FEDERATED U.S. GOVERNMENT SECURITIES FUND:
2-5 Years
Institutional Shares
Institutional Service Shares
Supplement to Prospectuses and Statement of Additional Information, as
appropriate, dated March 31, 1999
I. At the June 21, 1999 shareholder meeting, shareholders approved the
following changes to become effective July 1, 1999:
(1) Elected five Trustees.
(2) Ratified the selection of the Trust's independent auditors.
(3) Made changes to the Trust's fundamental investment policies and
limitations:
(a) Amended the Trust's fundamental investment limitation regarding
borrowing money and issuing senior securities to read as follows:
"The Trust may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the 1940 Act."
(b) Amended the Trust's fundamental investment limitation
regarding lending by the Trust to read as follows:
"The Trust may not make loans, provided that this
restriction does not prevent the Trust from purchasing
debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional
investors and investing in loans, including assignments
and participation interests."
(c) Amended and made non-fundamental the Trust's fundamental
investment limitation regarding buying securities on margin to
read as follows:
"The Trust will not purchase securities on margin,
provided that the Trust may obtain short-term credits
necessary for clearance of purchases and sales of
securities."
(d) Amended and made non-fundamental the Trust's fundamental
investment limitation regarding pledging assets to read as
follows:
"The Trust will not mortgage, pledge, or hypothecate any
of its assets, provided that this shall not apply to the
transfer of securities in connection with any permissible
borrowing or to collateral arrangements in connection with
permissible activities."
(e) Amended and made non-fundamental the Trust's fundamental
investment policy regarding investing in U.S. government
securities to read as follows:
"The Trust will invest primarily in U.S. government
securities. The term "U.S. government securities" as used
herein refers to (1) obligations of the United States and
(2) evidences of indebtedness issued or fully guaranteed
as to principal and interest by Federal Home Loan Banks,
the Federal National Mortgage Association, the Government
National Mortgage Association, Banks for Cooperatives
(including the Central Bank for Cooperatives), Federal
Land Banks, Federal Intermediate Credit Banks, The
Tennessee Valley Authority, The Export-Import Bank of the
United States, The Commodity Credit Corporation, The
Federal Financing Bank, The Student Loan Marketing
Association, The Federal Home Loan Mortgage Association or
the National Credit Union Administration."
(f) Amended and made non-fundamental the Trust's fundamental
investment policy regarding investing in repurchase agreements
to read as follows:
"The Trust may enter into repurchase agreements."
(g) Made non-fundamental the Trust's fundamental investment
policy regarding engaging in when-issued and delayed delivery
transactions.
(4) Eliminated certain of the Trust's fundamental investment policies
and limitations:
(a) Removed the Trust's fundamental investment limitation
regarding selling securities short.
(b) Removed the Trust's fundamental investment policy
regarding portfolio trading.
(5) Approved an amendment and restatement to the Trust's declaration of
Trust to permit the Board of Trustees to liquidate assets of the Trust without
seeking shareholder approval.
II. The following actions were taken by the Board of Trustees with regard to
non-fundamental investment policies and limitations:
(1) Approved revisions to the Trust's non-fundamental investment policy
regarding dollar- weighted maturity to read as follows:
"As a matter of operating policy, which may be changed without
shareholder approval, the average dollar-weighted duration of the portfolio will
not be less than two years nor more than five years."
(2) Approved the elimination of the Trust's non-fundamental investment
policy pertaining to when-issued and delayed delivery transactions that
provides that the Trust will not engage in such transactions to an
extent that would cause the segregation of more than 20% of the value
of its total assets.
(3) Approved revisions to the Trust's non-fundamental investment
limitations concerning purchasing illiquid securities to read as
follows:
"The Trust will not purchase securities for which there is no
readily available market, or enter into repurchase agreements
or purchase time deposits maturing in more than seven days, if
immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Trust's
net assets."
(4) Approved the elimination of the following undertaking of the Trust:
"The Trust does not expect to borrow money or pledge
securities in excess of 5% of the value of its total assets
during the coming fiscal year."
June 21, 1999
Cusip 8022502A-IS
Cusip 8022502A-SS
G02642-03 (6/99)
