FEDERATED GOVERNMENT INCOME SECURITIES INC, 485APOS, 1996-06-28

FEDERATED GOVERNMENT INCOME SECURITIES INC
485APOS, 1996-06-28

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1933 Act File No. 2-74191
1940 Act File No. 811-3266

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. ..........

Post-Effective Amendment No. 33 .......... X
-

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 24 ......................... X

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
on pursuant to paragraph (b)
----------------
X 60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has filed with the Securities and Exchange Commission a declaration
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and:

filed the Notice required by that Rule on ; or
---------------
intends to file the Notice required by that Rule on or about ;
------------
or
X during the most recent fiscal year did not sell any securities pursuant to
Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.

Copies to:

Charles H. Morin, Esquire
Dickstein, Shapiro & Morin,
2101 L Street, N.W.
Washington, D.C. 20037

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of FEDERATED GOVERNMENT INCOME
SECURITIES, INC., is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page...............Cover Page.
Item 2. Synopsis.................Summary of Fund Expenses.
Item 3. Condensed Financial
Information..............Financial Highlights; Performance
Information.
Item 4. General Description of
Registrant...............General Information; Investment Information;
Investment Objective; Investment Policies;
Special Considerations of Fixed Income
Securities; Portfolio Turnover; Investment
Limitations.
Item 5. Management of the Fund...Fund Information; Management of the Fund;
Distribution of Shares; Shareholder Services;
Other Payments to Financial Institutions;
Supplemental Payments to Financial Institutions;
Administration of the Fund.
Item 6. Capital Stock and Other
Securities...............Dividends and Distributions; Shareholder
Information; Voting Rights; Tax Information;
Federal Income Tax; State and Local Taxes.
Item 7. Purchase of Securities Being
Offered..................Net Asset Value; Investing in the Fund; Share
Purchases; Minimum Investment Required; What
Shares Cost; Eliminating the Sales Charge;
Systematic Investment Program; Exchange
Privilege; Certificates and Confirmations;
Retirement Plans.
Item 8. Redemption or Repurchase.Redeeming Shares; Through a Financial
Institution; Redeeming Shares by Telephone;
Redeeming Shares by Mail; Contingent Deferred
Sales Charge; Systematic Withdrawal Program;
Accounts with Low Balances.
Item 9. Pending Legal Proceedings None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page...............Cover Page.
Item 11. Table of Contents........Table of Contents.
Item 12. General Information and
History..................General Information About the Fund; About
Federated Investors.
Item 13. Investment Objectives and
Policies.................Investment Objective and Policies.
Item 14. Management of the Fund...Federated Government Income Securities, Inc.
Management.
Item 15. Control Persons and Principal
Holders of Securities....Fund Ownership.
Item 16. Investment Advisory and Other
Services.................Investment Advisory Services; Other Services.
Item 17. Brokerage Allocation.....Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not Applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered................Purchasing Shares; Determining Net Asset Value;
Exchange Privilege; Redeeming Shares.
Item 20. Tax Status...............Tax Status.
Item 21. Underwriters.............Not Applicable.
Item 22. Calculation of Performance
Data.....................Total Return; Yield; Current Distributions;
Performance Comparisons.
Item 23. Financial Statements.....The Financial Statements for the fiscal year
ended February 29, 1996, are incorporated herein
by reference to the Fund's Annual Report dated
February 29, 1996.

FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)

PROSPECTUS

Federated Government Income Securities, Inc. (the "Fund"), is an open-end,
diversified management investment company (a mutual fund) that seeks current
income by investing in a professionally managed, diversified portfolio limited
primarily to securities guaranteed as to payment of principal and interest by
the U.S. government or its agencies or instrumentalities.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in the Class F Shares of the Fund. Keep this prospectus for future
reference.

The Fund has also filed a Statement of Additional Information for the Fund dated
July 1, 1996, with the Securities and Exchange Commission. The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Fund is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus dated July 1, 1996

- -------------------------------------------------------------------------------

TABLE OF CONTENTS

Summary of Fund Expenses.......................................................1

Financial Highlights...........................................................2

General Information............................................................3

Investment Information.........................................................3
Investment Objective.........................................................3
Investment Policies..........................................................3
Special Considerations of Fixed Income
Securities................................................................6
Portfolio Turnover...........................................................8

Investment Limitations.......................................................8

Net Asset Value................................................................9

Investing in the Fund..........................................................9

Share Purchases..............................................................9
Minimum Investment Required.................................................10
What Shares Cost............................................................10
Eliminating the Sales Charge................................................11
Systematic Investment Program...............................................12
Exchange Privileges.........................................................12
Certificates and Confirmations..............................................13

Dividends and Distributions.................................................13

Retirement Plans............................................................13

Redeeming Shares..............................................................14
Through a Financial Institution.............................................14
Redeeming Shares by Telephone...............................................14
Redeeming Shares by Mail....................................................14
Contingent Deferred Sales Charge............................................15
Systematic Withdrawal Program...............................................16
Accounts with Low Balances..................................................16

Fund Information..............................................................17
Management of the Fund......................................................17

Distribution of Shares......................................................18

Shareholder Services........................................................18
Other Payments to Financial
Institutions.............................................................18

Supplemental Payments to Financial
Institutions.............................................................18

Administration of the Fund..................................................19

Shareholder Information.......................................................19
Voting Rights...............................................................19

Tax Information...............................................................20
Federal Income Tax..........................................................20
State and Local Taxes.......................................................20

Performance Information.......................................................20

Addresses.....................................................................21

- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES
FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)

SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).................................... 1.00%
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)......................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable) (1)................................................................................................ 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................................... None
Exchange Fee..................................................................................................... None

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (2)................................................................................ 0.50%
12b-1 Fee........................................................................................................ None
Total Other Expenses............................................................................................. 0.46%
Shareholder Services Fee.......................................................................... 0.25%
Total Operating Expenses (3)............................................................................ 0.96%
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price).........................
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price)..............
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, a
applicable) (1).....................................................................................
Redemption Fee (as a percentage of amount redeemed, if applicable)....................................
Exchange Fee..........................................................................................

(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
originial purchase price or the net asset value of shares redeemed within
four years of their purchase date. For a more complete description, see
"Contingent Deferred Sales Charge."

(2) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.75%.

(3) The total operating expenses would have been 1.21% absent the voluntary
waiver of a portion of the management fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of the Fund will bear, either
directly or indirectly. For more complete descriptions of the various costs and
expenses, see "Investing in the Fund," "Redeeming Shares" and "Fund
Information." Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.............. $30 $51 $63 $127
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $20 $40 $63 $127
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

- --------------------------------------------------------------------------------

FINANCIAL HIGHLIGHTS

FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY,GOVERNMENT INCOME SECURITIES, INC.)
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche LLP, the Fund's
independent auditors. Their report, dated April 18, 1996, on the Fund's
financial statements for the year ended February 29, 1996, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated by reference. This table should be read in conjunction with the
Fund's financial statements and notes thereto, which may be obtained from the
Fund.
<TABLE>
<CAPTION>
YEAR ENDED FEBRUARY 28 OR 29,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.55 $ 9.00 $ 9.44 $ 9.48 $ 9.32 $ 9.19 $ 9.00 $ 9.49 $ 9.76
- ------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------
Net investment income 0.62 0.63 0.68 0.79 0.83 0.87 0.87 0.86 0.88
- ------------------------
Net realized and
unrealized gain (loss)
on investments 0.20 (0.46) (0.44) (0.05) 0.17 0.15 0.24 (0.53) (0.27)
- ------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from investment
operations 0.82 0.17 0.24 0.74 1.00 1.02 1.11 0.33 0.61
- ------------------------
LESS DISTRIBUTIONS
- ------------------------
Distributions from net
investment income (0.62) (0.62) (0.68) (0.78) (0.83) (0.87) (0.91) (0.82) (0.88)
- ------------------------
Distributions in excess
of net investment
income -- -- -- -- (0.01 (b) (0.02 (b) (0.01 (b) -- --
- ------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total distributions (0.62) (0.62) (0.68) (0.78) (0.84) (0.89) (0.92) (0.82) (0.88)
- ------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END OF
PERIOD $ 8.75 $ 8.55 $ 9.00 $ 9.44 $ 9.48 $ 9.32 $ 9.19 $ 9.00 $ 9.49
- ------------------------ --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (C) 9.87% 2.11% 2.63% 8.08% 11.12% 11.63% 12.81% 3.65% 6.80%
- ------------------------
RATIOS TO AVERAGE NET
ASSETS
- ------------------------
Expenses 0.96% 0.97% 0.97% 0.90% 0.92% 0.90% 0.93% 0.88% 0.81%
- ------------------------
Net investment income 6.96% 7.34% 7.39% 8.27% 8.86% 9.43% 9.42% 9.33% 9.47%
- ------------------------
Expense waiver/
reimbursement (d) 0.25% 0.23% 0.19% -- -- -- -- -- --
- ------------------------
SUPPLEMENTAL DATA
- ------------------------
Net assets, end of
period
(000 omitted $2,264,374 $2,538,013 $3,542,078 $3,643,180 $2,261,762 $1,322,749 $1,320,710 $1,482,030 $1,846,198 $3,183,612
- ------------------------
Portfolio Turnover 161% 143% 134% 43% 36% 37% 76% 62% 34%
- ------------------------

<CAPTION>
<S> <C>
1987(A)
NET ASSET VALUE,
BEGINNING OF PERIOD $ 9.99
- ------------------------
INCOME FROM INVESTMENT
OPERATIONS
- ------------------------
Net investment income 0.94
- ------------------------
Net realized and
unrealized gain (loss)
on investments (0.23)
- ------------------------ -----------
Total from investment
operations 0.71
- ------------------------
LESS DISTRIBUTIONS
- ------------------------
Distributions from net
investment income (0.94)
- ------------------------
Distributions in excess
of net investment
income --
- ------------------------ -----------
Total distributions (0.94 )
- ------------------------ -----------
NET ASSET VALUE, END OF
PERIOD $ 9.76
- ------------------------ -----------
TOTAL RETURN (C) 6.76 %
- ------------------------
RATIOS TO AVERAGE NET
ASSETS
- ------------------------
Expenses 0.95 %*
- ------------------------
Net investment income 9.18 %*
- ------------------------
Expense waiver/
reimbursement (d) --
- ------------------------
SUPPLEMENTAL DATA
- ------------------------
Net assets, end of
period
(000 omitted)
- ------------------------
Portfolio Turnover 208 %
- ------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from April 4, 1986 (date of initial
public investment) to February 28, 1987.

(b) Distributions in excess of net investment income for the years endeed
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.

(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated February 29, 1996, which can be obtained free of charge.

- --------------------------------------------------------------------------------
GENERAL INFORMATION

The Fund was established as a Massachusetts business trust on September 23,
1981, and reorganized as a corporation under the laws of the State of Maryland
on February 4, 1986. At a meeting of the Board of Directors ("Directors") held
on February 26, 1996, the Directors approved an amendment to the Articles of
Incorporation to change the name of Government Income Securities, Inc. to
Federated Government Income Securities, Inc.

The Fund is designed primarily for individuals and institutions seeking current
income through a professionally managed, diversified portfolio of U.S.
government securities. A minimum initial investment of $1,500 is required,
except for retirement plans, in which case the minimum initial investment is
$50.

The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate Fund
listing.

- -------------------------------------------------------------------------------
INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide current income. The
investment objective cannot be changed without approval of shareholders. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus.

INVESTMENT POLICIES

The investment policies described below may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.

ACCEPTABLE INVESTMENTS
The Fund invests primarily in securities which are guaranteed as to payment of
principal and interest by the U.S. government or U.S. government agencies or
instrumentalities. Under normal circumstances, the Fund will invest at least 65%
of the value of its total assets in U.S. government securities.

The U.S. government securities in which the Fund invests include:

direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes,
and bonds (including zero coupon bonds); and

notes, bonds, and discount notes of U.S. government agencies or
instrumentalities, such as the: Farm Credit System, including the National Bank
for Cooperatives, Farm Credit Banks, and Banks for Cooperatives; Farmers Home
Administration, Federal Home Loan Banks, Farm Credit Banks, Federal Home Loan

Mortgage Corporation, Federal National Mortgage Association, Government
National Mortgage Association, and Student Loan Marketing Association.

The obligations of U.S. government agencies or instrumentalities which the Fund
may buy are backed in a variety of ways by the U.S. government or its agencies
or instrumentalities. Some of these obligations, such as Government National
Mortgage Association ("Ginnie Mae") mortgage-backed securities and obligations
of the Farmers Home Administration, are backed by the full faith and credit of
the U.S. Treasury. Obligations of the Farmers Home Administration are also
backed by the issuer's right to borrow from the U.S. Treasury. Obligations of
Federal Home Loan Banks and the Farmers Home Administration are backed by the
discretionary authority of the U.S. government to purchase certain obligations
of agencies or instrumentalities. Obligations of Federal Home Loan Banks,
Farmers Home Administration, Farm Credit Banks, Federal National Mortgage
Association ("Fannie Mae"), and Federal Home Loan Mortgage Corporation ("Freddie
Mac") are backed by the credit of the agency or instrumentality issuing the
obligations. Some of the securities purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest payments
on mortgage-backed securities. These securities are usually structured with two
classes and receive different proportions of the interest and principal
distributions on the pool of underlying mortgage-backed securities ("IOs and
POs"). In addition, the Fund may engage in certain strategies and transactions
as described in the prospectus.

COLLATERALIZED MORTGAGE
OBLIGATIONS ("CMOS")

CMOs are debt obligations collateralized by mortgage loans or mortgage
pass-through securities. Typically, CMOs are collateralized by Ginnie Mae,
Fannie Mae or Freddie Mac certificates, but may be collateralized by whole loans
or private pass-through securities. CMOs may have fixed or floating rates of
interest.

The Fund will invest only in CMOs that are rated AAA by a nationally recognized
statistical rating organization. The Fund may also invest in certain CMOs which
are issued by private entities such as investment banking firms and companies
related to the construction industry. The CMOs in which the Fund may invest may
be: (i) securities which are collateralized by pools of mortgages in which each
mortgage is guaranteed as to payment of principal and interest by an agency or
instrumentality of the U.S. government; (ii) securities which are collateralized
by pools of mortgages in which payment of principal and interest is guaranteed
by the issuer and such mortgages in which payment of principal and interest is
guaranteed by the issuer and such guarantee is collateralized by U.S. government
securities; or (iii) other securities in which the proceeds of the issuance are
invested in mortgage-backed securities and payment of the principal and interest
is supported by the credit of an agency or instrumentality of the U.S.
government.

CMOs that include a class bearing a floating rate of interest also may include a
class whose yield floats inversely against a specified index rate. These
"inverse floaters" are more volatile than conventional fixed or floating rate
classes of a CMO and the yield thereon, as well as the value thereof, will
fluctuate in inverse proportion to changes in the index on which interest rate
adjustments are based. As a result, the yield on an inverse floater class of a
CMO will generally increase when market yields (as reflected by the index)
decrease and decrease when market yields increase. The extent of the volatility
of inverse floaters depends on the extent of anticipated changes in market rates
of interest. Generally, inverse floaters provide for interest rate

adjustments based upon a multiple of the specified interest index, which further
increases their volatility. The degree of additional volatility will be directly
proportional to the size of the multiple used in determining interest rate
adjustments.

TEMPORARY INVESTMENTS

The Fund may invest temporarily in cash and cash items during times of unusual
market conditions for defensive purposes and to maintain liquidity.

REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or other
securities to the Fund and agree at the time of sale to repurchase them at a
mutually agreed upon time and price. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive less than
the repurchase price on any sale of such securities.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The yields generally available
on comparable securities when delivery occurs may be higher than yields on
securities obtained pursuant to such transactions. Settlement dates may be a
month or more after entering into these transactions, and the market values of
the securities purchased may vary from the purchase prices as interest rates
fluctuate. Accordingly, the Fund may pay more/less than the market value of the
securities on the settlement date. In addition, the seller's failure to complete
these transactions may cause the Fund to miss a price or yield considered to be
advantageous.

The Fund may dispose of a commitment prior to settlement if the adviser deems it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.

LENDING OF PORTFOLIO SECURITIES

In order to generate additional income, the Fund may lend portfolio securities
on a short-term or a long-term basis up to one-third of the value of its total
assets to broker/dealers, banks, or other institutional borrowers of securities.
The Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the investment adviser has determined are creditworthy
under guidelines established by the Fund's Directors and will receive collateral
in the form of cash or U.S. government securities equal to at least 100% of the
value of the securities loaned.

There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.

Securities lending transactions typically require the Fund to pay interest on
any cash collateral received. The Fund will seek to earn interest and additional
returns by investing cash collateral in repurchase agreements or liquid high
grade securities. The Fund will bear the risk of any losses on such investments
and the risk that the income from such investments are less than the interest
payable to the borrower.

SPECIAL CONSIDERATIONS OF FIXED INCOME SECURITIES

There is no limit to portfolio maturity. The prices of fixed income government
securities fluctuate inversely in relation to the direction of interest rates. A
decline in market interest rates results in a rise in the market prices of
outstanding debt obligations. Conversely, an increase in market interest rates
results in a decline in market prices of outstanding debt obligations. In either
case, the amount of change in market prices of debt obligations in response to
changes in market interest rates generally depends on the maturity of the debt
obligations: the debt obligations with the longest maturities will experience
the greatest market price changes. The prices of zero coupon securities, IOs and
POs, and certain structures of CMOs are more sensitive to fluctuations in
interest rates than are conventional bonds.

The market value of debt obligations, and therefore the Fund's net asset value,
will fluctuate due to changes in economic conditions and other market factors
such as interest rates which are beyond the control of the Fund's investment
adviser. The Fund's investment adviser could be incorrect in its expectations
about the direction or extent of these market factors. Although debt obligations
with longer maturities offer potentially greater returns, they have greater
exposure to market price fluctuation. Consequently, to the extent the Fund is
significantly invested in debt obligations with longer maturities, there is a
greater possibility of fluctuation in the Fund's net asset value.
CMOs are generally subject to higher prepayment risks than most other types of
debt instruments. Prepayment risks on mortgage securities tend to increase
during periods of declining mortgage interest rates because many borrowers
refinance their mortgages to take advantage of the more favorable rates.
Depending upon market conditions, the yield that the Fund receives from the
reinvestment of such prepayments, or any scheduled principal payments, may be
lower than the yield on the original mortgage security. As a consequence,
mortgage securities may be a less effective means of "locking in" interest rates
than other types of debt securities having the same stated maturity and may also
have less potential for capital appreciation.

With respect to securities that represent an interest solely in the interest
payments on mortgage-backed securities, because the yield to maturity is
extremely sensitive to the rate of principal payments (including prepayments) on
the related underlying mortgage-backed securities, it is possible that the Fund
might not recover its original investment on these securities if there are
substantial prepayments on the underlying mortgage.

In addition, the Fund may, but is not required to, utilize various other
investment strategies as described herein to manage the effective maturity or
duration of the Fund's fixed income securities or to enhance potential gain.
Such strategies are generally accepted by modern portfolio managers and are
regularly utilized by mutual funds and other institutional investors. These
techniques may increase the volatility of the Fund and may involve a small
investment of cash relative to the magnitude of the risk assumed.

For example, the Fund expects to purchase portfolio securities using investment
leverage. The Fund expects that substantially all of its leverage will be used
in connection with when-issued and delayed delivery transactions and portfolio
securities lending. Leveraging creates an opportunity for capital appreciation
but, at the same time, the use of leverage in a declining market will cause a
greater decline in the asset value of the shares than if the Fund were not
leveraged.

PUT AND CALL OPTIONS

The Fund may purchase put and call options on its portfolio securities. These
options will be used as a hedge to attempt to protect securities which the Fund
holds, or will be purchasing, against decreases or increases in value. The Fund
may also write (sell) put and call options on all or any portion of its
portfolio to generate income for the Fund. The Fund will write call options on
securities either held in its portfolio or for which it has the right to obtain
without payment of further consideration or for which it has segregated cash in
the amount of any additional consideration.

In the case of put options, the Fund will segregate cash or U.S. Treasury
obligations with a value equal to or greater than the exercise price of the
underlying securities.

The Fund may generally purchase and write over-the-counter options on portfolio
securities in negotiated transactions with the buyers or writers of the options
since options on the portfolio securities held by the Fund are not traded on an
exchange. The Fund purchases and writes options only with investment dealers and
other financial institutions (such as commercial banks or savings and loan
associations) deemed creditworthy by the Fund's adviser.

Over-the-counter options are two-party contracts with price and terms negotiated
between buyer and seller. In contrast, exchange-traded options are third-party
contracts with standardized strike prices and expiration dates and are purchased
from a clearing corporation. Exchange-traded options have a continuous liquid
market while over-the-counter options may not.

FINANCIAL FUTURES AND OPTIONS ON FUTURES

The Fund may purchase and sell financial futures contracts to hedge all or a
portion of its portfolio of long-term debt securities against changes in
interest rates. Financial futures contracts call for the delivery of particular
debt instruments issued or guaranteed by the U.S. Treasury or by specified
agencies or instrumentalities of the U.S. government at a certain time in the
future. The seller of the contract agrees to make delivery of the type of
instrument called for in the contract and the buyer agrees to take delivery of
the instrument at the specified future time.

The Fund may write call options and purchase put options on financial futures
contracts as a hedge to attempt to protect securities in its portfolio against
decreases in value resulting from anticipated increases in market interest
rates. When the Fund writes a call option on a futures contract, it is
undertaking the obligation of selling the futures contract at a fixed price at
any time during a specified period if the option is exercised. Conversely, as
purchaser of a put option on a futures contract, the Fund is entitled (but not
obligated) to sell a futures contract at the fixed price during the life of the
option.

The Fund may also write put options and purchase call options on financial
futures contracts as a hedge against rising purchase prices of portfolio
securities resulting from anticipated decreases in market interest rates. The
Fund will use these transactions to attempt to protect its ability to purchase
portfolio securities in the future at price levels existing at the time it
enters into the transactions. When the Fund writes a put option on a futures
contract, it is undertaking to buy a particular futures contract at a fixed
price at any time during a specified period if the option is exercised. As a
purchaser of a call option on a futures contract, the Fund is entitled (but not
obligated) to purchase a futures contract at a fixed price at any time during
the life of the option.

The Fund may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amount of margin deposits on

the Fund's existing futures positions and premiums paid for related options
would exceed 5% of the market value of the Fund's total assets.

RISKS

When the Fund uses financial futures and options on financial futures as hedging
devices, there is a risk that the prices of the securities subject to the
futures contracts may not correlate perfectly with the prices of the securities
in the Fund's portfolio. This may cause the futures contract and any related
options to react differently than the portfolio securities to market changes. In
addition, the Fund's investment adviser could be incorrect in its expectations
about the direction or extent of market factors such as interest rate movements.
In these events, the Fund may lose money on the futures contract or option. It
is not certain that a secondary market for positions in futures contracts or for
options will exist at all times. Although the investment adviser will consider
liquidity before entering into options transactions, there is no assurance that
a liquid secondary market on an exchange will exist for any particular futures
contract or option at any particular time. The Fund's ability to establish and
close out futures and options positions depends on this secondary market.

PORTFOLIO TURNOVER

Although the Fund does not intend to invest for the purpose of seeking
short-term profits, securities in its portfolio will be sold whenever the Fund's
investment adviser believes it is appropriate to do so in light of the Fund's
investment objective, without regard to the length of time a particular security
may have been held.

INVESTMENT LIMITATIONS

The Fund will not:

borrow money directly or through reverse repurchase agreements (arrangements in
which the Fund sells a portfolio instrument for a percentage of its cash value
with an agreement to buy it back on a set date) or pledge securities except,
under certain circumstances, the Fund may borrow up to one-third of the value
of its net assets and pledge up to 10% of the value of its total assets to
secure such borrowings; or

invest more than 10% of its total assets in securities subject to restrictions
on resale under the Securities Act of 1933.

The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, may be changed by the Directors without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.

The Fund will not:

invest more than 10% of its net assets in securities which are not readily
marketable or which are otherwise considered illiquid, including
over-the-counter options and repurchase agreements providing for settlement in
more than seven days after notice.

- -------------------------------------------------------------------------------
NET ASSET VALUE

The Fund's net asset value per share fluctuates. The net asset value for shares
is determined by adding the interest of all securities and all other assets,
less liabilities, by the number of shares outstanding.

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; and (iii) the following holidays: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day.

- -------------------------------------------------------------------------------
INVESTING IN THE FUND
SHARE PURCHASES

Fund shares are sold on days on which the New York Stock Exchange is open.
Shares of the Fund may be purchased through a financial institution which has a
sales agreement with Federated Securities Corp. (the "Distributor") or directly
from Federated Securities Corp. once an account has been established. In
connection with the sale of Fund shares, Federated Securities Corp. may from
time to time offer certain items of nominal value to any shareholder or
investor. The Fund reserves the right to reject any purchase request.

THROUGH A FINANCIAL INSTITUTION

An investor may call his financial institution (such as a bank or an investment
dealer) to place an order to purchase shares of the Fund . Orders placed through
a financial institution are considered received when the Fund is notified of the
purchase order. It is the financial institution's responsibility to transmit
orders promptly. Purchase orders through a registered broker/dealer must be
received by the broker before 4:00 p.m. (Eastern time) and must be transmitted
by the broker to the Fund before 5:00 p.m. (Eastern time) in order for shares to
be purchased at that day's price. Purchase orders through other financial
institutions must be received by the financial institution and transmitted to
the Fund before 4:00 p.m. (Eastern time) in order for shares to be purchased at
that day's price.

The financial institution which maintains investor accounts with the Fund must
do so on a fully disclosed basis unless it accounts for share ownership periods
used in calculating the contingent deferred sales charge, (see "Contingent
Deferred Sales Charge"). In addition, advance
payments made to financial institutions may be subject to reclaim by the
distributor for accounts transferred to financial institutions which do not
maintain investor accounts on a fully disclosed basis and do not account for
share ownership periods (see "Other Payments to Financial Institutions").

DIRECTLY BY MAIL

An investor may place an order to purchase shares of the Fund directly by mail
from the Distributor once an account has been established. To do so, mail a
check made payable to Federated Government Income Securities, Inc. to Federated
Services Company, P.O. Box 8600, Boston, MA 02266-8600.

Purchases by mail are considered received after payment by check is converted by
the tranfer agent's bank, State Street Bank and Trust Company ("State Street
Bank"), into federal funds. This is generally the next business day after the
transfer agent's bank receives the check.

DIRECTLY BY WIRE

To purchase shares of the Fund directly from the Distribtuor by Federal Reserve
wire once an account has been established, call the Fund. All information needed
will be taken over the telephone, and the order is considered received when the
transfer agent's bank receives payment by wire. Federal funds should be wired as
follows: Federated Shareholder Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts 02105; Attention EDGEWIRE; for Credit to:
Federated Government Income Securities, Inc.; Fund Number (this number can be
found on the account statement or by contacting the Fund); Group Number or Order
Number; Nominee or Institution Name; and ABA Number 011000028. Fund shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in the Fund is $1,500 unless the investment is in
a retirement plan, in which case the minimum initial investment is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement plans which must be in amounts of at least $50.

WHAT SHARES COST

Fund shares are sold at their net asset value next determined after an order is
received, plus a sales charge of 1% of the offering price (which is 1.01% of the
net amount invested). There is no sales charge for purchases of $1 million or
more. In addition, no sales charge is imposed for Fund shares purchased through
bank trust departments or investment advisers registered under the Investment
Advisers Act of 1940 purchasing on behalf of their clients, or by sales
representatives, Directors, and employees of the Fund, Federated Advisers, and
Federated Securities Corp., or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp., their spouses and
children under age 21, or any trusts or pension or profit-sharing plans for
these persons, or retirement plans where the third party administrator has
entered into certain arrangements with Federated Securities Corp. or its
affiliates, to the extent that no payment was advanced for purchases made by
such entities. Unaffiliated institutions through whom shares are purchased may
charge fees for services provided, which may be related to the ownership of Fund
shares. This prospectus should, therefore, be read together with any agreement
between the customer and institution with regard to services provided, the fees
charged for these services, and any restrictions and limitations imposed.

Under certain circumstances, described under "Redeeming Shares," shareholders
may be charged a contingent deferred sales charge by the distributor at the time
shares are redeemed.

DEALER CONCESSION

For sales of shares of the Fund, broker/dealers will normally receive 100% of
the applicable sales charge. Any portion of the sales charge which is not paid
to a broker/dealer will be retained by the distributor. However, from time to
time, and at the sole discretion of the distributor, all or part of that portion
may be paid to a dealer. The sales charge for shares sold other than through
registered broker/dealers will be retained by Federated Securities Corp.
Federated Securities Corp. may pay fees to banks out of the sales charge in
exchange for sales and/or administrative services performed on behalf of the
bank's customers in connection with the initiation of customer accounts and
purchases of Fund shares.

ELIMINATING THE SALES CHARGE

The sales charge can be eliminated on the purchase of Fund shares through:

quantity discounts and accumulated purchases;

signing a 13-month letter of intent;

using the reinvestment privilege; or

concurrent purchases.

QUANTITY DISCOUNTS AND
ACCUMULATED PURCHASES

There is no sales charge for purchases of $1 million or more. The Fund will
combine purchases made on the same day by the investor, his spouse, and his
children under age 21 when it calculates the sales charge. In addition, the
sales charge is eliminated for purchases of $1 million or more made at one time
by a trustee or fiduciary for a single trust estate or a single fiduciary
account.

If an additional purchase of Fund shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns Shares having a current value at the public offering price of
$900,000 and purchases $100,000 more at the current public offering price, there
will be no sales charges on the additional purchase.

The Fund will also combine purchases for the purpose of reducing the contingent
deferred sales charge imposed on some share redemptions. For example, if a
shareholder already owns shares having a current value at the public offering
price of $1 million and purchases an additional $1 million at the current public
offering price, the applicable contingent deferred sales charge would be reduced
to .50% for those additional shares. For more information on the levels of
contingent deferred sales charges and holding periods, see the section entitled
"Contingent Deferred Sales Charge."

To receive the sales charge elimination and/or the contingent deferred sales
charge reduction, Federated Securities Corp. must be notified by the shareholder
in writing or by their financial institution at the time the purchase is made
that Shares are already owned or that purchases are being combined. The Fund
will eliminate the sales charge and/or reduce the contingent deferred sales
charge after it confirms the purchases.

LETTER OF INTENT

If a shareholder intends to purchase at least $1 million of Fund shares over the
next 13 months, the sales charge may be eliminated by signing a letter of intent
to that effect. This letter of intent

includes a provision for a sales charge elimination depending on the amount
actually purchased within the 13-month period and a provision for the Fund's
custodian to hold 1.00% of the total amount intended to be purchased in escrow
(in shares of the Fund ) until such purchase is completed.

The 1.00% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent,
which must be $1 million or more of Fund shares, is not purchased. In this
event, an appropriate number of escrowed shares may be redeemed in order to
realize the 1.00% sales charge.

This letter of intent will not obligate the shareholder to purchase shares. This
letter may be dated as of a prior date to include any purchases made within the
past 90 days (purchases within the prior 90 days may be used to fulfill the
requirements of the letter of intent; however, the sales charge on such
purchases will not be adjusted to reflect a lower sales charge).

REINVESTMENT PRIVILEGE

If shares in the Fund have been redeemed, the shareholder has a one-time right,
within 120 days, to reinvest the redemption proceeds at the next-determined net
asset value without any sales charge. Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution of the
reinvestment in order to receive this elimination of the sales charge. If the
shareholder redeems his shares in the Fund, there may be tax consequences.

CONCURRENT PURCHASES

For purposes of qualifying for a sales charge elimination, a shareholder has the
privilege of combining concurrent purchases of two or more of certain funds
offering Class F Shares, the purchase prices of which include a sales charge.
For example, if a shareholder concurrently invested $400,000 in Class F Shares
of one of the other funds advised by subsidiaries of Federated Investors (the
"Federated Funds"), and $600,000 in Shares, the sales charge would be
eliminated.

To receive this sales charge elimination, Federated Securities Corp. must be
notified by the shareholder in writing or by his financial institution at the
time the concurrent purchases are made. The Fund will eliminate the sales charge
after it confirms the purchases.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis. Under this program, funds may be automatically withdrawn
monthly from the shareholder's checking account and invested in Shares at the
net asset value next determined after an order is received by the transfer
agent's bank, plus the 1.00% sales charge for purchases under $1 million. A
shareholder may apply for participation in this program through Federated
Securities Corp. or his financial institution.

EXCHANGE PRIVILEGES

Shareholders may exchange all or some of their Fund shares, at net asset value
for Class F Shares of other Federated Funds. Exchanges are made at net asset
value without being assessed a contingent deferred sales charge on the exchanged
shares. To the extent that a shareholder exchanges shares for Class F shares of
other Federated Funds, the time for which the exchanged-for Shares are to be
held will be added to the time for which exchanged-from Shares were held for
purposes of satisfying the applicable holding period.

Shareholders using this privilege must exchange shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Shareholders who desire to automatically exchange shares

of a predetermined amount on a monthly, quarterly, or annual basis may take
advantage of a systematic exchange privilege.

Further information on these exchange privileges is available by calling
Federated Securities Corp. or the shareholder's financial institution. The
exchange privilege is available to shareholders residing in any state in which
the shares being acquired may be legally sold.

Before making an exchange, a shareholder must receive a prospectus of the fund
for which the exchange is being made.

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a capital gain or loss may be
realized.

Please contact your financial institution directly or Federated Securities Corp.
at 1-800-341-7400 for information on and prospectuses for the Federated Funds
into which your Shares may be exchanged free of charge.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Shareholder Services Company maintains
a share account for each shareholder. Share certificates are not issued unless
requested on the application or by contacting the Fund.

Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly statements are sent to report dividends paid during the
month.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Distributions of any net realized long-term capital gains
will be made at least once every twelve months.

RETIREMENT PLANS

Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details contact Federated Securities Corp. and consult
a tax adviser.

- -------------------------------------------------------------------------------
REDEEMING SHARES

The Fund redeems shares at their net asset value, less any applicable contingent
deferred sales charge, next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemption requests must be received in proper form and can be made
through a financial institution or directly from the Fund by written request.

THROUGH A FINANCIAL INSTITUTION

A shareholder may redeem shares of the Fund by calling his financial institution
(such as a bank or an investment dealer) to request the redemption. Shares will
be redeemed at the net asset value, less any applicable contingent deferred
sales charge, next determined after the Fund receives the redemption request
from the financial institution. Redemption requests through a registered
broker/dealer must be received by the broker before 4:00 p.m. (Eastern time) and
must be transmitted by the broker to the Fund before 5:00 p.m. (Eastern time) in
order for shares to be redeemed at that day's net asset value. Redemption
requests through other financial institutions must be received by the financial
institution and transmitted to the Fund before 4:00 p.m. (Eastern time) in order
for shares to be redeemed at that day's net asset value. The financial
institution is responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. The financial
institution may charge customary fees and commissions for this service. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders will be promptly notified.

REDEEMING SHARES BY TELEPHONE

Shares of the Fund may be redeemed in any amount by calling the Fund provided
the Fund has a properly completed authorization form. These forms can be
obtained from Federated Securities Corp. Proceeds will be mailed in the form of
a check, to the shareholder's address of record or wire transfered to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System. The minimum amount for a wire transfer is $1,000.
Proceeds from redeemed shares purchased by check or through an Automated
Clearing House member will not be wired until that method of payment has
cleared. Proceeds from redemption requests received on holidays when wire
transfers are restricted will be wired the following business day. Questions
about telephone redemptions on days when wire transfers are restricted should be
directed to your sharehlder services representative at the telephone number
listed on your acount statement.

Telephone instructions will be recorded. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
this occurs, "Redeeming Shares By Mail" should be considered. If at any time the
Fund shall determine it necessary to terminate or modify the telephone
redemption privilege, shareholders would be promptly notified.

REDEEMING SHARES BY MAIL

Shares of the Fund may be redeemed in any amount by mailing a written request
to: Federated Shareholder Services Company, P.O. Box 8600, Boston, MA
02266-8600. If share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.

The written request should state: the Fund name and Class designation; the
account name as registered with the Fund; the account number; and the number of
shares to be redeemed or the dollar amount requested. All owners of the account
must sign the request exactly as the shares are registered. Normally, a check
for the proceeds is mailed within one business day, but in no event more than
seven days, after the receipt of a proper written redemption request. Dividends
are paid up to and including the day that a redemption request is processed.

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company, or savings association whose deposits are
insured by an organization which is administered by the Federal Deposit
Insurance Corporation; a member firm of a domestic stock exchange; or any other
"eligible guarantor institution," as defined in the Securities Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.

CONTINGENT DEFERRED SALES CHARGE

Shareholders redeeming shares from their Fund accounts within certain time
periods of the purchase date of those shares will be charged a contingent
deferred sales charge by the Fund's Distributor of the lesser of the original
purchase price or the net asset value of the shares redeemed as follows:
<TABLE>
<CAPTION>
CONTINGENT
AMOUNT OF SHARES DEFERRED
PURCHASE HELD SALES CHARGE
<S> <C> <C>
Up to $1,999,999 less than 4
years 1.00%
$2,000,000 to less than 2
$4,999,999 years .50%
Over $5,000,000 less than 1 year .25%
</TABLE>

In instances in which shares have been acquired in exchange for Class F Shares
in other Federated Funds, (i) the purchase price is the price of the shares when
originally purchased and (ii) the time period during which the shares are held
will run from the date of the original purchase. The contingent deferred sales
charge will not be imposed on shares acquired through the reinvestment of
dividends or distributions of short-term or long-term capital gains. In
computing the amount of contingent deferred sales charge for accounts with
shares subject to a single holding period, if any, redemptions are deemed to
have occurred in the following order: (1) shares acquired through the
reinvestment of dividends and long-term capital gains; (2) purchases of shares
occurring prior to the number of years necessary to satisfy the applicable
holding period; and (3) purchases of shares occurring within the current holding
period.

The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account after the beneficial owner
attains age 59-1/2; or (iii) from the death or total and permanent disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan, or a custodial account does not extend
to account transfers, rollovers, and other redemptions made for purposes of
reinvestment. Contingent deferred sales charges are not charged in connection
with exchanges of shares for shares in other Federated Funds, or in connection
with redemptions by the Fund of accounts with low balances. Shares of the Fund
originally purchased through a bank trust department or investment adviser
registered under the Investment Advisers Act of 1940, and third party
administrators acting on behalf of defined contribution plans, are not subject
to the contingent deferred sales charge, to the extent that no payment was
advanced for purchases made by such entities. For more information, see "Other
Payments to Financial Institutions."

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive monthly or quarterly payments of a
predetermined amount may take advantage of the Systematic Withdrawal Program.
Under this program, shares are redeemed to provide for periodic withdrawal
payments in an amount directed by the shareholder; the minimum withdrawal amount
is $100. Depending upon the amount of the withdrawal payments, the amount of
dividends paid and capital gains distributions with respect to shares, and the
fluctuation of the net asset value of shares redeemed under this program,
redemptions may reduce, and eventually deplete, the shareholder's investment in
shares. For this reason, payments under this program should not be considered as
yield or income on the shareholder's investment in shares. To be eligible to
participate in this program, a shareholder must have an account value of at
least $10,000 at current offering price.

A shareholder may apply for participation in this program through Federated
Securities Corp. Due to the fact that shares of the Fund are sold with a sales
charge, it is not advisable for shareholders to be purchasing shares while
participating in this program.

Contingent deferred sales charges are charged for shares redeemed through this
program within four years of their purchase dates.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below a required minimum value of
$1,000. This requirement does not apply, however, if the balance falls below
$1,000 because of changes in the Fund's net asset value.

Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.

- -------------------------------------------------------------------------------

FUND INFORMATION

MANAGEMENT OF THE FUND

BOARD OF DIRECTORS

The Fund is managed by a Board of Directors. The Directors are responsible for
managing the Fund's business affairs and for exercising all the Fund's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Directors handles the Board's responsibilities between meetings of the Board.

INVESTMENT ADVISER

Investment decisions for the Fund are made by Federated Advisers (the
"Adviser"), the Fund's investment adviser, subject to direction by the
Directors. The Adviser continually conducts investment research and supervision
for the Fund and is responsible for the purchase or sale of portfolio
instruments, for which it receives an annual fee from the Fund.

ADVISORY FEES
The Fund's adviser receives an annual investment advisory fee equal to .75% of
the Fund's average daily net assets. Under the investment advisory contract,
which provides for the voluntary waiver and reimbursement of expenses by the
adviser, the adviser may voluntarily waive all or a portion of the advisory fee
and reimburse some of the operating expenses of the Fund. The adviser can
terminate this voluntary waiver of its fee or reimbursement of expenses at any
time at its sole discretion. The adviser may also undertake to reimburse the
Fund for operating expenses in excess of limitations established by certain
states.

ADVISER'S BACKGROUND

Federated Advisers, a Delaware business trust organized on April 11, 1989, is a
registered investment adviser under the Investment Advisers Act of 1940. It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $80 billion invested across more than 250 funds
under management and/or administration by its subsidiaries, as of December 31,
1995, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,800 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have elected Federated funds for their
clients.

Both the Fund and the Adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interest. Among other things, the codes: require preclearance and
periodic reporting of personal securities transactions; prohibit personal
transactons in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on

securities held for less than sixty days. Violations of the codes are subject to
review by the Directors, and could result in severe penalties.

PORTFOLIO MANAGER'S BACKGROUND

Kathleen M. Foody-Malus has been the Fund's portfolio manager since July 1993.
Ms. Foody-Malus joined Federated Investors in 1983 and has been a Vice President
of the Fund's investment adviser since 1993. Ms. Foody-Malus served as an
Assistant Vice President of the investment adviser from 1990 until 1992. Ms.
Foody-Malus received her M.B.A. in Accounting/Finance from the University of
Pittsburgh.

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for Shares of the Fund.
Federated Securities Corp. is located at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779. It is a Pennsylvania corporation organized on November
14, 1969, and is the principal distributor for a number of investment companies.
Federated Securities Corp. is a subsidiary of Federated Investors.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

SHAREHOLDER SERVICES

The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to .25% of the average daily net asset value of Shares to
obtain certain personal services for shareholders and for the maintenance of
shareholder accounts ("Shareholder Services"). Under the Shareholder Services
Agreement, Federated Shareholder Services will either perform shareholder
services directly or will select financial institutions to perform shareholder
services. Financial institutions will receive fees based upon Shares owned by
their clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the Fund and
Federated Shareholder Services.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS

In addition, the Distributor will pay financial institutions, for distribution
and/or administrative services, an amount equal to 1.00% of the offering price
of the Shares acquired by their clients or customers on purchases up to
$1,999,999, .50% of the offering price on purchases of $2,000,000 to $4,999,999,
and .25% of the offering price on purchases of $5,000,000 or more. (This fee is
in addition to the 1.00% sales charge on purchases of less than $1 million). The
financial institutions may elect to receive amounts less than those stated,
which would reduce the stated contingent deferred sales charge and/or the
holding period used to calculate the fee.

SUPPLEMENTAL PAYMENTS TO
FINANCIAL INSTITUTIONS

Federated Securities Corp. and Federated Shareholder Services may offer to pay a
fee, from their own assets, to financial institutions as financial assistance
for providing substantial sales services, distribution-related support services,
or shareholder services. The support may include sponsoring sales, educational
and training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the Distributor may be reimbursed by the Adviser or its affiliates.

ADMINISTRATION OF THE FUND

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at an annual rate which relates to the average aggregate daily
net assets of the Federated Funds as specified below:

<TABLE>
<CAPTION>
ADMINISTRATIVE AVERAGE AGGREGATE
FEE DAILY NET ASSETS
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of
$750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

- -------------------------------------------------------------------------------
SHAREHOLDER INFORMATION

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted for vote. All shares of each portfolio or class in the
Fund have equal voting rights, except that only shares of that particular Fund
or class are entitled to vote in matters affecting that Fund or class.

As a Maryland corporation, the Fund is not required to hold annual shareholder
meetings. Shareholder approval will be sought only for certain changes in the
Fund's operation and for the election of Directors under certain circumstances.

Directors may be removed by the Directors or by shareholders at a special
meeting. A special meeting of shareholders shall be called by the Directors upon
the request of shareholders owning at least 10% of the Fund's outstanding shares
of all series entitled to vote.

As of June 5, 1996, Merrill Lynch, Pierce, Fenner & Smith owned 105,170,325
shares (43.18%) of voting securities of the Fund, and therefore, may, for
certain purposes, be deemed to control the Fund and be able to affect the
outcome of certain matter presented for a vote of shareholders.

- -------------------------------------------------------------------------------
TAX INFORMATION

FEDERAL INCOME TAX

The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code, as amended (the "Code") applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies.

Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held their shares. No federal income tax is due on
any dividends earned in an IRA or qualified retirement plan until distributed,
so long as such IRA or qualified retirement plan meets the applicable
requirements of the Code.

STATE AND LOCAL TAXES

Shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

- -------------------------------------------------------------------------------
PERFORMANCE INFORMATION

From time to time the Fund advertises its total return and yield.

Total return represents the change, over a specified period of time, in the
value of an investment in shares after reinvesting all income and capital gains
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.

The yield of shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by shares
over a thirty-day period by the maximum offering price per share of shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
shares, and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.

The performance information reflects the effect of the maximum sales charge and
other similar non-recurring charges, such as the contingent deferred sales
charge, which, if excluded, would increase the total return and yield.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Government Income Securities, Inc.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Investment Adviser
Federated Advisers Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank and P.O. Box 8600
Trust Company Boston, Massachusetts 02266-8600
- ---------------------------------------------------------------------------------------------------------------------

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- ---------------------------------------------------------------------------------------------------------------------

Independent Public Accountants
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

FEDERATED GOVERNMENT
INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME
SECURITIES, INC.)
PROSPECTUS

An Open-End, Diversified
Management Investment Company
July 1, 1996

Cusip 313912107
8040406A (7/96)

FEDERATED GOVERNMENT INCOME SECURITIES, INC.
(FORMERLY, GOVERNMENT INCOME SECURITIES, INC.)

STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus dated July 1, 1996, of Federated Government Income Securities,
Inc. (the "Fund"). This Statement is not a prospectus itself. You may
request a copy of a prospectus or a paper copy of this Statement of
Additional Information, if you have received it electronically, free of
charge by calling 1-800-341-7400.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

FEDERATED INVESTORS
Federated Investors Tower
Pittsburgh PA 15222-3779
Federated Securities Corp. is the distributor of the Funds
and is a subsidiary of Federated Investors.
Cusip 313912107
8040406B (7/96)
Statement dated July 1, 1996
GENERAL INFORMATION ABOUT THE
FUND 1

INVESTMENT OBJECTIVE AND POLICIES1

TYPES OF INVESTMENTS 1
WHEN-ISSUED AND DELAYED DELIVERY
TRANSACTIONS 1
FUTURES AND OPTIONS TRANSACTIONS2
LENDING OF PORTFOLIO SECURITIES 4
REPURCHASE AGREEMENTS 4
REVERSE REPURCHASE AGREEMENTS 4
PORTFOLIO TURNOVER 4
INVESTMENT LIMITATIONS 5
FEDERATED GOVERNMENT INCOME
SECURITIES, INC. MANAGEMENT 6

THE FUNDS 10
FUND OWNERSHIP 10
DIRECTORS COMPENSATION 11
INVESTMENT ADVISORY SERVICES 12

ADVISER TO THE FUND 12
ADVISORY FEES 12
BROKERAGE TRANSACTIONS 12

OTHER SERVICES 13

FUND ADMINISTRATION 13
CUSTODIAN AND PORTFOLIO
ACCOUNTANT 13
TRANSFER AGENT 13
INDEPENDENT AUDITORS 13
PURCHASING SHARES 13

SHAREHOLDER SERVICES 13
CONVERSION TO FEDERAL FUNDS 14
PURCHASES BY SALES
REPRESENTATIVES,
FUND DIRECTORS, AND EMPLOYEES14
EXCHANGING SECURITIES FOR FUND
SHARES 14
DETERMINING NET ASSET VALUE 14

DETERMINING MARKET VALUE OF
SECURITIES 14
EXCHANGE PRIVILEGE 15

REDUCED SALES CHARGE 15
REQUIREMENTS FOR EXCHANGE 15
TAX CONSEQUENCES 15
MAKING AN EXCHANGE 16
REDEEMING SHARES 16

REDEMPTION IN KIND 16
TAX STATUS 16

THE FUND'S TAX STATUS 16
SHAREHOLDERS' TAX STATUS 16
TOTAL RETURN 17

YIELD 17

CURRENT DISTRIBUTIONS 17

PERFORMANCE COMPARISONS 17
ECONOMIC AND MARKET INFORMATION18
ABOUT FEDERATED INVESTORS 18

MUTUAL FUND MARKET 19
INSTITUTIONAL CLIENTS 19
TRUST ORGANIZATIONS 19
BROKER/DEALERS AND BANK
BROKER/DEALER
SUBSIDIARIES 19
FINANCIAL STATEMENTS 19

GENERAL INFORMATION ABOUT THE FUND

The Fund was established as a Massachusetts business trust on September 23,
1981, and reorganized as a Maryland corporation on February 4, 1986. At a
meeting of the Board of Directors ("Directors") held on February 26, 1996, the
Directors approved an amendment to the Articles of Incorporation to change the
name of Government Income Securities, Inc. to Federated Government Income
Securities, Inc.
INVESTMENT OBJECTIVE AND POLICIES

The Fund's investment objective is to provide current income. Current income
includes, in general, discount earned on U.S. Treasury bills and agency discount
notes, interest earned on all other U.S. government securities and mortgage-
related securities, and short-term capital gains. The investment objective
cannot be changed without approval of shareholders.
TYPES OF INVESTMENTS
The Fund invests primarily in securities which are guaranteed as to payment of
principal and interest by the U.S. government or its instrumentalities.
U.S. GOVERNMENT SECURITIES
The types of U.S. government securities in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
othe full faith and credit of the U.S. Treasury (such as Farmers Home
Administration and Government National Mortgage Association);
othe issuer's right to borrow from the U.S. Treasury (such as Farmers Home
Administration);
othe discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities (such as Federal Home Loan
Banks and Farmers Home Administration); or
othe credit of the agency or instrumentality issuing the obligations (such
as Federal Home Loan Banks, Farmers Home Administration, Farm Credit
Banks, Federal National Mortgage Association, and Federal Home Loan
Mortgage Corporation).
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The Fund does not intend to set a specific percentage limitation on the
amount of CMOs in the portfolio, including inverse floaters and stripped
mortgage-related securities.
STRIPPED MORTGAGE-RELATED SECURITIES
Some of the mortgage-related securities purchased by the Fund may represent
an interest solely in the principal repayments or solely in the interest
payments on mortgage-backed securities (stripped mortgage-backed securities
or "SMBSs"). Due to the possibility of prepayments on the underlying
mortgages, SMBSs may be more interest-rate sensitive than other securities
purchased by the Fund. If prevailing interest rates fall below the level at
which SMBSs were issued, there may be substantial prepayments on the
underlying mortgages, leading to the relatively early prepayments of
principal-only SMBSs and a reduction in the amount of payments made to
holders of interest-only SMBSs. It is possible that the Fund might not
recover its original investment on interest-only SMBSs if there are
substantial prepayments on the underlying mortgages. Therefore, interest-
only SMBSs generally increase in value as interest rates rise and decrease
in value as interest rates fall, counter to changes in value experienced by
most fixed income securities. The Fund's adviser intends to use this
characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to
pursue current income.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other expenses, other than
normal transaction costs, are incurred. However, liquid assets of the Fund
sufficient to make payment for the securities to be purchased are segregated on
the Fund`s records at the trade date. These assets are marked to market daily
and are maintained until the transaction has been settled. The Fund does not
intend to set a specific percentage limitation on these types of
transactions.
FUTURES AND OPTIONS TRANSACTIONS
The Fund may attempt to hedge all or a portion of its portfolio by buying and
selling financial futures contracts and options on financial futures contracts.
Additionally, the Fund may buy and sell call and put options on U.S. government
securities.
FINANCIAL FUTURES CONTRACTS
A futures contract is a firm commitment by two parties, the seller who
agrees to make delivery of the specific type of security called for in the
contract ("going short") and the buyer who agrees to take delivery of the
security ("going long") at a certain time in the future. Financial futures
contracts call for the delivery of particular debt securities issued or
guaranteed by the U.S. Treasury or by specified agencies or
instrumentalities of the U.S. government.
In the fixed income securities market, price moves inversely to interest
rates. A rise in rates means a drop in price. Conversely, a drop in rates
means a rise in price. In order to hedge its holdings of fixed income
securities against a rise in market interest rates, the Fund could enter
into contracts to deliver securities at a predetermined price (i.e., "go
short") to protect itself against the possibility that the prices of its
fixed income securities may decline during the Fund's anticipated holding
period. The Fund would "go long" (agree to purchase securities in the
future at a predetermined price) to hedge against a decline in market
interest rates.
PURCHASING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts for
U.S. government securities. Unlike entering directly into a futures
contract, which requires the purchaser to buy a financial instrument on a
set date at a specified price, the purchase of a put option on a futures
contract entitles (but does not obligate) its purchaser to decide on or
before a future date whether to assume a short position at the specified
price.
The Fund would purchase put options on futures to protect portfolio
securities against decreases in value resulting from an anticipated
increase in market interest rates. Generally, if the hedged portfolio
securities decrease in value during the term of an option, the related
futures contracts will also decrease in value and the option will increase
in value. In such an event, the Fund will normally close out its option by
selling an identical option. If the hedge is successful, the proceeds
received by the Fund upon the sale of the second option will be large
enough to offset both the premium paid by the Fund for the original option
plus the realized decrease in value of the hedged securities.
Alternatively, the Fund may exercise its put option. To do so, it would
simultaneously enter into a futures contract of the type underlying the
option (for a price less than the strike price of the option) and exercise
the option. The Fund would then deliver the futures contract in return for
payment of the strike price. If the Fund neither closes out nor exercises
an option, the option will expire on the date provided in the option
contract, and the premium paid for the contract will be lost.
WRITING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write listed
call options on futures contracts for U.S. government securities to hedge
its portfolio against an increase in market interest rates. When the Fund
writes a call option on a futures contract, it is undertaking the
obligation of assuming a short futures position (selling a futures
contract) at the fixed strike price at any time during the life of the
option if the option is exercised. As market interest rates rise, causing
the prices of futures to go down, the Fund's obligation under a call option
on a future (to sell a futures contract) costs less to fulfill, causing the
value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below the strike
price, the buyer of the option has no reason to exercise the call, so that
the Fund keeps the premium received for the option. This premium can offset
the drop in value of the Fund's fixed income portfolio which is occurring
as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of it by
the buyer, the Fund may close out the option by buying an identical option.
If the hedge is successful, the cost of the second option will be less than
the premium received by the Fund for the initial option. The net premium
income of the Fund will then offset the decrease in value of the hedged
securities.
WRITING PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may write listed put options on financial futures contracts for
U.S. government securities to hedge its portfolio against a decrease in
market interest rates. When the Fund writes a put option on a futures
contract, it receives a premium for undertaking the obligation to assume a
long futures position (buying a futures contract) at a fixed price at any
time during the life of the option. As market interest rates decrease, the
market price of the underlying futures contract normally increases.
As the market value of the underlying futures contract increases, the buyer
of the put option has less reason to exercise the put because the buyer can
sell the same futures contract at a higher price in the market. The premium
received by the Fund can then be used to offset the higher prices of
portfolio securities to be purchased in the future due to the decrease in
market interest rates.
Prior to the expiration of the put option, or its exercise by the buyer,
the Fund may close out the option by buying an identical option. If the
hedge is successful, the cost of buying the second option will be less than
the premium received by the Fund for the initial option.
PURCHASING CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
An additional way in which the Fund may hedge against decreases in market
interest rates is to buy a listed call option on a financial futures
contract for U.S. government securities. When the Fund purchases a call
option on a futures contract, it is purchasing the right (not the
obligation) to assume a long futures position (buy a futures contract) at a
fixed price at any time during the life of the option. As market interest
rates fall, the value of the underlying futures contract will normally
increase, resulting in an increase in value of the Fund's option position.
When the market price of the underlying futures contract increases above
the strike price plus premium paid, the Fund could exercise its option and
buy the futures contract below market price.
Prior to the exercise or expiration of the call option, the Fund could sell
an identical call option and close out its position. If the premium
received upon selling the offsetting call is greater than the premium
originally paid, the Fund has completed a successful hedge.
LIMITATION ON OPEN FUTURES POSITIONS
The Fund will not maintain open positions in futures contracts it has sold
or call options it has written on futures contracts if, in the aggregate,
the value of the open positions (marked to market) exceeds the current
market value of its securities portfolio plus or minus the unrealized gain
or loss on those open positions, adjusted for the correlation of volatility
between the hedged securities and the futures contracts. If this limitation
is exceeded at any time, the Fund will take prompt action to close out a
sufficient number of open contracts to bring its open futures and options
positions within this limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or receive
money upon the purchase or sale of a futures contract. Rather, the Fund is
required to deposit an amount of "initial margin" in cash or U.S. Treasury
bills with its custodian (or the broker, if legally permitted). The nature
of initial margin in futures transactions is different from that of margin
in securities transactions in that futures contract initial margin does not
involve the borrowing of funds by the Fund to finance the transactions.
Initial margin is in the nature of a performance bond or good-faith deposit
on the contract which is returned to the Fund upon termination of the
futures contract, assuming all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily change
in value of the futures contract. This process is known as "marking to
market." Variation margin does not represent a borrowing or loan by the
Fund but is instead settlement between the Fund and the broker of the
amount one would owe the other if the futures contract expired. In
computing its daily net asset value, the Fund will mark to market its open
futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
PURCHASING PUT AND CALL OPTIONS ON U.S. GOVERNMENT SECURITIES
The Fund may purchase put and call options on U.S. government securities to
protect against price movements in particular securities. A put option
gives the Fund, in return for a premium, the right to sell the underlying
security to the writer (seller) at a specified price during the term of the
option. A call option gives the Fund, in return for a premium, the right to
buy the underlying security from the seller.
WRITING COVERED PUT AND CALL OPTIONS ON U.S. GOVERNMENT SECURITIES
The Fund may write covered put and call options to generate income. As
writer of a call option, the Fund has the obligation upon exercise of the
option during the option period to deliver the underlying security upon
payment of the exercise price. As a writer of a put option, the Fund has
the obligation to purchase a security from the purchaser of the option upon
the exercise of the option.
The Fund may only write call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment
of further consideration (or has segregated cash in the amount of any
additional consideration). In the case of put options, the Fund will
segregate cash or U.S. Treasury obligations with a value equal to or
greater than the exercise price of the underlying securities.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. 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 guidelines established by the Directors.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. This transaction is
similar to borrowing cash. In a reverse repurchase agreement the Fund transfers
possession of a portfolio instrument to another person, such as a financial
institution, broker, or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. For the fiscal years ended February 29, 1996
and February 28, 1995, the portfolio turnover rates were 161% and 143%,
respectively. The elevated portfolio turnover rate is a result of the Fund's
acquisition of securities that were more in line with current market conditions
relating to pre-payments and coupon rates. This had no significant impact on
the tax liability of the Fund and its shareholders, and Fund expenses were not a
factor as the Fund incurred no brokerage commissions.
INVESTMENT LIMITATIONS
BUYING ON MARGIN
The Fund will not purchase any securities on margin, but may obtain such
short-term credits as are necessary for clearance of transactions. The
deposit or payment by the Fund of initial or variation margin in connection
with financial futures contracts or related options transactions is not
considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities except that the Fund may borrow
money and engage in reverse repurchase agreements in amounts up to one-
third of the value of its net assets, including the amounts borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary or
emergency measure or to facilitate management of the portfolio by enabling
the Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The Fund will
not purchase any securities while any such borrowings are outstanding.
During the period any reverse repurchase agreements are outstanding, but
only to the extent necessary to assure completion of the reverse repurchase
agreements, the Fund will restrict the purchase of portfolio instruments to
money market instruments maturing on or before the expiration date of the
reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not pledge, mortgage, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may pledge assets having a
market value not exceeding the lesser of the dollar amounts borrowed or 10%
of the value of total assets at the time of the borrowing. Neither the
deposit of underlying securities and other assets in escrow in connection
with the writing of put or call options on U.S. government securities nor
margin deposits for the purchase and sale of financial futures contracts
and related options are deemed to be a pledge.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, although it may invest in
securities of companies whose business involves the purchase or sale of
real estate or in securities which are secured by real estate or interests
in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, except that the Fund may
purchase and sell financial futures contracts and related options.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities. (This
shall not prevent the purchase or holding of U.S. government securities,
repurchase agreements covering U.S. government securities, or other
transactions which are permitted by the Fund's investment objective and
policies.)
SELLING SHORT
The Fund will not sell securities short.
RESTRICTED SECURITIES
The Fund will not invest more than 10% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Board of Directors
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its total assets in
securities which are not readily marketable or which are otherwise
considered illiquid, including over-the-counter options and repurchase
agreements providing for settlement in more than seven days after notice.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not purchase securities of other investment companies.
WRITING COVERED PUT AND CALL OPTIONS AND PURCHASING PUT OPTIONS
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the
amount of any further payment. The Fund will not purchase put options on
securities unless the securities are held in the Fund's portfolio.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of the investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
The Fund did not engage in reverse repurchase agreements, borrow money, or
invest in illiquid securities in excess of 5% of the value of its total assets
during the last fiscal year, and has no present intent to do so in the coming
fiscal year.
For purposes of its policies and limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings and loan having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment to be "cash items."
Cash items may include short-term obligations such as:
o obligations of the U.S. government or its agencies or instrumentalities;
and
o repurchase agreements.

FEDERATED GOVERNMENT INCOME SECURITIES, INC. MANAGEMENT

Officers and Directors are listed with their addresses, birthdates, present
positions with Federated Government Income Securities, Inc., and principal
occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Director
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated Research
Corp. and Federated Global Research Corp.; Chairman, Passport Research, Ltd.;
Chief Executive Officer and Director or Trustee of the Funds. Mr. Donahue is the
father of J. Christopher Donahue, Executive Vice President of the Company.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Director
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Trustee, University
of Pittsburgh; Director or Trustee of the Funds.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Director
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real estate
ventures in Southwest Florida; formerly, President, Naples Property Management,
Inc. and Northgate Village Development Corporation; Director or Trustee of the
Funds.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Director
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Director
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or Trustee
of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Director
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.

Richard B. Fisher *
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
President and Director
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of the
Funds; Director or Trustee of some of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Director
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc., Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Director
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.

Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926
Director
Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare, Inc.;
Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Director
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Director
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University, U.S. Space Foundation and Czech
Management Center; President Emeritus, University of Pittsburgh; Founding
Chairman, National Advisory Council for Environmental Policy and Technology,
Federal Emergency Management Advisory Board and Czech Management Center;
Director or Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Director
Public relations/Marketing/Conference Planning, Manchester Craftsmen's Guild;
Restaurant Consultant, Frick Art & History Center; Conference Coordinator,
University of Pittsburgh Art History Department; Director or Trustee of the
Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated Research
Corp. and Federated Global Research Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services Company and Federated Shareholder
Services; Director, Federated Services Company; President or Executive Vice
President of the Funds; Director or Trustee, of some of the Funds. Mr. Donahue
is the son of John F. Donahue, Chairman and Director of the Company.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President , Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some
of the Funds.

* This Director is deemed to be an "interested person" as defined in the
Investment Company Act of 1940, as amended.
@ Member of the Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors
between meetings of the Board.
THE FUNDS

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Annuity Management Series; Arrow
Funds; Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; DG Investor
Series; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Trust; Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust;
Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds;
Fixed Income Securities, Inc.; Fortress Utility Fund, Inc.; High Yield Cash
Trust; Insurance Management Series; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty
Term Trust, Inc. - 1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust;
Tax-Free Instruments Trust; The Planters Funds; The Starburst Funds; The
Starburst Funds II; The Virtus Funds; Trust for Financial Institutions; Trust
for Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; and World Investment Series, Inc.
FUND OWNERSHIP
Officers and Directors own less than 1% of the Fund's outstanding shares.
Merrill Lynch, Pierce, Fenner & Smith, as record owner holding shares for its
clients, owned approximately 105,170,325 shares (43.18%) of the Fund as of June
5, 1996.

DIRECTORS COMPENSATION

NAME , AGGREGATE TOTAL COMPENSATION PAID
POSITION WITH COMPENSATION FROM TO DIRECTORS FROM
CORPORATION CORPORATION*# CORPORATION AND FUND COMPLEX +

John F. Donahue, $-0- $-0 for the Fund and 54 other
Chairman and Director investment companies in the Fund
Complex
Richard B. Fisher, $-0- $-0- for the Fund and 6 other
President and Director investment companies in the
Fund Complex

Thomas G. Bigley++, $3,386 $86,331 for the Fund and 54 other
Director investment companies in the Fund
Complex
John T. Conroy, Jr., $3,590 $115,760 for the Fund and 54 other
Director investment companies in the Fund
Complex

William J. Copeland, $3,590 $115,760 for the Fund and 54 other
Director investment companies in the Fund
Complex

James E. Dowd, $3,590 $115,760 for the Fund and 54 other
Director investment companies in the Fund
Complex

Lawrence D. Ellis, M.D., $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex

Edward L. Flaherty, Jr., $3,590 $115,760 for the Fund and 54 other
Director investment companies in the Fund
Complex

Peter E. Madden, $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex

Gregor F. Meyer, $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex

John E. Murray, Jr., $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex

Wesley W. Posvar, $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex

Marjorie P. Smuts, $3,386 $104,898 for the Fund and 54 other
Director investment companies in the Fund
Complex

*Information is furnished for the fiscal year ended February 29, 1996.
#The aggregate compensation is provided for the Corporation which is comprised
of one portfolio.
+The information is provided for the last calendar year.

++Mr. Bigley served on 39 investment companies in the Federated Funds Complex
from January 1 through September 30, 1995. On October 1, 1995, he was appointed
a Trustee on 15 additional Federated Funds.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE FUND
The Fund's investment adviser is Federated Advisers. It is a subsidiary of
Federated Investors. All of the voting securities of Federated Investors are
owned by a trust, the Trustees of which are John F. Donahue, his wife, and his
son, J. Christopher Donahue.
The adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the prospectus. During the fiscal years ended
February 29, 1996 and February 28, 1995 and 1994, the Fund's adviser earned
$18,231,613, $22,038,188, and $28,541,303, respectively, of which $6,060,604,
$6,801,420, and $7,242,625, respectively, were voluntarily waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses) exceed
2-1/2% per year of the first $30 million of average net assets, 2% per year
of the next $70 million of average net assets, and 1-1/2% per year of the
remaining average net assets, the adviser will reimburse the Fund for its
expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this limitation,
the investment advisory fee paid will be reduced by the amount of the
excess, subject to an annual adjustment. If the expense limitation is
exceeded, the amount to be reimbursed by the adviser will be limited, in
any single fiscal year, by the amount of the investment advisory fee.
This arrangement is not part of the advisory contract and may be amended or
rescinded in the future.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Directors.
The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.
For the fiscal years ended February 29, 1996 and February 28, 1995 and 1994, the
Fund paid no brokerage commissions on brokerage transactions.
OTHER SERVICES

FUND ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services necessary to the Fund for a fee as
described in the respective prospectuses. From March 1, 1994 to March 1, 1996,
Federated Administrative Services served as the Fund's Administrator. Prior to
March 1, 1994, Federated Administrative Services, Inc. served as the Fund's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information, Federated
Services Company, Federated Administrative Services, and Federated
Administrative Services, Inc. may hereinafter collectively be referred to as the
"Administrators." For the fiscal years ended February 29, 1996 and February 28,
1995 and 1994, the Administrators earned $1,839,595, $2,232,807, and $2,638,423,
respectivley. Dr. Henry J. Gailliot, an officer of Federated Advisers, the
adviser to the Fund, holds approximately 20% of the outstanding common stock and
serves as a director of Commercial Data Services, Inc., a company which provides
computer processing services to Federated Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for securities
and cash of the Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Fund's
portfolio investments. The fee paid for this service is based upon the level of
the Fund's average net assets for the period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Deloitte & Touche LLP, Pittsburgh,
PA.
PURCHASING SHARES

Except under certain circumstances described in the prospectus, shares are
sold at their net asset value plus a sales charge on days the New York Stock
Exchange is open for business. The procedure for purchasing shares of the Fund
is explained in the ^prospectus under ^"Investing in the Fund."
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
Other benefits, which may be realized under this arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to shareholders'
requests and inquiries concerning their accounts.
For the fiscal year ended February 29, 1996, payments in the amount of
$6,077,204 were made pursuant to the Shareholder Services Plan.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Shareholder Services Company acts as the shareholder's
agent in depositing checks and converting them to federal funds.
PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES
Directors, employees, and sales representatives of the Fund, Federated
Advisers, and Federated Securities Corp. or their affiliates and their immediate
family, or any investment dealer who has a sales agreement with Federated
Securities Corp., and their spouses and children under 21, may buy shares at net
asset value without a sales charge and are not subject to a redemption fee to
the extent the financial institution through which the shares are sold agrees to
waive any initial payment to which it might otherwise be entitled. Shares may
also be sold without a sales charge to trusts or pension or profit-sharing plans
for these persons.
These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange qualifying securities they already own for shares, or
they may exchange a combination of qualifying securities and cash for shares.
Any qualifying securities to be exchanged must meet the investment objective and
policies of the Fund, must have readily ascertainable market value, must be
liquid, and must not be subject to restrictions on resale.
The Fund will prepare a list of securities which are eligible for acceptance
and furnish this list to brokers upon request. The Fund reserves the right to
reject any security, even though it appears on the list, and the right to amend
the list of acceptable securities at any time without notice to brokers or
investors.
An investment broker acting for an investor should forward the securities in
negotiable form with an authorized letter of transmittal to Federated Securities
Corp. Federated Securities Corp. will determine that transmittal papers are in
good order and forward to the Fund's custodian, State Street Bank and Trust
Company. The Fund will notify the broker of its acceptance and valuation of the
securities within five business days of their receipt by State Street Bank.
The Fund values such securities in the same manner as the Fund values its
portfolio securities. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One share will be issued
for each equivalent amount of securities accepted.

Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription,
conversion, or other rights attached to the securities become the property of
the Fund, along with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the cost basis of the securities exchanged for
shares, a gain or loss may be realized by the investor.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset value
is calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
o as provided by an independent pricing service;
o for short-term obligations, according to the mean between the bid and asked
prices, as furnished by an independent pricing service, or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost unless the Board of Directors determines this
is not fair value; or
o at fair value as determined in good faith by the Fund's Directors.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices. Pricing services may consider:
o yield;
o quality;
o coupon rate;
o maturity;
o type of issue;
o trading characteristics; and
o other market data.
Over-the-counter put options will be valued at the mean between the bid and the
asked prices. Covered call options will be valued at the last sale price on the
national exchange on which such option is traded. Unlisted call options will be
valued at the latest bid price as provided by brokers.
EXCHANGE PRIVILEGE

The Securities and Exchange Commission has issued an order exempting the Fund
from certain provisions of the Investment Company Act of 1940. As a result, Fund
shareholders are allowed to exchange all or some of their ^shares for shares in
certain other Federated Funds (which are sold with a sales charge different from
that of the Fund or with no sales charge and which are advised by subsidiaries
or affiliates of Federated Investors) without the assessment of a contingent
deferred sales charge on the exchanged shares.
The order also allows certain other funds that are not advised by subsidiaries
or affiliates of Federated Investors, which do not have a sales charge, to
exchange their shares for Class F Shares on a basis other than their current
offering price. These exchanges may be made to the extent that such shares were
acquired in a prior exchange, at net asset value, for shares of a Federated Fund
carrying a sales charge.
REDUCED SALES CHARGE
If a shareholder making such an exchange qualifies for a reduction or
elimination of the sales charge, the shareholder must notify Federated
Securities Corp.
REQUIREMENTS FOR EXCHANGE
Shareholders using this privilege must exchange shares having a net asset
value equal to the minimum investment requirements of the fund into which the
exchange is being made. Before the exchange, the shareholder must receive a
prospectus of the fund for which the exchange is being made.
This privilege is available to shareholders resident in any state in which the
fund shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Class F Shares submitted for exchange are
redeemed and the proceeds invested in Class F Shares of the other fund.
Further information on the exchange privilege and prospectuses for Class F Funds
or certain Federated Funds are available by calling the Fund.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending upon the circumstances, a short-term or long-term capital
gain or loss may be realized.
MAKING AN EXCHANGE
Instructions for exchanges for certain Federated Funds may be given in writing
or by telephone. Written instructions may require a signature guarantee.
TELEPHONE INSTRUCTIONS
Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with the
Fund or its agents. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund or
its agents. Shares may be exchanged between two funds by telephone only if
the two funds have identical shareholder registrations.
Telephoned exchange instructions may be recorded. They must be received by
the Fund or its agent before 4:00 p.m. (Eastern time) for shares to be
exchanged that day. If reasonable procedures are not followed by the Fund,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
REDEEMING SHARES

The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Shareholder redemptions may be subject to a
contingent deferred sales charge. Redemption procedures are explained in the
prospectus under "Redeeming Shares." Although the transfer agent does not charge
for telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Directors determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem Shares for any shareholder
in cash up to the lesser of $250,000 or 1% of the Fund's net asset value during
any 90-day period.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
TAX STATUS

THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
o derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
o derive less than 30% of its gross income from the sale of securities held
less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. The Fund's dividends, and any short-term
capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held the
Fund shares.
TOTAL RETURN

The Fund's average annual total returns for the one-year and five-year
periods ended February 29, 1996, and for the period from April 4, 1986
(effective date of the Fund's registration statement), to February 29, 1996,
were 7.61%, 6.49%, and 7.45%, respectively.
The average annual total return for the Fund is the average compounded rate
of return for a given period that would equate a $1,000 initial investment to
the ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the maximum offering price per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares purchased
at the beginning of the period with $1,000, less any applicable sales charge,
adjusted over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge is deducted from the ending value of the investment based
on the lesser of the original purchase price or the offering price of shares
redeemed. Occassionally, total return, which does not reflect the effect of the
sales charge, may be quoted in advertising.
YIELD

The for the Fund for the thirty-day period ended February 29, 1996, was
5.62%.
The yield for the Fund is determined by dividing the net investment income
per share (as defined by the Securities and Exchange Commission) earned by
^shares over a thirty-day period by the maximum offering price per share of the
^Fund on the last day of the period. This value is then annualized using semi-
annual compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a 12-month period
and is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments required by
the Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
CURRENT DISTRIBUTIONS

The Fund's average net annualized current distribution rate for the thirty
days ended February 29, 1996, was 7.00%.
The Fund calculates its current distributions daily based upon its past twelve
months' income dividends and short-term capital gains distributions per share
divided by its offering price per share on that day. The Fund may reduce the
time period upon which it bases its calculation of current distributions if the
investment adviser believes a shortened period would be more representative in
light of current market conditions.
PERFORMANCE COMPARISONS

The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
. changes in the Fund's expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
o LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in net asset value over a specific period
of time. From time to time, the Fund will quote its Lipper ranking in the
"U.S. government funds" category in advertising and sales literature.
o SALOMON BROTHERS 15-YEAR MORTGAGE-BACKED SECURITIES INDEX includes the
average of all 15-year mortgage securities, which include Federal Home Loan
Mortgage Corporation (Freddie Mac), Federal National Mortgage Association
(Fannie Mae), and Government National Mortgage Association (Ginnie Mae).
o THE MERRILL LYNCH TAXABLE BOND INDICES include U.S. Treasury and agency
issues and were designed to keep pace with structural changes in the fixed
income market. The performance indicators capture all rating changes, new
issues, and any structural changes of the entire market.
o MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and other sales literature for the Fund may quote total
returns, which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in the
Fund based on monthly reinvestment of dividends over a specified period of
time.
From time to time , as it deems appropriate, the Fund may advertise
performance using charts, graphs, and descriptions, compared to federally
insured bank products, including certificates of deposits and time deposits, and
to money market funds using the Lipper Analytical Services money market
instruments average.
Advertisements may quote performance information which does not reflect the
effect of various sales charges on the Fund.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding, dollar-
cost averaging and systematic investment. In addition, the Fund can compare its
performance, or performance for the types of securities in which it invests, to
a variety of other investments, such as bank savings accounts, certificates of
deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
dvelopments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
ABOUT FEDERATED INVESTORS

Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making-structured, straightforward, and consistent. This
has resulted in a history of competitive performance with a range of competitive
investment products that have gained the confidence of thousands of clients and
their customers.
The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts, and
traders dedicated to specific market sectors. These traders handle trillions of
dollars in annual trading volume.
In the government sector, as of December 1995, Federated Investors managed 9
mortgage-backed, 5 government/agency and 17 government money market mutual
funds, with assets approximating $7.7 billion, $1.7 billion and $20.9 billion,
respectively. Federated trades approximately $300 million in U.S. government and
mortgage-backed securities daily and places approximately $13 billion in
repurchase agreements each day. Federated introduced the first U.S. government
fund to invest in the U.S. government bond securities in 1969. Federated has
been a major force in the short- and intermediate-term government markets since
1982 and currently manages nearly $10 billion in government funds within these
maturity ranges.
J. Thomas Madden, Executive Vice President, oversees Federatedis equity and high
yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federatedis domestic fixed income management. Henry A
Frantzen, Executive Vice President, oversees the management of Federatedis
international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial goals
through mututal funds. These investors, as well as businesses and institutions,
have entrusted over $3 trillion to the more than 5,500 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,500
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Mark R. Gensheimer, Executive
Vice President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. Federated's service to
financial professionals and institutions has earned it high rankings in several
DALBAR Surveys. The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Division.
*Source: Investment Company Institute
FINANCIAL STATEMENTS

The Financial Statements for the fiscal year ended February 29, 1996, are
incorporated herein by reference to the Annual Report for the Fund dated
February 29, 1996 (File Nos. 2-74191 and 811-3266). A copy of the Report may be
obtained without charge by contacting the Fund.

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:
(a) Financial Statements. (1-4) The Financial Statements for the fiscal
year ended February 29, 1996, are incorporated herein by reference to
the Fund's Annual Report dated February 29, 1996.
(b) Exhibits:
(1) (i)Conformed copy of Articles of Incorporation of the
Registrant (13);
(ii)Conformed copy of Agreement and Plan of Reorganization
(13);
(2) (i)Copy of By-Laws of the Registrant (13);
(ii)Copy of By-Laws Amendment of 2/87 (6);
(iii)Copy of By-Laws Amendment of 8/87 (6);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Capital Stock of the
Registrant (12);
(5) Conformed copy of Investment Advisory Contract of the
Registrant (8);
(6) (i)Form of Distributor's Contract of the Registrant
including Exhibit A (13);
(ii)Form of Exhibit B to the Distributor's Contract (13);
(iii)Form of Exhibit C to the Distributor's Contract (13);
(iv)Form of Exhibit D to the Distributor's Contract (13);
(v)The Registrant hereby incorporates the conformed copy of
the specimen Mutual Funds Sales and Service Agreement;
Mutual Funds Service Agreement and Plan Trustee/Mutual
Funds Service Agreement from Item 24(b)6 of the Cash Trust
Series II Registration Statement on Form N-1A, filed with
the Commission on July 24, 1995. (File Nos. 33-38550 and
811-6269)
(7) Not applicable;
(8) Conformed copy of Custodian Agreement of the Registrant (12);

+ All exhibits have been filed electronically.

6. Response is incorporated by reference to Registrant's Post-Effective
Amendment
No. 16 on Form N-1A filed April 22, 1988. (File Nos. 2-74191 and 811-3266)
8. Response is incororated by reference to Registrant's Post-Effective
Amendment
No. 19 on Form N-1A filed February 26, 1990. (File Nos. 2-74191 and
811-3266)
12. Response is incorporated by reference to Registrant's Post-Effective
Amendment
No. 30 on Form N-1A filed April 20, 1995. (File Nos. 2-74191 and 811-3266)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment
No. 32 on Form N-1A filed May 1, 1996. (File Nos. 2-74191 and 811-3266)

(9) (i) Conformed copy of Shareholder Services Agreement of the
Registrant (12);
(ii) Conformed copy of Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency Services, and
Custody Services Procurement (13);
(iii)The responses described in Item 24(b)6 are hereby
incorporated by reference.
(10) Conformed copy of Opinion and Consent of Counsel as to
Legality of Shares Being Registered (12);
(11) Conformed copy of Consent of Independent Public
Accountants;+
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding (12);
(14) Not applicable;
(15) Not applicable;
(16) Copy of Schedule for Computation of Fund Performance Data
(12);
(17) Financial Data Schedule;+
(18) The Registrant hereby incorporates by reference the
conformed copy of the specimen Multiple Class Plan from Item
24(b)(18) of the World Investment Series, Inc. Registration
Statement on Form N-1A, filed with the Commission on January
26, 1996. (File Nos. 33-52149 and 811-07141);
(19) Conformed copy of Power of Attorney; +

Item 25. Persons Controlled by or Under Common Control with Registrant:

None

+ All exhibits have been filed electronically.

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment
No. 30 on Form N-1A filed April 20, 1995. (File Nos. 2-74191 and 811-3266)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment
No. 32 on Form N-1A filed May 1, 1996. (File Nos. 2-74191 and 811-3266)

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of June 5, 1996

Shares of Capital Stock 66,227
($.001 per Share par value)

Item 27. Indemnification: (1.)

Item 28. Business and Other Connections of Investment Adviser:

(a)For a description of the other business of the investment adviser, see
the section entitled "Fund Information - Management of the Fund" in
Part A. The affiliations with the Registrant of four of the Trustees
and one of the Officers of the investment adviser are included in Part
B of this Registration Statement under "Fund Management - Officers and
Directors." The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard) 107 West Market Street, Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are: Mark L. Mallon,
William D. Dawson, III, Henry A. Frantzen, and J. Thomas Madden,
Executive Vice Presidents; Henry J. Gailliot, Senior Vice President-
Economist; Peter R. Anderson, Drew J. Collins, Jonathan C. Conley,
Mark Durbiano, J. Alan Minteer, Mary Jo Ochson, and Robert J.
Ostrowski, Senior Vice Presidents; J. Scott Albrecht, Joseph M.
Balestrino, Randall S. Bauer, David F. Belton, David A. Briggs,
Kenneth J. Cody, Deborah A. Cunningham, Michael P. Donnelly, Linda A.
Duessel, Kathleen M. Foody-Malus, Thomas M. Franks, Edward C.
Gonzales, Timothy E. Keefe, Stephen A. Keen, Mark S. Kopinski, Jeff A.
Kozemchak, Marian R. Marinack, Susan M. Nason, Jr., Charles A.
Ritter, James D. Roberge, Frank Semack, William F. Stotz, Edward J.
Tiedge, Sandra L. Weber, and Christopher H. Wiles, Vice Presidents;
Thomas R. Donahue, Treasurer; and Stephen A. Keen, Secretary. The
business address of each of the Officers of the investment adviser is
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779. These
individuals are also officers of a majority of the investment advisers
to the Funds listed in Part B of this Registration Statement under
"The Funds."

Item 29. Principal Underwriters:

(a) Federated Securities Corp., the Distributor for shares of
the Registrant, also acts as principal underwriter for the
following open-end investment companies: 111 Corcoran Funds;
Annuity Management Series; Arrow Funds; Automated Government Money
Trust; BayFunds; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated
Adjustable Rate U.S. Government Fund, Inc.; Federated
American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S.
Government Securities, Inc.; Federated GNMA Trust; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High
Yield Trust; Federated Income Securities Trust; Federated
Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Master Trust;
Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust;
Federated Short-Term Municipal Trust; Federated Short-Term U.S.
Government Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series,
Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 3-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority
Funds; Fixed Income Securities, Inc.; Fortress Utility Fund, Inc.;
High Yield Cash Trust; Independence One Mutual Funds;
Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust;
Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Marshall Funds, Inc.; Money
Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds;
Peachtree Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The
Biltmore Funds; The Biltmore Municipal Funds; The Monitor Funds;
The Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; Vision Group of Funds, Inc.; and World Investment Series,
Inc.

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Richard B. Fisher Director, Chairman, Chief Vice President Federated
Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.

John W. McGonigle Director, Federated Executive Vice
Federated Investors Tower Securities Corp. President and
Pittsburgh, PA 15222-3779 Secretary

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779

Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joeseph Kenedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.

Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor Assistant Secretary, Treasurer
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Item 30. Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Federated Government Income Federated Investors Tower
Securities, Inc. Pittsburgh, Pennsylvania
15222-3779

Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, Pennsylvania Disbursing Agent
and Portfolio 15222-3779
Recordkeeper")

Federated Services Company Federated Investors Tower
("Administrator") Pittsburgh, Pennsylvania 15222-3779

Federated Advisers Federated Investors Tower
("Adviser") Pittsburgh, Pennsylvania 15222-3779

State Street Bank and Trust Company P.O. Box 8600
("Custodian") Boston, Massachusetts 02266-8600

Item 31. Management Services: Not applicable.

Item 32. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Directors and the calling of special shareholder meetings by
shareholders.

Registrant hereby undertakes to furnish each person to whom a prospectus
is delivered with a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.

SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED GOVERNMENT INCOME
SECURITIES, INC., certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to Rule
485(a) under the Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 28th day of June, 1996.
FEDERATED GOVERNMENT INCOME SECURITIES, INC.

BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
June 28, 1996

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By:/s/Charles H. Field
Charles H. Field Attorney In Fact June 28, 1996
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

John F. Donahue* Chairman and Director
(Chief Executive Officer)

Richard B. Fisher* President and Director

John W. McGonigle* Executive Vice President, Secretary and
Treasurer (Principal Financial and Accounting Officer)

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

William J. Copeland* Director

James E. Dowd* Director

Lawrence D. Ellis, M.D.* Director

Edward L. Flaherty, Jr.* Director

Peter E. Madden* Director

Gregor F. Meyer* Director

John E. Murray, Jr.* Director

Wesley W. Posvar* Director

Marjorie P. Smuts* Director

* By Power of Attorney

Exhibit (11) under N-1A
Exhibit 23 under 601/Reg SK

INDEPENDENT AUDITORS' CONSENT

To the Board of Directors and
Shareholders of FEDERATED GOVERNMENT INCOME SECURITIES, INC.:

We consent to the use in Post-Effective Amendment No. 33 to Registration
Statement (No.2-74191) of Federated Government Income Securities, Inc.
(formerly, Government Income Securities, Inc.) of our report dated April
18, 1996, appearing in the Prospectuses, which are a part of such
Registration Statement, and to the reference to us under the heading
"Financial Highlights" in such Prospectuses.

/s/DELOITTE & TOUCHE
Deloitte & Touche

Pittsburgh, Pennsylvania
June 28, 1996

Exhibit 19 under Form N-1A
Exhibit 99 under Item 601/Reg. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of FEDERATED GOVERNMENT
INCOME SECURITIES, INC. and the Deputy General Counsel of Federated
Investors, and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for them and in
their names, place and stead, in any and all capacities, to sign any and
all documents to be filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934
and the Investment Company Act of 1940, by means of the Securities and
Exchange Commission's electronic disclosure system known as EDGAR; and to
file the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as each
of them might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
thereof.

SIGNATURES TITLE DATE

/s/John F. Donahue Chairman and Director June 26, 1996
John F. Donahue (Chief Executive Officer)

/s/Richard B. Fisher President June 26, 1996
Richard B. Fisher

/s/John W. McGonigle Treasurer and ExecutiveJune 26, 1996
John W. McGonigle Vice President
(Principal Financial and
Accounting Officer)

/s/Thomas G. Bigley Director June 26, 1996
Thomas G. Bigley

/s/John T. Conroy, Jr. Director June 26, 1996
John T. Conroy, Jr.

SIGNATURES TITLE DATE

/s/William J. Copeland Director June 26, 1996
William J. Copeland

/s/James E. Dowd Director June 26, 1996
James E. Dowd

/s/Lawrence D. Ellis, M.D. Director June 26, 1996
Lawrence D. Ellis, M.D.

/s/Edward L. Flaherty, Jr. Director June 26, 1996
Edward L. Flaherty, Jr.

/s/Peter E. Madden Director June 26, 1996
Peter E. Madden

/s/Gregor F. Meyer Director June 26, 1996
Gregor F. Meyer

/s/John E. Murray, Jr. Director June 26, 1996
John E. Murray, Jr.

/s/Wesley W. Posvar Director June 26, 1996
Wesley W. Posvar

/s/Marjorie P. Smuts Director June 26, 1996
Marjorie P. Smuts

Sworn to and subscribed before me this 26th day of June, 1996

/s/Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Sept. 16, 1996
Member, Pennsylvania Association of Notaries

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated Government Income Securities, Inc.

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<FISCAL-YEAR-END> Feb-29-1996
<PERIOD-END> Feb-29-1996
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