ANNUAL REPORT
President's Message
Dear Investor:
I am pleased to present the Annual Report to Shareholders for Automated
Government Cash Reserves for the 12-month period ended April 30, 1999. 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 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. 1 It invests exclusively
in a portfolio of securities issued or guaranteed by the U.S. government or
its agencies.
During the 12-month reporting period, dividends paid to shareholders totaled
$37.1 million, or $0.05 per share. At the end of the 12-month reporting period,
fund assets totaled $773.9 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
June 15, 1999
1 An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek 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 is rated AAAm by Standard & Poor's
Corporation 1 and Aaa by Moody's Investors Service, Inc.,2 the highest ratings
given to money market funds. The fund invests only in U.S. Treasury and U.S.
Government agency obligations, including issues of the Student Loan Marketing
Association, the Federal Farm Credit Bank System, the Federal Home Loan Bank
System, and the Tennessee Valley Authority. Typically, Automated Government Cash
Reserves maintains a small Treasury security position for liquidity purposes.
The fund does not invest in repurchase agreements, and is managed to provide
distributions which may be exempt from state and local taxes.
Early in the reporting period, economic fundamentals were the driving factor
behind movements in short-term rates. Economic growth was robust, and
inflationary pressures were non-existent. Also, economic uncertainty in Asia
began to drag on the U.S. economy in the second quarter. This environment lent
comfort to investors that economic growth would moderate and that the Federal
Reserve (the "Fed") would remain on the sidelines for the immediate future. By
the third quarter, however, market sentiment shifted dramatically. Uncertainty
in many of the world's economies led to a substantial flight-to-quality to U.S.
Treasury securities across the yield curve and to downside vulnerability in the
U.S. equity market. Economic trouble spots spread from the Asian nations to
Russia, and then to Latin America. What had been originally perceived as a
modest drag on fundamental U.S. economic conditions became an overpowering
influence on the capital markets. Although economic fundamentals still remained
fairly positive in this environment, fear dominated market sentiment over this
period.
Confronted with economic crises overseas and a significant liquidity crisis
worldwide, investors' monetary policy expectations changed dramatically. The Fed
adopted a tightening bias in March of 1998. However, by August, the Fed removed
this bias and market participants began to expect an easing of monetary policy.
In fact, at the September 29 Federal Open Market Committee meeting, the Fed
voted to ease monetary policy by 25 basis points. The move was widely viewed as
rather modest and did little to ease the tenuous situation in international
markets or the lack of liquidity in domestic fixed income markets. On October
15, in an intermeeting decision that surprised many market participants, the Fed
reduced the fed funds target rate by another 25 basis points to 5.00%. They also
voted to reduce the discount rate from 5.00% to 4.75%. Risk aversion and the
lack of liquidity in the credit markets subsided significantly following this
rate cut. Stock prices subsequently climbed to record levels. Finally, in
mid-November, the Fed voted once again to reduce both the fed funds target rate
and the discount rate by 25 basis points. The final rate cut was a reflection of
the concern that remained over the international situation and served as an
insurance policy against potential crises in the future. Markets clearly
stabilized in the final weeks of 1998 and into 1999 and the target rate remained
unchanged at 4.75% as of April 30, 1999.
1 This rating is obtained after Standard & Poor evaluates a number of factors,
including credit quality, market price exposure and management. Ratings are
subject to change, and do not remove market risks.
2 Money market funds and bond funds rated Aaa by Moody's Investors Services,
Inc., 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.
Attention returned to domestic economic fundamentals in the initial weeks of
1999. Fundamentals were characterized by continued economic growth coupled with
little or no signs of inflation. Market participants anticipated that the global
slowdown and widening U.S. trade deficit would slow economic growth as 1999
began. However, driven by robust consumer spending and a strong housing market,
GDP expanded by a solid 4.10% in the first quarter of 1999. This followed growth
of 3.70% and 6.00% in the third and fourth quarters of 1998. Inflation remained
remarkably benign over the same period. Consumer prices grew by just 1.00% to
2.00% over the reporting period and producer prices were essentially flat. By
the end of the reporting period, concerns over fragile global economies and
markets that began the period were supplanted by growing fears that the Fed may
need to raise rates in the face of robust growth.
Rate movements on short-term Treasury securities reflected the turmoil and
shifts in monetary policy over the reporting period. The yield on the
three-month Treasury Bill began the period at 5.00% and traded around this level
until September. As instability developed in the international markets and
investors shunned credit-sensitive securities in favor of U.S. Treasury
securities, the yield on the three-month bill plummeted to 3.62% on October 16,
1998. In response to the Fed moves and a return to some semblance of calm in the
international and credit-sensitive markets, the yield quickly rebounded to the
4.50% area by November. Generally, the three-month bill traded between 4.40% and
4.70% from mid-November until the end of the reporting period on April 30, 1999.
Although yields on short-term government agency securities also reflected the
market turmoil and changing monetary policy, these securities were less
influenced by technical supply factors and were more reflective of overall
market expectations. For example, the three-month agency discount note began the
period at the 5.45% level. By October 16, the yield on this security had
plummeted to 4.75%. This 70 basis point contraction compares to the 138 basis
point yield contraction on the three-month Treasury bill. Similar to U.S.
Treasury securities, the yield on the three-month agency discount note rebounded
to the 4.90% to 5.00% area through November and December. As markets stabilized
in the initial weeks of 1999, agency securities remained well-bid. The
three-month agency discount note traded in the 4.70% to 4.80% range through the
end of the reporting period in April 1999.
The fund began the reporting period with an average maturity target range of 35
to 45 days. As markets stabilized in the first quarter of 1999, the target range
was extended to 40 to 50 days. The actual average maturity of the fund varied
within this target range, based on relative value opportunities in the agency
markets. Agency securities were the dominant investment throughout the reporting
period as the Treasury market remained expensive. Also, short-term agency
securities with maturities between one and three months were the preferred
investment, particularly in the second half of the reporting period, relative to
overnight agency discount notes. On April 30, 1999, 29% of the fund was invested
in U.S. Government agency floating rate notes, including a position in a Student
Loan Marketing Association master note. The master note helped to provide
liquidity for the fund. This floating rate position was combined with short-term
agency discount notes to comprise the short end of the fund's barbell structure.
The fund combined this short position with agency securities of longer
maturities, typically six to twelve months.
The fund most likely will continue to remain in its neutral, 40 to 50 day
average maturity range as the economic backdrop continues to show mixed signals
of robust economic growth and subdued inflationary pressures. Changing economic
and market developments are continuously monitored, and performance was
maximized through on-going relative value analysis, to best serve clients
attracted to the short-term U.S. Government market.
Portfolio of Investments
APRIL 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
GOVERNMENT AGENCIES-99.9%
$ 97,719,000 1 Federal Farm Credit System
Discount Notes, 4.650% -
5.280%,
5/3/1999 - 8/27/1999 $ 97,091,039
38,000,000 2 Federal Farm Credit System
Floating Rate Notes,
4.717% - 4.780%,
5/24/1999 - 6/1/1999 37,996,089
14,000,000 Federal Farm Credit System
Notes, 5.000% - 5.550%,
6/1/1999 - 4/3/2000 13,999,140
336,225,000 1 Federal Home Loan Bank
System Discount Notes,
4.653% - 4.900%,
5/3/1999 - 8/11/1999 334,536,062
119,000,000 2 Federal Home Loan Bank
System Floating Rate
Notes, 4.757% - 4.910%,
5/3/1999 - 6/1/1999 118,979,829
35,900,000 Federal Home Loan Bank
System Notes, 4.790% -
5.705%, 5/5/1999 -
4/28/2000 35,885,895
48,000,000 2 Student Loan Marketing
Association Floating Rate
Notes, 4.763% - 5.107%,
5/3/1999 - 5/4/1999 47,989,973
16,800,000 2 Student Loan Marketing
Association Floating Rate
Master Note, 4.757%,
5/4/1999 16,800,000
16,500,000 Student Loan Marketing
Association Notes, 4.930%
- 5.890%, 8/11/1999 -
2/8/2000 16,531,485
53,000,000 1 Tennessee Valley Authority
Discount Notes, 4.640% -
4.690%,
5/5/1999 - 5/18/1999 52,937,476
TOTAL INVESTMENTS (AT
AMORTIZED COST) 3 $ 772,746,988
</TABLE>
1 Discount rate at time of purchase.
2 Floating rate note with current rate and next reset date shown.
3 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($773,909,693) at April 30, 1999.
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
APRIL 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at amortized
cost and value $ 772,746,988
Cash 1,165,547
Income receivable 2,340,856
Receivable for shares sold 4,961
TOTAL ASSETS 776,258,352
LIABILITIES:
Payable for shares
redeemed $ 163,049
Income distribution
payable 1,983,651
Accrued expenses 201,959
TOTAL LIABILITIES 2,348,659
Net assets for 773,909,693
shares outstanding $ 773,909,693
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE:
$773,909,693 / 773,909,693
shares outstanding $1.00
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED APRIL 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 41,859,019
EXPENSES:
Investment advisory fee $ 3,993,987
Administrative personnel
and services fee 602,293
Custodian fees 42,930
Transfer and dividend
disbursing agent fees and
expenses 46,803
Directors'/Trustees' fees 9,772
Auditing fees 13,136
Legal fees 5,539
Portfolio accounting fees 113,282
Shareholder services fee 1,996,993
Share registration costs 44,893
Printing and postage 9,522
Insurance premiums 3,503
Miscellaneous 7,199
TOTAL EXPENSES 6,889,852
WAIVER:
Waiver of investment
advisory fee (2,141,800)
Net expenses 4,748,052
Net investment income $ 37,110,967
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 37,110,967 $ 32,248,285
CHANGES IN NET ASSETS
RESULTING FROM OPERATIONS 37,110,967 32,248,285
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (37,110,967) (32,248,285)
CHANGES IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (37,110,967) (32,248,285)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 3,335,196,980 2,683,714,972
Net asset value of shares
issued to shareholders in
payment of
distributions declared 9,242,946 7,455,465
Cost of shares redeemed (3,232,730,282) (2,692,041,423)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 111,709,644 (870,986)
Change in net assets 111,709,644 (870,986)
NET ASSETS:
Beginning of period 662,200,049 663,071,035
End of period $ 773,909,693 $ 662,200,049
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS:
Distributions from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 4.75% 5.08% 4.90% 5.24% 4.68%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.59% 0.60% 0.59% 0.58% 0.58%
Net investment income 4.65% 4.96% 4.80% 5.12% 4.70%
Expenses 2 0.86% 0.87% 0.88% 0.88% 0.90%
Net investment income 2 4.38% 4.69% 4.51% 4.82% 4.38%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $773,910 $662,200 $663,071 $603,136 $603,849
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers would not have occurred, the ratios would have been as indicated.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
APRIL 30, 1999
ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of three portfolios. The financial
statements included herein are only those of Automated Government Cash Reserves
(the "Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective of the Fund is current income consistent with stability of principal
and liquidity.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
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, 1999, capital paid-in aggregated $773,909,693.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998
<S> <C> <C>
Shares sold 3,335,196,980 2,683,714,972
Shares issued to
shareholders in payment of
distributions declared 9,242,946 7,455,465
Shares redeemed (3,232,730,282) (2,692,041,423)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS 111,709,644 (870,986)
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Investment Management Company (formerly 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
FServ, through its subsidiary 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 (UNAUDITED)
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.
Report of Ernst & Young LLP, Independent Auditors
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
FEDERATED GOVERNMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Automated Government Cash Reserves (one of the
portfolios constituting Federated Government Trust) as of April 30, 1999, and
the related statement of operations for the year then ended, the statement of
changes in net assets for the each of the two years in the period then ended,
and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1999, by correspondence with the custodian. 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, a portfolio of Federated Government Trust,
at April 30, 1999, 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 each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
[Graphic]
Ernst & Young LLP
Boston, Massachusetts
June 8, 1999
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
CHARLES F. MANSFIELD, JR.
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 and Secretary
RICHARD B. FISHER
Vice President
RICHARD J. THOMAS
Treasurer
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 the 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
World-Class Investment Manager
ANNUAL REPORT
Automated Government Cash Reserves
ANNUAL REPORT TO SHAREHOLDERS
APRIL 30, 1999
[Graphic]
Federated
Automated Government Cash Reserves
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 314186107
G00773-01 (6/99)
[Graphic]
ANNUAL REPORT
President's Message
Dear Investor:
I am pleased to present the Annual Report to Shareholders for Automated Treasury
Cash Reserves for the 12-month period ended April 30, 1999. 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
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 1-all through a portfolio of
U.S. Treasury obligations.
During the 12-month reporting period, dividends paid to shareholders totaled $14
million, or $0.04 per share. At the end of the 12-month reporting period, net
assets totaled $254.7 million.
Thank you for participating in the daily income opportunities of Automated
Treasury Cash Reserves. Your questions, comments or suggestions are always
welcome.
Sincerely,
[Graphic]
Glen R. Johnson
President
June 15, 1999
1 An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek 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
Corporation 1 and Aaa by Moody's Investors Service, Inc.,2 is invested only in
U.S. Treasury Securities. The Fund does not invest in repurchase agreements, and
is managed to provide distributions which may be exempt from state and local
taxes, and liquidity is maintained through a laddered position of short-term
Treasury securities.
The annual reporting period was characterized by dramatic shifts in market
sentiment and expectations regarding the path of monetary policy. In May 1998,
economic fundamentals were the driving factor behind movements in short-term
interest rates. Economic growth was strong, and market participants were
convinced that the Federal Reserve (the "Fed") would remain on the sidelines.
The economic crises in Asia began to drag on the U.S. economy, particularly in
the manufacturing sector. This slowdown lent comfort to investors that economic
growth would not be so robust as to ignite inflationary pressures.
By the third quarter, however, uncertainty in the world economies introduced
vulnerability into the 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. economy as a result of the remote
Asian crisis now became an overpowering influence on the market and expectations
regarding future U.S. growth. Although the Fed had adopted a tightening bias in
March, by August it had removed this bias, and by late September had taken what
was to be the first of three 25 basis point monetary policy easings in an
attempt to calm the financial markets and relieve the credit and liquidity
constraints that were evident. While this first move had little effect on
lessening investors fears, the subsequent steps-an intermeeting move in mid-
October and another in mid-November -brought the fed funds target down to its
current 4.75% level and had the desired result.
In the midst of this turmoil, however, seemingly relentless consumer demand
continued to propel the economy along. After posting a torrid 6.00% pace of
growth in the fourth quarter of 1998, the economy entered the new year with
considerable strength. Although growth in the first quarter slowed modestly to
around 4.00%, this pace still was well above what has traditionally been viewed
as being the non-inflationary potential of the economy. Nonetheless, signs of
inflation remained remarkably absent. By the end of the reporting period,
however, lingering concern over the health of the global economies had been
replaced by apprehension that the Fed might be forced to tighten monetary policy
in order to ward off future inflationary pressures.
1 This rating is obtained after Standard & Poor evaluates a number of factors,
including credit quality, market price exposure and management. Ratings are
subject to change, and do not remove market risks.
2 Money market funds and bond funds rated Aaa by Moody's Investors Services,
Inc., are judged to be of an investment quality similiar 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 risk..
Movements in short-term interest rates reflected the shifting sentiment over the
reporting period. The yield on the three-month Treasury bill traded between
5.00% and 5.20% from May 1998 to mid-August. It then plummeted to 3.60% at the
peak of the liquidity crisis in mid-October, as investors seeking a safe haven
flooded the U.S. Treasury market. As the easing steps taken by the Fed calmed
the waters, the yield on this security rebounded to trade around 4.45% at the
beginning of 1999. The movements in interest rates for very short-term Treasury
securities were also influenced by technical factors over the period. The
Treasury Department's use of short-term cash management bills to meet temporary
shortfalls in the Treasury's cash balances introduced additional volatility into
this segment of the Treasury market. This was particularly evident in the first
quarter of 1999, when the Treasury issued over $100 billion of cash management
bills to provide interim financing until tax receipts were collected in April.
As a result of this influx in supply, the three-month T-Bill rose to almost
4.70% in late February, and then declined to close the period at 4.50% when
these securities matured.
The fund's average maturity generally moved between 45 and 55 days over the
reporting period, varying with the shifts in sentiment and in Treasury supply.
We favored Treasury notes to Treasury bills over the period due to the expensive
nature of this market. The fund maximized performance through ongoing relative
value analysis, and actively traded the portfolio holdings to achieve that goal.
Portfolio of Investments
APRIL 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS-98.2%
1 U.S. TREASURY BILLS-17.9%
$ 18,000,000 4.200% - 4.380%, 6/24/1999 $ 17,884,335
5,000,000 4.250%, 5/20/1999 4,988,785
11,000,000 4.355%, 7/22/1999 10,890,883
12,000,000 4.385%, 6/3/1999 11,951,765
TOTAL 45,715,768
U.S. TREASURY NOTES-80.3%
38,000,000 5.875% - 6.875%, 7/31/1999 38,124,662
12,000,000 5.875% - 6.875%, 8/31/1999 12,068,665
15,000,000 6.000%, 6/30/1999 15,037,109
15,000,000 6.000%, 8/15/1999 15,057,085
56,000,000 6.250% - 6.750%, 5/31/1999 56,074,072
63,000,000 6.375% - 9.125%, 5/15/1999 63,043,283
5,000,000 7.125%, 9/30/1999 5,050,716
TOTAL 204,455,592
TOTAL INVESTMENTS (AT AMORTIZED COST) 2 $ 250,171,360
</TABLE>
1 Each issue shows the rate of discount at time of purchase.
2 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($254,666,030) at April 30, 1999.
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
APRIL 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at amortized
cost and value $ 250,171,360
Cash 459,174
Income receivable 4,587,394
Receivable for shares sold 67,601
TOTAL ASSETS 255,285,529
LIABILITIES:
Payable for shares
redeemed $ 5,619
Income distribution
payable 552,459
Accrued expenses 61,421
TOTAL LIABILITIES 619,499
Net assets for
254,666,030 shares
outstanding $ 254,666,030
NET ASSET VALUE,
OFFERING PRICE AND
REDEMPTION PROCEEDS PER
SHARE:
$254,666,030 /
254,666,030 shares
outstanding $1.00
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED APRIL 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 15,978,775
EXPENSES:
Investment advisory fee $ 1,619,787
Administrative personnel
and services fee 244,264
Custodian fees 22,971
Transfer and dividend
disbursing agent fees
and expenses 26,805
Directors'/Trustees'
fees 7,278
Auditing fees 13,296
Legal fees 3,636
Portfolio accounting
fees 78,736
Shareholder services fee 809,893
Share registration costs 22,327
Printing and postage 8,990
Insurance premiums 2,426
Miscellaneous 8,470
TOTAL EXPENSES 2,868,879
WAIVERS:
Waiver of investment
advisory fee $ (860,344)
Waiver of shareholder
services fee (97,187)
TOTAL WAIVERS (957,531)
Net expenses 1,911,348
Net investment income $ 14,067,427
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
OPERATIONS:
Net investment income $ 14,067,427 $ 13,779,256
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS 14,067,427 13,779,256
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income (14,067,427) (13,779,256)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (14,067,427) (13,779,256)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 1,122,662,472 960,937,612
Net asset value of shares
issued to shareholders
in payment of
distributions declared 4,679,834 3,712,096
Cost of shares redeemed (1,202,582,539) (924,269,512)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS (75,240,233) 40,380,196
Change in net assets (75,240,233) 40,380,196
NET ASSETS:
Beginning of period 329,906,263 289,526,067
End of period $ 254,666,030 $ 329,906,263
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<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 0.04 0.05 0.05 0.05 0.04
LESS DISTRIBUTIONS:
Distributions from net investment income (0.04) (0.05) (0.05) (0.05) (0.04)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 4.40% 4.81% 4.71% 5.04% 4.37%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.59% 0.59% 0.57% 0.57% 0.56%
Net investment income 4.34% 4.70% 4.63% 4.92% 4.29%
Expenses 2 0.89% 0.89% 0.91% 0.94% 0.88%
Net investment income 2 4.04% 4.40% 4.29% 4.55% 3.91%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $254,666 $329,906 $289,526 $260,688 $167,508
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntarily waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
APRIL 30, 1999
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.
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, 1999, capital paid-in aggregated $254,666,030.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998
<S> <C> <C>
Shares sold 1,122,662,472 960,937,612
Shares issued to
shareholders in payment
of distributions
declared 4,679,834 3,712,096
Shares redeemed (1,202,582,539) (924,269,512)
NET CHANGE RESULTING
FROM SHARE TRANSACTIONS (75,240,233) 40,380,196
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Investment Management Company (formerly, 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC 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 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 (UNAUDITED)
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.
Report of Ernst & Young LLP, Independent Auditors
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
FEDERATED GOVERNMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Automated Treasury Cash Reserves (one of the
portfolios constituting Federated Government Trust), as of April 30, 1999, 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 each of the five years in the period then ended. These
financial statement and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Automated Treasury Cash Reserves, a portfolio of Federated Government Trust, at
April 30, 1999, 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 each of the five years in the period then
ended, in conformity with generally accepted accounting principles.
[Graphic]
Boston, Massachusetts
June 8, 1999
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
CHARLES F. MANSFIELD, JR.
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 and Secretary
RICHARD B. FISHER
Vice President
RICHARD J. THOMAS
Treasurer
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 the 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
World-Class Investment Manager
ANNUAL REPORT
Automated Treasury Cash Reserves
ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1999
[Graphic]
Federated
Automated Treasury Cash Reserves
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 314186404
G00783-01 (6/99)
[Graphic]
ANNUAL REPORT
President's Message
Dear Investor:
I am pleased to present the Annual Report to Shareholders for U.S. Treasury Cash
Reserves for the 12-month period ending April 30, 1999. 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 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 1-all through a portfolio
consisting primarily of U.S. Treasury bills and notes.
During the 12-month reporting period, dividends paid to shareholders of
Institutional Shares totaled $70.4 million, or $0.05 per share. Dividends paid
to shareholders of Institutional Service Shares totaled $35.6 million, or $0.04
per share. Net assets reached $2.6 billion at the end of the 12-month 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
June 15, 1999
1 An investment in money market funds is neither insured nor guaranteed by the
Federal Deposit Insurance Corporation or any other government agency. Although
money market funds seek 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
Corporation 1 and Aaa by Moody's Investors Service, Inc.,2 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 that 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.
The annual reporting period was characterized by dramatic shifts in market
sentiment and expectations regarding the path of monetary policy. Early in the
reporting period, in May 1998, economic fundamentals were still the driving
factor behind movements in short-term interest rates. With economic growth still
strong, market participants were convinced that the Federal Reserve Board (the
"Fed") would remain on the sidelines. The economic crises in Asia began to drag
on the U.S. economy - 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, uncertainty in the world economies introduced
vulnerability into 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. economy as a result of the remote
Asian crisis now became an overpowering influence on the market and expectations
regarding future U.S. growth. Although the Fed had adopted a tightening bias in
March, by August it had removed this bias, and by late September had taken what
was to be the first of three 25 basis point monetary policy easings in an
attempt to calm the financial markets and relieve the credit and liquidity
constraints that were evident. While this first move had little effect on
lessening investors fears, the subsequent steps - an intermeeting move in
mid-October and another in mid-November - that brought the fed funds target down
to its current 4.75% level had the desired result.
In the midst of this turmoil, however, seemingly relentless consumer demand
continued to propel the economy along. After posting a torrid 6.00% pace of
growth in the fourth quarter of 1998, the economy entered the new year with a
considerable head of steam. Although growth in the first quarter slowed modestly
to around 4.00%, this pace still was well above what has traditionally been
viewed as being the non-inflationary potential. Signs of inflation remained
remarkably absent. By the end of the reporting period, however, lingering
concern over the health of the global economies had been replaced by
apprehension that the Fed might be forced to tighten monetary policy in order to
ward off inflationary pressures down the road.
1 This rating is obtained after Standard & Poor's evaluates a number of factors,
including credit quality, market price exposure and management. Ratings are
subject to change, and do not remove market risks.
2 Money market funds and bond funds rated Aaa by Moody's Investors Services,
Inc., 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.
Movements in short-term interest rates reflected the shifting sentiment over the
annual reporting period. The yield on the three-month Treasury bill traded
between 5.00% and 5.20% from May 1998 to mid-August. It then plummeted to a low
of 3.60% at the height of the liquidity crisis in mid- October, as investors
seeking a safe haven flooded the U.S. treasury market. As the easing steps taken
by the Fed calmed the waters, the yield on this security rebounded to trade
around 4.45% at the beginning of 1999. The movements in interest rates for very
short-term Treasury securities were also influenced by technical factors over
the period. The Treasury Department's use of short-term cash management bills to
meet temporary shortfalls in the Treasury's cash balances introduced additional
volatility into this segment of the Treasury market. This was particularly
evident in the first quarter of 1999, when the Treasury issued over $100 billion
of cash management bills to provide interim financing until tax receipts were
collected in April. As a result of this influx in supply, the three-month T-Bill
rose to almost 4.70% in late February, and then declined to close the period at
4.50% when these securities matured.
The fund's average maturity generally moved between 45 and 55 days over the
reporting period, varying with the shifts in sentiment and in Treasury supply.
We favored Treasury notes to Treasury bills over the period due to the expensive
nature of this market. The fund maximized performance through ongoing relative
value analysis, and actively traded the portfolio holdings to achieve that goal.
Portfolio of Investments
APRIL 30, 1999
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS-98.5%
U.S. TREASURY BILLS-19.2% 1
$ 6,000,000 4.240%, 7/8/1999 $ 5,951,947
50,000,000 4.245%, 7/15/1999 49,557,814
30,000,000 4.250%, 5/20/1999 29,932,708
80,000,000 4.340% - 4.380%, 6/24/1999 79,478,000
141,000,000 4.350% - 4.490%, 6/3/1999 140,429,696
40,000,000 4.355% - 4.390%, 5/6/1999 39,975,718
11,000,000 4.355%, 7/22/1999 10,890,883
65,000,000 4.375%, 7/29/1999 64,296,962
73,000,000 4.435% - 4.440%, 5/27/1999 72,765,931
TOTAL 493,279,659
U.S. TREASURY NOTES-79.3%
340,000,000 5.875% - 6.875%, 7/31/1999 341,136,263
141,000,000 5.875% - 6.875%, 8/31/1999 141,690,490
175,000,000 6.000%, 6/30/1999 175,440,198
133,000,000 6.000%, 8/15/1999 133,493,336
579,000,000 6.250% - 6.750%, 5/31/1999 579,805,626
617,000,000 6.375% - 9.125%, 5/15/1999 617,424,932
50,000,000 7.125%, 9/30/1999 50,507,161
TOTAL 2,039,498,006
TOTAL INVESTMENTS (AT AMORTIZED COST) 2 $ 2,532,777,665
</TABLE>
1 Each issue shows the rate of discount at time of purchase.
2 Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($2,570,902,942) at April 30, 1999.
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
APRIL 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at amortized
cost and value $ 2,532,777,665
Cash 632,433
Income receivable 45,970,558
Receivable for shares
sold 11,297
TOTAL ASSETS 2,579,391,953
LIABILITIES:
Payable for shares
redeemed $ 1,428
Income distribution
payable 8,101,456
Accrued expenses 386,127
TOTAL LIABILITIES 8,489,011
Net assets for
2,570,902,942 shares
outstanding $ 2,570,902,942
NET ASSET VALUE,
OFFERING PRICE AND
REDEMPTION PROCEEDS PER
SHARE
INSTITUTIONAL SHARES:
$1,645,762,223 /
1,645,762,223 shares
outstanding $1.00
INSTITUTIONAL SERVICE
SHARES:
$925,140,719 /
925,140,719 shares
outstanding $1.00
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
YEAR ENDED APRIL 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 112,855,932
EXPENSES:
Investment advisory fee $ 9,280,201
Administrative personnel
and services fee 1,749,318
Custodian fees 130,694
Transfer and dividend
disbursing agent fees
and expenses 65,449
Directors'/Trustees'
fees 15,797
Auditing fees 13,355
Legal fees 10,458
Portfolio accounting
fees 156,037
Shareholder services
fee-Institutional Shares 3,780,424
Shareholder services
fee-Institutional
Service Shares 2,019,701
Share registration costs 193,147
Printing and postage 26,323
Insurance premiums 6,961
Miscellaneous 17,125
TOTAL EXPENSES 17,464,990
WAIVERS:
Waiver of investment
advisory fee $ (6,922,681)
Waiver of shareholder
services fee-
Institutional Shares (3,780,424)
TOTAL WAIVERS (10,703,105)
Net expenses 6,761,885
Net investment income $ 106,094,047
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS
OPERATIONS:
Net investment income $ 106,094,047 $ 89,271,752
CHANGE IN NET ASSETS
RESULTING FROM
OPERATIONS 106,094,047 89,271,752
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Institutional Shares (70,472,634) (63,939,786)
Institutional Service
Shares (35,621,413) (25,331,966)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (106,094,047) (89,271,752)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 7,823,041,987 6,778,715,401
Net asset value of shares
issued to shareholders
in payment of
distributions declared 12,987,955 9,676,916
Cost of shares redeemed (7,193,358,106) (6,437,576,516)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS 642,671,836 350,815,801
Change in net assets 642,671,836 350,815,801
NET ASSETS:
Beginning of period 1,928,231,106 1,577,415,305
End of period $ 2,570,902,942 $ 1,928,231,106
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights - Institutional Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.05 0.05 0.05 0.05 0.05
LESS DISTRIBUTIONS:
Distributions from net investment income (0.05) (0.05) (0.05) (0.05) (0.05)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN 1 4.79% 5.23% 5.10% 5.43% 4.75%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.20% 0.20% 0.20% 0.20% 0.20%
Net investment income 4.66% 5.11% 4.99% 5.29% 4.85%
Expenses 2 0.75% 0.76% 0.77% 0.79% 0.59%
Net investment income 2 4.11% 4.55% 4.42% 4.70% 4.46%
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $1,645,762 $1,256,710 $1,131,071 $937,662 $609,233
</TABLE>
1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
2 During the period, certain fees were voluntary waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
See Notes which are an integral part of the Financial Statements
Financial Highlights - Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998 1997 1996 1995 1
<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 0.04 0.05 0.05 0.05 0.03
LESS DISTRIBUTIONS:
Distributions from net investment income (0.04) (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 2 4.53% 4.97% 4.84% 5.17% 2.60%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.45% 0.45% 0.45% 0.45% 0.45% 3
Net investment income 4.41% 4.87% 4.73% 4.97% 5.33% 3
Expenses 4 0.75% 0.76% 0.77% 0.79% 0.84% 3
Net investment income 4 4.11% 4.56% 4.41% 4.63% 4.94% 3
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $925,141 $671,521 $446,344 $227,099 $60,508
</TABLE>
1 Reflects operations for the period from December 15, 1994 (date of initial
public investment) to April 30, 1995.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
4 During the period, certain fees were voluntary waived. If such voluntary
waivers had not occurred, the ratios would have been as indicated.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
APRIL 30, 1999
ORGANIZATION
Federated Government Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act") as an open-end, management
investment company. The Trust consists of three portfolios. The financial
statements included herein are only those of U.S. Treasury Cash Reserves (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held. The investment
objective of the Fund is current income consistent with stability of principal
and liquidity. The Fund offers two classes of shares: Institutional Shares and
Institutional Service Shares.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
The Fund uses the amortized cost method to value its portfolio securities in
accordance with Rule 2a-7 under the Act.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex- dividend
date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when- issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees (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, 1999, capital paid-in
aggregated $2,570,902,942.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED APRIL 30 1999 1998
INSTITUTIONAL SHARES:
<S> <C> <C>
Shares sold 4,865,315,994 4,809,364,236
Shares issued to
shareholders in payment
of distributions
declared 4,130,324 4,011,041
Shares redeemed (4,480,394,099) (4,687,736,118)
NET CHANGE RESULTING
FROM INSTITUTIONAL SHARE
TRANSACTIONS 389,052,219 125,639,159
<CAPTION>
YEAR ENDED APRIL 30 1999 1998
INSTITUTIONAL SERVICE
SHARES:
<S> <C> <C>
Shares sold 2,957,725,993 1,969,351,165
Shares issued to
shareholders in payment
of distributions
declared 8,857,631 5,665,875
Shares redeemed (2,712,964,007) (1,749,840,398)
NET CHANGE RESULTING
FROM INSTITUTIONAL
SERVICE SHARE
TRANSACTIONS 253,619,617 225,176,642
NET CHANGE RESULTING
FROM SHARE TRANSACTIONS 642,671,836 350,815,801
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Investment Management Company (formerly 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 Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. For the period ended April
30, 1999, FSSC waived its fee for the Institutional Shares. FSSC 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 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 (UNAUDITED)
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.
Report of Ernst & Young LLP, Independent Auditors
TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
FEDERATED GOVERNMENT TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of U.S. Treasury Cash Reserves (one of the
portfolios constituting Federated Government Trust), as of April 30, 1999, 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 each of the five years in the period then ended. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of April
30, 1999, by correspondence with the custodian. 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 U.S.
Treasury Cash Reserves, a portfolio of Federated Government Trust, at April 30,
1999, 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 each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
[Graphic]
Ernst & Young LLP
Boston, Massachusetts
June 8, 1999
Trustees
JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
WILLIAM J. COPELAND
LAWRENCE D. ELLIS, M.D.
EDWARD L. FLAHERTY, JR., ESQ.
GLEN R. JOHNSON
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
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 and Secretary
RICHARD B. FISHER
Vice President
RICHARD J. THOMAS
Treasurer
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 the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the trust's/fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses, and other
information.
[Graphic]
Federated
World-Class Investment Manager
ANNUAL REPORT
U.S. Treasury Cash Reserves
ANNUAL REPORT
TO SHAREHOLDERS
APRIL 30, 1999
[Graphic]
Federated
U.S. Treasury Cash Reserves
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 314186503
Cusip 314186305
G00784-01 (6/99)
[Graphic]
