PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Federated
U.S. Government Securities Fund: 2-5 Years (formerly, Federated Intermediate
Government Trust). The Report covers the six-month period ended July 31, 1995,
and includes the fund's Investment Review, Financial Statements, and Portfolio
of Investments.
During the reporting period, the fund pursued current income through a portfolio
that consisted primarily of U.S. Treasury notes. Dividends paid by the fund
during this period totaled $0.33 per share for Institutional Shares and $0.32
per share for Institutional Service Shares. The fund's net asset value began
the
period at $10.11 and ended the period at $10.48. On July 31, 1995, total net
assets stood at $819.5 million.
Over the six-month reporting period, the fund maintained its AAAf rating by
Standard & Poor's Ratings Group, the highest available from this independent
rating service.*
Thank you for your confidence in Federated U.S. Government Securities Fund: 2-5
Years. As always, we welcome your questions and comments.
Sincerely,
[GLEN R. JOHNSON SIGNATURE]
Glen R. Johnson
President
September 15, 1995
* RATINGS ARE SUBJECT TO CHANGE.
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
Federated U.S. Government Securities Fund: 2-5 Years (formerly, Federated
Intermediate Government Trust) represents a fully-invested participation in
those obligations of the U.S. Treasury and certain government agencies which
have a maximum maturity of five years and an average maturity of three to four
years. Since the fund's January 31, 1995, fiscal year end, the fund has
remained
fully invested in U.S. Treasury securities and repurchase agreements fully
collateralized by those securities. Standard & Poor's Ratings Group has
assigned
the fund a "AAAf" credit rating.*
Fixed income performance during the first half of 1995 was quite the opposite of
that in 1994. During the semi-annual reporting period, the intermediate sector
outperformed as the yield curve steepened in response to weak economic data.
The
market dramatically priced in the reduced likelihood of further tightening of
monetary policy by the Federal Reserve Board (the "Fed") following the rate
increase on February 1, 1995. In early July 1995, minimal inflation pressures
allowed the Fed to actually lower the Federal Funds target rate from 6.0% to
5.75% for the first time since September 1992. The 3-year Treasury note yield
fell from 7.4% at the end of January 1995 to 6.0% at the end of July 1995. The
fund's net asset value increased from $10.11 to $10.48. The fund maintained a
laddered portfolio structure with an average maturity between 3 and 3.2 years.
The fund's net total return for the six months ended July 31, 1995, was 6.98%**
compared to 7.0% for the Merrill Lynch 3-Year Treasury Index.***
Recent economic data has been mixed even though economic growth has slowed
dramatically from its rate during the fourth quarter of 1994. Although the
Federal Reserve may shift from a restrictive to a neutral monetary policy over
time, economic growth is not expected to slow enough to warrant an aggressive
easing of monetary policy.
*STANDARD & POOR'S RATINGS GROUP PROVIDES ITS "AAAF" RATING TO MUTUAL FUNDS, IN
ITS OPINION, WITH FUND PORTFOLIO HOLDINGS AND COUNTERPARTIES THAT PROVIDE
EXTREMELY STRONG PROTECTION AGAINST LOSSES FROM CREDIT DEFAULTS. THIS RATING
IS OBTAINED AFTER STANDARD & POOR'S RATINGS GROUP EVALUATES A NUMBER OF
FACTORS, INCLUDING CREDIT QUALITY, MARKET PRICE EXPOSURE AND MANAGEMENT. THEY
MONITOR THE PORTFOLIO WEEKLY FOR DEVELOPMENTS THAT COULD CAUSE CHANGES IN THE
RATINGS.
**PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT AN INVESTORS SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
***THIS INDEX IS UNMANAGED.
2
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
PORTFOLIO OF INVESTMENTS
JULY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ---------- ------------------------------------------------------------------ --
- ---------
<C> <S> <C>
U.S. TREASURY NOTES--98.4%
- ------------------------------------------------------------------------------
$15,000,000 6.875%, 10/31/1996 $15,195,450
------------------------------------------------------------------ -------
- ----
15,000,000 8.75%, 10/15/1997 15,861,300
------------------------------------------------------------------ -------
- ----
60,000,000 7.375%, 11/15/1997 61,804,200
------------------------------------------------------------------ -------
- ----
50,000,000 5.625%, 1/31/1998 49,588,000
------------------------------------------------------------------ -------
- ----
75,000,000 5.125%, 2/28/1998 73,452,750
------------------------------------------------------------------ -------
- ----
32,000,000 5.125%, 3/31/1998 31,320,960
------------------------------------------------------------------ -------
- ----
95,000,000 5.125%, 6/30/1998 92,754,200
------------------------------------------------------------------ -------
- ----
40,000,000 5.25%, 7/31/1998 39,153,600
------------------------------------------------------------------ -------
- ----
60,000,000 9.25%, 8/15/1998 65,264,400
------------------------------------------------------------------ -------
- ----
78,500,000 8.875%, 11/15/1998 84,955,840
------------------------------------------------------------------ -------
- ----
95,000,000 5.125%, 12/31/1998 92,251,650
------------------------------------------------------------------ -------
- ----
40,000,000 6.75%, 5/31/1999 40,830,400
------------------------------------------------------------------ -------
- ----
80,000,000 6.75%, 6/30/1999 81,661,600
------------------------------------------------------------------ -------
- ----
30,000,000 7.125%, 9/30/1999 31,048,200
------------------------------------------------------------------ -------
- ----
15,000,000 7.75%, 1/31/2000 15,905,850
------------------------------------------------------------------ -------
- ----
15,000,000 6.875%, 3/31/2000 15,407,850
------------------------------------------------------------------ -------
- ----
TOTAL U.S. TREASURY NOTES (IDENTIFIED COST, $789,633,994)
806,456,250
------------------------------------------------------------------ -------
- ----
(A) REPURCHASE AGREEMENTS--0.8%
- ------------------------------------------------------------------------------
6,535,000 J.P. Morgan Securities, Inc., 5.84%, dated 7/31/1995, due 8/1/1995
(AMORTIZED COST) 6,535,000
------------------------------------------------------------------ -------
- ----
TOTAL INVESTMENTS (IDENTIFIED COST $796,168,994) (b) $812,991,250
------------------------------------------------------------------ -------
- ----
<FN>
(a) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements is through participation in joint
accounts with other Federated funds.
</TABLE>
3
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
(b) The cost of investments for federal tax purposes amounts to $796,168,994.
The unrealized appreciation of investments on a federal tax basis amounts
to $16,822,256 which is comprised of $17,286,748 appreciation and $464,492
depreciation at July 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($819,533,595) at July 31, 1995.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
4
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------
- --------------
Investments in securities, at value (identified and tax cost $796,168,994)
$ 812,991,250
- --------------------------------------------------------------------------------
- --------------
Cash 5,393
- --------------------------------------------------------------------------------
- --------------
Income receivable 10,638,682
- --------------------------------------------------------------------------------
- --------------
Receivable for shares sold 598,108
- --------------------------------------------------------------------------------
- -------------- -------------
Total assets 824,233,433
- --------------------------------------------------------------------------------
- --------------
LIABILITIES:
- --------------------------------------------------------------------------------
- --------------
Payable for shares redeemed $ 1,851,615
- --------------------------------------------------------------------------------
Income distribution payable 2,716,891
- --------------------------------------------------------------------------------
Accrued expenses 131,332
- --------------------------------------------------------------------------------
- -----------
Total liabilities 4,699,838
- --------------------------------------------------------------------------------
- -------------- -------------
Net Assets for 78,196,346 shares outstanding $
819,533,595
- --------------------------------------------------------------------------------
- -------------- -------------
-------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
- --------------
Paid in capital $ 856,440,141
- --------------------------------------------------------------------------------
- --------------
Net unrealized appreciation (depreciation) of investments
16,822,256
- --------------------------------------------------------------------------------
- --------------
Accumulated net realized gain (loss) on investments
(53,728,802)
- --------------------------------------------------------------------------------
- -------------- -------------
Total Net Assets $ 819,533,595
- --------------------------------------------------------------------------------
- -------------- -------------
-------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
- --------------
INSTITUTIONAL SHARES:
($785,462,108 DIVIDED BY 74,945,416 shares outstanding) $
10.48
- --------------------------------------------------------------------------------
- -------------- -------------
-------------
INSTITUTIONAL SERVICE SHARES:
($34,071,487 DIVIDED BY 3,250,930 shares outstanding) $
10.48
- --------------------------------------------------------------------------------
- -------------- -------------
-------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
5
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JULY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
- ------------------------
Interest $27,493,929
- --------------------------------------------------------------------------------
- ------------------------
EXPENSES:
- --------------------------------------------------------------------------------
- ------------------------
Investment advisory fee $1,587,579
- --------------------------------------------------------------------------------
- -----------
Administrative personnel and services fee 300,449
- --------------------------------------------------------------------------------
- -----------
Custodian fees 129,224
- --------------------------------------------------------------------------------
- -----------
Transfer agent and dividend disbursing agent fees and expenses
128,193
- --------------------------------------------------------------------------------
- -----------
Directors'/Trustees' fees 7,059
- --------------------------------------------------------------------------------
- -----------
Auditing fees 12,498
- --------------------------------------------------------------------------------
- -----------
Legal fees 10,697
- --------------------------------------------------------------------------------
- -----------
Portfolio accounting fees 67,472
- --------------------------------------------------------------------------------
- -----------
Distribution services fee--Institutional Service Shares
42,412
- --------------------------------------------------------------------------------
- -----------
Shareholder services fee--Institutional Shares 949,825
- --------------------------------------------------------------------------------
- -----------
Shareholder services fee--Institutional Service Shares
42,412
- --------------------------------------------------------------------------------
- -----------
Share registration costs 15,385
- --------------------------------------------------------------------------------
- -----------
Printing and postage 9,050
- --------------------------------------------------------------------------------
- -----------
Insurance premiums 8,688
- --------------------------------------------------------------------------------
- -----------
Taxes 181
- --------------------------------------------------------------------------------
- -----------
Miscellaneous 6,697
- --------------------------------------------------------------------------------
- ----------- ----------
Total expenses 3,317,821
- --------------------------------------------------------------------------------
- -----------
Deduct--
- --------------------------------------------------------------------------------
- -----------
Waiver of investment advisory fee $133,910
- --------------------------------------------------------------------------------
Waiver of distribution services fee--Institutional Service Shares
37,911
- --------------------------------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares 949,825
- --------------------------------------------------------------------------------
Waiver of shareholder services fee--Institutional Service Shares 4,501
1,126,147
- --------------------------------------------------------------------------------
- -------- ----------
Net expenses 2,191,674
- --------------------------------------------------------------------------------
- ------------------------ -----------
Net investment income 25,302,255
- --------------------------------------------------------------------------------
- ------------------------ -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
- ------------------------
Net realized gain (loss) on investments
6,338,159
- --------------------------------------------------------------------------------
- ------------------------
Net change in unrealized appreciation (depreciation) on investments
21,912,100
- --------------------------------------------------------------------------------
- ------------------------ -----------
Net realized and unrealized gain (loss) on investments
28,250,259
- --------------------------------------------------------------------------------
- ------------------------ -----------
Change in net assets resulting from operations
$53,552,514
- --------------------------------------------------------------------------------
- ------------------------ -----------
-----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
6
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
JULY 31, YEAR ENDED
1995 JANUARY
(UNAUDITED) 31, 1995
-------- ----------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $25,302,255 $44,228,123
- --------------------------------------------------------------------------------
Net realized gain (loss) on investments ($6,338,159 net gain and $29,464,881 net
loss, respectively, as computed for federal income tax purposes)
6,338,159 (45,578,263)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 21,912,100
(12,312,883)
- --------------------------------------------------------------------------------
- -------- ----------
Change in net assets resulting from operations 53,552,514
(13,663,023)
- --------------------------------------------------------------------------------
- -------- ----------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------------
Distributions from net investment income:
- --------------------------------------------------------------------------------
Institutional Shares (24,262,331) (42,798,247)
- --------------------------------------------------------------------------------
Institutional Service Shares (1,039,924) (1,429,876)
- --------------------------------------------------------------------------------
- -------- ----------
Change in net assets resulting from distributions to shareholders
(25,302,255) (44,228,123)
- --------------------------------------------------------------------------------
- -------- ----------
SHARE TRANSACTIONS--
- --------------------------------------------------------------------------------
Proceeds from sale of Shares 178,091,402 296,717,727
- --------------------------------------------------------------------------------
Net asset value of Shares issued to shareholders in payment of distributions
declared 9,068,554 14,030,578
- --------------------------------------------------------------------------------
Cost of Shares redeemed (160,273,682) (470,751,036)
- --------------------------------------------------------------------------------
- -------- ----------
Change in net assets resulting from Share transactions 26,886,274
(160,002,731)
- --------------------------------------------------------------------------------
- -------- ----------
Change in net assets 55,136,533 (217,893,877)
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 764,397,062 982,290,939
- --------------------------------------------------------------------------------
- -------- ----------
End of period $819,533,595 $764,397,062
- --------------------------------------------------------------------------------
- -------- ----------
-------- ----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
7
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JULY YEAR ENDED JANUARY 31,
31, 1995 --------------------------------------------------------
- ---------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991 1990
1989
----------- ----------- ----------- ----------- ----------- ------
- ----- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.11 $10.78 $10.61 $10.25 $ 9.87 $9.59
$9.42 $9.88
- -------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------
Net investment income 0.33 0.54 0.46 0.57 0.71 0.75
0.79 0.81
- -------------------------
Net realized and
unrealized gain (loss)
on investments 0.37 (0.67) 0.17 0.36 0.38 0.28
0.17* (0.46)
- ------------------------- ----------- ----------- ----------- ----------- ------
- ----- ----------- ----------- -----------
Total from investment
operations 0.70 (0.13) 0.63 0.93 1.09 1.03 0.96
0.35
- -------------------------
LESS DISTRIBUTIONS
- -------------------------
Distributions from net
investment income (0.33) (0.54) (0.46) (0.57) (0.71) (0.75)
(0.79) (0.81)
- -------------------------
Distributions from net
realized gain on
investment transactions 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00
- ------------------------- ----------- ----------- ----------- ----------- ------
- ----- ----------- ----------- -----------
Total distributions (0.33) (0.54) (0.46) (0.57) (0.71)
(0.75) (0.79) (0.81)
- ------------------------- ----------- ----------- ----------- ----------- ------
- ----- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD $10.48 $10.11 $10.78 $10.61 $10.25 $9.87
$9.59 $9.42
- ------------------------- ----------- ----------- ----------- ----------- ------
- ----- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ------
- ----- ----------- -----------
Total Return (a) 6.98% (1.18)% 6.07% 9.37% 11.44% 11.18%
10.52% 3.66%
- -------------------------
RATIOS TO AVERAGE NET
ASSETS
- -------------------------
Expenses 0.54%(b) 0.54% 0.52% 0.50% 0.50% 0.51%
0.51% 0.47%
- -------------------------
Net investment income 6.39%(b) 5.16% 4.30% 5.52% 7.08% 7.75%
8.26% 8.37%
- -------------------------
Expense waiver/
reimbursement (c) 0.03%(b) 0.02% 0.00% 0.00% 0.00% 0.00%
0.00% 0.03%
- -------------------------
SUPPLEMENTAL DATA
- -------------------------
Net assets, end of
period (000 omitted) $785,462 $731,280 $951,528 $845,620 $779,686
$791,131 $959,728 $1,246,393
- -------------------------
Portfolio Turnover 77% 163% 131% 85% 108% 60%
166% 82%
- -------------------------
<CAPTION>
YEAR ENDED JANUARY 31,
-------------------------------------
1988 1987 1986
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value,
beginning of period $10.25 $10.02 $ 9.70
- -------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -------------------------
Net investment income 0.80 0.86 1.03
- -------------------------
Net realized and
unrealized gain (loss)
on investments (0.28) 0.29 0.32
- ------------------------- ----------- ----------- -----------
Total from investment
operations 0.52 1.15 1.35
- -------------------------
LESS DISTRIBUTIONS
- -------------------------
Distributions from net
investment income (0.80) (0.86) (1.03)
- -------------------------
Distributions from net
realized gain on
investment transactions (0.09) (0.06) 0.00
- ------------------------- ----------- ----------- -----------
Total distributions (0.89) (0.92) (1.03)
- ------------------------- ----------- ----------- -----------
NET ASSET VALUE, END OF
PERIOD $ 9.88 $10.25 $10.02
- ------------------------- ----------- ----------- -----------
----------- ----------- -----------
Total Return (a) 5.53% 11.98% 14.71%
- -------------------------
RATIOS TO AVERAGE NET
ASSETS
- -------------------------
Expenses 0.45% 0.45% 0.44%
- -------------------------
Net investment income 8.18% 8.37% 10.43%
- -------------------------
Expense waiver/
reimbursement (c) 0.03% 0.04% 0.13%
- -------------------------
SUPPLEMENTAL DATA
- -------------------------
Net assets, end of
period (000 omitted) $1,534,501 $1,859,687 $655,790
- -------------------------
Portfolio Turnover 70% 49% 126%
- -------------------------
<FN>
* The effect on the 1990 per share data as a result of the Trust's change in
recording interest income to include amortization of market discounts and
premiums was to increase investment income by $0.05 per share and decrease
net realized and unrealized gain (loss) on investments by a corresponding
amount.
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(b) Computed on an annualized basis.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
8
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JULY 31, YEAR ENDED JANUARY 31,
1995 -------------------------------------------
- ---
(UNAUDITED) 1995 1994 1993 (A)
-------------- -------------- -------------- ---------
- -----
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.11 $10.78 $10.61 $10.35
- --------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------
Net investment income 0.32 0.51 0.44 0.34
- --------------------------------------------------
Net realized and unrealized gain (loss) on
investments 0.37 (0.67) 0.17 0.26
- -------------------------------------------------- ------- ------- ----
- --- -------
Total from investment operations 0.69 (0.16) 0.61 0.60
- --------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------
Distributions from net investment income (0.32) (0.51) (0.44) (0.34)
- -------------------------------------------------- ------- ------- ----
- --- -------
NET ASSET VALUE, END OF PERIOD $10.48 $10.11 $10.78
$10.61
- -------------------------------------------------- ------- ------- ----
- --- -------
------- ------- ------- -------
TOTAL RETURN (B) 6.85% (1.42)% 5.81% 5.84%
- --------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------
Expenses 0.79%(c) 0.79% 0.77% 0.75%(c)
- --------------------------------------------------
Net investment income 6.13%(c) 5.00% 4.01%
5.13%(c)
- --------------------------------------------------
Expense waiver/reimbursement (d) 0.28%(c) 0.21% 0.00%
0.00%(c)
- --------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------
Net assets, end of period (000 omitted) $34,071 $33,117 $30,763
$12,987
- --------------------------------------------------
Portfolio Turnover 77% 163% 131% 85%
- --------------------------------------------------
<FN>
(a) Reflects operations for the period from June 18, 1992 (date of initial
public investment) to January 31, 1993.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) Computed on an annualized basis.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
9
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated U.S. Government Securities Fund: 2-5 Years (the "Fund") is registered
under the Investment Company Act of 1940, as amended (the "Act"), as a
diversified, open-end management investment company. The Fund provides two
classes of shares: Institutional Shares and Institutional Service Shares.
Shareholders approved a change in the name of the Fund as follows:
Effective April 13, 1995 the Fund changed its name from "Federated Intermediate
Government Trust" to "Federated U.S. Government Securities Fund: 2-5 Years."
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less may be stated at amortized cost, which approximates fair
market value. All other securities are valued at prices provided by an
independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the custodian
bank to take possession, to have legally segregated in the Federal Reserve
Book Entry System, or to have segregated within the custodian bank's vault,
all securities held as collateral under repurchase agreement transactions.
Additionally, procedures have been established by the Fund to monitor, on a
daily basis, the market value of each repurchase agreement's collateral to
ensure that the value of collateral at least equals the repurchase price to
be paid under the repurchase agreement transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines
established by the Board of Trustees (the "Trustees"). Risks may arise from
the potential inability of counterparties to honor the terms of the
repurchase agreement. Accordingly, the Fund could receive less than the
repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
10
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
- --------------------------------------------------------------------------------
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
At January 31, 1995, the Fund, for federal tax purposes, had a capital loss
carryforward of $43,953,577, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire in 1998 ($14,488,696) and 2003 ($29,464,881).
Additionally, net capital losses of $16,113,382 attributable to security
transactions incurred after October 31, 1994, are treated as arising on
February 1, 1995, the first day of the Fund's next taxable year.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, YEAR ENDED
1995 JANUARY 31, 1995
-------------------------- -----------------
- ---------
INSTITUTIONAL SHARES SHARES AMOUNT SHARES
AMOUNT
- ---------------------------------------------------------------------- ---------
- -- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares Sold 16,487,476 $ 170,657,591 26,144,012 $
270,233,159
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 797,090
8,277,846 1,282,080 13,129,629
- ----------------------------------------------------------------------
Shares redeemed (14,640,309) (151,798,944)
(43,394,809) (447,488,088)
- ---------------------------------------------------------------------- ---------
- -- ------------- ----------- -------------
Net change resulting from Institutional Share transactions 2,644,257 $
27,136,493 (15,968,717) $(164,125,300)
- ---------------------------------------------------------------------- ---------
- -- ------------- ----------- -------------
----------- ------------- ----------- ------
- -------
</TABLE>
11
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED JULY 31, YEAR ENDED
1995 JANUARY 31, 1995
-------------------------- -----------------
- ---------
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT SHARES
AMOUNT
- ---------------------------------------------------------------------- ---------
- -- ------------- ----------- -------------
Shares Sold 716,864 $ 7,433,811 2,584,111 $
26,484,568
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 76,103
790,708 87,976 900,949
- ----------------------------------------------------------------------
Shares redeemed (816,245) (8,474,738) (2,251,658)
(23,262,948)
- ---------------------------------------------------------------------- ---------
- -- ------------- ----------- -------------
Net change resulting from Institutional Service Share transactions (23,278)
$ (250,219) 420,429 $ 4,122,569
- ---------------------------------------------------------------------- ---------
- -- ------------- ----------- -------------
----------- ------------- ----------- ------
- -------
Net change resulting from Trust Share transactions 2,620,979 $
26,886,274 (15,548,288) $(160,002,731)
- ---------------------------------------------------------------------- ---------
- -- ------------- ----------- -------------
----------- ------------- ----------- ------
- -------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Management, the Fund's investment
adviser, (the "Adviser"), receives for its services an annual investment
advisory fee equal to .40 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Fund with administrative personnel and services. The FAS fee is based on the
level of average aggregate daily net assets of all funds advised by
subsidiaries of Federated Investors for the period. The administrative fee
received during the period of the Administrative Services Agreement shall be
at least $125,000 per portfolio and $30,000 per each additional class of
shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Fund will compensate Federated Securities Corporation ("FSC"), the
principal distributor, from the net assets of the Fund to finance activities
intended to result in the sale of the Fund's Institutional Service Shares.
The Plan provides that the Fund may incur distribution expenses up to .25 of
1% of the average daily net assets of the Institutional Service Shares,
annually, to compensate FSC. The distributor may voluntarily choose to waive
a portion of this fee. The distributor can modify or terminate this
voluntary waiver at any time at its sole discretion.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay FSS
up to .25 of 1% of average daily net assets of the Fund for the period. This
fee is to obtain certain services for shareholders and to maintain the
shareholder accounts. FSS may voluntarily choose to waive any portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its
sole discretion.
12
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 2-5 YEARS
(FORMERLY, FEDERATED INTERMEDIATE GOVERNMENT TRUST)
- --------------------------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period plus, out-of-pocket expenses.
GENERAL--Certain of the Officers and Trustees of the Fund are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended July 31, 1995, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
<S> <C>
PURCHASES $626,203,809
- ---------------------------------------------------------------------- ---------
- ---
SALES $603,796,289
- ---------------------------------------------------------------------- ---------
- ---
</TABLE>
13
<TABLE>
<CAPTION>
TRUSTEES OFFICERS
- ---------------------------------------------------------
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley CHAIRMAN
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland PRESIDENT
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. EXECUTIVE VICE PRESIDENT
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden EXECUTIVE VICE PRESIDENT
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. EXECUTIVE VICE PRESIDENT AND
Wesley W. Posvar SECRETARY
Marjorie P. Smuts Richard B. Fisher
VICE PRESIDENT
David M. Taylor
TREASURER
Robert C. Rosselot
ASSISTANT SECRETARY
</TABLE>
Mutual funds are not bank deposits or obligations, are not
guaranteed by any bank, and are not insured or guaranteed by the
U.S. government, the Federal Deposit Insurance Corporation, the
Federal Reserve Board, or any other government agency. Investment
in mutual funds involves risk, including the possible loss of
principal.
This report is authorized for distribution to prospective
investors only when preceded or accompanied by the Fund's
prospectus, which contains facts concerning its objective and
policies, management fees, expenses and other information.
14
- --------------------------------------------------------------------------------
FEDERATED U.S.
- --------------------------------------------------------------------------------
GOVERNMENT
- --------------------------------------------------------------------------------
SECURITIES
- --------------------------------------------------------------------------------
FUND: 2-5 YEARS
- --------------------------------------------------------------------------------
(formerly, Federated Intermediate
- --------------------------------------------------------------------------------
Goverment Trust)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1995
[FEDERATED LOGO] ----------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
--------------------------------------------------------
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
-------------------------------------------------------------------------
[RECYCLED LOGO]
RECYCLED
PAPER
CUSIP# 31428P103
CUSIP# 31428P202
8082202 (9/95)
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