--------------------------------------------------------------------------------
FEDERATED
--------------------------------------------------------------------------------
SHORT-TERM
--------------------------------------------------------------------------------
U.S.
--------------------------------------------------------------------------------
GOVERNMENT
--------------------------------------------------------------------------------
TRUST
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1995
---------------------------------------------------
FEDERATED SECURITIES CORP.
---------------------------------------------
(LOGO)
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
---------------------------------------------------
PITTSBURGH, PA 15222-3779
CUSIP 313905101
PRESIDENT'S MESSAGE
--------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Federated
Short-Term U.S. Government Trust, which covers the six-month period ended June
30, 1995. The Report begins with an investment review by the Trust's portfolio
manager and is followed by the Portfolio of Investments and Financial
Statements.
Federated Short-Term U.S. Government Trust continues to pursue daily income
while bringing you the additional advantages of daily liquidity and stability of
principal*--all through a portfolio of U.S. government money market securities.
On the last day of the reporting period, 42.9% of Trust net assets were invested
in direct government and government agency obligations, while 57.7% of Trust net
assets were invested in repurchase agreements fully collateralized by these
obligations.
Dividends paid to shareholders during the period totaled $24.6 million, or $0.03
per share. On June 30, 1995, net assets stood at $790 million.
We will continue to keep you up to date on your investment, and welcome your
comments and suggestions.
Sincerely,
Glen R. Johnson
President
August 15, 1995
* Although money market mutual funds seek to maintain a stable net asset value
of $1.00 per share, there is no assurance that they will be able to do so. An
investment in the Trust is neither insured nor guaranteed by the U.S.
government.
INVESTMENT REVIEW
--------------------------------------------------------------------------------
Federated Short-Term U.S. Government Trust is invested in direct U.S. Treasury
and U.S. government agency obligations and in repurchase agreements which have
these securities as collateral. Although the Trust has maintained a Treasury
position due to narrow agency yield spreads over Treasuries, the Trust continues
to invest primarily in issues of the Federal National Mortgage Association,
Student Loan Marketing Association, Farm Credit System, Federal Home Loan Banks,
and Federal Home Loan Mortgage Corporation. Recently, the Trust has been managed
with an average maturity of 35 to 45 days.
Over the semi-annual reporting period, the Federal Reserve Board (the "Fed")
raised the Fed Funds target rate once from 4.4% to 6%, which was the seventh
increase in monetary policy since the Fed began the tightening cycle in February
1994. With signs that the Fed policy moves were taking their hold on the
economy, market sentiment shifted over the reporting period to an expectation
that the next move from the Fed would be an easing rather than a tightening in
policy. The market proved to be right, as shortly after the end of the reporting
period the Fed modestly cut the Fed Funds target rate from 6% to 5.75%, citing
receding inflationary pressures.
Movement in short-term rates over the period were typical of a transition period
in monetary policy. The yield on the three-month Treasury bill rose to near 6.1%
at the beginning of February when the Fed tightened. The yield then declined to
close the period at 5.6%, amid signs of a surprising slowing in economic growth
over the second quarter. The front end of the yield curve flattened
significantly, in anticipation of a change in direction of monetary policy. The
one-year Treasury bill, which yielded 150 basis points above the three-month
Treasury bill at the beginning of the year, traded virtually flat to the
three-month Treasury bill by the end of June.
As a yield advantage continued to exist for investments in repurchase agreements
versus direct investments in short-term Treasury and agency securities, a
substantial percentage of the Trust's investments remained in repurchase
agreements. The Trust continued to combine attractive yields from repurchase
agreements collateralized by U.S. government mortgage-backed securities with
short-term agency floating rate notes and Treasury and agency securities with
longer maturities of 6 to 13 months. This portfolio structure has continued to
provide a competitive yield. The Trust's floating rate holdings are tied to
market-responsive indices such as three-month Treasury bill, three-month London
Interbank Offered Rate, or Fed Funds, and have short reset periods.
Over the reporting period, the average maturity of the Trust was extended from
the lower end of a 30 to 40 day target range to the current 35 to 45 day
range--sitting at the upper end of that range at the end of June--in order to
seek to lock in higher yields in anticipation of lower interest rates in the
future. While it does not appear that the economy is on the brink of recession,
the fairly benign inflationary environment should allow the Fed to reduce the
Fed Funds target modestly further, perhaps sometime later this summer. As a
result, the Trust will likely continue to seek to lock in higher yields, using
ongoing relative value analysis to maximize performance potential. However,
changing economic and market developments are continuously monitored to best
serve our clients attracted to the short-term U.S. government market.
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
PORTFOLIO OF INVESTMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM OBLIGATIONS--42.9%
----------------------------------------------------------------------------------
$ 7,000,000 (a) FEDERAL FARM CREDIT BANK, DISCOUNT NOTE--0.8%
--------------------------------------------------------------
6.58%, 2/23/1996 $ 6,715,666
--------------------------------------------------------------
27,600,000 FEDERAL HOME LOAN BANK NOTES--3.5%
--------------------------------------------------------------
6.015%-6.85%, 2/28/1996-6/13/1996 27,624,595
--------------------------------------------------------------
56,185,000 (a) FEDERAL HOME LOAN BANK, DISCOUNT NOTES--7.0%
--------------------------------------------------------------
6.12%-7.01%, 8/14/1995-1/19/1996 55,028,357
--------------------------------------------------------------
16,000,000 (b) FEDERAL HOME LOAN BANK, FLOATING RATE NOTE--2.0%
--------------------------------------------------------------
5.98%, 7/3/1995 15,995,300
--------------------------------------------------------------
8,835,000 (a) FEDERAL HOME LOAN MORTGAGE CORP., DISCOUNT NOTES--1.1%
--------------------------------------------------------------
6.80%-7.01%, 11/1/1995-2/8/1996 8,566,266
--------------------------------------------------------------
20,500,000 (b) FEDERAL HOME LOAN MORTGAGE CORP., FLOATING RATE NOTE--2.6%
--------------------------------------------------------------
5.91%, 7/3/1995 20,497,753
--------------------------------------------------------------
68,500,000 (a) FEDERAL NATIONAL MORTGAGE ASSOCIATION, DISCOUNT NOTES--8.5%
--------------------------------------------------------------
5.80%-6.96%, 7/17/1995-4/15/1996 67,120,536
--------------------------------------------------------------
39,500,000 (b) FEDERAL NATIONAL MORTGAGE ASSOCIATION, FLOATING RATE
NOTES--5.0%
--------------------------------------------------------------
5.61%-6.02%, 7/3/1995-7/5/1995 39,495,372
--------------------------------------------------------------
46,290,000 (b) HOUSING & URBAN DEVELOPMENT, FLOATING RATE NOTES--5.9%
--------------------------------------------------------------
6.262%, 7/3/1995 46,290,000
--------------------------------------------------------------
11,758,787 (b) EXPORT/IMPORT BANK, FLOATING RATE NOTE--1.5%
--------------------------------------------------------------
6.49%, 7/5/1995 11,751,654
--------------------------------------------------------------
</TABLE>
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ -------------------------------------------------------------- ------------
<C> <C> <S> <C>
SHORT-TERM OBLIGATIONS--CONTINUED
----------------------------------------------------------------------------------
$ 4,000,000 (a) STUDENT LOAN MARKETING ASSOCIATION, DISCOUNT NOTE--0.5%
--------------------------------------------------------------
6.75%, 2/21/1996 $ 4,004,470
--------------------------------------------------------------
10,000,000 (b) STUDENT LOAN MARKETING ASSOCIATION, FLOATING RATE NOTE--1.2%
--------------------------------------------------------------
5.66%, 7/5/1995 10,000,000
--------------------------------------------------------------
26,700,000 (a) UNITED STATES TREASURY BILLS--3.3%
--------------------------------------------------------------
5.27%-6.505%, 8/24/1995-6/27/1996 25,865,745
-------------------------------------------------------------- ------------
TOTAL SHORT-TERM OBLIGATIONS 338,955,714
-------------------------------------------------------------- ------------
(C) REPURCHASE AGREEMENTS--57.7%
----------------------------------------------------------------------------------
30,000,000 BT Securities Corporation, 6.15%, dated 6/30/1995, due
7/3/1995 30,000,000
--------------------------------------------------------------
4,800,000 Barclays de Zoete Wedd Securities, Inc., 6.18%, dated
6/30/1995, due 7/3/1995 4,800,000
--------------------------------------------------------------
25,000,000 Deutsche Bank Government Securities, Inc., 6.20%, dated
6/30/1995, due 7/3/1995 25,000,000
--------------------------------------------------------------
35,000,000 Goldman, Sachs and Co., 6.25%, dated 6/30/1995, due 7/3/1995 35,000,000
--------------------------------------------------------------
35,000,000 Greenwich Capital Markets, Inc., 6.25%, dated 6/30/1995, due
7/3/1995 35,000,000
--------------------------------------------------------------
35,000,000 Harris Government Securities, Inc., 6.20%, dated 6/30/1995,
due 7/3/1995 35,000,000
--------------------------------------------------------------
30,000,000 J.P. Morgan & Co., Inc., 6.25%, dated 6/30/1995, due 7/3/1995 30,000,000
--------------------------------------------------------------
35,000,000 Morgan Stanley and Co., Inc., 6.20%, dated 6/30/1995, due
7/3/1995 35,000,000
--------------------------------------------------------------
45,000,000 Nomura Securities International, Inc., 6.20%, dated 6/30/1995,
due 7/3/1995 45,000,000
--------------------------------------------------------------
100,000,000 PaineWebber Group, Inc., 6.20%, dated 6/30/1995, due 7/3/1995 100,000,000
--------------------------------------------------------------
</TABLE>
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
------------ -------------------------------------------------------------- ------------
<C> <C> <S> <C>
(C) REPURCHASE AGREEMENTS--CONTINUED
----------------------------------------------------------------------------------
$ 35,000,000 Smith Barney, Inc., 6.30%, dated 6/30/1995, due 7/3/1995 $ 35,000,000
--------------------------------------------------------------
30,000,000 Swiss Bank Capital Markets, 6.17%, dated 6/30/1995, due
7/3/1995 30,000,000
--------------------------------------------------------------
16,000,000 (d) Merrill Lynch Government Securities, Inc., 6.06%, dated
4/25/1995, due 7/27/1995 16,000,000
-------------------------------------------------------------- ------------
TOTAL REPURCHASE AGREEMENTS 455,800,000
-------------------------------------------------------------- ------------
TOTAL INVESTMENTS, AT AMORTIZED COST (E) $794,755,714
-------------------------------------------------------------- ------------
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase.
(b) Current rate and next demand date shown.
(c) 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.
(d) 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 if the creditworthiness of the issuer is
downgraded.
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($790,022,845) at June 30, 1995.
(See Notes which are an integral part of the Financial Statements.)
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
---------------------------------------------------------------------------------
Investments in repurchase agreements $ 455,800,000
-----------------------------------------------------------------
Investments in securities 338,955,714
----------------------------------------------------------------- -------------
Total investments in securities, at amortized cost $ 794,755,714
---------------------------------------------------------------------------------
Income receivable 1,711,124
---------------------------------------------------------------------------------
Receivable for shares sold 135,259
--------------------------------------------------------------------------------- -------------
Total assets 796,602,097
---------------------------------------------------------------------------------
LIABILITIES:
---------------------------------------------------------------------------------
Payable for investments purchased 3,000,000
-----------------------------------------------------------------
Payable for shares redeemed 107,098
-----------------------------------------------------------------
Income distribution payable 2,974,051
-----------------------------------------------------------------
Accrued expenses 76,889
-----------------------------------------------------------------
Payable to Bank 421,214
----------------------------------------------------------------- -------------
Total liabilities 6,579,252
--------------------------------------------------------------------------------- -------------
NET ASSETS for 790,022,845 shares outstanding $ 790,022,845
--------------------------------------------------------------------------------- -------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
($790,022,845 / 790,022,845 shares outstanding) $1.00
--------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
---------------------------------------------------------------------------------
Interest $26,563,073
---------------------------------------------------------------------------------
EXPENSES:
--------------------------------------------------------------------
Investment advisory fee $1,738,682
--------------------------------------------------------------------
Administrative personnel and services fee 329,045
--------------------------------------------------------------------
Custodian fees 97,321
--------------------------------------------------------------------
Transfer agent and dividend disbursing agent fees and expenses 29,387
--------------------------------------------------------------------
Directors'/Trustees' fees 5,421
--------------------------------------------------------------------
Auditing fees 8,860
--------------------------------------------------------------------
Legal fees 5,326
--------------------------------------------------------------------
Portfolio accounting fees 47,814
--------------------------------------------------------------------
Shareholder services fee 217,335
--------------------------------------------------------------------
Share registration costs 9,731
--------------------------------------------------------------------
Printing and postage 4,887
--------------------------------------------------------------------
Insurance premiums 9,231
--------------------------------------------------------------------
Taxes 2,534
--------------------------------------------------------------------
Miscellaneous 11,240
-------------------------------------------------------------------- ----------
Total expenses 2,516,814
--------------------------------------------------------------------
Deduct--Waiver of investment advisory fee 539,647
-------------------------------------------------------------------- ----------
Net expenses 1,977,167
--------------------------------------------------------------------------------- -----------
Net investment income $24,585,906
--------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
----------------------------------------------------
OPERATIONS--
----------------------------------------------------
Net investment income $ 24,585,906 $ 39,173,285
---------------------------------------------------- -------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS--
----------------------------------------------------
Distributions from net investment income (24,585,906) (39,173,285)
---------------------------------------------------- -------------- -----------------
SHARE TRANSACTIONS--
----------------------------------------------------
Proceeds from sale of Shares 1,178,154,012 3,137,334,559
----------------------------------------------------
Net asset value of Shares issued to shareholders in
payment of distributions declared 4,252,228 6,460,619
----------------------------------------------------
Cost of Shares redeemed (1,369,489,359) (3,251,369,237)
---------------------------------------------------- -------------- -----------------
Change in net assets resulting from Share
transactions (187,083,119) (107,574,059)
---------------------------------------------------- -------------- -----------------
Change in net assets (187,083,119) (107,574,059)
----------------------------------------------------
NET ASSETS:
----------------------------------------------------
Beginning of period 977,105,964 1,084,680,023
---------------------------------------------------- -------------- -----------------
End of period $ 790,022,845 $ 977,105,964
---------------------------------------------------- -------------- -----------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE YEAR ENDED DECEMBER 31,
30, 1995 -------------------------------------------------------------------------------------------------
(UNAUDITED) 1994 1993 1992 1991 1990 1989 1988 1987(A)
----------- ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET
VALUE,
BEGINNING OF
PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------
INCOME FROM
INVESTMENT
OPERATIONS
------------
Net
investment
income 0.03 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.05
------------ ------ ------ ------ ------ ------ ------ ------ ------ ------
LESS
DISTRIBUTIONS
------------
Distributions
from net
investment
income (0.03) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.05)
------------ ------ ------ ------ ------ ------ ------ ------ ------ ------
NET ASSET
VALUE, END
OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------ ------ ------ ------ ------ ------ ------ ------ ------
TOTAL RETURN
(B) 2.85% 3.99% 2.95% 3.64% 5.93% 8.11% 9.17% 7.47% 4.95%
------------
RATIOS TO
AVERAGE
NET ASSETS
------------
Expenses 0.45%(c) 0.45% 0.46% 0.46% 0.46% 0.46% 0.47% 0.48% 0.42%(c)
------------
Net
investment
income 5.66%(c) 3.89% 2.92% 3.58% 5.80% 7.82% 8.80% 7.39% 6.76%(c)
------------
Expense
waiver/
reimbursement
(d) 0.12%(c) 0.11% 0.05% 0.03% 0.03% 0.04% 0.04% 0.08% 0.20%(c)
------------
SUPPLEMENTAL
DATA
------------
Net assets,
end of
period (000
omitted) $790,023 $977,106 $1,084,680 $1,012,509 $959,881 $1,091,158 $923,088 $564,343 $206,644
------------
</TABLE>
(a) Reflects operations for the period from April 16, 1987 (date of initial
public investment) to December 31, 1987. For the period from the start of
business, April 6, 1987 to April 15, 1987, net investment income was
distributed to the Trust's adviser.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1995 (UNAUDITED)
--------------------------------------------------------------------------------
(1) ORGANIZATION
Federated Short-Term U.S. Government Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end, no-load management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--The Trust's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.
REPURCHASE AGREEMENTS--It is the policy of the Trust 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 Trust 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 Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust'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 Trust
could receive less than the repurchase price on the sale of collateral
securities.
FEDERAL TAXES--It is the Trust's policy to comply with the provisions of
the Internal Revenue Code, as amended (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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Code. Distributions to shareholders are recorded on the
ex-dividend date.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
--------------------------------------------------------------------------------
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.
OTHER--Investment transactions are accounted for on the trade date.
(3) 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 June
30, 1995, capital paid-in aggregated $790,022,845. Transactions in Trust shares
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1995 DECEMBER 31, 1994
--------------------------------------------------------- -------------- -----------------
<S> <C> <C>
Shares Sold 1,178,154,012 3,137,334,559
---------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 4,252,228 6,460,619
---------------------------------------------------------
Shares redeemed (1,369,489,359) (3,251,369,237)
--------------------------------------------------------- -------------- ----------------
Net change resulting from Share transactions (187,083,119) (107,574,059)
--------------------------------------------------------- -------------- ----------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Research, the Trust's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
equal to .40 of 1% of the Trust's average daily net assets. The Adviser may
voluntarily choose to waive a portion of its fee. The Adviser can modify or
terminate this voluntary waiver at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The FAS fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of Federated Investors for
the period. The administrative fee received during the period of the
Administrative Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to .25 of
1% of average daily net assets of the Trust for the period. This fee is to
obtain certain services for shareholders and to maintain shareholder accounts.
TRANSFER AGENT FEES--Federated Services Company ("FServ") serves as transfer and
dividend disbursing agent for the Trust. This fee is based on the size, type,
and number of accounts and transactions made by shareholders.
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
--------------------------------------------------------------------------------
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Trust's accounting records
for which it receives a fee. The fee is based on the level of the Trust'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.
<TABLE>
<S> <C>
TRUSTEES OFFICERS
---------------------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland President
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Glen R. Johnson Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
John E. Murray, Jr. Richard B. Fisher
Wesley W. Posvar Vice President
Marjorie P. Smuts David M. Taylor
Treasurer
Robert C. Rosselot
Assistant Secretary
</TABLE>
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 risk, including possible
loss of principal. Although money market funds seek to maintain a stable net
asset value of $1.00 per share, there is no assurance that they will be able to
do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Trust's prospectus which contains facts
concerning its investment objective and policies, management fees, expenses and
other information.
