FEDERATED INVESTORS
Federated Government Income Securities, Inc.
(formerly, Government Income Securities, Inc.)
10th Semi-Annual Report
August 31, 1996
Established 1986
INCOME
[Graphic]
PRESIDENT'S MESSAGE
Dear Fellow Shareholder:
I am pleased to present the Semi-Annual Report for Federated Government
Income Securities, Inc.
This Report covers the six-month period from March 1, 1996, through August
31, 1996. First, Kathy Foody-Malus, Vice President of Federated Advisers,
discusses interest rate environments and their past and present effects on
government bond issues in the fund and the fund's performance.
Following her discussion are results of a recent shareholder meeting, a
complete listing of the fund's holdings in U.S. government securities, and
the fund's financial statements. The fund continues to focus on
mortgage-backed securities for their yields and good long-term value in U.S.
Treasury securities. Presently, more than 60% of fund investments are in
mortgage-backed securities and 30% are in U.S. Treasury securities. In
addition, the fund's portfolio maintained its AAAf rating by Standard &
Poor's Ratings Group, the highest quality rating available for a mutual
fund.* As of September 30, 1996, the fund also has a 4-star rating by
Morningstar out of 948 fixed-income funds.**
* An AAAf rating means that the fund's portfolio holdings and counterparties
provide extremely strong protection against losses from credit defaults.
Ratings do not remove market risks and are subject to change.
** Morningstar proprietary ratings reflect historical risk-adjusted
performance as of September 30, 1996. They are subject to change every
month. Past performance is no guarantee of future results. Ratings are
calculated from the fund's 3-, 5-, and 10-year average annual returns in
excess of 90-day Treasury bill returns with appropriate fee adjustments, and
a risk factor that reflects fund performance below 90-day T-bill returns.
The 1-year rating is calculated using the same methodology, but is not a
component of the overall rating. The fund received 3, 3, and 4 stars for the
3-, 5-, and 10-year periods and was rated among 948, 500, and 186
fixed-income funds, respectively. For the 1-year period, the fund received 3
stars and was rated among 1,506 fixed-income funds. 10% of funds in a rating
universe receive 5 stars, 22.5% receive 4 stars, and 35% receive 3 stars.
Ratings quoted are for the Class F Shares. Star ratings for other classes
may vary and are available only for classes with 3 years of performance
history.
Over the past six months, Class F Shares provided a dividend stream of $0.28
per share. On August 31, 1996, Class F Shares' 30-day distribution rate was
6.49%, and the 30-day SEC yield was 5.99% based on offering price.*** While
interest rate increases had a negative effect on prices across the bond
market during the six-month period, mortgage-backed bonds were much less
affected. For example, Class F Shares achieved a total return of -0.31%+
based on net asset value, compared to the total return of -1.18% for the
Merrill Lynch 5-Year Treasury Note Index,++ and -1.00% for the Lipper
General U.S. Government Fund Average.+++
At the end of the period, the fund's total net assets stood at $1.9 billion.
As of August 5, 1996, three additional classes of shares -- Class A Shares,
Class B Shares, and Class C Shares -- were added to the fund.
Thank you for your continued participation in Federated Government Income
Securities, Inc. Remember, reinvesting your monthly dividends can be a
convenient way to build the value of your account. If you have any questions
or comments, please do not hesitate to write.
Very sincerely yours,
[Graphic]
Richard B. Fisher
President
October 15, 1996
*** Distribution rate reflects actual distribution made to shareholders. It
is calculated by dividing the monthly annualized dividend plus short-term
capital gains, if any, by the average 30-day offering price. Current net
yield is calculated by dividing the net investment income per share for the
prior 30 days by the maximum offering price per share on that date.
+ Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Total return for the
period for Class F Shares based on offering price was -2.26%.
++ Merrill Lynch 5-Year Treasury Note Index is comprised of the most
recently issued 5-year U.S. Treasury note. Index returns are calculated as
total returns for periods of one, three, six and twelve months as well as
year-to-date. Indexes are unmanaged. Investments cannot be made in an index.
+++ Lipper figures represent the average of the total returns reported by
all of the mutual funds designated by Lipper Analytical Services as falling
into the respective categories indicated. These figures do not reflect
sales charges.
INVESTMENT REVIEW
JUST WHEN 1994'S RATE ENVIRONMENT AND NEGATIVE BOND MARKET NEARLY FADED FROM
MEMORY, 1996 SAW A RETURN OF RISING INTEREST RATES AND FALLING BOND PRICES
- -- WITHOUT ANY ACTION BY THE FEDERAL RESERVE BOARD. CAN YOU COMMENT?
Basically, an economic recovery forced rates higher. The first half of
fiscal 1996, by all definitions, was robust; second quarter GDP was 4.8%,
following first quarter GDP growth of 2.0%. On a year-over-year basis, GDP
growth was up 2.6% in the second quarter, which was the highest quarter
since the first quarter of 1995. As the second half of 1996 started, the
economic data being released initially showed signs of weakness. However,
this optimism was short-lived, as stronger economic numbers surfaced in
August which forced yields on Treasury securities to year-to-date highs. For
example, both consumer outlays and factory output rebounded in August from
the early summer doldrums. The labor market has continued to tighten as
payroll growth on a year-to-date basis has averaged 236,000 per month, and
wage inflation is continuing to pick up.
These economic numbers, in combination with the revelation that the Federal
Reserve Board (the "Fed") assumed a tightening bias at the July meeting,
have bond market participants anticipating when the Fed will tighten
monetary policy. We anticipate continued gnashing of teeth and wringing of
hands by investors as to what course of action the Fed pursues over the
balance of 1996.
HOW HAVE MORTGAGE-BACKED SECURITIES FARED?
The year-to-date performance of the mortgage market has been stellar versus
other fixed-income asset classes. The mortgage market has benefited from a
continued decline in prepayment volatility. In order for the mortgage market
to become concerned about prepayment pressures, interest rates on 10-year
U.S. Treasury notes would have to decline about 125 basis points. Other
factors, such as two-thirds of the mortgage-backed securities selling at a
discount, decreased issuance of fixed-rate mortgages, and tight spread
levels on asset-backed and corporate securities, bode well for the mortgage
market. In addition, our outlook for a continued trading range in the
Treasury market for the balance of 1996 is a good environment for
mortgage-backed securities.
IN THIS ENVIRONMENT, HOW DID FEDERATED GOVERNMENT INCOME SECURITIES, INC.
PERFORM FOR SHAREHOLDERS DURING THE SIX-MONTH REPORTING PERIOD ENDED AUGUST
31, 1996?
Class F Shares provided a dividend stream of $0.28 per share, which amounted
to $68 million. Class F Shares' total return for the six-month fiscal period
ended August 31, 1996, was -0.31% based on net asset value.* While negative,
it compares favorably to a total return of -1.18% for the Merrill Lynch
5-Year Treasury Note Index, and -1.00% for the Lipper General U.S.
Government Fund Average.
HOW MUCH OF THE FUND IS IN MORTGAGE-BACKED SECURITIES AND TREASURYS, AND
WHY? AND WHAT IS THE FUND'S CURRENT DURATION?
We continue to favor a strong position in mortgage-backed securities due to
our belief that they offer good long-term value versus comparable government
securities.
The U.S. Treasury position currently represents 30% of investments and
provides duration and positive upside potential to the overall portfolio. As
of August 31, 1996, the portfolio composition based on market value of
investments was:
<TABLE>
<S> <C>
U.S. Treasurys 30.78%
Government National Mortgage Association (GNMA) 51.04%
Federal National Mortgage Association (FNMA) 11.67%
Federal Home Loan Mortgage Corporation (FHLMC) 5.03%
</TABLE>
The fund's current effective duration is 5.5 years.
WHAT ARE THE REASONS THAT INVESTORS SHOULD BUY AND HOLD SHARES OF THIS FUND?
Federated Government Income Securities, Inc., is designed for the investor
who wants exposure to the U.S. government market through intermediate
maturities. The portfolio is managed to pursue an attractive income stream
over comparable U.S. Treasury securities by blending mortgage-backed
securities and Treasurys. Given that we are in the late stages of economic
recovery, interest rate levels are currently quite attractive.
* Performance quoted represents past performance. Total return for the
period based on offering price for Class F Shares was -2.26%. Total returns
for the period based on offering price for Class A Shares, Class B Shares,
and Class C Shares were -6.12%, -7.01%, and -2.61%, respectively. These
figures reflect performance for the period from August 5, 1996 (date of
initial public offering) to August 31, 1996. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be
worth more or less than their original cost.
SHAREHOLDER MEETING RESULTS
A Special Meeting of the Shareholders of Federated Government Income
Securities, Inc. was held on July 17, 1996. On March 19, 1996, the record
date for shareholders voting at the meeting, there were 256,617,320 total
outstanding shares. The following items were considered by shareholders and
the results of their voting were as follows:
<TABLE>
<CAPTION>
ABSTENTIONS WITHHELD
AND BROKER AUTHORITY
AGENDA ITEM FOR AGAINST NON-VOTES TO VOTE
<S> <C> <C> <C> <C>
1. To approve or disapprove an amendment to and restatement of the Fund's
Articles of Incorporation to permit the Fund to establish and designate
separate portfolios and classes of shares.
130,215,347 12,239,509 11,892,573 0
2. To approve or disapprove an amendment to the Fund's Articles of
Incorporation to permit the Fund's Board of Directors to redeem all
outstanding shares of any portfolio or class of the Fund.*
124,011,507 17,951,690 12,384,233 0
* The votes cast for this proposal were not sufficient to approve it, and
the Fund's management decided to postpone consideration of this item until a
later time.
3. To approve or disapprove revisions to the Fund's fundamental investment
limitations to permit the unrestricted acquisition of certain securities
eligible for resale under Rule 144A of the Securities Act of 1933, as
amended.
128,253,187 13,065,670 13,028,572 0
4. To elect four Directors.**
Thomas G. Bigley 147,588,553 0 0 6,758,878
Peter E. Madden 147,582,800 0 0 6,764,631
John T. Conroy, Jr. 147,348,614 0 0 6,998,817
John E. Murray, Jr. 147,338,558 0 0 7,008,873
** The following Directors of the Fund continued their terms as Directors of
the Fund: John F. Donahue, William J. Copeland, James E. Dowd, Lawrence D.
Ellis, M.D., Richard B. Fisher, Edward L. Flaherty, Jr., Gregor F. Meyer,
Wesley W. Posvar, and Marjorie P. Smuts.
</TABLE>
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
INITIAL INVESTMENT:
IF YOU MADE AN INITIAL INVESTMENT OF $11,000 IN FEDERATED GOVERNMENT INCOME
SECURITIES, INC. CLASS F SHARES ON APRIL 4, 1986, REINVESTED DIVIDENDS AND
CAPITAL GAINS, AND DIDN'T REDEEM ANY SHARES, YOUR ACCOUNT WOULD HAVE BEEN
WORTH $22,265 ON AUGUST 31, 1996. YOU WOULD HAVE EARNED A 7.05%* AVERAGE
ANNUAL TOTAL RETURN FOR THE 10-YEAR INVESTMENT LIFE SPAN.
One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends,
and you gain the benefit of compounding.
As of September 30, 1996, the Class A Shares' cumulative total return since
inception (8/5/96) was -4.48%. Class B Shares' cumulative total return since
inception (8/5/96) was -5.48%. Class C Shares' cumulative total return since
inception (8/5/96) was -1.06%. Class F Shares' average annual 1-, 5-, and
10-year total returns were 2.15%, 5.35% and 7.25%, respectively.
GRAPHIC REPRESENTATION `A'' OMITTED. SEE APPENDIX.
* Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 1%
sales charge and 1% contingent deferred sales charge prior to 48 months for
Class F Shares.
Data quoted represents past performance and does not guarantee future
results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
ONE STEP AT A TIME:
$1,000 INVESTED IN THE FUND'S CLASS F SHARES EACH YEAR FOR 10 YEARS
(REINVESTING ALL DIVIDENDS AND CAPITAL GAINS) GREW TO $15,791.
With this approach, the key is consistency.
If you had started investing $1,000 annually in Federated Government Income
Securities, Inc. Class F Shares on April 4, 1986, reinvested your dividends
and capital gains, and didn't redeem any shares, you would have invested
only $11,000, but your account would have reached a total value of $15,791*
by August 31, 1996. You would have earned an average annual total return of
7.05%.
A practical investment plan helps you pursue long-term performance from U.S.
government securities. Through systematic investing, you buy shares on a
regular basis and reinvest all earnings. An investment plan works for you
when you invest only $1,000 annually. You can take it one step at a time.
Put time and compounding to work!
GRAPHIC REPRESENTATION `B'' OMITTED. SEE APPENDIX.
* No method of investing can guarantee a profit or protect against loss in
down markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices, and all
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue
purchases through periods of low price levels.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR CURRENT INCOME
Ten years ago, in April 1986, Anne and Denny Laughlin, an imaginary working
couple with no children, had to decide how to invest a $100,000 inheritance
from her late father's estate. They chose Class F Shares of Federated
Government Income Securities, Inc. because the Fund invests in government
securities which traditionally are some of the safest, most creditworthy
securities issued in America.+
They like the way they can use their account for an occasional extravagance
- -- like the $50,000 Jaguar -- without touching their original principal.
The Laughlin's account totaled $202,383 as of 8/31/96 for a total return of
7.05%.*
GRAPHIC REPRESENTATION `C'' OMITTED. SEE APPENDIX.
+ Fund shares are not guaranteed and their value will fluctuate.
* This hypothetical scenario is provided for illustrative purposes only and
does not represent the results obtained by any particular shareholder. Past
performance does not guarantee future results.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
PORTFOLIO OF INVESTMENTS
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM OBLIGATIONS--97.6%
FEDERAL HOME LOAN MORTGAGE CORP.--3.6%
$ 306,405 8.00%, 10/1/2025 $ 306,841
72,565,634 7.00%, 12/1/2025-7/1/2026 69,185,527
Total 69,492,368
FEDERAL HOME LOAN MORTGAGE CORP. REMIC--1.4%
27,855,974 Series 176 Class 2, IO, 6/1/2026 10,498,359
7,982,241 Series 177 Class 2, IO, 7/1/2026 3,003,318
25,000,000 Series 1859 PB, PO, 10/15/2023 13,312,500
Total 26,814,177
FEDERAL NATIONAL MORTGAGE ASSOCIATION--8.7%
10,000,000 8.00%, 12/1/2099 9,999,900
36,817,393 7.00%, 10/1/2025 35,056,417
132,721,990 6.50%, 8/1/2010-6/1/2026 122,771,496
Total 167,827,813
FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC--2.9%
49,877,230 Series 273, Class 1, PO, 7/1/2026 28,741,753
21,667,000 Series 93-257C, PO, 6/25/2023 9,564,680
17,389,145 Series 96-38B, PO, 11/25/2023 6,977,394
25,312,779 Series 96-38C, PO, 12/25/2023 10,105,368
Total 55,389,195
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--50.5%
7,876,061 12.50%, 4/15/2010-7/15/2015 9,086,927
22,060,563 12.00%, 5/15/2011-12/15/2015 25,231,548
7,432,219 10.50%, 9/15/2016 8,196,251
41,639,132 10.00%, 3/15/2016-11/15/2020 45,399,145
71,053,162 9.50%, 8/15/2016-2/15/2022 76,249,991
</TABLE>
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM OBLIGATIONS--CONTINUED
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--CONTINUED
$ 58,416,198 9.00%, 2/15/2009-11/15/2025 $ 61,421,028
146,758,916 8.50%, 1/15/2017-8/15/2026 150,110,228
139,199,422 8.00%, 10/15/2010-8/15/2026 139,241,182
272,122,339 7.50%, 5/15/2022-1/15/2026 265,941,699
172,166,930 7.00%, 7/15/2023-8/15/2026 163,448,622
35,000,000 6.50%, 4/15/2024-9/15/2026 32,210,500
Total 976,537,121
UNITED STATES TREASURY BONDS--8.4%
20,000,000 9.25%, 2/15/2016 24,117,800
27,600,000 8.75%, 5/15/2017 31,918,296
38,800,000 8.125%, 8/15/2019-5/15/2021 42,453,124
25,000,000 7.125%, 2/15/2023 24,577,500
33,705,000 6.00%, 2/15/2026 28,944,843
50,000,000 0.0%, STRIP, 2/15/2019 9,640,000
Total 161,651,563
UNITED STATES TREASURY NOTES--22.1%
22,600,000 7.875%, 11/15/2004 23,929,558
28,000,000 7.50%, 11/15/2001 28,905,520
43,500,000 7.375%, 11/15/1997 44,122,050
82,100,000 7.25%, 2/15/1998-8/15/2004 83,434,931
6,300,000 7.00%, 7/15/2006 6,325,704
16,000,000 6.875%, 5/15/2006 15,912,800
22,000,000 6.25%, 4/30/2001 21,594,100
98,500,000 6.125%, 9/30/2000 96,564,475
25,000,000 5.875%, 4/30/1998 24,849,500
</TABLE>
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM OBLIGATIONS -- CONTINUED
UNITED STATES TREASURY NOTES -- CONTINUED
$ 80,000,000 5.50%, 11/15/1998 $ 78,544,800
3,000,000 5.00%, 2/15/1999 2,903,100
Total 427,086,538
TOTAL LONG-TERM OBLIGATIONS (IDENTIFIED COST $1,926,107,151) 1,884,798,775
(A)REPURCHASE AGREEMENT -- 1.5%
28,385,000 BT Securities Corp., 5.27%, dated 8/30/1996, due 9/3/1996
(AT AMORTIZED COST) 28,385,000
TOTAL INVESTMENTS (IDENTIFIED COST $1,954,492,151)(B) $1,913,183,775
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to
$1,954,492,151. The net unrealized depreciation of investments on a
federal tax basis amounts to $41,308,376 which is comprised of
$4,040,489 appreciation and $45,348,865 depreciation at August 31, 1996.
Note: The categories of investments are shown as a percentage of net assets
($1,932,153,610) at August 31, 1996.
The following acronyms are used throughout this portfolio:
IO -- Interest Only
PO -- Principal Only
REMIC -- Real Estate Mortgage Investment Conduit
STRIP -- Separate Trading of Registered Interest & Principal of Securities
(See Notes which are an integral part of the Financial Statements)
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value
(identified and tax cost $1,954,492,151) $1,913,183,775
Cash 104,510
Income receivable 17,662,249
Receivable for investments sold 78,668,791
Receivable for shares sold 100,710
Total assets 2,009,720,035
LIABILITIES:
Payable for investments purchased $ 64,126,683
Payable for shares redeemed 2,270,391
Income distribution payable 10,754,182
Accrued expenses 415,169
Total liabilities 77,566,425
NET ASSETS for 228,813,161.649 shares
outstanding $1,932,153,610
NET ASSETS CONSIST OF:
Paid in capital $2,346,327,833
Net unrealized depreciation of investments (41,308,376)
Accumulated net realized loss on investments (372,860,259)
Distributions in excess of net investment
income (5,588)
Total Net Assets $1,932,153,610
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($292.56 / 34.649
shares outstanding) $8.44
Offering Price Per Share (100/95.50 of $8.44)* $8.84
Redemption Proceeds Per Share $8.44
CLASS B SHARES:
Net Asset Value Per Share ($129,977 / 15,392
shares outstanding) $8.44
Offering Price Per Share $8.44
Redemption Proceeds Per Share (94.50/100 of $8.44)** $7.98
CLASS C SHARES:
Net Asset Value Per Share ($24,816 / 2,939 shares
outstanding) $8.44
Offering Price Per Share $8.44
Redemption Proceeds Per Share (99.00/100 of $8.44)** $8.36
CLASS F SHARES:
Net Asset Value Per Share ($1,931,998,524 /
228,794,796 shares outstanding) $8.44
Offering Price Per Share (100/99.00 of $8.44)* $8.53
Redemption Proceeds Per Share (99.00/100 of $8.44)** $8.36
</TABLE>
* See "What Shares Cost" in the Prospectus.
** See "Contingent Deferred Sales Charge" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
<TABLE>
<CAPTION>
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense
of $6,162,083) $78,484,392
EXPENSES:
Investment advisory fee $ 7,932,286
Administrative personnel and services fee 799,574
Custodian fees 175,778
Transfer and dividend disbursing agent fees
and expenses 807,973
Directors'/Trustees' fees 19,614
Auditing fees 10,916
Legal 5,190
fees
Portfolio accounting fees 86,876
Shareholder services fee -- Class F Shares 2,644,084
Share registration costs 17,089
Printing and postage 178,587
Insurance premiums 16,591
Taxes 166,620
Miscellaneous 19,704
Total expenses 12,880,882
Waivers ---
Waiver of investment advisory fee $(2,680,985)
Waiver of shareholder services fee --
Class F Shares (21,153)
Total expenses (2,702,138)
Net expenses 10,178,744
Net investment income 68,305,648
REALIZED AND UNREALIZED GAIN
(LOSS) ON INVESTMENTS:
Net realized loss on investments (18,440,181)
Net change in unrealized depreciation
of investments (55,933,236)
Net realized and unrealized loss on investments (74,373,417)
Change in net assets resulting from operations $(6,067,769)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(UNAUDITED) ENDED
AUGUST 31, FEBRUARY 29,
1996 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 68,305,648 $ 169,262,443
Net realized gain (loss) on investments
($18,440,181 net loss and
$17,733,056 net loss, respectively, as
computed for federal
tax purposes) (18,440,181) 28,475,478
Net change in unrealized appreciation
(depreciation) (55,933,236) 34,036,205
Change in net assets resulting from operations (6,067,769) 231,774,126
NET EQUALIZATION (DEBITS)-- (758,447) (1,642,823)
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Class A Shares (2) --
Class B Shares (693) --
Class C Shares (132) --
Class F Shares (68,053,473) (171,414,167)
Change in net assets resulting from
distributions to shareholders (68,054,300) (171,414,167)
SHARE TRANSACTIONS--
Proceeds from sale of shares 11,070,261 53,344,226
Net asset value of shares issued to
shareholders in payment of
distributions declared 31,470,006 70,463,057
Cost of shares redeemed (299,879,826) (456,164,008)
Change in net assets resulting from
share transactions (257,339,559) (332,356,725)
Change in net assets (332,220,075) (273,639,589)
NET ASSETS:
Beginning of period 2,264,373,685 2,538,013,274
End of period (including undistributed
net investment income
of $0 and $501,511, respectively) $ 1,932,153,610 $ 2,264,373,685
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
FINANCIAL HIGHLIGHTS -- CLASS A SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04
Net realized and unrealized gain (loss) on investments (0.18)
Total from investment operations (0.14)
LESS DISTRIBUTIONS
Distributions from net investment income (0.05)
NET ASSET VALUE, END OF PERIOD $ 8.44
TOTAL RETURN(B) (1.66%)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.96%*
Net investment income 6.46%*
Expense waiver/reimbursement(c) 0.25%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $0
Portfolio turnover 49%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 5, 1996 (date of initial
public offering) to August 31, 1996.
(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 GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
FINANCIAL HIGHLIGHTS -- CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04
Net realized and unrealized gain (loss) on investments (0.18)
Total from investment operations (0.14)
LESS DISTRIBUTIONS
Distributions from net investment income (0.05)
NET ASSET VALUE, END OF PERIOD $ 8.44
TOTAL RETURN(B) (1.68%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.71%*
Net investment income 5.71%*
Expense waiver/reimbursement(c) 0.25%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $130
Portfolio turnover 49%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 5, 1996 (date of initial
public offering) to August 31, 1996.
(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 GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
FINANCIAL HIGHLIGHTS -- CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD
ENDED
AUGUST 31,
1996(A)
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.63
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04
Net realized and unrealized gain (loss) on investments (0.18)
Total from investment operations (0.14)
LESS DISTRIBUTIONS
Distributions from net investment income (0.05)
NET ASSET VALUE, END OF PERIOD $ 8.44
TOTAL RETURN(B) (1.68%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.71%*
Net investment income 5.71%*
Expense waiver/reimbursement(c) 0.25%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $25
Portfolio turnover 49%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 5, 1996 (date of initial
public offering) to August 31, 1996.
(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 GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
FINANCIAL HIGHLIGHTS -- CLASS F SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
AUGUST 31, YEAR ENDED FEBRUARY 28 OR 29,
1996 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF $ 8.75 $ 8.55 $ 9.00 $ 9.44 $ 9.48 $ 9.32 $ 9.19
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.28 0.62 0.63 0.68 0.79 0.83 0.87
Net realized and
unrealized gain
(loss) on
investments (0.31) 0.20 (0.46) (0.44) (0.05) 0.17 0.15
Total from
invest-
ment operations (0.03) 0.82 0.17 0.24 0.74 1.00 1.02
LESS
DISTRIBUTIONS
Distributions
from
net investment
income (0.28) (0.62) (0.62) (0.68) (0.78) (0.83) (0.87)
Distributions in
excess of net
invest-
ment income -- -- -- -- -- (0.01)(a) (0.02)(a)
Total
distributions (0.28) (0.62) (0.62) (0.68) (0.78) (0.84) (0.89)
NET ASSET VALUE
END OF PERIOD $ 8.44 $ 8.75 $ 8.55 $ 9.00 $ 9.44 $ 9.48 $ 9.32
TOTAL RETURN(B) (0.31%) 9.87% 2.11% 2.63% 8.08% 11.12% 11.63%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.96%* 0.96% 0.97% 0.97% 0.90% 0.92% 0.90%
Net investment
income 6.46%* 6.96% 7.34% 7.39% 8.27% 8.86% 9.43%
Expense waiver/
reimbursement(c) 0.25%* 0.25% 0.23% 0.19% -- -- --
SUPPLEMENTAL DATA
Net assets, end
of period (000
omitted) $1,931,999 $2,264,374 $2,538,013 $3,542,078 $3,643,180 $2,261,762 $1,322,749
Portfolio
turnover 49% 161% 143% 134% 43% 36% 37%
</TABLE>
<TABLE>
<CAPTION>
, YEAR ENDED FEBRUARY 28 OR 29,
1990 1989 1988
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF $ 9.00 $ 9.49 $ 9.76
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.87 0.86 0.88
Net realized and
unrealized gain
(loss) on
investments 0.24 (0.53) (0.27)
Total from
invest-
ment operations 1.11 0.33 0.61
LESS
DISTRIBUTIONS
Distributions
from
net investment
income (0.91) (0.82) (0.88)
Distributions in
excess of net
invest-
ment income (0.01)(a) -- --
Total
distributions (0.92) (0.82) (0.88)
NET ASSET VALUE
END OF PERIOD $ 9.19 $ 9.00 $ 9.49
TOTAL RETURN(B) 12.81% 3.65% 6.80%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.93% 0.88% 0.81%
Net investment
income 9.42% 9.33% 9.47%
Expense waiver/
reimbursement(c) -- -- --
SUPPLEMENTAL DATA
Net assets, end
of period (000
omitted) $1,320,710 $1,482,030 $1,846,198
Portfolio
turnover 76% 62% 34%
</TABLE>
* Computed on an annualized basis.
(a) Distributions in excess of net investment income for the years ended
February 29, 1992, February 28, 1991, and 1990 were a result of certain book
and tax timing differences. These distributions did not represent a return
of capital for federal income tax purposes.
(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 GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)
NOTES TO FINANCIAL STATEMENTS
AUGUST 31, 1996 (UNAUDITED)
1. ORGANIZATION
Federated Government Income Securities, Inc. (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Fund offers four
classes of shares: Class A Shares, Class B Shares, Class C Shares and Class
F Shares. The Fund's objective is to provide current income.
Effective March 31, 1996, the Board of Directors ("Directors") changed the
name of the Fund from Government Income Securities, Inc. to Federated
Government Income Securities, Inc.
Effective August 5, 1996, the Fund added Class A Shares, Class B Shares and
Class C Shares.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS -- U.S. government securities are generally valued at
the mean of the latest bid and asked price as furnished by an independent
pricing service. Short-term securities are valued at the prices provided by
an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS -- It is the policy of the Fund 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 Fund 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 Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Directors. Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund 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 Fund'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.
At February 29, 1996, the Fund, for federal tax purposes, had a capital loss
carryforward of $354,403,888, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
1997 $ 35,933,841
1998 $ 13,325,628
1999 $ 147,841
2000 $ 3,842,806
2001 $ 7,365,127
2002 $ 83,738,305
2003 $ 192,317,284
2004 $ 17,733,056
</TABLE>
EQUALIZATION -- The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from sales and
costs of redemptions of fund shares (equivalent, on a per share basis, to
the amount of undistributed net investment income on the date of the
transaction) is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of fund shares.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Fund may engage in
when-issued or delayed delivery transactions. The Fund 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.
DOLLAR ROLL TRANSACTIONS -- The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA and FHLMC, in which
the Fund sells mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon and
maturity) securities at a later date at an agreed upon price. Dollar roll
transactions are short-term financing arrangements which will not exceed
twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Fund's current yield and total return.
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. CAPITAL STOCK
At August 31, 1996, par value shares ($ 0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
NUMBER OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 500,000,000
Class B Shares 500,000,000
Class C Shares 500,000,000
Class F Shares 500,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
PERIOD YEAR
ENDED ENDED
AUGUST 31, FEBRUARY 29,
1996* 1996
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 34.649 $ 300 -- $ --
Shares issued to shareholders
in payment of
distributions declared -- -- -- --
Shares redeemed -- -- -- --
Net change resulting from
Class A Share transactions 34.649 $ 300 -- $ --
</TABLE>
* For the period from August 5, 1996 (date of initial public offering) to
August 31, 1996.
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
AUGUST 31, FEBRUARY 29,
1996* 1996
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 15,392 $ 132,402 -- $ --
Shares issued to shareholders
in payment of
distributions declared -- -- -- --
Shares redeemed -- -- -- --
Net change resulting from
Class B Share transactions 15,392 $ 132,402 -- $ --
</TABLE>
* For the period from August 5, 1996 (date of initial public offering) to
August 31, 1996.
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
AUGUST 31, FEBRUARY 29,
1996* 1996
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,939 $ 25,275 -- $ --
Shares issued to shareholders
in payment of
distributions declared -- -- -- --
Shares redeemed -- -- -- --
Net change resulting from
Class C Share transactions 2,939 $ 25,275 -- $ --
</TABLE>
* For the period from August 5, 1996 (date of initial public offering) to
August 31, 1996.
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
AUGUST 31, FEBRUARY 29,
1996 1996
CLASS F SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,268,955 $ 10,912,284 6,124,214 $ 53,344,226
Shares issued
to shareholders
in payment of
distributions
declared 3,672,768 31,470,006 8,062,587 70,463,057
Shares redeemed (35,037,523) (299,879,826) (52,286,242) (456,164,008)
Net change resulting
from Class F Share
transactions (30,095,800) $ (257,497,536) (38,099,441) $ (332,356,725)
Net change
resulting from Fund
share transactions (30,077,434.351) $ (257,339,559) (38,099,441) $ (332,356,725)
</TABLE>
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE -- Federated Advisers, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.75% of the Fund'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 Fund 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.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended
to result in the sale of the Fund's Class B Shares and Class C Shares. The
Plan provides that the Fund may incur distribution expenses according to the
following schedule annually, to compensate FSC.
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE
CLASS NAME DAILY NET ASSETS
<S> <C>
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to 0.25% of average daily net assets of the Fund 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 Fund. 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 Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.
GENERAL -- Certain of the Officers and Directors of the Fund are Officers
and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1996, were as follows:
PURCHASES $1,007,351,471
SALES $1,277,348,255
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Richard B. Fisher
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
Richard B. Fisher
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive 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 investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only
when preceded or accompanied by the fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
[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.
Cusip 313912206
Cusip 313912305
Cusip 313912404
Cusip 313912107
8092706 (10/96)
[Graphic]
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
APPENDIX
A. The graphic representation here displayed, entitled "Initial
Investment of $11,000", consists of a boxed legend in the upper left
quadrant indicating the components of the corresponding mountain chart.
The lighter shaded portion represents Reinvested Income and the darker
shaded portion represents the Principal Value of $11,000 Investment (1,095
Shares). The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an initial investment of $11,000
in the Class F Shares of Federated Government Income Securities, Inc. on
4/4/86 would have a reinvested total worth of $22,265 on 8/31/96. The "x"
axis reflects annual computation periods from 4/4/86 to 8/31/96. The right
margin of the chart reflects the ending values of a hypothetical investment
of $11,000 in the Fund measured in increments of $4,000 ranging from $0 to
$24,000.
B. The graphic representation here displayed, entitled "Yearly
Investments of $1,000", consists of a boxed legend in the upper left
quadrant indicating the components of the corresponding mountain chart.
The lighter shaded portion represents Reinvested Income and the darker
shaded portion represents the Principal Value of Annual $1,000 Investments
(totaling $11,000 by 8/31/96). The color-coded mountain chart is a visual
representation of the narrative text above it, which shows that if you had
started investing $1,000 annually in the Class F Shares of Federated
Government Income Securities, Inc. on 4/4/86, you would have a reinvested
total worth of $15,791/1,871 Shares on 8/31/96. The "x" axis reflects
annual computation periods from 4/4/86 to 8/31/96. The right margin
reflects the ending values of a hypothetical annual investment of $1,000 in
the Fund measured in increments of $4,000 ranging from $0 to $16,000.
C. The graphic representation here displayed, entitled "Income Over
Time", consists of a boxed legend in the upper left quadrant indicating the
components of the corresponding mountain chart. The lighter shaded portion
represents the value of Reinvested Income and the darker shaded portion
represents the Principal Value of $100,000 Investment (9,950 Shares). The
color-coded mountain chart is a visual representation of the narrative text
above it, which shows that an original $100,000 investment in the Class F
Shares of Federated Government Income Securities, Inc. on 4/4/86 would have
a reinvested total worth of $202,383/23,979 Shares on 8/31/96. The "x"
axis reflects annual computation periods from 4/4/86 to 8/31/96. The right
margin reflects the ending values of a hypothetical investment of $100,000
in the Fund measured in $50,000 increments ranging from $0 to $250,000.
