PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Automated
Government Cash Reserves, a portfolio of Federated Government Trust, for the
six-month period ended October 31, 1996. The Report begins with a brief
commentary by the fund's portfolio manager on the short-term government market,
followed by a complete listing of the fund's investments and its financial
statements.
On behalf of its investors, the fund pursues current income, a high level of
liquidity, and a stable net asset value of $1.00 per share. It invests
exclusively in a portfolio of securities issued or guaranteed by the U.S.
government or its agencies.* Of course, the fund itself is not guaranteed.
During the six-month reporting period, dividends paid to shareholders totaled
$14.6 million, or $0.02 per share. At the end of the reporting period, the
fund's net assets stood at $620.4 million.
Thank you for selecting Automated Government Cash Reserves as a high-quality
cash investment. As always, we welcome your questions, comments, or
suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
December 15, 1996
* No money market fund can guarantee that a stable net asset value will be
maintained. An investment in the fund is neither insured nor
guaranteed by the U.S. government.
INVESTMENT REVIEW
Automated Government Cash Reserves, which is rated AAAm by Standard & Poor's
Ratings Group* (`S&P'') and Aaa by Moody's Investors Service, Inc.,**
(`Moody's'') is invested only in direct issues of the U.S. Treasury and
government securities whose interest is exempt from various states' personal
income tax if owned directly.*** The fund's acceptable investments do not
include repurchase agreements, because it was created to meet the needs of
tax-sensitive investors in states which consider income from all repurchase
agreements as taxable. The fund continues to emphasize issues of the Student
Loan Marketing Association, Farm Credit Banks, and Federal Home Loan Banks. We
continue to maintain a small Treasury position within the Fund's portfolio when
agency spreads are narrow.
Over the six months ended October 31, 1996, the Federal Reserve Board (the
`Fed'') stood pat in the face of economic growth that exceeded the 2.50% pace
thought to be the non-inflationary potential. Confronted with persistent
strength in the housing, auto, and retail sectors, the Fed stuck to its belief
that economic growth in the second half of the year would return to a more
moderate pace. Over the reporting period, the market itself was not so sure,
and movements in interest rates proved to be rather volatile as expectations
regarding the timing and extent of the next policy move from the Fed swayed
back and forth with each new piece of economic data. When signs of the long-
awaited slowdown finally began to emerge in the third quarter of 1996, the
market then fretted that it might not be occurring quickly enough to prevent
the need for the Fed to tighten in order to ward off inflationary pressures. By
the end of the reporting period, however, the market calmed itself once more as
growth in employment and housing moderated and inflation remained tame.
Overall, the Fed funds target rate remained unchanged, at 5.25%, where it has
been since late January 1996.
Movements in interest rates reflected the market uncertainty. The yield on the
three-month Treasury bill began the reporting period at 5.10% in early May and
rose to 5.35% by late August amid fears that the robust economy might spark
inflation - particularly in the face of tight labor market conditions. The
yield then fell to 5.15% as signs of tempered growth began to appear, rose once
more to 5.35% as the market continued to reflect concerns over developing wage
pressures, and then plunged to 5.00% in late September/early October as relief
finally took hold. The yield finally rebounded to a more realistic 5.15% and
traded within a narrow range for the remainder of the reporting period, as the
market broke out of its trend of over-reacting to each economic release and
accepted the idea that the Fed was likely to be on hold indefinitely. Overall,
the short end of the Treasury yield curve ended the reporting period 20 basis
points flatter than it began, reflecting the retreat from expectations of a
imminent tightening in monetary policy.
For most of the six-month reporting period, the fund was targeted in a 35 to 45
day average maturity range, representing a neutral stance. The average maturity
of the fund varied within that range according to relative value opportunities
available in the short-term Treasury and agency markets. The fund remained
barbelled in structure, combining government agency floating rate notes with
purchases of fixed-rate Treasury and agency securities with longer maturities.
With a friendly inflation picture and no signs of a dramatic change in the
overall fundamental picture of the economy on the horizon, the fund will likely
maintain its current neutral positioning in the near future.
* This rating is obtained after S&P evaluates a number of factors including
credit quality, market price exposure and management. S&P monitors the
portfolio weekly for developments that could cause changes in the ratings.
This rating, however, does not remove market risks.
** Money market funds and bond funds rated Aaa by Moody's are judged to be of
an investment quality similar to Aaa-rated fixed income obligations, that
is, they are judged to be of the best quality. Ratings are subject to change
and do not remove market risks.
*** Income may be subject to the federal alternative minimum tax and local
taxes.
AUTOMATED GOVERNMENT CASH RESERVES
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM GOVERNMENT AND AGENCY OBLIGATIONS -- 101.6%
$ 6,500,000 Federal Farm Credit Bank Notes, 5.40%-5.60%, 12/2/1996-6/3/1997 $ 6,496,700
26,000,000 (a)Federal Farm Credit Bank, Discount Notes, 5.254%-5.272%,
11/14/1996-11/25/1996 25,935,653
10,000,000 (b)Federal Farm Credit Bank, Floating Rate Notes, 5.30%, 11/4/1996 9,994,672
232,030,000 (a)Federal Home Loan Bank, Discount Notes, 5.235%-5.735%,
11/1/1996-3/31/1997 230,587,582
34,400,000 (b)Federal Home Loan Bank, Floating Rate Notes, 5.195%-5.310%,
11/4/1996-11/25/1996 34,382,666
61,000,000 Student Loan Marketing Association Master Notes, 5.23%, 11/5/1996 61,000,000
3,000,000 Student Loan Marketing Association Notes, 5.62%, 6/30/1997 2,992,930
94,235,000 (a)Student Loan Marketing Association, Discount Notes, 5.275%-5.437%,
11/1/1996-12/18/1996 94,052,368
91,200,000 (b)Student Loan Marketing Association, Floating Rate Notes,
5.240%-5.605%, 11/5/1996 91,189,532
25,000,000 (a)Tennessee Valley Authority, Discount Notes, 5.285%-5.315%,
11/12/1996-11/20/1996 24,954,492
3,000,000 (a)United States Treasury Bills, 5.67%, 8/21/1997 2,869,127
46,000,000 United States Treasury Notes, 5.625%-8.500%, 11/15/1996-9/30/1997 46,153,010
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $ 630,608,732
</TABLE>
(a) Discount rate at time of purchase.
(b) Floating rate note with current rate and next reset date shown.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($620,374,296) at October 31, 1996.
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $630,608,732
Cash 610,986
Income receivable 2,469,107
Receivable for shares sold 953
Total assets 633,689,778
LIABILITIES:
Payable for investments purchased $10,760,979
Income distribution payable 2,385,299
Accrued expenses 169,204
Total liabilities 13,315,482
NET ASSETS for 620,374,296 shares outstanding $620,374,296
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$620,374,296 / 620,374,296 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest $16,380,457
EXPENSES:
Investment advisory fee $1,531,433
Administrative personnel and services fee 231,553
Custodian fees 43,986
Transfer and dividend disbursing agent fees and expenses 24,839
Directors'/Trustees' fees 4,600
Auditing fees 6,716
Legal fees 6,716
Portfolio accounting fees 52,089
Shareholder services fee 765,716
Share registration costs 10,170
Printing and postage 4,048
Insurance premiums 3,660
Miscellaneous 6,991
Total expenses 2,692,517
Waiver of investment advisory fee (902,579)
Net expenses 1,789,938
Net investment income $14,590,519
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1996 APRIL 30, 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 14,590,519 $ 28,284,828
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (14,590,519) (28,284,828)
SHARE TRANSACTIONS--
Proceeds from sale of shares 1,161,700,642 2,822,902,273
Net asset value of shares issued to shareholders in payment of
distributions declared 2,142,852 5,461,926
Cost of shares redeemed (1,146,605,058) (2,829,077,401)
Change in net assets resulting from share transactions 17,238,436 (713,202)
Change in net assets 17,238,436 (713,202)
NET ASSETS:
Beginning of period 603,135,860 603,849,062
End of period $ 620,374,296 $ 603,135,860
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
(UNAUDITED)
OCTOBER 31, YEAR ENDED APRIL 30,
1996 1996 1995 1994 1993 1992 1991 1990(A)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.02 0.05 0.05 0.03 0.03 0.05 0.07 0.02
LESS DISTRIBUTIONS
Distributions from net
investment income (0.02) (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 $ 1.00
TOTAL RETURN(B) 2.43% 5.24% 4.68% 2.77% 2.92% 4.79% 7.20% 1.93%
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.58%* 0.58% 0.58% 0.57% 0.57% 0.58% 0.55% 0.32%*
Net investment income 4.76%* 5.12% 4.70% 2.75% 2.87% 4.58% 6.70% 8.02%*
Expense waiver/
reimbursement(c) 0.29%* 0.30% 0.32% 0.09% 0.08% 0.14% 0.30% 0.89%*
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $620,374 $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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
AUTOMATED GOVERNMENT CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 (UNAUDITED)
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'). 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 Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- The Fund's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES -- It is the Fund's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on
the settlement date.
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
October 31, 1996, capital paid-in aggregated $620,374,296.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, APRIL 30,
1996 1996
<S> <C> <C>
Shares sold 1,161,700,642 2,822,902,273
Shares issued to shareholders in payment of distributions declared 2,142,852 5,461,926
Shares redeemed (1,146,605,058) (2,829,077,401)
Net change resulting from share transactions 17,238,436 (713,202)
</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.
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.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Fund. The fee paid to FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.
AUTOMATED GOVERNMENT CASH RESERVES
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.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Glen R. Johnson
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
S. Elliott Cohan
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
Although money market funds seek to maintain a stable net asset value of
$1.00 per share, there is no assurance that they will be able to do so.
This report is authorized for distribution to prospective investors only
when preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
AUTOMATED
GOVERNMENT
CASH
RESERVES
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1996
Federated Investors
[Graphic]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 314186107
0112708 (12/96)
AUTOMATED
TREASURY
CASH
RESERVES
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1996
Federated Investors
[Graphic]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 314186404
2112509 (12/96)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Automated
Treasury Cash Reserves, a portfolio of Federated Government Trust, for the
six-month period ended October 31, 1996. The Report begins with a brief
commentary by the fund's portfolio manager on the short-term government market,
followed by a complete listing of the fund's investments and its financial
statements.
On behalf of its investors, the fund pursues competitive income, a high level of
liquidity, and a stable net asset value of $1.00 per share*--all through a
portfolio of U.S. Treasury obligations.
During the six-month reporting period, dividends paid to shareholders totaled
$6.1 million, or $0.02 per share. At the end of the reporting period, the fund's
net assets stood at $260 million.
Thank you for your confidence in Automated Treasury Cash Reserves. Your
questions, comments, or suggestions are always welcome.
Sincerely,
LOGO
Glen R. Johnson
President
December 15, 1996
* No money market fund can guarantee that a stable net asset value will be
maintained. An investment in the fund is neither insured nor guaranteed by the
U.S. government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Automated Treasury Cash Reserves, which is rated AAAm by Standard & Poor's
Ratings Group* ("S&P") and Aaa by Moody's Investors Service, Inc.,** ("Moody's")
is invested only in direct issues of the U.S. Treasury. The fund was created to
meet the needs of tax-sensitive investors in states which consider income from
all repurchase agreements as taxable.*** Therefore, the fund's acceptable
investments do not include repurchase agreements, and liquidity can be
maintained by including a laddered position of short-term Treasury securities,
which are typically Treasury bills.
Over the six months ended October 31, 1996, the Federal Reserve Board (the
"Fed") stood pat in the face of economic growth that exceeded the 2.50% pace
thought to be the non-inflationary potential. Confronted with persistent
strength in the housing, auto, and retail sectors, the Fed stuck to its belief
that economic growth in the second half of the year would return to a more
moderate pace. Over the reporting period, the market itself was not so sure, and
movements in interest rates proved to be rather volatile as expectations
regarding the timing and extent of the next policy move from the Fed swayed back
and forth with each new piece of economic data. When signs of the long-awaited
slowdown finally began to emerge in the third quarter of 1996, the market then
fretted that it might not be occuring quickly enough to prevent the need for the
Fed to tighten in order to ward off inflationary pressures. By the end of the
reporting period, however, the market calmed itself once more as growth in
employment and housing moderated and inflation remained tame. Overall, the Fed
funds target rate remained unchanged, at 5.25%, where it has been since late
January 1996.
Movements in interest rates reflected the market uncertainty. The yield on the
three-month Treasury bill began the reporting period at 5.10% in early May and
rose to 5.35% by late August amid fears that the robust economy might spark
inflation--particularly in the face of tight labor market conditions. The yield
then fell to 5.15% as signs of tempered growth began to appear, rose once more
to 5.35% as the market continued to reflect concerns over developing wage
pressures, and then plunged to 5.00% in late September/early October as relief
finally took hold. The yield finally rebounded to a more realistic 5.15% and
traded within a narrow range for the remainder of the reporting period, as the
market broke out of its trend of over-reacting to each economic release and
accepted the idea that the Fed was likely to be on hold indefinitely.
For most of the six-month reporting period, the fund was targeted in a 35 to 45
day average maturity range, representing a neutral stance. The average maturity
of the fund varied within that range according to relative value opportunities
available in the short-term Treasury market and in response to shifting
technical factors at the front end of the yield curve. The fund trades actively
when market opportunities present themselves, in order to help maximize
shareholder value. With a friendly inflation picture and no signs of a dramatic
change in the overall fundamental picture of the economy on the horizon, the
fund will likely maintain its current neutral positioning in the near future.
* This rating is obtained after S&P evaluates a number of factors including
credit quality market price exposure and management. S&P monitors the
portfolio weekly for developments that would cause changes in the ratings.
This rating, however, does not remove market risks.
** Money market funds and bond funds rated Aaa by Moody's are judged to be of
an investment quality similar to Aaa-rated fixed income obligations, that
is, they are judged to be of the best quality. Ratings are subject to change
and do not remove market risks.
*** Income may be subject to the federal alternative minimum tax and local
taxes.
AUTOMATED TREASURY CASH RESERVES
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ----------- ---------------------------------------------------------------- ------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--99.4%
- -----------------------------------------------------------------------------------
(A) U.S. TREASURY BILLS--70.2%
----------------------------------------------------------------
$ 3,000,000 4.990%, 11/7/1996 $ 2,997,505
----------------------------------------------------------------
22,000,000 4.890%--5.115%, 11/21/1996 21,938,850
----------------------------------------------------------------
35,500,000 4.935%--5.135%, 11/29/1996 35,361,250
----------------------------------------------------------------
35,700,000 4.940%--5.190%, 12/5/1996 35,528,423
----------------------------------------------------------------
28,000,000 4.890%--4.975%, 12/12/1996 27,842,651
----------------------------------------------------------------
7,000,000 5.183%, 12/19/1996 6,951,630
----------------------------------------------------------------
10,000,000 4.940%--5.050%, 12/26/1996 9,923,688
----------------------------------------------------------------
9,700,000 4.961%, 1/9/1997 9,607,769
----------------------------------------------------------------
33,000,000 4.960%--5.030%, 1/16/1997 32,651,656
---------------------------------------------------------------- ------------
Total 182,803,422
---------------------------------------------------------------- ------------
U.S. TREASURY NOTES--29.2%
----------------------------------------------------------------
41,000,000 7.250%, 11/15/1996 41,029,579
----------------------------------------------------------------
25,000,000 7.250%, 11/30/1996 25,034,727
----------------------------------------------------------------
10,000,000 6.875%, 2/28/1997 10,050,511
---------------------------------------------------------------- ------------
Total 76,114,817
---------------------------------------------------------------- ------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $258,918,239
---------------------------------------------------------------- ------------
</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
($260,360,246) at October 31, 1996.
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $258,918,239
- --------------------------------------------------------------------------------
Cash 254,391
- --------------------------------------------------------------------------------
Income receivable 2,253,551
- --------------------------------------------------------------------------------
Receivable for investments sold 6,994,808
- --------------------------------------------------------------------------------
Receivable for shares sold 2,136
- --------------------------------------------------------------------------------
Deferred expenses 1,176
- -------------------------------------------------------------------------------- ------------
Total assets 268,424,301
- --------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------
Payable for investments purchased $6,951,630
- -------------------------------------------------------------------
Income distribution payable 1,057,292
- -------------------------------------------------------------------
Accrued expenses 55,133
- ------------------------------------------------------------------- ----------
Total liabilities 8,064,055
- -------------------------------------------------------------------------------- ------------
NET ASSETS for 260,360,246 shares outstanding $260,360,246
- -------------------------------------------------------------------------------- ------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
($260,360,246 / 260,360,246 shares outstanding) $ 1.00
- -------------------------------------------------------------------------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ------------------------------------------------------------------------------------
Interest $6,850,189
- ------------------------------------------------------------------------------------
EXPENSES:
- ------------------------------------------------------------------------------------
Investment advisory fee $ 657,231
- ----------------------------------------------------------------------
Administrative personnel and services fee 99,373
- ----------------------------------------------------------------------
Custodian fees 19,089
- ----------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 9,966
- ----------------------------------------------------------------------
Directors'/Trustees' fees 2,913
- ----------------------------------------------------------------------
Auditing fees 6,867
- ----------------------------------------------------------------------
Legal fees 3,155
- ----------------------------------------------------------------------
Portfolio accounting fees 32,769
- ----------------------------------------------------------------------
Shareholder services fees 328,616
- ----------------------------------------------------------------------
Share registration costs 15,639
- ----------------------------------------------------------------------
Printing and postage 2,975
- ----------------------------------------------------------------------
Insurance premiums 3,496
- ----------------------------------------------------------------------
Miscellaneous 13,439
- ---------------------------------------------------------------------- ----------
Total expenses 1,195,528
- ----------------------------------------------------------------------
Waivers--
- ----------------------------------------------------------------------
Waiver of investment advisory fee $(406,851)
- ----------------------------------------------------------
Waiver of shareholder services fee (39,434)
- ---------------------------------------------------------- ---------
Total waiver (446,285)
- ---------------------------------------------------------------------- ----------
Net expenses 749,243
- ------------------------------------------------------------------------------------ ----------
Net investment income $6,100,946
- ------------------------------------------------------------------------------------ ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1996 APRIL 30, 1996
----------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------
Net investment income/operating loss $ 6,100,946 $ 10,264,753
- ------------------------------------------------------- ----------------- --------------
Net realized gain (loss) on investments $ 0 $ 155,205
- ------------------------------------------------------- ----------------- --------------
Change in net assets resulting from operations $ 6,100,946 $ 10,419,958
- ------------------------------------------------------- ----------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------
Distributions from net investment income (6,100,946) (10,264,753)
- ------------------------------------------------------- ----------------- --------------
Distributions from net realized gains 0 (155,205)
- ------------------------------------------------------- ----------------- --------------
Change in net assets resulting from distributions
to shareholders (6,100,946) (10,419,958)
- ------------------------------------------------------- ----------------- --------------
SHARE TRANSACTIONS--
- -------------------------------------------------------
Proceeds from sale of shares 477,821,022 871,777,363
- -------------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 1,188,297 3,362,478
- -------------------------------------------------------
Cost of shares redeemed (479,317,280) (781,979,740)
- ------------------------------------------------------- ----------------- --------------
Change in net assets resulting from share
transactions (307,961) 93,160,101
- ------------------------------------------------------- ----------------- --------------
Change in net assets (307,961) 93,160,101
- -------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------
Beginning of period 260,668,207 167,508,106
- ------------------------------------------------------- ----------------- --------------
End of period $ 260,360,246 $ 260,668,207
- ------------------------------------------------------- ----------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
OCTOBER 31, YEAR ENDED APRIL 30,
----------- --------------------------------------------------
1996 1996 1995 1994 1993 1992(A)
- ---------------------------------------- ----------- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ----------------------------------------
Net investment income 0.02 0.05 0.04 0.03 0.03 0.03
- ----------------------------------------
Net realized and unrealized gain
(loss) on investments -- -- -- -- -- --
- ---------------------------------------- -------- ------ ------ ------ ------ -------
Total from investment operations 0.02 0.05 0.04 0.03 0.03 0.03
- ---------------------------------------- -------- ------ ------ ------ ------ -------
LESS DISTRIBUTIONS
- ----------------------------------------
Distributions from net investment
income (0.02) (0.05) (0.04) (0.03) (0.03) (0.03 )
- ----------------------------------------
Distributions from net realized gain
on investments -- -- -- -- -- --
- ---------------------------------------- -------- ------ ------ ------ ------ -------
Total distributions (0.02) (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 $ 1.00
- ---------------------------------------- -------- ------ ------ ------ ------ -------
TOTAL RETURN(B) 2.36% 5.04% 4.37% 2.58% 2.88% 3.07 %
- ----------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ----------------------------------------
Expenses 0.57%* 0.57% 0.56% 0.57% 0.39% 0.51 %*
- ----------------------------------------
Net investment income 4.64%* 4.92% 4.29% 2.55% 2.79% 3.84 %*
- ----------------------------------------
Expense waiver/reimbursement(c) 0.34%* 0.37% 0.32% 0.13% 0.53% 0.30 %*
- ----------------------------------------
SUPPLEMENTAL DATA
- ----------------------------------------
Net assets, end of period (000
omitted) $260,360 $260,668 $167,508 $190,480 $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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
AUTOMATED TREASURY CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
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"). 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.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering its shares, have been deferred and are being
amortized over a period not to exceed 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 affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
AUTOMATED TREASURY CASH RESERVES
- --------------------------------------------------------------------------------
OTHER--Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). At
October 31, 1996, capital paid-in aggregated $260,360,246.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
AUTOMATED TREASURY
CASH RESERVES
----------------------------------
YEAR ENDED YEAR ENDED
OCTOBER 31, 1996 APRIL 30, 1995
- ----------------------------------------------------------- ---------------- --------------
<S> <C> <C>
Shares sold 477,821,022 871,777,363
- -----------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,188,297 3,362,478
- -----------------------------------------------------------
Shares redeemed (479,317,280) (781,979,740)
- ----------------------------------------------------------- --------------- --------------
Net change resulting from share transactions (307,961) 93,160,101
- ----------------------------------------------------------- --------------- --------------
</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.
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 shares for the period. The fee paid to
FSS is used to finance certain services for shareholders and to maintain
shareholder accounts. FSS may voluntarily choose to waive any portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its sole
discretion.
AUTOMATED TREASURY CASH RESERVES
- --------------------------------------------------------------------------------
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the 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.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
- ---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Glen R. Johnson Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President, Treasurer
John E. Murray, Jr. and Secretary
Wesley W. Posvar Richard B. Fisher
Marjorie P. Smuts Vice President
S. Elliott Cohan
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
Although money market funds seek to maintain a stable net asset value of $1.00
per share, there is no assurance that they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
U.S.
TREASURY
CASH
RESERVES
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
October 31, 1996
Federated Investors
[Graphic]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 314186503
Cusip 34186305
2112510 (12/96)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for U.S. Treasury
Cash Reserves, a portfolio of Federated Government Trust, for the six-month
period ended October 31, 1996. The Report begins with a brief commentary by the
fund's portfolio manager on the short-term government market, followed by a
complete listing of the fund's investments and its financial statements.
On behalf of its investors, the fund pursues competitive income, a high level of
liquidity, and a stable net asset value of $1.00 per share*--all through a
portfolio consisting primarily of U.S. Treasury bills and notes.
During the six-month reporting period, dividends paid to shareholders of the
fund's Institutional Shares totaled $24.6 million, or $0.02 per share. For the
same period, dividends paid to shareholders of the fund's Institutional Service
Shares totaled $6.5 million, or $0.02 per share. Net assets rose from $1.2
billion at the beginning of the reporting period to $1.4 billion at the end of
the reporting period.
Thank you for your confidence in U.S. Treasury Cash Reserves. As always we,
welcome your questions, comments, or suggestions.
Sincerely,
LOGO
Glen R. Johnson
President
December 15, 1996
* No money market fund can guarantee that a stable net asset value will be
maintained. An investment in the fund is neither insured nor guaranteed by the
U.S. government.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
U.S. Treasury Cash Reserves, which is rated AAAm by Standard & Poor's Rating
Group* ("S&P") and Aaa by Moody's Investors Service, Inc.,** ("Moody's") is
invested only in direct issues of the U.S. Treasury. The fund was created to
meet the needs of tax-sensitive investors in states which consider income from
all repurchase agreements as taxable.*** Therefore, the fund's acceptable
investments do not include repurchase agreements, and liquidity can be
maintained by including a laddered position of short-term Treasury securities,
which are typically Treasury bills.
Over the six months ended October 31, 1996, the Federal Reserve Board (the
"Fed") stood pat in the face of economic growth that exceeded the 2.50% pace
thought to be the non-inflationary potential. Confronted with persistent
strength in the housing, auto, and retail sectors, the Fed stuck to its belief
that economic growth in the second half of the year would return to a more
moderate pace. Over the reporting period, the market itself was not so sure, and
movements in interest rates proved to be rather volatile as expectations
regarding the timing and extent of the next policy move from the Fed swayed back
and forth with each new piece of economic data. When signs of the long-awaited
slowdown finally began to emerge in the third quarter of 1996, the market then
fretted that it might not be occurring quickly enough to prevent the need for
the Fed to tighten in order to ward off inflationary pressures. By the end of
the reporting period, however, the market calmed itself once more as growth in
employment and housing moderated and inflation remained tame. Overall, the Fed
funds target rate remained unchanged, at 5.25%, where it has been since late
January 1996.
Movements in interest rates reflected the market uncertainty. The yield on the
three-month Treasury bill began the reporting period at 5.10% in early May and
rose to 5.35% by late August amid fears that the robust economy might spark
inflation--particularly in the face of tight labor market conditions. The yield
then fell to 5.15% as signs of tempered growth began to appear, rose once more
to 5.35% as the market continued to reflect concerns over developing wage
pressures, and then plunged to 5.00% in late September/early October as relief
finally took hold. The yield finally rebounded to a more realistic 5.15% and
traded within a narrow range for the remainder of the reporting period, as the
market broke out of its trend of over-reacting to each economic release and
accepted the idea that the Fed was likely to be on hold indefinitely.
For most of the six-month reporting period, the fund was targeted in a 35 to 45
day average maturity range, representing a neutral stance. The average maturity
of the fund varied within that range according to relative value opportunities
available in the short-term Treasury market and in response to shifting
technical factors at the front end of the yield curve. The fund trades actively
when market opportunities present themselves, in order to help maximize
shareholder value. With a friendly inflation picture and no signs of a dramatic
change in the overall fundamental picture of the economy on the horizon, the
fund will likely maintain its current neutral positioning in the near future.
* This rating is obtained after S&P evaluates a number of factors including
credit quality, market price exposure and management. S&P monitors the
portfolio weekly for developments that could cause changes in the ratings.
This rating, however, does not remove market risks.
** Money market funds and bond funds rated Aaa by Moody's are judged to be of
an investment quality similar to Aaa-rated fixed income obligations, that
is, they are judged to be of the best quality. Ratings are subject to change
and do not remove market risks.
*** Income may be subject to the federal alternative minimum tax and local
taxes.
U.S. TREASURY CASH RESERVES
PORTFOLIO OF INVESTMENTS
OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ ------------------------------------------------------------- --------------
<C> <C> <S> <C>
U.S. TREASURY OBLIGATIONS--99.6%
- ---------------------------------------------------------------------------------
(A) U.S. TREASURY BILLS--68.9%
-------------------------------------------------------------
$120,000,000 4.91%--5.10%, 12/12/1996 $ 119,327,179
-------------------------------------------------------------
133,000,000 5.00%--5.29%, 11/21/1996 132,623,094
-------------------------------------------------------------
193,000,000 5.05%--5.31%, 11/29/1996 192,239,287
-------------------------------------------------------------
127,500,000 5.05%--5.33%, 12/5/1996 126,886,270
-------------------------------------------------------------
46,000,000 5.07%--5.09%, 11/7/1996 45,961,897
-------------------------------------------------------------
60,000,000 5.07%--5.21%, 12/26/1996 59,541,056
-------------------------------------------------------------
77,000,000 5.09%--5.17%, 1/16/1997 76,185,280
-------------------------------------------------------------
77,000,000 5.09%, 1/9/1997 76,267,907
-------------------------------------------------------------
63,500,000 5.14%--5.18%, 1/30/1997 62,703,119
-------------------------------------------------------------
43,000,000 5.27%--5.29%, 12/19/1996 42,703,442
------------------------------------------------------------- --------------
Total 934,438,531
------------------------------------------------------------- --------------
U.S. TREASURY NOTES--30.7%
-------------------------------------------------------------
241,000,000 4.375%--7.25%, 11/15/1996 241,064,457
-------------------------------------------------------------
80,000,000 6.75%--6.875%, 2/28/1997 80,391,079
-------------------------------------------------------------
95,000,000 7.25%, 11/30/1996 95,130,308
------------------------------------------------------------- --------------
Total 416,585,844
------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST) (B) $1,351,024,375
------------------------------------------------------------- --------------
</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
($1,356,420,088) at October 31, 1996.
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------
Total investments in securities, at amortized cost and value $1,351,024,375
- ------------------------------------------------------------------------------
Cash 362,150
- ------------------------------------------------------------------------------
Income receivable 10,574,855
- ------------------------------------------------------------------------------
Receivable for investments sold 42,968,108
- ------------------------------------------------------------------------------ --------------
Total assets 1,404,929,488
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Payable for investments purchased $42,703,442
- ----------------------------------------------------------------
Income distribution payable 5,666,533
- ----------------------------------------------------------------
Accrued expenses 139,425
- ---------------------------------------------------------------- -----------
Total liabilities 48,509,400
- ------------------------------------------------------------------------------ --------------
Net Assets for 1,356,420,088 shares outstanding $1,356,420,088
- ------------------------------------------------------------------------------ --------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
- ------------------------------------------------------------------------------
INSTITUTIONAL SHARES:
- ------------------------------------------------------------------------------
$1,056,266,615 / 1,056,266,615 shares outstanding $1.00
- ------------------------------------------------------------------------------ --------------
INSTITUTIONAL SERVICE SHARES:
- ------------------------------------------------------------------------------
$300,153,473 / 300,153,473 shares outstanding $1.00
- ------------------------------------------------------------------------------ --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
STATEMENT OF OPERATIONS
SIX MONTHS ENDED OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $32,765,377
- -----------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------
Investment advisory fee $ 2,522,498
- --------------------------------------------------------------------
Administrative personnel and services fee 476,752
- --------------------------------------------------------------------
Custodian fees 68,613
- --------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 57,370
- --------------------------------------------------------------------
Directors'/Trustees' fees 5,336
- --------------------------------------------------------------------
Auditing fees 6,624
- --------------------------------------------------------------------
Legal fees 2,208
- --------------------------------------------------------------------
Portfolio accounting fees 68,967
- --------------------------------------------------------------------
Shareholder services fee--Institutional Shares 1,232,254
- --------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares 344,307
- --------------------------------------------------------------------
Share registration costs 47,012
- --------------------------------------------------------------------
Printing and postage 6,072
- --------------------------------------------------------------------
Insurance premiums 6,624
- --------------------------------------------------------------------
Miscellaneous 2,577
- -------------------------------------------------------------------- -----------
Total expenses 4,847,214
- --------------------------------------------------------------------
Waivers
- --------------------------------------------------------------------
Waiver of investment advisory fee $(1,981,656)
- ------------------------------------------------------
Waiver of shareholder services fee--Institutional
Shares (1,232,254)
- ------------------------------------------------------ -----------
Total waivers (3,213,910)
- -------------------------------------------------------------------- -----------
Net expenses 1,633,304
- ----------------------------------------------------------------------------------- -----------
Net investment income $31,132,073
- ----------------------------------------------------------------------------------- -----------
</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>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1996 APRIL 30, 1996
----------------- ---------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ----------------------------------------------------
OPERATIONS--
- ----------------------------------------------------
Net investment income $ 31,132,073 $ 47,756,192
- ---------------------------------------------------- ----------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ----------------------------------------------------
Distributions from net investment income
- ----------------------------------------------------
Institutional Shares (24,605,818) (40,360,730 )
- ----------------------------------------------------
Institutional Service Shares (6,526,255) (7,395,462 )
- ---------------------------------------------------- ----------------- --------------
Change in net assets resulting from
distributions to shareholders (31,132,073) (47,756,192 )
- ---------------------------------------------------- ----------------- --------------
SHARE TRANSACTIONS--
- ----------------------------------------------------
Proceeds from sale of shares 2,390,251,509 3,934,548,103
- ----------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 2,839,230 5,240,359
- ----------------------------------------------------
Cost of shares redeemed (2,251,431,524) (3,394,768,512 )
- ---------------------------------------------------- ----------------- --------------
Change in net assets resulting from share
transactions 141,659,215 545,019,950
- ---------------------------------------------------- ----------------- --------------
Change in net assets 141,659,215 545,019,950
- ----------------------------------------------------
NET ASSETS:
- ----------------------------------------------------
Beginning of period 1,214,760,873 669,740,923
- ---------------------------------------------------- ----------------- --------------
End of period $ 1,356,420,088 $1,214,760,873
- ---------------------------------------------------- ----------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
(UNAUDITED)
APRIL 30, YEAR ENDED APRIL 30,
------------ ---------------------------------------------------
1996 1996 1995 1994 1993 1992(A)
- ------------------------------ ------------ ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ------------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------------
Net investment income 0.02 0.05 0.05 0.03 0.03 0.04
- ------------------------------
LESS DISTRIBUTIONS
- ------------------------------
Distributions from net
investment income (0.02) (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 $ 1.00
- ------------------------------ --------- ------ ------ ------ ------ -------
TOTAL RETURN(B) 2.54% 5.43% 4.75% 2.95% 3.13% 4.24 %
- ------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------
Expenses 0.20%* 0.20% 0.20% 0.20% 0.20% 0.16 %*
- ------------------------------
Net investment income 4.99%* 5.29% 4.85% 2.93% 3.03% 4.42 %*
- ------------------------------
Expense waiver/
reimbursement(c) 0.56%* 0.59% 0.39% 0.43% 0.50% 0.62 %*
- ------------------------------
SUPPLEMENTAL DATA
- ------------------------------
Net assets, end of period
(000 omitted) $1,056,267 $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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
(UNAUDITED) YEAR ENDED
APRIL 30, APRIL 30,
------------ ------------------
1996 1996 1995(A)
- ----------------------------------------------------- ------------ ------ -------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------
Net investment income 0.02 0.05 0.03
- -----------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------
Distributions from net investment income (0.02) (0.05) (0.03 )
- ----------------------------------------------------- --------- ------ -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- ----------------------------------------------------- --------- ------ -------
TOTAL RETURN(B) 2.42% 5.17% 2.60 %
- -----------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------
Expenses 0.45%* 0.45% 0.45 %*
- -----------------------------------------------------
Net investment income 4.74%* 4.97% 5.33 %*
- -----------------------------------------------------
Expense waiver/reimbursement(c) 0.31%* 0.34% 0.39 %*
- -----------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------
Net assets, end of period (000 omitted) $300,153 $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.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
U.S. TREASURY CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
(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"). 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
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Fund's use of the amortized cost method to value
its portfolio securities is in accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
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
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(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 October 31, 1996, capital paid-in aggregated $1,356,420,088.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
OCTOBER 31, 1996 APRIL 30, 1996
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INSTITUTIONAL SHARES SHARES SHARES
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<S> <C> <C>
Shares sold 1,878,872,584 3,218,643,175
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Shares issued to shareholders in payment of
distributions declared 1,232,395 4,028,759
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Shares redeemed (1,761,499,867) (2,894,243,576 )
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Net change resulting from Institutional Share
transactions 118,605,112 328,428,358
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</TABLE>
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
OCTOBER 31, 1996 APRIL 30, 1996
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INSTITUTIONAL SERVICE SHARES SHARES SHARES
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<S> <C> <C>
Shares sold 511,378,925 715,904,928
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Shares issued to shareholders in payment of
distributions declared 1,606,835 1,211,600
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Shares redeemed (489,931,657) (500,524,936 )
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Net change resulting from Institutional Service
Share transactions 23,054,103 216,591,592
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Net change resulting from share transactions 141,659,215 545,019,950
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</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment adviser
(the "Adviser"), receives for its services an annual investment advisory fee
equal to 0.40% of 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
U.S. TREASURY CASH RESERVES
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Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to 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. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company ("FSSC") serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FSSC is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the 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.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
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John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Glen R. Johnson Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President, Treasurer
John E. Murray, Jr. and Secretary
Wesley W. Posvar Richard B. Fisher
Marjorie P. Smuts Vice President
S. Elliott Cohan
Assistant Secretary
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Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
Although money market funds seek to maintain a stable net asset value of $1.00
per share, there is no assurance that they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses, and other information.
