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 from
January 1, 1996 through June 30, 1996. The report begins with a commentary
by the Trust's portfolio manager and is followed by the Portfolio of
Investments and the 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. Dividends paid to shareholders during the six-month
period totaled $0.03 per share. On June 30, 1996, net assets stood at $581.9
million.
We will continue to keep you up to date on your investment, and welcome your
comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
August 15, 1996
* Although money market funds seek to maintain a share value of $1.00, there
is no guarantee that they will 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 in issues of the Federal National Mortgage
Association, Student Loan Marketing Association, Federal Farm Credit Bank
System, Federal Home Loan Bank System, and Federal Home Loan Mortgage Corp.
Recently, the Trust has been managed with an average maturity of 35-45 days.
Over the semi-annual reporting period ended June 30, 1996, the Federal
Reserve Board ("the Fed") eased monetary policy once. Faced with slowing
economic growth and benign inflationary pressures, the Fed lowered the Fed
Funds target rate from 5.50% to the current 5.25% at the end of January,
1996. The short end of the government yield curve anticipated the policy
move from the Fed, and amid indications of sluggish consumer and
manufacturing sectors of the economy, looked forward to additional eases in
the near-term.
The remainder of the reporting period brought a shift in market psychology
regarding the extent and direction of changes in monetary policy by the Fed.
Strength in consumer spending and housing, combined with signs of a rebound
in manufacturing, began to paint a picture of an economy that was not on the
verge of recession. In fact, indicators pointed to an economy growing at a
pace above the 2 1/2% rate thought by many to be the non-inflationary
potential rate of growth. Now confronted with a much sturdier economy than
previously thought, the front end of the market retreated from its
expectations for additional easing from the Fed in the near future, and
moved to pricing in anticipation of a tightening in monetary policy by the
Fed later in 1996. Yields on short-term government securities reflected this
rather volatile mood in the markets; the yield on the three-month Treasury
bill began the reporting period at the beginning of 1996 at 5.1%, declined
to 4.9% by mid-February 1996, and rose as high as 5.3% in late June, 1996.
The Trust remained targeted in a 40- to 50-day average maturity target range
throughout most of the reporting period, and moved its positioning within
that range according to the relative value opportunities offered in the
market. As a yield advantage continued to exist for investments in
repurchase agreements versus direct investments in very short-term Treasury
and agency securities, a large 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
the three-month Treasury bill, three-month London Interbank Offered Rate, or
Fed funds, and have short reset periods.
Although a run-up in commodity prices early in the second quarter has since
subsided, tight labor market conditions in many regions have raised fears of
wage inflation. Market participants now expect that the Fed will need to
tighten monetary policy in the not-too-distant future - in spite of the
Presidential election later in the year - to ward off these pressures.
Shortly before the close of the reporting period, the Trust lowered its
average maturity target range from 40-50 days to 35-45 days, to reflect our
anticipation of higher interest rates in the future. The Trust is expected
to maintain this posture in the near future, seeking to maximize its
performance through ongoing relative value analysis. 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, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM OBLIGATIONS--40.3%
FEDERAL FARM CREDIT BANK NOTE--0.5%
$ 3,000,000 5.60%, 6/3/1997 $ 2,996,114
(B)FEDERAL HOME LOAN BANK, DISCOUNT NOTE--0.7%
4,000,000 5.33%, 9/12/1996 3,958,228
(A)FEDERAL HOME LOAN BANK, FLOATING RATE NOTE--1.7%
10,000,000 5.27%, 7/1/1996 9,997,496
(B)FEDERAL HOME LOAN MORTGAGE CORP., DISCOUNT NOTES--3.4%
20,000,000 5.43%, 8/22/1996 19,846,600
FEDERAL NATIONAL MORTGAGE ASSOCIATION NOTES--2.1%
12,400,000 5.41%-5.91%, 8/19/1996-12/6/1996 12,394,923
(B)FEDERAL NATIONAL MORTGAGE ASSOCIATION, DISCOUNT NOTES--4.4%
25,955,000 5.25%-5.53%, 9/24/1996-12/24/1996 25,455,864
(A)FEDERAL NATIONAL MORTGAGE ASSOCIATION, FLOATING RATE
NOTES--8.4%
48,700,000 5.115%-5.55%, 7/1/1996-7/17/1996 48,672,038
(A)HOUSING AND URBAN DEVELOPMENT, FLOATING RATE NOTE--0.6%
3,535,000 5.70%, 7/1/1996 3,535,000
(A)EXPORT/IMPORT BANK, FLOATING RATE NOTE--1.3%
7,839,192 6.33%, 7/2/1996 7,836,170
(A)STUDENT LOAN MARKETING ASSOCIATION, FLOATING RATE NOTES--3.8%
22,000,000 5.39%-5.49%, 7/2/1996 21,996,329
(B)U.S. TREASURY BILLS--3.7%
22,000,000 5.00%-5.25%, 9/19/1996-3/6/1997 21,525,240
U.S. TREASURY NOTES--9.7%
56,000,000 6.50%-8.50%, 9/30/1996-4/15/1997 56,503,143
TOTAL SHORT-TERM OBLIGATIONS 234,717,145
</TABLE>
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS--59.8%
$ 4,700,000 Barclays de Zoete Wedd Securities, Inc., 5.47%,
dated 6/28/1996, due 7/1/1996 $ 4,700,000
25,000,000 Deutsche Morgan Grenfell, Inc., 5.53%, dated 6/28/1996,
due 7/1/1996 25,000,000
105,000,000 Fuji Government Securities, Inc., 5.55%, dated 6/28/1996,
due 7/1/1996 105,000,000
25,000,000 Greenwich Capital Markets, Inc., 5.58%, dated 6/28/1996,
due 7/1/1996 25,000,000
10,000,000 HSBC Securities, Inc., 5.53%, dated 6/28/1996, due 7/1/1996 10,000,000
25,000,000 Merrill Lynch Government Securities, Inc., 5.58%, dated
6/28/1996, due 7/1/1996 25,000,000
25,000,000 Nikko Securities, 5.58%, dated 6/28/1996, due 7/1/1996 25,000,000
25,000,000 Nomura Securities International, Inc., 5.60%, dated 6/28/1996,
due 7/1/1996 25,000,000
55,000,000 PaineWebber Inc., 5.53%, dated 6/28/1996, due 7/1/1996 55,000,000
17,000,000 (d)Goldman, Sachs & Co., 5.34%, dated 6/5/1996, due 7/5/1996 17,000,000
9,000,000 (d)J.P. Morgan Securities, Inc., 5.37%, dated 6/17/1996,
due 7/17/1996 9,000,000
14,000,000 (d)Lehman Brothers Government Securities, Inc., 5.43%,
dated 6/13/1996, due 9/11/1996 14,000,000
8,000,000 (d)Merrill Lynch Government Securities, Inc., 5.43%,
dated 6/13/1996, due 9/11/1996 8,000,000
TOTAL REPURCHASE AGREEMENTS 347,700,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $ 582,417,145
</TABLE>
(a) Floating rate note with current rate and next reset date shown.
(b) Each issue shows the rate of discount at time of purchase.
(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
($581,874,884) at June 30, 1996.
(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, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $347,700,000
Investments in securities 234,717,145
Total investments in securities, at amortized cost and value $582,417,145
Income receivable 2,372,346
Receivable for investments sold 3,535,000
Receivable for shares sold 59,211
Total assets 588,383,702
LIABILITIES:
Payable for investments purchased 3,535,000
Income distribution payable 2,381,863
Payable to Bank 591,173
Accrued expenses 782
Total liabilities 6,508,818
NET ASSETS for 581,874,884 shares outstanding $581,874,884
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$581,874,884 O 581,874,884 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, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $17,400,992
EXPENSES:
Investment advisory fee $ 1,269,370
Administrative personnel and services fee 239,911
Custodian fees 56,919
Transfer and dividend disbursing agent fees and expenses 32,304
Directors'/Trustees' fees 9,908
Auditing fees 8,281
Legal fees 4,985
Portfolio accounting fees 50,631
Shareholder services fee 793,356
Share registration costs 11,272
Printing and postage 3,822
Insurance premiums 6,198
Taxes 5,885
Miscellaneous 7,537
Total expenses 2,500,379
Waivers--
Waiver of investment advisory fee $(392,152)
Waiver of shareholder services fee (634,685)
Total waivers (1,026,837)
Net expenses 1,473,542
Net investment income $15,927,450
</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 YEAR ENDED
(UNAUDITED) DECEMBER
JUNE 30, 1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment
income $ 15,927,450 $ 46,061,505
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (15,927,450) (46,061,505)
SHARE TRANSACTIONS--
Proceeds from sale of shares 957,624,072 2,288,288,246
Net asset value of Shares issued to shareholders in
payment of distributions declared 2,844,317 8,919,702
Cost of shares redeemed (1,152,444,805) (2,500,462,612)
Change in net assets resulting from share transactions (191,976,416) (203,254,664)
Change in net assets (191,976,416) (203,254,664)
NET ASSETS:
Beginning of period 773,851,300 977,105,964
End of period $ 581,874,884 $ 773,851,300
</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
(UNAUDITED)
JUNE 30, YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.02 0.06 0.04 0.03 0.04
LESS DISTRIBUTIONS
Distributions from net
investment income (0.02) (0.06) (0.04) (0.03) (0.04)
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.52% 5.72% 3.99% 2.95% 3.64%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.46%* 0.46% 0.45% 0.46% 0.46%
Net investment income 5.02%* 5.57% 3.89% 2.92% 3.58%
Expense waiver/
reimbursement(c) 0.32%* 0.32% 0.11% 0.05% 0.03%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $581,875 $773,851 $977,106 $1,084,680 $1,012,509
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1991 1990 1989 1988 1987(a)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.06 0.08 0.09 0.07 0.05
LESS DISTRIBUTIONS
Distributions from net
investment income (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
TOTAL RETURN(B) 5.93% 8.11% 9.17% 7.47% 4.95%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.46% 0.46% 0.47% 0.48% 0.42%*
Net investment income 5.80% 7.82% 8.80% 7.39% 6.76%*
Expense waiver/
reimbursement(c) 0.03% 0.04% 0.04% 0.08% 0.20%*
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $959,881 $1,091,158 $923,088 $564,343 $206,644
</TABLE>
* Computed on an annualized basis.
(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 charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (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 management investment company. The investment
objective of the Trust is high current income consistent with stability of
principal and liquidity.
/
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.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the
"Code").Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES -- It is the Trust's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The 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 the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
/
OTHER -- Investment transactions are accounted for on the trade date.
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, 1996, capital paid-in aggregated $581,874,884. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996* 1995
<S> <C> <C>
Shares sold 957,624,072 2,288,288,246
Shares issued to shareholders in payment of distributions declared 2,844,317 8,919,702
Shares redeemed (1,152,444,805) (2,500,462,612)
Net change resulting from share transactions (191,976,416) (203,254,664)
</TABLE>
*Six months ended June 30, 1996.
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 0.40% of the Trust'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 Trust with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors 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 0.25% of average daily net assets of the Trust for the period.
The fee paid to FSS is used to finance certain services for shareholders
and to maintain shareholder accounts. FSS may voluntarily choose to waive
any portion of its fee. FSS can modify or terminate this voluntary waiver
at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ, through
its subsidiary, Federated Shareholder Services Company ("FSSC") serves as
transfer and dividend disbursing agent for the Trust. 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 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.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Glen R. Johnson
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
OFFICERS
John F. Donahue
Chairman
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
Richard B. Fisher
Vice President
John W. McGonigle
Executive Vice President, Treasurer and Secretary
Douglas L. Hein
Assistant Treasurer
S. Elliott Cohan
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 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.
FEDERATED
SHORT-TERM
U.S.
GOVERNMENT TRUST
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JUNE 30, 1996
[Graphic]
Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 313905101
8080106 (8/96)
