PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Automated
Government Cash Reserves for the six-month period ended October 31, 1998. The
report begins with a brief commentary by the fund's portfolio manager on the
short-term government market, followed by a complete list of the fund's
investments and its financial statements.
On behalf of investors, the fund pursues current income, a high level of
liquidity, and a stable net asset value of $1.00.* It invests exclusively in
a portfolio of securities issued or guaranteed by the U.S. government or its
agencies. Of course, the fund itself is not guaranteed.
During the six-month reporting period, dividends paid to shareholders
totaled $19.4 million, or $0.03 per share. At the end of the reporting
period, fund assets totaled $843 million.
Thank you for participating in the daily income opportunities of Automated
Government Cash Reserves as a high-quality cash investment. As always, we
welcome your questions, comments, or suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
December 15, 1998
* An investment in money market funds is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
INVESTMENT REVIEW
Automated Government Cash Reserves, which is rated AAAm by Standard & Poor's
Rating Services ("S&P")* and Aaa by Moody's Investors Service, Inc.
("Moody's"),** is invested in U.S. Treasury and U.S. Government agency
obligations only. Although the fund has maintained a Treasury position due to
narrow agency yield spreads over Treasuries, the fund continues to invest in
issues of the Student Loan Marketing Association, Federal Farm Credit Bank
System, Federal Home Loan Bank System, and Tennesee Valley Authority. The fund
does not invest in repurchase agreements, and is managed to provide
distributions which are exempt from state and local taxes. Recently, the fund
has been managed with a somewhat conservative average maturity of 30-40 days.
Early in the reporting period, economic fundamentals were still the driving
factor behind movements in short-term interest rates. With economic growth
still strong-albeit slowing from its torrid 5.5% pace of growth in the first
quarter-market participants were content with the idea that the Federal
Reserve Board ("Fed") would remain on the sidelines. The anticipated drag on
the U.S. economy resulting from the economic crises in Asia became apparent-
particularly in the manufacturing sector-over the second quarter. This
slowdown lent comfort to investors that economic growth would not be so
robust as to ignite inflationary pressures.
By the third quarter, however, a dramatic shift in market sentiment was
evident. Uncertainty in the world economies resulted in vulnerability in our
domestic equity market, and led to a substantial flight-to-quality to
U.S. Treasury securities across the yield curve. Economic trouble spread to
include Russia and Latin America, and what had been perceived to have been a
fairly modest drag on the U.S. economies as a result of the remote Asian
crisis now became an overpowering influence on the market and expectations
regarding future U.S. growth. Although economic fundamentals still remained
fairly positive in this environment, fear dominated market sentiment over
this reporting period.
Expectations regarding the direction of the next change in monetary policy
did an abrupt about-face over the reporting period. The Fed adopted a
tightening bias in March, a reflection of their underlying concern about
inflationary pressures. By August, the Fed had removed its tightening bias as
Fed officials perceived that the risks to the economy had become more
balanced. By late August, however, market expectations that the Fed might
eventually need to ease monetary policy to help the U.S. economy along as a
result of the world economic struggles had begun to grow. This expectation
intensified throughout September, and at the September 29 Federal Open
Market Committee ("FOMC") meeting, the Fed voted to ease monetary policy by a
modest 25 basis points. The Fed followed that move with another 25 basis
point ease on October 15-an intermeeting decision that surprised some market
participants-which brought the Fed funds target rate down to 5%. The Fed also
voted to cut the discount rate by the same magnitude, from 5% to 43/4%, at that
time. In mid-November, shortly after the end of the reporting period, the Fed
voted once again at its November 17th FOMC meeting to reduce the Fed funds
target rate and the discount rate by 25 basis points. These moves were a
reflection of concern over the potential economic impact that the crises in
foreign economies would have on U.S. domestic growth as well as with the
liquidity/credit crisis evident in the fixed income markets.
* The rating is obtained after S&P evaluates a number of factors, including
credit quality, market price exposure, and management. S&P monitors the
portfolio weekly for developments that could cause changes in the ratings.
** Money market funds and bond funds rated Aaa by Moody's are judged to be of
an investment quality similar to Aaa-rated fixed income obligations, that
is, they are judged to be of the best quality. Ratings are subject to
change and do not remove market risks.
Short-term interest rates reflected the turmoil and shift in monetary policy
over the period. From May through August, the yield on the three-month
Treasury bill traded within a range of 5 - 51/4%, driven by technical supply
factors rather than market sentiment. By mid-August, however, the trouble in
Asian economies had broadened to include Russia and Latin America, and a
flight-to-quality to U.S. Treasury securities from investors seeking a safe
haven became evident. The three-month bill declined steadily in ensuing weeks
to 3.6% in mid-October, around the time of the second easing step by the Fed.
The yield decline was exacerbated by the overall decline in issuance of
Treasury securities due to the improving Federal budget picture. The sudden
inter-meeting move by the Fed had the desired affect of calming the turbulent
financial markets, however, and the three-month bill retraced some of the
flight-to-quality influence to end the period at 4.4%. The U.S. government
agency market had less of a flight-to-quality influence in general, but still
declined sharply in yield over the period. The three-month agency discount
note began the period at 5.45% and traded within a very narrow range until
late August. At that point, the yield dropped steadily to close to 4.70% by
mid-October, and, similar to the Treasury market, retraced some of that
movement to end the reporting period at 4.9%.
The fund was managed within a 35- to 45-day average maturity target range
over the period, and attempted to maximize performance through ongoing
relative value analysis. The fund's portfolio continues to be barbelled in
structure, which has provided a competitive yield. Close to one-third of the
fund is invested in U.S. government agency floating rate notes, including a
masternote agreement designed to facilitate portfolio liquidity, which in
addition to short-term agency discount notes, comprise the short end of the
barbell. The fund combines this short position with Treasury and agency
securities with longer maturities of 6 to 12 months. However, changing
economic and market developments are continuously monitored to best serve our
clients attracted to the short-term U.S. Government market.
PORTFOLIO OF INVESTMENTS
AUTOMATED GOVERNMENT CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM GOVERNMENT AND AGENCY OBLIGATIONS--102.1%
<C> <S> <C>
$ 21,000,000 Federal Farm Credit Bank Notes, 5.500% - 5.700%, 11/3/1998 - 6/1/1999 $ 21,025,222
104,500,000 (a)Federal Farm Credit Bank, Discount Notes, 4.750% - 5.280%, 11/9/1998 - 7/7/1999 103,949,615
38,000,000 (b)Federal Farm Credit Bank, Floating Rate Notes, 4.999% - 5.354%, 11/24/1998 -
12/1/1998 37,980,790
13,400,000 Federal Home Loan Bank Notes, 5.000% - 5.705%, 5/5/1999 - 10/27/1999 13,397,052
301,261,000 (a)Federal Home Loan Bank, Discount Notes, 4.610% - 5.375%, 11/4/1998 - 5/19/1999 298,824,041
140,000,000 (b)Federal Home Loan Bank, Floating Rate Notes, 4.610% - 5.458%, 11/4/1998 - 11/26/1998 139,957,445
23,300,000 Student Loan Marketing Association, Floating Rate Master Note, 4.920%, 11/10/1998 23,300,000
40,000,000 (a) Student Loan Marketing Association, Discount Note, 5.420%, 11/2/1998 39,993,978
52,000,000 (b)Student Loan Marketing Association, Floating Rate Notes, 4.380% - 5.190%,
11/4/1998 - 11/10/1998 51,992,910
23,700,000 Student Loan Marketing Association, Notes, 5.400% - 5.720%, 11/20/1998 - 9/16/1999 23,697,307
107,000,000 (a)Tennessee Valley Authority, Discount Notes, 4.750% - 4.760%, 11/6/1998 - 11/24/1998 106,807,549
TOTAL INVESTMENTS (AT AMORTIZED COST)(C) $860,925,909
</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.
(c) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($843,105,972) at October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
AUTOMATED GOVERNMENT CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $860,925,909
Cash 294,562
Income receivable 2,532,678
Receivable for shares sold 5,323
Total assets 863,758,472
LIABILITIES:
Payable for investments purchased $17,000,000
Income distribution payable 3,399,299
Accrued expenses 253,201
Total liabilities 20,652,500
NET ASSETS for 843,105,972 shares outstanding $843,105,972
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
$843,105,972 / 843,105,972 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
AUTOMATED GOVERNMENT CASH RESERVES
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest $21,740,223
EXPENSES:
Investment advisory fee $ 1,979,535
Administrative personnel and services fee 298,514
Custodian fees 22,304
Transfer and dividend disbursing agent fees and expenses 30,618
Directors'/Trustees' fees 2,961
Auditing fees 6,521
Portfolio accounting fees 86,515
Shareholder services fee 989,767
Share registration costs 31,336
Printing and postage 60
Insurance premiums 2,325
Total expenses 3,450,456
Waivers --
Waiver of investment advisory fee (1,097,928)
Net expenses 2,352,528
Net investment income $19,387,695
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
AUTOMATED GOVERNMENT CASH RESERVES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31,
1998 YEAR ENDED
(UNAUDITED) APRIL 30, 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 19,387,695 $ 32,248,285
Change in net assets resulting from operations 19,387,695 32,248,285
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (19,387,695) (32,248,285)
SHARE TRANSACTIONS--
Proceeds from sale of shares 1,709,635,118 2,683,714,972
Net asset value of shares issued to shareholders in payment of
distributions declared 3,908,678 7,455,465
Cost of shares redeemed (1,532,637,873) (2,692,041,423)
Change in net assets resulting from share transactions 180,905,923 (870,986)
Change in net assets 180,905,923 (870,986)
NET ASSETS:
Beginning of period 662,200,049 663,071,035
End of period $ 843,105,972 $ 662,200,049
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
AUTOMATED GOVERNMENT CASH RESERVES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31,
1998 YEAR ENDED APRIL 30,
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05 0.05 0.05 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.05) (0.05) (0.05) (0.05) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.49% 5.08% 4.90% 5.24% 4.68% 2.77%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.59%* 0.60% 0.59% 0.58% 0.58% 0.57%
Net investment income 4.90%* 4.96% 4.80% 5.12% 4.70% 2.75%
Expense waiver/reimbursement(b) 0.28%* 0.27% 0.29% 0.30% 0.32% 0.09%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $843,106 $662,200 $663,071 $603,136 $603,849 $457,944
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
AUTOMATED GOVERNMENT CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of three portfolios. The financial
statements included herein are only those of Automated Government Cash
Reserves (the "Fund"). The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
The investment objective of the Fund is to provide current income consistent
with stability of principal and liquidity.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code"). Distributions to shareholders are recorded on the ex-
dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable
to regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax
are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-issued
or delayed delivery basis are marked to market daily and begin earning
interest on the settlement date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts of assets, liabilities, expenses, and revenues
reported in the financial statements. Actual results could differ from those
estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees (the "Trustee") to issue an
unlimited number of full and fractional shares of beneficial interest
(without par value). At October 31, 1998, capital paid-in aggregated
$843,105,972.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 APRIL 30, 1998
<S> <C> <C>
Shares sold 1,709,635,118 2,683,714,972
Shares issued to shareholders in payment of distributions declared 3,908,678 7,455,465
Shares redeemed (1,532,637,873) (2,692,041,423)
Net change resulting from share transactions 180,905,923 (870,986)
</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, Inc. for the
period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25% of average
daily net assets of the Fund shares for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
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.
YEAR 2000
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers do not
properly process and calculate date-related information and data from and
after January 1, 2000. The Fund's Adviser and Administrator are taking
measures that they believe are reasonably designed to address the Year 2000
issue with respect to computer systems that they use and to obtain reasonable
assurances that comparable steps are being taken by each of the Fund's other
service providers. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact to the Fund.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
J. Christopher Donahue
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Glen R. Johnson
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
[Graphic]Federated Investors
AUTOMATED GOVERNMENT CASH RESERVES
Semi-Annual Report
to Shareholders
October 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314186107
0112708 (12/98)
[Graphic]
PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Automated
Treasury Cash Reserves for the six-month period ended October 31, 1998. The
report begins with a brief commentary by the fund's portfolio manager on the
short-term government market, followed by a complete list of the fund's
investments and its financial statements.
On behalf of investors, the fund pursues competitive income, a high level of
liquidity, and a stable net asset value of $1.00*-all through a portfolio of
U.S. Treasury obligations.
During the six-month reporting period, dividends paid to shareholders
totaled $8.3 million, or $0.02 per share. At the end of the reporting period,
net assets reached $352 million.
Thank you for your participation in the daily income opportunities of
Automated Treasury Cash Reserves. Your questions, comments, or suggestions
are always welcome.
Sincerely,
[Graphic]
Glen R. Johnson
President
December 15, 1998
* An investment in money market funds is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
INVESTMENT REVIEW
Automated Treasury Cash Reserves, which is rated AAAm by Standard & Poor's
Rating Services ("S&P")* and Aaa by Moody's Investors Service, Inc.
("Moody's"),** is invested only in direct issues of the U.S. Treasury. The
fund was created to meet the needs of tax-sensitive investors in states which
consider income from all repurchase agreements as taxable. Therefore, the
fund's acceptable investments do not include repurchase agreements, and
liquidity is maintained by including a laddered position of short-term
Treasury securities.
Early in the reporting period, economic fundamentals were still the driving
factor behind movements in short-term interest rates. With economic growth
still strong-albeit slowing from its torrid 5.5% pace of growth in the first
quarter-market participants were content with the idea that the Federal
Reserve Board (the "Fed")would remain on the sidelines. The anticipated drag
on the U.S. economy resulting from the economic crises in Asia became
apparent-particularly in the manufacturing sector-over the second quarter.
This slowdown lent comfort to investors that economic growth would not be so
robust as to ignite inflationary pressures.
By the third quarter, however, a dramatic shift in market sentiment was
evident. Uncertainty in the world economies resulted in vulnerability in our
domestic equity market, and led to a substantial flight-to-quality to
U.S. Treasury securities across the yield curve. Economic trouble spread to
include Russia and Latin America, and what had been perceived to have been a
fairly modest drag on the U.S. economies as a result of the remote Asian
crisis, now became an overpowering influence on the market and expectations
regarding future U.S. growth. Although economic fundamentals still remained
fairly positive in this environment, fear dominated market sentiment over this
reporting period.
Expectations regarding the direction of the next change in monetary policy
did an abrupt about-face over the reporting period. The Fed adopted a
tightening bias in March, a reflection of their underlying concern about
inflationary pressures. By August, the Fed had removed its tightening bias
as Fed officials perceived that the risks to the economy had become more
balanced. By late August, however, market expectations that the Fed might
eventually need to ease monetary policy to help the U.S. economy along as a
result of the world economic struggles had begun to grow. This expectation
intensified throughout September, and at the September 29 Federal Open
Market Committee ("FOMC") meeting, the Fed voted to ease monetary policy by
a modest 25 basis points. The Fed followed that move with another 25 basis
point ease on October 15-an intermeeting decision that surprised some market
participants -which brought the Fed funds target rate down to 5%. The Fed
also voted to cut the discount rate by the same magnitude, from 5% to 43/4%,
at that time. In mid-November, shortly after the end of the reporting
period, the Fed voted once again at its November 17th FOMC meeting to reduce
the Fed funds target rate and the discount rate by 25 basis points. These
moves were a reflection of concern over the potential economic impact that
the crises in foreign economies would have on U.S. domestic growth as well
as with the liquidity/credit crisis evident in the fixed income markets.
Short-term interest rates reflected the turmoil and shift in monetary policy
over the period. From May through August, the yield on the three-month
Treasury bill traded within a range of 5 - 51/4%, driven by technical supply
factors rather than market sentiment. By mid-August, however, the trouble in
Asian economies had broadened to include Russia and Latin America, and a
flight-to-quality to U.S. Treasury securities from investors seeking a safe
haven became evident. The three-month bill declined steadily in ensuing weeks
to 3.6% in mid-October, around the time of the second easing step by the Fed.
The yield decline was exacerbated by the overall decline in issuance of
Treasury securities due to the improving Federal budget picture. The sudden
inter-meeting move by the Fed had the desired affect of calming the turbulent
financial markets, however, and the three-month bill retraced some of the
flight-to-quality influence to end the period at 4.4%.
The fund's average maturity over the period was driven not only by
fundamental factors, such as the outlook for the U.S. economy and
expectations regarding the Fed, but by technical factors relating to the
issuance of Treasury securities. The fund attempts to maximize performance
through ongoing relative value analysis, and actively trades the portfolio
holdings to help achieve that goal.
* The rating is obtained after S&P evaluates a number of factors, including
credit quality, market price exposure and management. S&P monitors the
portfolio weekly for developments that could cause changes in the ratings.
** Money market funds and bond funds rated Aaa by Moody's are judged to be of
an investment quality similar to Aaa rated fixed income obligations, that
is, they are judged to be of the best quality. Ratings are subject to
change.
PORTFOLIO OF INVESTMENTS
AUTOMATED TREASURY CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--86.9%
(A)U.S. TREASURY BILLS--11.0%
$ 21,000,000 3.640% - 4.265%, 1/7/1999 $ 20,850,060
11,000,000 4.020% - 4.760%, 1/14/1999 10,898,456
7,000,000 4.410%, 1/21/1999 6,932,257
Total 38,680,773
U.S. TREASURY NOTES--75.9%
112,000,000 5.500% - 8.875%, 11/15/1998 112,048,691
63,000,000 5.125% - 5.625%, 11/30/1998 63,044,846
28,000,000 5.875%, 1/31/1999 28,108,050
36,000,000 5.500% - 5.875%, 2/28/1999 36,104,411
28,000,000 6.250%, 3/31/1999 28,189,444
Total 267,495,442
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $306,176,215
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($352,193,069) at October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
AUTOMATED TREASURY CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $ 306,176,215
Cash 109,337,048
Income receivable 8,582,129
Receivable for investments sold 46,553,023
Receivable for shares sold 121
Total assets 470,648,536
LIABILITIES:
Payable for investments purchased $116,963,393
Income distribution payable 1,411,850
Accrued expenses 80,224
Total liabilities 118,455,467
NET ASSETS for 352,193,069 shares outstanding $ 352,193,069
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
$352,193,069 / 352,193,069 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
AUTOMATED TREASURY CASH RESERVES
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $9,396,065
EXPENSES:
Investment advisory fee $ 898,821
Administrative personnel and services fee 135,542
Custodian fees 8,239
Transfer and dividend disbursing agent fees and expenses 16,771
Directors'/Trustees' fees 2,949
Auditing fees 6,675
Legal fees 723
Portfolio accounting fees 51,297
Shareholder services fee 449,410
Share registration costs 14,859
Printing and postage 2,888
Insurance premiums 1,812
Total expenses 1,589,986
Waivers--
Waiver of investment advisory fee $(475,449)
Waiver of shareholder services fee (53,929)
Total waivers (529,378)
Net expenses 1,060,608
Net investment income $8,335,457
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
AUTOMATED TREASURY CASH RESERVES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31, 1998 YEAR ENDED
(UNAUDITED) APRIL 30, 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 8,335,457 $ 13,779,256
Change in net assets resulting from operations 8,335,457 13,779,256
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (8,335,457) (13,779,256)
Change in net assets resulting from distributions
to shareholders (8,335,457) (13,779,256)
SHARE TRANSACTIONS--
Proceeds from sale of shares 595,330,365 960,937,612
Net asset value of shares issued to shareholders in
payment of distributions declared 2,170,115 3,712,096
Cost of shares redeemed (575,213,674) (924,269,512)
Change in net assets resulting from share transactions 22,286,806 40,380,196
Change in net assets 22,286,806 40,380,196
NET ASSETS:
Beginning of period 329,906,263 289,526,067
End of period $ 352,193,069 $ 329,906,263
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
AUTOMATED TREASURY CASH RESERVES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31,
1998 YEAR ENDED APRIL 30,
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.05 0.05 0.05 0.04 0.03
LESS DISTRIBUTIONS
Distributions from net investment income (0.02) (0.05) (0.05) (0.05) (0.04) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.34% 4.81% 4.71% 5.04% 4.37% 2.58%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.59%* 0.59% 0.57% 0.57% 0.56% 0.57%
Net investment income 4.64%* 4.70% 4.63% 4.92% 4.29% 2.55%
Expense waiver/reimbursement(b) 0.29%* 0.30% 0.34% 0.37% 0.32% 0.13%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $352,193 $329,906 $289,526 $260,688 $167,508 $190,840
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
AUTOMATED TREASURY CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of three portfolios. The financial
statements included herein are only those of Automated Treasury Cash Reserves
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective of the Fund is to provide current income consistent with stability
of principal and liquidity.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code"). Distributions to shareholders are recorded on the ex-
dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable
to regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax
are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-issued
or delayed delivery basis are marked to market daily and begin earning
interest on the settlement date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts of assets, liabilities, expenses, and
revenues reported in the financial statements. Actual results could differ
from those estimated.
RECLASSIFICATION
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 presentation.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees (the "Trustee") to issue an
unlimited number of full and fractional shares of beneficial interest
(without par value). At October 31, 1998, capital paid-in aggregated
$352,193,069.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 APRIL 30,
(UNAUDITED) 1998
<S> <C> <C>
Shares sold 595,330,365 960,937,612
Shares issued to shareholders in payment of distributions declared 2,170,115 3,712,096
Shares redeemed (575,213,674) (924,269,512)
Net change resulting from share transactions 22,286,806 40,380,196
</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, Inc. for the
period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25% of average
daily net assets of the Fund for the period. The fee paid to FSS is used to
finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the Fund. The
fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors
or Trustees of the above companies.
YEAR 2000
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers do not
properly process and calculate date-related information and data from and
after January 1, 2000. The Fund's Adviser and Administrator are taking
measures that they believe are reasonably designed to address the Year 2000
issue with respect to computer systems that they use and to obtain reasonable
assurances that comparable steps are being taken by each of the Fund's other
service providers. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact to the Fund.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Glen R. Johnson
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
[GRAPHIC]
AUTOMATED TREASURY CASH RESERVES
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314186404
2112509 (12/98)
[GRAPHIC]
PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for
U.S. Treasury Cash Reserves for the six-month period ended October 31, 1998.
The report begins with a brief commentary by the fund's portfolio manager on
the short-term government market, followed by a complete list of the fund's
investments and its financial statements.
On behalf of investors, the fund continues to pursue competitive income, a
high level of liquidity, and a stable net asset value of $1.00* -- all through
a portfolio consisting primarily of U.S. Treasury bills and notes.
During the six-month reporting period, dividends paid to shareholders of
Institutional Shares totaled $34.6 million, or $0.03 per share. Dividends
paid to shareholders of Institutional Service Shares totaled $17.5 million,
or $0.02 per share. Net assets reached the $2 billion level at the end of the
reporting period.
Thank you for participating in the daily income opportunities of
U.S. Treasury Cash Reserves. As always, we welcome your questions, comments,
or suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
December 15, 1998
* An investment in money market funds is neither insured nor guaranteed by
the Federal Deposit Insurance Corporation or any other government agency.
Although the fund seeks to preserve the value of your investment at $1.00
per share, it is possible to lose money by investing in the fund.
INVESTMENT REVIEW
U.S. Treasury Cash Reserves, which is rated AAAm by Standard & Poor's Rating
Services ("S&P")* and Aaa by Moody's Investors Service, Inc. ("Moody's")** is
invested only in direct issues of the U.S. Treasury. The Fund was created to
meet the needs of tax-sensitive investors in states which consider income
from all repurchase agreements as taxable. Therefore, the fund's acceptable
investments do not include repurchase agreements, and liquidity is
maintained by including a laddered position of short-term Treasury
securities.
Early in the reporting period, economic fundamentals were still the driving
factor behind movements in short-term interest rates. With economic growth
still strong-albeit slowing from its torrid 5.5% pace of growth in the first
quarter-market participants were content with the idea that the Federal
Reserve Board (the "Fed") would remain on the sidelines. The anticipated drag
on the U.S. economy resulting from the economic crises in Asia became
apparent-particularly in the manufacturing sector-over the second quarter.
This slowdown lent comfort to investors that economic growth would not be so
robust as to ignite inflationary pressures.
By the third quarter, however, a dramatic shift in market sentiment was
evident. Uncertainty in the world economies resulted in vulnerability in our
domestic equity market, and led to a substantial flight-to-quality to
U.S. Treasury securities across the yield curve. Economic trouble spread to
include Russia and Latin America, and what had been perceived to have been a
fairly modest drag on the U.S. economies as a result of the remote Asian
crisis, now became an overpowering influence on the market and expectations
regarding future U.S. growth. Although economic fundamentals still remained
fairly positive in this environment, fear dominated market sentiment over
this reporting period.
Expectations regarding the direction of the next change in monetary policy
did an abrupt about-face over the reporting period. The Fed adopted a
tightening bias in March, a reflection of their underlying concern about
inflationary pressures. By August, the Fed had removed its tightening bias as
Fed officials perceived that the risks to the economy had become more
balanced. By late August, however, market expectations that the Fed might
eventually need to ease monetary policy to help the U.S. economy along as a
result of the world economic struggles had begun to grow. This expectation
intensified throughout September, and at the September 29 Federal Open
Market Committee (FOMC") meeting, the Fed voted to ease monetary policy by a
modest 25 basis points. The Fed followed that move with another 25 basis
point ease on October 15 - an intermeeting decision that surprised some market
participants - which brought the Fed funds target rate down to 5%. The Fed also
voted to cut the discount rate by the same magnitude, from 5% to 43/4%, at that
time. In mid-November, shortly after the end of the reporting period, the Fed
voted once again at its November 17th FOMC meeting to reduce the Fed funds
target rate and the discount rate by 25 basis points. These moves were a
reflection of concern over the potential economic impact that the crises in
foreign economies would have on U.S. domestic growth as well as with the
liquidity/ credit crisis evident in the fixed income markets.
Short-term interest rates reflected the turmoil and shift in monetary policy
over the period. From May through August, the yield on the three-month
Treasury bill traded within a range of 5-51/4%, driven by technical supply
factors rather than market sentiment. By mid-August, however, the trouble in
Asian economies had broadened to include Russia and Latin America, and a
flight-to-quality to U.S. Treasury securities from investors seeking a safe
haven became evident. The three-month bill declined steadily in ensuing weeks
to 3.6% in mid-October, around the time of the second easing step by the Fed.
The yield decline was exacerbated by the overall decline in issuance of
Treasury securities due to the improving Federal budget picture. The sudden
intermeeting move by the Fed had the desired affect of calming the turbulent
financial markets, however, and the three-month bill retraced some of the
flight-to-quality influence to end the period at 4.4%.
The Fund's average maturity over the period was driven not only by
fundamental factors, such as the outlook for the U.S. economy and
expectations regarding the Fed, but by technical factors relating to the
issuance of Treasury securities. The Fund attempts to maximize performance
through ongoing relative value analysis, and actively trades the portfolio
holdings to help achieve that goal.
* This rating is obtained after S&P evaluates a number of factors, including
credit quality, market price exposure and management. S&P monitors the
portfolio weekly for developments that could cause changes in the ratings.
Ratings are subject to change, and do not remove market risks.
** Money market funds and bond funds dated Aaa by Moody's are judged to be an
investment quality similar to Aaa-rated fixed income obligations, that is,
they are judged to be of the best quality. Ratings are subject to change,
and do not remove market risks.
PORTFOLIO OF INVESTMENTS
U.S. TREASURY CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
U.S. TREASURY OBLIGATIONS--87.5%
(A)U.S. TREASURY BILLS--17.3%
$ 15,000,000 3.870%, 11/5/1998 $ 14,993,550
21,000,000 4.920% - 4.930%, 11/12/1998 20,968,396
7,000,000 4.050%, 12/10/1998 6,969,288
7,000,000 4.130% - 4.900%, 12/17/1998 6,957,156
182,000,000 3.640% - 4.470%, 1/7/1999 180,620,182
94,000,000 3.500% - 4.760%, 1/14/1999 93,171,570
82,000,000 3.840% - 4.410%, 1/21/1999 81,245,051
TOTAL 404,925,193
U.S. TREASURY NOTES--70.2%
678,000,000 5.500% - 8.875%, 11/15/1998 678,257,065
384,074,000 5.125% - 5.625%, 11/30/1998 384,370,192
172,000,000 5.875%, 1/31/1999 172,663,736
20,000,000 8.875%, 2/15/1999 20,212,790
219,000,000 5.500% - 5.875%, 2/28/1999 219,633,766
172,000,000 6.250%, 3/31/1999 173,163,729
TOTAL 1,648,301,278
TOTAL INVESTMENTS (AT AMORTIZED COST)(B) $2,053,226,471
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase.
(b) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($2,347,112,463) at October 31, 1998.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
U.S. TREASURY CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at amortized cost and value $2,053,226,471
Cash 644,852,874
Income receivable 51,534,158
Receivable for investments sold 300,048,529
Total assets 3,049,662,032
LIABILITIES:
Payable for shares redeemed $692,778,842
Income distribution payable 9,410,250
Accrued expenses 360,477
Total liabilities 702,549,569
NET ASSETS for 2,347,112,463 shares outstanding $2,347,112,463
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$1,514,053,922 / 1,514,053,922 shares outstanding $1.00
INSTITUTIONAL SERVICE SHARES:
$833,058,541 / 833,058,541 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
U.S. TREASURY CASH RESERVES
SIX MONTHS ENDED OCTOBER 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $55,149,360
EXPENSES:
Investment advisory fee $ 4,230,676
Administrative personnel and services fee 797,482
Custodian fees 47,226
Transfer and dividend disbursing agent fees and expenses 104,602
Directors'/Trustees' fees 8,153
Auditing fees 6,655
Legal fees 3,668
Portfolio accounting fees 99,657
Shareholder services fee--Institutional Shares 1,726,918
Shareholder services fee--Institutional Service Shares 917,254
Share registration costs 65,540
Printing and postage 10,184
Insurance premiums 6,480
Miscellaneous 4,317
Total expenses 8,028,812
Waivers --
Waiver of investment advisory fee $(3,222,764)
Waiver of shareholder services fee--Institutional
Shares (1,726,918)
Total waivers (4,949,682)
Net expenses 3,079,130
Net investment income $52,070,230
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
U.S. TREASURY CASH RESERVES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31,
1998 YEAR ENDED
(UNAUDITED) APRIL 30, 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 52,070,230 $ 89,271,752
Change in net assets resulting from operations 52,070,230 89,271,752
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (34,605,210) (63,939,786)
Institutional Service Shares (17,465,020) (25,331,966)
Change in net assets resulting from distributions to shareholders (52,070,230) (89,271,752)
SHARE TRANSACTIONS--
Proceeds from sale of shares 3,568,466,552 6,778,715,401
Net asset value of shares issued to shareholders in
payment of distributions declared 4,889,984 9,676,916
Cost of shares redeemed (3,154,475,179) (6,437,576,516)
Change in net assets resulting from share transactions 418,881,357 350,815,801
Change in net assets 418,881,357 350,815,801
NET ASSETS:
Beginning of period 1,928,231,106 1,577,415,305
End of period $ 2,347,112,463 $ 1,928,231,106
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS-INSTITUTIONAL SHARES
U.S. TREASURY CASH RESERVES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31,
1998 YEAR ENDED APRIL 30,
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.05 0.05 0.05 0.05 0.03
LESS DISTRIBUTIONS
Distributions from net
investment income (0.03) (0.05) (0.05) (0.05) (0.05) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 2.54% 5.23% 5.10% 5.43% 4.75% 2.95%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.20%* 0.20% 0.20% 0.20% 0.20% 0.20%
Net investment income 5.01%* 5.11% 4.99% 5.29% 4.85% 2.93%
Expense waiver/reimbursement(b) 0.55%* 0.56% 0.57% 0.59% 0.39% 0.43%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $1,514,054 $1,256,710 $1,131,071 $937,662 $609,233 $265,030
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS-INSTITUTIONAL SERVICE SHARES
U.S. TREASURY CASH RESERVES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31,
1998 YEAR ENDED APRIL 30,
(UNAUDITED) 1998 1997 1996 1995(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.02 0.05 0.05 0.05 0.03
LESS DISTRIBUTIONS
Distributions from net
investment income (0.02) (0.05) (0.05) (0.05) (0.03)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.41% 4.97% 4.84% 5.17% 2.60%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45%* 0.45% 0.45% 0.45% 0.45%*
Net investment income 4.76%* 4.87% 4.73% 4.97% 5.33%*
Expense waiver/reimbursement(c) 0.30%* 0.31% 0.32% 0.34% 0.39%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $833,058 $671,521 $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) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
U.S. TREASURY CASH RESERVES
OCTOBER 31, 1998 (UNAUDITED)
ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of three portfolios. The financial
statements included herein are only those of U.S. Treasury Cash Reserves (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective of the Fund is to provide current income consistent with stability
of principal and liquidity. The Fund offers two classes of shares:
Institutional Shares and Institutional Service Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code"). Distributions to shareholders are recorded on the ex-
dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable
to regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax
are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make
payment for the securities purchased. Securities purchased on a when-issued
or delayed delivery basis are marked to market daily and begin earning
interest on the settlement date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.
RECLASSIFICATION
Certain amounts in the 1997 financial statements have been reclassified to
conform to the 1998 presentation.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees (the "Trustee") to issue an
unlimited number of full and fractional shares of beneficial interest
(without par value) for each class of shares. At October 31, 1998, capital
paid-in aggregated $2,347,112,463.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 APRIL 30,
INSTITUTIONAL SHARES (UNAUDITED) 1998
<S> <C> <C>
Shares sold 2,240,996,758 4,809,364,236
Shares issued to shareholders in payment of distributions declared 1,717,967 4,011,041
Shares redeemed (1,985,370,808) (4,687,736,118)
Net change resulting from Institutional Shares transactions 257,343,917 125,639,159
<CAPTION>
SIX MONTHS
ENDED
OCTOBER 31, YEAR ENDED
1998 APRIL 30,
INSTITUTIONAL SERVICE SHARES (UNAUDITED) 1998
<S> <C> <C>
Shares sold 1,327,469,794 1,969,351,165
Shares issued to shareholders in payment of distributions declared 3,172,017 5,665,875
Shares redeemed (1,169,104,371) (1,749,840,398)
Net change resulting from Institutional Service Shares transactions 161,537,440 225,176,642
Net change resulting from share transactions 418,881,357 350,815,801
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's investment adviser (the "Adviser"),
receives for its services an annual investment advisory fee equal to 0.40% of
the Fund's average daily net assets. The Adviser may voluntarily choose to
waive any portion of its fee. The Adviser can modify or terminate this
voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE
Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The
fee paid to FServ is based on the level of average aggregate daily net assets
of all funds advised by subsidiaries of Federated Investors, Inc. for the
period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated
Shareholder Services ("FSS"), the Fund will pay FSS up to 0.25% of average
daily net assets of the Fund for the period. The fee paid to FSS is used to
finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. For the
period ended October 31, 1998, Institutional Shares fully waived its
shareholder services fee. FSS can modify or terminate this voluntary waiver
at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary, Federated Shareholder Services Company
("FSSC") serves as transfer and dividend disbursing agent for the Fund. The
fee paid to FSSC is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors
or Trustees of the above companies.
YEAR 2000
Similar to other financial organizations, the Fund could be adversely
affected if the computer systems used by the Fund's service providers do not
properly process and calculate date-related information and data from and
after January 1, 2000. The Fund's Adviser and Administrator are taking
measures that they believe are reasonably designed to address the Year 2000
issue with respect to computer systems that they use and to obtain reasonable
assurances that comparable steps are being taken by each of the Fund's other
service providers. At this time, however, there can be no assurance that
these steps will be sufficient to avoid any adverse impact to the Fund.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
Nicholas P. Constantakis
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Glen R. Johnson
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
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U.S. Treasury Cash Reserves
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
OCTOBER 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 314186503
Cusip 314186305
2112510 (12/98)
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