FEDERATED GOVERNMENT TRUST/PA, N-30D, 1997-07-01

FEDERATED GOVERNMENT TRUST/PA
N-30D, 1997-07-01

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AUTOMATED GOVERNMENT CASH RESERVES

(A Portfolio of Federated Government Trust)

PROSPECTUS

The shares of Automated Government Cash Reserves (the "Fund") offered by this
prospectus represent interests in a portfolio of Federated Government Trust (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in short-term U.S. government securities to achieve current income
consistent with stability of principal and liquidity.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE FUND
ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE CAN BE
NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO SO.

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

The Fund has also filed a Statement of Additional Information dated June 30,
1997 with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information, or make inquiries about the Fund, contact the Fund at
the address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

Prospectus dated June 30, 1997

TABLE OF CONTENTS
<TABLE>
<S> <C>
Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Limitations 4
Fund Information 4
Management of the Fund 4
Distribution of Shares 5
Administration of the Fund 5
Net Asset Value 5
How to Purchase Shares 5
Purchasing Shares by Wire 6
Purchasing Shares by Check 6
Automatic Investments 6
How to Redeem Shares 6
Redeeming Shares by Telephone 6
Redeeming Shares by Mail 6
Account and Share Information 7
Dividends 7
Capital Gains 7
Certificates and Confirmations 7
Accounts with Low Balances 7
Voting Rights 7
Tax Information 7
Federal Income Tax 7
State and Local Taxes 7
Performance Information 8
Financial Statements 9
Report of Ernst & Young LLP,
Independent Auditors 15
</TABLE>

SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.21%
12b-1 Fee None
Shareholder Services Fee 0.25%
Total Other Expenses 0.38%
Total Operating Expenses(2) 0.59%
</TABLE>

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

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

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Fund Information." Wire-transferred redemptions of less than $5,000 may be
subject to additional fees.

EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.

<TABLE>
<S> <C>
1 Year $ 6
3 Years $19
5 Years $33
10 Years $74
</TABLE>

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

FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 15.
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1997 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 0.05 0.05 0.05 0.03 0.03 0.05 0.07 0.02
LESS DISTRIBUTIONS
Distributions from net (0.05) (0.05) (0.05) (0.03) (0.03) (0.05) (0.07) (0.02)
investment income
NET ASSET VALUE, END OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD
TOTAL RETURN(B) 4.90% 5.24% 4.68% 2.77% 2.92% 4.79% 7.20% 1.93%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.59% 0.58% 0.58% 0.57% 0.57% 0.58% 0.55% 0.32%*
Net investment income 4.80% 5.12% 4.70% 2.75% 2.87% 4.58% 6.70% 8.02%*
Expense 0.29% 0.30% 0.32% 0.09% 0.08% 0.14% 0.30% 0.89%*
waiver/reimbursement(c)
SUPPLEMENTAL DATA
Net assets, end of $663,071 $603,136 $603,849 $457,944 $396,370 $308,625 $206,694 $34,053
period (000 omitted)
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from February 15, 1990 (date of initial
public investment) to April 30, 1990.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

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

GENERAL INFORMATION

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is current income consistent with stability
of principal and liquidity. This investment objective cannot be changed without
shareholder approval. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by complying with the
diversification and other requirements of Rule 2a-7 under the Investment Company
Act of 1940 which regulates money market mutual funds and by following the
investment policies described in this prospectus.

INVESTMENT POLICIES

The Fund pursues its investment objective by investing only in a portfolio of
U.S. government securities maturing in 13 months or less. The average maturity
of the securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be 90 days or less. Unless indicated otherwise, the investment policies may
be changed by the Board of Trustees without shareholder approval. Shareholders
will be notified before any material change in these policies becomes effective.

The Fund will limit its investments to investments which, if owned directly, pay
interest exempt from state personal income tax. Therefore, dividends paid by the
Fund may be exempt from state personal income tax.

ACCEPTABLE INVESTMENTS

The Fund invests only in U.S. government securities. These instruments are
either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities include, but are not limited to:

* direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;

* notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States;

* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

* notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.

Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government are backed by the full faith and credit of the U.S.
Treasury. No assurances can be given that the U.S. government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These instrumentalities are supported by:

* the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

* discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

* the credit of the agency or instrumentality.

AGENCY MASTER DEMAND NOTES

The Fund may enter into master demand notes with various federal agencies and
instrumentalities. Under a master demand note, the Fund has the right to
increase or decrease the amount of the note on a daily basis within specified
maximum and minimum amounts. Master demand notes also normally provide for full
or partial repayment upon seven or more days notice by either the Fund or the
borrower and bear interest at a variable rate. The Fund relies on master demand
notes, in part, to provide daily liquidity. To the extent that the Fund cannot
obtain liquidity through master demand notes, it may be required to maintain a
larger cash position, invest more assets in securities with current maturities
or dispose of assets at a gain or loss to maintain sufficient liquidity.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter into transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

INVESTMENT LIMITATIONS

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

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

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

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

The Fund is managed by a Board of Trustees. The Trustees are responsible for
managing the Fund's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.

INVESTMENT ADVISER

Investment decisions for the Fund are made by Federated Management, the Fund's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Fund and is
responsible for the purchase and sale of portfolio instruments.

ADVISORY FEES

The adviser receives an annual investment advisory fee equal to 0.50% of the
Fund's average daily net assets. The adviser may voluntarily choose to waive a
portion of its fee or reimburse other expenses of the Fund, but reserves the
right to terminate such waiver or reimbursement at any time at its sole
discretion.

ADVISER'S BACKGROUND

Federated Management, a Delaware business trust, organized on April 11, 1989,
is a registered investment adviser under the Investment Advisers Act of 1940.
It is a subsidiary of Federated Investors. All of the Class A (voting) shares
of Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.

Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $110 billion invested across more than 300
funds under management and/or administration by its subsidiaries, as of
December 31, 1996, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 2,000 employees,
Federated continues to be led by the management who founded the company in
1955. Federated funds are presently at work in and through 4,500 financial
institutions nationwide.

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

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.

SHAREHOLDER SERVICES

The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to 0.25% of the average daily net asset value of its
shares, computed at an annual rate, to obtain certain personal services for
shareholders and to maintain shareholder accounts. From time to time and for
such periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

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

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund at an annual rate which
relates to the average aggregate daily net assets of all funds advised by
affiliates of Federated Investors specified below:

<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
<S> <C>
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million
</TABLE>

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

NET ASSET VALUE

The Fund attempts to stabilize the net asset value of its shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting total liabilities from total assets
and dividing the remainder by the number of shares outstanding. The Fund cannot
guarantee that its net asset value will always remain at $1.00 per share.

The net asset value is determined at 12:00 noon, 1:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.

HOW TO PURCHASE SHARES

To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. Minimum
investments will be calculated by combining all accounts maintained with the
Fund. Financial institutions may impose different minimum investment
requirements on their customers.

PURCHASING SHARES BY WIRE

Shares may be purchased by wire by calling the Fund before 2:00 p.m. Eastern
time to place an order. The order is considered received immediately. Payment by
federal funds must be received before 2:00 p.m. (Eastern time) that day. Federal
funds should be wired as follows: Federated Shareholder Services Company, c/o
State Street Bank and Trust Company, Boston, MA; Attention: EDGEWIRE; For Credit
to: Automated Government Cash Reserves; Fund Number (this number can be found on
the account statement or by contacting the Fund); Group Number or Order Number;
Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.

PURCHASING SHARES BY CHECK

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

AUTOMATIC INVESTMENTS

Investors may establish accounts with their financial institutions to have cash
accumulations automatically invested in the Fund. The investments may be made on
predetermined dates or when the investor's account reaches a certain level.
Participating financial institutions are responsible for prompt transmission of
orders relating to the program, and they may charge for their services.
Investors should read this prospectus along with the financial institution's
agreement or literature describing these services and fees.

HOW TO REDEEM SHARES

Shares are redeemed at their net asset value next determined after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Fund computes its net asset value. Redemption
requests must be received in proper form and can be made as described below.

REDEEMING SHARES BY TELEPHONE

Redemptions may be made by calling the Fund provided the Fund has a properly
completed authorization form. These forms can be obtained from Federated
Securities Corp. Proceeds from redemption requests received before 2:00 p.m.
(Eastern time) will be wired the same day to the shareholder's account at a
domestic commercial bank which is a member of the Federal Reserve System, but
will not include that day's dividend. Proceeds from redemption requests received
after that time include that day's dividend but will be wired the following
business day. Proceeds from redemption requests on holidays when wire transfers
are restricted will be wired the following business day. Questions about
telephone redemptions on days when wire transfers are restricted should be
directed to your shareholder services representative at the telephone number
listed on your account statement.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares by Mail"
should be considered. If at any time the Fund shall determine it necessary to
terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.

REDEEMING SHARES BY MAIL

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

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

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Fund unless cash
payments are requested by writing to the Fund. Shares purchased by wire before
2:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.

CAPITAL GAINS

The Fund does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Fund will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.

CERTIFICATES AND CONFIRMATIONS

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

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except accounts maintained by retirement plans,
and pay the proceeds to the shareholder if the account balance falls below a
required minimum value of $25,000 due to shareholder redemptions. Before shares
are redeemed to close an account, the shareholder is notified in writing and
allowed 30 days to purchase additional shares to meet the minimum requirement.

VOTING RIGHTS

Each share of the Trust owned by a shareholder gives that shareholder one vote
in Trustee elections and other matters submitted to shareholders for vote. All
shares of each portfolio in the Trust have equal voting rights, except that in
matters affecting only a particular portfolio, only shareholders of that
portfolio are entitled to vote. The Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for election of Trustees
under certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.

As of June 9, 1997, Fiduciary Trust Co. International Customer Account, New
York, NY, owned 27.01% of the voting securities of the Fund, and, therefore, may
for certain purposes, be deemed to control the Fund and be able to affect the
outcome of certain matters presented for a vote of shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies. The Fund will be
treated as a single, separate entity for federal income tax purposes so that
income (including capital gains) and losses realized by the Trust's other
portfolios will not be combined for tax purposes with those realized by the
Fund.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions received. This applies whether dividends
and distributions are received in cash or as additional shares.

STATE AND LOCAL TAXES

In the opinion of Houston, Donnelly & Meck, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.

The Fund will limit its investments to those which, if owned directly, pay
interest exempt from state personal income tax. However, under the laws of some
states, the net investment income distributed by the Fund may be taxable to
shareholders. Shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.

PERFORMANCE INFORMATION

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

Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment.

Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.

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

PORTFOLIO OF INVESTMENTS

AUTOMATED GOVERNMENT CASH RESERVES
APRIL 30, 1997

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM GOVERNMENT AND AGENCY OBLIGATIONS -- 102.7%
$ 3,500,000 Federal Farm Credit Bank Note, 5.600%, 6/3/1997 $ 3,499,556
112,895,000 (a)Federal Farm Credit Bank, Discount Notes, 5.160% - 5.550%, 112,144,014
5/14/1997 - 9/30/1997
21,000,000 (b)Federal Farm Credit Bank, Floating Rate Note, 5.520% - 5.720%, 20,993,376
5/2/1997
12,400,000 Federal Home Loan Bank Notes, 5.460% - 6.025%, 11/18/1997 -
4/15/1998 12,389,010 269,340,000 (a)Federal Home Loan Bank, Discount Notes,
5.160% - 5.640%, 5/1/1997 - 268,015,545
10/23/1997
38,500,000 (b)Federal Home Loan Bank, Floating Rate Notes, 5.349% - 5.563%, 38,488,922
5/2/1997 - 6/4/1997
39,800,000 Student Loan Marketing Association Master Notes, 5.435%, 5/6/1997 39,800,000
72,000,000 (a)Student Loan Marketing Association, Discount Notes, 5.390% - 71,850,596
5.450%, 5/6/1997 - 6/3/1997
75,000,000 (b)Student Loan Marketing Association, Floating Rate Notes, 5.530% - 74,958,017
5.610%, 5/6/1997
3,000,000 Student Loan Marketing Association, 5.620%, 6/30/1997 2,998,240
6,000,000 (a)U.S. Treasury Bills, 5.300% - 5.360%, 3/5/1998 5,725,880
30,000,000 U.S. Treasury Notes, 5.750% - 7.875%, 5/31/1997 - 1/15/1998 30,160,706
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $681,023,862
</TABLE>

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

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

Note: The categories of investments are shown as a percentage of net assets
($663,071,035) at April 30, 1997.

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

STATEMENT OF ASSETS AND LIABILITIES

AUTOMATED GOVERNMENT CASH RESERVES
APRIL 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $681,023,862
Cash 796,689
Income receivable 2,229,194
Receivable for investments sold 3,058,280
Receivable for shares sold 34,873
Total assets $687,142,898
LIABILITIES:
Payable for investments purchased $ 21,696,578
Payable for shares redeemed 15,223
Income distribution payable 2,178,381
Accrued expenses 181,681
Total liabilities 24,071,863
NET ASSETS for 663,071,035 shares outstanding $663,071,035
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$663,071,035 / 663,071,035 shares outstanding $1.00
</TABLE>

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

STATEMENT OF OPERATIONS
AUTOMATED GOVERNMENT CASH RESERVES
YEAR ENDED APRIL 30, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest $33,024,025
EXPENSES:
Investment advisory fee $ 3,065,198
Administrative personnel and services fee 463,179
Custodian fees 82,055
Transfer and dividend disbursing agent fees and expenses 57,322
Directors'/Trustees' fees 10,728
Auditing fees 13,188
Legal fees 6,732
Portfolio accounting fees 94,147
Shareholder services fee 1,532,599
Share registration costs 32,488
Printing and postage 9,344
Insurance premiums 7,228
Miscellaneous 13,580
Total expenses 5,387,788
Waivers --
Waiver of investment advisory fee (1,792,822)
Net expenses 3,594,966
Net investment income $29,429,059
</TABLE>

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

STATEMENT OF CHANGES IN NET ASSETS
AUTOMATED GOVERNMENT CASH RESERVES

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 29,429,059 $ 28,284,828
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (29,429,059) (28,284,828)
SHARE TRANSACTIONS --
Proceeds from sale of shares 2,280,856,911 2,822,902,273
Net asset value of shares issued to shareholders in 5,319,923 5,461,926
payment of distributions declared
Cost of shares redeemed (2,226,241,659) (2,829,077,401)
Change in net assets resulting from share
transactions 59,935,175 (713,202)
Change in net assets 59,935,175 (713,202)
NET ASSETS:
Beginning of period 603,135,860 603,849,062
End of period $ 663,071,035 $ 603,135,860
</TABLE>

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

NOTES TO FINANCIAL STATEMENTS
AUTOMATED GOVERNMENT CASH RESERVES
APRIL 30, 1997

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'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 April
30, 1997, capital paid-in aggregated $663,071,035.

Transactions in shares were as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1997 1996
<S> <C> <C>
Shares sold 2,280,856,911 2,822,902,273
Shares issued to shareholders in payment of
distributions declared 5,319,923 5,461,926
Shares redeemed (2,226,241,659) (2,829,077,401)
Net change resulting from share transactions 59,935,175 (713,202)
</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

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.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Trustees and Shareholders of AUTOMATED GOVERNMENT CASH RESERVES:

We have audited the accompanying statement of assets and liabilities of
Automated Government Cash Reserves (a portfolio of Federated Government Trust),
including the portfolio of investments, as of April 30, 1997, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of April 30, 1997, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Automated Government Cash Reserves at April 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 13, 1997

AUTOMATED GOVERNMENT
CASH RESERVES
Federated Investors Tower
Pittsburgh, PA 15222-3779

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

INVESTMENT ADVISER
Federated Management
Federated Investors Tower Pittsburgh, PA 15222-3779

CUSTODIAN
State Street Bank and
Trust Company
c/o Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

[Graphic]

AUTOMATED GOVERNMENT
CASH RESERVES

(A Portfolio of Federated Government Trust)

PROSPECTUS
JUNE 30, 1997

An Open-End,
Management Investment Company

Federated Securities Corp., Distributor

[Graphic]

Cusip 314186107
0011606X (6/97)

AUTOMATED GOVERNMENT CASH RESERVES

(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Automated Government Cash Reserves (the "Fund"), a portfolio of Federated
Government Trust (the "Trust") dated June 30, 1997. This Statement is not a
prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779

Statement dated June 30, 1997 [Graphic]

Cusip 314186107
0011606B (6/97)

TABLE OF CONTENTS
<TABLE>
<S> <C>
INVESTMENT POLICIES 1
Acceptable Investments 1
When-Issued and Delayed Delivery Transactions 1
INVESTMENT LIMITATIONS 1
Selling Short and Buying on Margin 1
Issuing Senior Securities and Borrowing Money 1
Pledging Assets 1
Lending Cash or Securities 1
Investing in Real Estate 1
Investing in Illiquid Securities 2
Investing in Securities of Other
Investment Companies 2
Regulatory Compliance 2
FEDERATED GOVERNMENT TRUST MANAGEMENT 2
Share Ownership 6
Trustee Compensation 7
Trustee Liability 7
INVESTMENT ADVISORY SERVICES 8
Investment Adviser 8
Advisory Fees 8
BROKERAGE TRANSACTIONS 8
OTHER SERVICES 8
Fund Administration 8
Custodian and Portfolio Accountant 8
Transfer Agent 9
Independent Auditors 9
Shareholder Services 9
DETERMINING NET ASSET VALUE 9
REDEMPTION IN KIND 9
MASSACHUSETTS PARTNERSHIP LAW 10
THE FUND'S TAX STATUS 10
PERFORMANCE INFORMATION 10
Yield 10
Effective Yield 10
Total Return 10
Performance Comparisons 11
Economic and Market Information 11
ABOUT FEDERATED INVESTORS 11
Mutual Fund Market 12
Institutional Clients 12
Bank Marketing 12
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 12
</TABLE>

INVESTMENT POLICIES

Unless indicated otherwise, the policies described below may be changed by the
Board of Trustees without shareholder approval. Shareholders will be notified
before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS

Some of the short-term U.S. government securities the Fund may purchase carry
variable interest rates. These securities have a rate of interest subject to
adjustment at least annually. This adjusted interest rate is ordinarily tied to
some objective standard, such as the 91-day U.S. Treasury bill rate. Variable
interest rates will reduce the changes in the market value of such securities
from their original purchase prices. Accordingly, the potential for capital
appreciation or capital depreciation should not be greater than that of fixed
interest rate U.S. government securities having maturities equal to the interest
rate adjustment dates of the variable rate U.S. government securities. The Fund
may purchase variable rate U.S. government securities upon the determination by
the Board of Trustees that the interest rate as adjusted will cause the
instrument to have a current market value that approximates its par value on the
adjustment date.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund in a dollar
amount sufficient to make payment for the securities to be purchased are:
segregated on the Fund's records at the trade date; marked to market daily; and
maintained until the transaction is settled. The Fund does not intend to engage
in when-issued and delayed delivery transactions to an extent that would cause
the segregation of more than 20% of the total value of its assets.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as may be necessary for clearance of
transactions.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

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

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

PLEDGING ASSETS

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

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except that it may purchase or hold
U.S. government securities permitted by its investment objective, policies, and
limitations or Declaration of Trust.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate, or limited partnership interests
in real estate, although it may invest in securities of companies whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or which represent interests in real estate.

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

INVESTING IN ILLIQUID SECURITIES

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

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.

For purposes of the above limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items." Except with
respect to borrowing money, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value or net assets will not result in a violation of such limitation.

The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do so
during the coming fiscal year.

REGULATORY COMPLIANCE

The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, which regulates money market mutual
funds. The Fund will determine the effective maturity of its investments
according to Rule 2a-7. The Fund may change these operational policies to
reflect changes in the laws and regulations without the approval of its
shareholders.

FEDERATED GOVERNMENT TRUST MANAGEMENT

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

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

William J. Copeland
One PNC Plaza -- 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 2, 1929

President and Trustee

Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA

Birthdate: October 6, 1926

Trustee

Former Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee
of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

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

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

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

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:

111 Corcoran Funds; Arrow Funds; Automated Government Money Trust; Blanchard
Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II; Cash Trust
Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American
Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Investment Portfolios; Federated Investment Trust; Federated Master
Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc. -- 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds;
Trust for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Wesmark Funds; and World Investment Series, Inc.

SHARE OWNERSHIP

Officers and Trustees as a group own less than 1% of the Fund.

As of June 9, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of the Automated Government Cash Reserves: Cambridge Trust
Co., Cambridge, MA, owned 5.68%; The Chase Manhattan Bank, N.A., New York, NY,
owned 6.44%; Fiduciary Trust Co. International Customer Account, New York, NY,
owned 27.01%; BANCFIRST, Oklahoma City, OK, owned 9.59%; State Street Bank and
Trust, North Quincy, MA, owned 14.75%; Wheeler & Co., Boston, MA, owned 7.44%.

TRUSTEES COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue, $ 0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Fund Complex
Thomas G. Bigley, $887.22 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, $976.10 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
William J. Copeland, $976.10 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
James E. Dowd, $976.10 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $887.22 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $976.10 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Glen R. Johnson, $ 0 $0 for the Trust and
President and Trustee 8 other investment companies in the Fund Complex
Peter E. Madden, $887.22 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Gregor F. Meyer, $887.22 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr., $887.22 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar, $887.22 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts, $887.22 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
</TABLE>

* Information is furnished for the fiscal year ended April 30, 1997.

# The aggregate compensation is provided for the Trust which is comprised of
three portfolios.

+ The information is provided for the last calendar year.

TRUSTEE LIABILITY

The Declaration of Trust provides that the Trustees will not be liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISER

The Fund's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All the voting securities of Federated Investors are
owned by a trust, the trustees of which are John F. Donahue, his wife and
his son, J. Christopher Donahue.

The adviser shall not be liable to the Trust, the Fund, or any shareholder of
the Fund for any losses that may be sustained in the purchase, holding, or sale
of any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.

ADVISORY FEES

For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended April
30, 1997, 1996, and 1995, the adviser earned $3,065,198, $2,764,784, and
$2,501,388, respectively, of which $1,792,822, $1,634,559, and $1,583,947,
respectively, were waived.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
guidelines established by the Trustees. The adviser may select brokers and
dealers who offer brokerage and research services. These services may be
furnished directly to the Fund or to the adviser and may include: advice as to
the advisability of investing in securities; security analysis and reports;
economic studies; industry studies; receipt of quotations for portfolio
evaluations; and similar services. Research services provided by brokers and
dealers may be used by the adviser or its affiliates in advising the Fund and
other accounts. To the extent that receipt of these services may supplant
services for which the adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The adviser and its affiliates exercise
reasonable business judgment in selecting brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
year(s) ended April 30, 1997, 1996 and 1995, the Fund paid no brokerage
commissions.

Although investment decisions for the Fund are made independently from those of
the other accounts managed by the adviser, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the adviser are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the adviser to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.

OTHER SERVICES

FUND ADMINISTRATION

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. From March 1, 1994 to March 1, 1996, Federated Administrative
Services, a subsidiary of Federated Investors, served as the Fund's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal years ended
April 30, 1997, 1996, and 1995, the Administrators earned $463,179, $418,364,
and $378,710, respectively.

CUSTODIAN AND PORTFOLIO ACCOUNTANT

State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of-pocket expenses.

TRANSFER AGENT

Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on size, type, number of
accounts and transactions made by shareholders.

INDEPENDENT AUDITORS

The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh, PA.

SHAREHOLDER SERVICES

This arrangement permits the payment of fees to Federated Shareholder Services
to cause services to be provided which are necessary for the maintenance of
shareholder accounts and to encourage personal services to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include but are not limited to
providing office space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.

By adopting the Shareholder Services Agreement, the Trustees expect that the
Fund will benefit by: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.

For the fiscal year ended April 30, 1997, the Fund paid shareholder service fees
in the amount of $1,532,599, all of which was paid to financial institutions.

DETERMINING NET ASSET VALUE

The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Fund computed by dividing the annualized daily income on the Fund's portfolio by
the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.

The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed for
purposes of distribution and redemption, at $1.00 per share, taking into account
current market conditions and the Fund's investment objective. The procedures
include monitoring the relationship between the amortized cost value per share
and the net asset value per share based upon available indications of market
value. The Trustees will decide what, if any, steps should be taken if there is
a difference of more than 0.5% between the two values. The Trustees will take
any steps they consider appropriate (such as redemption in kind or shortening
the average portfolio maturity) to minimize any material dilution or other
unfair results arising from differences between the two methods of determining
net asset value.

REDEMPTION IN KIND

The Fund is obligated to redeem shares solely in cash up to $250,000 or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period. Any redemption beyond this amount will also be in cash unless the
Trustees determine that further payments should be in kind. In such cases, the
Fund will pay all or a portion of the remainder of the redemption in portfolio
instruments valued in the same way as the Fund determines net asset value. The
portfolio instruments will be selected in a manner that the Trustees deem fair
and equitable. Redemption in kind is not as liquid as a cash redemption. If
redemption is made in kind, shareholders who sell these securities could receive
less than the redemption value and could incur certain transaction costs.

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect its
shareholders, the Trust has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or its Trustees enter into or
sign.

In the unlikely event a shareholder is held personally liable for the Trust's
obligations, the Trust is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Trust will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Trust. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Trust itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.

THE FUND'S TAX STATUS

To qualify for the special tax treatment afforded to regulated investment
companies, the Fund must, among other requirements: derive at least 90% of its
gross income from dividends, interest, and gains from the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months; invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.

PERFORMANCE INFORMATION

Performance depends upon such variables as: portfolio quality; average portfolio
maturity; type of instruments in which the portfolio is invested; changes in
interest rates; changes in expenses; and the relative amount of cash flow. To
the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in shares of
the Fund, the performance will be reduced for those shareholders paying those
fees.

YIELD

The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional shares purchased with
dividends earned from the original one share and all dividends declared on the
original and any purchased shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7.

The Fund's yield for the seven-day period ended April 30, 1997, was 4.95%.

EFFECTIVE YIELD

The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result. The Fund's effective yield for the
seven-day period ended April 30, 1997, was 5.07%.

TOTAL RETURN

Average annual total return is the average compounded rate of return for a given
period that would equate a $1,000 initial investment to the ending redeemable
value of that investment. The ending redeemable value is computed by multiplying
the number of shares owned at the end of the period by the net asset value per
share at the end of the period. The number of shares owned at the end of the
period is based on the number of shares purchased at the beginning of the period
with $1,000, adjusted over the period by any additional shares, assuming the
monthly reinvestment of all dividends and distributions.

The Fund's average annual total returns for the one-year and five-year periods
ended April 30, 1997, and for the period from February 15, 1990 (date of initial
public investment) through April 30, 1997, were 4.90%, 4.10% and 4.75%,
respectively.

PERFORMANCE COMPARISONS

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:

* LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income dividends
and capital gains distributions, if any.

* IBC/DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly and
12-month-to-date investment results for the same money funds.

* MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.

* SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.

* DISCOUNT CORPORATION OF NEW YORK 30-DAY FEDERAL AGENCIES is a weekly quote of
the average daily offering price for selected federal agency issues maturing
in 30 days.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.

ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by portfolio managers and their views and analysis on how such
developments could affect the funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making --structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.

The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. These traders handle trillions of dollars
in annual trading volume.

In the money market sector, Federated Investors gained prominence in the mutual
fund industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost method
of accounting for valuing shares of money market funds, a principal means used
by money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1996, Federated Investors managed more than $50.3 billion in assets across 50
money market funds, including 18 government, 11 prime and 21 municipal with
assets approximating $28.0 billion, $12.8 billion and $9.5 billion,
respectively.

J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high-yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.*

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.

BANK MARKETING

Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwide - we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country - supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

* Source: Investment Company Institute

Automated Treasury Cash Reserves

(A Portfolio of Federated Government Trust)

PROSPECTUS

The shares of Automated Treasury Cash Reserves (the "Fund") offered by this
prospectus represent interests in a portfolio of Federated Government Trust (the
"Trust"), an open-end management investment company (a mutual fund). The Fund
invests in short-term U.S. Treasury securities to achieve current income
consistent with stability of principal and liquidity.

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

The Fund has also filed a Statement of Additional Information dated June 30,
1997, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information, or make inquiries about the Fund, contact the Fund at
the address listed in the back of this prospectus. The Statement of Additional
Information, material incorporated by reference into this document, and other
information regarding the Fund is maintained electronically with the SEC at
Internet Web site (http://www.sec.gov).

Prospectus dated June 30, 1997

TABLE OF CONTENTS

Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Limitations 3
Fund Information 3
Management of the Fund 3
Distribution of Shares 4
Administration of the Fund 5
Net Asset Value 5
How to Purchase Shares 5
Purchasing Shares by Wire 5
Purchasing Shares by Check 5
Automatic Investments 5
How to Redeem Shares 6
Redeeming Shares by Telephone 6
Redeeming Shares by Mail 6
Account and Share Information 6
Dividends 6
Capital Gains 6
Certificates and Confirmations 6
Accounts with Low Balances 7
Voting Rights 7
Tax Information 7
Federal Income Tax. 7
State and Local Taxes 7
Performance Information 7
Financial Statements 8
Report of Ernst & Young LLP,
Independent Auditors 14

SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering None
price)
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage None
of offering price)
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.19%
12b-1 Fee None
Shareholder Services Fee (after waiver)(2) 0.22%
Total Other Expenses 0.38%
Total Operating Expenses(3) 0.57%
</TABLE>

(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 0.91% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.

EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.

1 Year $ 6
3 Years $18
5 Years $32
10 Years $71

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

FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 14.

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1997 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 0.05 0.05 0.04 0.03 0.03 0.03
Net realized and unrealized gain (loss) on 0.00(b) -- -- -- -- --
investments
Total from investment operations 0.05 0.05 0.04 0.03 0.03 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.05) (0.04) (0.03) (0.03) (0.03)
Distributions from net realized gain on 0.00(b) (0.00)(b) -- -- -- --
investments
Total distributions (0.05) (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(C) 4.71% 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 4.58% 4.92% 4.29% 2.55% 2.79% 3.84%*
Expense waiver/reimbursement(d) 0.34% 0.37% 0.32% 0.13% 0.53% 0.30%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $289,526 $260,668 $167,508 $190,840 $252,955 $36,803
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from August 9, 1991 (date of initial
public investment) to April 30, 1992.

(b) 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)

GENERAL INFORMATION

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The Fund is designed primarily for institutional investors, such as
banks, fiduciaries, custodians of public funds, and similar institutional
investors, such as corporations, unions, hospitals, insurance companies and
municipalities as a convenient means of accumulating an interest in a
professionally managed portfolio investing only in short-term U.S. Treasury
securities. The Fund is also designed for customers of institutional investors.
A minimum initial investment of $25,000 over a 90-day period is required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

The Fund pursues its investment objective by investing only in a portfolio of
U.S. Treasury securities maturing in 13 months or less. The average maturity of
the securities in the Fund's portfolio, computed on a dollar-weighted basis,
will be 90 days or less. Unless indicated otherwise, the investment policies may
be changed by the Board of Trustees without shareholder approval. Shareholders
will be notified before any material change in these policies becomes effective.

ACCEPTABLE INVESTMENTS

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

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

INVESTMENT LIMITATIONS

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

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

INVESTMENT ADVISER

ADVISORY FEES

ADVISER'S BACKGROUND

DISTRIBUTION OF SHARES

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

NET ASSET VALUE

HOW TO PURCHASE SHARES

PURCHASING SHARES BY WIRE

Shares may be purchased by Federal Reserve wire by calling the Fund before 2:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 2:00 p.m. (Eastern
time) that day. Federal funds should be wired as follows: Federated Shareholder
Services Company, c/o State Street Bank and Trust Company, Boston, MA;
Attention: EDGEWIRE; For Credit to: Automated Treasury Cash Reserves; Fund
Number (this number can be found on the account statement or by contacting the
Fund); Group Number or Order Number; Nominee or Institution Name; and ABA Number
011000028. Shares cannot be purchased by wire on holidays when wire transfers
are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.

PURCHASING SHARES BY CHECK

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

AUTOMATIC INVESTMENTS

HOW TO REDEEM SHARES

REDEEMING SHARES BY TELEPHONE

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

REDEEMING SHARES BY MAIL

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

CAPITAL GAINS

CERTIFICATES AND CONFIRMATIONS

ACCOUNTS WITH LOW BALANCES

VOTING RIGHTS

As of June 9, 1997, The Chase Manhattan Bank, N.A., New York, NY, owned 42.03%
of the voting securities of the Fund, and, therefore, may, for certain purposes,
be deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

PERFORMANCE INFORMATION

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

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

PORTFOLIO OF INVESTMENTS
AUTOMATED TREASURY CASH RESERVES
APRIL 30, 1997

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <C> <C>
U.S. TREASURY OBLIGATIONS -- 105.6%
(A)U.S. TREASURY BILLS -- 45.1%
$ 20,000,000 5.025% - 5.040%, 5/1/1997 $ 20,000,000
8,000,000 4.960% - 4.990%, 5/8/1997 7,992,249
33,000,000 4.990% - 5.210%, 5/22/1997 32,902,018
15,000,000 5.070%, 5/29/1997 14,940,850
12,000,000 5.185%, 6/5/1997 11,939,508
26,000,000 5.190%, 6/12/1997 25,842,570
7,000,000 4.970%, 7/10/1997 6,932,353
10,000,000 5.160%, 7/31/1997 9,869,567
Total 130,419,115
U.S. TREASURY NOTES -- 60.5%
64,000,000 6.500% - 8.500%, 5/15/1997 64,060,979
49,000,000 6.125%, 5/31/1997 49,023,791
33,000,000 5.625% - 6.375%, 6/30/1997 33,035,605
16,000,000 8.500%, 7/15/1997 16,100,865
8,000,000 5.875%, 7/31/1997 8,006,771
5,000,000 6.500%, 8/15/1997 5,012,938
Total 175,240,949
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $ 305,660,064
</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
($289,526,067) at April 30, 1997.

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

STATEMENT OF ASSETS AND LIABILITIES
AUTOMATED TREASURY CASH RESERVES
APRIL 30, 1997

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $305,660,064
Cash 991,493
Income receivable 4,813,818
Receivable for investments sold 9,990,861
Receivable for shares sold 3,193
Total assets 321,459,429
LIABILITIES:
Payable for investments purchased $30,911,853
Payable for shares redeemed 46,592
Income distribution payable 883,692
Accrued expenses 91,225
Total liabilities 31,933,362
NET ASSETS for 289,526,067 shares outstanding $289,526,067
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$289,526,067 / 289,526,067 shares outstanding $1.00
</TABLE>

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

STATEMENT OF OPERATIONS
AUTOMATED TREASURY CASH RESERVES
YEAR ENDED APRIL 30, 1997

<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $13,910,055
EXPENSES:
Investment advisory fee $ 1,348,133
Administrative personnel and services fee 203,712
Custodian fees 34,690
Transfer and dividend disbursing agent fees and expenses 45,893
Directors'/Trustees' fees 7,179
Auditing fees 13,188
Legal fees 7,204
Portfolio accounting fees 68,051
Shareholder services fee 674,066
Share registration costs 24,625
Printing and postage 5,969
Insurance premiums 4,584
Miscellaneous 23,858
Total expenses 2,461,152
Waivers --
Waiver of investment advisory fee $(832,502)
Waiver of shareholder services fee (80,888)
Total waivers (913,390)
Net expenses 1,547,762
Net investment income 12,362,293
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 118,401
Change in net assets resulting from operations $12,480,694
</TABLE>

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

STATEMENT OF CHANGES IN NET ASSETS
AUTOMATED TREASURY CASH RESERVES

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 12,362,293 $ 10,264,753
Net realized gain on investments 118,401 155,205
Change in net assets resulting from operations 12,480,694 10,419,958
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (12,362,293) (10,264,753)
Distributions from net realized gains (118,401) (155,205)
Change in net assets resulting from distributions to (12,480,694) (10,419,958)
shareholders
SHARE TRANSACTIONS --
Proceeds from sale of shares 925,773,225 871,777,363
Net asset value of shares issued to shareholders in 2,903,115 3,362,478
payment of distributions declared
Cost of shares redeemed (899,818,480) (781,979,740)
Change in net assets resulting from share transactions 28,857,860 93,160,101
Change in net assets 28,857,860 93,160,101
NET ASSETS:
Beginning of period 260,668,207 167,508,106
End of period $ 289,526,067 $ 260,668,207
</TABLE>

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

NOTES TO FINANCIAL STATEMENTS

AUTOMATED TREASURY CASH RESERVES
APRIL 30, 1997

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

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

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

SHARES OF BENEFICIAL INTEREST

Transactions in shares were as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1997 1996
<S> <C> <C>
Shares sold 925,773,225 871,777,363
Shares issued to shareholders in payment of distributions 2,903,115 3,362,478
declared
Shares redeemed (899,818,480) (781,979,740)
Net change resulting from share transactions 28,857,860 93,160,101
</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

ADMINISTRATIVE FEE

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

PORTFOLIO ACCOUNTING FEES

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

GENERAL

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

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Trustees and Shareholders of

AUTOMATED TREASURY CASH RESERVES:

We have audited the accompanying statement of assets and liabilities of
Automated Treasury Cash Reserves (a portfolio of Federated Government Trust),
including the portfolio of investments, as of April 30, 1997, and the related
statement of operations for the year then ended, the statement of changes in net
assets for each of the two years in the period then ended and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Automated Treasury Cash Reserves at April 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 13, 1997

NOTES

[Graphic]
Federated Investors

Automated Treasury Cash Reserves
(A Portfolio of Federated Government Trust)

PROSPECTUS
JUNE 30, 1997

An Open-End,
Management Investment Company

AUTOMATED TREASURY CASH RESERVES
Federated Investors Tower
Pittsburgh, PA 15222-3779

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

INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779

CUSTODIAN
State Street Bank and Trust Company
c/o Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

Federated Securities Corp., Distributor

Cusip 314186404
1052101A (6/97)

[Graphic]

AUTOMATED TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus of
Automated Treasury Cash Reserves (the "Fund"), a portfolio of Federated
Government Trust (the "Trust") dated June 30, 1997. This Statement is not a
prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779

Statement dated June 30, 1997

Cusip 314186404
1052101B (6/97)

TABLE OF CONTENTS

INVESTMENT POLICIES 1
When-Issued and Delayed Delivery Transactions 1
INVESTMENT LIMITATIONS 1
Selling Short and Buying on Margin 1
Issuing Senior Securities and Borrowing Money 1
Pledging Assets 1
Lending Cash or Securities 1
Investing in Real Estate 1
Investing in Illiquid Securities 1
Investing in Securities of Other
Investment Companies 1
Regulatory Compliance 2
FEDERATED GOVERNMENT TRUST MANAGEMENT 2
Share Ownership 6
Trustee Compensation 7
Trustee Liability 8
INVESTMENT ADVISORY SERVICES 8
Investment Adviser 8
Advisory Fees 8
Brokerage Transactions 8
OTHER SERVICES 8
Fund Administration 8
Custodian and Portfolio Accountant 8
Transfer Agent 8
Independent Auditors 8
Shareholder Services 8
DETERMINING NET ASSET VALUE 8
REDEMPTION IN KIND 9
MASSACHUSETTS PARTNERSHIP LAW 9
THE FUND'S TAX STATUS 9
PERFORMANCE INFORMATION 9
Yield 9
Effective Yield 9
Total Return 9
Performance Comparisons 10
Economic and Market Information 10
ABOUT FEDERATED INVESTORS 10
Mutual Fund Market 11
Institutional Clients 11
Bank Marketing 11
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 11

INVESTMENT POLICIES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as may be necessary for clearance of
transactions.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

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

PLEDGING ASSETS

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except that it may purchase or
hold U. S. Treasury obligations, as permitted by its investment objective,
policies, and limitations or Declaration of Trust.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate, including limited partnership
interests.

INVESTING IN ILLIQUID SECURITIES

The Fund will not invest more than 10% of the value of its net assets in
illiquid securities, such as demand master notes, the demand for full or partial
prepayment of which may not occur within 7 days notice.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund will not purchase securities of other investment companies, except as
part of a merger, consolidation, or other acquisition.

The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do so
during the coming fiscal year.

REGULATORY COMPLIANCE

FEDERATED GOVERNMENT TRUST MANAGEMENT

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

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 2, 1929

President and Trustee

Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA

Birthdate: October 6, 1926

Trustee

Former Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee
of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:

SHARE OWNERSHIP

Officers and Trustees as a group own less than 1% of the Fund.

As of June 9, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of the Automated Treasury Cash Reserves: The Chase Manhattan
Bank, N.A., New York, NY, owned 42.03%; State Street Bank and Trust, North
Quincy, MA, owned 8.12%; Capital Bank, Miami, FL, owned 8.07%; Var & Co., St.
Paul, MN, owned 7.75%; BHC Securities Inc., Philadelphia, PA, owned 11.07%.

TRUSTEE COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue, $ 0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the
Fund Complex
Thomas G. Bigley, $573.18 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John T. Conroy, $630.57 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
William J. Copeland, $630.57 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
James E. Dowd, $630.57 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Lawrence D. Ellis, $573.18 $108,725 for the Trust and
M.D.,
Trustee 56 other investment companies in the
Fund Complex
Edward L. Flaherty, $630.57 $119,615 for the Trust and
Jr.,
Trustee 56 other investment companies in the
Fund Complex
Glen R. Johnson, $ 0 $0 for the Trust and
President and Trustee 8 other investment companies in the
Fund Complex
Peter E. Madden, $573.18 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Gregor F. Meyer, $573.18 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John E. Murray, Jr., $573.18 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Wesley W. Posvar, $573.18 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Marjorie P. Smuts, $573.18 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
</TABLE>

* Information is furnished for the fiscal year ended April 30, 1997.

# The aggregate compensation is provided for the Trust which is comprised of
three portfolios.

+ The information is provided for the last calendar year.

TRUSTEE LIABILITY

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISER

ADVISORY FEES

For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended April
30, 1997, 1996, and 1995, the adviser earned $1,348,133, $1,059,678, and
$916,195, respectively, of which $832,502, $734,005, and $587,578, respectively,
were waived.

BROKERAGE TRANSACTIONS

OTHER SERVICES

FUND ADMINISTRATION

CUSTODIAN AND PORTFOLIO ACCOUNTANT

TRANSFER AGENT

INDEPENDENT AUDITORS

The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh, PA.

SHAREHOLDER SERVICES

For the fiscal year ended April 30, 1997, the Fund paid shareholder service fees
in the amount of $674,066 of which $80,888 was waived.

DETERMINING NET ASSET VALUE

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

THE FUND'S TAX STATUS

PERFORMANCE INFORMATION

YIELD

The Fund's yield for the seven-day period ended April 30, 1997, was 4.65%.

EFFECTIVE YIELD

TOTAL RETURN

The Fund's average annual total returns for the one-year and five-year periods
ended April 30, 1997, and for the period from August 9, 1991, (date of initial
public investment) through April 30, 1997, were 4.71%, 3.91% and 3.95%,
respectively.

PERFORMANCE COMPARISONS

* LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories based
on total return, which assumes the reinvestment of all income dividends and
capital gains distributions, if any.

* MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.

* SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.

ECONOMIC AND MARKET INFORMATION

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making -- structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.

MUTUAL FUND MARKET

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwide -- we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country -- supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

* Source: Investment Company Institute

U.S. Treasury Cash Reserves

Institutional Shares
(A Portfolio of Federated Government Trust)

Prospectus

The Institutional Shares of U.S. Treasury Cash Reserves (the "Fund") offered by
this prospectus represent interests in a portfolio of Federated Government Trust
(the "Trust"), an open-end management investment company (a mutual fund). The
Fund invests in short-term U.S. Treasury securities to achieve current income
consistent with stability of principal and liquidity.

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

Prospectus dated June 30, 1997

TABLE OF CONTENTS

Summary of Fund Expenses 1
Financial Highlights -- Institutional Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Limitations 3
Fund Information 4
Management of the Fund 4
Distribution of Institutional Shares 4
Administration of the Fund 5
Net Asset Value 5
How to Purchase Shares 5
Purchasing Shares by Wire 5
Purchasing Shares by Check 5
Automatic Investments 5
How to Redeem Shares 6
Redeeming Shares by Telephone 6
Redeeming Shares by Mail 6
Account and Share Information 6
Dividends 6
Capital Gains 6
Certificates and Confirmations 6
Accounts with Low Balances 7
Voting Rights 7
Tax Information 7
Federal Income Tax 7
State and Local Taxes 7
Other Classes of Shares 7
Performance Information 8
Financial Highlights -- Institutional Service Shares 9
Financial Statements 10
Report of Ernst & Young LLP,
Independent Auditors Inside Back Cover

SUMMARY OF FUND EXPENSES

INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of
offering price) None Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering None price) Contingent Deferred Sales Charge (as a
percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver)(1) 0.08%
12b-1 Fee None
Shareholder Services Fee (after waiver)(2) 0.00%
Total Other Expenses 0.12%
Total Operating Expenses(3) 0.20%
</TABLE>

(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of the shareholder services fee. The shareholder service provider can
terminate this voluntary waiver at any time at its sole discretion.
The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 0.77% absent the voluntary
waiver of a portion of the management fee and the voluntary waiver of the
shareholder services fee.

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Institutional Shares of the Fund will
bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Fund Information." Wire-transferred redemptions
of less than $5,000 may be subject to additional fees.

Example

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.

1 Year $ 2
3 Years $ 6
5 Years $11
10 Years $26

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

FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
the inside back cover.
<TABLE>
<CAPTION>

YEAR ENDED APRIL 30,
1997 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 0.05 0.05 0.05 0.03 0.03 0.04
Net realized gain on investments 0.00(b) -- -- -- -- --
Total from investment operations 0.05 0.05 0.05 0.03 0.03 0.04
LESS DISTRIBUTIONS
Distributions from net investment (0.05) (0.05) (0.05) (0.03) (0.03) (0.04)
income
Distributions from net realized gains 0.00(b) -- -- -- -- --
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(C) 5.10% 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 4.95% 5.29% 4.85% 2.93% 3.03% 4.42%*
Expense waiver/reimbursement(d) 0.57% 0.59% 0.39% 0.43% 0.50% 0.62%*
SUPPLEMENTAL DATA
Net assets, end of period (000 $1,131,071 $937,662 $609,233 $265,030 $177,471 $83,244
omitted)
</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) 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)

GENERAL INFORMATION

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Board of
Trustees has established two classes of shares known as Institutional Shares and
Institutional Service Shares. This prospectus relates only to Institutional
Shares of the Fund, which are designed primarily for institutional investors,
such as banks, fiduciaries, custodians of public funds and similar institutional
investors, such as corporations, unions, hospitals, insurance companies and
municipalities as a convenient means of accumulating an interest in a
professionally managed portfolio investing only in short-term U.S. Treasury
securities. The Fund is also designed for customers of institutional investors.
A minimum initial investment of $25,000 over a 90-day period is required.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

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

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

INVESTMENT LIMITATIONS

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

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

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

INVESTMENT ADVISER

ADVISORY FEES

The adviser receives an annual investment advisory fee equal to 0.40% of the
Fund's average daily net assets. The adviser may voluntarily choose to waive a
portion of its fee or reimburse other expenses of the Fund, but reserves the
right to terminate such waiver or reimbursement at any time at its sole
discretion.

ADVISER'S BACKGROUND

DISTRIBUTION OF INSTITUTIONAL SHARES

Federated Securities Corp. is the principal distributor for Institutional
Shares of the Fund. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment
companies. Federated Securities Corp. is a subsidiary of Federated
Investors.

SHAREHOLDER SERVICES

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

NET ASSET VALUE

The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to Institutional
Shares from the value of Fund assets attributable to Institutional Shares, and
dividing the remainder by the number of Institutional Shares outstanding. The
Fund cannot guarantee that its net asset value will always remain at $1.00 per
share.

HOW TO PURCHASE SHARES

PURCHASING SHARES BY WIRE

Shares may be purchased by Federal Reserve wire by calling the Fund before 2:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 2:00 p.m. (Eastern
time) that day. Federal funds should be wired as follows: Federated Shareholder
Services Company, c/o State Street Bank and Trust Company, Boston, MA;
Attention: EDGEWIRE; For Credit to: U.S. Treasury Cash Reserves -- Institutional
Shares; Fund Number (this number can be found on the account statement or by
contacting the Fund); Group Number or Order Number; Nominee or Institution Name;
and ABA Number 011000028. Shares cannot be purchased by wire on holidays when
wire transfers are restricted. Questions on wire purchases should be directed to
your shareholder services representative at the telephone number listed on your
account statement.

PURCHASING SHARES BY CHECK

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

AUTOMATIC INVESTMENTS

HOW TO REDEEM SHARES

REDEEMING SHARES BY TELEPHONE

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

REDEEMING SHARES BY MAIL

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

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

CAPITAL GAINS

CERTIFICATES AND CONFIRMATIONS

ACCOUNTS WITH LOW BALANCES

VOTING RIGHTS

Each share of the Trust owned by a shareholder gives that shareholder one vote
in Trustee elections and other matters submitted to shareholders for vote. All
shares of all classes of each portfolio in the Trust have equal voting rights,
except that in matters affecting only a particular portfolio or class, only
shareholders of that portfolio or class are entitled to vote. The Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Trust's or the Fund's operation and for
election of Trustees under certain circumstances.

TAX INFORMATION

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

OTHER CLASSES OF SHARES

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

All classes are subject to certain of the same expenses.

Institutional Service Shares are distributed under a 12b-1 Plan adopted by the
Fund and also are subject to shareholder services fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-341-7400.

PERFORMANCE INFORMATION

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

Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.

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

FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
the inside back cover.
<TABLE>
<CAPTION>

YEAR ENDED APRIL 30,
1997 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 0.05 0.05 0.03
Net realized gain on investments 0.00(b) -- --
LESS DISTRIBUTIONS
Distributions from net investment income (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
TOTAL RETURN(C) 4.84% 5.17% 2.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45% 0.45% 0.45%*
Net investment income 4.69% 4.97% 5.33%*
Expense waiver/reimbursement(d) 0.32% 0.34% 0.39%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $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)

PORTFOLIO OF INVESTMENTS

U.S. TREASURY CASH RESERVES

APRIL 30, 1997
<TABLE>
<CAPTION>

PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY OBLIGATIONS -- 106.3%
(A)U.S. TREASURY BILLS -- 29.1%
$ 138,000,000 5.09%, 5/1/1997 $ 138,000,000
15,000,000 5.08%, 5/8/1997 14,985,533
13,000,000 5.09%, 7/10/1997 12,874,369
115,000,000 5.11% - 5.32%, 5/22/1997 114,660,238
5,000,000 5.14%, 5/29/1997 4,980,381
25,000,000 5.18%, 6/5/1997 24,876,528
72,000,000 5.26% - 5.30%, 7/31/1997 71,061,676
25,000,000 5.28%, 7/17/1997 24,725,153
4,000,000 5.32%, 6/12/1997 3,975,780
50,000,000 5.35%, 7/24/1997 49,393,917
Total 459,533,575
U.S. TREASURY NOTES -- 77.2%
335,000,000 5.625% - 6.375%, 6/30/1997 335,285,134
42,000,000 5.875%, 7/31/1997 42,035,547
361,000,000 6.125% - 6.750%, 5/31/1997 361,197,626
323,000,000 6.500% - 8.500%, 5/15/1997 323,296,282
30,000,000 6.500%, 8/15/1997 30,077,637
124,000,000 8.500%, 7/15/1997 124,754,358
Total 1,216,646,584
Total Investments (at amortized cost)(b) $ 1,676,180,159
</TABLE>

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

(b) Also represents cost for federal tax purposes.

Note: The categories of investments are shown as a percentage of net assets
($1,577,415,305) at April 30, 1997.

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

STATEMENT OF ASSETS AND LIABILITIES

U.S. TREASURY CASH RESERVES

APRIL 30, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 1,676,180,159
Cash 339,030
Income receivable 31,624,056
Receivable for investments sold 41,950,277
Total assets 1,750,093,522
LIABILITIES:
Payable for investments purchased $ 166,207,629
Payable for shares redeemed 515,001
Income distribution payable 5,715,558
Accrued expenses 240,029
Total liabilities 172,678,217
NET ASSETS FOR 1,577,415,305 SHARES OUTSTANDING $ 1,577,415,305
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$1,131,070,846 / 1,131,070,846 shares outstanding $1.00
INSTITUTIONAL SERVICE SHARES:
$446,344,459 / 446,344,459 shares outstanding $1.00
</TABLE>

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

STATEMENT OF OPERATIONS

U.S. TREASURY CASH RESERVES

YEAR ENDED APRIL 30, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $71,640,994
EXPENSES:
Investment advisory fee $ 5,563,438
Administrative personnel and services fee 1,050,793
Custodian fees 159,302
Transfer and dividend disbursing agent fees and expenses 111,452
Directors'/Trustees' fees 17,630
Auditing fees 13,188
Legal fees 8,185
Portfolio accounting fees 129,357
Shareholder services fee -- Institutional Shares 2,642,922
Shareholder services fee -- Institutional Service Shares 834,227
Share registration costs 137,472
Printing and postage 7,629
Insurance premiums 12,394
Miscellaneous 10,598
Total expenses 10,698,587
Waivers --
Waiver of investment advisory fee $ (4,378,520)
Waiver of shareholder services fee --
Institutional Shares (2,642,922)
Total waivers (7,021,442)
Net expenses 3,677,145
Net investment income 67,963,849
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 534,077
Change in net assets resulting from operations $68,497,926
</TABLE>

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

STATEMENT OF CHANGES IN NET ASSETS

U.S. TREASURY CASH RESERVES

YEAR ENDED APRIL 30,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 67,963,849 $ 47,756,192
Net realized gain on investments 534,077 --
Change in net assets resulting from operations 68,497,926 47,756,192
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Institutional Shares (52,325,091) (40,360,730)
Institutional Service Shares (15,638,758) (7,395,462)
Distribution from net realized gains
Institutional Shares (405,943) --
Institutional Service Shares (128,134) --
Change in net assets resulting from distributions to (68,497,926) (47,756,192)
shareholders
SHARE TRANSACTIONS --
Proceeds from sale of shares 5,551,441,597 3,934,548,103
Net asset value of shares issued to shareholders in 8,283,271 5,240,359
payment of distributions declared
Cost of shares redeemed (5,197,070,436) (3,394,768,512)
Change in net assets resulting from share transactions 362,654,432 545,019,950
Change in net assets 362,654,432 545,019,950
NET ASSETS:
Beginning of period 1,214,760,873 669,740,923
End of period $ 1,577,415,305 $ 1,214,760,873
</TABLE>

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

NOTES TO FINANCIAL STATEMENTS

U.S. TREASURY CASH RESERVES

APRIL 30, 1997

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

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

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

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 April 30, 1997, capital paid-in aggregated $1,577,415,305.

Transactions in shares were as follows:

YEAR ENDED APRIL 30,
INSTITUTIONAL SHARES 1997 1996
<S> <C> <C>
Shares sold 4,027,835,159 3,218,643,175
Shares issued to shareholders in payment of
distributions declared 3,282,589 4,028,759
Shares redeemed (3,837,708,405) (2,894,243,576)
Net change resulting from Institutional Shares
transactions 193,409,343 328,428,358
<CAPTION>

YEAR ENDED APRIL 30,
INSTITUTIONAL SERVICE SHARES 1997 1996
<S> <C> <C>
Shares sold 1,523,606,438 715,904,928
Shares issued to shareholders in payment of
distributions declared 5,000,682 1,211,600
Shares redeemed (1,359,362,031) (500,524,936)
Net change resulting from Institutional Service Shares
transactions 169,245,089 216,591,592
Net change resulting from share transactions 362,654,432 545,019,950
</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

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. For the fiscal year ended
April 30, 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

PORTFOLIO ACCOUNTING FEES

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

GENERAL

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

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Trustees and Shareholders of
U.S. TREASURY CASH RESERVES:

We have audited the accompanying statement of assets and liabilities of U.S.
Treasury Cash Reserves (a portfolio of Federated Government Trust), including
the portfolio of investments, as of April 30, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and financial highlights for the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of U.S.
Treasury Cash Reserves at April 30, 1997, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for the periods presented, in
conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 13, 1997

[Graphic]
U.S. Treasury Cash Reserves
Institutional Shares

(A Portfolio of Federated Government Trust)
Prospectus
June 30, 1997
An Open-End, Management Investment Company

U.S. TREASURY CASH RESERVES
Institutional Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779

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

INVESTMENT ADVISER
Federated Management
Federated Investors Tower
Pittsburgh, PA 15222-3779

CUSTODIAN
State Street Bank and Trust Company
c/o Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

Federated Securities Corp., Distributor

Cusip 314186305
1022103A-IS (6/97)

[Graphic]

U.S. Treasury Cash Reserves

Institutional Service Shares
(A Portfolio of Federated Government Trust)

PROSPECTUS

The Institutional Service Shares of U.S. Treasury Cash Reserves (the "Fund")
offered by this prospectus represent interests in a portfolio of Federated
Government Trust (the "Trust"), an open-end management investment company (a
mutual fund). The Fund invests in short-term U.S. Treasury securities to achieve
current income consistent with stability of principal and liquidity.

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

Prospectus dated June 30, 1997

TABLE OF CONTENTS

Summary of Fund Expenses 1
Financial Highlights -- Institutional Service Shares 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Limitations 3
Fund Information 4
Management of the Fund 4
Distribution of Institutional Service Shares 4
Administration of the Fund 5
Net Asset Value 5
How to Purchase Shares 5
Purchasing Shares Through a Financial Institution 6
Purchasing Shares by Wire 6
Purchasing Shares by Check 6
Automatic Investments 6
How to Redeem Shares 6
Redeeming Shares Through a Financial Institution 6
Redeeming Shares by Telephone 6
Redeeming Shares by Mail 7
Account and Share Information 7
Dividends 7
Capital Gains 7
Certificates and Confirmations 7
Accounts with Low Balances 7
Voting Rights 7
Tax Information 8
Federal Income Tax 8
State and Local Taxes 8
Other Classes of Shares 8
Performance Information 8
Financial Highlights -- Institutional 9
Shares
Financial Statements 10
Report of Ernst & Young LLP,
Independent Auditors Inside Back Cover

SUMMARY OF FUND EXPENSES

<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) None Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering None price) Contingent Deferred Sales Charge (as a
percentage of original purchase price or redemption
proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.08%
12b-1 Fee(2) 0.00%
Shareholder Services Fee 0.25%
Total Other Expenses 0.37%
Total Operating Expenses(3) 0.45%
</TABLE>

(2) The Institutional Service Shares has no present intention of paying or
accruing the 12b-1 fee during the fiscal year ending April 30, 1998. If the
Institutional Service Shares were paying or accruing the 12b-1 fee, the
Institutional Service Shares would be able to pay up to 0.25% of its
average daily net assets for the 12b-1 fee. See "Fund Information."

(3) The total operating expenses would have been 0.77% absent the voluntary
waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Institutional Service Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Fund Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.

EXAMPLE

You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.

1 Year $ 5
3 Years $14
5 Years $25
10 Years $57

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

FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
the inside back cover.

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
1997 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 0.05 0.05 0.03
Net realized gain on investments 0.00(b) -- --
LESS DISTRIBUTIONS
Distributions from net investment income (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
TOTAL RETURN(C) 4.84% 5.17% 2.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45% 0.45% 0.45%*
Net investment income 4.69% 4.97% 5.33%*
Expense waiver/reimbursement(d) 0.32% 0.34% 0.39%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $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)

GENERAL INFORMATION

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated December 7, 1989. The Declaration of Trust permits the Trust to
offer separate series of shares representing interests in separate portfolios of
securities. The shares in any one portfolio may be offered in separate classes.
With respect to this Fund, as of the date of this prospectus, the Board of
Trustees has established two classes of shares known as Institutional Service
Shares and Institutional Shares. This prospectus relates only to Institutional
Service Shares of the Fund, which are designed primarily for accounts for which
financial institutions act in an agency or fiduciary capacity as a convenient
means of accumulating an interest in a professionally managed portfolio
investing only in short-term U.S. Treasury securities. A minimum initial
investment of $25,000 over a 90-day period is required. Institutional Service
Shares are also distributed under a 12b-1 Plan adopted by the Trust and are
subject to shareholder services fees.

The Fund attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

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

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

INVESTMENT LIMITATIONS

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

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF TRUSTEES

INVESTMENT ADVISER

ADVISORY FEES

ADVISER'S BACKGROUND

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

Federated Securities Corp. is the principal distributor for Institutional
Service Shares of the Fund. It is a Pennsylvania corporation organized on
November 14, 1969, and is the principal distributor for a number of
investment companies. Federated Securities Corp. is a subsidiary of
Federated Investors.

DISTRIBUTION PLAN AND SHAREHOLDER SERVICES

Under a distribution plan adopted in accordance with Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan"), the distributor may be paid a fee
by the Institutional Service Shares of the Fund in an amount computed at an
annual rate of up to 0.25% of the average daily net asset value of the Fund. The
distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers to provide
sales services or distribution-related support services as agents for their
clients or customers.

The Plan is a compensation-type Plan. As such, the Fund makes no payments to the
distributor except as described above. Therefore, the Fund does not pay for
unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Plan.

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25% of the average daily net asset value of
its shares to obtain certain personal services for shareholders and to maintain
shareholder accounts. Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or will
select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

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

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS

0.15% on the first $250 million
0.125% on the next $250 million
0.10% on the next $250 million
0.075% on assets in excess of $750 million

NET ASSET VALUE

The Fund attempts to stabilize the net asset value of shares at $1.00 by valuing
the portfolio securities using the amortized cost method. The net asset value
per share is determined by subtracting liabilities attributable to Institutional
Service Shares from the value of Fund assets attributable to Institutional
Service Shares, and dividing the remainder by the number of Institutional
Service Shares outstanding. The Fund cannot guarantee that its net asset value
will always remain at $1.00 per share.

HOW TO PURCHASE SHARES

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

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

PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION

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

PURCHASING SHARES BY WIRE

Shares may be purchased by Federal Reserve wire by calling the Fund before 2:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 2:00 p.m. (Eastern
time) that day. Federal funds should be wired as follows: Federated Shareholder
Services Company, c/o State Street Bank and Trust Company, Boston, MA;
Attention: EDGEWIRE; For Credit to: U.S. Treasury Cash Reserves -- Institutional
Service Shares; Fund Number (this number can be found on the account statement
or by contacting the Fund); Group Number or Order Number; Nominee or Institution
Name; and ABA Number 011000028. Shares cannot be purchased by wire on holidays
when wire transfers are restricted. Questions on wire purchases should be
directed to your shareholder services representative at the telephone number
listed on your account statement.

PURCHASING SHARES BY CHECK

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

AUTOMATIC INVESTMENTS

HOW TO REDEEM SHARES

REDEEMING SHARES THROUGH A FINANCIAL INSTITUTION

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

REDEEMING SHARES BY TELEPHONE

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

REDEEMING SHARES BY MAIL

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

CAPITAL GAINS

CERTIFICATES AND CONFIRMATIONS

ACCOUNTS WITH LOW BALANCES

VOTING RIGHTS

As of June 9, 1997, The Chase Manhattan Bank, N.A., New York, NY, owned 25.53%
of the voting securities of the Fund, and, therefore, may, for certain purposes,
be deemed to control the Fund and be able to affect the outcome of certain
matters presented for a vote of shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

OTHER CLASSES OF SHARES

The Fund also offers another class of shares called Institutional Shares.
Institutional Shares are sold at net asset value primarily to institutional
investors, such as banks, fiduciaries, custodians of public funds and similar
institutional investors, such as corporations, unions, hospitals, insurance
companies and municipalities and are subject to a minimum initial investment of
$25,000 within a 90-day period.

All classes are subject to certain of the same expenses.

Institutional Shares are distributed with no 12b-1 Plan but are subject to
shareholder services fees.

Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-341-7400.

PERFORMANCE INFORMATION

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

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

FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
the inside back cover.

YEAR ENDED APRIL 30,
1997 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 0.05 0.05 0.05 0.03 0.03 0.04
Net realized gain on investments 0.00(b) -- -- -- -- --
Total from investment operations 0.05 0.05 0.05 0.03 0.03 0.04
LESS DISTRIBUTIONS
Distributions from net investment (0.05) (0.05) (0.05) (0.03) (0.03) (0.04)
income
Distributions from net realized gains 0.00(b) -- -- -- -- --
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(C) 5.10% 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 4.95% 5.29% 4.85% 2.93% 3.03% 4.42%*
Expense waiver/reimbursement(d) 0.57% 0.59% 0.39% 0.43% 0.50% 0.62%*
SUPPLEMENTAL DATA
Net assets, end of period (000 $1,131,071 $937,662 $609,233 $265,030 $177,471 $83,244
omitted)
</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) 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)

PORTFOLIO OF INVESTMENTS

U.S. TREASURY CASH RESERVES
APRIL 30, 1997

PRINCIPAL
AMOUNT VALUE
U.S. TREASURY OBLIGATIONS -- 106.3%
(A)U.S. TREASURY BILLS -- 29.1%
<C> <S> <C>
$ 138,000,000 5.09%, 5/1/1997 $ 138,000,000
15,000,000 5.08%, 5/8/1997 14,985,533
13,000,000 5.09%, 7/10/1997 12,874,369
115,000,000 5.11% - 5.32%, 5/22/1997 114,660,238
5,000,000 5.14%, 5/29/1997 4,980,381
25,000,000 5.18%, 6/5/1997 24,876,528
72,000,000 5.26% - 5.30%, 7/31/1997 71,061,676
25,000,000 5.28%, 7/17/1997 24,725,153
4,000,000 5.32%, 6/12/1997 3,975,780
50,000,000 5.35%, 7/24/1997 49,393,917
Total 459,533,575
U.S. TREASURY NOTES -- 77.2%
335,000,000 5.625% - 6.375%, 6/30/1997 335,285,134
42,000,000 5.875%, 7/31/1997 42,035,547
361,000,000 6.125% - 6.750%, 5/31/1997 361,197,626
323,000,000 6.500% - 8.500%, 5/15/1997 323,296,282
30,000,000 6.500%, 8/15/1997 30,077,637
124,000,000 8.500%, 7/15/1997 124,754,358
Total 1,216,646,584
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $ 1,676,180,159
</TABLE>

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

(b) Also represents cost for federal tax purposes.

Note: The categories of investments are shown as a percentage of net assets
($1,577,415,305) at April 30, 1997.

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

STATEMENT OF ASSETS AND LIABILITIES

U.S. TREASURY CASH RESERVES
APRIL 30, 1997

<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $1,676,180,159
Cash 339,030
Income receivable 31,624,056
Receivable for investments sold 41,950,277
Total assets 1,750,093,522
LIABILITIES:
Payable for investments purchased $ 166,207,629
Payable for shares redeemed 515,001
Income distribution payable 5,715,558
Accrued expenses 240,029
Total liabilities 172,678,217
NET ASSETS for 1,577,415,305 shares outstanding $1,577,415,305
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$1,131,070,846 / 1,131,070,846 shares outstanding $1.00
INSTITUTIONAL SERVICE SHARES:
$446,344,459 / 446,344,459 shares outstanding $1.00
</TABLE>

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

STATEMENT OF OPERATIONS

U.S. TREASURY CASH RESERVES
YEAR ENDED APRIL 30, 1997

<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $71,640,994
EXPENSES:
Investment advisory fee $ 5,563,438
Administrative personnel and services fee 1,050,793
Custodian fees 159,302
Transfer and dividend disbursing agent fees and 111,452
expenses
Directors'/Trustees' fees 17,630
Auditing fees 13,188
Legal fees 8,185
Portfolio accounting fees 129,357
Shareholder services fee -- Institutional Shares 2,642,922
Shareholder services fee -- Institutional Service 834,227
Shares
Share registration costs 137,472
Printing and postage 7,629
Insurance premiums 12,394
Miscellaneous 10,598
Total expenses 10,698,587
Waivers --
Waiver of investment advisory fee $ (4,378,520)
Waiver of shareholder services fee -- Institutional (2,642,922)
Shares
Total waivers (7,021,442)
Net expenses 3,677,145
Net investment income 67,963,849
REALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 534,077
Change in net assets resulting from operations $68,497,926
</TABLE>

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

STATEMENT OF CHANGES IN NET ASSETS
U.S. TREASURY CASH RESERVES

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

NOTES TO FINANCIAL STATEMENTS
U.S. TREASURY CASH RESERVES
APRIL 30, 1997

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

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

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on the trade date.

SHARES OF BENEFICIAL INTEREST

Transactions in shares were as follows:

<TABLE>
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
INSTITUTIONAL SHARES 1997 1996
Shares sold 4,027,835,159 3,218,643,175
Shares issued to shareholders in payment of 3,282,589 4,028,759
distributions declared
Shares redeemed (3,837,708,405) (2,894,243,576)
Net change resulting from Institutional Shares 193,409,343 328,428,358
transactions
<CAPTION>
YEAR ENDED APRIL 30,
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES 1997 1996
Shares sold 1,523,606,438 715,904,928
Shares issued to shareholders in payment of 5,000,682 1,211,600
distributions declared
Shares redeemed (1,359,362,031) (500,524,936)
Net change resulting from Institutional Service
Shares transactions 169,245,089 216,591,592
Net change resulting from share transactions 362,654,432 545,019,950
</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

ADMINISTRATIVE FEE

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. For the fiscal year ended
April 30, 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

PORTFOLIO ACCOUNTING FEES

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

GENERAL

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

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

To the Trustees and Shareholders of
U.S. TREASURY CASH RESERVES:

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
June 13, 1997

[Graphic]
Federated Investors

U.S. Treasury
Cash Reserves

Institutional Service Shares
(A Portfolio of Federated Government Trust)

PROSPECTUS
JUNE 30, 1997

An Open-End,
Management Investment Company

U.S. TREASURY CASH RESERVES
Institutional Service Shares
Federated Investors Tower
Pittsburgh, PA 15222-3779

DISTRIBUTOR
Federated Securites Corp.
Federated Investors Tower
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779

CUSTODIAN
State Street Bank and
Trust Company
c/o Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

Federated Securities Corp., Distributor

Cusip 314186503
1022103A-SS (6/97)

[Graphic]

U.S. TREASURY CASH RESERVES
(A PORTFOLIO OF FEDERATED GOVERNMENT TRUST)
INSTITUTIONAL SERVICE SHARES
INSTITUTIONAL SHARES

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information should be read with the prospectus(es)
of U.S. Treasury Cash Reserves (the "Fund"), a portfolio of Federated Government
Trust (the "Trust") dated June 30, 1997. This Statement is not a prospectus. You
may request a copy of a prospectus or a paper copy of this Statement, if you
have received it electronically, free of charge by calling 1-800-341-7400.

FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779

Statement dated June 30, 1997

[Graphic]
Federated Investors
Federated Securities Corp., Distributor

Cusip 314186305
Cusip 314186503
1022103B (6/97)

TABLE OF CONTENTS

INVESTMENT POLICIES 1
When-Issued and Delayed Delivery Transactions 1
INVESTMENT LIMITATIONS 1
Selling Short and Buying on Margin 1
Issuing Senior Securities and Borrowing Money 1
Pledging Assets 1
Lending Cash or Securities 1
Investing in Real Estate 1
Investing in Illiquid Securities 1
Investing in Securities of Other
Investment Companies 1
Regulatory Compliance 2
FEDERATED GOVERNMENT TRUST MANAGEMENT 2
Share Ownership 5
Trustee Compensation 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 7
Investment Adviser 7
Advisory Fees 7
BROKERAGE TRANSACTIONS 7
OTHER SERVICES 7
Fund Administration 7
Custodian and Portfolio Accountant 7
Transfer Agent 8
Independent Auditors 8
Distribution Plan (Institutional Service Shares)
and Shareholder Services 8
DETERMINING NET ASSET VALUE 8
REDEMPTION IN KIND 9
MASSACHUSETTS PARTNERSHIP LAW 9
THE FUND'S TAX STATUS 9
PERFORMANCE INFORMATION 9
Yield 9
Effective Yield 9
Total Return 10
Performance Comparisons 10
Economic and Market Information 10
ABOUT FEDERATED INVESTORS 10
Mutual Fund Market 11
Institutional Clients 11
Bank Marketing 11
Broker/Dealer and Bank
Broker/Dealer Subsidiaries 11

INVESTMENT POLICIES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as may be necessary for clearance of
transactions.

ISSUING SENIOR SECURITIES AND BORROWING MONEY

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

PLEDGING ASSETS

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

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except that it may purchase or hold
U.S. Treasury obligations as permitted by its investment objective, policies,
and limitations or Declaration of Trust.

INVESTING IN REAL ESTATE

The Fund will not purchase or sell real estate, including limited partnership
interests, although it may invest in the securities of companies whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or which represent interests in real estate.

INVESTING IN ILLIQUID SECURITIES

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

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund will not acquire more than 3% of the total outstanding securities of
other investment companies, except as part of a merger, consolidation, or other
acquisition.

The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do so
during the coming fiscal year.

REGULATORY COMPLIANCE

The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in each
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7, which regulates money market mutual
funds. The Fund will determine the effective maturity of its investments
according to Rule 2a-7. The Fund may change these operational policies to
reflect changes in the laws and regulations without the approval of its
shareholders.

FEDERATED GOVERNMENT TRUST MANAGEMENT

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

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA

Birthdate: July 28, 1924

Chairman and Trustee

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL

Birthdate: June 23, 1937

Trustee

William J. Copeland
One PNC Plaza -- 23rd Floor
Pittsburgh, PA

Birthdate: July 4, 1918

Trustee

James E. Dowd
571 Hayward Mill Road
Concord, MA

Birthdate: May 18, 1922

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA

Birthdate: October 11, 1932

Trustee

Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center -- Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Glen R. Johnson*
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 2, 1929

President and Trustee

Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
203 Kensington Ct.
Pittsburgh, PA

Birthdate: October 6, 1926

Trustee

Former Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee
of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA

Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA

Birthdate: April 11, 1949

Executive Vice President

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 26, 1938

Executive Vice President, Secretary and Treasurer

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA

Birthdate: May 17, 1923

Vice President

* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:

SHARE OWNERSHIP

Officers and Trustees as a group own less than 1% of the Fund.

As of June 9, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of the U.S. Treasury Cash Reserves-Institutional Shares: The
Chase Manhattan Bank, New York, NY, owned 8.12%; Farmers & Merchants Bank of
Long Beach, Long Beach, CA, owned 5.37%; BARHEMCO, Boston, MA, owned 6.83%.

As of June 9, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of the U.S. Treasury Cash Reserves-Institutional Service
Shares: The Chase Manhattan Bank, New York, NY, owned 25.53%; Seaway National
Bank of Chicago Trustee for the Account of City of Chicago Equipment 1997,
Chicagi, IL, owned 8.05%; HAMAC, Richmond, VA, owned 7.41% Central Carolina Bank
& Trust, Durham NC, owned 8.79%.

TRUSTEE COMPENSATION

<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <S>
John F. Donahue, $ 0 $0 for the Trust and
Chairman and Trustee 56 other investment companies in the Fund Complex
Thomas G. Bigley, $1,415.27 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, $1,557.02 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
William J. Copeland, $1,557.02 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
James E. Dowd, $1,557.02 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D., $1,415.27 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr., $1,557.02 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Glen R. Johnson, $ 0 $0 for the Trust and
President and Trustee 8 other investment companies in the Fund Complex
Peter E. Madden, $1,415.27 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Gregor F. Meyer, $1,415.27 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr., $1,415.27 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar, $1,415.27 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts, $1,415.27 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
</TABLE>

* Information is furnished for the fiscal year ended April 30, 1997.

# The aggregate compensation is provided for the Trust which is comprised of
three portfolios.

+ The information is provided for the last calendar year.

TRUSTEE LIABILITY

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISER

The adviser shall not be liable to the Trust, the Fund,or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale of
any security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.

ADVISORY FEES

For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended April
30, 1997, 1996, and 1995, the adviser earned $5,563,438, $3,645,164, and
$1,572,822, respectively, of which $4,378,520, $3,091,301, and $1,525,643,
respectively, were waived.

BROKERAGE TRANSACTIONS

OTHER SERVICES

FUND ADMINISTRATION

CUSTODIAN AND PORTFOLIO ACCOUNTANT

TRANSFER AGENT

INDEPENDENT AUDITORS

The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh, PA.

DISTRIBUTION PLAN (INSTITUTIONAL SERVICE SHARES) AND SHAREHOLDER SERVICES

These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include but are not limited to
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.

By adopting the Plan on behalf of the Institutional Service Shares, the Trustees
expect that the Fund will be able to achieve a more predictable flow of cash for
investment purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in seeking to achieve its investment
objectives. By identifying potential investors whose needs are served by the
Fund's objectives, and properly servicing these accounts, the Fund may be able
to curb sharp fluctuations in rates of redemptions and sales.

Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.

For the fiscal year ended April 30, 1997, no payments were made under the
Distribution Plan. In addition, for the fiscal year ended April 30, 1997, the
Fund paid shareholder service fees for Institutional Shares and Institutional
Service Shares in the amount of $2,642,922 and $834,227, respectively, of which
$2,642,922 and $0 were waived, respectively.

DETERMINING NET ASSET VALUE

REDEMPTION IN KIND

MASSACHUSETTS PARTNERSHIP LAW

THE FUND'S TAX STATUS

PERFORMANCE INFORMATION

YIELD

For the seven-day period ended April 30, 1997, the yield for Institutional
Service Shares was 4.80%, and Institutional Shares was 5.05%.

EFFECTIVE YIELD

The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.

For the seven-day period ended April 30, 1997, the effective yield for
Institutional Service Shares was 4.93%, and Institutional Shares was 5.18%.

TOTAL RETURN

For the one-year period ended April 30, 1997, and for the period from December
15, 1994 (date of initial public investment) through April 30, 1997, the average
annual total returns were 4.84% and 5.03%, respectively, for Institutional
Service Shares. For the one-year and five-year periods ended April 30, 1997, and
for the period from June 11, 1991 (date of initial public investment) through
April 30, 1997, the average annual total returns were 5.10%, 4.27% and 4.35%,
respectively, for Institutional Shares.

PERFORMANCE COMPARISONS

* LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories based
on total return, which assumes the reinvestment of all income dividends and
capital gains distributions, if any.

* MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.

* SALOMON 30-DAY TREASURY BILL INDEX is a weekly quote of the most
representative yields for selected securities, issued by the U.S. Treasury,
maturing in 30 days.

ECONOMIC AND MARKET INFORMATION

ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making -- structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.

MUTUAL FUND MARKET

Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

BANK MARKETING

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

* Source: Investment Company Institute

FEDERATED GOVERNMENT TRUST

Federated Investors
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

(412) 288-1900

July 1, 1997

EDGAR Operations Branch
Securities and Exchange Commission
Division of Investment Management
450 Fifth Street, Northwest
Washington, DC 20549

RE: FEDERATED GOVERNMENT TRUST
Automated Government Cash Reserves
Automated Treasury Cash Reserves
U.S. Treasury Cash Reserves
Institutional Shares
Institutional Service Shares

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

Dear Sir or Madam:

The annual report of the above-referenced Trust is hereby
electronically transmitted pursuant to Section 30(b)(2) of the Investment
Company Act of 1940, and Rule 30b2-1 thereunder. The annual report information
is contained in Part A/Prospectus, dated June 30, 1997, of this filing and does
not pertain to Part B/Statement of Additional Information.

If you have any questions regarding this filing, please call Matthew S.
Hardin at (412) 288-8515.

Very truly yours,

/s/Daniel J. Perry
Daniel J. Perry, Esquire

Enclosures