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, 1997, through June 30, 1997. The report begins with a commentary by the
trust's portfolio manager and follows with a complete list of the trust's
holdings 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* through a portfolio of U.S. government money market
securities.
On June 30, 1997, net assets stood at $506 million. The trust's net assets were
invested across repurchase agreements fully collateralized by U.S. government
and/or agency securities (63.7%) and short-term, direct U.S. government
obligations (36.4%). Dividends paid to shareholders during the six-month
reporting period totaled $0.02 per share.
Thank you for choosing Federated Short-Term U.S. Government Trust as a daily
cash investment. We welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
August 15, 1997
* 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. An investment
in the trust is not insured or 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 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.
The first half of 1997 brought a change in monetary policy by the Federal
Reserve Board (the "Fed"). After keeping monetary policy on hold for over a
year, the Fed voted to raise the federal funds target rate by 25 basis points on
March 25, 1997, to 5.50% from 5.25%. The move was seen as being preemptive
against inflation in the face of persistent demand. At the beginning of the
reporting period, short-term interest rates traded within a fairly narrow range,
lulled by continued evidence of benign inflationary pressures. Continued
above-trend economic growth, however, eventually began to weigh heavily on the
market in light of tight labor market conditions. Short-term interest rates
started to rise in late February, spurred onward by a particularly hawkish
Congressional testimony by Fed Chairman Alan Greenspan late in the month, in
which he indicated that the transitory factors preventing a rise in wages in the
face of fairly robust growth may be ending. By the time the Fed tightened, much
of the move had already been priced into the financial markets.
In the following weeks, short-term interest rates traded within a relatively
narrow range as market participants debated the timing of the next tightening.
As signs of weakened consumer demand finally appeared, rates fell in late April
and throughout May, and then traded within a range for the remainder of the
reporting period. Technical factors in the Treasury bill market, brought about
by reduced supply of Treasury securities due to larger than expected tax
receipts, provided a strong bid to this sector which exacerbated the decline in
short-term interest rates over the reporting period.
Movements in the six-month Treasury bill over the reporting period reflected
both shifting market sentiment regarding the Fed and these technical influences.
The yield on the six-month Treasury bill opened 1997 at 5.30%, and traded
between 5.15% and 5.35% until mid-February. As fears that strong economic growth
might spark inflationary pressures unsettled the market, the yield on the
six-month Treasury bill rose steadily to 5.60% by the time of the Fed
tightening. The yield stayed high for several weeks before falling under the
weight of technical factors to close the reporting period at 5.20%.
As a yield advantage continued to exist for investments in repurchase agreements
versus direct investments in short-term Treasury or U.S. government agency
securities, a substantial percentage of the trust's investments remained in
repurchase agreements. The barbell structure of the trust was maintained over
the reporting period, combining a significant position in short-term repurchase
agreements and government agency floating rate notes with longer maturity
securities of six to twelve months. This portfolio structure continued to
provide a competitive yield.
The trust was targeted in an average maturity range of 35 to 45 days over the
reporting period, representing a relatively neutral posture, and moved its
positioning within that target range according to the relative value
opportunities available in the market. With economic growth slowing from its
torrid pace of 5.90% in the first quarter of the year and inflation remaining
quite friendly, the Fed is likely to stay on the sidelines for the time being.
As a result, the trust will likely remain in its current neutral stance in the
near future barring any significant resurgence in growth or an uptake in
inflationary pressures. 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, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
SHORT-TERM OBLIGATIONS -- 36.4%
<C> <S> <C>
$ 4,000,000 (a)Federal Farm Credit Bank, Discount Note -- 0.8%
5.570%, 8/15/1997 $ 3,972,900
10,800,000 Federal Home Loan Bank Notes -- 2.1%,
5.460% - 6.025%, 11/18/1997 - 4/15/1998 10,793,197
12,500,000 (a)Federal Home Loan Bank, Discount Notes -- 2.4%
5.450% - 5.740%, 7/15/1997 - 12/10/1997 12,315,406
11,000,000 (b)Federal Home Loan Bank, Floating Rate Notes -- 2.2%
5.571% - 5.623%, 7/21/1997 - 9/4/1997 10,995,311
7,500,000 Federal Home Loan Mortgage Corp., Notes -- 1.5%
5.640% - 5.840%, 8/28/1997 - 4/8/1998 7,497,548
10,809,000 (a)Federal Home Loan Mortgage Corp., Discount Notes -- 2.1%
5.570% - 5.800%, 8/15/1997 - 11/5/1997 10,660,980
7,000,000 (b)Federal Home Loan Mortgage Corp., Floating Rate
Note -- 1.4%, 5.688%, 7/21/1997 6,994,681
11,100,000 Federal National Mortgage Association, Notes -- 2.2%
5.790% - 6.000%, 3/25/1998 - 6/18/1998 11,087,075
46,500,000 (a)Federal National Mortgage Association, Discount
Notes -- 9.1%, 5.480% - 5.880%, 7/2/1997 - 12/12/1997 45,947,936
23,000,000 (b)Federal National Mortgage Association, Floating
Rate Notes -- 4.5%, 5.270% - 5.543%, 7/11/1997 - 7/15/1997
22,996,569 20,000,000 (b)Student Loan Marketing Association, Floating Rate
Notes -- 4.0%, 5.260% - 5.320%, 7/15/1997 19,998,700
2,000,000 (a)U.S. Treasury Bill -- 0.4%
5.600%, 3/5/1998 1,927,272
18,700,000 U.S. Treasury Notes -- 3.7%
6.125%-7.875%, 11/15/1997-5/15/1998 18,830,352
TOTAL SHORT-TERM OBLIGATIONS 184,017,927
(C)REPURCHASE AGREEMENTS -- 63.7%
80,000,000 Fuji Government Securities, Inc., 6.150%, dated 6/30/1997,
due 7/1/1997 80,000,000
10,000,000 HSBC Securities, Inc., 6.150%, dated 6/30/1997, 10,000,000
due 7/1/1997
</TABLE>
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS -- CONTINUED
$ 20,000,000 Lehman Brothers, Inc. Government Securities, 6.250%,
dated 6/30/1997, due 7/1/1997 $ 20,000,000
60,000,000 PaineWebber Group, Inc., 6.100%, dated 6/30/1997, 60,000,000
due 7/1/1997
20,000,000 Prudential Securities, Inc., 6.020%, dated 20,000,000
6/30/1997, due 7/1/1997
1,900,000 SBC Capital Markets, 5.950%, dated 6/30/1997, due 1,900,000
7/1/1997
20,000,000 Toronto Dominion Securities (USA) Inc., 6.150%,
dated 6/30/1997, due 7/1/1997 20,000,000
25,000,000 UBS Securities, Inc., 6.150%, dated 6/30/1997, due 25,000,000
7/1/1997
11,000,000 (d)Chase Government Securities, Inc., 5.550%, dated
5/21/1997, due 7/3/1997 11,000,000
11,000,000 (d)Chase Government Securities, Inc., 5.620%, dated
4/3/1997, due 7/2/1997 11,000,000
25,000,000 (d)CS First Boston, 5.520%, dated 5/21/1997, due 25,000,000
7/3/1997
14,000,000 (d)Goldman Sachs Group, LP, 5.550%, dated 6/4/1997, 14,000,000
due 7/7/1997
12,000,000 (d)Lehman Brothers, Inc. Government Securities, 5.620%,
dated 4/7/1997, due 7/7/1997 12,000,000
12,000,000 (d)UBS Securities, Inc., 5.520%, dated 5/21/1997, due 12,000,000
7/3/1997
TOTAL REPURCHASE AGREEMENTS 321,900,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $505,917,927
</TABLE>
(a) Each issue shows the rate of discount at time of purchase.
(b) Current rate and next reset 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.
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($505,703,613) at June 30, 1997.
(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, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 321,900,000
Investments in securities 184,017,927
Total investments in securities, at amortized cost and value $ 505,917,927
Cash 168,003
Income receivable 1,816,469
Receivable for shares sold 49,807
Total assets 507,952,206
LIABILITIES:
Income distribution payable 2,201,466
Accrued expenses 47,127
Total liabilities 2,248,593
NET ASSETS for 505,703,613 shares outstanding $ 505,703,613
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$505,703,613 / 505,703,613 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, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C
INVESTMENT INCOME:
Interest $ 15,408,338
EXPENSES:
Investment advisory fee $ 1,123,755
Administrative personnel and services fee 212,109
Custodian fees 26,087
Transfer and dividend disbursing agent fees and 38,706
expenses
Directors'/Trustees' fees 8,419
Auditing fees 7,508
Legal fees 2,404
Portfolio accounting fees 49,296
Shareholder services fee 702,347
Share registration costs 9,593
Printing and postage 4,167
Insurance premiums 3,439
Taxes 3,042
Miscellaneous 5,633
Total expenses 2,196,505
Waivers
Waiver of investment advisory fee $ (329,946)
Waiver of shareholder services fee (561,878)
Total waivers (891,824)
Net expenses 1,304,681
Net investment income $ 14,103,657
</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 31,
JUNE 30, 1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 14,103,657 $ 30,352,600
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income (14,103,657) (30,352,600)
SHARE TRANSACTIONS --
Proceeds from sale of shares 906,131,921 1,768,232,818
Net asset value of shares issued to shareholders in
payment of distributions declared 3,330,664 7,281,495
Cost of shares redeemed (1,013,347,927) (1,939,776,658)
Change in net assets resulting from share (103,885,342) (164,262,345)
transactions
Change in net assets (103,885,342) (164,262,345)
NET ASSETS:
Beginning of period 609,588,955 773,851,300
End of period $ 505,703,613 $ 609,588,955
</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,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987(A)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD
INCOME FROM
INVESTMENT OPERATIONS
Net investment
income 0.02 0.05 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.05
LESS DISTRIBUTIONS
Distributions
from
net investment
income (0.02) (0.05) (0.06) (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 $ 1.00 $ 1.00
TOTAL RETURN(B) 2.52% 5.10% 5.72% 3.99% 2.95% 3.64% 5.93% 8.11% 9.17% 7.47% 4.95%
RATIOS TO
AVERAGE
NET ASSETS
Expenses 0.46%* 0.46% 0.46% 0.45% 0.46% 0.46% 0.46% 0.46% 0.47% 0.48% 0.42%*
Net investment
income 5.02%* 4.99% 5.57% 3.89% 2.92% 3.58% 5.80% 7.82% 8.80% 7.39% 6.76%*
Expense waiver/
reimbursement(c) 0.32%* 0.33% 0.32% 0.11% 0.05% 0.03% 0.03% 0.04% 0.04% 0.08% 0.20%*
SUPPLEMENTAL DATA
Net assets,
end of period
(000 omitted) $505,704 $609,589 $773,851 $977,106 $1,084,680 $1,012,509 $959,881 $1,091,158 $923,088 $564,343 206,614
</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, 1997 (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 an 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 uses the amortized cost method to value its
portfolio securities in accordance with Rule 2a-7 under the Act.
REPURCHASE AGREEMENTS -- It is the policy of the 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, 1997, capital paid-in aggregated $505,703,613.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED DECEMBER 31,
JUNE 30, 1997 1996
<S> <C> <C>
Shares sold 906,131,921 1,768,232,818
Shares issued to shareholders in payment of distributions 3,330,664 7,281,495
declared
Shares redeemed (1,013,347,927) (1,939,776,658)
Net change resulting from share transactions (103,885,342) (164,262,345)
</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 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
Marjorie P. Smuts
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
Matthew S. Hardin
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves 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, 1997
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Cusip 313905101
8080106 (8/97)
[Graphic]
