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, 1997. The report begins with a brief
commentary by the fund's portfolio manager on the short-term government market,
followed by a complete list 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.* 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
$15.9 million, or $0.02 per share. At the end of the reporting period, fund net
assets totaled $663.2 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, 1997
* 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. An investment
in this fund is not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
Automated Government Cash Reserves, which is rated AAAm by Standard & Poor's
Ratings Services ("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, Federal Farm Credit Bank, and Federal Home Loan Bank. We continue
to maintain a small Treasury position within the Fund's portfolio when agency
spreads are narrow.
Over the six-month period ended October 31, 1997, Federal Reserve Board ("Fed")
policy remained on hold with the federal funds target rate at 5.50%. Economic
fundamentals remained strong over the period, but inflationary pressures
remained benign. On the heels of the 0.25% tightening by the Fed in late March
1997, short-term interest rates gradually declined over the second quarter as
fears of another near-term Fed tightening receded notably in light of little to
no evidence of price pressures. The market then traded within a fairly narrow
range through the summer months, with few new developments to break it out of
its holding pattern. Fed tightening fears were rekindled in early October 1997.
However, comments by Fed officials indicated an internal debate at the Fed over
whether tight labor markets and above-trend growth must eventually lead to
inflationary pressures, and many analysts expected a 0.25% hike in the Fed funds
target rate at the Fed's November 12, 1997 Federal Open Market Committee
meeting. Turmoil in the overseas markets in late October 1997, particularly in
the Asian equity markets, took the pressure off of the Fed in the near term and
put them back on the sidelines until the situation stabilizes.
Movements in the one-year Treasury bill reflected the shifting market sentiment
over the period. The yield on this security declined steadily from 5.90% in
early May 1997 to 5.50% in early July 1997, then traded within a fairly narrow
range until early October 1997. Then, the yield rose to 5.60% by the middle of
the month as Fed tightening expectations resurfaced, plunged to 5.20% in the
midst of the Asian crisis as investors sought a safe haven in Treasury
securities, and ended the month around 5.30%.
Over the 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. Technical influences in shorter-term
Treasury securities caused agency spreads to widen, and as a result, the agency
market was our preferred investment sector over the period. The Fund remained
barbelled in structure, combining short-term discount notes and government
agency floating rate notes with purchases of fixed-rate securities with longer
maturities. Liquidity for the portfolio was enhanced by the use of a floating
rate agency master note agreement. Although the economic fundamentals still
point to an economy with a decent head of steam, the uncertainty about the
recent developments in Asia are likely to keep the Fed on hold for the time
being, and the Fund will likely maintain its current stance in the near term.
* 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. 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.
PORTFOLIO OF INVESTMENTS
AUTOMATED GOVERNMENT CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM GOVERNMENT AND AGENCY OBLIGATIONS--104.5%
$ 3,500,000 Federal Farm Credit Bank Note, 5.700%, 9/2/1998 $ 3,495,937
16,000,000 (a)Federal Farm Credit Bank, Discount Notes, 5.380%, 15,961,742
11/17/1997
11,000,000 (b)Federal Farm Credit Bank, Floating Rate Notes, 5.430%, 10,998,464
11/4/1997
60,500,000 Federal Home Loan Bank Notes, 5.460% - 13.000%, 11/18/1997 - 60,725,809
10/23/1998
252,115,000 (a)Federal Home Loan Bank, Discount Notes, 5.380% - 5.620%, 250,603,486
11/3/1997 - 4/15/1998
55,500,000 (b)Federal Home Loan Bank, Floating Rate Notes, 5.310% - 55,467,491
5.529%, 11/4/1997 - 12/4/1997
34,800,000 Student Loan Marketing Association Floating Rate Master 34,800,000
Notes, 5.450%, 11/4/1997
177,000,000 (a)Student Loan Marketing Association, Discount Notes, 176,458,241
5.400% - 5.630%, 11/3/1997 - 1/27/1998
58,000,000 (b)Student Loan Marketing Association, Floating Rate
Notes, 57,974,216 5.270% - 5.580%, 11/4/1997
6,000,000 Student Loan Marketing Association Note, 5.535%, 2/25/1998 5,992,364
12,000,000 (a)Tennessee Valley Authority, Discount Notes, 5.390%, 11,913,760
12/19/1997
2,000,000 (a)U.S. Treasury Bills, 5.300%, 3/5/1998 1,963,489
2,500,000 U.S. Treasury Notes, 6.125%, 5/15/1998 2,502,387
4,000,000 U.S. Treasury Notes, 6.250%, 7/31/1998 4,015,864
Total Investments (at amortized cost)(c) $ 692,873,250
</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
($663,219,741) at October 31, 1997.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
AUTOMATED GOVERNMENT CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 692,873,250
Cash 322,163
Income receivable 2,571,554
Receivable for investments sold 20,003,125
Receivable for shares sold 1,005
Total assets 715,771,097
LIABILITIES:
Payable for investments purchased $ 49,737,821
Income distribution payable 2,702,084
Accrued expenses 111,451
Total liabilities 52,551,356
Net Assets for 663,219,741 shares outstanding $ 663,219,741
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$663,219,741 / 663,219,741 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
AUTOMATED GOVERNMENT CASH RESERVES
SIX MONTHS ENDED OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 17,828,261
EXPENSES:
Investment advisory fee $ 1,608,599
Administrative personnel and services fee 242,898
Custodian fees 15,601
Transfer and dividend disbursing agent fees and expenses 11,184
Trustees' fees 5,520
Auditing fees 6,532
Legal fees 3,496
Portfolio accounting fees 29,204
Shareholder services fee 804,300
Share registration costs 12,788
Printing and postage 4,784
Insurance premiums 3,496
Miscellaneous 6,992
Total expenses 2,755,394
Waiver --
Waiver of investment advisory fee (843,092)
Net expenses 1,912,302
Net investment income $ 15,915,959
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
AUTOMATED GOVERNMENT CASH RESERVES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1997 APRIL 30, 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 15,915,959 $ 29,429,059
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (15,915,959) (29,429,059)
SHARE TRANSACTIONS--
Proceeds from sale of shares 1,123,225,458 2,280,856,911
Net asset value of shares issued to shareholders in payment 2,345,463 5,319,923
of distributions declared
Cost of shares redeemed (1,125,422,215) (2,226,241,659)
Change in net assets resulting from share transactions 148,706 59,935,175
Change in net assets 148,706 59,935,175
NET ASSETS:
Beginning of period 663,071,035 603,135,860
End of period $ 663,219,741 $ 663,071,035
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
OCTOBER 31, YEAR ENDED APRIL 30,
1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.05 0.05 0.05 0.03 0.03
LESS DISTRIBUTIONS
Distributions from net
investment income (0.02) (0.05) (0.05) (0.05) (0.03) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.52% 4.90% 5.24% 4.68% 2.77% 2.92%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.59%* 0.59% 0.58% 0.58% 0.57% 0.57%
Net investment income 4.95%* 4.80% 5.12% 4.70% 2.75% 2.87%
Expense waiver/reimbursement(b) 0.26%* 0.29% 0.30% 0.32% 0.09% 0.08%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $663,220 $663,071 $603,136 $603,849 $457,944 $396,370
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
AUTOMATED GOVERNMENT CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
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.
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 uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES
It is the 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.
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, 1997, capital paid-in aggregated $663,219,741.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
OCTOBER 31, 1997 APRIL 30,
1997
<S> <C> <C>
Shares sold 1,123,225,458 2,280,856,911
Shares issued to shareholders in payment of 2,345,463 5,319,923
distributions declared
Shares redeemed (1,125,422,215) (2,226,241,659)
Net change resulting from share transactions 148,706 59,935,175
</TABLE>
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.
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.
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
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves 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.
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Automated Government Cash Reserves
SEMI-ANNUAL REPORT TO SHAREHOLDERS
OCTOBER 31, 1997
Cusip 314186107
0112708 (12/97)
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, 1997. The report begins with a brief
commentary by the fund's portfolio manager on the short-term government market,
followed by a complete list 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,* all through a portfolio of
U.S. Treasury obligations.
During the six-month reporting period, dividends paid to shareholders totaled
$6.4 million, or $0.02 per share. At the end of the reporting period, the fund's
net assets reached $303.3 million.
Thank you for your confidence in Automated Treasury Cash Reserves. Your
questions, comments, or suggestions are always welcome.
Sincerely,
[Graphic]
Glen R. Johnson
President
December 15, 1997
* Money market funds seek to maintain a stable net asset value of $1.00.
There is no assurance that they will be able to do so. An investment in this
fund is not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
Automated Treasury Cash Reserves, which is rated AAAm by Standard & Poor's
Ratings Services ("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 is
maintained by including a laddered position of short-term Treasury securities.
With Federal Reserve Board ("Fed") policy remaining on hold over the reporting
period, movements in short-term Treasury securities were dominated by technical
influences, particularly in the Treasury bill market. Stronger-than-expected tax
receipts and continued improvement in the budget deficit led to reductions in
the overall size of Treasury bill auctions. This lack of supply relative to the
overall demand for these securities drove interest rates lower. The technical
pressures were relieved temporarily at times with the issuance of short-term
cash management bills, but resumed again with the maturity of these instruments.
The downward pressure on rates was exacerbated toward the end of September 1997
with quarter-end window-dressing, and in October 1997 by a flight-to-quality to
the Treasury markets because of turmoil in the Asian equity markets. Overall,
the combination of these factors caused short Treasury securities to trade at an
abnormal relationship to the federal funds target--trading well below that 5.50%
target for securities under six months in maturity--given the generally robust
state of the economy.
The yield on the three-month Treasury bill began the reporting period on May 1,
1997, at 5.20% but plunged to 4.80% by the end of the month. The yield then rose
as high as 5.30% by early August 1997, but then fell steadily again to 4.90% by
late September 1997. The yield on this security then climbed back to end October
1997, in spite of all of the volatility over the period, at 5.20% once more.
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 and was at times somewhat above or
below 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 maximize shareholder value. Although the
economic fundamentals still point to an economy with a decent head of steam, the
uncertainty about the recent developments in Asia are likely to keep the Fed on
hold for the time being.
* 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.
Money market funds and bond funds rate 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.
PORTFOLIO OF INVESTMENTS
AUTOMATED TREASURY CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY--100.1%
(A)U.S. TREASURY BILLS--41.0%
$ 24,000,000 4.850% - 4.925%, 12/26/1997 $ 23,820,562
9,000,000 4.890% - 5.015%, 1/2/1998 8,923,129
20,500,000 4.905% - 4.950%, 12/4/1997 20,407,185
9,000,000 4.905% - 5.080%, 1/15/1998 8,906,208
37,000,000 4.970% - 5.170%, 1/22/1998 36,576,214
4,000,000 4.985%, 1/8/1998 3,955,308
10,000,000 5.060%, 1/29/1998 9,874,906
12,000,000 5.135%, 11/13/1997 11,979,460
TOTAL 124,442,972
U.S. TREASURY NOTES--59.1%
38,000,000 5.000%, 1/31/1998 37,953,159
5,000,000 5.125%, 2/28/1998 4,995,557
48,000,000 5.375% - 6.000%, 11/30/1997 48,016,155
5,000,000 6.125%, 3/31/1998 5,015,087
28,000,000 7.250%, 2/15/1998 28,132,960
55,000,000 7.375%, 11/15/1997 55,036,007
TOTAL 179,148,925
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $ 303,591,897
</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
($303,362,143) at October 31, 1997.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
AUTOMATED TREASURY CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 303,591,897
Income receivable 4,040,563
Receivable for investments sold 24,768,083
Total assets 332,400,543
LIABILITIES:
Payable for investments purchased $ 24,712,778
Income distribution payable 1,168,612
Payable to Bank 3,087,769
Accrued expenses 69,241
Total liabilities 29,038,400
Net Assets for 303,362,143 shares outstanding $ 303,362,143
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$303,362,143 / 303,362,143 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
AUTOMATED TREASURY CASH RESERVES
SIX MONTHS ENDED OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 7,233,096
EXPENSES:
Investment advisory fee $ 684,454
Administrative personnel and services fee 103,353
Custodian fees 8,485
Transfer and dividend disbursing agent fees and expenses 8,104
Trustees' fees 3,496
Auditing fees 6,532
Legal fees 3,312
Portfolio accounting fees 36,404
Shareholder services fee 342,227
Share registration costs 12,344
Printing and postage 3,312
Insurance premiums 2,392
Miscellaneous 7,104
Total expenses 1,221,519
Waivers--
Waiver of investment advisory fee $ (372,796)
Waiver of shareholder services fee (41,067)
Total waivers (413,863)
Net expenses 807,656
Net investment income $ 6,425,440
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
AUTOMATED TREASURY CASH RESERVES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1997 APRIL 30, 1997
<S> <C> <C>
INCREASE IN NET ASSETS:
OPERATIONS--
Net investment income $ 6,425,440 $ 12,362,293
Net realized gain (loss) on investments -- 118,401
Change in net assets resulting from operations 6,425,440 12,480,694
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (6,425,440) (12,362,293)
Distributions from net realized gains -- (118,401)
Change in net assets resulting from distributions to (6,425,440) (12,480,694)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 478,426,771 925,773,225
Net asset value of shares issued to shareholders in payment of 1,056,750 2,903,115
distributions declared
Cost of shares redeemed (465,647,445) (899,818,480)
Change in net assets resulting from share transactions 13,836,076 28,857,860
Change in net assets 13,836,076 28,857,860
NET ASSETS:
Beginning of period 289,526,067 260,668,207
End of period $ 303,362,143 $ 289,526,067
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
OCTOBER 31, YEAR ENDED APRIL 30,
1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.05 0.05 0.04 0.03 0.03
Net realized and unrealized gain (loss)
on investments -- 0.00(a) -- -- -- --
Total from investment operations 0.02 0.05 0.05 0.04 0.03 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.05) (0.05) (0.04) (0.03) (0.03)
Distributions from net realized
gain on investments -- (0.00)(a) (0.00)(a) -- -- --
Total distributions (0.02) (0.05) (0.05) (0.04) (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) 2.38% 4.71% 5.04% 4.37% 2.58% 2.88%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.59%* 0.57% 0.57% 0.56% 0.57% 0.39%
Net investment income 4.69%* 4.58% 4.92% 4.29% 2.55% 2.79%
Expense waiver/reimbursement(c) 0.30%* 0.34% 0.37% 0.32% 0.13% 0.53%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $303,362 $289,526 $260,668 $167,508 $190,840 $252,955
</TABLE>
* Computed on an annualized basis.
(a) Amount is less than one cent.
(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)
NOTES TO FINANCIAL STATEMENTS
AUTOMATED TREASURY CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
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.
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 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.
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, 1997, capital paid-in aggregated $303,362,143.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
October 31, 1997 April 30, 1997
<S> <C> <C>
Shares sold 478,426,771 925,773,225
Shares issued to shareholders in payment of 1,056,750 2,903,115
distributions declared
Shares redeemed (465,647,445) (899,818,480)
Net change resulting from share transactions 13,836,076 28,857,860
</TABLE>
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. 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 EXPENSE
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.
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
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves 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.
[Graphic]Federated Investors
Automated Treasury Cash Reserves
SEMI-ANNUAL REPORT TO SHAREHOLDERS OCTOBER 31, 1997
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314186404
2112509 (12/97)
[Graphic]
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, 1997. The report begins with a brief commentary by the
fund's portfolio manager on the short-term government market, followed by a
complete list 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,* 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 $30.5 million, or $0.03 per share. For the
same reporting period, dividends paid to shareholders of the fund's
Institutional Service Shares totaled $11.2 million, or $0.02 per share. Fund net
assets rose from $1.5 billion at the beginning of the reporting period to reach
$1.7 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,
[Graphic]
Glen R. Johnson
President
December 15, 1997
* Money market funds seek to maintain a stable net asset value of $1.00.
There is no assurance that they will be able to do so. An investment in this
fund is not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
U.S. Treasury Cash Reserves, which is rated AAAm by Standard & Poor's
Ratings Services ("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 is maintained by including a laddered position of short-term
Treasury securities.
With Federal Reserve Board ("Fed") policy remaining on hold over the reporting
period, movements in short-term Treasury securities were dominated by technical
influences, particularly in the Treasury bill market. Stronger-than-expected tax
receipts and continued improvement in the budget deficit led to reductions in
the overall size of Treasury bill auctions. This lack of supply relative to the
overall demand for these securities drove interest rates lower. The technical
pressures were relieved temporarily at times with the issuance of short-term
cash management bills, but resumed again with the maturity of these instruments.
The downward pressure on rates was exacerbated toward the end of September 1997
with quarter-end window-dressing, and in October 1997 by a flight-to-quality to
the Treasury markets because of turmoil in the Asian equity markets. Overall,
the combination of these factors caused short Treasury securities to trade at an
abnormal relationship to the federal funds target--trading well below that 5.50%
target for securities under six months in maturity--given the generally robust
state of the economy.
The yield on the three-month Treasury bill began the reporting period on May 1,
1997, at 5.20% but plunged to 4.80% by the end of the month. The yield then rose
as high as 5.30% by early August 1997, but then fell steadily again to 4.90% by
late September 1997. The yield on this security then climbed back to end October
1997, in spite of all of the volatility over the period, at 5.20% once more.
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 and was at times somewhat above or
below 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 maximize shareholder value. Although the
economic fundamentals still point to an economy with a decent head of steam, the
uncertainty about the recent developments in Asia are likely to keep the Fed on
hold for the time being.
* 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. Money market
funds and bond funds rate 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.
PORTFOLIO OF INVESTMENTS
U.S. TREASURY CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--99.1%
(A)U.S. TREASURY BILLS--26.8%
$ 65,000,000 4.905% - 5.080%, 1/15/1998 $ 64,326,354
23,500,000 4.910% - 4.950%, 12/4/1997 23,393,790
65,000,000 4.920% - 5.015%, 1/2/1998 64,445,143
11,000,000 4.925%, 12/26/1997 10,917,233
24,000,000 4.985%, 1/8/1998 23,774,013
247,300,000 5.015% - 5.180%, 1/22/1998 244,388,910
42,000,000 5.060%, 1/29/1998 41,474,603
5,000,000 5.135%, 11/20/1997 4,986,449
TOTAL 477,706,495
U.S. TREASURY NOTES--72.3%
260,410,000 5.000%, 1/31/1998 260,089,856
35,000,000 5.125%, 2/28/1998 34,968,897
257,644,000 5.375% - 6.000%, 11/30/1997 257,676,203
35,000,000 6.125%, 3/31/1998 35,105,609
125,000,000 7.250%, 2/15/1998 125,588,852
576,600,000 7.375% - 8.875%, 11/15/1997 577,022,870
TOTAL 1,290,452,287
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $ 1,768,158,782
</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
($1,783,706,599) at October 31, 1997.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
U.S. TREASURY CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 1,768,158,782
Income receivable 31,988,534
Receivable for investments sold 231,829,260
Total assets 2,031,976,576
LIABILITIES:
Payable for investments purchased $ 231,604,790
Income distribution payable 7,476,205
Payable to Bank 9,029,950
Accrued expenses 159,032
Total liabilities 248,269,977
Net Assets for 1,783,706,599 shares outstanding $ 1,783,706,599
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
INSTITUTIONAL SHARES:
$1,254,981,021 / 1,254,981,021 shares outstanding $1.00
INSTITUTIONAL SERVICE SHARES:
$528,725,578 / 528,725,578 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
U.S. TREASURY CASH RESERVES
SIX MONTHS ENDED OCTOBER 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 44,126,294
EXPENSES:
Investment advisory fee $ 3,329,034
Administrative personnel and services fee 628,355
Custodian fees 51,426
Transfer and dividend disbursing agent fees and 89,336
expenses
Trustees' fees 9,016
Auditing fees 6,532
Legal fees 4,232
Portfolio accounting fees 73,755
Shareholder services fee--Institutional Shares 1,498,711
Shareholder services fee--Institutional Service 581,935
Shares
Share registration costs 44,436
Printing and postage 3,863
Insurance premiums 6,531
Miscellaneous 3,220
Total expenses 6,330,382
Waivers--
Waiver of investment advisory fee $ (2,548,601)
Waiver of shareholder services fee--Institutional (1,498,711)
Shares
Total waivers (4,047,312)
Net expenses 2,283,070
Net investment income $ 41,843,224
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
U.S. TREASURY CASH RESERVES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
OCTOBER 31, 1997 APRIL 30, 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 41,843,224 $ 67,963,849
Net realized gain on investments -- 534,077
Change in net assets resulting from operations 41,843,224 68,497,926
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (30,549,262) (52,325,091)
Institutional Service Shares (11,293,962) (15,638,758)
Distributions from net realized gains
Institutional Shares -- (405,943)
Institutional Service Shares -- (128,134)
Change in net assets resulting from distributions to (41,843,224) (68,497,926)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 3,223,075,022 5,551,441,597
Net asset value of shares issued to shareholders in payment 4,053,431 8,283,271
of distributions declared
Cost of shares redeemed (3,020,837,159) (5,197,070,436)
Change in net assets resulting from share transactions 206,291,294 362,654,432
Change in net assets 206,291,294 362,654,432
NET ASSETS:
Beginning of period 1,577,415,305 1,214,760,873
End of period $ 1,783,706,599 $ 1,577,415,305
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
OCTOBER 31, YEAR ENDED APRIL 30,
1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05 0.05 0.03 0.03
Net realized gain on investments -- 0.00(a) -- -- -- --
Total from investment operations 0.03 0.05 0.05 0.05 0.03 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.05) (0.03) (0.03)
Distributions from net realized gains -- 0.00(a) -- -- -- --
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.59% 5.10% 5.43% 4.75% 2.95% 3.13%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.20%* 0.20% 0.20% 0.20% 0.20% 0.20%
Net investment income 5.10%* 4.95% 5.29% 4.85% 2.93% 3.03%
Expense waiver/reimbursement(c) 0.56%* 0.57% 0.59% 0.39% 0.43% 0.50%
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $1,254,981 $1,131,071 $937,662 $609,233 $265,030 $177,471
</TABLE>
* Computed on an annualized basis.
(a) Amount is less than one cent.
(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)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
OCTOBER 31, YEAR ENDED APRIL 30,
1997 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.05 0.05 0.03
Net realized gain on investments -- 0.00(b) -- --
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.05) (0.05) (0.03)
Distributions from net realized gains -- 0.00(b) -- --
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(C) 2.46% 4.84% 5.17% 2.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45%* 0.45% 0.45% 0.45%*
Net investment income 4.85%* 4.69% 4.97% 5.33%*
Expense waiver/reimbursement(d) 0.31%* 0.32% 0.34% 0.39%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $528,726 $446,344 $227,099 $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) Amount is less than one cent.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
U.S. TREASURY CASH RESERVES
OCTOBER 31, 1997 (UNAUDITED)
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.
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 uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES
It is the 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.
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, 1997, capital paid-in aggregated $1,783,706,599.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
INSTITUTIONAL SHARES OCTOBER 31, 1997 APRIL 30, 1997
<S> <C> <C>
Shares sold 2,345,789,036 4,027,835,159
Shares issued to shareholders in payment of distributions declared 1,689,123 3,282,589
Shares redeemed (2,223,567,984) (3,837,708,405)
Net change resulting from Institutional Shares transactions 123,910,175 193,409,343
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
INSTITUTIONAL SERVICE SHARES OCTOBER 31, 1997 APRIL 30, 1997
<S> <C> <C>
Shares sold 877,285,986 1,523,606,438
Shares issued to shareholders in payment of distributions declared 2,364,308 5,000,682
Shares redeemed (797,269,175) (1,359,362,031)
Net change resulting from Institutional Service Shares transactions 82,381,119 169,245,089
Net change resulting from share transactions 206,291,294 362,654,432
</TABLE>
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 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. For the period ended October
31, 1997, 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 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.
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
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves 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.
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U.S. Treasury Cash Reserves
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1997
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314186503
Cusip 314186305
2112510 (12/97)
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