time to time.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed
upon between the parties, as may be added to or amended from time to
time. In addition, any other expenses incurred by the Company at the
request or with the consent of the Investment Company and/or the
Fund, will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
ARTICLE 18. REPRESENTATIONS.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter
into this arrangement and to provide the services contemplated in Section
Four of this Agreement.
SECTION FIVE: GENERAL PROVISIONS.
ARTICLE 19. PROPER INSTRUCTIONS.
As used throughout this Agreement, a "Proper Instruction" means a
writing signed or initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such writing shall set forth
the specific transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Company reasonably
believes them to have been given by a person previously authorized in
Proper Instructions to give such instructions with respect to the
transaction involved, and (b) the Investment Company, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Investment
Company, or the Fund, and the Company are satisfied that such procedures
afford adequate safeguards for the Fund's assets. Proper Instructions may
only be amended in writing.
ARTICLE 20. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights
or obligations under this Agreement may be assigned by either party without
the written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may without
further consent on the part of the Investment Company subcontract
for the performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a
Delaware business trust, which is duly registered as a transfer
agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934, as amended, or any succeeding statute ("Section
17A(c)(1)"); or
(2) such other provider of services duly registered as a transfer
agent under Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Investment Company
for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further
consent on the part of the Investment Company subcontract for the
performance of such services with Federated Administrative Services,
a wholly-owned subsidiary of the Company.
D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement
with an Agent selected by the Investment Company, other than as
described in B. and C. above; provided, however, that the Company
shall in no way be responsible to the Investment Company for the
acts and omissions of the Agent.
ARTICLE 21. DOCUMENTS.
A. In connection with the appointment of the Company under this
Agreement, the Investment Company shall file with the Company the
following documents:
(1) A copy of the Charter and By-Laws of the Investment Company and
all amendments thereto;
(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Investment Company or the Funds in the forms approved by the
Board of the Investment Company with a certificate of the
Secretary of the Investment Company as to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Investment Company
authorizing the original issuance of each Fund's, and/or
Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document
and the By-Laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for
fund accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such
forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or appropriate
in the proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each
jurisdiction where the nature of its business requires such
qualification, and in the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations under
this Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(6) it is in compliance with federal securities law requirements
and in good standing as an administrator and fund accountant;
and
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Investment Company is an open-end investment company
registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each
Fund being offered for sale.
ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be
held to a standard of reasonable care in carrying out the provisions
of this Contract. The Company shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Investment
Company) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice, provided
that such action is not in violation of applicable federal or state
laws or regulations, and is in good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company
or Fund shall indemnify and hold the Company, including its
officers, directors, shareholders and their agents, employees and
affiliates, harmless against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising
out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Investment Company
or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of the
Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and Shareholder
account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Funds; or
(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other third
parties contracted by or approved by the Investment
Company of Fund for use in the performance of services
under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Investment Company.
(3) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the
Investment Company or the Fund.
(4) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares be
registered in such state or in violation of any stop order or
other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
state.
Provided, however, that the Company shall not be protected by
this Article 23.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties or failure to
meet the standard of care set forth in 23.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services
to be performed by the Company under this Agreement, and the Company
and its agents or subcontractors shall not be liable and shall be
indemnified by the Investment Company or the appropriate Fund for
any action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such
action is not in violation of applicable federal or state laws or
regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which
are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Investment Company or the Fund,
and the proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 23 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with respect
to all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior written
consent.
ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from March 1, 1996 and shall continue
until February 28, 2003 (`Term"). Thereafter, the Agreement will continue
for 18 month terms. The Agreement can be terminated by either party upon
18 months notice to be effective as of the end of such 18 month period. In
the event, however, of willful misfeasance, bad faith, negligence or
reckless disregard of its duties by the Company, the Investment Company has
the right to terminate the Agreement upon 60 days written notice, if
Company has not cured such willful misfeasance, bad faith, negligence or
reckless disregard of its duties within 60 days. The termination date for
all original or after-added Investment companies which are, or become, a
party to this Agreement. shall be coterminous. Investment Companies that
merge or dissolve during the Term, shall cease to be a party on the
effective date of such merger or dissolution.
Should the Investment Company exercise its rights to terminate, all out-
of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Articles 10 and 23 shall survive the termination of this Agreement.
ARTICLE 25. AMENDMENT.
This Agreement may be amended or modified by a written agreement
executed by both parties.
ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Agreement as may
in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that
no such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the Charter. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
ARTICLE 27. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
ARTICLE 28. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Investment Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779,
or to such other address as the Investment Company or the Company may
hereafter specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.
ARTICLE 29. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
ARTICLE 30. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or Shareholders of the Company, but bind only the
appropriate property of the Fund, or Class, as provided in the Declaration
of Trust.
ARTICLE 31. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
ARTICLE 32. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by
the Investment Company, the Company shall upon termination of this
Agreement deliver to such successor agent at the office of the Company all
properties of the Investment Company held by it hereunder. If no such
successor agent shall be appointed, the Company shall at its office upon
receipt of Proper Instructions deliver such properties in accordance with
such instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or before
the date when such termination shall become effective, then the Company
shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $2,000,000, all properties held by the
Company under this Agreement. Thereafter, such bank or trust company shall
be the successor of the Company under this Agreement.
ARTICLE 33. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder
or any damages resulting therefrom to the Fund as a result of work
stoppage, power or other mechanical failure, natural disaster, governmental
action, communication disruption or other impossibility of performance.
ARTICLE 34. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all
of or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party.
Nothing in this Article 34 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 35. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of
the Investment Company, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this Agreement
are not binding upon any of the Trustees or Shareholders of the Investment
Company, but bind only the property of the Fund, or Class, as provided in
the Declaration of Trust.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and year first above
written.

INVESTMENT COMPANIES
(LISTED ON EXHIBIT 1)

By: /s/ S. Elliott Cohan
S. Elliott Cohan
Assistant Secretary

FEDERATED SERVICES COMPANY

By: /s/ Thomas J. Ward
Thomas J. Ward
Secretary

EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes

March 1, 1996 FEDERATED GOVERNMENT TRUST
AUTOMATED GOVERNMENT CASH RESERVES
AUTOMATED TREASURY CASH RESERVES
U.S. TREASURY CASH RESERVES
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES

FEDERATED SERVICES COMPANY provides the following services:

Administrative Services
Fund Accounting Services
Shareholder Recordkeeping Services

Exhibit 4(iv) on Form N-1A
Exhibit 99 under Item 601/Reg S-K

FEDERATED GOVERNMENT TRUST

AUTOMATED GOVERNMENT CASH RESERVES
P O R T F O L I O

Number Shares
Account No. Alpha Code Organized Under the Laws See Reverse Side For
of the Commonwealth of Certain Definitions
Massachusetts

THIS IS TO CERTIFY THAT is the owner of

CUSIP 314186107

Fully Paid and Non-Assessable Shares of Beneficial Interest of AUTOMATED
GOVERNMENT CASH RESERVES, a portfolio of FEDERATED GOVERNMENT TRUST hereafter
called the Trust, transferable on the books of the Trust by the owner in
person or by duly authorized attorney upon surrender of this certificate
properly endorsed.

The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.

This Certificate is not valid unless countersigned by the Transfer
Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.

Dated: FEDERATED GOVERNMENT TRUST
Seal
1989
Massachusetts

/s/John W. McGonigle /s/ John F. Donahue
Treasurer Chairman

Countersigned:
Federated Shareholder Services Company
(Boston)
Transfer Agent
By:
Authorized Signature

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)

Additional abbreviations may also be used though not in the above list.

For value received hereby sell, assign, and transfer unto
----------

Please insert social security or other
identifying number of assignee

- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)

- -----------------------------------------------------------------------------

shares
- ----------------------------------------------------------------------
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
==========================================
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.

Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must
correspond with the name as written upon the
face of the certificate in every particular,
without alteration or enlargement or any change
whatever.

All persons dealing with Automated Government Cash Reserves, a portofolio of
Federated Government Trust, a Massachusetts business trust, must look solely
to the Trust property for the enforcement of any claim against the Trust, as
the Trustees, officers, agents or shareholders of the Trust assume no
personal liability whatsoever for obligations entered into on behalf of the
Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears

Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED GOVERNMENT
TRUST, and the Deputy General Counsel of Federated Investors, and each of
them, their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and
stead, in any and all capacities, to sign any and all documents to be filed
with the Securities and Exchange Commission pursuant to the Securities Act
of 1933, the Securities Exchange Act of 1934 and the Investment Company Act
of 1940, by means of the Securities and Exchange Commission's electronic
disclosure system known as EDGAR; and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to sign and perform each and every
act and thing requisite and necessary to be done in connection therewith, as
fully to all intents and purposes as each of them might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.

SIGNATURES TITLE DATE

/s/ John F. Donahue Chairman June 5, 1996
John F. Donahue and Trustee
(Chief Executive Officer)

/s/Glen R. Johnson President and Trustee June 5, 1996
Glen R. Johnson

/s/John W. McGonigle Treasurer and Executive June 5, 1996
John W. McGonigle Vice President
(Principal Financial and
Accounting Officer)

/s/ Thomas G. Bigley Trustee June 5, 1996
Thomas G. Bigley

/s/ John T. Conroy, Jr. Trustee June 5, 1996
John T. Conroy, Jr.

/s/ William J. Copeland Trustee June 5, 1996
William J. Copeland

/s/ James E. Dowd Trustee June 5, 1996
James E. Dowd

/s/ Lawrence D. Ellis, M.D. Trustee June 5, 1996
Lawrence D. Ellis, M.D.

/s/ Edward L. Flaherty, Jr. Trustee June 5, 1996
Edward L. Flaherty, Jr.

/s/ Peter E. Madden Trustee June 5, 1996
Peter E. Madden

/s/ Gregor F. Meyer Trustee June 5, 1996
Gregor F. Meyer

/s/ John E. Murray Trustee June 5, 1996
John E. Murray

/s/ Wesley W. Posvar Trustee June 5, 1996
Wesley W. Posvar

/s/ Marjorie P. Smuts Trustee June 5, 1996
Marjorie P. Smuts

Sworn to and subscribed before me this 5th day of June, 1996.

/s/ Marie M. Hamm

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 01
<NAME> Federated Government Trust
Automated Government Cash Reserves

<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1996
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 622,878,518
<INVESTMENTS-AT-VALUE> 622,878,518
<RECEIVABLES> 7,910,670
<ASSETS-OTHER> 199,363
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 630,988,551
<PAYABLE-FOR-SECURITIES> 25,823,893
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,028,798
<TOTAL-LIABILITIES> 27,852,691
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 603,135,860
<SHARES-COMMON-STOCK> 603,135,860
<SHARES-COMMON-PRIOR> 603,849,062
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 603,135,860
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 31,513,653
<OTHER-INCOME> 0
<EXPENSES-NET> 3,228,825
<NET-INVESTMENT-INCOME> 28,284,828
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 28,284,828
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 28,284,828
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,822,902,273
<NUMBER-OF-SHARES-REDEEMED> 2,829,077,401
<SHARES-REINVESTED> 5,461,926
<NET-CHANGE-IN-ASSETS> (713,202)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 2,764,784
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,863,384
<AVERAGE-NET-ASSETS> 552,956,745
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 03
<NAME> Federated Government Trust
Automated Treasury Cash Reserves

<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1996
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 259,518,084
<INVESTMENTS-AT-VALUE> 259,518,084
<RECEIVABLES> 11,815,029
<ASSETS-OTHER> 472,920
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 271,806,033
<PAYABLE-FOR-SECURITIES> 10,339,063
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 798,763
<TOTAL-LIABILITIES> 11,137,826
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 260,668,207
<SHARES-COMMON-STOCK> 260,668,207
<SHARES-COMMON-PRIOR> 167,508,106
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 260,668,207
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 11,427,581
<OTHER-INCOME> 0
<EXPENSES-NET> 1,207,828
<NET-INVESTMENT-INCOME> 10,264,753
<REALIZED-GAINS-CURRENT> 155,205
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 10,419,958
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,264,753
<DISTRIBUTIONS-OF-GAINS> 155,205
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 871,777,363
<NUMBER-OF-SHARES-REDEEMED> 781,979,740
<SHARES-REINVESTED> 3,362,478
<NET-CHANGE-IN-ASSETS> 93,160,101
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,059,678
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,974,564
<AVERAGE-NET-ASSETS> 211,935,551
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.57
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> Federated Government Trust
U.S. Treasury Cash Reserves
Institutional Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1996
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 1,211,166,205
<INVESTMENTS-AT-VALUE> 1,211,166,205
<RECEIVABLES> 59,184,681
<ASSETS-OTHER> 434,842
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,270,785,728
<PAYABLE-FOR-SECURITIES> 51,695,313
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,329,542
<TOTAL-LIABILITIES> 56,024,855
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,214,760,873
<SHARES-COMMON-STOCK> 937,661,503
<SHARES-COMMON-PRIOR> 609,233,145
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 937,661,503
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 49,987,998
<OTHER-INCOME> 0
<EXPENSES-NET> 2,231,806
<NET-INVESTMENT-INCOME> 47,756,192
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 47,756,192
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 40,360,730
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,218,643,175
<NUMBER-OF-SHARES-REDEEMED> 2,894,243,576
<SHARES-REINVESTED> 4,028,759
<NET-CHANGE-IN-ASSETS> 545,019,950
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,645,164
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,229,561
<AVERAGE-NET-ASSETS> 911,290,981
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> Federated Government Trust
U.S. Treasury Cash Reserves
Institutional Service Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Apr-30-1996
<PERIOD-END> Apr-30-1996
<INVESTMENTS-AT-COST> 1,211,166,205
<INVESTMENTS-AT-VALUE> 1,211,166,205
<RECEIVABLES> 59,184,681
<ASSETS-OTHER> 434,842
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,270,785,728
<PAYABLE-FOR-SECURITIES> 51,695,313
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 4,329,542
<TOTAL-LIABILITIES> 56,024,855
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,214,760,873
<SHARES-COMMON-STOCK> 277,099,370
<SHARES-COMMON-PRIOR> 60,507,778
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 277,099,370
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 49,987,998
<OTHER-INCOME> 0
<EXPENSES-NET> 2,231,806
<NET-INVESTMENT-INCOME> 47,756,192
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 47,756,192
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7,395,462
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 715,904,928
<NUMBER-OF-SHARES-REDEEMED> 500,524,936
<SHARES-REINVESTED> 1,211,600
<NET-CHANGE-IN-ASSETS> 545,019,950
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,645,164
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,229,561
<AVERAGE-NET-ASSETS> 911,290,981
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.050
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.050
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>