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 reporting
period from December 1, 1997, through May 31, 1998. The report contains
commentary by the portfolio manager, followed by a complete listing of the
trust's investments on the last day of the reporting period, and the financial
statements.
This money market mutual fund pursues daily income, along with the additional
advantages of daily liquidity and stability of principal,* through a portfolio
composed of U.S. Treasury and government agency obligations and repurchase
agreements backed by these obligations.
Dividends paid to shareholders over the reporting period totaled $0.05 per
share, which amounted to a six-month total return of 5.28%. The trust's
seven-day net yield, as of May 31, 1998, was 5.15%.** At the end of the
reporting period, the trust's net assets stood at $680.2 million.
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, 1998
* Money market funds seek to maintain a stable net asset value of $1.00 per
share. There is no assurance that they will do so. An investment in the
trust is not insured or guaranteed by the U.S. government.
** Performance quoted represents past performance and is not indicative of
future results. Yield will vary. Yields quoted for money market funds most
closely reflect the fund's current earnings.
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 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") kept monetary policy on hold over the
six-month reporting period ended May 31, 1998, with the federal funds target
rate at 5.50%. It has now been over a year since the last change in policy, a 25
basis point tightening in late March 1997. The reporting period was
characterized by robust economic growth, however, and had the crisis in the
Asian economies not surfaced, the Fed might well have been inclined to tighten
policy to ward off inflationary pressures. Gross Domestic Product grew at over
3.00%, fueled by lower long-term interest rates and solid consumer spending.
Although inflation remained benign over the reporting period, tight labor market
conditions kept the Fed watchful.
Continued improvement in the federal budget deficit, dropping to its lowest
level in more than two decades, led to a reduction in overall Treasury security
issuance. This reduction in supply was most evident in the Treasury bill sector,
which traded well below the federal funds target rate over the reporting period.
Yields on short U.S. government agency securities better reflected underlying
economic fundamentals. The one-year agency discount note yield opened the
reporting period at 5.90%, and dropped to 5.30% by in early February as the
Asian economic crisis intensified. As domestic growth continued strong and the
overseas situation seemingly stabilized, the yield on the one-year agency
security rebounded to 5.60% by the middle of the second quarter of 1998, and
then traded within a fairly narrow range for the remainder of the reporting
period.
The trust remained targeted in a 35- to 45-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. This stance
represents a neutral positioning for the trust. The trust's portfolio continues
to be barbelled in structure, combining 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 six to twelve months. This portfolio structure continues to
provide a competitive yield. Over the reporting period, the trust reduced its
holdings of Treasury securities in favor of fixed-rate agency securities, due to
the relatively attractive spreads available in that sector. The trust will
likely maintain its current neutral position in the near future, as concerns
over the impact that the Asian crisis will have on the domestic economy is
likely to keep the Fed on the sidelines for the time being.
PORTFOLIO OF INVESTMENTS
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
MAY 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
GOVERNMENT AGENCIES--38.6%
$ 7,871,000 (a)Federal Farm Credit System Discount Notes, 5.170%, $ 7,652,840
12/11/1998
18,000,000 (b)Federal Farm Credit System Floating Rate Notes, 5.456% - 17,984,905
5.459%, 6/1/1998
11,000,000 Federal Farm Credit System, 5.500% - 5.700%, 9/2/1998 - 10,991,786
4/1/1999
92,000,000 (a)Federal Home Loan Bank System Discount Notes, 5.290% - 90,816,469
5.520%, 6/2/1998 - 11/12/1998
70,000,000 (b)Federal Home Loan Bank System Floating Rate Notes, 5.418% 69,971,427
- 5.650%, 6/1/1998 - 6/23/1998
38,300,000 Federal Home Loan Bank System, 5.500% - 5.820%, 6/16/1998 - 38,293,311
5/5/1999
9,000,000 (b)Student Loan Marketing Association Floating Rate Notes, 8,998,223
5.655%, 6/2/1998
17,855,000 Student Loan Marketing Association, 5.400% - 5.830%, 17,854,793
10/29/1998 - 3/11/1999
TOTAL GOVERNMENT AGENCIES 262,563,754
U.S. TREASURY--0.3%
2,000,000 U.S. Treasury Notes, 5.875%, 1/31/1999 2,004,173
(C)REPURCHASE AGREEMENTS--65.7%
30,000,000 ABN AMRO Chicago Corp., 5.590%, dated 5/29/1998, due 30,000,000
6/1/1998
18,000,000 (e)(d)Deutsche Bank Government Securities, Inc., 5.490%, 18,000,000
dated 5/28/1998, due 6/30/1998
14,800,000 Deutsche Bank Government Securities, Inc., 5.570%, dated 14,800,000
5/29/1998, due 6/1/1998
30,000,000 Donaldson, Lufkin and Jenrette Securities Corp., 5.570%, 30,000,000
dated 5/29/1998, due 6/1/1998
20,000,000 First Union Capital Markets, 5.580%, dated 5/29/1998, due 20,000,000
6/1/1998
125,000,000 Fuji Government Securities, Inc., 5.570%, dated 5/29/1998, 125,000,000
due 6/1/1998
27,000,000 (d)Goldman Sachs Group, LP, 5.490%, dated 5/18/1998, due 27,000,000
6/9/1998
25,000,000 Harris Government Security, Inc., 5.580%, dated 5/29/1998, 25,000,000
due 6/1/1998
27,000,000 (d)Merrill Lynch, Pierce, Fenner and Smith, 5.500%, dated 27,000,000
5/8/1998, due 8/10/1998
25,000,000 PaineWebber Group, Inc., 5.570%, dated 5/29/1998, due 25,000,000
6/1/1998
30,000,000 Societe Generale Securities Corp., 5.570%, dated 5/29/1998, 30,000,000
due 6/1/1998
20,000,000 Toronto Dominion Securities (USA) Inc., 5.570%, dated 20,000,000
5/29/1998, due 6/1/1998
</TABLE>
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS--CONTINUED
$ 25,000,000 UBS Securities, Inc., 5.570%, dated 5/29/1998, due 6/1/1998 $ 25,000,000
30,000,000 Westdeutsche Landesbank Girozentrale, 5.570%, dated 30,000,000
5/29/1998, due 6/1/1998
TOTAL REPURCHASE AGREEMENTS 446,800,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(F) $ 711,367,927
</TABLE>
(a) Rates noted reflect the effective yield.
(b) Denotes variable rate securities which show current rate and next demand
date.
(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) 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) Represents a forward commitment for the delayed delivery of securities,
which will settle and be collateralized on June 30, 1998. The fair value of the
foward commitment approximates the contract amount at May 31, 1998. 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.
(f) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($680,158,721) at May 31, 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
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
MAY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 446,800,000
Investments in securities 264,567,927
Total investments in securities, at amortized cost and value $ 711,367,927
Cash 95,362
Income receivable 1,633,687
Total assets 713,096,976
LIABILITIES:
Payable for investments purchased 29,975,085
Income distribution payable 2,859,634
Accrued expenses 103,536
Total liabilities 32,938,255
NET ASSETS for 680,158,721 shares outstanding 680,158,721
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
$680,158,721 / 680,158,721 shares outstanding $1.00
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
SIX MONTHS ENDED MAY 31, 1998 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 18,378,631
EXPENSES:
Investment advisory fee $ 1,309,518
Administrative personnel and services fee 246,844
Custodian fees 16,373
Transfer and dividend disbursing agent fees and 13,405
expenses
Directors'/Trustees' fees 14,014
Auditing fees 8,554
Legal fees 3,276
Portfolio accounting fees 53,376
Shareholder services fee 818,449
Share registration costs 9,646
Printing and postage 5,460
Insurance premiums 2,912
Taxes 4,550
Miscellaneous 910
Total expenses 2,507,287
Waivers --
Waiver of investment advisory fee $ (365,125)
Waiver of shareholder services fee (654,759)
Total waivers (1,019,884)
Net expenses 1,487,403
Net investment income $ 16,891,228
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
MAY 31, NOVEMBER 30,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 16,891,228 $ 36,426,778
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (16,891,228) (36,426,778)
SHARE TRANSACTIONS--
Proceeds from sale of shares 1,144,981,351 2,804,629,799
Net asset value of shares issued to shareholders in payment 1,821,823 5,562,130
of distributions declared
Cost of shares redeemed (1,142,632,220) (2,978,312,468)
Change in net assets resulting from share transactions 4,170,954 (168,120,539)
Change in net assets 4,170,954 (168,120,539)
NET ASSETS:
Beginning of period 675,987,767 844,108,306
End of period $ 680,158,721 $ 675,987,767
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
MAY 31, YEAR ENDED NOVEMBER 30,
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 0.05 0.05 0.05 0.06 0.04 0.03
LESS DISTRIBUTIONS
Distributions from net
investment income (0.05) (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) 5.28% 5.20% 5.09% 5.63% 3.70% 2.87%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45%* 0.45% 0.45% 0.45% 0.45% 0.45%
Net investment income 5.16%* 5.07% 4.98% 5.47% 3.55% 2.82%
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $680,159 $675,988 $844,108 $952,757 $1,184,269 $1,730,402
</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)
NOTES TO FINANCIAL STATEMENTS
TRUST FOR SHORT-TERM U.S. GOVERNMENT
MAY 31, 1998 (UNAUDITED)
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 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's use of 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 May
31, 1998, capital paid-in aggregated $680,158,721. Transactions in shares were
as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
MAY 31, NOVEMBER 30,
1998 1997
<S> <C> <C>
Shares sold 1,144,981,351 2,804,629,799
Shares issued to shareholders in payment of
distributions declared 1,821,823 5,562,130
Shares redeemed (1,142,632,220) (2,978,312,468)
Net change resulting from share transactions 4,170,954 (168,120,539)
</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 will waive, to the extent of its advisory
fee, the amount, if any, by which the Trust's aggregate annual operating
expenses exceed 0.45% of 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, 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. This fee is to obtain 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.
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 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.
[Graphic]
Federated Investors
Trust for Short-Term U.S. Government Securities
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
MAY 31, 1998
Federated Securities Corp., Distributor
Federated Investors, Inc.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 898331103
8063001 (7/98)
[Graphic]
