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 reporting period
from January 1, 1998, through June 30, 1998. The report begins with a commentary
by the trust's portfolio manager, followed by a complete listing of the trust's
holdings and its financial statements.
Federated Short-Term U.S. Government Trust continues to pursue daily income
while offering you the additional advantages of daily liquidity and stability of
principal*, all through a portfolio of U.S. government money market securities.
On June 30, 1998, the $343 million portfolio was invested across repurchase
agreements fully collateralized by U.S. government and/or agency securities
(60.8%) and short-term, direct U.S. government obligations (39.3%).
Over the six-month reporting period, the portfolio paid dividends totaling $0.03
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,
/s/ Glen R. Johnson
Glen R. Johnson
President
August 15, 1998
* 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 fund is not insured or guaranteed by the U.S. government.
INVESTMENT REVIEW
Federated Short-Term U.S. Government Trust may invest in direct U.S. Treasury
and U.S. government agency obligations and in repurchase agreements which have
these securities as collateral. The trust continues to emphasize 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. The trust may also maintain a Treasury position when agency
spreads over Treasuries are narrow. Recently, the portfolio has been managed
with a neutral average maturity stance of 35 to 45 days.
The Federal Reserve Board (the "Fed") kept monetary policy unchanged during the
first half of 1998, with the federal funds target rate at 5.50%. Expectations
regarding the need for and the direction of a policy change by the Fed swayed
back and forth early in the reporting period, as strong economic growth was
balanced by concern over the impact that the financial crisis in Asia would
ultimately have on the domestic economy. Overall, the combination of tight labor
markets and economic growth at a pace above what is generally considered to be
non-inflationary would likely have forced the Fed to tighten in order to ward
off inflationary pressures, had not the uncertainty overseas become such a
dominant issue. As signs of the long-awaited drag from developments in Asia
became evident in the second quarter, the Fed was content to remain on the
sidelines. Although the economy expanded at a robust 5.40% in the first quarter,
a deteriorating trade balance, a buildup in inventories, the ongoing strike by
GM workers, and signs of a slowdown in manufacturing pointed to gross domestic
product growth that was significantly lower, for the second quarter and perhaps
beyond.
While the situation in Asia took center stage for much of the reporting period,
the continued improvement in the federal budget picture also had an impact on
the short-term government markets. The promise of a surplus for the current
fiscal year has led to reduced issuance of Treasury securities and kept this
market well-bid. The Treasury bill sector has been particularly affected by this
trend.
Movements in the yield on the one-year U.S. government agency discount note, an
area where the technical supply factors were not quite as dominant, were more
reflective of overall market expectations. Although volatile early in the year,
trading within a rather broad range of 5.30% to 5.65% as fears that the Fed
might actually have to ease to help the Asian situation flared, but then
subsided again, and were then replaced by fears of a tightening by the Fed as
domestic growth remained strong. By early March, however, the market had
embraced the view that the uncertainty overseas was too great to permit a policy
change by the Fed in the near term, and the one-year agency traded within a much
more narrow range of 5.50% to 5.65% in this more stable environment.
As a yield advantage continued to exist for investments in repurchase agreements
versus direct investments in very short-term Treasury or U.S. government agency
securities, a substantial percentage of the trust's investments remained in
repurchase agreements. The trust favored U.S. government agency securities over
the reporting period due to the expensive nature of Treasury securities. 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 has 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 expectations of slower growth for
the remainder of this year, the Fed is likely to remain on hold. As a result,
our near-term strategy for the management of the trust is likely to remain
intact. However, changing economic and market developments are continuously
monitored to best serve our clients attracted to the short-term U.S. government
market.
PORTFOLIO OF INVESTMENTS
Federated Short-Term U.S. Government Trust
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
Short-Term Obligations--39.3%
$ 4,500,000 Federal Farm Credit System Notes, 5.500% - 5.600%, 10/1/1998 - 4/1/1999 $ 4,496,306
1,300,000 (a)Federal Home Loan Bank System Discount Notes, 5.390%, 11/12/1998 1,273,918
11,000,000 (b)Federal Home Loan Bank System Floating Rate Notes, 5.426% - 5.617%, 7/8/1998 - 7/23/1999 10,997,995
12,300,000 Federal Home Loan Bank System, 5.500% - 5.705%, 10/23/1998 - 5/5/1999 12,295,043
6,500,000 (a)Federal Home Loan Mortgage Corp. Discount Notes, 5.350% - 5.380%, 9/30/1998 - 12/2/1998 6,388,387
3,000,000 (b)Federal Home Loan Mortgage Corp. Floating Rate Notes, 5.456%, 7/21/1998 2,998,574
3,500,000 Federal Home Loan Mortgage Corp., 5.550% - 5.605%, 3/12/1999 - 4/29/1999 3,498,445
30,300,000 (a)Federal National Mortgage Association Discount Notes, 5.300% - 5.400%,
7/7/1998 - 12/18/1998 29,831,726
42,000,000 (b)Federal National Mortgage Association Floating Rate Notes, 5.442% - 5.670%,
7/12/1998 - 8/28/1998 41,986,000
8,500,000 Federal National Mortgage Association Notes, 5.360% - 5.650%, 8/14/1998 - 5/26/1999 8,495,443
7,000,000 (b)Student Loan Marketing Association Floating Rate Notes, 5.631%, 7/7/1998 6,998,896
4,000,000 Student Loan Marketing Association Notes, 5.580% - 5.830%, 10/29/1998 - 3/11/1999 3,999,806
1,500,000 United States Treasury Notes, 5.875%, 1/31/1999 1,502,745
Total Short-Term Obligations 134,763,284
(c) Repurchase Agreements--60.8%
15,000,000 ABN AMRO Chicago Corp., 6.250%, dated 6/30/1998, due 7/1/1998 15,000,000
1,800,000 Deutsche Morgan Grenfell, 5.870%, dated 6/30/1998, due 7/1/1998 1,800,000
50,000,000 Fuji Government Securities, Inc., 6.250%, dated 6/30/1998, due 7/1/1998 50,000,000
12,000,000 Goldman Sachs Group, LP, 5.530%, dated 6/5/1998, due 7/6/1998 12,000,000
5,000,000 Morgan Stanley Co., Inc., 5.530%, dated 6/5/1998, due 7/6/1998 5,000,000
55,000,000 PaineWebber Group, Inc., 6.200%, dated 6/30/1998, due 7/1/1998 55,000,000
10,000,000 Paribas Corp., 6.250%, dated 6/30/1998, due 7/1/1998 10,000,000
</TABLE>
<TABLE>
<S> <C> <C> 15,000,000 Prudential Securities, Inc., 6.250%, dated 6/30/1998,
due 7/1/1998 15,000,000 15,000,000 Salomon SmithBarney, Inc., 6.250%,
dated 6/30/1998, due 7/1/1998 15,000,000 20,000,000 (d)Lehman Brothers,
Inc., 5.540%, dated 6/8/1998, due 7/8/1998 20,000,000 10,000,000 (d)Morgan
Stanley Co., Inc., 5.535%, dated 5/11/1998, due 7/13/1998 10,000,000
Total Repurchase Agreements 208,800,000
Total Investments (at amortized cost)(e) $343,563,284
</TABLE>
Federated Short-Term U.S. Government Trust
(a) Each issue shows the rate of discount at the time of purchase.
(b) Floating rate note with 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
($343,214,422) at June 30, 1998.
The following acronym is used throughout this portfolio:
LP--Limited Partnership
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
Federated Short-Term U.S. Government Trust
June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Assets:
<S> <C> <C>
Investments in repurchase agreements $208,800,000
Investments in securities 134,763,284
Total investments in securities, at amortized cost and value $343,563,284
Cash 73,046
Income receivable 1,082,084
Total assets 344,718,414
Liabilities:
Income distribution payable 1,448,639
Accrued expenses 55,353
Total liabilities 1,503,992
Net Assets for 343,214,422 shares outstanding $343,214,422
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
$343,214,422 / 343,214,422 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
Federated Short-Term U.S. Government Trust
Six Months Ended June 30, 1998 (unaudited)
<TABLE>
<CAPTION>
Investment Income:
<S> <C> <C> <C>
Interest $11,290,513
Expenses:
Investment advisory fee $ 802,464
Administrative personnel and services fee 151,264
Custodian fees 11,435
Transfer and dividend disbursing agent fees and expenses 32,704
Directors'/Trustees' fees 8,145
Auditing fees 7,240
Legal fees 2,896
Portfolio accounting fees 36,110
Shareholder services fee 501,540
Share registration costs 10,679
Printing and postage 4,887
Miscellaneous 9,955
Total expenses 1,579,319
Waivers --
Waiver of investment advisory fee $ (246,424)
Waiver of shareholder services fee (401,232)
Total waivers (647,656)
Net expenses 931,663
Net investment income $10,358,850
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
Federated Short-Term U.S. Government Trust
<TABLE>
<CAPTION>
Six Months
Ended
(unaudited) Year Ended
June 30, 1998 December 31, 1997
<S> <C> <C>
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 10,358,850 $ 26,938,415
Distributions to Shareholders--
Distributions from net investment income (10,358,850) (26,938,415)
Share Transactions--
Proceeds from sale of shares 654,042,801 1,781,376,018
Net asset value of shares issued to shareholders in payment of distributions declared 2,442,232 7,242,227
Cost of shares redeemed (802,562,780) (1,908,915,031)
Change in net assets resulting from share transactions (146,077,747) (120,296,786)
Change in net assets (146,077,747) (120,296,786)
Net Assets:
Beginning of period 489,292,169 609,588,955
End of period $ 343,214,422 $ 489,292,169
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
Federated Short-Term U.S. Government Trust
<TABLE>
<CAPTION>
(For a share outstanding throughout each period)
Six Months
Ended
(unaudited)
June 30, Year Ended December 31,
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.03 0.05 0.05 0.06 0.04 0.03
Less distributions
Distributions from net investment income (0.03) (0.05) (0.05) (0.06) (0.04) (0.03)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (a) 2.59% 5.24% 5.10% 5.72% 3.99% 2.95%
Ratios to average net assets
Expenses 0.47%* 0.46% 0.46% 0.46% 0.45% 0.46%
Net investment income 5.16%* 5.10% 4.99% 5.57% 3.89% 2.92%
Expense waiver (b) 0.32%* 0.33% 0.33% 0.32% 0.11% 0.05%
Supplemental data
Net assets, end of period (000 omitted) $343,214 $489,292 $609,589 $773,851 $977,106 $1,084,680
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) 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)
NOTES TO FINANCIAL STATEMENTS
Federated Short-Term U.S. Government Trust
June 30, 1998 (unaudited)
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.
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.
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, 1998, capital paid-in aggregated $343,214,422. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, December 31,
1998 1997
<S> <C> <C>
Shares sold 654,042,801 1,781,376,018
Shares issued to shareholders in payment of distributions declared 2,442,232 7,242,227
Shares redeemed (802,562,780) (1,908,915,031)
Net change resulting from share transactions (146,077,747) (120,296,786)
</TABLE>
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, Inc. 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.
Year 2000
Similar to other financial organizations, the Trust could be adversely affected
if the computer systems used by the Trust's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Trust's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Trust's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Trust.
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd, Esq.
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr., Esq.
Glen R. Johnson
Peter E. Madden
John E. Murray, Jr., J.D., S.J.D.
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
John W. McGonigle
Executive Vice President, Treasurer,
and Secretary
Richard B. Fisher
Vice President
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 investment 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 objective and policies, management fees, expenses and other
information.
Federated
Short-Term
U.S. Government
Trust
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Semi-Annual Report
to Shareholders
June 30, 1998
Cusip 313905101
8080106 (8/98)
