FEDERATED GOVERNMENT INCOME SECURITIES INC, N-30D, 1999-04-28

FEDERATED GOVERNMENT INCOME SECURITIES INC
N-30D, 1999-04-28

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ANNUAL REPORT

[Graphic]

RICHARD B. FISHER

President

Federated Government Income Securities, Inc.

President's Message

Dear Fellow Shareholder:

Federated Government Income Securities, Inc. was created in 1986, and I am
pleased to present its 13th Annual Report. This U.S. government securities
fund pursues generous monthly income from a portfolio of mortgage backed
securities issued by U.S. government agencies along with U.S. Treasury notes
and bonds. The fund currently has an overall four-star Morningstar Rating(TM)
out of 1521 taxable bond funds as of March 31, 1999. 1 The fund's assets
totaled $1.5 billion as of February 28, 1999.

This report covers the 12-month reporting period from March 1, 1998 through
February 28, 1999. It begins with an interview with the fund's portfolio
manager, Kathy Foody-Malus, Vice President of Federated Investment Management
Company. She offers her views on today's interest rate environment, fund
performance, and how your fund is invested in mortgage backed and Treasury
securities. Following her discussion, you will find three additional items of
shareholder interest. First is a series of graphs showing the fund's long-term
investment performance. Second is a complete listing of the fund's holdings, and
third is the publication of the fund's financial statements.

The fund's portfolio focuses on U.S. government agency securities, i.e.,
Government National Mortgage Association ("GNMA") issues, Federal Home Loan
Mortgage Corporation ("FHLMC") issues, and Federal National Mortgage Association
("FNMA") issues, as well as U.S. Treasury bonds. These U.S. government
securities have no credit or default risk, though the prices of all U.S.
government issues are subject to interest rate changes with corresponding price
changes in the marketplace.

1 Past performance is no guarantee of future results. Morningstar proprietary
ratings reflect historical risk-adjusted performance as of 3/31/99. They are
subject to change every month. Ratings are calculated from the fund's three-,
five- and ten-year average annual returns in excess of 90-day Treasury bill
returns with appropriate fee adjustments, and a risk factor that reflects fund
performance below 90-day T-bill returns. The Fund received 3, 3, and 4 stars for
the three-, five-, and ten-year periods and was rated among 1521, 1048, and 371
taxable bond funds, respectively. The top 10% of funds in a rating universe
receive 5 stars, the next 22.5% receive 4 stars, the middle 35% receive 3 stars,
the next 22.5% receive 2 stars and the bottom 10% receive 1 star.

The 12-month reporting period saw three distinct interest rate environments for
investors. The first half of the fund's fiscal year was relatively tranquil with
interest rates moving in a 75 basis point range. Next came three months of high
volatility in which yields on long-term U.S. Treasuries declined to lows not
seen in over a generation. This volatility caused non- Treasury securities to
underperform because investors retreated from these securities in favor of the
most liquid types of investments. As the reporting period closed, a more stable
market emerged, and U.S. Treasuries gave back most of their earlier gains. This
reversal in the U.S. Treasury market benefited other types of fixed income
securities, such as mortgage backed issues, as investors sought the additional
yield spread over Treasuries.

In this environment, the fund's investment returns for the fiscal year ended
February 28, 1999 were competitive with the overall Treasury market and that of
the average U.S. government bond fund. Individual share class total return
performance for the 12-month reporting period, including income distributions,
follows. 2

TOTAL RETURN INCOME DISTRIBUTIONS NET ASSET VALUE CHANGE
<S> <C> <C> <C>
Class A Shares 5.58% $0.536 $8.84 to $8.79 = (0.57%)
Class B Shares 4.65% $0.466 $8.84 to $8.78 = (0.68%)
Class C Shares 4.76% $0.466 $8.84 to $8.79 = (0.57%)
Class F Shares 5.49% $0.528 $8.83 to $8.78 = (0.57%)

</TABLE>

The fund continued to offer investors the income opportunities of the mortgage
backed securities market and the price performance of U.S. Treasury securities.
At the end of the reporting period, more than 75% of the fund's assets were
invested in mortgage backed securities that were issued by GNMA, FNMA and FHLMC.
These government securities are guaranteed as to payment of principal and
interest by the U.S. government, its agencies or instrumentalities. 3

Thank you for your continued participation in Federated Government Income
Securities, Inc. If you have any questions or comments, please do not hesitate
to write.

Very sincerely yours,

[Graphic]

Richard B. Fisher
President
April 15, 1999

2 Performance quoted is based on net asset value, reflects past performance and
is not indicative of future results. Investment return and principal value will
fluctuate, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Total returns for the period, based on offering
price (i.e., less any applicable sales charge), for Class A, B, C, and F Shares
were 0.79%, (0.82%), 3.76%, and 3.44%, respectively.

3 Fund shares are not guaranteed by the U.S. government.

[Graphic]

Kathy Foody-Malus
Vice President
Federated Investment
Management Company

Investment Review

WHAT ARE YOUR COMMENTS ON THE FIXED INCOME MARKET DURING THE FUND'S FISCAL YEAR?

During 1998, the "Goldilocks" U.S. economy continued to perform as advertised -
not too hot and not too cold. The U.S. Treasury market during the reporting
period was in a state of flux. The key factors driving the performance of U.S.
Treasuries were reductions in Treasury supply due to the first budget surplus in
close to 30 years, declining commodity prices, overseas turmoil, and heightened
liquidity premiums.

As the reporting period began, the overall tone of the Treasury market was one
of complacency as the Federal Reserve Board (the "Fed") appeared to be taking a
"wait and see" approach to monetary policy. However, this changed at mid-year as
events in Russia and Latin America reawakened the potential for easing of
short-term rates by the Fed. As this crisis unfolded, investors favored the most
liquid U.S. Treasury securities available and avoided all other fixed income
asset classes. At the peak of this turmoil, yields on longer maturity Treasuries
fell to levels not seen in over a generation. For example, the yield on the
30-year U.S. Treasury reached a low of 4.72%. During this time, the Fed eased
the Federal Funds Target Rate by 75 basis points over a three month time frame
to provide stability to the capital markets. The robust state of the U.S.
economy took a back seat as these events unfolded.

As the final quarter of the reporting period began, the U.S. Treasury market
again began to focus on domestic economic data and its impact rather than events
going on overseas. A weaker dollar versus the Yen and concerns about potential
selling of U.S. Treasury securities by the Japanese caused bond yields to move
higher. These concerns plus Fed Chairman Alan Greenspan's semi-annual
Humphrey-Hawkins testimony caused the 30-year bond yield to finish the fiscal
year at 5.56%. This was the highest yield level in more than six months.

IN THIS ENVIRONMENT, HOW DID THE MORTGAGE BACKED SECURITIES MARKET FARE
RELATIVE TO U.S. TREASURIES, AND HAS REFINANCING BEEN A SIGNIFICANT FACTOR?

This past year will probably go down as one of the most tumultuous times in the
mortgage backed securities market. During the first half of the fund's fiscal
year, the mortgage backed securities market benefited from a relatively stable
Treasury market and outperformed by 20 basis points. The second half of the
fiscal year saw a complete 180-degree turn for mortgage backed securities
investors. This dramatic turn occurred as a "flight-to- liquidity" driven rally
in U.S. Treasuries pushed mortgage spreads versus U.S. Treasuries to their
widest levels since the late 1980s. Liquidity concerns, and not concern over
increasing prepayments, caused the overall spread widening. The mortgage backed
securities sector did not widen in isolation, but in concert with other fixed
income spread sectors.

The fourth quarter of 1998 proved to be the positive turning point for the
mortgage backed securities market. This recovery has continued with a vengeance
into 1999 as investors realized that the mortgage backed securities sector is
attractive given current market levels.

The mortgage backed securities market in 1998 experienced two major refinancing
waves as fixed mortgage rates declined to 30-year lows. These refinancing waves
caused some indigestion initially in the mortgage backed securities market.
However, the supply ended up being easily absorbed by FHLMC and FNMA into their
own investment portfolios and by the financial services sector to replace normal
monthly principal paydowns.

WHAT IS YOUR STRATEGY FOR THE FUND IN THESE MARKET CONDITIONS?

The strategy of the fund attempts to balance the price performance of U.S.
Treasury securities with the income advantage of the mortgage backed securities
market. During the fiscal third quarter of 1998, we reduced the fund's exposure
to the U.S. Treasury market and increased its exposure to the mortgage backed
securities market. The portfolio sold short- to intermediate-term U.S.
Treasuries to purchase current coupon mortgage backed securities. This increased
exposure was due to the decade-wide levels in spreads on mortgage backed
securities versus U.S. Treasuries. The allocation to mortgage backed securities
favored the FHLMC and FNMA agency sectors. These agencies offered value due to
the potential for dollar roll opportunities as well as a collateralized mortgage
obligation bid.

The fund's allocation to the U.S. Treasury market continued to favor the longer
maturity sector to aid in maintaining the fund's overall portfolio duration of
five years.

HOW WAS THE FUND'S PORTFOLIO ALLOCATED AT THE END OF THE REPORTING PERIOD?

The portfolio currently has a 75% allocation to the mortgage backed securities
market due to historically attractive valuations versus the U.S. Treasury
market. As of February 28, 1999, the fund's portfolio was invested in the
following types of issues:

Percentage
of
Net Assets

<S> <C>
Federal National Mortgage Association 37.20%
U.S. Treasury and Agency Obligations 30.50%
Federal Home Loan Mortgage Corporation 21.60%
Government National Mortgage Association 20.90%

</TABLE>

HOW DID FEDERATED GOVERNMENT INCOME SECURITIES, INC., PERFORM FOR
SHAREHOLDERS IN TERMS OF TOTAL RETURN AND INCOME DURING THE

REPORTING PERIOD?

For the fiscal year ended February 28, 1999, the fund's Class A Shares produced
a total return of 5.58%, based on net asset value. 1 The fund's Class B, C, and
F Shares produced total returns of 4.65%, 4.76% and 5.49%, respectively, based
on net asset value. 1

The fund's returns kept pace with those of the market overall. For the 12-
month reporting period ended February 28, 1999, the Merrill Lynch 5-Year
Treasury Note Index returned 5.87%. 2 The total return for the Lipper
U.S. Government Funds Average was 5.08%. 3

In terms of income, the fund's Class A, B, C, and F Shares paid monthly
dividends totaling $0.536, $0.466, $0.466, and $0.528 per share, respectively.

1 Performance quoted reflects past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total returns for the reporting period, based on offering price (i.e.,
less any applicable sales charge), for Class A, B, C, and F Shares were 0.79%,
(0.82%), 3.76% and 3.44%, respectively.

2 Merrill Lynch 5-Year Treasury Note Index comprises the most recently issued
5-year U.S. Treasury notes. Index returns are calculated as total returns for
periods of 1, 3, 6, and 12 months as well as year-to-date. This index is
unmanaged, and investments cannot be made in an index.

3 Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling into
the category indicated. These figures do not take sales charges into account.

Two Ways You May Seek to Invest for Success:

RESULTS OF A $13,000 INVESTMENT

If you had made an initial investment of $13,000 in the Class F Shares of
Federated Government Income Securities, Inc. on 4/4/86, reinvested your
dividends and capital gains, and did not redeem any shares, your account would
have been worth $32,110 on 2/28/99. You would have earned a 7.30% average annual
total return for the investment life span. 1

One key to investing wisely is to reinvest all distributions in fund shares.
This increases the number of shares on which you can earn future dividends, and
you gain the benefit of compounding.

As of 3/31/99, the Class A Shares' average annual 1-year and since inception
(8/5/96) total returns were 1.12% and 5.53%, respectively. The Class B Shares'
average annual 1-year and since inception (8/5/96) total returns were (0.48%)
and 5.23%, respectively. Class C Shares' average annual 1-year and since
inception (8/5/96) total returns were 4.09% and 6.63%, respectively. Class F
Shares' average annual 1-year, 5-year, and 10-year total returns were 3.79%,
6.80%, and 7.74%, respectively. 2

[Graphic representation omitted. See Appendix A1.]

1 Total return represents the change in the value of an investment after
reinvesting all income and capital gains, and takes into account the 1.00% sales
charge for Class F Shares. A contingent deferred sales charge of 1.00% would be
applied on any redemption of Class F Shares less than four years from the
purchase date. Data quoted represents past performance and does not guarantee
future results. Investment return and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.

2 The total returns stated take into account all applicable sales charges. The
maximum sales charges and contingent deferred sales charges for the fund are as
follows: Class A Shares, 4.50% sales charge; Class B Shares, 5.50%, contingent
deferred sales charge; Class C Shares, 1.00% contingent deferred sales charge;
Class F Shares, 1.00% sales charge and 1.00% contingent deferred sales charge.

ONE STEP AT A TIME

$1,000 initial investment and subsequent investments of $1,000 each year for 12
years (reinvesting all dividends and capital gains) grew to $21,468.

With this approach, the key is consistency.

If you had started investing $1,000 annually in the Class F Shares of Federated
Government Income Securities, Inc. on 4/4/86, reinvested your dividends and
capital gains, and did not redeem any shares, you would have invested only
$13,000, but your account would have reached a total value of $21,468 1 by
2/28/99. You would have earned an average annual total return of

7.10%.

A practical investment plan helps you pursue long-term performance from U.S.
government securities. Through systematic investing, you buy shares on a regular
basis and reinvest all earnings. An investment plan can work for you when you
invest only $1,000 annually. You can take it one step at a time. Put time,
money, and compounding to work.

[Graphic representation omitted. See Appendix A2.]

1 This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. No method of investing can guarantee a profit or
protect against loss in down markets. However, by investing regularly over time
and buying shares at various prices, investors can purchase more shares at lower
prices. All accumulated shares have the ability to pay income to the investor.

Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue purchases
through periods of low price levels.

Hypothetical Investor Profile-
Investing For Current Income

Thirteen years ago, in April 1986, Anne and Denny Laughlin, an imaginary working
couple with no children, had to decide how to invest a $100,000 inheritance from
her late father's estate. They chose the Class F Shares of Federated Government
Income Securities, Inc. because the fund invests in government securities which
traditionally are some of the safest, most credit-worthy securities issued in
America.

They like the way they can use their account for an occasional extravagance-
like the $55,000 Jaguar they bought to celebrate their anniversary-without
touching their original principal.

The Laughlins' account totaled $247,003 as of 2/28/99 for an average annual
total return of 7.30%. 1

[Graphic representation omitted. See Appendix A3.]

1 This hypothetical scenario is provided for illustrative purposes only and
does not represent the result obtained by any particular shareholder. Past

performance does not guarantee future results.

Federated Government Income Securities, Inc.-Class A Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Government Income Securities, Inc. (Class A Shares) (the "Fund") from
August 5, 1996 (start of performance) to February 28, 1999 compared to the
Merrill Lynch 5 Year Treasury Index (ML5YRT), the Lehman Brothers Mortgage
Backed Securities Index (LBMBSI), a blended index comprised of 60% Lehman
Brothers Mortgage Backed Securities Index and 40% Lehman Brothers Government
Index (LBMBGSI), and the Lipper U.S. Government Funds Average (LUSGFA). 2

AVERAGE ANNUAL TOTAL RETURN3 FOR THE PERIOD ENDED FEBRUARY 28, 1999 <S> <C> 1
Year 0.79% Start of Performance (8/5/96) 5.47% </TABLE>

[Graphic representation omitted. See Appendix A4.]

PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF
OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.

1 Represents a hypothetical investment of $9,550 in the Fund after deducting the
maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge =
$9,550). The Fund's performance assumes the reinvestment of all dividends and
distributions. The ML5YRT, LBMBSI, LBMBGSI, and the LUSGFA have been adjusted to
reflect reinvestment of dividends on securities in the indexes and the average.

2 The ML5YRT, LBMBSI, and LBMBGSI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires to
be reflected in the Fund's performance. The indexes are unmanaged. The LUSGFA
represents the average of the total returns reported by all of the mutual funds
designated by Lipper Analytical Services, Inc. as falling in the category
indicated, and is not adjusted to reflect any sales charges. However, these
total returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.

3 Total returns quoted reflect all applicable sales charges and contingent
deferred sales charges.

Federated Government Income Securities, Inc.-Class B Shares

GROWTH OF $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Government Income Securities, Inc. (Class B Shares) (the "Fund") from
August 5, 1996 (start of performance) to February 28, 1999, compared to the
Merrill Lynch 5 Year Treasury Index (ML5YRT), the Lehman Brothers Mortgage
Backed Securities Index (LBMBSI), a blended index comprised of 60% Lehman
Brothers Mortgage Backed Securities Index and 40% Lehman Brothers Government
Index (LBMBGSI), and the Lipper U.S. Government Funds Average (LUSGFA). 2

<TABLE>

AVERAGE ANNUAL TOTAL RETURN 3 FOR THE
PERIOD ENDED FEBRUARY 28, 1999
<S> <C>
1 Year (0.82%)
Start of Performance (8/5/96) 5.18%
</TABLE>

[Graphic representation omitted. See Appendix A5.]

1 Represents a hypothetical investment of $10,000 in the Fund. The ending value
of the Fund reflects a 4.00% contingent deferred sales charge on any redemptions
less than three years from the purchase date. The maximum contingent deferred
sales charge is 5.50% on any redemption less than one year from the purchase
date. The Fund's performance assumes the reinvestment of all dividends and
distributions. The ML5YRT, LBMBSI, LBMBGSI, and the LUSGFA have been adjusted to
reflect reinvestment of dividends on securities in the indexes and average.

3 Total returns quoted reflect all applicable sales charges and contingent
deferred sales charges.

Federated Government Income Securities, Inc.-
Class C Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Government Income Securities, Inc. (Class C Shares) (the "Fund") from
August 5, 1996 (start of performance) to February 28, 1999, compared to the
Merrill Lynch 5 Year Treasury Index (ML5YRT), the Lehman Brothers Mortgage
Backed Securities Index (LBMBSI), a blended index comprised of 60% Lehman
Brothers Mortgage Backed Securities Index and 40% Lehman Brothers Government
Index (LBMBGSI), and the Lipper U.S. Government Funds Average (LUSGFA). 2

AVERAGE ANNUAL TOTAL RETURN 3 FOR THE PERIOD ENDED FEBRUARY 28, 1999 <S> <C> 1
Year 3.76% Start of Performance (8/5/96) 6.63% </TABLE>

[Graphic representation omitted. See Appendix A6.]

1 Represents a hypothetical investment of $10,000 in the Fund. A 1.00%
contingent deferred sales charge would be applied on any redemption less than
one year from the purchase date. The Fund's performance assumes the reinvestment
of all dividends and distributions. The ML5YRT, LBMBSI, LBMBGSI, and the LUSGFA
have been adjusted to reflect reinvestment of dividends on securities in the
indexes and average.

2 The ML5YRT, LBMBSI, and LBMBGSI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires to
be reflected in the Fund's performance. The indexes are unmanaged. The LUSGFA
represent the average of the total returns reported by all of the mutual funds
designated by Lipper Analytical Services, Inc. as falling in the category
indicated, and is not adjusted to reflect any sales charges. However, these
total returns are reported net of expenses or other fees that the Securities and
Exchange Commission requires to be reflected in a fund's performance.

3 Total returns quoted reflect all applicable sales charges and contingent
deferred sales charges.

Federated Government Income Securities, Inc.-

Class F Shares

GROWTH OF A $10,000 INVESTMENT

The graph below illustrates the hypothetical investment of $10,000 1 in the
Federated Government Income Securities, Inc. (Class F Shares) (the "Fund") from
February 28, 1989 to February 28, 1999, compared to the Merrill Lynch 5 Year
Treasury Index (ML5YRT), the Lehman Brothers Mortgage Backed Securities Index
(LBMBSI), a blended index comprised of 60% Lehman Brothers Mortgage Backed
Securities Index and 40% Lehman Brothers Government Index (LBMBGSI), and the
Lipper U.S. Government Funds Average (LUSGFA). 2

AVERAGE ANNUAL TOTAL RETURN 3 FOR THE PERIOD ENDED FEBRUARY 28, 1999 <S> <C> 1
Year 3.44% 5 Years 6.24% 10 Years 7.70% Start of Performance (4/4/86) 7.30%
</TABLE>

[Graphic representation omitted. See Appendix A7.]

1 Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 1.00% ($10,000 investment minus $100 sales charge =
$9,900). A contingent deferred sales charge of 1.00% would be applied on any
redemption less than four years from the purchase date. The Fund's performance
assumes the reinvestment of all dividends and distributions. The ML5YRT, LBMBSI,
LBMBGSI, and the LUSGFA have been adjusted to reflect reinvestment of dividends
on securities in the indexes and average.

2 The ML5YRT, LBMBSI, and LBMBGSI are not adjusted to reflect sales charges,
expenses, or other fees that the Securities and Exchange Commission requires to
be reflected in the Fund's performance. The indexes are unmanaged. The LUSGFA
represents the average of the total returns reported by all of the mutual funds
designated by Lipper Analytical Services, Inc. as falling in the respective
category indicated, and is not adjusted to reflect any sales charges. However,
these total returns are reported net of expenses or other fees that the
Securities and Exchange Commission requires to be reflected in a fund's
performance.

3 Total returns quoted reflect all applicable sales charges and contingent
deferred sales charges.

Portfolio of Investments

FEBRUARY 28, 1999

<TABLE>
<CAPTION>
PRINCIPAL

AMOUNT VALUE
<C> <S> <C>

LONG-TERM OBLIGATIONS-105.7%
FEDERAL HOME LOAN BANK-1.5%

$ 22,325,000 5.925%, 4/9/2008 $ 22,307,140
FEDERAL HOME LOAN MORTGAGE CORP.-13.7%
9,428,371 9.500%, 8/1/2016 10,067,708
7,149,573 7.500%, 1/1/2027 7,346,186
184,806,267 6.500%, 9/1/2028 - 2/1/2029 183,653,670
TOTAL 201,067,564
FEDERAL HOME LOAN MORTGAGE CORP. REMIC-7.9%

24,400,000 Series 1127-G, 8.500%, 8/15/2006 24,795,280
10,000,000 Series 1347-I, 8.000%, 8/15/2022 10,169,000
7,000,000 Series 2081-ED, 7.500%, (Interest Only), 8/15/2028 1,933,750
4,744,194 Series 1991-PJ, 7.000%, (Interest Only), 9/15/2027 1,747,951
22,000,000 Series 1591-PV, 6.250%, 10/15/2023 21,219,440
23,991,000 Series 2024-E, 6.000%, 1/15/2028 21,666,992
115,695,000 Series 2136-S, 2.720%, (Interest Only), 3/15/2010 8,098,650
233,368,223 Series 2111-SB, 2.564%, (Interest Only), 1/15/2029 8,678,964
204,695,511 Series 2097-S, 2.560%, (Interest Only), 11/15/2028 8,187,820
5,123,047 Series 197-1, (Principal Only), 4/1/2028 3,563,130
7,875,000 Series 1802-A, (Principal Only), 3/15/2024 4,946,524
TOTAL 115,007,501
FEDERAL HOME LOAN MORTGAGE CORPORATION AGENCY DEBENTURE-3.3%

48,800,000 5.750%, 7/15/2003 - 4/15/2008 48,741,768
FEDERAL NATIONAL MORTGAGE ASSOCIATION-28.4%
45,228,912 7.500%, 7/1/2028 46,105,448
57,111,165 6.500%, 9/1/2013 - 9/1/2028 57,136,749
233,043,375 6.000%, 12/1/2028 - 2/1/2029 225,907,587
19,000,000 6.000%, 5/15/2008 19,231,610
70,000,000 1 6.000%, 4/1/2029 67,855,900
TOTAL 416,237,294

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>

LONG-TERM OBLIGATIONS-continued
FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC-8.8%

$ 23,945,029 Series 1993-201-FA, 9.440%, 10/25/2023 $ 27,896,438
17,294,358 Series 1991-146-Z, 8.000%, 10/25/2006 17,540,457
9,128,009 Series 1997-89-E, (Interest Only), 7.000%, 12/20/2027 3,397,354
13,970,000 Series 1994-56-K, 6.500%, 3/25/2024 13,855,027
10,324,345 Series 1994-30-K, 6.500%, 2/25/2024 10,273,756
25,000,000 Series 1997-67-PL, 6.500%, 10/18/2012 24,431,595
11,075,000 Series 1993-198-L, 6.250%, 10/25/2023 10,719,271
28,346,746 Series 276-1, (Principal Only), 10/1/2024 21,499,306
TOTAL 129,613,204
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION-20.3%

984,189 13.000%, 1/15/2011 - 11/15/2014 1,152,632
3,758,533 12.500%, 4/15/2010 - 7/15/2015 4,362,406
16,935,957 12.000%, 5/15/2011 - 1/15/2016 19,562,980
5,742,866 11.000%, 12/15/2009 - 10/15/2019 6,447,512
4,647,968 10.500%, 3/15/2016 5,170,864
204,000 9.000%, 2/15/2009 219,937
81,522,397 8.000%, 6/15/2017 - 8/15/2028 85,266,564
20,844,481 7.500%, 1/15/2028 - 4/15/2028 21,456,892
21,700,000 1 7.500%, 3/15/2029 22,337,546
130,081,208 7.000%, 10/15/2025 - 1/15/2029 131,879,040
TOTAL 297,856,373
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION REMIC-0.6%
13,926,641 Series 1997-7-PI, 8.000% (Interest Only), 5/16/2027 4,003,909
16,694,831 Series 1997-13-PI, 8.000% (Interest Only), 9/16/2027 5,133,661
TOTAL 9,137,570
UNITED STATES TREASURY SECURITIES-21.2%

22,000,000 12.000%, 5/15/2005 29,531,920
14,600,000 11.250%, 2/15/2015 22,858,198
15,000,000 9.250%, 2/15/2016 20,488,950
40,800,000 9.000%, 11/15/2018 55,838,880
71,725,000 8.125%, 8/15/2019 - 5/15/2021 91,748,976
6,100,000 5.750%, 10/31/2002 6,192,171
<CAPTION>

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>

LONG-TERM OBLIGATIONS-continued

$ 26,400,000 5.625%, 12/31/2002 $ 26,701,224
37,000,000 4.750%, 2/15/2004 - 11/15/2008 35,730,910
66,000,000 0%, 8/15/2017 22,109,340
TOTAL 311,200,569
TOTAL LONG-TERM OBLIGATIONS (IDENTIFIED COST
$1,566,046,988) 1,551,168,983
REPURCHASE AGREEMENTS-4.5%2

6,690,000 ABN AMRO Chicago Corp., Inc., 4.860%, dated 2/26/1999, due

3/1/1999 6,690,000

60,000,000 3, 4 Goldman Sachs Group, LP, 4.770%, dated 2/19/1999, due

4/14/1999 60,000,000
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) 66,690,000
TOTAL INVESTMENTS (IDENTIFIED COST $1,632,736,988)5 $ 1,617,858,983
</TABLE>

1 Indicates securities subject to dollar roll transactions with a total market
value of $90,193,446.

2 The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.

3 Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase agreement
within seven days if the creditworthiness of the issuer is downgraded.

4 Security held as collateral for future dollar roll transactions.

5 The cost of investments for federal tax purposes amounts to $1,633,059,398.
The net unrealized depreciation of investments on a federal tax basis amounts to
$15,200,415 which is comprised of $11,333,963 appreciation and $26,534,378
depreciation at February 28, 1999.

Note: The categories of investments are shown as a percentage of net assets
($1,467,605,133) at February 28, 1999.

The following acronyms are used throughout this portfolio:

LP -Limited Partnership
REMIC -Real Estate Mortgage Investment Conduit

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

FEBRUARY 28, 1999

ASSETS:

Total investments in securities, at value (identified cost
$1,632,736,988

and tax cost $1,633,059,398) $ 1,617,858,983
Cash 1,480
Income receivable 12,740,652
Receivable for investments sold 101,374,426
Receivable for shares sold 4,232,330
TOTAL ASSETS 1,736,207,871
LIABILITIES:

Payable for investments purchased $ 263,657,694
Payable for shares redeemed 1,425,904
Income distribution payable 3,098,324
Accrued expenses 420,816
TOTAL LIABILITIES 268,602,738
Net assets for 167,088,879 shares outstanding $ 1,467,605,133
NET ASSETS CONSIST OF:
Paid in capital $ 1,772,144,316
Net unrealized depreciation of investments (14,878,005)
Accumulated net realized loss on investments (292,533,085)
Undistributed net investment income 2,871,907
TOTAL NET ASSETS $ 1,467,605,133
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($182,597,320 / 20,780,439 shares
outstanding) $8.79
Offering Price Per Share (100/95.50 of $8.79)1 $9.20
Redemption Proceeds Per Share $8.79
CLASS B SHARES:
Net Asset Value Per Share ($48,303,711 / 5,503,496 shares
outstanding) $8.78
Offering Price Per Share $8.78
Redemption Proceeds Per Share (94.50/100 of $8.78)1 $8.30
CLASS C SHARES:
Net Asset Value Per Share ($15,681,612 / 1,783,359 shares
outstanding) $8.79
Offering Price Per Share $8.79
Redemption Proceeds Per Share (99.00/100 of $8.79)1 $8.70
CLASS F SHARES:
Net Asset Value Per Share ($1,221,022,490 / 139,021,585
shares outstanding) $8.78
Offering Price Per Share (100/99.00 of $8.78)1 $8.87
Redemption Proceeds Per Share (99.00/100 of $8.78)1 $8.69
</TABLE>

1 See "What Do Shares Cost?" in the Prospectus.

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED FEBRUARY 28, 1999

<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense of $4,564,660) $ 105,037,089
EXPENSES:

Investment advisory fee $ 11,358,153
Administrative personnel and services fee 1,141,873
Custodian fees 135,218
Transfer and dividend disbursing agent fees and expenses 996,589
Directors'/Trustees' fees 23,710
Auditing fees 22,000
Legal fees 7,268
Portfolio accounting fees 182,519
Distribution services fee-Class A Shares 411,832
Distribution services fee-Class B Shares 183,567
Distribution services fee-Class C Shares 61,686
Shareholder services fee-Class A Shares 411,832
Shareholder services fee-Class B Shares 61,189
Shareholder services fee-Class C Shares 20,562
Shareholder services fee-Class F Shares 3,292,472
Share registration costs 43,507
Printing and postage 179,639
Insurance premiums 5,302
Taxes 146,925
Miscellaneous 16,455
TOTAL EXPENSES 18,702,298
WAIVERS:
Waiver of investment advisory fee $ (3,151,420)
Waiver of distribution services fee-Class A Shares (411,832)
Waiver of shareholder services fee-Class F Shares (26,340)
TOTAL WAIVERS (3,589,592)
Net expenses 15,112,706
Net investment income 89,924,383
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 22,482,080
Net change in unrealized appreciation of investments (31,614,379)
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (9,132,299)
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS $ 80,792,084
</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

YEAR ENDED FEBRUARY 28 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS

OPERATIONS:

Net investment income $ 89,924,383 $ 115,159,955
Net realized gain on investments ($21,822,092 and
$26,969,638, respectively, as computed for federal tax
purposes) 22,482,080 29,943,557
Net change in unrealized appreciation (31,614,379) 14,565,744
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS 80,792,084 159,669,256
NET EQUALIZATION CREDITS (DEBITS)- - (123,530)
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net investment income

Class A Shares (10,042,618) (6,962,087)
Class B Shares (1,386,425) (388,908)
Class C Shares (462,569) (139,249)
Class F Shares (77,291,063) (107,135,838)
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS

TO SHAREHOLDERS (89,182,675) (114,626,082)
SHARE TRANSACTIONS:
Proceeds from sale of shares 217,946,689 186,850,576
Net asset value of shares issued to shareholders in payment

of distributions declared 49,379,711 60,263,685
Cost of shares redeemed (372,130,856) (489,191,268)
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS (104,804,456) (242,077,007)
Change in net assets (113,195,047) (197,157,363)
NET ASSETS:

Beginning of period 1,580,800,180 1,777,957,543
End of period (including undistributed net investment income
of $2,871,907 and $912,530, respectively) $ 1,467,605,133 $ 1,580,800,180
</TABLE>

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

YEAR ENDED FEBRUARY 28 1999 1998 1997 1
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.84 $ 8.59 $ 8.63
INCOME FROM INVESTMENT OPERATIONS:

Net investment income 0.53 2 0.62 2 0.30
Net realized and unrealized gain (loss) on investments (0.04) 0.22 (0.02)
TOTAL FROM INVESTMENT OPERATIONS 0.49 0.84 0.28
LESS DISTRIBUTIONS:

Distributions from net investment income (0.54) (0.59) (0.32)
NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.84 $ 8.59
TOTAL RETURN 3 5.58% 10.10% 3.34%

RATIOS TO AVERAGE NET ASSETS:

Expenses 0.98% 0.96% 1.03% 4
Net investment income 5.99% 7.13% 6.45% 4
Expense waiver 5 0.46% 0.49% 0.50% 4
SUPPLEMENTAL DATA:

Net assets, end of period (000 omitted) $182,597 $138,554 $289
Portfolio turnover 209% 264% 97%
</TABLE>

1 Reflects operations for the period from August 5, 1996 (date of initial public
investment) to February 28, 1997.

2 Per Share information presented is based upon the average number of shares
outstanding.

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

4 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

YEAR ENDED FEBRUARY 28 1999 1998 1997 1
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.84 $ 8.59 $ 8.63
INCOME FROM INVESTMENT OPERATIONS:

Net investment income 0.46 2 0.58 0.28
Net realized and unrealized gain (loss) on investments (0.05) 0.20 (0.02)
TOTAL FROM INVESTMENT OPERATIONS 0.41 0.78 0.26
LESS DISTRIBUTIONS:

Distributions from net investment income (0.47) (0.53) (0.30)
NET ASSET VALUE, END OF PERIOD $ 8.78 $ 8.84 $ 8.59
TOTAL RETURN 3 4.65% 9.34% 3.00%

RATIOS TO AVERAGE NET ASSETS:

Expenses 1.73% 1.71% 1.71% 4
Net investment income 5.36% 6.51% 5.80% 4
Expense waiver 5 0.21% 0.24% 0.26% 4
SUPPLEMENTAL DATA:

Net assets, end of period (000 omitted) $48,304 $10,819 $2,421
Portfolio turnover 209% 264% 97%
</TABLE>

1 Reflects operations for the period from August 5, 1996 (date of initial public
investment) to February 28, 1997.

2 Per Share information presented is based upon the average number of shares
outstanding.

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

4 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class C Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

YEAR ENDED FEBRUARY 28 1999 1998 1997 1
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.84 $ 8.59 $ 8.63
INCOME FROM INVESTMENT OPERATIONS:

Net investment income 0.48 2 0.55 0.27
Net realized and unrealized gain (loss) on investments (0.06) 0.23 (0.01)
TOTAL FROM INVESTMENT OPERATIONS 0.42 0.78 0.26
LESS DISTRIBUTIONS:

Distributions from net investment income (0.47) (0.53) (0.30)
NET ASSET VALUE, END OF PERIOD $ 8.79 $ 8.84 $ 8.59
TOTAL RETURN 3 4.76% 9.29% 3.02%

RATIOS TO AVERAGE NET ASSETS:

Expenses 1.73% 1.71% 1.71% 4
Net investment income 5.38% 6.21% 5.65% 4
Expense waiver 5 0.21% 0.24% 0.26% 4
SUPPLEMENTAL DATA:

Net assets, end of period (000 omitted) $15,682 $2,836 $1,343
Portfolio turnover 209% 264% 97%
</TABLE>

1 Reflects operations for the period from August 5, 1996 (date of initial public
investment) to February 28, 1997.

2 Per Share information presented is based upon the average number of shares
outstanding.

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

4 Computed on an annualized basis.

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

See Notes which are an integral part of the Financial Statements

Financial Highlights-Class F Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

YEAR ENDED FEBRUARY 28 OR 29 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.83 $ 8.59 $ 8.75 $ 8.55 $ 9.00
INCOME FROM INVESTMENT OPERATIONS:

Net investment income 0.53 1 0.61 0.55 0.62 0.63
Net realized and unrealized gain (loss) on
investments (0.05) 0.24 (0.15) 0.20 (0.46)
TOTAL FROM INVESTMENT OPERATIONS 0.48 0.85 0.40 0.82 0.17
LESS DISTRIBUTIONS:

Distributions from net investment income (0.53) (0.61) (0.56) (0.62) (0.62)
NET ASSET VALUE, END OF PERIOD $ 8.78 $ 8.83 $ 8.59 $ 8.75 $ 8.55
TOTAL RETURN 2 5.49% 10.19% 4.81% 9.87% 2.11%

RATIOS TO AVERAGE NET ASSETS:

Expenses 0.98% 0.96% 0.96% 0.96% 0.97%
Net investment income 5.95% 6.87% 6.42% 6.96% 7.34%
Expense waiver 3 0.21% 0.24% 0.26% 0.25% 0.23%
SUPPLEMENTAL DATA:

Net assets, end of period (000 omitted) $1,221,022 $1,428,591 $1,773,905 $2,264,374 $2,538,013
Portfolio turnover 209% 264% 97% 161% 143%
</TABLE>

1 Per Share information presented is based upon the average number of shares
outstanding.

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

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

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

FEBRUARY 28, 1999

ORGANIZATION

Federated Government Income Securities, Inc. (the "Fund") is registered under
the Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end management investment company. The Fund offers four classes of shares:
Class A Shares, Class B Shares, Class C Shares and Class F Shares. The Fund's
objective is to provide current income.

SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.

INVESTMENT VALUATIONS

U.S. government securities are generally valued at the mean of the latest bid
and asked price as furnished by an independent pricing service. Short-term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of 60 days or less at
the time of purchase may be valued at amortized cost, which approximates fair
market value.

REPURCHASE AGREEMENTS

It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.

The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (the "Directors").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex- dividend
date.

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to adjustments relating to dollar roll and
REMIC transactions. The following reclassifications have been made to the
financial statements.

INCREASE /(DECREASE)

ACCUMULATED UNDISTRIBUTED
NET REALIZED NET INVESTMENT

PAID-IN CAPITAL GAIN/LOSS INCOME
<S> <C> <C>
($235,273) ($982,396) $1,217,669

</TABLE>

Net investment income, net realized gains/ losses and net assets were not
affected by this reclassification.

FEDERAL TAXES

It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.

At February 28, 1999, the Fund, for federal tax purposes, had a capital loss
carryforward of $292,210,675, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal tax. Pursuant to the Code, such capital loss carryforward
will expire as follows:

EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2002 $ 59,627,977
2003 $192,317,284
2004 $ 16,981,637
2005 $ 23,283,777

</TABLE>

EQUALIZATION

Effective March 1, 1998, the Fund discontinued its use of equalization.
Equalization is an accounting practice whereby a portion of the proceeds of
sales and costs of redemptions of Fund shares is credited or charged to
undistributed net investment income on a per share basis, as determined on the
date of transaction. This change in accounting policy does not effect the Fund's
net assets, net asset value per share, or net investment income. The financial
statements included herein reflect the following reclassification to close out
accumulated equalization debits as of August 31, 1998.

INCREASE (DECREASE)

UNDISTRIBUTED

NET INVESTMENT
PAID IN CAPITAL INCOME

<S> <C>
$(78,484) $78,484

</TABLE>

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.

DOLLAR ROLL TRANSACTIONS

The Fund enters into dollar roll transactions, with respect to mortgage
securities issued by GNMA, FNMA and FHLMC, in which the Fund sells mortgage
securities to financial institutions and simultaneously agrees to accept
substantially similar (same type, coupon and maturity) securities at a later
date at an agreed upon price. Dollar roll transactions involve "to be announced"
securities and are treated as short-term financing arrangements which will not
exceed 12 months. The Fund will use the proceeds generated from the transactions
to invest in short-term investments, which may enhance the Fund's current yield
and total return.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.

OTHER

Investment transactions are accounted for on the trade date.

CAPITAL STOCK

At February 28, 1999, par value shares ($0.001 per share) authorized were as
follows:

NUMBER

OF PAR VALUE
CAPITAL STOCK

CLASS NAME AUTHORIZED <S> <C> Class A Shares 500,000,000 Class B Shares
500,000,000 Class C Shares 500,000,000 Class F Shares 500,000,000 </TABLE>

Transactions in capital stock were as follows:

YEAR ENDED FEBRUARY 28 1999 1998
CLASS A SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 13,380,685 $ 121,312,072 17,863,053 $ 154,174,787
Shares issued to shareholders in payment of

distributions declared 968,378 8,642,719 686,406 6,011,544
Shares redeemed (9,234,999) (82,910,600) (2,916,697) (25,430,665)
NET CHANGE RESULTING FROM

CLASS A SHARE TRANSACTIONS 5,114,064 $ 47,044,191 15,632,762 $ 134,755,666

YEAR ENDED FEBRUARY 28 1999 1998
CLASS B SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 5,160,248 $ 46,198,415 1,033,325 $ 9,058,031
Shares issued to shareholders in payment of

distributions declared 96,415 859,149 24,091 211,420
Shares redeemed (976,960) (8,731,605) (115,339) (1,007,902)
NET CHANGE RESULTING FROM

CLASS B SHARE TRANSACTIONS 4,279,703 $38,325,959 942,077 $ 8,261,549

YEAR ENDED FEBRUARY 28 1999 1998
CLASS C SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,208,237 $ 19,790,392 370,357 $ 3,245,060
Shares issued to shareholders in payment of

distributions declared 28,812 257,083 9,162 80,022
Shares redeemed (774,462) (6,929,369) (215,020) (1,900,157)
NET CHANGE RESULTING FROM

CLASS C SHARE TRANSACTIONS 1,462,587 $ 13,118,106 164,499 $ 1,424,925

YEAR ENDED FEBRUARY 28 1999 1998
CLASS F SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,427,530 $ 30,645,810 2,333,488 $ 20,372,698
Shares issued to shareholders in payment of

distributions declared 4,449,449 39,620,760 6,195,998 53,960,699
Shares redeemed (30,717,933) (273,559,282) (53,122,484) (460,852,544)
NET CHANGE RESULTING FROM

CLASS F SHARE TRANSACTIONS (22,840,954) $ (203,292,712) (44,592,998) $ (386,519,147)
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS (11,984,600) $ (104,804,456) (27,853,660) $ (242,077,007)
</TABLE>

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Advisers, the Fund's investment adviser (the "Adviser"), receives for
its services an annual investment advisory fee equal to 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.

ADMINISTRATIVE FEE

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on the level of average aggregate daily net assets of all
funds advised by subsidiaries of Federated Investors, Inc. for the period. The
administrative fee received during the period of the Administrative Services
Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.

DISTRIBUTION SERVICES FEE

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's Class A
Shares, Class B Shares, and Class C Shares. The Plan provides that the Fund may
incur distribution expenses according to the following schedule annually, to
compensate FSC.

PERCENTAGE OF
AVERAGE DAILY
NET ASSETS

SHARE CLASS NAME OF CLASS
<S> <C>
Class A Shares 0.25%
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>

The distributor may voluntarily choose to waive any portion of its fee. The
distributor can modify or terminate this voluntary waiver at any time at its
sole discretion.

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC can modify or terminate
this voluntary waiver at any time at its sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing
agent for the Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.

PORTFOLIO ACCOUNTING FEES

FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

GENERAL

Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
year ended February 28, 1999, were as follows:

<S> <C>
Purchases $ 3,338,035,506
Sales $ 3,223,318,102

</TABLE>

YEAR 2000 (UNAUDITED)

Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.

SUBSEQUENT EVENT

Effective March 31, 1999, Federated Advisers, the Fund's Adviser, merged into
Federated Investment Management Company.

Independent Auditors' Report

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF

FEDERATED GOVERNMENT INCOME SECURITIES, INC.:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Government Income Securities, Inc. as
of February 28, 1999 and the related statement of operations for the year then
ended, the statement of changes in net assets for the years ended February 28,
1999 and 1998, and the financial highlights for the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
February 28, 1999, by correspondence with the custodian and brokers; where
replies were not received, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Government
Income Securities, Inc. as of February 28, 1999, the results of its operations,
the changes in its net assets and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.

Deloitte & Touche LLP
Boston, Massachusetts

April 9, 1999

Directors

JOHN F. DONAHUE

THOMAS G. BIGLEY

JOHN T. CONROY, JR.

NICHOLAS P. CONSTANTAKIS

WILLIAM J. COPELAND

JOHN F. CUNNINGHAM

LAWRENCE D. ELLIS, M.D.

RICHARD B. FISHER

PETER E. MADDEN

CHARLES F. MANSFIELD, JR.

JOHN E. MURRAY, JR., J.D., S.J.D.

MARJORIE P. SMUTS

JOHN S. WALSH

Officers

JOHN F. DONAHUE

Chairman

RICHARD B. FISHER

President

J. CHRISTOPHER DONAHUE

Executive Vice President

EDWARD C. GONZALES

Executive Vice President

JOHN W. MCGONIGLE

Executive Vice President and Secretary

RICHARD J. THOMAS

Treasurer

KATHLEEN M. FOODY-MALUS

Vice President

MATTHEW S. HARDIN

Assistant Secretary

Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.

This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.

AS OF FEBRUARY 28, 1999

[Graphic]
Federated

World-Class Investment Manager

ANNUAL REPORT

Federated Government Income Securities, Inc.

Established 1986

13TH ANNUAL REPORT

[Graphic]
Federated

Federated Government Income Securities, Inc.
Federated Investors Funds
5800 Corporate Drive

Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Cusip 313912206
Cusip 313912305
Cusip 313912404
Cusip 313912107
G001109-01 (4/99)

[Graphic]

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

APPENDIX

A1. The graphic presentation here displayed consists of a legend in the upper
left quadrant indicating the components of the corresponding mountain chart. The
color coded mountain chart is a visual representation of the narrative text
above it. The "x" axis reflects computation periods from 4/4/86 to 2/28/99. The
"y" axis is measured in increments of $5,000 ranging from $0 to $35,000 and
indicates that the ending value of a hypothetical initial investment of $13,000
in the fund's Class F Shares, assuming all sales charges and the reinvestment of
capital gains and dividends, would have grown to $32,110 on 2/28/99.

A2. The graphic presentation here displayed consists of a legend in the upper
left quadrant indicating the components of the corresponding mountain chart. The
color coded mountain chart is a visual representation of the narrative text
above it. The "x" axis reflects computation periods from 4/4/96 to 2/28/99. The
"y" axis is measured in increments of $5,000 ranging from $0 to $25,000 and
indicates that the ending value of hypothetical yearly investments of $1,000 in
the fund's Class F Shares, assuming the reinvestment of capital gains and
dividends, would have grown to $21,468 on 2/28/99.

A3. The graphic presentation here displayed consists of a legend in the upper
left quadrant indicating the components of the corresponding mountain chart. The
color coded mountain chart is a visual representation of the narrative text
above it. The "x" axis reflects computation periods from 4/4/86 to 2/28/99. The
"y" axis is measured in increments of $50,000 ranging from $0 to $250,000 and
indicates that the ending value of hypothetical initial investment of $100,000
in the fund's Class F Shares, assuming the reinvestment of capital gains and
dividends, would have grown to $247,003 on 2/28/99.

A4. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class A
Shares of Federated Government Income Securities, Inc. (the "Fund") are
represented by a solid line. The Merrill Lynch 5 Year Treasury Index (ML5YRT) is
represented by a broken line, the Lehman Brothers Mortgage Backed Securities
Index (LBMBSI) is represented by a dashed line, the blended index comprised of
60% Lehman Brothers Mortgage Backed Securities Index and 40% Lehman Brothers
Government Index (LBMBGSI) is represented by a dotted line, and the Lipper U.S.
Government Funds Average (LUSGFA) is represented by a wide line. The line graph
is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class A Shares of the Fund, and the ML5YRT,
LBMBSI, LBMBGSI, and the LUSGFA. The "x" axis reflects computation periods from
8/5/96 to 2/28/99. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund's
Class A Shares as compared to the ML5YRT, LBMBSI, LBMBGSI, and the LUSGFA. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class A Shares as compared to the ML5YRT, LBMBSI, LBMBGSI, and the
LUSGFA. The ending values were $11,472, $11,892, $12,308, $12,287, and $12,057,
respectively.

A5. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class B
Shares of Federated Government Income Securities, Inc. (the "Fund") are
represented by a solid line. The Merrill Lynch 5 Year Treasury Index (ML5YRT) is
represented by a broken line, the Lehman Brothers Mortgage Backed Securities
Index (LBMBSI) is represented by a dashed line, the blended index comprised of
60% Lehman Brothers Mortgage Backed Securities Index and 40% Lehman Brothers
Government Index (LBMBGSI) is represented by a dotted line, and the Lipper U.S.
Government Funds Average (LUSGFA) is represented by a wide line. The line graph
is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class B Shares of the Fund, and the ML5YRT,
LBMBSI, LBMBGSI, and the LUSGFA. The "x" axis reflects computation periods from
8/5/96 to 2/28/99. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund's
Class B Shares as compared to the ML5YRT, LBMBSI, LBMBGSI, and the LUSGFA. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class B Shares as compared to the ML5YRT, LBMBSI, LBMBGSI, and the
LUSGFA. The ending values were $11,386, $11,892, $12,308, $12,287, and $12,057,
respectively.

A6. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class C
Shares of Federated Government Income Securities, Inc. (the "Fund") are
represented by a solid line. The Merrill Lynch 5 Year Treasury Index (ML5YRT) is
represented by a broken line, the Lehman Brothers Mortgage Backed Securities
Index (LBMBSI) is represented by a dashed line, the blended index comprised of
60% Lehman Brothers Mortgage Backed Securities Index and 40% Lehman Brothers
Government Index (LBMBGSI) is represented by a dotted line, and the Lipper U.S.
Government Funds Average (LUSGFA) is represented by a wide line. The line graph
is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class C Shares of the Fund, and the ML5YRT,
LBMBSI, LBMBGSI, and the LUSGFA. The "x" axis reflects computation periods from
8/5/96 to 2/28/99. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund's
Class C Shares as compared to the ML5YRT, LBMBSI, LBMBGSI, and the LUSGFA. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class C Shares as compared to the ML5YRT, LBMBSI, LBMBGSI, and the
LUSGFA. The ending values were $11,795, $11,892, $12,308, $12,287, and $12,057,
respectively.

A7. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed underneath. The Class F
Shares of Federated Government Income Securities, Inc., (the "Fund") based are
represented by a solid line. The Merrill Lynch 5 Year Treasury Index (ML5YRT) is
represented by a broken line, the Lehman Brothers Mortgage Backed Securities
Index (LBMBSI) is represented by a dashed line, the blended index comprised of
60% Lehman Brothers Mortgage Backed Securities Index and 40% Lehman Brothers
Government Index (LBMBGSI) is represented by a dotted line, and the Lipper U.S.
Government Funds Average (LUSGFA) is represented by a wide line. The line graph
is a visual representation of a comparison of change in value of a $10,000
hypothetical investment in the Class F Shares of the Fund, and the ML5YRT,
LBMBSI, LBMBGSI, and the LUSGFA. The "x" axis reflects computation periods from
2/28/89 to 2/28/99. The "y" axis reflects the cost of the investment. The right
margin reflects the ending value of the hypothetical investment in the Fund's
Class F Shares as compared to the ML5YRT, LBMBSI, LBMBGSI, and the LUSGFA. The
right margin reflects the ending value of the hypothetical investment in the
Fund's Class F Shares as compared to the ML5YRT, LBMBSI, LBMBGSI, and the
LUSGFA. The ending values were $21,003, $21,733, $23,759, $23,660, and $21,220,
respectively.