PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders for Trust for
Short-Term U.S. Government Securities, which covers the six-month period
from December 1, 1995 through May 31, 1996. The report contains commentary
by the portfolio manager, followed by a complete list of the fund's
investments on the last day of the period, and the financial statements.
The fund continues to pursue daily income, which may be exempt from state
and local taxes, along with the additional advantages of daily liquidity and
stability of principal* -- all through a portfolio composed of U.S. Treasury
and government agency obligations and repurchase agreements backed by these
obligations.
At the end of the period, the fund's net assets stood at $883 million.
Dividends paid to shareholders during the period totaled $23 million, or
$0.03 per share.
Thank you for selecting Trust for Short-Term U.S. Government Securities as a
daily cash investment. We welcome your comments and suggestions.
Sincerely,
[Graphic]
Glen R. Johnson
President
July 15, 1996
* 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. An
investment in the fund is neither insured nor guaranteed by the U.S.
government.
INVESTMENT REVIEW
Trust for Short-Term U.S. Government Securities is invested in direct U.S.
Treasury and U.S. Government agency obligations and in repurchase agreements
which have these securities as collateral. The Trust will not invest in
agency issues which are subject to state taxation either directly or as
repurchase agreement collateral. The Trust continues to invest in issues of
the Student Loan Marketing Association, Federal Farm Credit Bank System, and
Federal Home Loan Bank System, and maintains a small Treasury position for
liquidity purposes.
The Federal Reserve Board (the "Fed") eased monetary policy twice over the
six-month reporting period ended in May. Faced with slowing economic growth
and benign inflationary pressures, the Fed lowered the Federal funds target
rate from 5.75% to 5.50% in the latter part of December, and again from
5.50% to the current 5.25% at the end of January. The short end of the
government yield curve anticipated the policy moves from the Fed, and amid
indications of sluggish consumer and manufacturing sectors of the economy,
looked forward to additional eases in the not too distant future.
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 to paint a picture of an economy that was not on the verge
of recession -- as thought earlier this year -- but of one that is growing
at a pace above the 2 1/2% 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 in December 1995 at 5.50%, declined to 4.90%
by mid-February 1996, and ended May at close to 5.20%.
The Trust remained targeted in a 40 to 50-day average maturity target range
throughout 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 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. Treasury and Government agency securities
with short-term agency floating rate notes and Treasury and agency
securities with longer maturities of 6 to 12 months. This portfolio
structure continues to provide a competitive yield.
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 after 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, intending 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.
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
PORTFOLIO OF INVESTMENTS
MAY 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM GOVERNMENT OBLIGATIONS -- 18.5%
FEDERAL FARM CREDIT BANK NOTES -- 1.1%
$ 10,000,000 5.40%-5.60%, 12/2/1996-6/3/1997 $ 9,989,385
(a)FEDERAL FARM CREDIT BANK, DISCOUNT NOTES -- 0.9%
8,000,000 5.27%, 11/4/1996 7,825,627
(b)FEDERAL FARM CREDIT BANK, FLOATING RATE NOTES -- 1.8%
16,000,000 5.33%, 6/4/1996 15,984,987
FEDERAL HOME LOAN BANK NOTES -- 3.2%
28,200,000 6.02%-6.05%, 6/3/1996-6/13/1996 28,200,308
(a)FEDERAL HOME LOAN BANK, DISCOUNT NOTES -- 2.3%
21,000,000 5.33%-5.43%, 9/30/1996-11/5/1996 20,562,530
(b)FEDERAL HOME LOAN BANK, FLOATING RATE NOTES -- 4.9%
43,000,000 5.27%-5.34%, 6/4/1996-6/24/1996 42,980,883
STUDENT LOAN MARKETING ASSOCIATION NOTES -- 1.1%
10,000,000 6.08%, 7/1/1996 10,006,212
(b)STUDENT LOAN MARKETING ASSOCIATION, FLOATING RATE NOTES -- 3.2%
28,000,000 5.31%-5.41%, 6/4/1996 27,995,067
TOTAL SHORT-TERM GOVERNMENT OBLIGATIONS 163,544,999
SHORT-TERM U.S. TREASURY OBLIGATIONS -- 18.5%
(a)U.S. TREASURY BILLS -- 4.3%
39,000,000 4.79%-4.98%, 9/19/1996-3/6/1997 38,024,187
U.S. TREASURY NOTES -- 14.2%
123,893,000 6.50%-8.50%, 9/30/1996-4/15/1997 124,959,368
TOTAL SHORT-TERM U.S. TREASURY OBLIGATIONS 162,983,555
TOTAL SHORT-TERM OBLIGATIONS 326,528,554
</TABLE>
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(c)REPURCHASE AGREEMENTS -- 63.5%
$ 40,000,000 BOT Securities, 5.35%, dated 5/31/1996, due 6/3/1996 $ 40,000,000
20,400,000 Barclays de Zoete Wedd Securities, Inc., 5.34%, dated 5/31/1996,
due 6/3/1996 20,400,000
40,000,000 Dean Witter Reynolds, 5.34%, dated 5/31/1996, due 6/3/1996 40,000,000
45,000,000 Deutsche Bank Government Securities, Inc., 5.32%, dated 5/31/1996,
due 6/3/1996 45,000,000
150,000,000 Fuji Securities, Inc., 5.34%, dated 5/31/1996, due 6/3/1996 150,000,000
40,000,000 Harris Government Securities, Inc., 5.34%, dated 5/31/1996,
due 6/3/1996 40,000,000
80,000,000 J.P. Morgan Securities, Inc., 5.33%, dated 5/31/1996, due 6/3/1996 80,000,000
25,000,000 PaineWebber Inc., 5.34%, dated 5/31/1996, due 6/3/1996 25,000,000
40,000,000 Prudential Securities, Inc., 5.35%, dated 5/31/1996, due 6/3/1996 40,000,000
40,000,000 Swiss Bank Corp., New York, 5.33%, dated 5/31/1996, due 6/3/1996 40,000,000
40,000,000 UBS Securities, Inc., 5.33%, dated 5/31/1996, due 6/3/1996 40,000,000
TOTAL REPURCHASE AGREEMENTS 560,400,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(d) $ 886,928,554
</TABLE>
(a) Each issue shows the rate of discount at the time of purchase.
(b) Denotes variable rate obligations for which the current rates and next
reset dates are 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 a joint account with other Federated funds.
(d) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($882,573,094) at May 31, 1996.
(See Notes which are an integral part of the Financial Statements)
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 560,400,000
Investments in securities 326,528,554
Total investments in securities, at amortized cost and value $ 886,928,554
Income receivable 3,649,505
Total assets 890,578,059
LIABILITIES:
Payable for investments purchased $ 3,994,388
Income distribution payable 3,596,271
Payable to Bank 292,934
Accrued expenses 121,372
Total liabilities 8,004,965
NET ASSETS for 882,573,094 shares outstanding $ 882,573,094
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
($882,573,094 O 882,573,094 shares outstanding) $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $25,155,372
EXPENSES:
Investment advisory fee $ 1,834,914
Administrative personnel and services fee 346,799
Custodian fees 72,589
Transfer and dividend disbursing agent fees and expenses 34,639
Directors'/Trustees' fees 11,986
Auditing fees 9,981
Legal fees 27,450
Portfolio accounting fees 60,980
Shareholder services fee 1,146,821
Share registration costs 11,621
Printing and postage 7,503
Insurance premiums 7,686
Taxes 5,490
Miscellaneous 4,483
Total expenses 3,582,942
Waivers --
Waiver of investment advisory fee $ (584,095)
Waiver of shareholder services fee (917,457)
Total waivers (1,501,552)
Net expenses 2,081,390
Net investment income $23,073,982
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 23,073,982 $ 56,767,637
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income $ (23,073,982) $ (56,767,637)
SHARE TRANSACTIONS --
Proceeds from sale of shares 1,982,285,036 5,427,561,959
Net asset value of shares issued to shareholders in payment of
distributions declared 2,474,080 6,759,749
Cost of shares redeemed (2,054,943,196) (5,665,833,600)
Change in net assets resulting from share transactions (70,184,080) (231,511,892)
Change in net assets (70,184,080) (231,511,892)
NET ASSETS:
Beginning of period 952,757,174 1,184,269,066
End of period $ 882,573,094 $ 952,757,174
</TABLE>
(See Notes which are an integral part of the Financial Statements)
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
MAY 31,
1996 YEAR ENDED NOVEMBER 30,
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988 1987
<S> <C> <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 $ 1.00
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.03 0.06 0.04 0.03 0.04 0.06 0.08 0.09 0.07 0.06
LESS DISTRIBUTIONS
Distributions
from net
investment
income (0.03) (0.06) (0.04) (0.03) (0.04) (0.06) (0.08) (0.09) (0.07) (0.06)
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
TOTAL RETURN(a) 2.55% 5.63% 3.70% 2.87% 3.72% 6.10% 8.08% 9.01% 7.05% 6.09%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.45%* 0.45% 0.45% 0.45% 0.45% 0.46% 0.45% 0.45% 0.45% 0.45%
Net investment
income 5.03%* 5.47% 3.55% 2.82% 3.68% 5.99% 7.79% 8.65% 6.79% 5.90%
SUPPLEMENTAL DATA
Net assets, end
of period
(000 omitted) $882,573 $952,757 $1,184,269 $1,730,402 $2,358,748 $2,802,108 $3,603,455 $3,852,650 $3,993,621 $5,148,285
</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.
(See Notes which are an integral part of the Financial Statements)
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1996 (UNAUDITED)
1. ORGANIZATION
Trust for Short-Term U.S. Government Securities (the "Trust") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end 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.
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.
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
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
May 31, 1996, capital paid-in aggregated $882,573,094.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1996 1995
<S> <C> <C>
Shares sold 1,982,285,036 5,427,561,959
Shares issued to shareholders in payment of distributions declared 2,474,080 6,759,749
Shares redeemed (2,054,943,196) (5,665,833,600)
Net change resulting from share transactions (70,184,080) (231,511,892)
</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 will waive, to the extent of its advisory fee, the amount, if any,
by which the Trust's aggregate annual operating expenses exceed .45% of the
average daily net assets of the Trust.
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 daily average 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.
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
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.
5. FORWARD TRADE COMMITMENTS
The Trust may enter into forward commitments for the delayed delivery of
securities which are based upon financial indices at a fixed price at a
future date. Risks may arise upon entering these contracts from the
potential inability of counterparts to meet the terms of their contracts and
from unanticipated movements in security prices.
At May 31, 1996, the Trust had no forward commitments outstanding.
<TABLE>
<S> <S>
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
Peter E. Madden Executive Vice President
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. Executive Vice President, Secretary, and Treasurer
Wesley W. Posvar Richard B. Fisher
Marjorie P. Smuts Vice President
S. Elliott Cohan
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 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.
TRUST
FOR
SHORT-TERM U.S.
GOVERNMENT
SECURITIES
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1996
[Graphic]
[Graphic]
Cusip 898331103
8063001 (7/96)
