July 31, 2018 Share Class Ticker Institutional FICMX Service FITSX Federated Government Income Trust Fund Established 1982 Dear Valued Shareholder, I am pleased to present the for your fund covering the period from February 1, 2018 through July 31, 2018. This report includes a complete listing of your fund s holdings, performance information and financial statements along with other important fund information. In addition, our website, FederatedInvestors.com, offers easy access to Federated resources that include timely fund updates, economic and market insights from our investment strategists, and financial planning tools. Thank you for investing with Federated. I hope you find this information useful and look forward to keeping you informed. Sincerely, J. Christopher Donahue, President Not FDIC Insured May Lose Value No Bank Guarantee
CONTENTS Portfolio of Investments Summary Tables... 1 Portfolio of Investments... 2 Financial Highlights... 17 Statement of Assets and Liabilities... 19 Statement of Operations... 20 Statement of Changes in Net Assets... 21 Notes to Financial Statements... 22 Shareholder Expense Example... 31 Evaluation and Approval of Advisory Contract... 33 Voting Proxies on Fund Portfolio Securities... 40 Quarterly Portfolio Schedule... 40
Portfolio of Investments Summary Tables (unaudited) At July 31, 2018, the Fund s portfolio composition 1 was as follows: Percentage of Type of Investments Total Net Assets U.S. Government Agency Mortgage-Backed Securities 99.2% Cash Equivalents 2 0.6% Derivative Contracts 3 0.0% 4 Other Assets and Liabilities Net 5 0.2% TOTAL 100.0% 1 See the Fund s Prospectus and Statement of Additional Information for a description of the principal types of securities in which the Fund invests. 2 Cash Equivalents include any investments in money market mutual funds and/or overnight repurchase agreements other than those representing dollar-roll collateral. 3 Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract on the Fund s performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of the contract s significance to the portfolio. More complete information regarding the Fund s direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report. 4 Represents less than 0.1%. 5 Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities. 1
Portfolio of Investments July 31, 2018 (unaudited) Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES 99.2% Value Federal Home Loan Mortgage Corporation 22.2% $ 3,651,404 3.000%, 5/1/2045 $ 3,534,487 2,486,600 3.000%, 1/1/2048 2,397,655 455,202 3.500%, 11/1/2025 459,993 1,327,269 3.500%, 8/1/2026 1,341,807 1,522,582 3.500%, 6/1/2032 1,534,341 2,936,607 3.500%, 5/1/2046 2,915,811 14,360,666 3.500%, 9/1/2047 14,236,530 2,425,699 3.500%, 10/1/2047 2,404,731 9,530,052 3.500%, 11/1/2047 9,450,651 714,131 4.000%, 8/1/2025 731,742 13,913,269 4.000%, 1/1/2047 14,143,448 126,007 4.500%, 6/1/2019 126,572 661,683 4.500%, 3/1/2024 678,656 599,321 4.500%, 11/1/2039 627,739 1,002,013 4.500%, 4/1/2040 1,049,526 735,564 4.500%, 5/1/2040 769,982 1,201,243 4.500%, 6/1/2040 1,257,452 197,680 4.500%, 9/1/2040 206,806 1,032,197 4.500%, 9/1/2040 1,079,851 296,797 5.000%, 8/1/2023 306,642 1,124,304 5.000%, 1/1/2034 1,197,184 176,628 5.000%, 5/1/2034 188,162 694,076 5.000%, 9/1/2039 740,269 1,903,637 5.000%, 10/1/2039 2,030,332 732,104 5.000%, 12/1/2039 780,599 88,794 5.500%, 12/1/2021 91,582 18,085 5.500%, 1/1/2022 18,656 41,898 5.500%, 1/1/2022 42,910 86,952 5.500%, 1/1/2022 89,684 891,858 5.500%, 5/1/2034 964,557 20,459 5.500%, 12/1/2035 22,143 41,992 5.500%, 3/1/2036 45,517 163,289 5.500%, 3/1/2036 177,143 553,350 5.500%, 10/1/2037 599,897 2
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Federal Home Loan Mortgage Corporation continued $ 393,472 5.500%, 1/1/2038 $ 426,523 172,245 5.500%, 3/1/2038 186,953 151,570 5.500%, 11/1/2038 164,464 148,404 5.500%, 1/1/2039 161,075 200,998 6.000%, 4/1/2036 221,752 620,406 6.000%, 7/1/2037 684,201 136,913 6.000%, 3/1/2038 151,188 143,296 6.000%, 4/1/2038 158,294 65,388 6.000%, 9/1/2038 72,275 16,987 6.000%, 9/1/2038 18,785 22,558 6.500%, 9/1/2029 24,694 34,079 7.000%, 2/1/2031 38,583 43,034 7.000%, 10/1/2031 47,623 7,362 7.000%, 10/1/2031 8,010 80,413 7.000%, 1/1/2032 91,188 130,798 7.000%, 3/1/2032 147,154 139,437 7.500%, 6/1/2027 155,006 17,368 7.500%, 8/1/2029 19,708 2,274 7.500%, 3/1/2030 2,594 5,291 7.500%, 1/1/2031 6,027 106,334 7.500%, 2/1/2031 120,950 TOTAL 69,150,104 Federal National Mortgage Association 48.1% 3,865,975 3.000%, 6/1/2027 3,854,531 2,728,644 3.000%, 7/1/2027 2,720,567 1,601,436 3.000%, 6/1/2032 1,580,311 4,276,557 3.000%, 8/1/2032 4,220,142 13,332,371 3.000%, 6/1/2043 12,948,177 3,202,332 3.000%, 8/1/2045 3,097,042 3,765,528 3.000%, 8/1/2045 3,641,720 46,047,115 3.000%, 10/1/2046 44,511,545 905,994 3.500%, 1/1/2026 916,467 7,307,875 3.500%, 12/1/2041 7,302,654 1,354,493 3.500%, 4/1/2042 1,353,526 3,839,450 3.500%, 9/1/2042 3,833,108 512,772 3.500%, 9/1/2042 511,925 3,703,010 3.500%, 9/1/2042 3,698,050 3
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Federal National Mortgage Association continued $ 478,007 3.500%, 9/1/2042 $ 477,292 1,063,146 3.500%, 12/1/2042 1,061,389 5,035,811 3.500%, 12/1/2046 4,999,166 4,115,284 4.000%, 12/1/2031 4,220,500 2,810,825 4.000%, 12/1/2041 2,878,298 10,575,896 4.000%, 12/1/2041 10,829,767 1,683,810 4.000%, 4/1/2042 1,723,703 3,629,341 4.000%, 6/1/2042 3,715,329 7,338,844 4.000%, 12/1/2042 7,512,718 2,231,782 4.500%, 9/1/2041 2,353,909 1,333,923 4.500%, 10/1/2041 1,394,829 2,853,774 4.500%, 11/1/2041 2,987,196 162,072 4.500%, 11/1/2041 169,827 1,380,787 4.500%, 1/1/2042 1,443,833 329,484 5.000%, 10/1/2023 340,795 181,094 5.000%, 4/1/2024 187,532 1,026,554 5.000%, 7/1/2034 1,094,495 1,518,719 5.000%, 1/1/2040 1,621,991 448,451 5.500%, 9/1/2034 486,803 651,873 5.500%, 6/1/2035 706,580 549,618 5.500%, 12/1/2035 596,083 128,663 5.500%, 4/1/2036 139,575 440,929 5.500%, 4/1/2036 478,056 350,952 5.500%, 9/1/2037 381,316 44,856 6.000%, 2/1/2022 46,522 867,576 6.000%, 2/1/2033 960,617 43,209 6.000%, 5/1/2036 47,579 161,769 6.000%, 7/1/2036 178,513 531,179 6.000%, 1/1/2037 583,849 50,294 6.000%, 9/1/2037 55,353 81,177 6.000%, 9/1/2037 89,377 179,237 6.000%, 6/1/2038 197,079 101,188 6.000%, 8/1/2038 111,161 41,452 6.000%, 10/1/2038 46,077 3,546 6.500%, 12/1/2027 3,818 3,501 6.500%, 6/1/2029 3,865 10,247 6.500%, 7/1/2029 11,296 4
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Federal National Mortgage Association continued $ 10,782 6.500%, 8/1/2029 $ 11,830 2,602 6.500%, 8/1/2029 2,861 70,298 6.500%, 4/1/2032 77,411 280,205 6.500%, 5/1/2032 310,507 45,510 6.500%, 12/1/2035 50,900 30,403 6.500%, 7/1/2037 34,229 542,814 6.500%, 8/1/2037 609,858 113,164 6.500%, 9/1/2037 127,471 1,582 7.000%, 7/1/2029 1,769 7,871 7.000%, 9/1/2029 8,367 532 7.000%, 10/1/2031 569 57,703 7.000%, 11/1/2031 65,369 51,389 7.000%, 12/1/2031 58,359 25,033 7.000%, 12/1/2031 28,133 5,118 7.000%, 12/1/2031 5,332 23,677 7.000%, 12/1/2031 26,828 8,147 7.000%, 1/1/2032 9,205 36,277 7.000%, 2/1/2032 41,256 21,279 7.500%, 7/1/2028 24,041 51,241 7.500%, 8/1/2031 58,485 81,720 8.000%, 12/1/2026 91,556 12,587 10.000%, 9/1/2021 13,499 306 10.000%, 11/1/2021 316 14 10.500%, 12/1/2019 14 29 10.500%, 1/1/2021 29 43 10.500%, 4/1/2022 44 TOTAL 149,984,091 Government National Mortgage Association 28.9% 6,136,569 3.000%, 5/20/2047 5,997,912 2,639,855 3.500%, 12/15/2040 2,644,502 5,411,710 3.500%, 9/15/2041 5,430,539 1,050,001 3.500%, 1/15/2042 1,054,638 2,305,212 3.500%, 2/15/2042 2,315,394 1,361,963 3.500%, 5/20/2042 1,371,330 626,431 3.500%, 8/15/2042 630,372 3,601,668 3.500%, 8/20/2042 3,626,439 1,125,826 3.500%, 9/15/2042 1,132,558 5
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 987,615 3.500%, 9/15/2042 $ 993,521 8,427,102 3.500%, 9/20/2047 8,440,292 4,111,055 4.000%, 3/15/2042 4,235,388 2,033,564 4.000%, 8/15/2042 2,095,066 1,275,650 4.000%, 12/15/2042 1,314,231 2,799,778 4.000%, 2/15/2043 2,884,454 1,450,989 4.000%, 2/15/2043 1,494,872 1,967,591 4.000%, 3/15/2043 2,027,098 1,253,003 4.000%, 3/15/2043 1,290,898 3,150,646 4.000%, 3/15/2043 3,245,933 1,087,393 4.000%, 3/15/2043 1,120,280 2,518,479 4.500%, 6/15/2040 2,646,851 3,654,037 4.500%, 8/15/2040 3,846,000 1,565,082 4.500%, 8/15/2040 1,650,982 2,642,525 4.500%, 11/15/2040 2,779,697 721,358 4.500%, 1/15/2042 758,470 314,198 4.500%, 2/15/2042 330,362 881,692 5.000%, 10/15/2033 939,885 1,509,918 5.000%, 6/20/2034 1,609,626 627,039 5.000%, 5/20/2039 669,555 359,432 5.000%, 7/20/2039 385,376 315,599 5.000%, 8/20/2039 336,271 2,755,448 5.000%, 2/15/2040 2,976,399 694,800 5.000%, 2/20/2040 740,309 1,222,200 5.000%, 9/15/2041 1,302,253 1,231,318 5.000%, 10/15/2041 1,311,968 463,216 5.500%, 7/20/2033 496,706 205,704 5.500%, 4/15/2034 222,391 699,066 5.500%, 6/15/2034 757,865 540,931 5.500%, 10/20/2034 581,664 1,938,342 5.500%, 7/20/2035 2,087,540 249,130 5.500%, 11/20/2038 269,838 59,592 6.000%, 8/15/2031 65,143 57,809 6.000%, 9/15/2031 63,065 15,540 6.000%, 9/15/2031 17,004 36,672 6.000%, 11/15/2031 40,215 53,599 6.000%, 1/15/2032 58,512 6
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 15,499 6.000%, 1/15/2032 $ 16,996 62,885 6.000%, 1/15/2032 68,919 82,008 6.000%, 1/15/2032 90,143 126,476 6.000%, 2/15/2032 138,821 61,477 6.000%, 3/15/2032 67,312 302,710 6.000%, 4/15/2032 333,206 67,503 6.000%, 5/15/2032 74,263 381,500 6.000%, 5/15/2036 422,682 63,511 6.000%, 6/15/2036 70,272 1,834,785 6.000%, 6/20/2036 2,025,617 1,233,853 6.000%, 7/20/2036 1,362,498 320,765 6.000%, 7/20/2038 355,615 7,017 6.500%, 5/15/2027 7,678 5,216 6.500%, 1/15/2029 5,790 14,548 6.500%, 1/15/2029 16,110 10,971 6.500%, 1/20/2029 12,065 5,859 6.500%, 2/15/2029 6,330 10,998 6.500%, 3/15/2029 12,186 10,872 6.500%, 3/15/2029 12,080 3,768 6.500%, 3/20/2029 4,151 5,765 6.500%, 5/20/2029 6,360 29,299 6.500%, 6/15/2029 32,347 12,378 6.500%, 7/20/2029 13,648 6,095 6.500%, 8/20/2029 6,737 3,280 6.500%, 10/20/2029 3,619 5,239 6.500%, 11/20/2029 5,797 3,186 6.500%, 10/20/2030 3,546 7,193 6.500%, 4/20/2031 8,020 3,578 6.500%, 5/20/2031 3,992 21,028 6.500%, 6/20/2031 23,457 8,644 6.500%, 7/15/2031 9,685 1,040 6.500%, 7/15/2031 1,168 5,768 6.500%, 7/20/2031 6,440 6,049 6.500%, 10/20/2031 6,758 5,178 6.500%, 11/20/2031 5,788 14,965 6.500%, 1/20/2032 16,721 229,825 6.500%, 10/20/2038 256,909 7
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 26,279 7.000%, 6/15/2026 $ 28,732 8,576 7.000%, 6/15/2026 9,412 10,885 7.000%, 12/15/2026 11,910 12,417 7.000%, 6/15/2027 13,677 2,192 7.000%, 10/15/2027 2,425 15,173 7.000%, 11/15/2027 16,762 7,090 7.000%, 2/15/2028 7,838 18,215 7.000%, 4/15/2028 20,249 4,610 7.000%, 6/15/2028 5,149 25,768 7.000%, 6/15/2028 28,796 34,792 7.000%, 7/15/2028 38,929 11,459 7.000%, 7/15/2028 12,738 54,220 7.000%, 8/15/2028 60,924 11,546 7.000%, 8/15/2028 12,862 4,516 7.000%, 9/15/2028 5,047 1,795 7.000%, 9/15/2028 1,971 10,026 7.000%, 10/15/2028 11,246 7,338 7.000%, 10/15/2028 8,190 19,555 7.000%, 10/15/2028 21,824 57,469 7.000%, 11/15/2028 63,973 59,202 7.000%, 11/15/2028 66,675 20,513 7.000%, 12/15/2028 22,879 15,824 7.000%, 12/15/2028 17,831 75,671 7.000%, 12/15/2028 84,066 25,490 7.000%, 12/15/2028 28,430 2,884 7.000%, 1/15/2029 3,240 4,460 7.000%, 1/15/2029 5,017 11,837 7.000%, 1/15/2029 13,309 3,943 7.000%, 1/15/2029 4,178 12,675 7.000%, 1/15/2029 14,283 15,513 7.000%, 1/15/2029 17,501 35,620 7.000%, 1/15/2029 40,162 5,916 7.000%, 1/15/2029 6,377 8,056 7.000%, 1/15/2029 9,008 7,259 7.000%, 1/15/2029 8,075 4,049 7.000%, 1/15/2029 4,398 12,187 7.000%, 1/15/2029 13,710 8
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 14,391 7.000%, 1/15/2029 $ 16,161 3,275 7.000%, 2/15/2029 3,691 7,030 7.000%, 2/15/2029 7,449 12,634 7.000%, 2/15/2029 14,007 7,696 7.000%, 2/15/2029 8,662 4,376 7.000%, 2/15/2029 4,905 11,869 7.000%, 2/15/2029 13,352 367 7.000%, 2/15/2029 409 160 7.000%, 2/15/2029 176 1,940 7.000%, 3/15/2029 2,191 1,758 7.000%, 3/15/2029 1,967 17,579 7.000%, 3/15/2029 19,529 3,744 7.000%, 3/15/2029 4,202 1,241 7.000%, 3/15/2029 1,400 1,203 7.000%, 3/15/2029 1,358 1,259 7.000%, 3/15/2029 1,419 95 7.000%, 3/15/2029 99 205 7.000%, 3/15/2029 213 2,888 7.000%, 3/15/2029 3,222 10,962 7.000%, 4/15/2029 12,387 11,793 7.000%, 4/15/2029 13,162 697 7.000%, 4/15/2029 707 58,523 7.000%, 4/15/2029 65,873 41,644 7.000%, 4/15/2029 46,652 2,908 7.000%, 4/15/2029 3,275 3,038 7.000%, 4/15/2029 3,408 44 7.000%, 4/15/2029 49 6,311 7.000%, 4/15/2029 7,095 9,213 7.000%, 4/15/2029 10,127 256 7.000%, 4/15/2029 289 3,607 7.000%, 5/15/2029 4,060 155 7.000%, 5/15/2029 159 1,059 7.000%, 5/15/2029 1,191 2,690 7.000%, 5/15/2029 3,037 3,247 7.000%, 5/15/2029 3,671 3,321 7.000%, 5/15/2029 3,738 8,783 7.000%, 6/15/2029 9,914 9
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 3,131 7.000%, 6/15/2029 $ 3,540 4,372 7.000%, 6/15/2029 4,910 340 7.000%, 6/15/2029 385 4,499 7.000%, 6/15/2029 4,826 807 7.000%, 6/15/2029 913 15,050 7.000%, 6/15/2029 16,959 1,980 7.000%, 6/15/2029 2,239 967 7.000%, 6/15/2029 1,093 7,335 7.000%, 7/15/2029 8,266 2,729 7.000%, 7/15/2029 3,030 12,923 7.000%, 7/15/2029 14,602 66,670 7.000%, 7/15/2029 74,999 11,600 7.000%, 7/15/2029 13,122 2,303 7.000%, 7/15/2029 2,498 3,695 7.000%, 7/15/2029 4,163 6,429 7.000%, 7/15/2029 7,272 5,595 7.000%, 7/15/2029 6,260 8,908 7.000%, 7/15/2029 9,980 1,120 7.000%, 8/15/2029 1,265 11,835 7.000%, 8/15/2029 13,259 2,215 7.000%, 8/15/2029 2,509 3,368 7.000%, 8/15/2029 3,791 1,695 7.000%, 8/15/2029 1,919 3,584 7.000%, 8/15/2029 4,052 4,327 7.000%, 9/15/2029 4,867 14,955 7.000%, 9/15/2029 16,890 7,080 7.000%, 9/15/2029 8,001 5,273 7.000%, 9/15/2029 5,965 8,101 7.000%, 9/15/2029 9,159 6,974 7.000%, 9/15/2029 7,898 2,546 7.000%, 10/15/2029 2,672 2,219 7.000%, 11/15/2029 2,515 21,285 7.000%, 12/15/2029 23,972 7,249 7.000%, 12/15/2029 7,616 5,721 7.000%, 12/15/2029 6,424 4,507 7.000%, 1/15/2030 5,090 22,143 7.000%, 1/15/2030 25,140 10
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 14,086 7.000%, 1/15/2030 $ 15,616 6,700 7.000%, 1/15/2030 7,520 3,923 7.000%, 1/15/2030 4,364 24,369 7.000%, 2/15/2030 27,283 13,507 7.000%, 2/15/2030 15,335 13,337 7.000%, 2/15/2030 15,029 311 7.000%, 2/15/2030 313 58,977 7.000%, 2/15/2030 66,991 58,439 7.000%, 3/15/2030 66,071 24,350 7.000%, 3/15/2030 27,470 8,542 7.000%, 4/15/2030 9,576 3,738 7.000%, 4/15/2030 4,249 18,452 7.000%, 6/15/2030 21,001 6,256 7.000%, 6/15/2030 7,077 49,799 7.000%, 8/15/2030 56,594 8,405 7.000%, 8/15/2030 9,487 13,739 7.000%, 9/15/2030 15,177 16,037 7.000%, 10/15/2030 18,225 7,859 7.000%, 10/15/2030 8,676 169 7.000%, 10/15/2030 172 30,983 7.000%, 10/15/2030 35,297 6,496 7.000%, 11/15/2030 7,397 121,991 7.000%, 2/15/2031 138,408 10,191 7.000%, 2/15/2031 11,577 42,225 7.000%, 3/15/2031 47,950 11,860 7.000%, 3/15/2031 13,347 1,145 7.000%, 7/15/2031 1,294 511 7.000%, 9/15/2031 573 23,718 7.000%, 10/15/2031 27,014 10,753 7.000%, 11/15/2031 12,267 16,678 7.000%, 1/15/2032 18,853 9,816 7.000%, 4/15/2032 11,106 16,020 7.000%, 5/15/2032 18,143 876 7.000%, 11/15/2032 966 634 7.000%, 1/15/2033 725 278,836 7.500%, 11/15/2027 313,895 221,596 7.500%, 11/15/2027 248,889 11
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 602 7.500%, 4/15/2029 $ 685 6,022 7.500%, 7/15/2029 6,709 1,845 7.500%, 7/15/2029 2,051 456 7.500%, 7/15/2029 519 36,459 7.500%, 8/15/2029 41,230 51,574 7.500%, 8/15/2029 58,826 9,604 7.500%, 8/15/2029 10,868 10,544 7.500%, 8/15/2029 12,060 40,659 7.500%, 8/15/2029 46,533 7,708 7.500%, 8/15/2029 8,086 1,351 7.500%, 8/15/2029 1,546 985 7.500%, 8/15/2029 1,119 27,705 7.500%, 8/20/2029 31,344 57,879 7.500%, 9/15/2029 66,055 5,940 7.500%, 9/15/2029 6,718 5,427 7.500%, 10/15/2029 6,204 13,082 7.500%, 10/15/2029 14,673 25,007 7.500%, 10/15/2029 27,180 42,744 7.500%, 10/15/2029 48,669 3,634 7.500%, 10/15/2029 4,161 8,778 7.500%, 12/15/2029 9,971 11,068 7.500%, 1/15/2030 12,602 19,073 7.500%, 3/20/2030 21,680 33,363 7.500%, 8/15/2030 37,964 79,724 7.500%, 10/15/2030 88,859 18,288 7.500%, 10/15/2030 20,803 97 7.500%, 10/15/2030 101 40,773 7.500%, 10/15/2030 46,306 11,585 7.500%, 11/20/2030 13,160 8,249 7.500%, 12/15/2030 9,467 8,215 7.500%, 1/15/2031 9,437 6,730 7.500%, 2/15/2031 7,724 27,376 7.500%, 4/20/2031 31,219 68,735 7.500%, 7/15/2031 78,391 15,816 7.500%, 9/15/2031 17,604 7,893 7.500%, 9/15/2031 9,033 1,839 7.500%, 9/15/2031 2,099 12
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 18,101 7.500%, 10/15/2031 $ 20,829 14,922 7.500%, 11/15/2031 17,094 16,639 7.500%, 12/15/2031 18,475 7,753 7.500%, 2/15/2032 8,906 12,599 7.500%, 3/15/2032 14,412 9,372 7.500%, 5/15/2032 10,753 3,293 8.000%, 11/15/2023 3,566 91,717 8.000%, 11/15/2027 103,176 60,291 8.000%, 11/15/2027 68,724 10,801 8.000%, 5/15/2029 12,571 103,781 8.000%, 8/15/2029 120,543 78,736 8.000%, 11/15/2029 91,877 33,310 8.000%, 12/15/2029 38,894 1,418 8.000%, 12/15/2029 1,506 3,059 8.000%, 1/15/2030 3,567 15,323 8.000%, 1/15/2030 17,915 7,060 8.000%, 1/15/2030 8,183 2,304 8.000%, 2/15/2030 2,385 4,595 8.000%, 2/15/2030 5,355 2,822 8.000%, 3/15/2030 3,042 6,559 8.000%, 4/15/2030 7,613 4,484 8.000%, 4/15/2030 5,186 13,580 8.000%, 4/15/2030 15,916 475 8.000%, 4/15/2030 515 7,470 8.000%, 4/15/2030 8,723 915 8.000%, 4/15/2030 1,072 6,779 8.000%, 5/15/2030 7,925 9,346 8.000%, 5/15/2030 10,848 2,271 8.000%, 5/15/2030 2,663 1,495 8.000%, 5/15/2030 1,740 674 8.000%, 5/15/2030 765 2,129 8.000%, 5/15/2030 2,446 12,333 8.000%, 6/15/2030 14,213 10,220 8.000%, 6/15/2030 11,879 72,816 8.000%, 6/15/2030 85,023 35,028 8.000%, 6/15/2030 41,103 8,909 8.000%, 6/15/2030 10,382 13
Principal Amount or Shares 1 MORTGAGE-BACKED SECURITIES continued Value Government National Mortgage Association continued $ 1,070 8.000%, 6/15/2030 $ 1,253 2,014 8.000%, 6/15/2030 2,291 5,429 8.000%, 6/15/2030 6,311 50,070 8.000%, 7/15/2030 58,682 2,818 8.000%, 7/15/2030 3,292 10,641 8.000%, 7/15/2030 12,494 6,132 8.000%, 7/15/2030 7,142 2,668 8.000%, 7/15/2030 2,913 27,390 8.000%, 8/15/2032 31,247 20,067 8.000%, 8/15/2032 23,880 24,836 8.500%, 6/15/2030 28,144 TOTAL 90,263,467 TOTAL MORTGAGE-BACKED SECURITIES (IDENTIFIED COST $317,633,206) 309,397,662 INVESTMENT COMPANY 0.6% 1,742,432 Federated Government Obligations Fund, Premier Shares, 1.80% 2 (IDENTIFIED COST $1,742,432) 1,742,432 TOTAL INVESTMENT IN SECURITIES 99.8% (IDENTIFIED COST $319,375,638) 3 311,140,094 OTHER ASSETS AND LIABILITIES - NET 0.2% 4 674,004 TOTAL NET ASSETS 100% $311,814,098 At July 31, 2018, the Fund had the following outstanding futures contracts: Description Number of Contracts Notional Value Expiration Date Value and Unrealized Appreciation 5 United States Treasury Notes 10-Year Short Futures 100 $11,942,188 September 2018 $12,266 Unrealized Appreciation on Futures Contracts is included in Other Assets and Liabilities Net. 14
Affiliated fund holdings are investment companies which are managed by the Adviser or an affiliate of the Adviser. Transactions with affiliated fund holdings during the period ended July 31, 2018, were as follows: Federated Government Obligations Fund, Premier Shares Balance of Shares Held 1/31/2018 5,610,874 Purchases/Additions 70,930,285 Sales/Reductions (74,798,727) Balance of Shares Held 7/31/2018 1,742,432 Value $ 1,742,432 Change in Unrealized Appreciation/Depreciation N/A Net Realized Gain/(Loss) N/A Dividend Income $ 30,538 1 Due to monthly principal payments, the average lives of the Federal Home Loan Mortgage Corporation, Federal National Mortgage Association and Government National Mortgage Association securities approximate one to ten years. 2 7-day net yield. 3 The cost of investments for federal tax purposes amounts to $319,713,810. 4 Assets, other than investments in securities, less liabilities. See Statement of Assets and Liabilities. 5 Non-income-producing security. Note: The categories of investments are shown as a percentage of total net assets at July 31, 2018. Various inputs are used in determining the value of the Fund s investments. These inputs are summarized in the three broad levels listed below: Level 1 quoted prices in active markets for identical securities. Level 2 other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost. Level 3 significant unobservable inputs (including the Fund s own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. 15
The following is a summary of the inputs used, as of July 31, 2018, in valuing the Fund s assets carried at fair value: Valuation Inputs Level 1 Quoted Prices Level 2 Other Significant Observable Inputs Level 3 Significant Unobservable Inputs Total Debt Securities: Mortgage-Backed Securities $ $309,397,662 $ $309,397,662 Investment Company 1,742,432 1,742,432 TOTAL SECURITIES $1,742,432 $309,397,662 $ $311,140,094 Other Financial Instruments 1 Assets $ 12,266 $ $ $ 12,266 Liabilities TOTAL OTHER FINANCIAL INSTRUMENTS $ 12,266 $ $ $ 12,266 1 Other financial instruments are futures contracts. See Notes which are an integral part of the Financial Statements 16
Financial Highlights Institutional Shares (For a Share Outstanding Throughout Each Period) Six Months Ended (unaudited) Year Ended January 31, 7/31/2018 2018 2017 2016 2015 2014 Net Asset Value, Beginning of Period $9.97 $10.13 $10.34 $10.44 $10.28 $10.54 Income From Investment Operations: Net investment income (loss) 0.12 1 0.21 1 0.17 1 0.17 1 0.25 1 0.24 1 Net realized and unrealized gain (loss) (0.13) (0.13) (0.17) (0.03) 0.19 (0.23) TOTAL FROM INVESTMENT OPERATIONS (0.01) 0.08 0.00 0.14 0.44 0.01 Less Distributions: Distributions from net investment income (0.13) (0.24) (0.21) (0.24) (0.28) (0.27) Net Asset Value, End of Period $9.83 $9.97 $10.13 $10.34 $10.44 $10.28 Total Return 2 (0.13)% 0.78% 0.02% 1.36% 4.31% 0.12% Ratios to Average Net Assets: Net expenses 0.63% 3 0.63% 0.62% 0.62% 0.62% 0.62% Net investment income 2.50% 3 2.07% 1.64% 1.67% 2.40% 2.28% Expense waiver/reimbursement 4 0.11% 3 0.08% 0.08% 0.07% 0.09% 0.08% Supplemental Data: Net assets, end of period (000 omitted) $286,053 $356,449 $417,820 $452,756 $495,495 $347,131 Portfolio turnover 22% 201% 264% 307% 153% 178% Portfolio turnover (excluding purchases and sales from dollar-roll transactions) 3% 29% 17% 18% 54% 68% 1 Per share numbers have been calculated using the average shares method. 2 Based on net asset value. Total returns for periods of less than one year are not annualized. 3 Computed on an annualized basis. 4 This expense decrease is reflected in both the net expense and the net investment income ratios shown above. See Notes which are an integral part of the Financial Statements 17
Financial Highlights Service Shares (For a Share Outstanding Throughout Each Period) Six Months Ended (unaudited) Year Ended January 31, 7/31/2018 2018 2017 2016 2015 2014 Net Asset Value, Beginning of Period $9.97 $10.13 $10.34 $10.44 $10.28 $10.54 Income From Investment Operations: Net investment income (loss) 0.11 1 0.19 1 0.15 1 0.15 1 0.23 1 0.22 1 Net realized and unrealized gain (loss) (0.13) (0.13) (0.17) (0.03) 0.19 (0.23) TOTAL FROM INVESTMENT OPERATIONS (0.02) 0.06 (0.02) 0.12 0.42 (0.01) Less Distributions: Distributions from net investment income (0.12) (0.22) (0.19) (0.22) (0.26) (0.25) Net Asset Value, End of Period $9.83 $9.97 $10.13 $10.34 $10.44 $10.28 Total Return 2 (0.22)% 0.58% (0.18)% 1.16% 4.11% (0.06)% Ratios to Average Net Assets: Net expenses 0.83% 3 0.83% 0.82% 0.82% 0.82% 0.82% Net investment income 2.31% 3 1.87% 1.44% 1.47% 2.22% 2.08% Expense waiver/reimbursement 4 0.09% 3 0.06% 0.04% 0.03% 0.02% 0.00% Supplemental Data: Net assets, end of period (000 omitted) $25,761 $28,203 $34,800 $58,206 $63,715 $27,209 Portfolio turnover 22% 201% 264% 307% 153% 178% Portfolio turnover (excluding purchases and sales from dollar-roll transactions) 3% 29% 17% 18% 54% 68% 1 Per share numbers have been calculated using the average shares method. 2 Based on net asset value. Total returns for periods of less than one year are not annualized. 3 Computed on an annualized basis. 4 This expense decrease is reflected in both the net expense and the net investment income ratios shown above. See Notes which are an integral part of the Financial Statements 18
Statement of Assets and Liabilities July 31, 2018 (unaudited) Assets: Investment in securities, at value including $1,742,432 of investment in an affiliated holding (identified cost $319,375,638) $311,140,094 Restricted cash (Note 2) 105,000 Income receivable 976,847 Income receivable from an affiliate holding 2,512 Receivable for shares sold 339,031 TOTAL ASSETS 312,563,484 Liabilities: Payable for shares redeemed $489,596 Income distribution payable 103,773 Payable for daily variation margin on futures contracts 4,651 Payable for investment adviser fee (Note 5) 4,571 Payable for administrative fees (Note 5) 683 Payable for transfer agent fee 39,794 Payable for portfolio accounting fees 62,045 Payable for other service fees (Notes 2 and 5) 39,870 Accrued expenses (Note 5) 4,403 TOTAL LIABILITIES 749,386 Net assets for 31,722,087 shares outstanding 311,814,098 Net Assets Consist of: Paid-in capital $333,994,372 Net unrealized depreciation (8,223,278) Accumulated net realized loss (13,874,945) Distributions in excess of net investment income (82,051) TOTAL NET ASSETS $311,814,098 Net Asset Value, Offering Price and Redemption Proceeds Per Share Institutional Shares: Net asset value per share ($286,052,839 29,101,466 shares outstanding), no par value, unlimited shares authorized $9.83 Service Shares: Net asset value per share ($25,761,259 2,620,621 shares outstanding), no par value, unlimited shares authorized $9.83 See Notes which are an integral part of the Financial Statements 19
Statement of Operations Six Months Ended July 31, 2018 (unaudited) Investment Income: Interest $ 5,255,984 Dividends received from an affiliated holding* 30,538 TOTAL INCOME 5,286,522 Expenses: Investment adviser fee (Note 5) $ 675,094 Administrative fee (Note 5) 135,241 Custodian fees 22,661 Transfer agent fee 141,609 Directors /Trustees fees (Note 5) 4,877 Auditing fees 14,678 Legal fees 4,401 Portfolio accounting fees 75,358 Other service fees (Notes 2 and 5) 146,325 Share registration costs 21,293 Printing and postage 17,784 Miscellaneous (Note 5) 14,488 TOTAL EXPENSES 1,273,809 Waiver and Reimbursements: Waiver/reimbursement of investment adviser fee (Note 5) $ (64,775) Reimbursement of other operating expenses (Notes 2 and 5) (119,629) TOTAL WAIVER AND REIMBURSEMENTS (184,404) Net expenses 1,089,405 Net investment income 4,197,117 Realized and Unrealized Gain (Loss) on Investments and Futures Contracts Net realized loss on investments (1,285,524) Net realized gain on futures contracts 553,026 Net change in unrealized depreciation of investments (4,022,810) Net change in unrealized appreciation of futures contracts (146,289) Net realized and unrealized loss on investments and futures contracts (4,901,597) Change in net assets resulting from operations $ (704,480) * See information listed after the Fund s Portfolio of Investments. See Notes which are an integral part of the Financial Statements 20
Statement of Changes in Net Assets Six Months Ended (unaudited) 7/31/2018 Year Ended 1/31/2018 Increase (Decrease) in Net Assets Operations: Net investment income $ 4,197,117 $ 8,787,879 Net realized gain (loss) (732,498) 459,903 Net change in unrealized appreciation/depreciation (4,169,099) (5,151,080) CHANGE IN NET ASSETS RESULTING FROM OPERATIONS (704,480) 4,096,702 Distributions to Shareholders: Distributions from net investment income Institutional Shares (4,050,062) (9,405,507) Service Shares (320,790) (690,752) CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS (4,370,852) (10,096,259) Share Transactions: Proceeds from sale of shares 13,575,738 66,790,736 Net asset value of shares issued to shareholders in payment of distributions declared 3,680,107 8,530,752 Cost of shares redeemed (85,018,065) (137,289,892) CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (67,762,220) (61,968,404) Change in net assets (72,837,552) (67,967,961) Net Assets: Beginning of period 384,651,650 452,619,611 End of period (including undistributed (distributions in excess of) net investment income of $(82,051) and $91,684, respectively) $311,814,098 $ 384,651,650 See Notes which are an integral part of the Financial Statements 21
Notes to Financial Statements July 31, 2018 (unaudited) 1. ORGANIZATION Federated Government Income Trust (the Fund ) is registered under the Investment Company Act of 1940, as amended (the Act ), as a diversified, open-end management investment company. The Fund offers two classes of shares: Institutional Shares and Service Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is current income. 2. 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 U.S. generally accepted accounting principles (GAAP). Investment Valuation In calculating its net asset value (NAV), the Fund generally values investments as follows: Fixed-income securities are fair valued using price evaluations provided by a pricing service approved by the Fund s Board of Trustees (the Trustees ). Shares of other mutual funds or non-exchange-traded investment companies are valued based upon their reported NAVs. Derivative contracts listed on exchanges are valued at their reported settlement or closing price, except that options are valued at the mean of closing bid and asked quotations. Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees. For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered, such as: the last traded or purchase price of the security, information obtained by contacting the issuer or dealers, analysis of the issuer s financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the movement of the market in which the security is normally traded, public trading in similar securities or derivative contracts of the issuer or comparable issuers, movement of a relevant index, or other factors including but not limited to industry changes and relevant government actions. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, if the Fund cannot obtain price evaluations from a pricing service or from more than one dealer for an investment within a reasonable period of time as set forth in the Fund s valuation policies and procedures, or if information furnished by a pricing service, in the opinion of the valuation committee ( Valuation Committee ), is deemed not representative of the fair value of such security, the Fund uses the fair value of the investment determined in accordance with the procedures described below. There can be no assurance that the Fund could obtain the fair value assigned to an investment if it sold the investment at approximately the time at which the Fund determines its NAV per share. Fair Valuation Procedures The Trustees have ultimate responsibility for determining the fair value of investments for which market quotations are not readily available. The Trustees have appointed a Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (the Adviser ) and certain of the Adviser s affiliated companies to assist in determining fair 22
value and in overseeing the calculation of the NAV. The Trustees have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for purposes of calculating the NAV. The Valuation Committee employs various methods for reviewing third-party pricing-service evaluations including periodic reviews of third-party pricing services policies, procedures and valuation methods (including key inputs, methods, models and assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review and approve the fair valuations made by the Valuation Committee and any changes made to the procedures. Factors considered by pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions, indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a bid evaluation). Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a mid evaluation). The Fund normally uses bid evaluations for any U.S. Treasury and Agency securities, mortgage-backed securities and municipal securities. The Fund normally uses mid evaluations for any other types of fixed-income securities and any OTC derivative contracts. In the event that market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees. Repurchase Agreements The Fund may invest in repurchase agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund s custodian or sub-custodian eligible securities or cash with a market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or subcustodian in which the Fund holds a securities entitlement and exercises control as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value of the transferred securities and requiring the transfer of additional eligible securities if necessary to equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in exchange for other eligible securities of equivalent market value. The insolvency of the other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party. 23
The Fund may enter into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund s Adviser and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of proceeds from any repurchase or other disposition of such securities. Investment Income, Gains and Losses, Expenses and Distributions Investment transactions are accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Foreign dividends are recorded on the ex-dividend date or when the Fund is informed of the ex-dividend date. Distributions of net investment income, if any, are declared daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value. Amortization/accretion of premium and discount is included in investment income. Gains and losses realized on principal payment of mortgage-backed securities (paydown gains and losses) are classified as part of investment income. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that select classes will bear certain expenses unique to those classes. The detail of the total fund expense waiver and reimbursements of $184,404 is disclosed in various locations in this Note 2 and Note 5. 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. Other Service Fees The Fund may pay other service fees up to 0.25% of the average daily net assets of the Fund s Institutional Shares and Service Shares to unaffiliated financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for other service fees. For the six months ended July 31, 2018, other service fees for the Fund were as follows: Other Service Fees Incurred Other Service Fees Reimbursed Institutional Shares $113,143 $(113,143) Service Shares 33,182 (6,486) TOTAL $146,325 $(119,629) Federal Taxes It is the Fund s policy to comply with the Subchapter M provision of the Internal Revenue Code (the Code ) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary. As of and during the six months ended July 31, 2018, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. As of July 31, 2018, tax years 2015 through 2018 remain subject to examination by the Fund s major tax jurisdictions, which include the United States of America and the Commonwealth of Massachusetts. 24
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. The Fund may transact in To Be Announced Securities (TBAs). As with other delayeddelivery transactions, a seller agrees to issue TBAs at a future date. However, the seller does not specify the particular securities to be delivered. Instead, the Fund agrees to accept any security that meets specified terms such as issuer, interest rate and terms of underlying mortgages. The Fund records TBAs on the trade date utilizing information associated with the specified terms of the transaction as opposed to the specific mortgages. TBAs are marked to market daily and begin earning interest on the settlement date. Losses may occur due to the fact that the actual underlying mortgages received may be less favorable than those anticipated by the Fund. Futures Contracts The Fund purchases and sells financial futures contracts to manage duration risk and yield curve risk. Upon entering into a financial futures contract with a broker, the Fund is required to deposit in a segregated account a specified amount of cash or U.S. government securities, which is shown as Restricted cash in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized gains or losses are recorded in a variation margin account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of the underlying securities. There is minimal counterparty risk to the Fund since futures contracts are exchange traded and the exchange s clearinghouse, as counterparty to all exchange traded futures contracts, guarantees the futures contracts against default. Futures contracts outstanding at period end are listed after the Fund s Portfolio of Investments. The average notional value of short futures contracts held by the Fund throughout the period was $11,269,542. This is based on amounts held as of each month-end throughout the fiscal six-month period. Dollar-Roll Transactions The Fund engages in dollar-roll transactions in which the Fund sells mortgage-backed securities with a commitment to buy similar (same type, coupon and maturity), but not identical mortgage-backed securities on a future date. Both securities involved are TBA mortgage-backed securities. The Fund treats dollar-roll transactions as purchases and sales. Dollar-rolls are subject to interest rate risks and credit risks. Option Contracts The Fund buys or sells put and call options to manage duration risk and yield curve risk. The seller ( writer ) of an option receives a payment or premium, from the buyer, which the writer keeps regardless of whether the buyer exercises the option. When the Fund writes a put or call option, an amount equal to the premium received is recorded as a liability and subsequently marked to market to reflect the current value of the option written. Premiums received from 25
writing options which expire are treated as realized gains. The Fund, as a writer of an option, bears the market risk of an unfavorable change in the price of the underlying reference instrument. When the Fund purchases a put or call option, an amount equal to the premium paid is recorded as an increase to the cost of the investment and subsequently marked to market to reflect the current value of the option purchased. Premiums paid for purchasing options which expire are treated as realized losses. Premiums received/paid for writing/ purchasing options which are exercised or closed are added to the proceeds or offset against amounts paid on the underlying reference instrument to determine the realized gain or loss. The risk associated with purchasing put and call options is limited to the premium paid. Options can trade on securities or commodities exchanges. In this case, the exchange sets all the terms of the contract except for the price. Most exchanges require investors to maintain margin accounts through their brokers to cover their potential obligations to the exchange. This protects investors against potential defaults by the counterparty. At July 31, 2018, the Fund had no outstanding written option contracts. Additional Disclosure Related to Derivative Instruments Derivatives not accounted for as hedging instruments under ASC Topic 815 Interest rate contracts Statement of Assets and Liabilities Location Liability Fair Value Payable for daily variation margin on futures contracts $(12,266)* * Includes cumulative appreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day s variation margin is reported within the Statement of Assets and Liabilities. The Effect of Derivative Instruments on the Statement of Operations for the Six Months Ended July 31, 2018 Amount of Realized Gain or (Loss) on Derivatives Recognized in Income Futures Contracts Interest rate contracts $553,026 Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income Futures Contracts Interest rate contracts $(146,289) Other The preparation of financial statements in conformity with GAAP 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. The Fund applies investment company accounting and reporting guidance. 26
3. SHARES OF BENEFICIAL INTEREST The following tables summarize share activity: Six Months Ended 7/31/2018 Year Ended 1/31/2018 Institutional Shares: Shares Amount Shares Amount Shares sold 1,266,560 $ 12,497,159 6,222,087 $ 63,130,288 Shares issued to shareholders in payment of distributions declared 344,858 3,404,987 785,811 7,965,183 Shares redeemed (8,264,963) (81,610,724) (12,517,021) (126,898,473) NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS (6,653,545) $(65,708,578) (5,509,123) $ (55,803,002) Six Months Ended 7/31/2018 Year Ended 1/31/2018 Service Shares: Shares Amount Shares Amount Shares sold 109,266 $ 1,078,579 360,901 $ 3,660,448 Shares issued to shareholders in payment of distributions declared 27,870 275,120 55,792 565,569 Shares redeemed (345,306) (3,407,341) (1,024,516) (10,391,419) NET CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS (208,170) $ (2,053,642) (607,823) $ (6,165,402) NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS (6,861,715) $(67,762,220) (6,116,946) $(61,968,404) 4. FEDERAL TAX INFORMATION At July 31, 2018, the cost of investments for federal tax purposes was $319,713,810. The net unrealized depreciation of investments for federal tax purposes was $8,561,450. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $3,554,046 and net unrealized depreciation from investments for those securities having an excess of cost over value of $12,115,496. The amounts presented are inclusive of derivative contracts. At January 31, 2018, the Fund had a capital loss carryforward of $12,644,803 which will reduce the Fund s taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years ( Carryforward Limit ), whereas a net capital loss incurred in taxable years beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit. 27
The following schedule summarizes the Fund s capital loss carryforwards and expiration years: Expiration Year Short-Term Long-Term Total No Expiration $9,815,429 $1,831,079 $11,646,508 2019 $ 998,295 NA $ 998,295 5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES Investment Adviser Fee The advisory agreement between the Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund s average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any portion of its fee. For the six months ended July 31, 2018, the Adviser voluntarily waived $63,718 of its fee. The Adviser has agreed to reimburse the Fund for certain investment adviser fees as a result of transactions in other affiliated investment companies. For the six months ended July 31, 2018, the Adviser reimbursed $1,057. Administrative Fee Federated Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. For purposes of determining the appropriate rate breakpoint, Investment Complex is defined as all of the Federated Funds subject to a fee under the Administrative Services Agreement. The fee paid to FAS is based on the average daily net assets of the Investment Complex as specified below: Average Daily Net Assets Administrative Fee of the Investment Complex 0.100% on assets up to $50 billion 0.075% on assets over $50 billion Subject to the terms described in the Expense Limitation note, FAS may voluntarily choose to waive any portion of its fee. For the six months ended July 31, 2018, the annualized fee paid to FAS was 0.080% of average daily net assets of the Fund. Prior to September 1, 2017, the breakpoints of the Administrative Fee paid to FAS, described above, were: Average Daily Net Assets Administrative Fee of the Investment Complex 0.150% on the first $5 billion 0.125% on the next $5 billion 0.100% on the next $10 billion 0.075% on assets in excess of $20 billion In addition, FAS may charge certain out-of-pocket expenses to the Fund. 28