SEMI-ANNUAL REPORT
President's Message
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders of Federated
Government Ultrashort Fund (formerly, Federated Institutional Short Duration
Government Fund), a portfolio of Federated Institutional Trust. The report
covers the six-month period from August 1, 1999 through January 31, 2000 and
includes commentary by the fund's portfolio manager, followed by the portfolio
of investments and financial statements.
Federated Government Ultrashort Fund pursues a competitive level of current
income, with a low level of principal volatility. The fund's portfolio consists
of U.S. government securities with a dollar weighted average duration of one
year or less. Investments are limited to those that qualify the fund as a
permissible investment for federal credit unions and federal savings
associations, and as an appropriate direct investment for national banks.
Dividends paid by the fund's Institutional Shares during this reporting period
totaled $0.06 per share, while the net asset value declined by a minimal $0.01
per share to end the reporting period at $1.98 per share. The fund's
Institutional Service Shares, a new share class, began operation on September
30, 1999. During its initial period of operation, Institutional Service Shares
paid dividends totaling $0.04 per share, while the net asset value remained
unchanged to end the reporting period at $1.98 per share.
The fund's total net assets reached $184.4 million on the last day of the
reporting period.
Thank you for participating in the conservative income opportunities of the
Federated Government Ultrashort Fund. As always, we welcome your questions and
comments.
Sincerely,
[Graphic]
Glen R. Johnson
President
March 15, 2000
Investment Review
Federated Government Ultrashort Fund invests in U.S. Government securities,
including U.S. Treasuries, U.S. Government agencies, and U.S. Government
agency-sponsored mortgage-backed securities, either directly or through
repurchase agreements. The fund seeks to maintain a duration of one year or
less. The fund was renamed on September 30, 1999, and has been assigned a AAAf
credit rating 1 from Standard & Poor's.
The Federal Reserve Board (the "Fed") tightened monetary policy on two occasions
over the semi-annual reporting period ended January 31, 2000. These two
quarter-point moves, combined with an initial tightening of similar magnitude at
the end of June 1999, brought the federal funds target rate back to 5.50%. This
was the level of the federal funds target rate prior to the fourth quarter of
1998, when the Fed infused liquidity into the fixed income markets during a
period of global economic turmoil. Shortly after the end of January 2000,
however, the Fed opted to raise the federal funds target rate yet again by 25
basis points, arguably restricting monetary policy for the first time since
prior to the liquidity and credit crisis of over a year ago.
Robust economic growth prompted the policy moves by the Fed. Economic growth in
1999 exceeded 4.00%, well in excess of what is generally considered to be the
long-run, non-inflationary growth potential of the economy. Consumer spending
continued to be one of the main drivers behind the impressive pace of growth,
and the interest rate sectors of the economy have remained remarkably strong in
spite of a rise in mortgage rates. Inflationary pressures at the producer and
consumer level remain remarkably absent in the face of this growth. However,
while the notion of a non-inflationary potential-traditionally 2.00% to
2.50%-has increased in recent times due to evidence that productivity
enhancements have been controlling inflationary pressures, continued growth well
above 3.00% is likely to keep the Fed on its current tightening course in the
near term.
Short-term interest rates reflected-and largely anticipated-the monetary policy
tightenings over the reporting period. The yield on the 1-year agency discount
note, for example, began the reporting period at 5.66%, traded up to 5.80% by
the time of the Fed's decision to tighten in August 1999, and to 5.90% by the
second tightening of the reporting period in November 1999. The yield then
climbed steadily to close the reporting period at 6.43%, two days prior to the
latest decision by the Fed to tighten which brought the federal funds target
rate to its current 5.75% level.
1 An AAAf rating means that the fund's portfolio holdings and counterparties
provide extremely strong protection against losses from credit defaults. Ratings
are subject to change, and do not remove market risks.
Much attention-both in the financial markets and the popular press-was given in
the fourth quarter to the potential dislocations feared at year end due to the
Year 2000 effect. In hindsight, of course, the world experienced very few
troubles, and the economic impact appears to be non- existent. However, very
short-term government securities did seem to reflect a flight to quality
concentrated in the last few days and weeks of the trading year. Furthermore,
rates on repurchase agreements-reflecting the steps that the Fed had taken to
assure that sufficient liquidity would be available to the banking system at
year end in the event of a crisis- traded around 3.00% in the last few days of
the year, well below the typical level of around the then 5.50% federal funds
target rate. After the tightening step taken in November 1999, the Fed was
largely -and accurately-expected to stay on hold until the early February
Federal Open Market Committee meeting to minimize any dislocations experienced
at this time.
About one-third of the fund was allocated to mortgage-backed securities (MBS),
which help to provide incremental yield to the portfolio relative to traditional
money market alternatives. MBS spreads contracted during the reporting period as
investors took advantage of historically wide spreads, low prepayments and
positive market technicals. While the overall mortgage allocation increased
slightly, exposure to adjustable rate mortgage (ARM) securities declined.
Significant asset-backed and corporate issuance early in the semi-annual
reporting period resulted in wider spreads for those sectors as well as agency
MBS. As the supply overhang was absorbed, mortgage spreads tightened. Par-priced
15-year MBS spreads, for example, tightened 35 basis points as prepayments and
supply declined while demand increased. Fifteen year MBS issuance decreased 50%
from August 1999 to January 2000.
Rising interest rates led to a 10% decline in the Mortgage Bankers Association's
Refinance Index. Like the fixed-rate sector, ARM prepayments declined. However,
the ARM-to-fixed refinance incentive increased in the second half of the
semi-annual reporting period. Therefore, the fund acted to take some profits in
the ARM sector in favor of short-duration planned amortization class (PAC)
collateralized mortgage obligations (CMOs) and GNMA 8.50% MBS.
The remaining two-thirds of the fund was in traditional government money market
securities. We reduced our overall holdings of repurchase agreements going into
the end of 1999 in order to minimize the anticipated effect of lower repurchase
agreement rates on the fund's yield as a result of Year 2000 dislocations in the
short-term markets. Our purchases in this sector over the reporting period were
concentrated in short-term fixed and floating rate agency securities.
The net asset values of the fund's Institutional Shares and Institutional
Service Shares both ended the reporting period at $1.98 per share. The
portfolio's effective duration was 0.77 years, modestly longer than its
benchmark, the Merrill Lynch Six-Month Treasury Bill Index. 2
2 Merrill Lynch 6-month Treasury Bill Index is an unmanaged index tracking
6-month U.S. government securities. The index is produced by Merrill Lynch,
Pierce, Fenner & Smith, Inc. Indexes are unmanaged and investments cannot
be made in an index.
Portfolio of Investments
JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM U.S. GOVERNMENT
OBLIGATIONS-80.3%
FEDERAL HOME LOAN BANK -
4.9%
$ 2,000,000 4.950%, 2/17/2000 $ 1,999,580
2,000,000 4.980%, 2/16/2000 1,999,660
2,000,000 4.995%, 2/24/2000 1,999,180
1,000,000 5.035%, 2/25/2000 999,590
1,000,000 6.050%, 10/25/2000 995,940
1,000,000 6.372%, 2/7/2001 999,910
TOTAL 8,993,860
FEDERAL HOME LOAN BANK,
DISCOUNT NOTE-1.0% 1
2,000,000 5.950%, 1/12/2001 1,887,220
FEDERAL HOME LOAN BANK,
FLOATING RATE NOTE-1.1% 2
2,000,000 5.581%, 2/15/2000 2,000,160
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION-3.6%
6,695,317 7.500%, 8/1/2014 -
10/1/2014 6,674,427
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION, DISCOUNT
NOTE-7.0% 1
13,000,000 5.560% - 5.710%, 2/2/2000 -
4/6/2000 12,899,000
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION, FLOATING RATE
NOTE-6.5% 2
10,000,000 5.586%, 2/18/2000 9,998,200
2,000,000 5.640%, 2/22/2000 2,000,200
TOTAL 11,998,400
FEDERAL HOME LOAN MORTGAGE
ASSOCIATION, REMIC-4.1%
3,496,792 Series 1544-E, 6.250%,
6/15/2008 3,482,420
4,048,959 Series 1873-C, 7.000%,
6/15/2008 4,042,278
TOTAL 7,524,698
FEDERAL NATIONAL MORTGAGE
ASSOCIATION-11.8%
2,000,000 0.00%, 2/1/2000 1,993,400
4,000,000 5.000%, 5/5/2000 -
1/11/2001 3,964,140
2,000,000 5.570%, 3/17/2000 1,999,240
5,824,343 7.500%, 15 Year, TBA 5,806,171
8,000,000 8.000%, 30 Year, TBA 7,980,000
TOTAL 21,742,951
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM U.S. GOVERNMENT
OBLIGATIONS-continued
FEDERAL NATIONAL MORTGAGE
ASSOCIATION ARM-10.1%
$ 8,728,221 5.812%, 3/1/2033 $ 8,515,078
3,744,817 6.692%, 11/1/2018 3,814,171
6,074,466 6.848%, 9/1/2021 6,229,972
TOTAL 18,559,221
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, FLOATING RATE
NOTE-14.6% 2
7,000,000 5.594%, 2/15/2000 7,000,000
20,000,000 5.940%, 2/5/2000 19,993,600
TOTAL 26,993,600
FEDERAL NATIONAL MORTGAGE
ASSOCIATION, REMIC-3.2%
5,983,866 Series 1993-206-E, 5.650%,
5/25/2017 5,941,500
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION-6.7%
12,130,301 8.500%, 11/15/2029 -
12/15/2029 12,376,668
STUDENT LOAN MARKETING
ASSOCIATION-1.1%
2,000,000 4.930%, 2/8/2000 1,999,060
STUDENT LOAN MARKETING
ASSOCIATION, FLOATING RATE
NOTE-4.6% 2
3,500,000 6.199%, 2/3/2000 3,499,755
5,000,000 6.229%, 2/1/2000 5,000,750
TOTAL 8,500,505
TOTAL LONG-TERM U.S.
GOVERNMENT OBLIGATIONS
(IDENTIFIED
COST $148,540,428) 148,091,270
REPURCHASE AGREEMENTS-
23.6% 3
5,000,000 Bank of America, 5.800%,
dated 1/31/2000, due
2/1/2000 5,000,000
5,000,000 Barclays Capital, Inc.,
5.800%, dated 1/31/2000,
due 2/1/2000 5,000,000
2,790,000 Deutsche Bank AG, 5.700%,
dated 1/31/2000, due
2/1/2000 2,790,000
5,800,000 4 Goldman Sachs Group, LP,
5.650%, dated 1/19/2000,
due 2/17/2000 5,800,000
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
REPURCHASE AGREEMENTS-
continued 3
$ 5,000,000 Goldman Sachs Group, LP,
5.800%, dated 1/31/2000,
due 2/1/2000 $ 5,000,000
5,000,000 Morgan Stanley Group,
Inc., 5.800%, dated
1/31/2000, due 2/1/2000 5,000,000
5,000,000 Paribas Corp., 5.800%,
dated 1/31/2000, due
2/1/2000 5,000,000
5,000,000 Prudential Securities,
Inc., 5.800%, dated
1/31/2000, due 2/1/2000 5,000,000
5,000,000 Salomon Brothers, Inc.,
5.800%, dated 1/31/2000,
due 2/1/2000 5,000,000
TOTAL REPURCHASE
AGREEMENTS (AT AMORTIZED
COST) 43,590,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$192,130,428) 5 $ 191,681,270
</TABLE>
1 Discount rate at time of purchase.
2 Current rate and next reset date shown.
3 The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
4 Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase agreement
within seven days.
5 The cost of investments for federal tax purposes amounts to $192,130,428. The
net unrealized depreciation of investments on a federal tax basis amounts to
$449,158, which is comprised of $16,276 appreciation and $465,434 depreciation
at January 31, 2000.
Note: The categories of investments are shown as a percentage of net assets
($184,442,327) at January 31, 2000.
The following acronyms are used throughout this portfolio:
ARM -Adjustable Rate Mortgage
REMIC -Real Estate Mortgage Investment Conduit
TBA -To Be Announced
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase
agreements $ 43,590,000
Investments in securities 148,091,270
Total investments in
securities, at value
(identified and tax cost
$192,130,428) $ 191,681,270
Cash 14,935
Income receivable 1,121,902
Receivable for investments
sold 7,358,797
Receivable for shares sold 48,053
TOTAL ASSETS 200,224,957
LIABILITIES:
Payable for investments
purchased 14,870,197
Income distribution
payable 881,962
Accrued expenses 30,471
TOTAL LIABILITIES 15,782,630
Net assets for 93,252,388
shares outstanding $ 184,442,327
NET ASSETS CONSIST OF:
Paid-in capital $ 186,695,444
Net unrealized
depreciation of
investments (449,158)
Accumulated net realized
loss on investments (1,788,723)
Accumulated distributions
in excess of net investment
income (15,236)
TOTAL NET ASSETS $ 184,442,327
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
INSTITUTIONAL SHARES:
$163,871,377 / 82,848,848
shares outstanding $1.98
INSTITUTIONAL SERVICE
SHARES:
$20,570,950 / 10,403,540
shares outstanding $1.98
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
SIX MONTHS ENDED JANUARY 31, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar
roll expense of $77,063) $ 4,937,291
EXPENSES:
Investment adviser fee $ 338,694
Administrative personnel
and services fee 65,026
Custodian fees 8,609
Transfer and dividend
disbursing agent fees and
expenses 13,039
Directors'/Trustees' fees 4,674
Auditing fees 5,419
Legal fees 3,491
Portfolio accounting fees 28,464
Shareholder services fee-
Institutional Service
Shares 6,073
Share registration costs 9,930
Printing and postage 7,486
Insurance premiums 634
Miscellaneous 2,452
TOTAL EXPENSES 493,991
WAIVERS:
Waiver of investment
adviser fee $ (272,695)
Waiver of shareholder
services fee-Institutional
Service Shares (3,645)
TOTAL WAIVERS (276,340)
Net expenses 217,651
Net investment income 4,719,640
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on
investments (483,584)
Net change in unrealized
depreciation of
investments (91,649)
Net realized and
unrealized loss on
investments (575,233)
Change in net assets
resulting from operations $ 4,144,407
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited) YEAR ENDED
JANUARY 31, JULY 31,
2000 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 4,719,640 $ 9,956,181
Net realized loss on
investments ($(483,584)
and $(1,305,139),
respectively, as computed
for federal tax purposes) (483,584) (1,275,123)
Net change in unrealized
depreciation (91,649) (342,432)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS 4,144,407 8,338,626
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Institutional Shares (4,592,532) (9,957,683)
Institutional Service
Shares (141,386) -
Distributions from net
realized gain on
investments
Institutional Shares - (61,004)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (4,733,918) (10,018,687)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 64,080,014 369,878,554
Net asset value of shares
issued to shareholders in
payment of
distributions declared 2,778,102 7,420,283
Cost of shares redeemed (68,188,042) (307,189,137)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS (1,329,926) 70,109,700
Change in net assets (1,919,437) 68,429,639
NET ASSETS:
Beginning of period 186,361,764 117,932,125
End of period $ 184,442,327 $ 186,361,764
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(unaudited)
JANUARY 31, YEAR ENDED JULY
31,
2000 1999
1998 1997 1
<S> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.99 $ 2.00 $
2.00 $ 2.00
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.06 0.10
0.11 0.01
Net realized and unrealized loss on investments (0.01)
(0.01) - -
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.09
0.11 0.01
LESS DISTRIBUTIONS:
Distributions from net investment income (0.06) (0.10)
(0.11) (0.01)
Distributions from net realized gain on investments - (0.00) 2
(0.00) 2 -
TOTAL DISTRIBUTIONS (0.06) (0.10)
(0.11) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.98 $ 1.99 $
2.00 $ 2.00
TOTAL RETURN 3 2.33% 4.87%
5.86% 0.34%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.25% 4 0.25%
0.15% 0.00% 4
Net investment income 5.57% 4 5.20%
5.62% 5.75% 4
Expenses waiver/reimbursement 5 0.32% 4 0.36%
0.63% 77.80% 4
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $163,871 $186,362
$117,932 $11,100
Portfolio turnover 68% 278%
145% 0%
</TABLE>
1 Reflects operations for the period from July 10, 1997 (start of performance)
to July 31, 1997. For the period from August 1, 1996 to July 9, 1997 all income
was distributed to the administrator.
2 Per share amount does not round to $(0.01).
3 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
4 Computed on an annualized basis.
5 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
(unaudited)
JANUARY 31,
2000 1
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.98
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.04
Net realized and unrealized loss on investments (0.00)
TOTAL FROM INVESTMENT OPERATIONS 0.04
LESS DISTRIBUTIONS:
Distributions from net investment income (0.04)
NET ASSET VALUE, END OF PERIOD $ 1.98
TOTAL RETURN 2 1.89%
RATIOS TO AVERAGE NET ASSETS:
Expenses 0.35% 3
Net investment income 5.82% 3
Expenses waiver/reimbursement 4 0.47% 3
SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $20,571
Portfolio turnover 68%
</TABLE>
1 Reflects operations for the period from September 30, 1999 (start of
performance) to January 31, 2000.
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 This voluntary expense decrease is reflected in both the expense and the net
investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
JANUARY 31, 2000 (UNAUDITED)
ORGANIZATION
Federated Institutional 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 one diversified portfolio, Federated
Government Ultrashort Fund ("the Fund") (formerly, Federated Institutional Short
Duration Government Fund). The investment objective of the Fund is current
income. The Fund offers two classes of shares: Institutional Shares and
Institutional Service Shares.
Shareholders and/or the Board of Trustees (the "Trustees") approved a change in
the name of the Fund as follows:
<TABLE>
<CAPTION>
EFFECTIVE DATE New Name
<S> <C>
09/29/1999 Federated Government Ultrashort Fund
</TABLE>
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
U.S. government securities and mortgage backed securities are generally valued
at the mean of the latest bid and asked price as furnished by an independent
pricing service. Short-term securities are valued at the prices provided by an
independent pricing service. However, short-term securities with remaining
maturities of 60 days or less at the time of purchase may be valued at amortized
cost, which approximates fair market value.
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.
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 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. The Fund, along with other affiliated
investment companies, may utilize a joint trading account for the purpose of
entering into one or more repurchase agreements.
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"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at fair market value. The Fund offers multiple classes of shares,
which differ in their respective distribution and service fees. All shareholders
bear the common expenses of the Fund based on average daily net assets of each
class, without distinction between share classes. Dividends are declared
separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses.
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 provision for federal tax is
necessary.
Additionally, net capital losses of $1,305,139 attributable to security
transactions incurred after October 31, 1998, are treated as arising on the
first day of the next taxable year.
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. Losses may occur on these transactions due to changes in market
conditions or the failure of counterparties to perform under the contract.
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 a trade date basis.
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
January 31, 2000, capital paid-in aggregated $186,695,444.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JANUARY 31, 2000 JULY 31, 1999
INSTITUTIONAL SHARES: SHARES AMOUNT
SHARES AMOUNT
<S> <C> <C>
<C> <C>
Shares sold 21,762,525 $43,109,712
184,938,794 $369,878,554
Shares issued to
shareholders in payment of
distributions declared 1,378,133 2,728,703
3,713,864 7,420,283
Shares redeemed (34,173,794) (67,767,838)
(153,728,509) (307,189,137)
NET CHANGE RESULTING
FROM INSTITUTIONAL
SHARE TRANSACTIONS (11,033,136) $(21,929,423) 34,924,149
$ 70,109,700
<CAPTION>
PERIOD ENDED YEAR ENDED
JANUARY 31, 2000 1 JULY 31, 1999
INSTITUTIONAL SERVICE
SHARES: SHARES AMOUNT
SHARES AMOUNT
<S> <C> <C>
<C> <C>
Shares sold 10,590,815 $20,970,302
- - $ -
Shares issued to
shareholders in payment of
distributions declared 24,949 49,399
- - -
Shares redeemed (212,224) (420,204)
- - -
NET CHANGE RESULTING FROM
INSTITUTIONAL SERVICE
SHARE TRANSACTIONS 10,403,540 $20,599,497
- - $ -
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS (629,596) $(1,329,926)
34,924,149 $70,109,700
</TABLE>
1 Reflects operations for the period from September 30, 1999 (start of
performance) to January 31, 2000.
INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER FEE
Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser 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 a scale that ranges from 0.15% to 0.075% of the
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors, Inc., subject to a $125,000 minimum per portfolio and
$30,000 per each additional class.
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. For the period ended
January 31, 2000, the Fund's Institutional Shares did not incur a shareholder
services fee.
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.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities (and in-kind
contributions), for the period ended January 31, 2000, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchases $92,508,483
Sales $99,309,998
</TABLE>
Trustees
JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
JOHN F. CUNNINGHAM
J. CHRISTOPHER DONAHUE
LAWRENCE D. ELLIS, M.D.
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
JOHN E. MURRAY, JR., J.D., S.J.D.
MARJORIE P. SMUTS
JOHN S. WALSH
Officers
JOHN F. DONAHUE
Chairman
GLEN R. JOHNSON
President
WILLIAM D. DAWSON III
Chief Investment Officer
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
C. GRANT ANDERSON
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.
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Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT
Federated Government Ultrashort Fund
SEMI-ANNUAL REPORT TO SHAREHOLDERS
JANUARY 31, 2000
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Federated
Federated Government Ultrashort Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 31420B102
Cusip 31420B201
G02287-05 (3/00)
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