FEDERATED GOVERNMENT INCOME SECURITIES INC, 485APOS, 1999-02-26

FEDERATED GOVERNMENT INCOME SECURITIES INC
485APOS, 1999-02-26

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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. 38 _........................ X
------ ------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
------

Amendment No. 28 ....................................... X
------- ------

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)

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

John W. McGonigle, Esquire,
Federated Investors Tower

1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
__ on ______________, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i) on April 30, 1999,
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.

Copies to:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky LLP

2101 L Street, N.W.
Washington, D.C. 20037

Prospectus

FEDERATED GOVERNMENT INCOME
SECURITIES, INC.

Class A Shares
Class B Shares
Class C Shares

A mutual fund seeking 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.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

Contents Risk/Return
Summary What are the Fund's
Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund
Invests?
What are the Specific Risks
of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Fund?
Financial Information

April 30, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
The Fund's investment objective is to provide current income. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing primarily in U.S.
government securities, including mortgage backed securities.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to
lose money in the Fund. The primary factors that may reduce the Fund's returns
include:

o changes in prevailing interest rates and

o increased prepayment of mortgages

Complex mortgage backed securities generally entail greater risks than
ordinary mortgage backed securities. An investment in the Fund includes
additional risks such as credit risks, liquidity risks, and leverage risks.

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 or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

<PAGE>

Risk/Return Bar Chart and Table
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares
as of the calendar year-end for each of two years.
The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1.00% up to 10.00%. The `x' axis represents calculation periods
Fund's Class A Shares start of business through the calendar year ended 1998.
The light gray shaded chart features two distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return percentages
for the calendar year stated directly at its base. The calculated total return
percentage for the Class A Shares for each calendar year is stated directly at
the top of each respective bar, for the calendar years 1997 through 1998, The
percentages noted are: 9.37% and 7.69%. The total returns displayed for the
Fund's Class A Shares do not reflect the payment of any sales charges or
recurring shareholder account fees. If these charges or fees had been included,
the returns shown would have been lower. The Fund's Class A Shares total return
from January 1, 1999 to March 31, 1999 was ____%. Within the period shown in the
Chart, the Fund's highest quarterly return was ___%. Its lowest quarterly return
was ___%.

Average Annual Total Return

Life of the Fund1 1 Year
Class A Shares ____% ____%
Class B Shares ____% ____%
Class C Shares ____% ____%
Broad-Based Index ____% ____%
Index #2 ____% ____%
Index #3 ____% ____%
1 Since inception date of August 5, 1996.
The Fund Compared to __________________[Index Name] for the calendar periods
ending February 28, 1999. The bar chart shows the variability of the Fund's
actual total return on a yearly basis. The table shows the Fund's total returns
averaged over a period of years relative to _______________(name of index), a
broad-based market index . Past performance does not necessarily predict future
performance. This information provides you with historical performance so that
you can analyze whether the Fund's investment risks are balanced by its
potential rewards.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

Federated government income securities, inc.

Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's Class A Shares, Class B Shares and Class C Shares.

Shareholder Fees
Fees Paid Directly From Your Investment Class A Class B Class C
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering 4.50% None None
price)
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase 0.00% 5.50% 1.00%
price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other None None None
Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None

Annual Fund Operating Expenses (Before Waivers)(1)
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management Fee[2] 0.75% 0.75% 0.75%
Distribution (12b-1) Fee[3] 0.25% 0.75% 0.75%
Shareholder Services Fee 0.25% 0.25% 0.25%
Other Expenses ____% ____% ____%
Total Annual Fund Operating Expenses ____% ___%(4) ____%
1 Although not contractually obligated to do so, the Adviser and distributor
waived certain amounts. These are shown below along with the net expenses the
Fund actually paid for the fiscal year ended February 28, 1999.
Reimbursements of Fund Expenses _____% _____% ____%
Total Actual Annual Fund Operating Expenses (after waivers ) _____% _____% ____%
</TABLE>

2 The Adviser voluntarilly waived a portion of the management fee. The Adviser
can terminate this voluntary waiver at any time. The management fee paid by
the Fund (after the voluntary waiver) was ____% fo rthe fiscal year ended
February 28, 1999.
3 Class A Shares did not pay or accrue the distribution (12b-1) fee during the
fiscal year ended February 28, 1999. Class A Shares have no present intention
of paying or accruing the distribution (12b-1) fee during the fiscal year
ended February 28, 2000.
4 Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately eight years after purchase.

<PAGE>

Example
This Example is intended to help you compare the cost of investing in the Fund's
Class A, B, and C Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class A, B, and C
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. Expenses assuming no redemption are also shown. The
Example also assumes that your investment has a 5% return each year and that the
Fund's Class A, B, and C Shares operating expenses are before waivers as shown
in the table and remain the same. Although your actual costs may be higher or
lower, based on these assumptions your costs would be: Share Class 1 Year 3
Years 5 Years 10 Years Class A Shares Expenses assuming redemption $ $ $ $
Expenses assuming no redemption $ $ $ $

Class B Shares
Expenses assuming redemption $ $ $ $
Expenses assuming no redemption $ $ $ $

Class C Shares
Expenses assuming redemption $ $ $ $
Expenses assuming no redemption $ $ $ $

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund invests in a combination of U.S. government securities, including
U.S. Treasury obligations and mortgage-backed securities.

Mortgage-backed securities generally provide higher current yields than
other U.S. government securities and can add current income to a portfolio. U.S.
Treasury obligations are not subject to the unique prepayment risks of
mortgage-backed securities, and therefore can reduce the volatility in the yield
of a portfolio. The Adviser actively manages the Fund's portfolio of U.S.
government securities seeking the highest income under current market
conditions.

To maximize current income, the Adviser considers the current and potential
yield, the anticipated duration and the projected cash flow of a security or
security class (U.S. Treasury or mortgage-backed). The Adviser purchases
mortgage-backed securities primarily for their yield advantages over U.S.
Treasuries. Depending on the interest rate spread between U.S. Treasury
obligations and mortgage-backed securities, the Fund may at any time be invested
primarily in mortgage-backed securities. Because of their unique prepayment
risks, however, the current yield of mortgage-backed securities is subject to
greater volatility resulting from interest rate fluctuation than are other
fixed-income securities. The Adviser purchases U.S. Treasury bonds both for
their current yield and because they are not subject to prepayment risk.

The Adviser also attempts to maximize current income by managing the weighted
average duration of the Fund's portfolio. Duration measures the price
sensitivity of a portfolio of fixed income securities to changes in interest
rates. The Adviser generally shortens the portfolio average duration when it
expects interest rates to rise, and extends the duration when the Adviser
expects interest rates to fall. The Adviser continuously formulates its interest
rate outlook by analyzing a variety of factors such as:

.........o........current U.S. economic activity and the economic outlook,

.........o........current interest rates,

.........o........the Federal Reserve Board's policies regarding short-term
interest rates, and

.........o........potential effects of foreign economic activity on interest
rates.

Additionally, if the Adviser expects that an anticipated decline in interest
rates may adversely affect the Fund's current yield by causing prepayments of
mortgage-backed securities, the Fund may increase the percentage of its
portfolio which is invested in U.S. Treasury bonds.

The Adviser may also use collateralized mortgage obligations ("CMOs") with
relatively predictable cash flows (such as sequential pay, planned authorization
class and targeted amortization class) to improve the Fund's performance in
volatile markets. In addition, the Adviser may use combinations of CMOs, and
CMOs and other mortgage-backed securities to attempt to provide a higher
yielding investment with relatively low sensitivity to fluctuations in interest
rates. Unanticipated differences in prepayment rates, however, may reduce the
anticipated returns of these investments.

In order to generate additional current income, the Fund will invest in delayed
delivery transactions and dollar rolls.

Portfolio Turnover
Prepayments of mortgage backed securities will cause the Fund to have an
increased portfolio turnover rate, which is likely to generate short-term gains
(losses) for its shareholders. Short-term gains are taxed at a higher rate than
long-term gains. Portfolio turnover increases the Fund's trading costs and may
have an adverse impact on the Fund's performance.

Temporary Defensive Investments
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
fixed rate. The rate may be a fixed percentage of principal or adjusted
periodically. In addition, the issuer of a fixed-income security must repay the
principal amount of the security normally within a specified time.

A security's yield will increase or decrease depending upon whether it costs
less (a discount) or more (a premium) than the principal amount. If the issuer
may redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields.

The following describes the types of fixed income securities in which the Fund
principally invests:

Treasury Securities
Treasury securities are direct obligations of the Federal government of the
United States. Treasury securities are generally regarded as having the
lowest credit risks.

Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full, faith and credit. Other
GSEs receive support through federal subsidies, loans or other benefits. A
few GSEs have no explicit financial support, but are regarded as having
implied support because the federal government sponsors their activities.
Agency securities are generally regarded as having low credit risks, but
not as low as U.S. Treasury securities. The Fund treats mortgage backed
securities guaranteed by GSEs as agency securities. Although a GSE
guarantee protects against credit risks, it does not reduce the market and
prepayment risks of these mortgage backed securities.

<PAGE>

Mortgage Backed Securities
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto
the certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and pre-payments from the
underlying mortgages. As a result, the holders assume all the prepayment
risks of the underlying mortgages.

Collateralized Mortgage Obligations
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage
backed securities. This creates different prepayment and market risks
for each CMO class.

PACs, TACs and Companion Classes
More sophisticated CMOs include planned amortization classes (PACs) and
targeted amortization classes (TACs). PACs and TACs are issued with
companion classes. PACs and TACs receive principal payments and
prepayments at a specified rate. The companion classes receive
principal payments and prepayments in excess of the specified rate. In
addition, PACs will receive the companion classes' share of principal
payments, if necessary, to cover a shortfall in the prepayment rate.
This helps PACs and TACs to control prepayment risks by increasing the
risks to their companion classes.

IOs and POs
CMOs may allocate interest payments to one class (Interest Only or IOs)
and principal payments to another class (Principal Only or POs). POs
increase in value when prepayment rates increase. In contrast, IOs
decrease in value when prepayments increase, because the underlying
mortgages generate less interest payments. However, IOs tend to
increase in value when interest rates rise (and prepayments decrease),
making IOs a useful hedge against market risks.

Floaters and Inverse Floaters
Another variant allocates interest payments between two classes of
CMOs. One class (Floaters) receives a share of interest payments based
upon a market index such as LIBOR. The other class (Inverse Floaters)
receives any remaining interest payments from the underlying mortgages.
Floater classes receive more interest (and Inverse Floater classes
receive correspondingly less interest) as interest rates rise. This
shifts prepayment and market risks from the Floater to the Inverse
Floater class, reducing the price volatility of the Floater class and
increasing the price volatility of the Inverse Floater class.

The degree of increased or decreased prepayment risks depends upon the
structure of the CMOs. However, the actual returns on any type of
mortgage backed security depend upon the performance of the underlying
pool of mortgages, which no one can predict and will vary among pools.

Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
first-lien mortgages. Most asset backed securities involve consumer or
commercial debts with maturities of less than ten years. However, almost
any type of fixed income assets (including other fixed income securities)
may be used to create an asset backed security. The Fund will invest only
in the following kinds of asset backed securities: home equity loans,
second mortgages and manufactured housing obligations. Asset backed
securities may take the form of notes or pass through certificates. Asset
backed securities have prepayment risks. Like CMOs, asset backed securities
may be structured like Floaters, Inverse Floaters, IOs and POs.

Special Transactions

Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser. The Fund's custodian or subcustodian will take possession of the
securities subject to repurchase agreements. The Adviser or subcustodian
will monitor the value of the underlying security each day to ensure that
the value of the security always equals or exceeds the repurchase price.

Delayed Delivery Transactions
Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Fund. The Fund records the
transaction when it agrees to buy the securities and reflects their value
in determining the price of its shares. Settlement dates may be a month or
more after entering into these transactions so that the market values of
the securities bought may vary from the purchase prices. Therefore, delayed
delivery transactions create market risks for the Fund. Delayed delivery
transactions also involve credit risks in the event of a counterparty
default.

To Be Announced Securities (TBAs)
As with other delayed delivery transactions, a seller agrees to issue a
TBA security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to
accept any security that meets specified terms. For example, in a TBA
mortgage backed transaction, the Fund and the seller would agree upon
the issuer, interest rate and terms of the underlying mortgages. The
seller would not identify the specific underlying mortgages until it
issues the security. TBA mortgage backed securities increase market
risks because the underlying mortgages may be less favorable than
anticipated by the Fund.

Dollar Rolls
Dollar rolls are transactions where the Portfolio sells mortgage-backed
securities with a commitment to buy similar, but not identical,
mortgage-backed securities on a future date at a lower price. Normally,
one or both securities involved are TBA mortgage backed securities.
Dollar rolls are subject to market risks.

Asset Coverage
In order to secure its obligations in connection with derivatives
contracts or special transactions, the Fund will either own the
underlying assets, enter into an offsetting transaction or set aside
readily marketable securities with a value that equals or exceeds the
Fund's obligations. Unless the Fund has other readily marketable assets
to set aside, it cannot trade assets used to secure such obligations
entering into an offsetting derivative contract or terminating a
special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

Securities Lending
The Fund may lend portfolio securities to borrowers that the Adviser
deems creditworthy. In return, the Fund receives cash or liquid
securities from the borrower as collateral. The borrower must furnish
additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Fund the equivalent of any
dividends or interest received on the loaned securities. The Fund will
reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral. Loans are subject to
termination at the option of the Fund or the borrower. The Fund will
not have the right to vote on securities while they are on loan, but it
will terminate a loan in anticipation of any important vote. The Fund
may pay administrative and custodial fees in connection with a loan and
may pay a negotiated portion of the interest earned on the cash
collateral to a securities lending agent or broker. Securities lending
activities are subject to market risks and credit risks.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

Bond Market Risks
o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise,
prices of fixed income securities fall.

o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity
of a fixed income security to changes in interest rates.

Credit Risks
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.

Prepayment Risks

o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate
mortgages when mortgage rates fall. This results in the prepayment of
mortgage backed securities with higher interest rates. Conversely,
prepayments due to refinancings decrease when mortgage rates increase. This
extends the life of mortgage backed securities with lower interest rates.
As a result, increases in prepayments of high interest rate mortgage backed
securities, or decreases in prepayments of lower interest rate mortgage
backed securities, may reduce their yield and price. This relationship
between interest rates and mortgage prepayments makes the price of mortgage
backed securities more volatile than most other types of fixed income
securities with comparable credit risks.

Liquidity Risks
o Trading opportunities are more limited for CMOs that have complicated terms
or that are not widely held. These features may make it more difficult to
sell or buy a security at a favorable price or time. Consequently, the Fund
may have to accept a lower price to sell a security, sell other securities
to raise cash or give up an investment opportunity, any of which could have
a negative effect on the Fund's performance. Infrequent trading of
securities may also lead to an increase in their price volatility.

o Liquidity risk also refers to the possibility that the Fund may not be able
to sell a security when it wants to. If this happens, the Fund will be
required to continue to hold the security, and the Fund could incur losses.

Risks Associated with Complicated CMOs
o CMOs with complicated terms, such as companion classes, IOs, POs, and
Inverse Floaters, generally entail greater market, prepayment and liquidity
risks than other mortgage backed securities. For example, their prices are
more volatile and their trading market may be more limited.

Leverage Risks
o Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Portfolio's risk of loss and potential for gain.
The Fund may invest in instruments whose returns are based on a multiple of a
specified index, security, or other benchmark. Such performance multiplication
may increase leverage risks.

WHAT DO SHARES COST?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form,
it is processed at the next calculated net asset value (NAV) plus any applicable
front-end sales charge (public offering price). NAV is determined at the end of
regular trading (normally 4 p.m. Eastern time) each day the NYSE is open.

The Fund's current NAV and public offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

The following table summarizes the minimum required investment amount and the
maximum sales charge, if any, that you will pay on an investment in the Fund.
Keep in mind that investment professionals may charge you fees for their
services in connection with your Share transactions.

Maximum Sales Charge
Minimum Initial/Subsequent Front-End Sales Contingent
Shares Offered Investment Amounts1 Charge2 Deferred Sales
Charge3
Class A $1,500/$100 4.50% 0.00%
Class B $1,500/$100 None 5.50%
Class C $1,500/$100 None 1.00%
1 The minimum initial and subsequent investment amounts for retirement plans are
$250 and $100, respectively. The minimum subsequent investment amounts for
Systematic Investment Programs is $50. Investment professionals may impose
higher or lower minimum investment requirements on their customers than those
imposed by the Fund. Orders for $250,000 or more will be invested in Class A
Shares instead of Class B Shares to maximize your return and minimize the sales
charges and marketing fees. Accounts held in the name of an investment
professional may be treated differently. Class B Shares will automatically
convert into Class A Shares after eight full years from the purchase date. This
conversion is a non-taxable event. 2 Front-End Sales Charge is expressed as a
percentage of public offering price. See "Sales Charge When You Purchase". 3 See
"Sales Charge When You Redeem."

SALES CHARGE WHEN YOU PURCHASE

Class A Shares

<PAGE>

Sales Charge as a Sales Charge as a
Purchase Amount Percentage of Public Percentage of NAV
Offering Price
Less than $100,000 4.50% 4.71% $100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56% $500,000 but less than $1 million
2.00% 2.04% $1 million or greater1 0.00% 0.00% 1 A contingent deferred sales
charge of 0.75% of the redemption amount applies to Class A Shares redeemed up
to 24 months after purchase under certain investment programs where an
investment professional received an advance payment on the transaction. The
sales charge at purchase may be eliminated by:

o purchasing Shares in greater quantities to reduce the applicable sales
charge;

o combining concurrent purchases of Shares:

- - by you, your spouse, and your children under age 21; or
- - of the same share class of two or more Federated Funds (other than money
market funds); o accumulating purchases (in calculating the sales charge on an
additional purchase, include the
current value of previous Share purchases still invested in the Fund); or

o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

The sales charge will be eliminated when you purchase Shares:

o within 120 days of redeeming Shares of an equal or lesser amount;

o by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);

o through wrap accounts or other investment programs where you pay the
investment professional directly for services;

o through investment professionals that receive no portion of the sales
charge;

o as a Federated Life Member (Class A Shares only) and their immediate family
members; or

o as a Director or employee of the Fund, the Adviser, the Distributor and their
affiliates, and the immediate family members of these individuals.

If your investment qualifies for a reduction or elimination of the sales
charge, you or your investment professional should notify the Fund's
Distributor, Federated Securities Corp., at the time of purchase. If the
Distributor is not notified, you will receive the reduced sales charge only on
additional purchases, and not retroactively on previous purchases.

SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).

Class A Shares

A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase under certain investment
programs where an investment professional received an advance payment on the
transaction.

Class B Shares
Shares Held Up To: CDSC
1 year 5.50%
2 years 4.75%
3 years 4.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 years or more 0.00%

Class C Shares
You will pay a 1% CDSC if you redeem Shares within one year of the purchase
date.

You Will Not be Charged a CDSC When Redeeming Shares:

purchased with reinvested dividends or capital gains;

o purchased within 120 days of redeeming Shares of an equal or lesser amount;

o that you exchanged into the same share class of another Federated Fund where
the shares were held for the applicable CDSC holding period (other than a
money market fund);

o purchased through investment professionals that did not receive advanced
sales payments; or

o if, after you purchase Shares, you become disabled as defined by the IRS.

In addition, you will not be charged a CDSC:

o if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;

o if your redemption is a required retirement plan distribution;

o upon the death of the last surviving shareholder of the account.

If your redemption qualifies, you or your investment professional should notify
the Distributor at the time of redemption to eliminate the CDSC. If the
Distributor is not notified, the CDSC will apply.To keep the sales charge as low
as possible, the Fund redeems your Shares in this order:

o Shares that are not subject to a CDSC;

o Shares held the longest (to determine the number of years your Shares have
been held, include the time you held shares of other Federated Funds that
have been exchanged for Shares of this Fund); and

o then, the CDSC is calculated using the share price at the time of purchase or
redemption, whichever is lower.

HOW IS THE FUND SOLD?

The Fund offers four share classes: Class A Shares, Class B Shares, Class C
Shares, and Class F Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Class A Shares, Class B Shares, and
Class C Shares. Each share class has different sales charges and other expenses,
which affect their performance. Contact your investment professional or call
1-800-341-7400 for more information concerning the other class.

The Fund's Distributor markets the Shares described in this prospectus to
institutions or individuals, directly or through investment professionals.

When the Distributor receives sales charges and marketing fees, it may pay some
or all of them to investment professionals. The Distributor and its affiliates
may pay out of their assets other amounts (including items of material value) to
investment professionals for marketing and servicing Shares.The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Class A Shares, Class B Shares, and Class C
Shares. Because these Shares pay marketing fees on an ongoing basis, your
investment cost may be higher over time than other shares with different sales
charges and marketing fees.

HOW TO PURCHASE SHARES

You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.

Where the Fund offers more than one Share Class and you do not specify the Class
choice on your New Account Form or form of payment (e.g., Federal Reserve wire
or check) you automatically will receive Class A Shares.

THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and

o Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will
receive the next calculated NAV if the investment professional forwards the
order to the Fund on the same day and the Fund receives payment within three
business days. You will become the owner of Shares and receive dividends when
the Fund receives your payment.

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

o Establish your account with the Fund by submitting a completed New Account
Form; and

o Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

By Wire Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number
You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone other
than you or The Federated Funds).

THROUGH AN EXCHANGE
You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM
Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program
section of the New Account Form or by contacting the Fund or your investment
professional.

BY AUTOMATED CLEARING HOUSE (ACH)
Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

RETIREMENT INVESTMENTS
You may purchase Shares as retirement investments (such as qualified plans and
IRAs or transfer or rollover of assets). Call your investment professional or
the Fund for information on retirement investments. We suggest that you discuss
retirement investments with your tax adviser. You may be subject to an annual
IRA account fee.

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

o through an investment professional if you purchased Shares through an
investment professional; or

o directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL
Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

By Telephone
You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.

By Mail
You may redeem or exchange Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed or exchanged;

o signatures of all Shareholders exactly as registered; and

o if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

Signature Guarantees Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last 30 days;

o a redemption is payable to someone other than the shareholder(s) of record;
or

o if exchanging (transferring) into another fund with a different shareholder
registration.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS
Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:

o an electronic transfer to your account at a financial institution that is
an ACH member; or

o wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

Redemption in Kind
Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

REDEMPTIONS FROM RETIREMENT ACCOUNTS
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in the Fund may be withheld for taxes. This
withholding only applies to certain types of retirement accounts.

EXCHANGE PRIVILEGES
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.

SYSTEMATIC WITHDRAWAL PROGRAM
You may automatically redeem Shares in a minimum amount of $100 on a regular
basis. Complete the appropriate section of the New Account Form or an Account
Service Options Form or contact your investment professional or the Fund. Your
account value must meet the minimum initial investment amount at the time the
program is established. This program may reduce, and eventually deplete, your
account. Payments should not be considered yield or income.

Generally, it is not advisable to continue to purchase Shares subject to a sales
charge while redeeming Shares using this program.

Systematic Withdrawal Program (SWP) On Class B Shares You will not be charged a
CDSC on SWP redemptions if:

o you redeem 12% or less of your account value in a single year;

o your account is at least one year old;

o you reinvest all dividends and capital gains distributions; and

o your account has at least a $10,000 balance when you establish the SWP. (You
cannot aggregate multiple Class B Share accounts to meet this minimum
balance).

You will be subject to a CDSC on redemption amounts that exceed the 12% annual
limit. In measuring the redemption percentage, your account is valued when you
establish the SWP and then annually at calendar year-end. You can redeem only at
a rate of 1% monthly, 3% quarterly, or 6% semi-annually.

ADDITIONAL CONDITIONS

Telephone Transactions
The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

Share Certificates
The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.

ACCOUNT AND SHARE INFORMATION

CONFIRMATIONS AND ACCOUNT STATEMENTS
You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends monthly to shareholders. Dividends are
paid to all shareholders invested in the Fund on the record date. The record
date is the date on which a shareholder must officially own shares in order to
earn a dividend.

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, non-retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.

TAX INFORMATION
The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be primarily dividends. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.

WHO MANAGES THE FUND?

The Board of Directors governs the Fund. The Board selects and oversees the
Adviser, Federated Advisers. The Adviser manages the Fund's assets, including
buying and selling portfolio securities. The Adviser's address is Federated
Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Fund's portfolio managers are:

Kathleen M. Foody-Malus has been the Fund's portfolio manager since July
1993. She is Vice President of the Corporation. Ms. Foody-Malus joined Federated
Investors in 1983 and has been a Senior Portfolio Manager since 1996 and a Vice
President of the Fund's investment adviser since 1993. She was a Portfolio
Manager and a Vice President of the Fund's investment adviser from 1993 to 1996.
Ms. Foody-Malus received her M.B.A. in Accounting/Finance from the University of
Pittsburgh.

Edward J. Tiedge has been the Fund's portfolio manager since April 1997.
Mr. Tiedge joined Federated Investors in 1993 as a Senior Analyst and has been a
Portfolio Manager and a Vice President of the Fund's investment adviser since
1996. He served as Portfolio Manager and an Assistant Vice President of the
Fund's investment adviser in 1995, and an Investment Analyst during 1993 and
1994. Mr. Tiedge is a Chartered Financial Analyst and received his M.S. in
Industrial Administration from Carnegie Mellon University.

The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which total more than $111 billion in assets as of
December 31, 1998. Federated was established in 1955 and is one of the largest
mutual fund investment managers in the United States with approximately 1,900
employees. More than 4,000 investment professionals make Federated Funds
available to their customers.

Advisory Fees
The Adviser receives an annual investment advisory fee of 0.75% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

Year 2000 Readiness
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999. The Year 2000 problem may cause systems to process information incorrectly
and could disrupt businesses that rely on computers, like the Fund.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS
The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.

This information has been audited by Deloitte & Touche, whose report, along with
the Fund's audited financial statements, is included in the Annual Report.

<PAGE>

41
FEDERATED GOVERNMENT
INCOME SECURITIES, INC.

Class A Shares
Class B Shares
class C Shares

A Statement of Additional Information (SAI) dated April 30, 1999 is incorporated
by reference into this prospectus. Additional information about the Fund's
investments is contained in the Fund's annual and semi-annual reports to
shareholders as they become available. The annual report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the annual report,
semi-annual report and other information without charge, call your investment
professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

Investment Company Act File No. 811-3266
Cusip 313912206
Cusip 313912305
Cusip 313912404

G01090-01 (4/99)

Statement of Additional Information

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

Class A Shares
Class B Shares
Class C Shares
Class F Shares

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Federated Government Income
Securities Inc. (Fund), dated April 30, 1999.

This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectuses or the Annual Report without charge by calling 1-800-341-7400.

April 30, 1999

Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Exchanging Securities for Shares
Subaccounting Services
Redemption in Kind
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Addresses
Cusip 313912206
Cusip 313912305
Cusip 313912404
Cusip 313912107

8040406B (4/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified open-end, management investment company that was
established under the laws of the State of Maryland on February 4, 1986. The
Fund changed its name from Government Income Securities, Inc. to Federated
Government Income Securities, Inc. on February 26, 1996.

The Board of Directors (the Board) has established four classes of shares of the
Fund, known as Class A Shares, Class B Shares, Class C Shares, and Class F
Shares (Shares). This SAI relates to all classes of the above-mentioned Shares.
The Fund's investment adviser is Federated Advisers (Adviser).

SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields

The following decries the types of fixed income securities in which the Fund
principally invests: Treasury Securities Treasury securities are direct
obligations of the Federal government of the United States. Treasury
securities are generally regarded as having the lowest credit risks. Agency
Securities Agency securities are issued or guaranteed by a federal agency
or other government sponsored entity acting under federal authority (a
GSE). The United States supports some GSEs with its full, faith and credit.
Other GSEs receive support through federal subsidies, loans or other
benefits. A few GSEs have no explicit financial support, but are regarded
as having implied support because the federal government sponsors their
activities. Agency securities are generally regarded as having low credit
risks, but not as low as treasury securities. The Fund treats mortgage
backed securities guaranteed by GSEs as agency securities. Although a GSE
guarantee protects against credit risks, it does not reduce the market and
prepayment risks of these mortgage backed securities.

Sequential CMOs
In a sequential pay CMO, one class of CMOs receives all principal
payments and prepayments. The next class of CMOs receives all principal
payments after the first class is paid off. This process repeats for
each sequential class of CMO. As a result, each class of sequential pay
CMOs reduces the prepayment risks of subsequent classes. PACs, TACs and
Companion Classes More sophisticated CMOs include planned amortization
classes (PACs) and targeted amortization classes (TACs). PACs and TACs
are issued with companion classes. PACs and TACs receive principal
payments and prepayments at a specified rate. The companion classes
receive principal payments and prepayments in excess of the specified
rate. In addition, PACs will receive the companion classes' share of
principal payments, if necessary, to cover a shortfall in the
prepayment rate. This helps PACs and TACs to control prepayment risks
by increasing the risks to their companion classes. IOs and POs CMOs
may allocate interest payments to one class (Interest Only or IOs) and
principal payments to another class (Principal Only or POs). POs
increase in value when prepayment rates increase. In contrast, IOs
decrease in value when prepayments increase, because the underlying
mortgages generate less interest payments. However, IOs tend to
increase in value when interest rates rise (and prepayments decrease),
making IOs a useful hedge against market risks. Floaters and Inverse
Floaters Another variant allocates interest payments between two
classes of CMOs. One class (Floaters) receives a share of interest
payments based upon a market index such as LIBOR. The other class
(Inverse Floaters) receives any remaining interest payments from the
underlying mortgages. Floater classes receive more interest (and
Inverse Floater classes receive correspondingly less interest) as
interest rates rise. This shifts prepayment and market risks from the
Floater to the Inverse Floater class, reducing the price volatility of
the Floater class and increasing the price volatility of the Inverse
Floater class. Z Classes CMOs must allocate all payments received from
the underlying mortgages to some class. To capture any unallocated
payments, CMOs generally have an accrual (Z) class. Z classes do not
receive any payments from the underlying mortgages until all other CMO
classes have been paid off. Once this happens, holders of Z class CMOs
receive all payments and prepayments.

The degree of increased or decreased prepayment risks depends upon the
structure of the CMOs. However, the actual returns on any type of mortgage
backed security depend upon the performance of the underlying pool of
mortgages, which no one can predict and will vary among pools.

Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
first-lien mortgages. However, almost any type of fixed income assets
(including other fixed income securities) may be used to create an asset
backed security. The Fund will invest only in the following kinds of asset
backed securities: home equity loans, second mortgages and manufactured
housing obligations. Asset backed securities may take the form of notes or
pass through certificates. Asset backed securities have prepayment risks.
Like CMOs, asset backed securities may be structured like Floaters, Inverse
Floaters, IOs and POs.

Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to
pay amounts due on a fixed income security if the issuer defaults. In some
cases the company providing credit enhancement makes all payments directly
to the security holders and receives reimbursement from the issuer.
Normally, the credit enhancer has greater financial resources and liquidity
than the issuer. For this reason, the Adviser usually evaluates the credit
risk of a fixed income security based solely upon its credit enhancement.

Derivative Contracts
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell Fund securities at unfavorable prices to do so). Inability to close
out a contract could also harm the Fund by preventing it from disposing of or
trading any assets it has been using to secure its obligations under the
contract.

The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending how the Fund uses derivative contracts and the relationships between
the market value of a derivative contract and the underlying asset, derivative
contracts may increase or decrease the Fund's exposure to market and currency
risks, and may also expose the Fund to liquidity and leverage risks. OTC
contracts also expose the Fund to credit risks in the event that a counterparty
defaults on the contract.

Hedging

The Fund may engage in hedging transactions using derivative contracts.
Hedging transactions are intended to reduce specific risks. For
example, to protect the Fund against circumstances that would normally
cause the Fund's portfolio securities to decline in value, the Fund may
buy or sell a derivative contract that would normally increase in value
under the same circumstances. The Fund may also attempt to hedge by
using combinations of different derivatives contracts, or derivatives
contracts and securities. The Fund's ability to hedge may be limited by
the costs of the derivatives contracts. The Fund may attempt to lower
the cost of hedging by entering into transactions that provide only
limited protection, including transactions that (1) hedge only a
portion of its portfolio, (2) use derivatives contracts that cover a
narrow range of circumstances or (3) involve the sale of derivatives
contracts with different terms. Consequently, hedging transactions will
not eliminate risk even if they work as intended. In addition, hedging
strategies are not always successful, and could result in increased
expenses and losses to the Fund.

The Fund may trade in the following types of derivative contracts:
Futures Contracts
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts.

The Fund may buy/sell financial futures contracts.

Options
Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right
to sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer
keeps regardless of whether the buyer uses (or exercises) the option.

The Fund may:

o Buy call options on securities and financial futures contracts in
anticipation of an increase in value of the underlying asset;

o Buy put options on securities and financial futures contracts in
anticipation of a decrease in the value of the underlying asset; and

o Buy or write options to close out existing options positions.
The Fund may also write call options on financial futures contracts to
generate income from premiums, and in anticipation of a decrease or only
limited increase in the value of the underlying asset. If a call written by
the Fund is exercised, the Fund foregoes any possible profit from an
increase in the market price of the underlying asset over the exercise
price plus the premium received. The Fund may also write put options on
securities and financial futures contracts to generate income from
premiums, and in anticipation of an increase or only limited decrease in
the value of the underlying asset. In writing puts, there is a risk that
the Fund may be required to take delivery of the underlying asset when its
current market price is lower than the exercise price. When the Fund writes
options on futures contracts, it will be subject to margin requirements
similar to those applied to futures contracts.

Special Transactions
Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security
from a dealer or bank and agrees to sell the security back at a mutually
agreed upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
Adviser. The Fund's custodian or subcustodian will take possession of the
securities subject to repurchase agreements. The Adviser or subcustodian
will monitor the value of the underlying security each day to ensure that
the value of the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.

Reverse Repurchase Agreements

Reverse repurchase agreements are repurchase agreements in which the Fund
is the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must
repurchase the underlying security at a higher price, regardless of the
market value of the security at the time of repurchase.

Delayed Delivery Transactions

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with
payment and delivery of the securities scheduled for a future time. During
the period between purchase and settlement, no payment is made by the Fund
to the issuer and no interest accrues to the Portfolio. The Portfolio
records the transaction when it agrees to buy the securities and reflects
their value in determining the price of its shares. Settlement dates may be
a month or more after entering into these transactions so that the market
values of the securities bought may vary from the purchase prices.
Therefore, delayed delivery transactions create market risks for the Fund.
Delayed delivery transactions also involve credit risks in the event of a
counterparty default.
To Be Announced Securities (TBAs)
As with other delayed delivery transactions, a seller agrees to issue a
TBA security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to
accept any security that meets specified terms. For example, in a TBA
mortgage backed transaction, the Fund and the seller would agree upon
the issuer, interest rate and terms of the underlying mortgages. The
seller would not identify the specific underlying mortgages until it
issues the security. TBA mortgage backed securities increase market
risks because the underlying mortgages may be less favorable than
anticipated by the Fund. Dollar Rolls Dollar rolls are transactions
where the Fund sells mortgage-backed securities with a commitment to
buy similar, but not identical, mortgage-backed securities on a future
date at a lower price. Normally, one or both securities involved are
TBA mortgage backed securities. Dollar rolls are subject to market
risks.

Securities Lending
The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from
the borrower as collateral. The borrower must furnish additional collateral
if the market value of the loaned securities increases. Also, the borrower
must pay the Fund the equivalent of any dividends or interest received on
the loaned securities. The Fund will reinvest cash collateral in securities
that qualify as an acceptable investment for the Fund. However, the Fund
must pay interest to the borrower for the use of cash collateral. Loans are
subject to termination at the option of the Fund or the borrower. The Fund
will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund
may pay administrative and custodial fees in connection with a loan and may
pay a negotiated portion of the interest earned on the cash collateral to a
securities lending agent or broker. Securities lending activities are
subject to market risks and credit risks.

INVESTMENT RISKS
There are many factors which may effect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

Credit Risks
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.

Prepayment Risks

o Mortgage backed securities generally compensate for greater prepayment risk
by paying a higher yield. The difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security is
perceived to have increased prepayment risk or less market demand. An
increase in the spread may cause the price of the security to decline.
o If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
Liquidity Risks
o Trading opportunities are more limited for CMOs that have complicated terms
or that are not widely held. These features may make it more difficult to
sell or buy a security at a favorable price or time. Consequently, the Fund
may have to accept a lower price to sell a security, sell other securities
to raise cash or give up an investment opportunity, any of which could have
a negative effect on the Fund's performance. Infrequent trading of
securities may also lead to an increase in their price volatility.

INVESTMENT LIMITATIONS

Buying on Margin
The Fund will not purchase any securities on margin, other than in connection
with the purchase of put options on financial futures contracts, but may obtain
such short-term credits as are necessary for clearance of transactions.

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 where 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. However, the Fund may purchase
put options on financial futures contracts. The Fund may also enter into futures
contracts in order to exercise put options on financial futures contracts in its
portfolio. In addition, the Fund reserves the right to hedge the portfolio by
entering into financial futures contracts and to sell calls on financial futures
contracts. The Fund will notify shareholders before such a change in its
operating policies is implemented.

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 limitations cannot be changed unless authorized by the "vote of a
majority of its outstanding voting securities," as defined by the Investment
Company Act. The following limitations, however, may be changed by the Board
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 15% 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.

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 or borrow money 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.

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 year ended February 28, 1998,
and 1999, the portfolio turnover rates were ____%, and 264%, 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.

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
for equity securities, according to the last sale price in the market
in which they are primarily traded (either a national securities exchange or
the over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

for bonds and other fixed income securities, at the last sale price on
a national securities exchange, if available, otherwise, as determined by an
independent pricing service;

o futures contracts and options are valued at market values established by the
exchanges on which they are traded at the close of trading on such exchanges.
Options traded in the over-the-counter market are valued according to the
mean between the last bid and the last asked price for the option as provided
by an investment dealer or other financial institution that deals in the
option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value;

for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as
determined in good faith by the Board; and

for all other securities, at fair value as determined in good faith by the
Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

eliminating THE FRONT-END SALES CHARGE
You can eliminate the applicable front-end sales charge, as follows.

Quantity Discounts
Larger purchases of the same Share class eliminate the sales charge you pay. You
can combine purchases of Shares made on the same day by you, your spouse, and
your children under age 21. In addition, purchases made at one time by a trustee
or fiduciary for a single trust estate or a single fiduciary account can be
combined.

Accumulated Purchases
If you make an additional purchase of Shares, you can count previous Share
purchases still invested in the Fund in calculating the applicable sales charge
on the additional purchase.

Concurrent Purchases
You can combine concurrent purchases of the same Share class of two or more
Federated Funds in calculating the applicable sales charge.

Letter of Intent
You can sign a Letter of Intent committing to purchase a certain amount of the
same class of Shares within a 13 month period to combine such purchases in
calculating the sales charge. The Fund's custodian will hold Shares in escrow
equal to the maximum applicable sales charge. If you complete the Letter of
Intent, the Custodian will release the Shares in escrow to your account. If you
do not fulfill the Letter of Intent, the Custodian will redeem the appropriate
amount from the Shares held in escrow to pay the sales charges that were not
applied to your purchases.

Reinvestment Privilege
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV, without any sales charge.

Purchases by Affiliates of the Fund
The following individuals and their immediate family members may buy Shares at
NAV without any sales charge because there are nominal sales efforts associated
with their purchases:

o the Directors, employees, and sales representatives of the Fund, the
Adviser, the Distributor and their affiliates;

o Employees of State Street Bank Pittsburgh who started their employment on
January 1, 1998, and were employees of Federated Investors, Inc. (Federated)
on December 31, 1997;

o any associated person of an investment dealer who has a sales agreement
with the Distributor; and

o trusts, pension or profit-sharing plans for these individuals.

Federated Life Members
Shareholders of the Fund known as "Federated Life Members" are exempt from
paying any front-end sales charge. These shareholders joined the Fund
originally:

o through the "Liberty Account," an account for Liberty Family of Funds
shareholders on February 28, 1987 (the Liberty Account and Liberty Family
of Funds are no longer marketed); or

o as Liberty Account shareholders by investing through an affinity group prior
to August 1, 1987.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE
These reductions or eliminations are offered because: no sales commissions have
been advanced to the investment professional selling Share; the shareholder has
already paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts
are associated with the original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:

o following the death or post-purchase disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of the last surviving
shareholder;

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of
70-1/2;

o representing a total or partial distribution from a qualified plan. A total
or partial distribution does not include an account transfer, rollover or
other redemption made for purposes of reinvestment. A qualified plan does not
include an Individual Retirement Account, Keogh Plan, or a custodial account,
following retirement;

o which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements;

o which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program;

o of Shares that represent a reinvestment within 120 days of a previous
redemption;

o of Shares held by the Directors, employees, and sales representatives of the
Fund, the Adviser, the Distributor and their affiliates; employees of any
investment professional that sells Shares according to a sales agreement with
the Distributor; and the immediate family members of the above persons; and

o of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator
has entered into certain arrangements with the Distributor or its affiliates,
or any other investment professional, to the extent that no payments were
advanced for purchases made through these entities.

HOW IS THE FUND SOLD?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.), located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, offers Shares on a continuous, best-efforts basis.

FRONT-END SALES CHARGE REALLOWANCES
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professionals for sales and/or administrative services. Any payments
to investment professionals in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to an investment professional.

RULE 12B-1 PLAN
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Fund's service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

Federated and its subsidiaries may benefit from arrangements where the Rule
12b-1 Plan fees related to Class B Shares may be paid to third-parties who have
advanced commissions to investment professionals.

SHAREHOLDER SERVICES
The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated, for providing shareholder services and maintaining shareholder
accounts. Federated Shareholder Services Company may select others to perform
these services for their customers and may pay them fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

When an investment professional's customer purchases shares, the investment
professional may receive:

o an amount equal to 0.50% of the NAV of Class A Shares under certain qualified
retirement plans as approved by the Distributor. (Such payments are subject
to a reclaim from the investment professional should the assets leave the
program within 12 months after purchase.)

o an amount up to 5.50% and 1.00%, respectively, of the NAV of Class B and C
Shares.

o an amount on the NAV of Class F Shares purchased as follows: up to 1% on
purchases below $2 million; 0.50% on purchases from $2 million but below $5
million; and 0.25% on purchases of $5 million or more.

In addition, the Distributor may pay investment professionals 0.25% of the
purchase price of $1 million or more of Class A and Class F Shares that its
customer has not redeemed over the first year.

Class A Shares
Investment professionals purchasing Class A Shares for their customers are
eligible to receive an advance payment from the Distributor based on the
following breakpoints:

Amount Advance Payments as a Percentage of Public
Offering Price
First $1 - $5 million 0.75%
Next $5 - $20 million 0.50%
Over $20 million 0.25%
For accounts with assets over $1 million, the dealer advance payments resets
annually to the first breakpoint on the anniversary of the first purchase.

Class A Share purchases under this program may be made by Letter of Intent or by
combining concurrent purchases. The above advance payments will be paid only on
those purchases that were not previously subject to a front-end sales charge and
dealer advance payments. Certain retirement accounts may not be eligible for
this program.

A contingent deferred sales charge of 0.75% of the redemption amount applies to
Class A Shares redeemed up to 24 months after purchase. The CDSC does not apply
under certain investment programs where the investment professional does not
receive an advance payment on the transaction including, but not limited to,
trust accounts and wrap programs where the investor pays an account level fee
for investment management.

Class F Shares
Investment professionals purchasing Class F Shares for their customers are
eligible to receive an advance payment from the distributor of 0.25% of the
purchase price.

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept
your securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated
as a sale of your securities for federal tax purposes.

SUBACCOUNTING SERVICES

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Director elections and
other matters submitted to shareholders for vote. All Shares of the Fund have
equal voting rights, except that in matters affecting only a particular class,
only Shares of that class are entitled to vote.

Directors may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares.

As of February 8, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares: MLPF&S, for the sole
benefit of its customers, Jacksonville, Florida, owned 19,689,615 Class A Shares
(96.61%); MLPF&S, for the sole benefit of its customers, Jacksonville, Florida,
owned 777,458 Class B Shares (15.59%); and MLPF&S, for the sole benefit of its
customers, Jacksonville, Florida, owned 1,214,005 Class C Shares (75.12%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF DIRECTORS
The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birthdate, present position(s) held with the Fund's,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Director from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Federated Fund Complex is
comprised of 56 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.

As of February 8, 1999, the Fund's Board and Officers as a group owned
approximately [less than 1% of the Fund's outstanding Class A, B, C, F Shares.

An asterisk (*) denotes a Director who is deemed to be an interested person as
defined in the Investment Company Act of 1940. The following symbol (#) denotes
a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.

<PAGE>

Name Total
Birthdate Aggregate Compensation From
Address Principal Occupations Compensation Fund
Position With Fund for Past 5 Years From Fund and Fund Complex
John F. Donahue*+ Chief Executive Officer and Director or Trustee of the $0 $0 for the
Birthdate: July 28, 1924 Federated Fund Complex; Chairman and Director, Fund and
Federated Investors Tower Federated Investors, Inc.; Chairman and Trustee, 54 other investment
1001 Liberty Avenue Federated Advisers, Federated Management, and companies
Pittsburgh, PA Federated Research; Chairman and Director, Federated in the Fund Complex
CHAIRMAN AND DIRECTOR Research Corp., and Federated Global Research Corp.;
Chairman, Passport Research, Ltd.
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $ $113,860.22 for the
Birthdate: February 3, 1934 Director, Member of Executive Committee, Children's Fund and
15 Old Timber Trail Hospital of Pittsburgh; formerly: Senior Partner, 54 other investment
Pittsburgh, PA Ernst & Young LLP; Director, MED 3000 Group, Inc.; companies
DIRECTOR Director, Member of Executive Committee, University of in the Fund Complex
Pittsburgh.

John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $ $125,264.48for the
Birthdate: June 23, 1937 President, Investment Properties Corporation; Senior Fund and
Wood/IPC Commercial Dept. Vice President, John R. Wood and Associates, Inc., 54 other investment
John R. Wood Associates, Realtors; Partner or Trustee in private real estate companies
Inc. Realtors ventures in Southwest Florida; formerly: President, in the Fund Complex
3255 Tamiami Trial North Naples Property Management, Inc. and Northgate Village
Naples, FL Development Corporation.
DIRECTOR
Nicholas Constantakis Director or Trustee of the Federated Fund Complex; $ $47,958.02for the
Birthdate: September 3, 1939 formerly: Partner, Andersen Worldwide SC. Fund and
175 Woodshire Drive 29 other investment
Pittsburgh, PA companies
DIRECTOR in the Fund Complex
William J. Copeland Director or Trustee of the Federated Fund Complex; $ $125,264.48 for the
Birthdate: July 4, 1918 Director and Member of the Executive Committee, Fund and
One PNC Plaza-23rd Floor Michael Baker, Inc.; formerly: Vice Chairman and 54 other investment
Pittsburgh, PA Director, PNC Bank, N.A., and PNC Bank Corp.; companies
DIRECTOR Director, Ryan Homes, Inc. in the Fund Complex

Previous Positions: Director, United Refinery;
Director, Forbes Fund; Chairman, Pittsburgh
Foundation; Chairman, Pittsburgh Civic Light Opera.
John F. Cunningham++ Director or Trustee of some of the Federated Funds; $ $0 for the
Birthdate: March 5, 1943 Chairman, President and Chief Executive Officer, Fund and
353 El Brillo Way Cunningham & Co., Inc. ; Trustee Associate, Boston 26 other investment
Palm Beach, FL College; Director, EMC Corporation; formerly: companies
DIRECTOR Director, Redgate Communications. in the Fund Complex

Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.
Lawrence D. Ellis, M.D.* Director or Trustee of the Federated Fund Complex; $ $113,860.22 for the
Birthdate: October 11, 1932 Professor of Medicine, University of Pittsburgh; Fund and
3471 Fifth Avenue Medical Director, University of Pittsburgh Medical 54 other investment
Suite 1111 Center - Downtown; Hematologist, Oncologist, and companies
Pittsburgh, PA Internist, University of Pittsburgh Medical Center; in the Fund Complex
DIRECTOR Member, National Board of Trustees, Leukemia Society
of America.
Peter E. Madden Director or Trustee of the Federated Fund Complex; $ $113,860.22 for the
Birthdate: March 16, 1942 formerly: Representative, Commonwealth of Fund and
One Royal Palm Way Massachusetts General Court; President, State Street 54 other investment
100 Royal Palm Way Bank and Trust Company and State Street Corporation. companies
Palm Beach, FL in the Fund Complex
DIRECTOR Previous Positions: Director, VISA USA and VISA
International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust
Corporation.
Charles F. Mansfield, Jr.++ Director or Trustee of some of the Federated Funds; $ $0 for the
Birthdate: April 10, 1945 Management Consultant. Fund and
80 South Road 26 other
Westhampton Beach, NY Previous Positions: Chief Executive Officer, PBTC investment
DIRECTOR International Bank; Chief Financial Officer of Retail companies
Banking Sector, Chase Manhattan Bank; Senior Vice in the Fund Complex
President, Marine Midland Bank; Vice President,
Citibank; Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra University.
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $ $113,860.22 for the
S.J.D. President, Law Professor, Duquesne University; Fund and
Birthdate: December 20, 1932 Consulting Partner, Mollica & Murray. 54 other investment
President, Duquesne companies
University Previous Positions: Dean and Professor of Law, in the Fund Complex
Pittsburgh, PA University of Pittsburgh School of Law; Dean and
DIRECTOR Professor of Law, Villanova University School of Law.
Wesley W. Posvar Director or Trustee of the Federated Fund Complex; $ $113,860.22 for the
Birthdate: September 14, 1925 President, World Society of Ekistics (metropolitan Fund and
1202 Cathedral of Learning planning), Athens; Professor, International Politics; 54 other investment
University of Pittsburgh Management Consultant; Trustee, Carnegie Endowment for companies
Pittsbugh, PA International Peace, RAND Corporation, Online Computer in the Fund Complex
DIRECTOR Library Center, Inc., National Defense University and
U.S. Space Foundation; President Emeritus, University
of Pittsburgh; Founding Chairman, National Advisory
Council for Environmental Policy and Technology,
Federal Emergency Management Advisory Board; Trustee,
Czech Management Center, Prague.

Previous Positions: Professor, United States Military
Academy; Professor, United States Air Force Academy.

Marjorie P. Smuts Director or Trustee of the Federated Fund Complex; $ $113,860.22 for the
Birthdate: June 21, 1935 Public Relations/Marketing/Conference Planning. Fund and
4905 Bayard Street 54 other investment
Pittsburgh, PA Previous Positions: National Spokesperson, Aluminum companies
DIRECTOR Company of America; business owner. in the Fund Complex
John S. Walsh++ Director or Trustee of some of the Federated Funds; $ $0 for the
Birthdate: November 28, 1957 President and Director, Heat Wagon, Inc.; President Fund and
2007 Sherwood Drive and Director, Manufacturers Products, Inc.; President, 23 other investment
Valparaiso, IN Portable Heater Parts, a division of Manufacturers companies
DIRECTOR Products, Inc.; Director, Walsh & Kelly, Inc.; in the Fund Complex
formerly: Vice President, Walsh & Kelly, Inc.

J. Christopher Donahue+ President or Executive Vice President of the Federated $0 $0 for the
Birthdate: April 11, 1949 Fund Complex; Director or Trustee of some of the Funds Fund and
Federated Investors Tower in the Federated Fund Complex; President and Director, 16 other investment
1001 Liberty Avenue Federated Investors, Inc.; President and Trustee, companies
Pittsburgh, PA Federated Advisers, Federated Management, and in the Fund Complex
EXECUTIVE VICE PRESIDENT Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.;
President, Passport Research, Ltd.; Trustee, Federated
Shareholder Services Company; Director, Federated
Services Company.

<PAGE>

Edward C. Gonzales Trustee or Director of some of the Funds in the $0 $0 for the
Birthdate: October 22, 1930 Federated Fund Complex; President, Executive Vice Fund and
Federated Investors Tower President and Treasurer of some of the Funds in the 1 other investment
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated company
Pittsburgh, PA Investors, Inc.; Vice President, Federated Advisers, in the Fund Complex
EXECUTIVE VICE PRESIDENT 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.
John W. McGonigle Executive Vice President and Secretary of the $0 $0 for the
Birthdate: October 26, 1938 Federated Fund Complex; Executive Vice President, Fund and
Federated Investors Tower Secretary, and Director, Federated Investors, Inc.; 54 other investment
1001 Liberty Avenue Trustee, Federated Advisers, Federated Management, and companies
Pittsburgh, PA Federated Research; Director, Federated Research Corp. in the Fund Complex
EXECUTIVE VICE PRESIDENT AND and Federated Global Research Corp.; Director,
SECRETARY Federated Services Company; Director, Federated
Securities Corp.
Richard J. Thomas Treasurer of the Federated Fund Complex; Vice $0 $0 for the
Birthdate: June 17, 1954 President - Funds Financial Services Division, Fund and
Federated Investors Tower Federated Investors, Inc.; Formerly: various 54 other investment
1001 Liberty Avenue management positions within Funds Financial Services companies
Pittsburgh, PA Division of Federated Investors, Inc. in the Fund Complex
TREASURER
Richard B. Fisher* President or Vice President of some of the Funds in $0 $0 for the
Birthdate: May 17, 1923 the Federated Fund Complex; Director or Trustee of Fund and
Federated Investors Tower some of the Funds in the Federated Fund Complex; 6 other investment
1001 Liberty Avenue Executive Vice President, Federated Investors, Inc.; companies
Pittsburgh, PA Chairman and Director, Federated Securities Corp. in the Fund Complex
PRESIDENT AND DIRECTOR
William D. Dawson, III Chief Investment Officer of this Fund and various $0 $0 for the
Birthdate: March 3, 1949 other Funds in the Federated Fund Complex; Executive Fund and
Federated Investors Tower Vice President, Federated Investment Counseling, 41 other investment
1001 Liberty Avenue Federated Global Research Corp., Federated Advisers, companies
Pittsburgh, PA Federated Management, Federated Research, and Passport in the Fund Complex
CHIEF INVESTMENT OFFICER Research, Ltd.; Registered Representative, Federated
Securities Corp.; Portfolio Manager, Federated
Administrative Services; Vice President,
Federated Investors, Inc.; Formerly: Executive
Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior
Vice President, Federated Research Corp.,
Federated Advisers, Federated Management,
Federated Research, and Passport Research,
Ltd.
J. Thomas Madden Chief Investment Officer of this Fund and various $0 $0 for the
Birthdate: October 22, 1945 other Funds in the Federated Fund Complex; Executive Fund and
Federated Investors Tower Vice President, Federated Investment Counseling, 12 other investment
1001 Liberty Avenue Federated Global Research Corp., Federated Advisers, companies
Pittsburgh, PA Federated Management, Federated Research, and Passport in the Fund Complex
CHIEF INVESTMENT OFFICER Research, Ltd.; Vice President, Federated Investors,
Inc.; Formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio Management
Services Division; Senior Vice President,
Federated Research Corp., Federated Advisers,
Federated Management, Federated Research, and
Passport Research, Ltd.
Kathleen M. Foody-Malus Kathleen M. Foody-Malus [has been the Fund's portfolio $0 $0 for the
Birthdate: March 26, 1960 manager since July 1993. She is Vice President of the Fund and
Federated Investors Tower Fund. Ms. Foody-Malus joined Federated Investors in 3 other investment
1001 Liberty Avenue 1983 and has been a Senior Portfolio Manager since companies
Pittsburgh, PA 1996 and a Vice President of the Fund's investment in the Fund Complex
VICE PRESIDENT adviser since 1993. She was a Portfolio Manager and a
Vice President of the Fund's investment adviser from
1993 to 1996. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.

Edward J. Tiedge Edward J. Tiedge [has been the Fund's portfolio $0 $0 for the
Birthdate: June 14, 1959 manager since April 1997. Mr. Tiedge joined Fund and
Federated Investors Tower Federated Investors in 1993 as a Senior Analyst and no other investment
1001 Liberty Avenue has been a Portfolio Manager and a Vice President of companies
Pittsburgh, PA the Fund's investment adviser since 1996. He served in the Fund Complex
VICE PRESIDENT as Portfolio Manager and an Assistant Vice President
of the Fund's investment adviser in 1995, and an
Investment Analyst during 1993 and 1994. Mr. Tiedge is
a Chartered Financial Analyst and received his M.S. in
Industrial Administration from Carnegie Mellon
University.
</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Fund.

++ Messrs. Cunningham, Mansfield and Walsh became members of the Board of
Directors on January 1, 1999. They did not earn any fees for serving the Fund
Complex since these fees are reported as of the end of the last calendar year.
They did not receive any fees as of the fiscal year end of the Fund.

INVESTMENT ADVISER
The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly-owned subsidiary of Federated.

The Adviser shall not be liable to the Fund or any Fund 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.

Other Related Services
Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

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. 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 may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.

Research Services
Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those 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.

For the fiscal year ended, February 28, 1999, the Fund's adviser directed
brokerage transactions to certain brokers due to research services they
provided. The total amount of these transactions was $_______ for which the Fund
paid $_______ in brokerage commissions.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

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

Maximum Administrative Fee Average Aggregate Daily Net Assets of the Federated
Funds 0.150 of 1% on the first $250 million 0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million 0.075 of 1% on assets in excess of $750
million 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 voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT PUBLIC ACCOUNTANTs
Deloitte & Touche LLP is the independent public accountant for the Fund.

FEES PAID BY THE FUND FOR SERVICES

For the Year ended February 28, 1999 1999 1998 1997
Advisory Fee Earned $ $12,503,435 $14,913,257
Advisory Fee Reduction $ $4,007,152 $5,195,862
Brokerage Commissions $ $ $
Administrative Fee $ $1,258,281 $1,502,736
12b-1 Fee
Class A Shares $ ---- ----
Class B Shares $ ---- ----
Class C Shares $ ---- ----
Shareholder Services Fee
Class A Shares $ ---- ----
Class B Shares $ ---- ----
Class C Shares $ ---- ----
Class F Shares $ ---- ----
</TABLE>

Fees are allocated among Classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable Class of Shares.

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Unless otherwise stated, any quoted Share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded, would
increase the total return and yield. The performance of Shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in the
Fund's or any class of Shares' expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

Average Annual Total Returns and Yield
Total returns given for the one-year, five-year, ten-year or since inception
periods ended February 28, 1999.

Yield given for the 30-day period ended February 28, 1999.

30 -Day Period 1 Year 5 Years 10 Years
Since
Inception

on 8/5/96
Class A Shares
Total Return NA % NA NA
%
Yield % NA NA NA
NA

30 -Day Period 1 Year 5 Years 10 Years
Since
Inception

on 8/5/96
Class B Shares
Total Return NA % NA NA
%
Yield % NA NA NA
NA

30 -Day Period 1 Year 5 Years 10 Years
Since
Inception

on 8/5/96
Class C Shares
Total Return NA % NA NA
%
Yield % NA NA NA
NA

30 -Day Period 1 Year 5 Years 10 Years

Class F Shares
Total Return NA % % %
Yield % NA NA NA

TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares 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 NAV 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 annual reinvestment of all
dividends and distributions.

YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a thirty-day period; by (ii) the maximum
offering price per Share on the last day of the period. This number 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 Shares because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS
Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the 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:

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.

Lehman Brothers Mortgage-Backed Securities Index
The Lehman Brothers Mortgage-Backed Securities Index is a universe of fixed
rate securities backed by mortgage pools of Government National Mortgage
Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Federal
National Mortgage Association (FNMA).

The Merrill Lynch Taxable Bond Indices
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.

Morningstar, Inc.
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.

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

Federated Funds overview

Municipal Funds
In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

Equity Funds
In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

Corporate Bond Funds
In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset-backed securities market, a market
totaling more than $209 billion.

Government Funds
In the government sector, as of December 31, 1998, Federated manages 9
mortgage-backed, 5 government/ agency and 19 government money market mutual
funds, with assets approximating $5.3 billion, $1.8 billion and $41.6 billion,
respectively. Federated trades approximately $425 million in U.S. government and
mortgage-backed securities daily and places approximately $25 billion in
repurchase agreements each day. Federated introduced the first U.S. government
fund to invest in 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 approximately $43.2 billion in government funds within
these maturity ranges.

Money Market Funds
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the Federated advisory companies.

Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

Federated Clients Overview

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

Institutional Clients
Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

Bank Marketing
Other institutional clients include more than 1,600 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 Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.

Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated Funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F.
Getz, President, Broker/Dealer Sales Division, Federated Securities Corp.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended February 28,
1999 are incorporated herein by reference to the Annual Report to Shareholders
of Federated Government Income Securities, Inc. dated February 28, 1999.

<PAGE>

ADDRESSES

Federated government income securities, inc.

Class A Shares
Class B Shares
Class C Shares
Class F Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, PA 15222-3779

Investment Adviser
Federated Advisers
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

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

Independent Public Accountants
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

Prospectus

FEDERATED GOVERNMENT INCOME
SECURITIES, INC.

Class F Shares

April 30, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?
The Fund pursues its investment objective by investing primarily in U.S.
government securities, including mortgage backed securities.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to
lose money in the Fund. The primary factors that may reduce the Fund's returns
include:

o changes in prevailing interest rates and

o increased prepayment of mortgages

<PAGE>

Risk/Return Bar Chart and Table
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class F Shares of the Fund as of the calendar year-end
for each of ten years. The `y' axis reflects the "% Total Return" beginning with
"(2.00%)" and increasing in increments of 1.00% up to 16.00%. The `x' axis
represents calculation periods for the last ten calendar years of the Fund's
Class F Shares, beginning with 1989. The light gray shaded chart features ten
distinct vertical bars, each shaded in charcoal, and each visually representing
by height the total return percentages for the calendar year stated directly at
its base. The calculated total return percentage for the Class F Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1989 through 1998, The percentages noted are: 13.55%, 9.53%,
13.06%, 6.13%, 4.68%, (1.91%), 14.77%, 4.04%, 9.45%, and 7.63%. The total
returns displayed for the Fund's Class F Shares do not reflect the payment of
any sales charges or recurring shareholder account fees. If these charges or
fees had been included, the returns shown would have been lower. The Fund's
Class F Shares total return from January 1, 1999 to March 31, 1999 was ____%.
Within the period shown in the Chart, the Fund's Class F Shares highest
quarterly return was ___%. Its lowest quarterly return was ___%.

Average Annual Total Return

Life of the Fund1 1 Year 5 Years 10 Years
Fund/Class 7.48% 5.56% 6.44% 7.88%
Broad-Based Index ____% ____% ___% ____%
Index #2 ____% ____% ___% ____%
1 Since inception date of April 4, 1986.
The Fund Compared to _____________________[Index Name] for the calendar periods
ending February 28, 1999. The bar chart shows the variability of the Fund's
actual total return on a yearly basis. The table shows the Fund's total returns
averaged over a period of years relative to _______________(name of index), a
broad-based market index. Past performance does not necessarily predict future
performance. This information provides you with historical performance so that
you can analyze whether the Fund's investment risks are balanced by its
potential rewards.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

Federated government income securities, inc.

Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's Class F Shares.

Shareholder Fees
<TABLE>
<CAPTION>

<S> <C>

Fees Paid Directly From Your Investment Class F
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering 1.00%
price)
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase 1.00%
price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other None
Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

Annual Fund Operating Expenses (Before Waivers)(1)
Expenses That are Deducted From Fund Assets (as a percentage of average net
assets)
Management Fee[2] 0.75%
Distribution (12b-1) Fee None
Shareholder Services Fee 0.25%
Other Expenses ____%
Total Annual Fund Operating Expenses ____%
1 Although not contractually obligated to do so, the adviser will waive
certain amounts. These are shown below along with the net expenses the Fund
actually paid for the fiscal year ended February 28, 1999.
Waivers of Fund Expenses ____%
Total Actual Annual Fund Operating Expenses (after waivers) ____%
2 The Adviser voluntarily waived a portion of the management fee. The Adviser
can terminate this voluntary waiver ast any time. The managment fee paid by
the Fund (after the voluntary waiver) was____% for the year ended February
28, 1999.

</TABLE>

<PAGE>

Example
This Example is intended to help you compare the cost of investing in the Fund's
Class F Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class F Shares for
the time periods indicated and then redeem all of your Shares at the end of
those periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that the Fund's Class
F Shares operating expenses are before waivers as shown in the table and remain
the same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be: Share Class 1 Year 3 Years 5 Years 10 Years
Class F Shares Expenses assuming redemption $ $ $ $ Expenses assuming no
redemption $ $ $ $

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund invests in a combination of U.S. government securities, including U.S.
Treasury obligations and
mortgage-backed securities.

Mortgage-backed securities generally provide higher current yields than other
U.S. government securities and can add current income to a portfolio. U.S.
Treasury obligations are not subject to the unique prepayment risks of
mortgage-backed securities, and therefore can reduce the volatility in the yield
of a portfolio. The Adviser actively manages the Fund's portfolio of U.S.
government securities seeking the highest income under current market
conditions.

.........o........current U.S. economic activity and the economic outlook,

.........o........current interest rates,

.........o........the Federal Reserve Board's policies regarding short-term
interest rates, and

.........o........potential effects of foreign economic activity on interest
rates.

In order to generate additional current income, the Fund will invest in delayed
delivery transactions and dollar rolls.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

The following describes the types of fixed income securities in which the Fund
principally invests:

Treasury Securities
Treasury securities are direct obligations of the Federal government of the
United States. Treasury securities are generally regarded as having the
lowest credit risks.

Special Transactions

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

Credit Risks
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.

Prepayment Risks

WHAT DO SHARES COST?

NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.

The Fund's current NAV and public offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.

Maximum Sales Charge
Minimum Initial/Subsequent Front-End Sales Contingent
Shares Offered Investment Amounts1 Charge2 Deferred Sales
Charge3
Class F $1,500/$100 1.00% 1.00% 1 The minimum initial and subsequent
investment amounts for retirement plans are $250 and $100, respectively. The
minimum subsequent investment amounts for Systematic Investment Programs is $50.
Investment professionals may impose higher or lower minimum investment
requirements on their customers than those imposed by the Fund. 2 Front-End
Sales Charge is expressed as a percentage of public offering price. See "Sales
Charge When You Purchase." 3 See "Sales Charge When You Redeem."

SALES CHARGE WHEN YOU PURCHASE

Class F Shares

<PAGE>

Sales Charge as a Sales Charge as a
Purchase Amount Percentage of Public Percentage of NAV
Offering Price
Less than $1 million 1.00% 1.01%
$1 million or greater 0.00% 0.00%
The sales charge at purchase may be eliminated by:

o purchasing Shares in greater quantities to reduce the applicable sales
charge;

o combining concurrent purchases of Shares:

o signing a letter of intent to purchase a specific dollar amount of Shares
within 13 months (call your investment professional or the Fund for more
information).

The sales charge will be eliminated when you purchase Shares:

o within 120 days of redeeming Shares of an equal or lesser amount;

o by exchanging shares from the same share class of another Federated Fund
(other than a money market fund);

o through wrap accounts or other investment programs where you pay the
investment professional directly for services;

o through investment professionals that receive no portion of the sales
charge;

o as a Federated Life Member (Class A Shares only) and their immediate family
members; or

o as a Director or employee of the Fund, the Adviser, the Distributor and
their affiliates, and the immediate family members of these individuals.

SALES CHARGE WHEN YOU REDEEM
Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC).

Class F Shares
Purchase Amount Shares Held CDSC
Up to $2 million 4 years or less 1.00%
$2 - $5 million 2 years or less 0.50%
$5 million or more 1 year or less 0.25%

You Will Not be Charged a CDSC When Redeeming Shares:

purchased with reinvested dividends or capital gains;

o purchased within 120 days of redeeming Shares of an equal or lesser amount;

o that you exchanged into the same share class of another Federated Fund where
the shares were held for the applicable CDSC holding period (other than a
money market fund);

o purchased through investment professionals that did not receive advanced
sales payments; or

o if, after you purchase Shares, you become disabled as defined by the IRS.

In addition, you will not be charged a CDSC:

o if the Fund redeems your Shares and closes your account for not meeting the
minimum balance requirement;

o if your redemption is a required retirement plan distribution;

o upon the death of the last surviving shareholder of the account.

To keep the sales charge as low as possible, the Fund redeems your Shares in
this order:

o Shares that are not subject to a CDSC;

o then, the CDSC is calculated using the share price at the time of purchase or
redemption, whichever is lower.

HOW IS THE FUND SOLD?

The Fund offers four share classes: Class A Shares, Class B Shares, Class C
Shares, and Class F Shares, each representing interests in a single portfolio of
securities. This prospectus relates only to Class F Shares. Each share class has
different sales charges and other expenses, which affect their performance.
Contact your investment professional or call 1-800-341-7400 for more information
concerning the other classes.

The Fund's Distributor markets the Shares described in this prospectus to
institutions or individuals, directly or through investment professionals.

HOW TO PURCHASE SHARES

THROUGH AN INVESTMENT PROFESSIONAL
o Establish an account with the investment professional; and

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

o Establish your account with the Fund by submitting a completed New Account
Form; and

o Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

By Wire Send your wire to:

By Check
Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds).

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

o through an investment professional if you purchased Shares through an
investment professional; or

o directly from the Fund if you purchased Shares directly from the Fund.

DIRECTLY FROM THE FUND

By Telephone
You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.

By Mail
You may redeem or exchange Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317 All requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed or exchanged;

o signatures of all Shareholders exactly as registered; and

o if exchanging, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

Signature Guarantees Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last 30 days;

o a redemption is payable to someone other than the shareholder(s) of record;
or

o if exchanging (transferring) into another fund with a different shareholder
registration.

o an electronic transfer to your account at a financial institution that is
an ACH member; or

o wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

EXCHANGE PRIVILEGES
You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

Generally, it is not advisable to continue to purchase Shares subject to a sales
charge while redeeming Shares using this program.

ADDITIONAL CONDITIONS

ACCOUNT AND SHARE INFORMATION

Fund distributions are expected to be primarily dividends. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.

WHO MANAGES THE FUND?

The Fund's portfolio managers are:

Kathleen M. Foody-Malus has been the Fund's portfolio manager since July 1993.
She is Vice President of the Corporation. Ms. Foody-Malus joined Federated
Investors in 1983 and has been a Senior Portfolio Manager since 1996 and a Vice
President of the Fund's investment adviser since 1993. She was a Portfolio
Manager and a Vice President of the Fund's investment adviser from 1993 to 1996.
Ms. Foody-Malus received her M.B.A. in Accounting/Finance from the University of
Pittsburgh.

Edward J. Tiedge has been the Fund's portfolio manager since April 1997. Mr.
Tiedge joined Federated Investors in 1993 as a Senior Analyst and has been a
Portfolio Manager and a Vice President of the Fund's investment adviser since
1996. He served as Portfolio Manager and an Assistant Vice President of the
Fund's investment adviser in 1995, and an Investment Analyst during 1993 and
1994. Mr. Tiedge is a Chartered Financial Analyst and received his M.S. in
Industrial Administration from Carnegie Mellon University.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

FINANCIAL INFORMATION

<PAGE>

FEDERATED GOVERNMENT
INCOME SECURITIES, INC.

Class F Shares

Investment Company Act File No. 811-3266

Cusip 313912107
G01090-02 (4/99)

PART C. OTHER INFORMATION.

Item 23. Exhibits:

(a) (i) Conformed copy of Amended and Restated Articles of
Incorporation of the Registrant; +

(ii) Certificate of Correction 10/96; +
(iii) Certificate of Correction 4/97; +

(b) (i) Copy of Amended and Restated By-Laws of the Registrant; (5)
(ii) Copy of Amendment to By-Laws 2/87; (6)
(iii) Copy of Amendment to By-Laws 8/87; (6)
(iv) Copy of Amendment No. 3 to the By-Laws; +
(v) Copy of Amendment No. 4 to the By-Laws; +
(vi) Copy of Amendment No. 5 to the By-Laws; +
(c) (i) Copy of Specimen Certificates
for Shares of Capital Stock for
Class A, Class B, and Class C
Shares of the Registrant; (15)
(ii) Copy of Specimen Certificate for
Shares of Capital Stock for Class F
Shares of the Registrant; (15)
(d) Conformed copy of Investment Advisory Contract of the Registrant; (8)
(e) (i) Conformed copy of Distributor's Contract of the Registrant
including Exhibit A; (15)
(ii) Conformed copy of Exhibit B to the
Distributor's Contract; (15) (iii) Conformed
copy of Exhibit C to the Distributor's
Contract; (15)
(iv) Conformed copy of Exhibit D to the Distributor's Contract;
(15)
(v) Conformed copy of Distributor's
Contract (Class B Shares) including
Exhibit 1 and Schedule A; (16)
(f) Not applicable;

- ---------------------
+ All exhibits have been filed electronically.

5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 13 on Form N-1A filed October 29, 1986. (File Nos. 2-74191
and 811-3266)

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 incorporated 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)

15. Response is incorporated by reference to Registrant's Port-Effective
Amendment No. 36 on Form N-1A filed April 29, 1997. (File Nos. 2-74191 and
811-3266)

16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 37 on Form N-1A filed April 28, 1998. (File Nos. 2-74191 and
811-3266)

<PAGE>

(g) (i) Conformed copy of Custodian Agreement
of the Registrant; (12) (ii) Conformed copy
of Domestic Custody Fee Schedule; (16)
(h) (i) Conformed copy of Principal
Shareholder Servicer's Agreement
(Class B Shares) including Exhibit
1 and Schedule A; (16)
(ii) Conformed copy of Shareholder
Services Agreement (Class B Shares)
including Exhibit 1 and Schedule A;
(16)
(iii) Conformed copy of Amended and Restated Shareholder
Services Agreement; (16)

(iv) Conformed copy of Agreement for Fund Accounting Services,
Administrative Services, Transfer Agency Services, and
Custody

Services Procurement; (13)

(v) The responses described in Item
24(b)6 are hereby incorporated by
reference.

(i) Conformed copy of Opinion and Consent of Counsel as to Legality of
Shares Being Registered; (12)
(j) Conformed copy of Consent of Independent Auditors; (16)
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (12)
(m) (i) Conformed copy of Rule 12b-1 Plan; (16)
(ii) Conformed copy of Exhibit 1 and Schedule A to the 12b-1
Distribution Plan (Class B Shares)of the Registrant; (16)
(n) Copy of Financial Data Schedules; (To be filed by amendment)
(o) 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);

(p) (i) Power of Attorney of the Registrant; (16)
(ii) Power of Attorney of Chief Investment Officer of the
Registrant; +
(iii) Power of Attorney of Treasurer of the Registrant; +

+ 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)

16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 37 on Form N-1A filed April 28, 1998. (File Nos. 2-74191 and
811-3266)

<PAGE>

(iv) Power of Attorney of Director of the Registrant; +
(v) Power of Attorney of Director of the Registrant; +
(vi) Power of Attorney of Director of the Registrant. +

Item 24. Persons Controlled by or Under Common Control with Registrant:

None

Item 25. Indemnification: (1)

Item 26. Business and Other Connections of Investment Adviser:

(a) For a description of the other business of the investment adviser, see the
section entitled "Who Manages 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 "Who Manages and Provides Services to the Fund-- Board of 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 W. Market Street,
Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are:

Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden

Senior Vice Presidents: Joseph M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer

+ All exhibits have been filed electronically.

1. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed December 28, 1981. (File Nos. 2-74191
and 811-3266)

<PAGE>

David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Charles A. Ritter
Keith J. Sabol
Frank Semack
Aash M. Shah
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Marc Halperin

Assistant Vice Presidents: Nancy J. Belz
Robert E. Cauley
Lee R. Cunningham, II
B. Anthony Delserone, Jr.
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Michael W. Sirianni
Leonardo A. Vila
Lori A. Wolff
Gary Farwell

Secretary: Stephen A. Keen

Treasurer: Thomas R. Donahue
Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. Newcamp
Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the
investment companies in the Federated Fund Complex described in
Part B of this Registration Statement.

Item 27. Principal Underwriters:

(a)......Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following ..........open-end
investment companies, including the Registrant:

Automated Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
CCB Funds; 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 Core Trust; 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 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: 2-5 Years; Federated U.S. Government Securities Fund: 5-10
Years; Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia
Funds; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Investment Series Funds, Inc.; 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 Obligations Trust II; Money Market Trust; Municipal Securities
Income Trust; Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds;
Tax-Free Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal FundsTrust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; High Yield Cash Trust; Investment Series Trust; Star Funds;
Targeted Duration Trust; The Virtus Funds; Trust for Financial Institutions;
Federated Securities Corp. also acts as principal underwriter for the following
closed-end investment company:
Liberty Term Trust, Inc.- 1999.

<PAGE>

(b)
<TABLE>
<CAPTION>

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

Richard B. Fisher Director, Chairman, Chief President
Federated Investors Tower Executive Officer, Chief
1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, President
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, Assistant
Federated Investors Tower Federated Securities Corp. Secretary
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

</TABLE>

<PAGE>

Item 28. 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:

Registrant Federated
Investors
Tower 1001
Liberty Avenue
Pittsburgh, PA
15222-3779
(Notices
should be sent
to Agent for
Service at the
above address)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Federated Shareholder Services Company Federated Investors Tower
("Transfer Agent and Dividend 1001 Liberty Avenue
Disbursing Agent") Pittsburgh, PA 15222-3779

Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Federated Advisers Federated Investors Tower
("Adviser") 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Item 29. Management Services: Not applicable.

Item 30. 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.

<PAGE>

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., has duly caused this Amendment to its Registration Statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 26th day of February, 1999.

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

BY: /s/ Matthew S. Hardin
Matthew S. Hardin, Assistant Secretary
Attorney in Fact for John F. Donahue
February 26, 1999

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/Matthew S. Hardin Attorney In Fact February 26, 1999
Matthew S. Hardin For the Persons
ASSISTANT SECRETARY Listed Below

NAME TITLE

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

Richard B. Fisher* President and Director

William D. Dawson III* Chief Investment Officer

John W. McGonigle* Executive Vice President and
Secretary

Richard J. Thomas* Treasurer (Principal Financial
and Accounting Officer)

Thomas G. Bigley* Director

John T. Conroy, Jr.* Director

Nicholas P. Constantakis* Director

William J. Copeland* Director

John F. Cunningham* Director

James E. Dowd, Esq.* Director

Lawrence D. Ellis, M.D.* Director

Edward L. Flaherty, Jr., Esq.* Director

Peter E. Madden* Director

Charles F. Mansfield, Jr.* Director

John E. Murray, Jr., J.D., S.J.D.* Director

Wesley W. Posvar* Director

Marjorie P. Smuts* Director

John S. Walsh* Director

* By Power of Attorney

Exhibit p(iv) under Form N-1A
Exhibit 24 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 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. Cunningham Director February 4, 1999
- ------------------------------------
John F. Cunningham

Sworn to and subscribed before me this 4th day of February 4, 1999

/s/ Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit p(ii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/s/William D. Dawson Chief Investment Officer February 4, 1999
- ------------------------------
William D. Dawson

Sworn to and subscribed before me this 4th day of February, 1999

/s/ Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit p(v) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/s/ Charles F. Mansfield Director February 4, 1999
- --------------------------------
Charles F. Mansfield

Sworn to and subscribed before me this 4th day of February 4, 1999

/s/ Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit p(iii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/s/Richard J. Thomas Treasurer December 11, 1998
- --------------------------------
Richard J. Thomas (Principal Financial and
Accounting Officer)

Sworn to and subscribed before me this 11th day of December, 1998

/s/ Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit p(vi) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/s/ John S. Walsh Director February 4, 1999
- --------------------------------
John S. Walsh

Sworn to and subscribed before me this 4th day of February 4, 1999

/s/ Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit b(iv) under From N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

(formerly: Government Income Securities, Inc.)

Amendment #3
to the By-Laws

(effective February 23, 1998)

Delete Sections 1, 2, 3, 4 & 5 from Article IV, OFFICERS, and replace with the
following:

Section 1. GENERAL PROVISIONS. The Officers of the Corporation shall be
a President, one or more Vice Presidents, a Treasurer, and a Secretary.
The Board of Directors, in its discretion, may elect or appoint a
Chairman of the Board of Directors and other Officers or agents,
including one or more Assistant Vice Presidents, one or more Assistant
Secretaries, and one or more Assistant Treasurers. A Vice President,
the Secretary or the Treasurer may appoint an Assistant Vice President,
an Assistant Secretary or an Assistant Treasurer, respectively, to
serve until the next election of Officers. Two or more offices may be
held by a single person except the offices of President and Vice
President may not be held by the same person concurrently. It shall not
be necessary for any Director or any Officer to be a holder of shares
in any Series or Class of the Corporation.

Section 2. ELECTION, TERM OF OFFICE AND QUALIFICATIONS. The Officers
shall be elected annually by the Board of Directors at its Annual
Meeting. Each Officer shall hold office for one year and until the
election and qualification of his successor, or until earlier
resignation or removal. The Chairman of the Board of Directors, if
there is one, shall be elected annually by and from the Directors, and
serve until a successor is so elected and qualified, or until earlier
resignation or removal.

Section 3. REMOVAL. Any Officer elected by the Board of Directors or
whose appointment has been ratified by the Board of Directors may be
removed with or without cause at any time by a majority vote of all of
the Directors. Any other employee of the Corporation may be removed or
dismissed at any time by the President.

Section 4. RESIGNATIONS. Any Officer may resign at any time by giving
written notice to the Board of Directors. Any such resignation shall
take effect at the time specified therein or, if no time is specified,
at the time of receipt. Unless otherwise specified , the acceptance of
such resignation shall not be necessary to make it effective.

Section 5. VACANCIES. Any vacancy in any of the offices, whether by
resignation, removal or otherwise, may be filled for the unexpired
portion of the term by the President. A vacancy in the office of
Assistant Vice President may be filled by a Vice President; in the
office of by the Secretary; or in the office of Assistant Treasurer by
the Treasurer. Any appointment to fill any vacancy shall serve subject
to ratification by the Board of Directors at its next Regular Meeting.

Exhibit b(v) under From N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

Federated Government Income Securities, Inc.

Amendment #4
to the By-Laws

(effective February 27, 1998)

Delete Section 7 Proxies of Article I, Meetings of Shareholders, and replace
with the following:

Section 7. PROXIES. Any Shareholder entitled to vote at any meeting of
Shareholders may vote either in person or by proxy, but no proxy which
is dated more than eleven months before the meeting named therein shall
be accepted unless otherwise provided in the proxy. Every proxy shall
be in writing and signed by the Shareholder or his duly authorized
agent or be in such other form as may be permitted by the Maryland
General Corporation Law, including electronic transmissions from the
shareholder or his authorized agent. Authorization may be given orally,
in writing, by telephone, or by other means of communication. A copy,
facsimile transmission or other reproduction of the writing or
transmission may be substituted for the original writing or
transmission for any purpose for which the original transmission could
be used. Every proxy shall be dated, but need not be sealed, witnessed
or acknowledged. Where Shares are held of record by more than one
person, any co-owner or co-fiduciary may appoint a proxy holder, unless
the Secretary of the Corporation is notified in writing by any co-owner
or co-fiduciary that the joinder of more than one is to be required.
All proxies shall be filed with and verified by the Secretary or an
Assistant Secretary of the Corporation, or the person acting as
Secretary of the Meeting. Unless otherwise specifically limited by
their term, all proxies shall entitle the holders thereof to vote at
any adjournment of such meeting but shall not be valid after the final
adjournment of such meeting.

Exhibit b(vi) under From N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

Federated Government Income Securities, Inc.

Amendment #5
to the By-Laws

(effective May 12, 1998)

Strike Section 3 - Place of Meetings from Article I - Meeting of Shareholder and
replace it with the following:

Section 3. PLACE OF MEETINGS. All meetings of the Shareholders of the
Corporation or a particular Series or Class, shall be held at such
place within or without the State of Maryland as may be fixed by the
Board of Directors.

Exhibit a(i) under Form N-1A
Exhibit 3(i) under Item 601/Reg. S-K

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

FEDERATED GOVERNMENT INCOME SECURITIES, INC., a Maryland corporation having post
office addresses in the City of Pittsburgh, Pennsylvania and the city of
Baltimore, Maryland (hereinafter called the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland that: WHEREAS, the
Corporation desires to restate its charter as currently in effect. The Charter
as restated is as follows: FIRST: The name of the corporation is Federated
Government Income Securities, Inc.
("Corporation").

SECOND: The purpose for which the Corporation is formed is to act as
an open-end investment company registered as such with the
Securities and Exchange Commission pursuant to the Investment
Company Act of 1940 as amended (the "1940 Act") and to
exercise and generally to enjoy all of the powers, rights and
privileges granted to, or conferred upon, corporations by the
Maryland General Corporation Law now or hereafter in force.

THIRD: The post office address of the principal office of the
Corporation in the State of Maryland is: c/o The Corporation
Trust Incorporated, 32 South Street, Baltimore, Maryland
21202. The resident agent of the Corporation in the State of
Maryland is The Corporation Trust Incorporated, which is a
corporation organized and existing under the laws of the State
of Maryland, the address of which is 32 South Street,
Baltimore, Maryland 21202.

FOURTH: (a) The Corporation is authorized to issue shares of common
stock, par value $0.001 per share. The aggregate par value of all
shares which the Corporation is authorized to issue is
$2,000,000. Subject to the following paragraph, the authorized
shares are classified as $500,000,000 shares of the Class A
Shares, $500,000,000 shares of the Class B Shares, $500,000,000
shares of the Class C Shares, and $500,000,000 shares of the
Class F Shares.

(b) The Board of Directors is authorized to classify or
to reclassify (i.e., into series and classes within
series), from time to time, any unissued shares of
stock of the Corporation, whether now or hereafter
authorized, by setting, changing or eliminating the
preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends,
qualifications or terms and conditions of or rights
to require redemption of the stock.

Unless otherwise provided by the Board of Directors
prior to the issuance of the stock, the shares of any
and all classes of stock shall be subject to the
following:

(i) The Board of Directors may redesignate a class of stock
whether or not shares of such class are issued and
outstanding, provided that such redesignation does not
affect the preferences, conversion or other rights,
voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of
redemption of such class of stock.

(ii) The assets attributable to each class may be invested
in a common investment portfolio. The assets and
liabilities of each series and the income and expenses
of each class of the Corporation's stock shall be
determined separately and, accordingly, the net asset
value of shares of the Corporation's stock may vary
from class to class. The income or gain and the expense
or liabilities of the Corporation shall be allocated to
each class of stock as determined by or under the
direction of the Board of Directors.

(iii)Shares of each class of stock shall be entitled to
such dividends or distributions, in stock or in cash or
both, as may be declared from time to time by the Board
of Directors with respect to such class. Dividends or
distributions shall be paid on shares of a class of
stock only out of the assets belonging to that series,
reflecting expenses attributable to such class.

(iv) In the event of the liquidation or dissolution of the
Corporation, the stockholders of each class of the
Corporation's stock shall be entitled to receive, as a
class, out of the assets of the Corporation available
for distribution to stockholders, the assets
attributable to that class less the liabilities or
expenses allocated to that class. The assets so
distributable to the stockholders of a class shall be
distributed among such stockholders in proportion to
the number of shares of that class held by them
multiplied by the net asset value of a share of such
class on the date of determination and recorded on the
books of the Corporation. In the event that there are
any assets available for distribution that are not
attributable to any particular class of stock, such
assets shall be allocated to all classes in proportion
to the net asset value of the respective classes.

(v) All holders of shares of stock shall vote as a single
class except as may be otherwise required by law
pursuant to the 1940 Act or any applicable order, rule
or interpretation issued by the Securities and Exchange
Commission, or otherwise, and except with respect to
any matter which affects only one or more series or
classes of stock, in which case only the holders of
shares of the series or classes affected shall be
entitled to vote.

(c) The Corporation may issue fractional shares. Any
fractional share shall carry proportionately all the
rights of a whole share, excepting any right to
receive a certificate evidencing such fractional
share, but including, without limitation, the right
to vote and the right to receive dividends.

FIFTH: (a) The number of Directors of the Corporation shall be
thirteen.

The number may be changed by the Bylaws of the
Corporation or by the Board of Directors pursuant to
the Bylaws.

(b) The name of the Directors who shall act until their
successors are elected and qualify, are:

Thomas G. Bigley Edward L. Flaherty, Jr.
John T. Conroy, Jr. Peter E. Madden
William J. Copeland Gregor F. Meyer
John F. Donahue John E. Murray, Jr.
James E. Dowd Wesley W. Posvar
Lawrence D. Ellis, M.D. Marjorie P. Smuts
Richard B. Fisher

SIXTH: (a) To the extent the Corporation has funds or
property legally available therefor, each shareholder
shall have the right at such times as may be permitted
by the Corporation, but no less frequently than as
required under the 1940 Act, to require the Corporation
to redeem all or any part of its shares at a redemption
price equal to the net asset value per share next
determined after the shares are tendered for
redemption, less any applicable redemption fee or
deferred and/or contingent deferred sales charge as
determined by the Board of Directors. The Board of
Directors may adopt requirements and procedures for
redemption of shares.

Notwithstanding the foregoing, the Corporation may
postpone payment or deposit of the redemption price
and may suspend the right of the shareholders to
require the Corporation to redeem shares of any
series or class pursuant to the applicable rules and
regulations, or any order, of the Securities and
Exchange Commission.

(b) The Corporation shall have the right, exercisable at
the discretion of the Boardof Directors, to redeem any
shareholder's shares of any series or class for their
then current net asset value per share if at such time
the shareholder owns shares having an aggregate net
asset value of less than $500 or such lesser or greater
amount for such series or class set forth in the
current registration statement of the Corporation filed
with the Securities and Exchange Commission, or
regardless of the amount, if a shareholder fails to
supply a valid taxpayer identification number.

(c) Each share is subject to redemption by the
Corporation at the redemption price computed in the
manner set forth in subparagraph (a) of Article SIXTH
of these Amended and Restated Articles of
Incorporation at any time if the Board of Directors,
in its sole discretion, determines that failure to so
redeem may result in a material adverse impact on the
Corporation or its shareholders.

SEVENTH: The following provisions are hereby adopted for the purpose of
defining, limiting, and regulating the powers of the Corporation and of the
Directors and shareholders:

(a) No shareholder shall have any pre-emptive or
preferential right of subscription to any shares of
any series or class whether now or hereafter
authorized.

(b) Without the vote of the shares of any class of stock of
the Corporation then outstanding (unless stockholder approval is otherwise
required by applicable law) the Corporation may, if approved by the Board of
Directors:

(i) Sell and convey the assets belonging or attributed to a
class or series of stock to another corporation or
trust that is a management investment company (as
defined in the Investment Company Act of 1940, as
amended) and is organized under the laws of any state
of the United States for consideration which may
include the assumption of all outstanding obligations,
taxes and other liabilities, accrued or contingent,
belonging or attributed to such class and which may
include securities issued by such corporation or trust.
Following such sale and conveyance, and after making
provision for the payment of any liabilities belonging
to attributed to such class that are not assumed by the
purchaser of the assets belonging or attributed to such
class, the Corporation may, at its option, redeem all
outstanding shares of such class at the net asset value
thereof as determined by the Board of Directors in
accordance with the provisions of applicable law, less
such redemption fee or other charge, if any, as may be
fixed by resolution of the Board of Directors.
Notwithstanding any other provision of the Charter of
the Corporation to the contrary, the redemption price
may be paid in any combination of cash or other assets
belonging to attributed to the class, including but not
limited to, the distribution of the securities or other
consideration received by the Corporation for the
assets belonging or attributed to such class upon such
conditions as the Board of Directors deems, in its sole
discretion, to be appropriate consistent with
applicable law and the Charter of the Corporation.

(ii) Sell and convert the assets belonging
or attributed to a class or series of stock
into money and, after making provision for
the payment of all obligations, taxes and
other liabilities, accrued or contingent,
belonging or attributed to such class, the
Corporation may, at its option (a) redeem
all outstanding shares of such class at the
net asset value thereof as determined by the
Board of Directors in accordance with the
provisions of applicable law, less such
redemption fee or other charge, if any, as
may be fixed by resolution of the Board of
Directors that the Board of Directors deems,
in its sole discretion, to be appropriate
consistent with applicable law and the
Charter of the Corporation, or (b) combine
the assets belonging or attributed to such
class following such sale and conversion
with the assets belonging or attributed or
more other classes of stock; or

(iii) Combine the assets belonging or
attributed to a class or series of stock
with the assets belonging or attributed to
any one or more classes or series of stock
of the Corporation if the Board of Directors
reasonably determines that such combination
will not have a material adverse effect on
the stockholders of any class or series of
stock of the Corporation participating in
such combination. In connection with any
such combination of assets, the shares of
any class or series of stock of the
Corporation then outstanding may, if so
determined by the Board of Directors, be
converted into shares of any other class or
classes or series of stock of the
Corporation with respect to which conversion
is permitted by applicable law, or may be
redeemed, at the option of the Corporation,
at the net asset value thereof as determined
by the Board of Directors, less such
redemption fee or charge, if any, as may be
fixed by resolution of the Board of
Directors, upon such conditions as the Board
of Directors deems, in its sole discretion,
to be appropriate consistent with applicable
laws and the Charter of the Corporation.
Notwithstanding any other provision of this
Charter to the contrary, any redemption
price, or part thereof, may be paid in
shares of any other existing or future class
or classes of stock of the Corporation.

(iv) Any redemption made pursuant to this
section shall be made and be effective upon
terms, at the time and in accordance with
procedures specified by the Board of
Directors. At such time as the redemption is
effective, all rights of the holders of such
shares shall cease and terminate, except the
right to receive the redemption payment, and
the shares so redeemed shall no longer be
outstanding for any purpose."

(c) In addition to its other powers explicitly or
implicitly granted under these Amended and Restated
Articles of Incorporation, by law or otherwise, the
Board of Directors of the Corporation (i) is expressly
authorized to make, alter, amend or repeal the Bylaws
of the Corporation, (ii) may from time to time
determine whether, to what extent, at what times and
places, and under what conditions and regulations the
accounts and books of the Corporation, or any of them,
shall be open to the inspection of the shareholders,
and no shareholder shall have any right to inspect any
account, book or document of the Corporation except as
conferred by statute or as authorized by the Board of
Directors of the Corporation, (iii) is empowered to
authorize, without shareholder approval, the issuance
and sale from time to time of shares of stock of the
Corporation whether now or hereafter authorized on such
terms and for such consideration as the Board of
Directors may determine, and (iv) is authorized to
adopt procedures for determination of and, to the
extent deemed desirable by the Board of Directors, to
maintain the constant the net asset value of shares of
the Corporation's stock.

(d) Notwithstanding any provision of the laws of the
State of Maryland requiring a greater proportion than
a majority of the votes of any or all series or
classes of shares entitled to be cast to take or
authorize any action, the Corporation shall, except
to the extent otherwise required by the 1940 Act,
take or authorize any such action that otherwise
requires a greater proportion of votes upon the
concurrence of a majority of the aggregate number of
the votes entitled to be cast thereon.

(e) The Corporation shall take or authorize any action
permitted by the laws of the State of Maryland to be
taken upon the concurrence of a majority of
shareholders present and voting thereon.

(f) The Corporation reserves the right from time to time
to make any amendment of its Charter now or hereafter
authorized by law, including any amendment which
alters the contract rights, as expressly set forth in
its Charter, of any outstanding shares or any series
or class.

(g) The Board of Directors is expressly authorized to
declare and pay dividends and distributions in cash,
securities or other property from surplus or any funds
legally available therefor, at such intervals (which
may be as frequently as daily) or on such other
periodic basis, as it shall determine, for any series
or class of stock of the Corporation; to declare such
dividends or distributions for any series or class of
stock of the Corporation by means of a formula or other
method of determination, at meetings held less
frequently than the frequency of the effectiveness of
such declarations; to establish payment dates for
dividends or any other distributions for any series or
class of stock of the Corporation on any basis,
including dates occurring less frequently than the
effectiveness of declarations thereof; and to provide
for the payment of declared dividends on a date earlier
or later than the specified payment date in the case of
shareholders of such series or class of stock redeeming
their entire ownership of shares.

(h) Any determination made in good faith by or pursuant to
the direction of the Board of Directors as to the
amount of the assets, debts, obligations or liabilities
of the Corporation, as to the amount of any reserves or
charges set up and the propriety thereof, as to the
time of or purpose for creating such reserves or
charges, as to the use, alteration or cancellation of
any reserves or charges (whether or not any debt,
obligation or liability for which such reserves or
charges shall have been created shall have been paid or
discharged or shall be then or thereafter required to
be paid or discharged), as to the value of or the
method of valuing any investment or other asset owned
or held by the Corporation, as to the number of shares
of any class of stock outstanding, as to the income of
the Corporation or as to any other matter relating to
the determination of net asset value, the declaration
of dividends or the issue, sale, redemption or other
acquisition of shares of the Corporation, shall be
final and conclusive and shall be binding upon the
Corporation and all holders of its shares, past,
present and future, and shares of the Corporation are
issued and sold on the condition and understanding that
any and all such determinations shall be binding as
aforesaid.

EIGHTH: (a) To the fullest extent that limitations on the
liability of directors and officers are permitted by
the Maryland General Corporation Law, no director or
officer of the Corporation shall have any liability to
the Corporation or its shareholders for damages. This
limitation on liability applies to events occurring at
the time a person serves as a director or officer of
the Corporation whether or not such person is a
director or officer at the time of any proceeding in
which liability is asserted.

(b) The Corporation shall indemnify and advance expenses to
its currently acting and its former directors to the
fullest extent that indemnification of directors is
permitted by the Maryland General Corporation Law. The
Corporation shall indemnify and advance expenses to its
officers to the same extent as its directors and may do
so to such further extent as is consistent with law.
The Board of Directors may by bylaw, resolution or
agreement make further provision for indemnification of
directors, officers, employees and agents to the
fullest extent permitted by the Maryland General
Corporation Law. (c) No provision of this Article shall
be effective to protect or purport to protect any
director or officer of the Corporation against any
liability to the Corporation or its security holders to
which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the
conduct of his office.

(d) References to the Maryland General Corporation Law in
these Amended and Restated Articles of Incorporation
are to that law as from time to time amended. No
amendment to the Charter of the Corporation shall
affect any right of any person under this Article
based on any event, omission or proceeding prior to
the amendment.

The foregoing restatement to the charter of the Corporation was approved by a
majority of the entire Board of Directors of the Corporation as well as a
majority of the stockholders; and the Corporation is registered as an open-end
company under the Investment Company Act of 1940, as amended.

The provisions set forth in these Articles of Restatement are all the
provisions of the Charter currently in effect. The current address of
the principal office of the Corporation, the name and address of the
Corporation's resident agent and the number of Directors of the
Corporation and the names of those currently in office are stated
above.

<PAGE>

IN WITNESS WHEREOF, Federated Government Income Securities, Inc. has
caused these presents to be signed in its name and on its behalf by its
Executive Vice President and witnessed by its Assistant Secretary on July 17,
1996.

The undersigned, John W. McGonigle, Executive Vice President and
Secretary of the Corporation, hereby acknowledges in the name and on behalf of
the Corporation the foregoing Articles of Amendment to be its corporate act and
further certifies to the best of his knowledge, information and belief, that the
matters and facts set forth herein with respect to the authorization and
approval hereof are true in all material respects and that this statement is
made under the penalties of perjury.

ATTEST: FEDERATED GOVERNMENT
INCOME SECURITIES, INC.

/s/ S. Elliott Cohan /s/ John W. McGonigle
S. Elliott Cohan John W. McGonigle
Assistant Secretary Executive Vice President and
Secretary

Exhibit a(iii) under Form N-1A
Exhibit 3(i) under Item 601/Reg. S-K

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

CERTIFICATE OF CORRECTION

Federated Government Income Securities, Inc., a Maryland corporation
(the "Corporation"), hereby certifies that:

FIRST: The title of the document being corrected is:

"CERTIFICATE OF CORRECTION"

SECOND:The only party to the document being corrected is Federated
Government Income Securities, Inc.

THIRD:The document being corrected was filed with the State
Department of Assessments and Taxation of Maryland on October 21, 1996.

FOURTH:A. Article FOURTH B of the Certificate of Correction as filed on
October 21, 1996, reads as follows:

"FOURTH: (a) The Corporation is authorized to issue shares of
common stock, par value $0.001 per share. The aggregate par value
of all shares which the Corporation is authorized to issue is
$2,000,000. Subject to the following paragraph, the authorized
shares are classified as 500,000,000 shares of the Class A
Shares, 500,000,000 shares of the Class B Shares, 500,000,000
shares of the Class C Shares, and 500,000,000 shares of the Class
F Shares."

B. As corrected, Article Fourth B of the Certificate
of Correction reads as follows:

"FOURTH: (a) The Corporation is authorized to issue
two billion (2,000,000,000) shares of common stock,
par value $0.001 per share. The aggregate par value
of all shares which the Corporation is authorized to
issue is $2,000,000. Subject to the following
paragraph, the authorized shares are classified as
500,000,000 shares of the Class A Shares, 500,000,000
shares of the Class B Shares, 500,000,000 shares of
the Class C Shares, and 500,000,000 shares of the
Class F Shares."

IN WITNESS WHEREOF, Federated Government Income Securities, Inc. has
caused these presents to be signed in its name and on its behalf, as of April
11, 1997, by its duly authorized officers who acknowledge that this Certificate
of Correction is the act of the Corporation, that to the best of their
knowledge, information, and belief, all matters and facts set forth herein that
are required to be executed under oath are true in all material respects, and
that this statement is made under the penalties of perjury.

WITNESS: FEDERATED GOVERNMENT INCOME SECURITIES, INC.

/s/ S. Elliott Cohan By: /s/ John W. McGonigle
S. Elliott Cohan John W. McGonigle
Assistant Secretary Executive Vice President

Exhibit a(ii) under Form N-1A
Exhibit 3(i) under Item 601/Reg. S-K

FEDERATED GOVERNMENT INCOME SECURITIES, INC.

CERTIFICATE OF CORRECTION

Federated Government Income Securities, Inc., a Maryland corporation
having post office addresses in the City of Pittsburgh, Pennsylvania and its
principal office in the State of Maryland in Baltimore, Maryland (hereinafter
called the "Corporation"), hereby certifies to the State Department of
Assessments and Taxation of Maryland that:

FIRST: The title of the document being corrected is:

"AMENDED AND RESTATED Articles of INCORPORATION"

SECOND: The only party to the document being corrected is
Federated Government Income Securities, Inc.

THIRD: The document being corrected was filed with the State
Department of Assessments and Taxation of Maryland on August 5, 1996.

FOURTH: A. Article FOURTH (a) of the Amended and Restates Articles of
Incorporation as filed on August 5, 1996, reads as follows:

"FOURTH: (a) The Corporation is authorized to issue
shares of common stock, par value $0.001 per share. The
aggregate par value of all shares which the Corporation
is authorized to issue is $2,000,000. Subject to the
following paragraph, the authorized shares are
classified as $500,000,000 shares of the Class A
Shares, $500,000,000 shares of the Class B Shares,
$500,000,000 shares of the Class C Shares, and
$500,000,000 shares of the Class F Shares."

B. As corrected, Article FOURTH (a) of the Amended and
Restated Articles of Incorporation reads as follows:

"FOURTH: (a) The Corporation is authorized to issue
shares of common stock, par value $0.001 per share. The
aggregate par value of all shares which the Corporation
is authorized to issue is $2,000,000. Subject to the
following paragraph, the authorized shares are
classified as 500,000,000 shares of the Class A Shares,
500,000,000 shares of the Class B Shares, 500,000,000
shares of the Class C Shares, and 500,000,000 shares of
the Class F Shares."

FIFTH: A. Article SEVENTH (b) of the Amended and Restates Articles of
Incorporation as filed on August 5, 1996, reads as follows:

"SEVENTH: (b) Without the vote of the shares of any
class of stock of the Corporation then outstanding
(unless stockholder approval is otherwise required by
applicable law) the Corporation may, if approved by the
Board of Directors:

(ii) Sell and convert the assets belonging or attributed to
a class or series of stock into money and, after making
provision for the payment of all obligations, taxes and
other liabilities, accrued or contingent, belonging or
attributed to such class, the Corporation may, at its
option (a) redeem all outstanding shares of such class
at the net asset value thereof as determined by the
Board of Directors in accordance with the provisions of
applicable law, less such redemption fee or other
charge, if any, as may be fixed by resolution of the
Board of Directors that the Board of Directors deems,
in its sole discretion, to be appropriate consistent
with applicable law and the Charter of the Corporation,
or (b) combine the assets belonging or attributed to
such class following such sale and conversion with the
assets belonging or attributed or more other classes of
stock; or

(iii)Combine the assets belonging or attributed to a class
or series of stock with the assets belonging or
attributed to any one or more classes or series of
stock of the Corporation if the Board of Directors
reasonably determines that such combination will not
have a material adverse effect on the stockholders of
any class or series of stock of the Corporation
participating in such combination. In connection with
any such combination of assets, the shares of any class
or series of stock of the Corporation then outstanding
may, if so determined by the Board of Directors, be
converted into shares of any other class or classes or
series of stock of the Corporation with respect to
which conversion is permitted by applicable law, or may
be redeemed, at the option of the Corporation, at the
net asset value thereof as determined by the Board of
Directors, less such redemption fee or charge, if any,
as may be fixed by resolution of the Board of
Directors, upon such conditions as the Board of
Directors deems, in its sole discretion, to be
appropriate consistent with applicable laws and the
Charter of the Corporation. Notwithstanding any other
provision of this Charter to the contrary, any
redemption price, or part thereof, may be paid in
shares of any other existing or future class or classes
of stock of the Corporation.

(iv) Any redemption made pursuant to this section
shall be made and be effective upon terms,
at the time and in accordance with
procedures specified by the Board of
Directors. At such time as the redemption is
effective, all rights of the holders of such
shares shall cease and terminate, except the
right to receive the redemption payment, and
the shares so redeemed shall no longer be
outstanding for any purpose."

B. As corrected, Article SEVENTH (b) of the Amended and
Restated Articles of Incorporation reads as follows:

"SEVENTH: (b) [RESERVED]"

<PAGE>

IN WITNESS WHEREOF, Federated Government Income Securities, Inc. has
caused these presents to be signed in its name and on its behalf by its duly
authorized officers who acknowledge that this Certificate of Correction is the
act of the Corporation, that to the best of their knowledge, information, and
belief, all matters and facts set forth herein relating to the authorization and
approval of this Certificate are true in all material respects, and that this
statement is made under the penalties of perjury.

ATTEST: FEDERATED GOVERNMENT INCOME SECURITIES, INC.

/s/ S. Elliott Cohan By: /s/ John W. McGonigle
S. Elliott Cohan John W. McGonigle
Assistant Secretary Executive Vice President and Secretary