FUND FOR U S GOVERNMENT SECURITIES INC, 485APOS, 1994-05-26

FUND FOR U S GOVERNMENT SECURITIES INC
485APOS, 1994-05-26

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1933 Act File No. 2-33490
1940 Act File No. 811-1890

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. 60 X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 X

Amendment No. 35 X

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

(Exact Name of Registrant as Specified in Charter)

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

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

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

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
X 60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.

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

X filed the Notice required by that Rule on May 16, 1994; or
intends to file the Notice required by that Rule on or
about ____________; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need
not file the Notice.

Copies to:

Thomas J. Donnelly, Esquire Charles H. Morin, Esquire
Houston, Houston & Donnelly Dickstein, Shapiro & Morin
2510 Centre City Tower 2101 L Street, N.W.
650 Smithfield Street Washington, D.C. 20037
Pittsburgh, Pennsylvania 15222

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of FUND FOR
U.S. GOVERNMENT SECURITIES, INC. , is comprised of three
classes of shares, Class A Shares (l) , Class B Shares (2),
and Class C Shares (3) and is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page Cover Page (1-3).
Item 2. Synopsis Summary of Fund Expenses (1-
3).
Item 3. Condensed Financial
Information Financial Hightlights - Class
A Shares and Class C Shares
(1,3).
Item 4. General Description of
Registrant Performance Information;
General Information; Liberty
Family of Funds; Investment
Information; Investment
Objective; Investment
Policies; Investment
Limitations (1-3).
Item 5. Management of the Fund Fund Information; Management
of the Fund (1-3);
Distribution of Class A
Shares (1); Distribution of
Class B Shares (2);
Distribution of Class C Shares
(3); Other Payments to
Financial Institutions ;
Administration of the Fund (1-
3); Expenses of the Fund and
Class B Shares (2); Expenses
of the Fund and Class C Shares
(3).
Item 6. Capital Stock and Other
Securities Dividends and Distributions;
Shareholder Information;
Voting Rights; Tax
Information; Federal Income
Tax; Pennsylvania Corporate
and Personal Property Taxes (1-
3).
Item 7. Purchase of Securities Being
Offered Net Asset Value (1-3);
Investing in the Fund and
Class A Shares (1); Investing
in the Fund and Class B Shares
(2); Investing in the Fund and
Class C Shares (3); Share
Purchases; Minimum Investment
Required; What Shares Cost;
Systematic Investment Program;
Certificates and
Confirmations; Retirement
Plans; Exchange Privilege (1-
3); Reduced Sales Charge (1);
Requirements for Exchange; Tax
Consequences; Making an
Exchange (1-3).
Item 8. Redemption or Repurchase Redeeming Class A Shares (1);
Redeeming Class B Shares (2);
Redeeming Class C Shares (3);
Through a Financial
Institution; Directly From the
Fund; Contingent Deferred
Sales Charge (1-3);
Elimination of Contingent
Deferred Sales Charge (2);
Systematic Withdrawal Program;
Accounts With Low Balances (1-
3).
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.

Item 10. Cover Page Cover Page (1-3).
Item 11. Table of Contents Table of Contents (1-3).
Item 12. General Information and
History General Information About the
Fund (1-3).
Item 13. Investment Objectives and
Policies Investment Objective and
Policies (1-3).
Item 14. Management of the Fund See Part A. Management of the
Fund (1-3).
Item 15. Control Persons and Principal
Holders of Securities Fund Ownership (1-3).
Item 16. Investment Advisory and Other
Services Investment Advisory Services
(1-3). Administrative Services
(1-3).
Item 17. Brokerage Allocation Brokerage Transactions (1-3).
Item 18. Capital Stock and Other
Securities Not applicable (1-3).
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered Purchasing Shares; Determining
Net Asset Value; Redeeming
Shares.
Item 20. Tax Status Tax Status (1-3).
Item 21. Underwriters Distribution of Shares (1-3).
Item 22. Calculation of Performance
Data Total Return; Yield;
Performance Comparisons (1-3).
Item 23. Financial Statements Financial Statements.
[Incorporated by reference to
Annual Report of Registrant
dated March 31, 1994; File
Nos. 2-33490 and 811-1890,
(1,3)]; [To be filed by
amendment;(2)].

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
CLASS A SHARES
PROSPECTUS

The Class A Shares of Fund For U.S. Government Securities, Inc., (the "Fund")
represent interests in an open-end, diversified management investment company (a
mutual fund) that seeks current income by investing in a professionally managed,
diversified portfolio limited to U.S. government securities.

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

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

The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, and Class C Shares, dated August __, 1994, with the
Securities and Exchange Commission. The information contained in the Combined
Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund contact your financial
institution.

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

Prospectus dated August __, 1994

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--
CLASS A SHARES 2

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

GENERAL INFORMATION 3
- ------------------------------------------------------

LIBERTY FAMILY OF FUNDS 3
- ------------------------------------------------------

Liberty Family Retirement Program 4

INVESTMENT INFORMATION 5
- ------------------------------------------------------

Investment Objective 5
Investment Policies 5
Acceptable Investments 5

Collateralized Mortgage Obligations 6

Repurchase Agreements 7
When-Issued and Delayed Delivery
Transactions 7
Lending of Portfolio Securities 7
Portfolio Turnover 7
Investment Limitations 7

NET ASSET VALUE 8
- ------------------------------------------------------

INVESTING IN CLASS A SHARES 8
- ------------------------------------------------------

Share Purchases 8
Through a Financial Institution 8
Directly from the Distributor 8
Minimum Investment Required 9
What Shares Cost 9
Dealer Concession 10
Reducing the Sales Charge 10
Quantity Discounts and Accumulated
Purchases 10
Letter of Intent 10
Reinvestment Privilege 11
Purchases with Proceeds from
Redemptions of Unaffiliated
Investment Companies 11
Concurrent Purchases 11
Systematic Investment Program 11
Certificates and Confirmations 11
Dividends and Distributions 12
Retirement Plans 12

EXCHANGE PRIVILEGE 12
- ------------------------------------------------------
Reduced Sales Charge 12
Requirements for Exchange 12
Tax Consequences 13
Making an Exchange 13
Telephone Instructions 13

REDEEMING CLASS A SHARES 13
- ------------------------------------------------------

Through a Financial Institution 14
Directly from the Fund 14
By Telephone 14
By Mail 14
Signatures 14

Contingent Deferred Sales Charge 15

Systematic Withdrawal Program 16
Accounts with Low Balances 16

FUND INFORMATION 16
- ------------------------------------------------------

Management of the Fund 16
Board of Directors 16
Officers and Directors 16
Investment Adviser 20
Advisory Fees 20
Adviser's Background 20
Other Payments to Financial
Institutions 21
Distribution of Class A Shares 21
Administration of the Fund 21
Administrative Services 21
Shareholder Services Plan 21
Custodian 22
Transfer Agent and Dividend
Disbursing Agent 22
Legal Counsel 22
Independent Auditors 22

SHAREHOLDER INFORMATION 22
- ------------------------------------------------------

Voting Rights 22

TAX INFORMATION 23
- ------------------------------------------------------

Federal Income Tax 23
Pennsylvania Corporate and Personal
Property Taxes 23

PERFORMANCE INFORMATION 23
- ------------------------------------------------------

OTHER CLASSES OF SHARES 24
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--
CLASS C SHARES 25

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

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
CLASS A SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price).................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable) (1)............................................. 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)...................................... None
Exchange Fee............................................................................................ None
ANNUAL CLASS A SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee.......................................................................................... 0.60%
12b-1 Fee............................................................................................... None
Total Other Expenses.................................................................................... 0.36%
Shareholder Services Fee (2)............................................................. 0.15%
Total Class A Shares Operating Expenses (3).................................................... 0.96%
</TABLE>

- ---------

(1) Shareholders who purchased Shares with the proceeds of a redemption of
shares of a mutual fund sold with a sales charge and not distributed by
Federated Securities Corp., prior to June 1, 1994, will be charged a
contingent deferred sales charge by the Fund's distributor of .50 of 1% for
redemptions made within one year of purchase. See "Contingent Deferred Sales
Charge."

(2) The maximum Shareholder Services fee is 0.25%.

(3) The Total Class A Shares Operating Expenses in the table above are based on
expenses expected for the fiscal year ending March 31, 1995. The Total Class
A Shares Operating Expenses were 0.88% for the fiscal year ended March 31,
1994.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS A SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "INVESTING IN CLASS A SHARES" AND "FUND INFORMATION."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.

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

The information set forth in the foregoing table and example relates only to
Class A Shares of the Fund. The Fund also offers two additional classes of
shares called Class B Shares and Class C Shares. Class A Shares, Class B Shares,
and Class C Shares are subject to certain of the same expenses. However, Class B
Shares are subject to a 12b-1 fee of 0.75% and a maximum contingent deferred
sales charge of 3.00%, but are not subject to a sales load. Class C Shares are
subject to a 12b-l fee of 0.75% and a contingent deferred sales charge of l.00%
but are not subject to a sales load. See "Other Classes of Shares."

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
FINANCIAL HIGHLIGHTS
CLASS A SHARES
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche, the Fund's
independent public auditors. Their report dated May 13, 1994 on the Fund's
financial statements for each of the ten years for the period ended March 31,
1994 is included in the Annual Report dated March 31, 199, which is incorporated
by reference.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77 $ 8.37 $ 7.74
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 0.63 0.71 0.75 0.77 0.78 0.76 0.78 0.80 0.93 0.74
- --------------------
Net realized and
unrealized
gain/(loss) on
investments (0.61) (0.03) 0.08 0.19 0.21 (0.40) (0.15) (0.21) 0.46 0.64
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
Total from
investment
operations 0.02 0.68 0.83 0.96 0.99 0.36 0.63 0.59 1.39 1.38
- --------------------
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders from
net investment
income (0.63) (0.69) (0.73) (0.78) (0.77) (0.76) (0.78) (0.80) (0.99) (0.75)
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END
OF PERIOD $ 7.89 $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77 $ 8.37
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN** 0.13% 8.31% 10.20% 12.12% 12.59% 4.47% 7.66% 7.23% 17.42% 18.39%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 0.88% 0.83% 0.91% 0.97% 0.96% 0.96% 0.96% 0.95% 0.91% 0.89%(a)
- --------------------
Net investment
income 7.50% 8.33% 8.69% 9.21% 9.32% 9.22% 9.31% 9.24% 10.51% 12.11%(a)
- --------------------
Expense waiver/
reimbursement -- -- -- -- 0.04% -- 0.01% 0.05% 0.13% 0.55%(a)
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets, end of
period (000
omitted) $1,693,293 $1,844,712 $1,384,117 $1,133,017 $1,039,493 $1,054,055 $1,150,395 $1,193,389 $761,290 $156,834
- --------------------
Portfolio turnover
rate 149% 52% 43% 27% 98% 83% 72% 135% 179% 121%
- --------------------

<CAPTION>
JUNE 30,
1984
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.45
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 0.92
- --------------------
Net realized and
unrealized
gain/(loss) on
investments (0.72)
- -------------------- -----------
Total from
investment
operations 0.20
- --------------------
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders from
net investment
income (0.91)
- -------------------- -----------
NET ASSET VALUE, END
OF PERIOD $ 7.74
- -------------------- -----------
TOTAL RETURN** 2.27%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 1.15%
- --------------------
Net investment
income 11.16%
- --------------------
Expense waiver/
reimbursement 0.24 %
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets, end of
period (000
omitted) $47,215
- --------------------
Portfolio turnover
rate 117 %
- --------------------
</TABLE>

* For the nine months ended March 31, 1985. The Fund changed its fiscal
year-end from June 30 to March 31, effective March 1, 1985.

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

(a)Computed on an annualized basis.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated March 31, 1994, which can be obtained free of charge.

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

The Fund was incorporated under the laws of the State of Maryland on June 9,
1969. The Fund's address is Liberty Center, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation permit the
Fund to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The shares in any one portfolio
may be offered in separate classes. With respect to this Fund, as of the date of
this prospectus, the Board of Directors ("Directors") has established three
classes of shares, known as Class A Shares, Class B Shares and Class C Shares.
This prospectus relates only to the Class A Shares ("Shares") of the Fund.

Class A Shares of the Fund are designed for individuals and institutions seeking
current income through a professionally managed, diversified portfolio of
securities which are guaranteed as to the payment of principal and interest by
the U.S. government, its agencies or instrumentalities. A minimum initial
investment of $500 is required, except for retirement plans.

Class A Shares are sold at net asset value plus an applicable sales charge and
are redeemed at net asset value.

The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Liberty Family Funds."

LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------

This Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:

American Leaders Fund, Inc., providing growth of capital and income
through high-quality stocks;

_ Capital Growth Fund, providing appreciation of capital primarily through
equity securities;

_ International Equity Fund, providing long-term capital growth and income
through international securities;

_ International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;

_ Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income producing equity securities;

_ Liberty High Income Bond Fund, Inc., providing high current income
through high-yielding, lower-rated corporate bonds;

_ Liberty Municipal Securities Fund, Inc., providing a high level of
current income exempt from federal regular income tax through municipal
bonds;

_ Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;

_ Liberty Utility Fund, Inc., providing current income and long-term growth
of income, primarily through electric, gas, and communications utilities;

_ Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment grade
securities;

_ Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation
of principal, primarily limited to municipal securities;

_ Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;

_ Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;

_ Strategic Income Fund, providing a high level of current income,
primarily through domestic and foreign corporate debt obligations;

_ Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities;

_ World Utility Fund, providing total return primarily through securities
issued by domestic and foreign companies in the utilities industries.

Prospectuses for these funds are available by writing to Federated Securities
Corp.

Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.

The Liberty Family of Funds provides flexibility and diversification for an
investor's long-term investment planning. It enables an investor to meet the
challenges of changing market conditions by offering convenient exchange
privileges which give access to various investment vehicles and by providing the
investment services of a proven, professional investment adviser.

Shareholders of Class A Shares participating in The Liberty Account, are
designated as Liberty Life Members. Liberty Life Members are exempt from sales
charges on future purchases in and exchanges between the Class A Shares of any
Funds in the Liberty Family of Funds, as long as they maintain a $500 balance in
one of the Liberty Funds.

LIBERTY FAMILY RETIREMENT PROGRAM

The Fund is also a member of the Liberty Family Retirement Program, an
integrated program of investment options, plan recordkeeping, and consultation
services for 401(k) and other participant-directed benefit and savings plans.
Under the Program, employers or plan trustees may select a group of investment
options to be offered in a plan which also uses the Program for recordkeeping
and administrative services. Additional fees are charged to participating plans
for these services. As part of the Program, exchanges may readily be made
between investment options selected by the employer or a plan trustee.

The other funds participating in the Liberty Family Retirement Program are:
American Leaders Fund, Inc., Capital Growth Fund, International Equity Fund,
International Income Fund, Liberty Equity Income Fund, Inc., Liberty High Income
Bond Fund, Inc., Liberty Utility Fund, Inc., Prime Cash Series, and Stock and
Bond Fund, Inc.

No sales charge is imposed on purchases made by qualified retirement plans with
over $l million invested in funds available in the Liberty Family Retirement
Program.

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

INVESTMENT OBJECTIVE

The investment objective of the Fund 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 investment policies described in this
prospectus. The investment objective and the policies and limitations described
below cannot be changed without approval of shareholders.

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS. The Fund invests only in securities which are primary
or direct obligations of the U.S. government, its agencies or instrumentalities;
or which are guaranteed by the U.S. government, its agencies, or
instrumentalities and in certain collateralized mortgage obligations ("CMOs")
described below.

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

direct obligations of the U.S. Treasury such as U.S. Treasury bills,
notes, and bonds; and

obligations of U.S. government agencies or instrumentalities such as
Federal Land Banks, Farmers Home Administration, Federal Home Loan Banks,
Federal Intermediate Credit Banks, Central Bank for Cooperatives, and
Federal National Mortgage Association.

Some obligations issued or guaranteed by agencies or instrumentalities of the
U.S. government, such as Government National Mortgage Association participation
certificates, are backed by the full faith and credit of the U.S. Treasury. No
assurances can be given that the U.S. government will provide financial support
to other agencies or instrumentalities, since it is not obligated to do so.
These instrumentalities are supported by:

the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

the credit of the agency or instrumentality.

As a matter of investment practice which may be changed without shareholder
approval, the Fund will continue to limit its investments, within the parameters
of applicable regulations of the Federal Home Loan Bank System or
interpretations thereof, to legal investments and investment practices for
federal credit unions as set forth in Sections 107(7) and (8) of the Federal
Credit Union Act and Part 703 of the National Credit Union Administration
Regulations. The Fund will provide all federal credit union
shareholders of record with sixty (60) days' written notice should the Fund
intend to change such investment practice.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

There is no limit to portfolio maturity. The prices of government bonds
fluctuate inversely in relation to the direction of interest rates. The prices
of longer term bonds fluctuate more widely in response to market interest rate
changes.

COLLATERALIZED MORTGAGE OBLIGATIONS. _Collateralized mortgage obligations are
debt obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or
Freddie Mac Certificates, but also may be collateralized by whole loans or
Private Pass-Throughs (such collateral collectively hereinafter referred to as
"Mortgage Assets"). Multiclass pass-through securities are equity interests in a
trust composed of Mortgage Assets. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities. CMOs in which the Fund
invests are issued by agencies or instrumentalities of the U.S. government. The
issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage
Investment Conduit (a "REMIC"), which has certain special tax attributes.

In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semi-annual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a series of a CMO in innumerable ways.
In one structure, payments of principal, including any principal prepayments, on
the Mortgage Assets are applied to the classes of a CMO in the order of their
respective stated maturities or final distribution dates, so that no payment of
principal will be made on any class of CMOs until all other classes having an
earlier stated maturity or final distribution date have been paid in full.

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

The Trust may also invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the
stated maturity date or final distribution date of each class, which, as with
other CMO structures, must be retired by its stated maturity date or final
distribution date but may be retired earlier. PAC Bonds generally require
payments of a specified amount of principal on each payment date. PAC Bonds are
always parallel pay CMOs with the required principal payment on such securities
having the highest priority after interest has been paid to all classes.

REPURCHASE AGREEMENTS. The U.S. government securities in which the Fund invests
may be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government or other securities to the Fund and agree at
the time of sale to repurchase them at a mutually agreed upon time and price.

As a matter of investment practice which can be changed without shareholder
approval, the Fund will not invest more than 10% of its total assets in
securities which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. In when-issued and delayed delivery
transactions, the Fund relies on the seller to complete the transaction. The
seller's failure to complete the transaction may cause the Fund to miss a price
or yield considered to be advantageous.

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

PORTFOLIO TURNOVER. Securities in the Fund's portfolio will be sold whenever
the Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held. The adviser to the Fund does not
anticipate that portfolio turnover will result in adverse tax consequences. Any
such trading will increase the Fund's portfolio turnover rate and transaction
costs.

INVESTMENT LIMITATIONS

The Fund will not borrow money except, under certain circumstances, the Fund may
borrow up to 10% of the value of its total assets.

The following limitation may be changed by the Directors without shareholder
approval. Shareholders will be notified before any material change in this
limitation becomes effective.

The Fund will not own securities of open-end or closed-end investment companies,
except under certain circumstances and subject to certain limitations not
exceeding 10% of its net assets.

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

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class A Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class A Shares in the liabilities of the Fund and those attributable to the
Class A Shares, and dividing the remainder by the number of Class A Shares
outstanding. The net asset value for Class A Shares may differ from that of
Class B and Class C Shares 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.

INVESTING IN CLASS A SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

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

Participants in plans under the Liberty Family Retirement Program shall purchase
Shares in accordance with the requirements of their respective plans.

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

DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Shares directly from Federated Securities Corp. once an account has been
established. To do so:

complete and sign the new account form available from the Fund;

enclose a check made payable to Fund for U.S. Government Securities,
Inc.-Class A Shares; and

mail both to Federated Securities Company, P.O. Box 8604, Boston, MA
02266-8604.

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

To purchase Shares directly from the distributor by wire, once an account has
been established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received
when State Street Bank receives payment by wire. Federal funds should be wired
as follows: Federated Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts 02105; Attention: Mutual Fund Servicing Division; For
Credit to: Fund for U.S. Government Securities, Inc.-Class A Shares; Title or
Name of Account; Wire Order Number and/or Account Number. Shares cannot be
purchased by wire on Columbus Day, Veteran's Day, or Martin Luther King Day.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in the Fund is $500 unless the investment is in a
retirement plan, in which case the minimum initial investment is $50. Subsequent
investments must be in amounts of at least $100, except for retirement plans
which must be in amounts of at least $50. (Other minimum investment requirements
may apply to investments through the Liberty Family Retirement Program.)

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:

<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
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 $750,000 % 2.00 % 2.04
$750,000 but less than $1 million % 1.00 % 1.01
$1 million or more % 0.00 % 0.00
</TABLE>

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

Shareholders designated as Liberty Life Members are exempt from sales charges.
Shareholders of record in the Fund on February 28, 1987, who are NOT
participating in The Liberty Account are exempt from sales charges only in the
Fund and only as long as they maintain a $500 balance in the Fund.

No sales charge is imposed for Shares purchased through bank trust departments,
investment advisers registered under the Investment Advisers Act of 1940, as
amended, or retirement plans where the third party administrator has entered
into certain arrangements with Federated Securities Corp. or its affiliates.
However, investors who purchase Shares through a trust department or investment
adviser may be charged an additional service fee by that institution.

No sales charge is imposed on purchases made by qualified retirement plans with
over $1 million invested in funds available in the Liberty Family Retirement
Program.

DEALER CONCESSION. For sales of Shares, a dealer will normally receive up to
90% of the applicable sales load. Any portion of the sales charge which is not
paid to a dealer will be retained by the distributor. However, the distributor,
may offer to pay dealers up to one-hundred percent of the sales load retained by
it. Such payments may take the form of promotional incentives, such as payment
of certain expenses of qualified employees and their spouses to attend
informational meetings about the Fund or other special events at
recreational-type facilities, or of items of material value. In some instances,
these incentives will be made available only to dealers whose employees have
sold or may sell significant amount of Shares. On purchases of $1 million or
more, the investor pays no sales charge; however, the distributor will make
twelve monthly payments to the dealer totalling 0.25% of the public offering
price over the first year following the purchase. Such payments are based on the
original purchase price of shares outstanding at each month end.

The sales charge for Shares sold other than through registered broker/dealers
will be retained by Federated Securities Corp. Federated Securities Corp. may
pay fees to banks out of the sales charge in exchange for sales and/or
administrative services performed on behalf of the bank's customers in
connection with the initiation of customer accounts and purchases of Shares.

REDUCING THE SALES CHARGE

The sales charge can be reduced on the purchase of Shares through:

quantity discounts and accumulated purchases;

signing a 13-month letter of intent;

using the reinvestment privilege;

purchases with proceeds from redemptions of unaffiliated mutual fund
shares; or

concurrent purchases.

QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table above,
larger purchases reduce the sales charge paid. The Fund will combine purchases
made on the same day by the investor, his spouse, and his children under age 21
when it calculates the sales charge. In addition, the sales charge, if
applicable, is reduced for purchases made at one time by a trustee or fiduciary
for a single trust estate or a single fiduciary account.

If an additional purchase of Shares is made, the Fund will consider the previous
purchases still invested in the Fund. For example, if a shareholder already owns
Shares having a current value at the public offering price of $90,000 and he
purchases $10,000 more at the current public offering price, the sales charge on
the additional purchase according to the schedule now in effect would be 3.75%,
not 4.50%.

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

LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the funds in the Liberty Family of Funds over the next 13 months, the
sales charge may be reduced by signing a letter of intent to that effect. This
letter of intent includes a provision for a sales charge adjustment depending on
the amount actually purchased within the 13-month period and a provision for the
custodian to
hold 4.5% of the total amount intended to be purchased in escrow (in shares)
until such purchase is completed.

The 4.5% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent is
not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.

This letter of intent will not obligate the shareholder to purchase Shares, but
if he does, each purchase during the period will be at the sales charge
applicable to the total amount intended to be purchased. This letter may be
dated as of a prior date to include any purchases made within the past 90 days
towards the dollar fulfillment of the letter of intent. Prior trade prices will
not be adjusted.

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

PURCHASES WITH PROCEEDS FROM REDEMPTIONS OF UNAFFILIATED INVESTMENT COMPANIES.
Investors may purchase Shares at net asset value, without a sales charge, with
the proceeds from the redemption of shares of an investment company which were
sold with a sales charge or commission and was not distributed by Federated
Securities Corp. (This does not include shares of a mutual fund which were or
would be subject to a contingent deferred sales charge upon redemption.) The
purchase must be made within 60 days of the redemption, and Federated Securities
Corp. must be notified by the investor in writing, or by his financial
institution, at the time the purchase is made.

CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or more
funds in the Liberty Family of Funds, the purchase price of which includes a
sales charge. For example, if a shareholder concurrently invested $30,000 in one
of the other Liberty Funds with a sales charge, and $70,000 in this Fund, the
sales charge would be reduced.

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

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund, plus the applicable sales charge. A shareholder may apply
for participation in this program through his financial institution or directly
through the Fund.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
in writing to Federated Services Company.

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Distributions of any net realized long-term capital gains
will be made at least once every twelve months. Dividends and distributions are
automatically reinvested in additional Shares of the Fund on payment dates at
the ex-dividend date net asset value without a sales charge, unless shareholders
request cash payments on the new account form or by writing to the transfer
agent. All shareholders on the record date are entitled to the dividend. The
record date is the second to last business day of each month. If Shares are
redeemed or exchanged prior to the record date or purchased after the record
date, those Shares are not entitled to that month's dividend.

RETIREMENT PLANS

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

EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------

Class A shareholders may exchange all or some of their Shares for Class A Shares
of other funds in the Liberty Family of Funds at net asset value. Shareholders
of Class A Shares may also exchange into certain funds which are advised by
subsidiaries or affiliates of Federated Investors which are sold with a sales
charge different from that of the Fund's or which no sales charge. These
exchanges are made at net asset value plus the difference between the Fund's
sales charge already paid and any sales charge of the Federated Fund into which
the Shares are to be exchanged, if higher. Neither the Fund nor any of the funds
in the Liberty Family of Funds imposes any additional fees on exchanges.
Participants in a plan under the Liberty Family Retirement Program may exchange
all or some of their Shares for Class A Shares of other funds offered under the
plan at net asset value.

REDUCED SALES CHARGE

If a shareholder making such an exchange qualifies for a reduction of the sales
charge, Federated Securities Corp. must be notified in writing by the
shareholder or by his financial institution.

REQUIREMENTS FOR EXCHANGE

Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirement of the Fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.

This privilege is available to shareholders resident in any state in which the
Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in shares of the other fund. The exchange privilege may be
terminated at any time. Shareholders will be notified of the modification or
termination of the exchange privilege. This privilege is not available where
redeemed Shares are assessed a contingent deferred sales charge or similar
charge.

Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

Instructions for exchanges for the Liberty Family of Funds or certain Federated
Funds may be given in writing or by telephone. Written instructions may require
a signature guarantee. Shareholders of the Fund may have difficulty in making
exchanges by telephone through brokers and other financial institutions during
times of drastic economic or market changes. If a shareholder cannot contact his
broker or financial institution by telephone, it is recommended that an exchange
request be made in writing and sent by overnight mail to Federated Services
Company, P.O. Box 8604, Boston, Massachusetts 02266-8604.

Instructions for exchanges for the Liberty Family Retirement Program should be
given to the plan administrator.

TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. Telephone exchange instructions may be recorded. If the
instructions are given by a broker, a telephone authorization form completed by
the broker must be on file with the Fund. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. Shares may be exchanged between two funds by
telephone only if the two funds have identical shareholder registrations.

Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, P.O. Box 8604, Boston, Massachusetts
02266-8604 and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions are recorded and will be binding upon the
shareholder. Such instructions will be processed as of 4:00 p.m. (Eastern time)
and must be received by the Fund before that time for Shares to be exchanged the
same day. Shareholders exchanging into a Fund will not receive any dividend that
is payable to shareholders of record on that date. This privilege may be
modified or terminated at any time.

REDEEMING CLASS A SHARES
- --------------------------------------------------------------------------------

The Fund redeems Shares at their net asset value , less any applicable
contingent deferred sales charge, next determined after the Fund receives the
redemption request. Redemptions will be made on days on which the Fund computes
its net asset value. Redemptions can be made through a financial institution or
directly from the Fund. Redemption requests must be received in proper form.
Redemptions of Shares held through the Liberty Family Retirement Program will be
governed by the requirements of the respective plans.

THROUGH A FINANCIAL INSTITUTION

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

DIRECTLY FROM THE FUND

BY TELEPHONE. Shareholders who have not purchased through a financial
institution may redeem their Shares by telephoning the Fund. Telephone
redemption instructions may be recorded. The proceeds will be mailed to the
shareholder's address of record or wire transferred to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System,
normally within one business day, but in no event longer than seven days after
the request. The minimum amount for a wire transfer is $l,000. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, shareholders would be promptly notified.

An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp. If reasonable procedures are not
followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be considered.

BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company. The written request should include the shareholder's
name, the Fund name and class designation of shares name, the Fund name, the
account number, and the Share or dollar amount requested, and should be signed
exactly as the Shares are registered.

If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request.
Shareholders should call the Fund for assistance in redeeming by mail.

SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record must
have signatures on written redemption requests guaranteed by:

a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.

Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.

CONTINGENT DEFERRED SALES CHARGE

Shareholders who purchased Shares with the proceeds of a redemption of shares of
a mutual fund sold with a sales charge or commission and not distributed by
Federated Securities Corp. prior to June 1, 1994, will be charged a contingent
deferred sales charge by the Fund's distributor of 0.50 of 1% for redemptions
made within one year of purchase. Purchases under the program made after that
date will not be subject to any type of contingent deferred sales charge. The
contingent deferred sales charge will be calculated based upon the lesser of the
original purchase price of the Shares or the net asset value of the Shares when
redeemed.

The contingent deferred sales charge will not be imposed on Shares acquired
through reinvestment of dividends or distributions of long-term capital gains.
Redemptions are deemed to have occurred in the following order: 1) Shares
acquired through the reinvestment of dividends and long-term capital gains, 2)
purchases of Shares occurring more than one year before the date of redemption,
3) purchases of Shares within the previous year without the use of redemption
proceeds as described above, and 4) purchases of Shares within the previous year
through the use of redemption proceeds as described above.

The contingent deferred sales charge will not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 59-1/2; or (iii) from the death or disability of the beneficial
owner. The exemption from the contingent deferred sales charge for qualified
plans, an IRA, Keogh Plan or a custodial account does not extend to account
transfers, rollovers, and other redemptions made for purposes of reinvestment.

A contingent deferred sales charge will not be charged in connection with
exchanges of Shares for Class A Shares in other Liberty Family Funds or Liberty
Family Retirement Program funds, in connection with redemptions by the Fund of
accounts with low balances. No contingent deferred sales charge will be charged
for redemption from the Liberty Family Retirement Program.

SYSTEMATIC WITHDRAWAL PROGRAM

Shareholders who desire to receive payments of a predetermined amount not less
than $100 may take advantage of the Systematic Withdrawal Program. Under this
program, Shares are redeemed to provide for periodic withdrawal payments in an
amount directed by the shareholder. Depending upon the amount of the withdrawal
payments, the amount of dividends paid and capital gains distributions with
respect to Shares, and the fluctuation of the net asset value of Shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in the Fund. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000. A shareholder may
apply for participation in this program through his financial institution. Due
to the fact that Shares are sold with a sales charge, it is not advisable for
shareholders to be purchasing Shares while participating in this program.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$500. This requirement does not apply, however, if the balance falls below $500
because of changes in the Fund's net asset value. Before Shares are redeemed to
close an account, the shareholder is notified in writing and allowed 30 days to
purchase additional Shares to meet the minimum requirement.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

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

OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations, and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated Services Company, Federated
Securities Corp., Federated Administrative Services, and the Funds (as defined
in the Combined Statement of Additional Information).

<TABLE>
<CAPTION>
POSITIONS WITH
NAME AND ADDRESS THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>

John F. Donahue*\ Chairman and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director Trustee, Federated Adviser, Federated Management and
Pittsburgh, PA Federated Research; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard First Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, President and Director of
the Fund.

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

J. Christopher Donahue* President President and Trustee, Federated Investors and Federated
Federated Investors Tower and Director Administrative Services; Trustee, Federated Advisers,
Pittsburgh, PA Federated Management and Federated Research; Trustee,
Federated Services Company; President or Vice President of
the Funds; Director, Trustee, or Managing General Partner of
some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Director of the Fund.

James E. Dowd Director Attorney-at-law; Director, The Emerging Germany Fund, Inc.;
571 Hayward Mill Road Director, Trustee, or Managing General Partner of the Funds;
Concord, MA formerly, Director, Blue Cross of Massachusetts, Inc.
</TABLE>

<TABLE>
POSITIONS WITH
NAME AND ADDRESS THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and
Suite 1111 Montefiore Hospitals; Clinical Professor of Medicine and
3471 Fifth Avenue Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.

Edward L. Flaherty, Jr.\ Director Attorney-at-law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Eat'N Park Restaurants, Inc. and Statewide Settlement
Pittsburgh, PA Agency, Inc.; Director Trustee, or Managing General Partner
of the Funds; formerly, Counsel, Horizon Financial, F.A.,
Western Region.

Peter E. Madden Director Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Director, Trustees, or Managing General
Boston, MA Partner of the Funds; formerly President, State Street Bank
& Trust Company and State Street Boston Corporation and
Trustee, Lahey Clinic Foundation, Inc.

Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
formerly, Vice Chairman, Horizon Financial, F.A.

Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant;
1202 Cathedral Trustee, Carnegie Endowment for International Peace, RAND
of Learning Corporation, Online Computer Library Center, Inc.; and U.S.
University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Management Center;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
President, Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental Policy
and Technology.

Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or
4905 Bayard Street Managing General Partner of the Funds.
Pittsburgh, PA
</TABLE>

<TABLE>
POSITIONS WITH
NAME AND ADDRESS THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
Richard B. Fisher Vice President Executive Vice President and Trustee, Federated Investors;
Federated Investors Tower Chairman and Director, Federated Securities Corp.; President
Pittsburgh, PA or Vice President of the Funds; Director or Trustee of some
of the Funds.

Edward C. Gonzales Vice President Vice President, Treasurer and Trustee, Federated Investors;
Federated Investors Tower and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Pittsburgh, PA Management, and Federated Research; Executive Vice
President, Treasurer, and Director, Federated Securities
Corp.; Chairman, Treasurer, and Trustee, Federated
Administrative Services; Trustee, Federated Services
Company; Trustee of some of the Funds; Vice President and
Treasurer of the Funds.

John W. McGonigle Vice President Vice President, Secretary, and Secretary, General Counsel
Federated Investors Tower and Trustee, Federated Investors; Vice President, Secretary
Pittsburgh, PA and Trustee, Federated Adviser, Federated Management, and
Federated Research; Executive Vice President, Secretary, and
Trustee, Federated Administrative Services; Trustee,
Federated Services Company; Executive Vice President and
Director, Federated Securities Corp.; Vice President and
Secretary of the Funds.

John A. Staley, IV Vice President Vice President and Trustee, Federated Investors; Executive
Federated Investors Tower Vice President, Federated Securities Corp.; President and
Pittsburgh, PA Trustee, Federated Advisers, Federated Management and
Federated Research; Vice President of the Funds; Director,
Trustee, or Managing General Partner of some of the Funds;
formerly, Vice President, The Standard Fire Insurance
Company and President of its Federated Research Division.
</TABLE>

*This Director is deemed to be an "interested person" of the Fund as
defined in the Investment Company Act of 1940, as amended.

\Members of the Fund's Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors between
meetings of the Board.

Officers and Directors own less than 1% of the Fund's outstanding shares.

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

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee based on the Fund's average daily net assets as shown on the chart
below, plus 4.5% of the Fund's gross income (excluding any capital gains or
losses).

<TABLE>
<CAPTION>
% OF AVERAGE
AVERAGE DAILY NET ASSETS DAILY NET ASSETS
<S> <C>
First $500 million .25 of 1%
Second $500 million .225 of 1%
Over $1 billion .20 of 1%
</TABLE>

The adviser may voluntarily waive a portion of its fee or reimburse the Fund for
certain operating expenses. The adviser can terminate this voluntary waiver at
any time at its sole discretion. The adviser has also undertaken to reimburse
the Fund for operating expenses in excess of limitations established by certain
states.

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

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors are
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.

Gary J. Madich has been the Fund's co-portfolio manager since February,
1987. Mr. Madich joined Federated Investors in 1984 and has been a Senior
Vice President of the Fund's investment adviser since 1993. Mr. Madich
served as Vice President of the Fund's investment adviser from 1988 until
1993. Mr. Madich is a Chartered Financial Analyst and received his M.B.A.
in Public Finance from the University of Pittsburgh.

Kathleen M. Foody-Malus has been the Fund's co-portfolio manager since
July, 1993. Ms. Foody-Malus joined Federated Investors in 1983 and has been
a Vice President of the Fund's investment adviser since 1993. Ms.
Foody-Malus served as an Assistant Vice President of the investment
adviser from 1990 until 1992, and from 1986 until 1989 she acted as an
investment analyst.
Ms. Foody-Malus received her M.B.A. in Accounting/Finance from the
University of Pittsburgh.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. _In addition to periodic payments
to financial institutions under the Shareholder Services Plan, certain
financial institutions may be compensated by the Adviser or its affiliates
for the continuing investment of customers' assets in certain funds,
including the Fund, advised by those entities. These payments will be made
directly by the distributor or adviser from their assets, and will not be
made from the assets of the Fund or by the assessment of a sales charge on
Shares. Furthermore, the Adviser or its affiliates may offer to pay a fee
from their own assets to financial institutions as financial assistance for
providing substantial marketing, sales and operational support to the
distributor. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Assistance will be predicated upon the amount of Shares the dealer
sells or may sell, and/or upon the type and nature of sales or operational
support furnished by the dealer.

DISTRIBUTION OF CLASS A SHARES

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

ADMINISTRATION OF THE FUND

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

<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS
MAXIMUM ADMINISTRATIVE FEE OF THE FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

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

SHAREHOLDER SERVICES PLAN. _The Fund has adopted a Shareholder Services Plan
(the "Services Plan") under which it may make payments up to 0.25 of 1% of the
average daily net asset value of the Class A Shares to obtain certain personal
services for shareholders and the maintenance of shareholder accounts
("shareholder services"). The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which Federated Shareholder Services will either perform
shareholder services directly or will select financial institutions to
perform shareholder services. Financial Institutions will receive fees based
upon shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.

The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the capacities described above or should
Congress relax current restrictions on depository institutions, the Directors
will consider appropriate changes in the services.

State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from the interpretations
given to the Glass-Steagall Act and, therefore, banks and financial institutions
may be required to register as dealers pursuant to state laws.

CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. _Federated Services Company, P.O.
Box 8604, Boston, Massachusetts 02266-8604, is transfer agent for the shares of
the Fund, and dividend disbursing agent for the Fund.

LEGAL COUNSEL. Legal counsel is provided by Houston, Houston & Donnelly, 2510
Centre City Tower, Pittsburgh, Pennsylvania 15222, and Dickstein, Shapiro &
Morin, 2101 L Street, N.W., Washington, D.C. 20037.

INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, 125 Summer Street, Boston, Massachusetts 02110.

SHAREHOLDER 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 each portfolio
or class in the Fund have equal voting rights, except that in matters affecting
only a particular portfolio or class, only shares of that portfolio or class are
entitled to vote.

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

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

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

FEDERAL INCOME TAX

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

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

PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Fund:

the Fund is subject to the Pennsylvania corporate franchise tax; and

Fund shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

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

From time to time the Fund advertises its total return and yield for Class A
Shares.

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

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

The performance information reflects the effect of the maximum sales load which,
if excluded, would increase the total return.

Total return and yield will be calculated separately for Class A Shares, Class B
Shares and Class C Shares. Because Class B Shares and Class C Shares are subject
to Rule 12b-1 fees, and Services Plan fees, the total return and yield for Class
A Shares, for the same period, will exceed that of Class B Shares and Class C
Shares. Because Class A Shares are subject to a higher maximum sales load, the
total return for Class B Shares and Class C Shares for the same period will
exceed that of Class A
Shares. Depending on the dollar amount invested, and the time period for which
any particular class of shares is held, the total return for any particular
class may exceed that of another.

From time to time the Fund may advertise the performance of Class A Shares,
Class B Shares, and Class C Shares using certain financial publications and/or
compare the performance of Class A Shares, Class B Shares, and Class C Shares to
certain indices.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund currently offers Class A Shares, Class B Shares and Class C Shares.

Class A Shares are not distributed pursuant to a 12b-1 Plan and therefore are
not subject to a distribution services fee. Class B Shares are sold primarily to
customers of financial institutions subject to certain contingent deferred sales
charges. Class B Shares are distributed pursuant to a 12b-1 Plan adopted by the
Fund whereby the distributor is paid a fee of up to 0.75 of 1%. The Fund has
also adopted a Services Plan fee of up to 0.25 of 1% of the Class B Shares'
average daily net assets with respect to Class B Shares. Investments in Class B
Shares are subject to a minimum initial investment of $1,500, unless the
investment is in a retirement account in which case the minimum investment is
$50.

Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales charge; however, Class C Shares are subject to
a contingent deferred sales charge up to 1.0%. Class C Shares are distributed
pursuant to a Rule 12b-1 Plan adopted by the Fund whereby the distributor is
paid a fee of up to 0.75 of 1%, in addition to a shareholder services fee of up
to 0.25 of 1% of the Class C Shares' average daily net assets. Investments in
Class C Shares are subject to a minimum initial investment of $1,500 unless the
investment is in a retirement account, in which case the minimum investment is
$50.

The amount of dividends payable to Class A Shares will generally exceed that of
Class B Shares and Class C Shares by the difference between Class Expenses borne
by shares of each respective class.

The stated advisory fee is the same for all classes of shares.

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
FINANCIAL HIGHLIGHTS
CLASS C SHARES
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

The following table has been audited by Deloitte & Touche, the Fund's
independent public auditors. Their report dated May 13, 1994 on the Fund's
financial statements for the year ended March 31, 1994 is included in the Annual
Report dated March 31, 1994, which is incorporated by reference.

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.54
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.54
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.63)
- -------------------------------------------------------------------------------------------------- ---------------
Total from investment operations (0.09)
- --------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.54)
- --------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.02)***
- -------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.56)
- -------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 7.89
- -------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** (1.17)%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.81%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 6.45%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement --
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $103,433
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 149%
- --------------------------------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from April 26, 1993 (date of initial
public offering) to March 31, 1994.

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

*** Distributions in excess of net investment income was the result of certain
book and tax timing differences. This distribution does not represent a
return of capital for federal income tax purposes.

(a) Computed on an annualized basis.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated March 31, 1994, which can be obtained free of charge.

FUND FOR
U.S. GOVERNMENT
SECURITIES, INC.
CLASS A SHARES

PROSPECTUS

An Open-End, Diversified
Management Investment Company

July __, 1994

[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
LIBERTY CENTER
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779

8062807A-A (5/94)

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
CLASS C SHARES
PROSPECTUS

The Class C Shares of Fund For U.S. Government Securities, Inc., (the "Fund")
represent interests in an open-end, diversified management investment company (a
mutual fund) that seeks current income by investing in a professionally managed,
diversified portfolio limited to U.S. government securities.

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

The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares and Class C Shares, dated August __, 1994, with the
Securities and Exchange Commission. The information contained in the Combined
Statement of Additional Information is incorporated by reference in this
prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information, or make inquiries about the Fund contact your financial
institution.

Prospectus dated August __, 1994

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--
CLASS C SHARES 2

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

GENERAL INFORMATION 3
- ------------------------------------------------------

LIBERTY FAMILY OF FUNDS 3
- ------------------------------------------------------

Liberty Family Retirement Program 4

INVESTMENT INFORMATION 4
- ------------------------------------------------------

Investment Objective 4
Investment Policies 4
Acceptable Investments 4

Collateralized Mortgage Obligations 5

Repurchase Agreements 6
When-Issued and Delayed Delivery
Transactions 6
Lending of Portfolio Securities 7
Portfolio Turnover 7
Investment Limitations 6

NET ASSET VALUE 7
- ------------------------------------------------------

INVESTING IN CLASS C SHARES 7
- ------------------------------------------------------

Share Purchases 7
Through a Financial Institution 8
Directly From the Distributor 8
Minimum Investment Required 8
What Shares Cost 9
Systematic Investment Program 9
Certificates and Confirmations 9
Dividends and Distributions 9
Retirement Plans 9

EXCHANGE PRIVILEGE 9
- ------------------------------------------------------

Requirements for Exchange 10
Tax Consequences 10
Making an Exchange 10
Telephone Instructions 10

REDEEMING CLASS C SHARES 11
- ------------------------------------------------------

Through a Financial Institution 11
Directly From the Fund 11
By Telephone 11
By Mail 11
Signatures 12

Contingent Deferred Sales Charge 12

Systematic Withdrawal Program 13
Accounts with Low Balances 13

FUND INFORMATION 13
- ------------------------------------------------------

Management of the Fund 13
Board of Directors 13
Officers and Directors 13
Investment Adviser 17
Advisory Fees 17
Adviser's Background 17
Other Payments to Financial
Institutions 18
Distribution of Class C Shares 18

Distribution and Shareholder
Services Plans 19

Administration of the Fund 19
Administrative Services 19

Custodian 20

Transfer Agent and
Dividend Disbursing Agent 20

Legal Counsel 20
Independent Auditors 20
Expenses of the Fund and Class C Shares 20

SHAREHOLDER INFORMATION 21
- ------------------------------------------------------

Voting Rights 21

TAX INFORMATION 21
- ------------------------------------------------------

Federal Income Tax 21
Pennsylvania Corporate and
Personal Property Taxes 21

PERFORMANCE INFORMATION 22
- ------------------------------------------------------

OTHER CLASSES OF SHARES 22
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--
CLASS A SHARES 24

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

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
CLASS C SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................... None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price).................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds as applicable) (1)............................................................... 1.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................ None
Exchange Fee.............................................................................................. None
ANNUAL CLASS C SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee............................................................................................ 0.60%
12b-1 Fee................................................................................................. 0.75%
Total Other Expenses...................................................................................... 0.46%
Shareholder Services Fee.................................................................. 0.25%
Total Class C Shares Operating Expenses......................................................... 1.81%
</TABLE>

- ---------

(1) The contingent deferred sales charge assessed is 1.00% of the lesser of the
original purchase price or the net asset value of Shares redeemed within
one year of their purchase date. For a more complete description, see
"Redeeming Class C Shares."

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS C SHARES WILL BEAR,
EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS
COSTS AND EXPENSES, SEE "INVESTING IN CLASS C SHARES" AND "FUND INFORMATION."
Wire transferred redemptions of less than $5,000 may be subject to additional
fees.

Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charges permitted under the rules of the National
Association of Securities Dealers, Inc.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time
period................................................................ $ 29 $ 57 $ 98 $ 210
You would pay the following expenses on the same investment, assuming
no redemption......................................................... $ 18 $ 57 $ 98 $ 210
</TABLE>

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

The information set forth in the foregoing table and example relates only
to Class C Shares of the Fund. The Fund also offers two additional classes of
shares called Class A Shares and Class B Shares. Class C Shares, Class A Shares
and Class B Shares are subject to certain of the same expenses; however, Class A
Shares are subject to a maximum sales load of 4.50%, but are not subject to a
12b-1 fee or a contingent deferred sales charge. Class B Shares are subject to a
12b-1 fee of 0.75% and a maximum contingent deferred sales charge of 3.00%, but
are not subject to a sales load. See "Other Classes of Shares."

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
FINANCIAL HIGHLIGHTS
CLASS C SHARES
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.54
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------
Net investment income 0.54
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.63)
- --------------------------------------------------------------------------------------------------- ---------------
Total from investment operations (0.09)
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.54)
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.02)***
- --------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.56)
- --------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 7.89
- --------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** (1.17)%
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Expenses 1.81%(a)
- ---------------------------------------------------------------------------------------------------
Net investment income 6.45%(a)
- ---------------------------------------------------------------------------------------------------
Expense waiver/reimbursement --
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $103,433
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate 149%
- ---------------------------------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from April 26, 1993 (date of initial
public offering) to March 31, 1994.

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

*** Distributions in excess of net investment income was the result of certain
book and tax turning differences. This distribution does not represent a
return of capital for federal income tax purposes.

(a) Computed on an annualized basis.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated March 31, 1994, which can be obtained free of charge.

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

The Fund was incorporated under the laws of the State of Maryland on June 9,
1969. The Fund's address is Liberty Center, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation permit the
Fund to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The shares in any one portfolio
may be offered in separate classes. With respect to this Fund, as of the date of
this prospectus, the Board of Directors ("Directors") have established three
classes of shares, known as Class A Shares, Class B Shares and Class C Shares.
This prospectus relates only to Class C Shares ("Shares") of the Fund.

Class C Shares of the Fund are designed for individuals and institutions seeking
current income through a professionally managed, diversified portfolio of
securities which are guaranteed as to the payment of principal and interest by
the U.S. government, its agencies or instrumentalities. A minimum initial
investment of $1,500 is required, unless the investment is in a retirement
account, in which case the minimum investment is $50.

Class C Shares are sold at net asset value. A contingent deferred sales charge
of 1.00% will be charged on assets redeemed within the first 12 months following
purchase.

The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Liberty Family Funds."

LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------

This Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:

American Leaders Fund, Inc., providing growth of capital and income
through high-quality stocks;

Capital Growth Fund, providing appreciation of capital primarily through
equity securities;

International Equity Fund, providing long-term capital growth and income
through international securities;

International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;

Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income producing equity securities;

Liberty High Income Bond Fund, Inc., providing high current income through
high-yielding, lower-rated corporate bonds;

Liberty Municipal Securities Fund, Inc., providing a high level of current
income exempt from federal regular income tax through municipal bonds;

Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high-quality U.S.
government securities;

Liberty Utility Fund, Inc., providing current income and long-term growth
of income, primarily through electric, gas, and communications utilities;

Strategic Income Fund, providing a high level of current income, primarily
through domestic and foreign corporate debt obligations; and

Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities.

Prospectuses for these funds are available by writing to Federated Securities
Corp.

Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.

LIBERTY FAMILY RETIREMENT PROGRAM

The Fund is also a member of the Liberty Family Retirement Program (the
"Program"), an integrated program of investment options, plan recordkeeping, and
consultation services for 401(k) and other participant-directed benefit and
savings plans. Under the Program, employers or plan trustees may select a group
of investment options to be offered in a plan which also uses the Program for
recordkeeping and administrative services. Additional fees are charged to
participating plans for these services. As part of the Program, exchanges may
readily be made between investment options selected by the employer or a plan
trustee.

The other funds participating in the Liberty Family Retirement Program are:
American Leaders Fund, Inc., Capital Growth Fund, Stock and Bond Fund, Inc.,
International Equity Fund, International Income Fund, Liberty Equity Income
Fund, Inc., Liberty High Income Bond Fund, Inc., Liberty Utility Fund, Inc., and
Prime Cash Series. Plans with over $1 million invested in funds available in the
Liberty Family Retirement Program may purchase Class A Shares without a sales
load.

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

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS. The Fund invests only in securities which are primary
or direct obligations of the U.S. government, or its agencies or
instrumentalities; or which are guaranteed by the U.S.
government, its agencies, or instrumentalities and in certain collateralized
mortgage obligations ("CMOs"), described below.

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

direct obligations of the U.S. Treasury such as U.S. Treasury bills,
notes, and bonds; and

the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

the credit of the agency or instrumentality.

As a matter of investment practice which may be changed without shareholder
approval, the Fund will continue to limit its investments, within the parameters
of applicable regulations of the Federal Home Loan Bank System or
interpretations thereof, to legal investments and investment practices for
federal credit unions as set forth in Sections 107(7) and (8) of the Federal
Credit Union Act and Part 703 of the National Credit Union Administration
Regulations. The Fund will provide all federal credit union shareholders of
record with sixty (60) days' written notice should the Fund intend to change
such investment practice.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

The Trust may also invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.

INVESTMENT LIMITATIONS

The Fund will not borrow money except, under certain circumstances, the Fund may
borrow up to 10% of the value of its total assets.

The following limitation may be changed by the Directors without shareholder
approval. Shareholders will be notified before any material change in this
limitation becomes effective.

The Fund will not own securities of open-end or closed-end investment companies,
except under certain circumstances and subject to certain limitations not
exceeding 10% of its net assets.

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

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of Class C Shares in the market value of
all securities and other assets of the Fund, subtracting the interest of Class C
Shares in the liabilities of the Fund and those attributable to Class C Shares,
and dividing the remainder by the number of Class C Shares outstanding. The net
asset value for Class A Shares and Class B Shares may differ from that of Class
C Shares 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.

INVESTING IN CLASS C SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

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

Participants in plans under the Liberty Family Retirement Program shall purchase
Shares in accordance with the requirements of their respective plans.

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

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

DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Shares directly from Federated Securities Corp. once an account has been
established. To do so:

complete and sign the new account form available from the Fund;

enclose a check made payable to Fund for U.S. Government Securities,
Inc.--Class C Shares; and

mail both to Federated Services Company, P.O. Box 8604 , Boston, MA
02266-8604

To purchase Shares directly from the distributor by wire once an account has
been established, call the Fund. All information needed will be taken over the
telephone, and the order is considered received when State Street Bank receives
payment by wire. Federal funds should be wired as follows: Federated Services
Company, c/o State Street Bank and Trust Company, Boston, Massachusetts 02105;
Attention: Mutual Fund Servicing Division; For Credit to: Fund for U.S.
Government Securities, Inc.--Class C Shares; Title or Name of Account; Wire
Order Number and/or Account Number. Shares cannot be purchased by wire on
Columbus Day, Veteran's Day, or Martin Luther King Day.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in the Fund is $1,500 unless the investment is in
a retirement plan, in which case the minimum initial investment is $50.
Subsequent investments must be in amounts of at least $100, except for
retirement plans, which must be in amounts of at least $50. (Other minimum
investment requirements may apply to investments through the Liberty Family
Retirement Program.)

WHAT SHARES COST

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

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the Fund. A shareholder may apply for participation in this program
through his financial institution or directly through the Fund.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
in writing to Federated Services Company.

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.

DIVIDENDS AND DISTRIBUTIONS

Dividends are declared and paid monthly to all shareholders invested in the Fund
on the record date. Distributions of any net realized long-term capital gains
will be made at lease once every twelve months. Dividends are automatically
reinvested in additional Shares on payment dates at the ex-dividend date net
asset value without a sales charge, unless shareholders request cash payments on
the new account form or by writing to the transfer agent. All shareholders on
the record date are entitled to the dividend. If Shares are redeemed or
exchanged prior to the record date or purchased after the record date, or
purchased after the record date, those Shares are not entitled to that month's
dividend.

RETIREMENT PLANS. Shares of the Fund can be purchased as an investment for
retirement plans or for IRA accounts. For further details, including prototype
retirement plans, contact the Fund and consult a tax adviser.

EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------

In order to provide greater flexibility to Fund Shareholders whose investment
objectives have changed, Class C shareholders may exchange all or some of their
Shares for Class C Shares in other funds in the Liberty Family of Funds at net
asset value without a contingent deferred sales charge. Participants in a plan
under the Liberty Family Retirement Program may exchange some or all of their
Shares for Class C Shares of other funds offered under their plan at net asset
value without a contingent deferred sales charge. Any contingent deferred sales
charge charged at the time exchanged-for Shares are redeemed is
calculated as if the shareholder had held the Shares from the date on which he
or she became a shareholder of the exchanged-from Shares. For more information,
see "Contingent Deferred Sales Charge."

REQUIREMENTS FOR EXCHANGE

This privilege is available to shareholders resident in any state in which the
shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in Class C Shares of the other fund. The exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of the modification or termination of the exchange privilege.

Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds or certain Federated Funds are available by contacting the Fund.

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

Instructions for exchanges for the Liberty Family Retirement Program should be
given to the plan administrator.

TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.

Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company, P.O. Box 8604, Boston, Massachusetts,
02266-8604 and deposited to the shareholder's account before being exchanged.
Telephone exchange instructions may be recorded. Such instructions will be
processed as of 4:00 p.m. (Eastern time) and must be received by the Fund before
that time for Shares to be exchanged the same day. Shareholders exchanging into
a Fund will not receive any dividend that is payable to shareholders of record
on that date. This privilege may be
modified or terminated at any time. If reasonable procedures are not followed by
the Fund, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.

REDEEMING CLASS C SHARES
- --------------------------------------------------------------------------------

The Fund redeems Shares at their net asset value, less any applicable contingent
deferred sales charge next determined after the Fund receives the redemption
request. Redemptions will be made on days on which the Fund computes its net
asset value. Redemptions can be made through a financial institution or directly
from the Fund. Redemption requests must be received in proper form. Redemptions
of Shares held through the Liberty Family Retirement Program will be governed by
the requirements of the respective plans.

THROUGH A FINANCIAL INSTITUTION

DIRECTLY FROM THE FUND

BY TELEPHONE. Shareholders who have not purchased through a financial
institution may redeem their Shares by telephoning the Fund. Telephone
redemption instructions may be recorded. The proceeds will be mailed to the
shareholder's address of record or wire transferred to the shareholder's account
at a domestic commercial bank that is a member of the Federal Reserve System,
normally within one business day, but in no event longer than seven days after
the request. The miminum amount for a wire transfer is $1,000. If at any time
the Fund shall determine it necessary to terminate or modify this method of
redemption, sharesholders would be promptly notified.

In the event of drastic economic or market changes, a shareholder may experience
difficulty redeeming by telephone. If such a case should occur, another method
of redemption should be considered.

BY MAIL. Any shareholder may redeem Shares by sending a written request to
Federated Services Company. The written request should include the shareholder's
name, the Fund name and class
designation, the account number, and the Share or dollar amount requested, and
should be signed exactly as the Shares are registered.

a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.

CONTINGENT DEFERRED SALES CHARGE

Shareholders who purchased Shares will be charged a contingent deferred sales
charge by Federated Securities Corp. of 1.00% for redemptions of those Shares
made within one year from date of purchase. To the extent that a shareholder
exchanges between or among Class C Shares in other funds in the Liberty Family
of Funds, the time for which the exchanged-for shares were held will be added,
or "tacked," to the time for which the exchanged-from shares were held for
purposes of satisfying the one-year holding period. The contingent deferred
sales charge will be calculated based upon the lesser of the original purchase
price of the Shares or the net asset value of the Shares when redeemed. For
additional information, see "Other Payments to Financial Institutions."

The contingent deferred sales charge will not be imposed on Shares acquired
through reinvestment of dividends or distributions of short-term or long-term
capital gains. Redemptions are deemed to have occurred in the following order:
(i) Shares acquired through the reinvestment of dividends and long-term capital
gains; (ii) purchases of Shares occurring more than one year before the date of
redemption; (iii) purchases of Shares within the previous year.

The contingent deferred sales charge will be not be imposed when a redemption
results from a tax-free return under the following circumstances: (i) a total or
partial distribution from a qualified plan, other than and IRA, Keogh Plan or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 59-1/2; or (iii) from the death or permanent and total disability of
the beneficial owner. The exemption from the contingent deferred sales charge
for qualified plans, an IRA, Keogh Plan or a custodial account does not extend
to account transfers, rollovers and other redemptions made for purposes of
reinvestment.

A contingent deferred sales charge will not be charged in connection with
exchanges of Shares for Class C Shares in other Liberty Family Funds or Liberty
Family Retirement Program funds or in connection with redemptions by the Fund of
accounts with low balances. No conginent deferred sales charge will be imposed
on shares purchased through a bank trust department, an investment adviser or a
retirement plan where the third party administrator has entered into certain
arrangements with Federated Securities Corp. No contingent deferred sales charge
will be charged for redemptions from the Liberty Family Retirement Program. For
additional information, see "Other Payments to Financial Institutions."

SYSTEMATIC WITHDRAWAL PROGRAM

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the balance falls below
$1,500 because of changes in the Fund's net asset value. Before Shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional Shares to meet the minimum requirement.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations, and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated
Services Company, Federated Securities Corp., Federated Administrative Services,
and the Funds (as defined in the Combined Statement of Additional Information).

<TABLE>
<CAPTION>
POSITIONS WITH
NAME AND ADDRESS THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
John F. Donahue*\ Chairman and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director Trustee, Federated Adviser, Federated Management and
Pittsburgh, PA Federated Research; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard First Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, President and Director of
the Fund.
John T. Conroy, Jr. Director President, Investment Properties Corporation; Senior Vice
Wood/IPC Commercial President, John R. Wood and Associates, Inc., Realtors;
Department President, Northgate Village Development Corporation;
John R. Wood and General Partner or Trustee in private real estate ventures
Associates, Inc., in Southwest Florida; Director, Trustee, or Managing General
Realtors Partner of the Funds; formerly, President, Naples Property
3255 Tamiami Trail North Management, Inc.
Naples, FL

William J. Copeland Director Director and Member of the Executive Committee, Michael
One PNC Plaza-- Baker, Inc.; Director, Trustee, or Managing General Partner
23rd Floor of the Funds; formerly Vice Chairman and Director, PNC Bank
Pittsburgh, PA N.A. and PNC Bank Corp., and Director, Ryan Homes, Inc.
J. Christopher Donahue* President President and Trustee, Federated Investors and Federated
Federated Investors Tower and Director Administrative Services; Trustee, Federated Advisers,
Pittsburgh,PA Federated Management and Federated Research; Trustee,
Federated Services Company; President or Vice President of
the Funds; Director, Trustee, or Managing General Partner of
some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Director of the Fund.

<TABLE>
<CAPTION>
POSITIONS WITH
NAME AND ADDRESS THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and
Suite 1111 Montefiore Hospitals; Clinical Professor of Medicine and
3471 Fifth Avenue Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.

Edward L. Flaherty, Jr.\ Director Attorney-at-law; Partner, Meyer and Flaherty; Director,
5916 Penn Mall Trustee, or Managing General Partner of the Funds; formerly,
Pittsburgh, PA Counsel, Horizon Financial, F.A., Western Region.

Peter E. Madden Director Consultant; State Representative, Commonwealth of
225 Franklin Street Massachusetts; Trustee, Lahey Clinic Foundation, Inc.;
Boston, MA Director, Trustees, or Managing General Partner of the
Funds; formerly President, State Street Bank & Trust Company
and State Street Boston Corporation.
Gregor F. Meyer Director Attorney-at-law; Partner, Meyer and Flaherty; Chairman,
5916 Penn Mall Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
formerly, Vice Chairman, Horizon Financial, F.A.

Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant;
1202 Cathedral Trustee, Carnegie Endowment for International Peace, RAND
of Learning Corporation; Online Computer Library Center, Inc.; and U.S.
University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Management Center;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental Policy
and Technology.

Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or
4905 Bayard Street Managing General Partner of the Funds.
Pittsburgh, PA

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

John W. McGonigle Vice President and Vice President, Secretary, General Counsel and Trustee,
Federated Investors Tower Secretary Federated Investors; Vice President, Secretary and Trustee,
Pittsburgh, PA Federated Adviser, Federated Management, and Federated
Research; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Trustee, Federated
Services Company; Executive Vice President and Director,
Federated Securities Corp.; Vice President and Secretary of
the Funds.

</TABLE>

*This Director is deemed to be an "interested person" of the Fund as
defined in the Investment Company Act of 1940, as amended.

\Members of the Fund's Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors between
meetings of the Board.

Officers and Directors own less than 1% of the Fund's outstanding shares.

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

ADVISORY FEES. The Fund's adviser receives an annual investment advisory
fee based on the Fund's average daily nest assets as shown on the chart
below, plus 4.5% of the Fund's gross income (excluding any capital gains or
losses).

<TABLE>
<CAPTION>
ADVISORY FEE AS
% OF AVERAGE
AVERAGE DAILY NET ASSETS DAILY NET ASSETS
<S> <C>
First $500 million 0.25 of 1%
Second $500 million 0.225 of 1%
Over $l billion 0.20 of 1%
</TABLE>

The adviser may choose to voluntarily waive a portion of its fee or
reimburse the Fund for certain operating expenses. The adviser can
terminate this voluntary waiver at any time at its sole discretion. The
adviser has also undertaken to reimburse the Fund for operating expenses in
excess of limitations established by certain states.

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors is
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.

Gary J. Madich has been the Fund's co-portfolio manager since February,
1987. Mr. Madich joined Federated Investors in 1984 and has been a Senior
Vice President of the Fund's investment adviser since 1993. Mr. Madich
served as a Vice President of the Fund's investment adviser from 1988 until
1993. Mr. Madich is a Chartered Financial Analyst and received his M.B.A.
in Public Finance from the University of Pittsburgh.

Kathleen M. Foody-Malus has been the Fund's co-portfolio manager since
July, 1993. Ms. Foody-Malus joined Federated Investors in 1983 and has been
a Vice President of the Fund's investment adviser since 1993. Ms.
Foody-Malus served as an Assistant Vice President of the investment adviser
from 1990 until 1992, and from 1986 until 1989 she acted as an investment
analyst. Ms. Foody-Malus received her M.B.A. in Accounting/Finance from the
University of Pittsburgh.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. _In addition to periodic payments to
financial institutions under the Distribution and Shareholder Services Plans,
certain financial institutions may be compensated by the adviser or its
affiliates for the continuing investment of customers' assets in certain funds,
including the Fund, advised by those entities. These payments will be made
directly by the distributor or adviser from their assets, and will not be made
from the assets of the Fund or by the assessment of a sales charge on Class C
Shares.

The distributor will pay financial institutions an amount equal to 1% of the net
asset value of Shares purchased by their clients or customers at the time of
purchase (except for participants in the Liberty Family Retirement Program).
Financial institutions may elect to waive the initial payment described above;
such waiver will result in the waiver by the Fund of the otherwise applicable
contingent deferred sales charge. Furthermore, the Adviser or its affiliates may
offer to pay a fee from their own assets to financial institutions as financial
assistance for providing substantial marketing, sales and operational support to
the distributor. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Assistance will be predicated upon the amount of Shares the dealer sells
or may sell, and/or upon the type and nature of sales or operational support
furnished by the dealer.

DISTRIBUTION OF CLASS C SHARES

DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. _Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Class C Shares will pay to the distributor an amount, computed at an annual
rate of .75 of 1% of the average daily net assets of the Fund to finance any
activity which is principally intended to result in the sale of shares subject
to the Distribution Plan. The distributor may select financial institutions such
as banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales support services as agents for their clients or
customers.

The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amount or may earn a profit from future payments made by the Fund
under the Distribution Plan.

In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of the Class C Shares to obtain certain personal services for
shareholders and the maintenance of shareholder accounts ("shareholder
services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select Financial Institutions to perform shareholder services. Financial
Institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.

State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state laws.

ADMINISTRATION OF THE FUND

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

CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston,
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. _Federated Services Company, P.O.
Box 8604, Boston, Massachusetts, 02266-8604, is transfer agent for the shares of
the Fund and dividend disbursing agent for the Fund.

INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, 125 Summer Street, Boston, Massachusetts 02110.

EXPENSES OF THE FUND AND CLASS C SHARES

Holders of Shares pay their allocable portion of Fund and portfolio expenses.

The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Fund and continuing
its existence; registering the Fund with federal and state securities
authorities; Directors' fees; auditors' fees; the cost of meetings of Directors;
legal fees of the Fund; association membership dues and such non-recurring and
extraordinary items as may arise from time to time.

The portfolio expenses for which holders of Shares each pay their allocable
portion include, but are not limited to: registering the portfolio and Shares of
the portfolio; investment advisory services; taxes and commissions; custodian
fees; insurance premiums; auditors' fees; and such non-recurring and
extraordinary items as may arise from time to time.

At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Fund's Distribution Plan. However, the Directors
reserve the right to allocate certain expenses to holders of Shares as it deems
appropriate ("Class Expenses"). In any case, Class Expenses would be limited to:
distribution fees; transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; fees under the Fund's Shareholder Services
Plan; printing and postage expenses related to preparing and distributing
materials such as shareholder reports, prospectuses and proxies to current
shareholders; registration fees paid to the Securities and Exchange Commission
and to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Shares; legal fees relating solely to
Shares; and Directors' fees incurred as a result of issues relating solely to
Shares.

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

VOTING RIGHTS

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

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

FEDERAL INCOME TAX

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

PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Fund:

the Fund is subject to the Pennsylvania corporate franchise tax; and

Fund shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

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

From time to time the Fund advertises its total return and yield for Class C
Shares.

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

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

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

Total Return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares. Because Class B Shares and Class C Shares are
subject to Rule 12b-l fees and service plan fees, the yield for Class A Shares,
for the same period, may exceed that of Class B Shares and Class C Shares.
Because Class A Shares are subject to a higher maximum sales load, the total
return for Class B Shares and Class C Shares, for the same period, may exceed
that of Class A Shares. Depending on the dollar amount invested, and the time of
period for which any particular class of shares is held, the total return for
any particular class may exceed that of another.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund currently offers Class A Shares, Class B Shares and Class C Shares.

Class A Shares are sold to customers of financial institutions subject to a
front-end sales charge of up to 4.50%. The Fund has also adopted a Services Plan
fee of up to 0.25 of 1% of the Class A Shares' average daily net assets with
respect to Class A Shares. Class A Shares are subject to a minimum initial
investment of $500, unless the investment is in a retirement account, in which
case the minimum investment is $50. Class A Shares are not distributed pursuant
to a Rule 12b-1 Plan and therefore are not subject to a distribution services
fee. Class B Shares are sold primarily to customers of financial institutions
subject to certain contingent deferred sales charges. Class B Shares are
distributed pursuant to a 12b-1 Plan adopted by the Fund whereby the distributor
is paid a fee of up to 0.75 of 1%. The Fund has also adopted a Services Plan fee
of up to 0.25 of 1% of the Class B Shares' average daily net assets with respect
to Class B Shares. Investments in Class B Shares are subject to a minimum
initial investment of $1,500, unless the investment is in a retirement account
in which case the minimum investment is $50.

The amount of dividends to Class A Shares will generally exceed that payable to
Class B Shares and Class C Shares by the difference between Class Expenses borne
by shares of each respective class.

The stated advisory fee is the same for all classes of shares.

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
FINANCIAL HIGHLIGHTS
CLASS A SHARES
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77 $ 8.37 $ 7.74
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 0.63 0.71 0.75 0.77 0.78 0.76 0.78 0.80 0.93 0.74
- --------------------
Net realized and
unrealized
gain/(loss) on
investments (0.61) (0.03) 0.08 0.19 0.21 (0.40) (0.15) (0.21) 0.46 0.64
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
Total from
investment
operations 0.02 0.68 0.83 0.96 0.99 0.36 0.63 0.59 1.39 1.38
- --------------------
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders from
net investment
income (0.63) (0.69) (0.73) (0.78) (0.77) (0.76) (0.78) (0.80) (0.99) (0.75)
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END
OF PERIOD $ 7.89 $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77 $ 8.37
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN** 0.13% 8.31% 10.20% 12.12% 12.59% 4.47% 7.66% 7.23% 17.42% 18.39%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 0.88% 0.83% 0.91% 0.97% 0.96% 0.96% 0.96% 0.95% 0.91% 0.89%(a)
- --------------------
Net investment
income 7.50% 8.33% 8.69% 9.21% 9.32% 9.22% 9.31% 9.24% 10.51% 12.11%(a)
- --------------------
Expense waiver/
reimbursement -- -- -- -- 0.04% -- 0.01% 0.05% 0.13% 0.55%(a)
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets, end of
period
(000 omitted) $1,693,293 $1,844,712 $1,384,117 $1,133,017 $1,039,493 $1,054,055 $1,150,395 $1,193,389 $761,290 $156,834
- --------------------
Portfolio turnover
rate 149% 52% 43% 27% 98% 83% 72% 135% 179% 121%
- --------------------

<CAPTION>
JUNE 30,
1984
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.45
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 0.92
- --------------------
Net realized and
unrealized
gain/(loss) on
investments (0.72)
- -------------------- -----------
Total from
investment
operations 0.20
- --------------------
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders from
net investment
income (0.91)
- -------------------- -----------
NET ASSET VALUE, END
OF PERIOD $ 7.74
- -------------------- -----------
TOTAL RETURN** 2.27%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 1.15%
- --------------------
Net investment
income 11.16%
- --------------------
Expense waiver/
reimbursement 0.24 %
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets, end of
period
(000 omitted) $47,215
- --------------------
Portfolio turnover
rate 117%
- --------------------
</TABLE>

* For the nine months ended March 31, 1985. The Fund changed its fiscal
year-end from June 30 to March 31, effective March 1, 1985.

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

(a)Computed on an annualized basis.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated, March 31, 1994 which can be obtained free of charge.

FUND FOR
U.S. GOVERNMENT
SECURITIES, INC.
CLASS C SHARES

PROSPECTUS

An Open-End, Diversified
Management Investment Company

August __, 1994

8062807A-C (5/94)

DOCUMENT DESCRIPTION
DOCUMENT TYPE
COUNT 26

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
CLASS B SHARES
PROSPECTUS

The Class B Shares of Fund For U.S. Government Securities, Inc., (the "Fund")
represent interests in an open-end, diversified management investment company (a
mutual fund) that seeks current income by investing in a professionally managed,
diversified portfolio limited to U.S. government securities.

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

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

The Fund has also filed a Combined Statement of Additional Information for Class
A Shares, Class B Shares, and Class C Shares, dated August , 1994, with the
Securities and Exchange Commission. The information contained in the Combined
Statement of Additional Information is incorporated by reference in this
prospectus. You may request a copy of the Combined Statement of Additional
Information free of charge by calling 1-800-235-4669. To obtain other
information or make inquiries about the Fund, contact your financial
institution.

Prospectus dated August , 1994

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

LIBERTY FAMILY OF FUNDS 2
- ------------------------------------------------------

INVESTMENT INFORMATION 3
- ------------------------------------------------------

Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Collateralized Mortgage Obligations 4
Repurchase Agreements 5
When-Issued and Delayed Delivery
Transactions 5
Lending of Portfolio Securities 5
Portfolio Turnover 6
Investment Limitations 6

NET ASSET VALUE 6
- ------------------------------------------------------

INVESTING IN CLASS B SHARES 6
- ------------------------------------------------------

Share Purchases 6
Through a Financial Institution 6
Directly from the Distributor 7
Minimum Investment Required 7
What Shares Cost 7
Conversion of Class B Shares 8
Systematic Investment Program 8
Certificates and Confirmations 8
Dividends and Distributions 8
Retirement Plans 9

EXCHANGE PRIVILEGE 9
- ------------------------------------------------------

Requirements for Exchange 9
Tax Consequences 9
Making an Exchange 9
Telephone Instructions 10

REDEEMING CLASS B SHARES 10
- ------------------------------------------------------

Through a Financial Institution 10
Directly from the Fund 10
By Telephone 10
By Mail 11
Signatures 11
Contingent Deferred Sales Charge 12
Elimination of Contingent Deferred
Sales Charge 12
Systematic Withdrawal Program 13
Accounts with Low Balances 13

FUND INFORMATION 13
- ------------------------------------------------------

Management of the Fund 13
Board of Directors 13
Officers and Directors 13
Investment Adviser 16
Advisory Fees 17
Adviser's Background 17
Distribution of Class B Shares 18
Distribution and Shareholder
Services Plans 18
Other Payments to Financial Institutions 19
Administration of the Fund 19
Administrative Services 19
Custodian 19
Transfer Agent and Dividend
Disbursing Agent 19
Legal Counsel 19
Independent Auditors 19
Expenses of the Fund and Class B Shares 20

SHAREHOLDER INFORMATION 20
- ------------------------------------------------------

Voting Rights 20

TAX INFORMATION 21
- ------------------------------------------------------

Federal Income Tax 21
Pennsylvania Corporate and Personal
Property Taxes 21

PERFORMANCE INFORMATION 21
- ------------------------------------------------------

OTHER CLASSES OF SHARES 22
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--CLASS C SHARES 23
- ------------------------------------------------------

FINANCIAL HIGHLIGHTS--CLASS A SHARES 24
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C>
CLASS B SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................................ None
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)..................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds as applicable) (1)................................................. 3.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)......................................... None
Exchange Fee............................................................................................... None
ANNUAL CLASS B SHARES OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee............................................................................................. 0.60%
12b-1 Fee.................................................................................................. 0.75%
Total Other Expenses....................................................................................... 0.46%
Shareholder Services Fee.................................................................... 0.25%
Total Class B Shares Operating Expenses (2)....................................................... 1.81%
</TABLE>
- ---------
(1) The contingent deferred sales charge is imposed on the lesser of the net
asset value of the redeemed shares at the time of purchase or the net asset
value of the redeemed shares at the time of redemption at the rates of 3%
for shares redeemed within one year of the purchase date, 2% for shares
redeemed within two years of the purchase date, and 1% for shares redeemed
within three years of the purchase date. No contingent deferred sales charge
is imposed on shares redeemed more than three years from the purchase date.

(2) Class B Shares convert to Class A Shares (which pay lower ongoing expenses)
approximately seven years after purchase.

* Total Class B Shares Operating Expenses are estimated based on average
expenses expected to be incurred during the period ending March 31, 1995.
During the course of this period, expenses may be more or less than the
average amount shown.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF CLASS B SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN CLASS B SHARES" AND "FUND
INFORMATION." WIRE-TRANSFERRED REDEMPTIONS OF LESS THAN $5,000 MAY BE SUBJECT TO
ADDITIONAL FEES.

Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charge permitted under the rules of the National Association of
Securities Dealers, Inc.

<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period.................................................. $ 49 $ 68
You would pay the following expenses on the same investment,
assuming no redemption......................................................................... $ 18 57
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MARCH 31,
1995.

The information set forth in the foregoing table and example relates only to
Class B Shares of the Fund. The Fund also offers two additional classes of
shares called Class A Shares and Class C Shares. Class A Shares, Class B Shares
and Class C Shares are subject to certain of the same expenses. However, Class A
Shares are subject to a maximum sales load of 4.50%, but are not subject to a
contingent deferred sales charge or a 12b-1 fee. Class C Shares are subject to a
12b-l fee of 0.75% and a contingent deferred sales charge of l.00% but are not
subject to a sales load. See "Other Classes of Shares."

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

The Fund was incorporated under the laws of the State of Maryland on June 9,
1969. The Fund's address is Liberty Center, Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779. The Articles of Incorporation permit the
Fund to offer separate series of shares of beneficial interest representing
interests in separate portfolios of securities. The shares in any one portfolio
may be offered in separate classes. With respect to this Fund, as of the date of
this prospectus, the Board of Directors ("Directors") have established three
classes of shares, known as Class A Shares, Class B Shares, and Class C Shares.
This prospectus relates only to the Class B Shares ("Shares") of the Fund.

Class B Shares of the Fund are designed for individuals and institutions seeking
current income through a professionally managed, diversified portfolio of
securities which are guaranteed as to the payment of principal and interest by
the U.S. government, its agencies or instrumentalities. A minimum initial
investment of $1,500 is required, unless the investment is in a retirement
account, in which case the minimum is $50.

Except as otherwise noted in this prospectus, Class B Shares are sold at net
asset value and are redeemed at net asset value. However, a contingent deferred
sales charge is imposed on certain Shares which are redeemed within three full
years of purchase.

The Fund's current net asset value and offering price can be found in the mutual
funds section of local newspapers under "Liberty Family Funds."

LIBERTY FAMILY OF FUNDS
- --------------------------------------------------------------------------------

This Fund is a member of a family of mutual funds, collectively known as the
Liberty Family of Funds. The other funds in the Liberty Family of Funds are:

American Leaders Fund, Inc., providing growth of capital and income
through high-quality stocks;

Capital Growth Fund, providing appreciation of capital primarily through
equity securities;

International Equity Fund, providing long-term capital growth and income
through international securities;

International Income Fund, providing a high level of current income
consistent with prudent investment risk through high-quality debt
securities denominated primarily in foreign currencies;

Liberty Equity Income Fund, Inc., providing above-average income and
capital appreciation through income-producing equity securities;

Liberty High Income Bond Fund, Inc., providing high current income through
high-yielding, lower-rated, corporate bonds;

Liberty Municipal Securities Fund, Inc., providing a high level of current
income exempt from federal regular income tax through municipal bonds;

Liberty U.S. Government Money Market Trust, providing current income
consistent with stability of principal through high quality U.S.
government securities;

Liberty Utility Fund, Inc., providing current income and long-term growth
of income, primarily through electric, gas and communication utilities;

Limited Term Fund, providing a high level of current income consistent
with minimum fluctuation in principal value through investment grade
securities;

Limited Term Municipal Fund, providing a high level of current income
exempt from federal regular income tax consistent with the preservation of
principal, primarily limited to municipal securities;

Michigan Intermediate Municipal Trust, providing current income exempt
from federal regular income tax and the personal income taxes imposed by
the state of Michigan and Michigan municipalities, primarily through
Michigan municipal securities;

Pennsylvania Municipal Income Fund, providing current income exempt from
federal regular income tax and the personal income taxes imposed by the
Commonwealth of Pennsylvania, primarily through Pennsylvania municipal
securities;

Strategic Income Fund, providing a high level of current income, primarily
through domestic and foreign corporate debt obligations;

Tax-Free Instruments Trust, providing current income consistent with
stability of principal and exempt from federal income tax, through
high-quality, short-term municipal securities; and

World Utility Fund, providing total return through securities issued by
domestic and foreign companies in the utilities industries.

Prospectuses for these funds are available by writing to Federated Securities
Corp.

Each of the funds may also invest in certain other types of securities as
described in each fund's prospectus.

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

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS. The Fund invests only in securities which are primary
or direct obligations of the U.S. government, or its agencies or
instrumentalities, or which are guaranteed by the U.S. government, its
agencies, or instrumentalities, and in certain collateralized mortgage
obligations ("CMOs") described below.

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

direct obligations of the U.S. Treasury such as U.S. Treasury bills,
notes, and bonds; and

the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

the credit of the agency or instrumentality.

As a matter of investment practice which may be changed without shareholder
approval, the Fund will continue to limit its investments, within the parameters
of applicable regulations of the Federal Home Loan Bank System or
interpretations thereof, to legal investments and investment practices for
federal credit unions as set forth in Sections 107(7) and (8) of the Federal
Credit Union Act and Part 703 of the National Credit Union Administration
Regulations. The Fund will provide all federal credit union shareholders of
record with sixty (60) days' written notice should the Fund intend to change
such investment practice.

The prices of fixed income securities fluctuate inversely to the direction of
interest rates.

COLLATERALIZED MORTGAGE OBLIGATIONS. Collateralized mortgage obligations are
debt obligations collateralized by mortgage loans or mortgage pass-through
securities. Typically, CMOs are collateralized by Ginnie Mae, Fannie Mae or
Freddie Mac Certificates, but also may be collateralized by whole loans or
Private Pass-Throughs (such collateral collectively hereinafter referred to as
"Mortgage Assets"). Multiclass pass-through securities are equity interests in a
trust composed of Mortgage Assets. Unless the context indicates otherwise, all
references herein to CMOs include multiclass pass-through securities. Payments
of principal of and interest on the Mortgage Assets, and any reinvestment income
thereon, provide the funds to pay debt service on the CMOs or make scheduled
distributions on the multiclass pass-through securities. CMOs in which the Fund
invests are issued by agencies or instrumentalities of the U.S. government. The
issuer of a series of CMOs may elect to be treated as a Real Estate Mortgage
Investment Conduit (a "REMIC"), which has certain special tax attributes.

In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, often referred to as a "tranche," is issued at a specific fixed
or floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semi-annual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a series of a CMO in innumerable
ways. In one structure, payments of principal, including any principal
prepayments, on the Mortgage Assets are applied to the classes of a CMO in
the order of their respective stated maturities or final distribution dates,
so that no payment of principal will be made on any class of CMOs until all
other classes having an earlier stated maturity or final distribution date
have been paid in full.

The Trust may also invest in, among others, parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date but may be retired earlier. PAC Bonds generally require payments of a
specified amount of principal on each payment date. PAC Bonds are always
parallel pay CMOs with the required principal payment on such securities having
the highest priority after interest has been paid to all classes.

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

INVESTMENT LIMITATIONS

The Fund will not borrow money except, under certain circumstances, the Fund may
borrow up to 10% of the value of its total assets.

The following limitation may be changed by the Directors without shareholder
approval. Shareholders will be notified before any material change in this
limitation becomes effective.

The Fund will not own securities of open-end or closed-end investment companies,
except under certain circumstances and subject to certain limitations not
exceeding 10% of its net assets.

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

The Fund's net asset value per Share fluctuates. The net asset value for Shares
is determined by adding the interest of the Class B Shares in the market value
of all securities and other assets of the Fund, subtracting the interest of the
Class B Shares in the liabilities of the Fund and those attributable to the
Class B Shares, and dividing the remainder by the number of Class B Shares
outstanding. The net asset value for Class B Shares may differ from that of
Class A Shares and Class C Shares 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.

INVESTING IN CLASS B SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

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

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

DIRECTLY FROM THE DISTRIBUTOR. An investor may place an order to purchase
Shares directly from Federated Securities Corp. once an account has been
established. To do so:

complete and sign the new account form available from the Fund;

enclose a check made payable to Fund for U.S. Government Securities
Inc.--Class B Shares; and

mail both to Federated Services Company, P.O. Box 8604, Boston, MA
02266-8604.

To purchase Shares directly from the distributor by wire, call the Fund. All
information needed will be taken over the telephone, and the order is considered
received when State Street Bank receives payment by wire. Federal funds should
be wired as follows: Federated Services Company, c/o State Street Bank and Trust
Company, Boston, Massachusetts 02105; Attention: Mutual Fund Servicing Division;
For Credit to: Fund for U.S. Government Securities, Inc.--Class B Shares; Title
or Name of Account; Wire Order Number and/or Account Number. Shares cannot be
purchased by wire on Columbus Day, Veteran's Day, or Martin Luther King Day.

MINIMUM INVESTMENT REQUIRED

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received.

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

CONVERSION OF CLASS B SHARES. Class B Shares will automatically convert into
Class A Shares at the end of the month seven years after the purchase date,
except as noted below, and will no longer be subject to a distribution services
fee (see "Other Classes of Shares"). Class B Shares acquired by exchange from
Class B Shares of another fund in the Liberty Family of Funds will convert into
Class A Shares based on the time of the initial purchase. Class B Shares
acquired through reinvestment of distributions will convert into Class A Shares
based on the date of the initial purchase to which such shares relate. For this
purpose, Class B Shares acquired through reinvestment of distributions will be
attributed to particular purchases of Class B Shares in accordance with such
procedures as the Directors may determine from time to time. The availability of
the conversion feature is subject to the granting of an exemptive order by the
Securities and Exchange Commission or the adoption of a rule permitting such
conversion. In the event that the exemptive order or rule ultimately issued by
the Securities and Exchange Commission requires any conditions additional to
those described in this prospectus, shareholders will be notified. The
conversion of Class B Shares to Class A Shares is subject to the continuing
availability of a ruling from the Internal Revenue Service or an opinion of
counsel that such conversions will not constitute taxable events for Federal tax
purposes. There can be no assurance that such ruling or opinion will be
available, and the conversion of Class B Shares to Class A Shares will not occur
if such ruling or opinion is not available. In such event, Class B Shares would
continue to be subject to higher expenses than Class A Shares for an indefinite
period.

SYSTEMATIC INVESTMENT PROGRAM

Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $100. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Shares at the net asset value next determined after an order is
received by the transfer agent. A shareholder may apply for participation in
this program through his financial institution or directly through the Fund.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Services Company maintains a Share
account for each shareholder. Share certificates are not issued unless requested
in writing to Federated Services Company.

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.

DIVIDENDS AND DISTRIBUTIONS

RETIREMENT PLANS

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

EXCHANGE PRIVILEGE
- --------------------------------------------------------------------------------

In order to provide greater flexibility to Fund shareholders whose investment
objectives have changed, Class B shareholders may exchange all or some of their
Shares for Class B Shares of other funds in the Liberty Family of Funds. (Not
all funds in the Liberty Family of Funds currently offer Class B Shares. Contact
your financial institution regarding the availability of other Class B Shares in
the Liberty Family of Funds.) Exchanges are made at net asset value without
being assessed a contingent deferred sales charge on the exchanged shares. To
the extent that a shareholder exchanges Shares for Class B Shares in other funds
in the Liberty Family of Funds, the time for which the exchanged-for shares were
held will be added, or tacked, to the time for which exchanged-from shares were
held for purposes of satisfying the applicable holding period.

REQUIREMENTS FOR EXCHANGE

Shareholders using this privilege must exchange Shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
the fund for which the exchange is being made.

This privilege is available to shareholders resident in any state in which the
Shares being acquired may be sold. Upon receipt of proper instructions and
required supporting documents, Shares submitted for exchange are redeemed and
the proceeds invested in Class B Shares of the other fund. The exchange
privilege may be terminated at any time. Shareholders will be notified of the
modification or termination of the exchange privilege. This privilege is not
available where redeemed Shares are assessed a redemption fee or similar charge.

Further information on the exchange privilege and prospectuses for the Liberty
Family of Funds are available by contacting the Fund.

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

Instructions for exchanges for the Liberty Family of Funds may be given in
writing or by telephone. Written instructions may require a signature guarantee.
Shareholders of the Fund may have difficulty in making exchanges by telephone
through brokers and other financial institutions during times of drastic
economic or market changes. If a shareholder cannot contact his broker or
financial institution by telephone, it is recommended that an exchange request
be made in writing and sent by overnight mail to Federated Services Company,
P.O. Box 8604, Boston, Massachusetts, 02266-8604.

TELEPHONE INSTRUCTIONS. Telephone instructions made by the investor may be
carried out only if a telephone authorization form completed by the investor is
on file with the Fund. If the instructions are given by a broker, a telephone
authorization form completed by the broker must be on file with the Fund. Shares
may be exchanged between two funds by telephone only if the two funds have
identical shareholder registrations.

Any Shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Services Company and deposited to the shareholder's
account before being exchanged. Telephone exchange instructions may be recorded.
Such instructions will be processed as of 4:00 p.m. (Eastern time) and must be
received by the transfer agent before that time for Shares to be exchanged the
same day. Shareholders exchanging into a Fund will not receive any dividend that
is payable to shareholders of record on that date. This privilege may be
modified or terminated at any time. If reasonable procedures are not followed by
the Fund, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.

REDEEMING CLASS B SHARES
- --------------------------------------------------------------------------------

The Fund redeems Shares at their net asset value, next determined after the Fund
receives the redemption request, less any applicable contingent deferred sales
charge (see "Contingent Deferred Sales Charge" below). Redemptions will be made
on days on which the Fund computes its net asset value. Redemptions can be made
through a financial institution or directly from the Fund. Redemption requests
must be received in proper form.

THROUGH A FINANCIAL INSTITUTION

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

DIRECTLY FROM THE FUND

BY TELEPHONE. Shareholders who have not purchased through a financial
institutions may redeem their Shares by telephoning the Fund. The proceeds will
be mailed to the shareholder's address of record or wire transferred to the
shareholder's account at a domestic commercial bank that is a member of the
Federal Reserve System, normally within one business day, but in no event longer
than seven days after the request. The miminum amount for a wire transfer is
$l,000. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, sharesholders would be promptly notified.

An authorization form permitting the transfer agent to accept telephone requests
must first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be considered.

Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

BY MAIL. Any shareholder may redeem Shares by sending a written request to the
transfer agent. The written request should include the shareholder's name and
class of shares name, the Fund name and class designation, the account number,
and the share or dollar amount requested, and should be signed exactly as the
Shares are registered.

a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

a savings bank or savings and loan association whose deposits are insured
by the Savings Association Insurance Fund ("SAIF"), which is administered
by the FDIC; or

any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Fund does not accept signatures guaranteed by a notary public.

Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.

CONTINGENT DEFERRED SALES CHARGE

Shareholders redeeming Shares from their Fund accounts within three full years
of the purchase date of those Shares will be charged a contingent deferred sales
charge by the Fund's distributor. Any applicable contingent deferred sales
charge will be imposed on the lesser of the net asset value of the redeemed
Shares at the time of purchase or the net asset value of the redeemed
Shares at the time of redemption in accordance with the following schedule:

<TABLE>
<CAPTION>
CONTINGENT DEFERRED
SHARES HELD SALES CHARGE
<S> <C>
Less than one year..................................................................... 3%
More than one year but less than two years............................................. 2%
More than two years but less than three years.......................................... 1%
More than three years.................................................................. None
</TABLE>

The contingent deferred sales charge will be deducted from the redemption
proceeds otherwise payable to the shareholder and will be retained by the
distributor. The contingent deferred sales charge will not be imposed with
respect to: (1) Shares acquired through the reinvestment of dividends or
distributions of long-term capital gains; and (2) Shares held for more than
three full years from the date of purchase. Redemptions will be processed in a
manner intended to maximize the amount of redemption which will not be subject
to a contingent deferred sales charge. In computing the amount of the applicable
contingent deferred sales charge, redemptions are deemed to have occurred in the
following order: (1) Shares acquired through the reinvestment of dividends and
long-term capital gains; (2) Shares held for more than three full years from the
date of purchase; (3) Shares held for fewer than three years on a first-in,
first-out basis. A contingent deferred sales charge is not assessed in
connection with an exchange of Fund Shares for shares of other Class B Shares of
funds in the Liberty Family of Funds (see "Exchanges for Shares of Other
Funds"). Any contingent deferred sales charge imposed at the time the
exchanged-for shares are redeemed is calculated as if the shareholder had held
the shares from the date on which he became a shareholder of the exchanged-from
shares. Moreover, the contingent deferred sales charge will be eliminated with
respect to certain redemptions (see "Elimination of Contingent Deferred Sales
Charge" below).

ELIMINATION OF CONTINGENT DEFERRED SALES CHARGE

The contingent deferred sales charge will be eliminated with respect to the
following redemptions:
(1) redemptions following the death or disability, as defined in Section
72(m)(7) of the Internal Revenue Code of 1986, of a shareholder; (2) redemptions
in connection with certain distributions from Individual Retirement Accounts,
qualified retirement plans or tax-sheltered annuities; and (3) involuntary
redemptions by the Fund of shares in shareholder accounts that do not comply
with the minimum balance requirements. In addition, to the extent that the
distributor does not make advance payments to certain financial institutions for
purchases made by their clients, no contingent deferred sales charge will be
imposed on redemptions of Shares held by Directors, employees and sales
representatives of the Fund, the distributor, or affiliates of the Fund or
distributor; employees of any financial institution that sells shares of the
Fund pursuant to a sales agreement with the distributor; and spouses and
children under the age of 21 of the aforementioned persons. Finally, no
contingent deferred sales charge will be imposed on the redemption of Shares
originally purchased through a bank trust department, an investment adviser
registered under the Investment Advisers Act of 1940, an insurance company, or
any other financial institution, to the extent that no payments were advanced
for purchases made through or by such entities. The Directors reserve the right
to discontinue elimination of the contingent deferred sales load. Shareholders
will be notified of such elimination. Any Shares purchased prior to
the termination of such waiver would have the contingent deferred sales charge
eliminated as provided in the Fund's prospectus at the time of the purchase of
the Shares. If a shareholder making a redemption qualifies for an elimination of
the contingent deferred sales charge, the shareholder must notify Federated
Securities Corp. or the transfer agent in writing that he is entitled to such
elimination.

SYSTEMATIC WITHDRAWAL PROGRAM

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account, except retirement plans, and pay the proceeds to
the shareholder if the account balance falls below the required minimum value of
$1,500. This requirement does not apply, however, if the balance falls below
$1,500 because of changes in the Fund's net asset value. Before Shares are
redeemed to close an account, the shareholder is notified in writing and allowed
30 days to purchase additional Shares to meet the minimum requirement.

FUND INFORMATION
- --------------------------------------------------------------------------------

MANAGEMENT OF THE FUND

OFFICERS AND DIRECTORS. Officers and Directors are listed with their addresses,
principal occupations, and present positions, including any affiliation with
Federated Advisers, Federated Investors, Federated Securities Corp., Federated
Administrative Services, Inc., and the Funds (as defined in the Combined
Statement of Additional Information).

<TABLE>
<CAPTION>
POSITION WITH
NAME AND ADDRESS THE FUND PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
John F. Donahue*\ Chairman and Chairman and Trustee, Federated Investors; Chairman and
Federated Investors Tower Director Trustee, Federated Adviser, Federated Management and
Pittsburgh, PA Federated Research; Director, AEtna Life and Casualty
Company; Chief Executive Officer and Director, Trustee, or
Managing General Partner of the Funds; formerly, Director,
The Standard First Insurance Company. Mr. Donahue is the
father of J. Christopher Donahue, President and Director of
the Fund.

J. Christopher Donahue* President President and Trustee, Federated Investors; Trustee,
Federated Investors Tower and Director Federated Advisers, Federated Management and Federated
Pittsburgh, PA Research; President and Director, Federated Administrative
Services, Inc.; President or Vice President of the Funds;
Director, Trustee, or Managing General Partner of some of
the Funds. Mr. Donahue is the son of John F. Donahue,
Chairman and Director of the Fund.

Lawrence D. Ellis, M.D. Director Hematologist, Oncologist, and Internist, Presbyterian and
Suite 1111 Montefiore Hospitals; Clinical Professor of Medicine and
3471 Fifth Avenue Trustee, University of Pittsburgh; Director, Trustee, or
Pittsburgh, PA Managing General Partner of the Funds.

Wesley W. Posvar Director Professor, Foreign Policy and Management Consultant;
1202 Cathedral Trustee, Carnegie Endowment for International Peace, RAND
of Learning Corporation, Online Computer Library Center, Inc., and U.S.
University of Pittsburgh Space Foundation; Chairman, Czecho Slovak Management Center;
Pittsburgh, PA Director, Trustee, or Managing General Partner of the Funds;
President Emeritus, University of Pittsburgh; formerly,
Chairman, National Advisory Council for Environmental Policy
& Technology.

Marjorie P. Smuts Director Public relations/marketing consultant; Director, Trustee, or
4905 Bayard Street Managing General Partner of the Funds.
Pittsburgh, PA

Edward C. Gonzales Vice President Vice President, Treasurer and Trustee, Federated Investors;
Federated Investors Tower and Treasurer Vice President and Treasurer, Federated Advisers, Federated
Pittsburgh, PA Management, and Federated Research; Executive Vice
President, Treasurer, and Director, Federated Securities
Corp.; Chairman, Treasurer, and Director, Federated
Administrative Services, Inc.; Trustee of some of the Funds;
Vice President and Treasurer of the Funds.

John W. McGonigle Vice President Vice President, Secretary, and Secretary, General Counsel
Federated Investors Tower and Trustee, Federated Investors; Vice President, Secretary
Pittsburgh, PA and Trustee, Federated Adviser, Federated Management, and
Federated Research; Executive Vice President, Secretary, and
Director, Federated Administrative Services, Inc.; Executive
Vice President and Director, Federated Securities Corp.;
Vice President and Secretary of the Funds.

*This Director is deemed to be an "interested person" of the Fund as
defined in the Investment Company Act of 1940.

\Members of the Fund's Executive Committee. The Executive Committee of the Board
of Directors handles the responsibilities of the Board of Directors between
meetings of the Board.

Officers and Directors own less than 1% of the Fund's outstanding shares.

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

<TABLE>
<CAPTION>
% OF AVERAGE
AVERAGE DAILY NET ASSETS DAILY NET ASSETS
<S> <C>
First $500 million .25 of 1%
Second $500 million .225 of 1%
Over $1 billion .20 of 1%
</TABLE>

Federated Advisers and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services
to a number of investment companies. Total assets under management or
administration by these and other subsidiaries of Federated Investors is
approximately $70 billion. Federated Investors, which was founded in 1956
as Federated Investors, Inc., develops and manages mutual funds primarily
for the financial industry. Federated Investors' track record of
competitive performance and its disciplined, risk averse investment
philosophy serve approximately 3,500 client institutions nationwide.
Through these same client institutions, individual shareholders also have
access to this same level of investment expertise.

Gary J. Madich has been the Fund's portfolio manager since February, 1987.
Mr. Madich joined Federated Investors in 1984 and has been a Senior Vice
President of the Fund's investment adviser since 1993. Mr. Madich served as
a Vice President of the Fund's investment adviser from 1988 until 1993. Mr.
Madich is a Chartered Financial Analyst and received his M.B.A. in Public
Finance from the University of Pittsburgh.

Kathleen M. Foody-Malus has been the Fund's co-portfolio manager since
July, 1993. Ms. Foody-Malus joined Federated Investors in 1983 and has been
a Vice President of the Fund's investment adviser since 1993. Ms.
Foody-Malus served as an Assistant Vice President of the investment adviser
from 1990 until 1992, and from 1986 until 1989 she acted as an investment
analyst. Ms. Foody-Malus received her M.B.A. in Accounting/Finance from the
University of Pittsburgh.

DISTRIBUTION OF CLASS B SHARES

The distributor will pay dealers an amount equal to 3% of the net asset value of
Shares purchased by their clients or customers. These payments will be made
directly by the distributor from its assets, and will not be made from the
assets of the Fund.

DISTRIBUTION AND SHAREHOLDER SERVICES PLANS. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
Class B Shares will pay to the distributor an amount computed at an annual rate
of .75% of the average daily net assets of Class B Shares to finance any
activity which is principally intended to result in the sale of Class B Shares
subject to the Distribution Plan.

Because distribution fees to be paid by the Fund to the distributor may not
exceed an annual rate of .75% of the Class B Shares' average daily net assets,
it will take the distributor a number of years to recoup the expenses it has
incurred for its distribution and distribution-related services pursuant to the
Plan.

The Distribution Plan is a compensation type Plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by Shares
under the Plan.

In addition, the Fund has adopted a Shareholder Services Plan (the "Services
Plan") under which it may make payments up to 0.25 of 1% of the average daily
net asset value of Class B Shares to obtain certain person services for
shareholders and the maintenance of shareholder accounts ("Shareholder
Services"). The Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
Federated Shareholder Services will either perform shareholder services directly
or will select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.

OTHER PAYMENTS TO FINANCIAL INSTITUTIONS. Certain financial institutions may be
compensated by the adviser or its affiliates for the continuing investment of
customers' assets in certain funds, including the Fund, advised by those
entities. These payments will be made directly by the distributor or adviser
from their assets, and will not be made from the assets of the Fund.
Furthermore, the Adviser or its affiliates may offer to pay a fee from their own
assets to financial institutions as financial assistance for providing
substantial marketing, sales and operational support to the distributor. The
support may include sponsoring sales, educational and training seminars for
their employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such assistance will be
predicated upon the amount of Shares the dealer sells or may sell, and/or upon
the type and nature of sales or operational support furnished by the dealer.

ADMINISTRATION OF THE FUND

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

<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET ASSETS
MAXIMUM ADMINISTRATIVE FEE OF FEDERATED FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.10 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

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

CUSTODIAN. State Street Bank and Trust Company, P.O. Box 8604, Boston
Massachusetts 02266-8604, is custodian for the securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is transfer agent for shares of the Fund and dividend
disbursing agent for the Fund.

INDEPENDENT AUDITORS. The independent auditors for the Fund are Deloitte &
Touche, 125 Summer Street, Boston, Massachusetts 02110.

EXPENSES OF THE FUND AND CLASS B SHARES

Holders of Shares pay their allocable portion of Fund and portfolio expenses.

The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: the cost of organizing the Fund and continuing
its existence; registering the Fund with Federal and state securities
authorities; Directors fees; auditors' fees; the cost of meetings of Directors;
legal fees of the Fund; association membership dues and such non-recurring and
extraordinary items as may arise from time to time.

At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Fund's Shareholder Services Plan and Distribution
Plan. However, the Directors reserve the right to allocate certain other
expenses to holders of Shares as it deems appropriate ("Class Expenses"). In any
case, Class Expenses would be limited to: distribution fees; transfer agent fees
as identified by the transfer agent as attributable to holders of Shares; fees
under the Fund's Shareholder Services Plan; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and to state securities commissions; expenses
related to administrative personnel and services as required to support holders
of Shares; legal fees relating solely to Shares; and Directors' fees incurred as
a result of issues relating solely to Shares.

SHAREHOLDER 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 each portfolio
or class in the Fund have equal voting rights, except that in matters affecting
only a particular portfilio or class, only shares of that portfolio or class are
entitled to vote.

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

FEDERAL INCOME TAX

PENNSYLVANIA CORPORATE AND PERSONAL PROPERTY TAXES

In the opinion of Houston, Houston & Donnelly, counsel to the Fund:

the Fund is subject to the Pennsylvania corporate franchise tax; and

Fund shares are exempt from personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania.

Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.

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

From time to time the Fund advertises its total return and yield for Class B
Shares.

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

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

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

Total return and yield will be calculated separately for Class A Shares, Class B
Shares, and Class C Shares. Because Class B Shares and Class C Shares are
subject to Rule 12b-1 fees and Services Plan fees, the yield for Class A Shares,
for the same period, may exceed that of Class B Shares and Class C Shares.
Depending on the dollar amount invested, and the time period for which
any particular class of shares is held, the total return for any particular
class may exceed that of another.

From time to time Fund may advertise the performance of Class A Shares, Class B
Shares, and Class C Shares using certain financial publications and/or compare
the performance of Class A Shares, Class B Shares and Class C Shares to certain
indices.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund presently offers Class A Shares, Class B Shares, and Class C Shares.

Class A Shares are sold primarily to customers of financial institutions subject
to a front-end sales charge of up to 4.50%. The Fund has also adopted a Services
Plan fee of up to 0.25 of 1% of the Class A Shares' average daily net assets
with respect to Class A Shares. Investments in Class A Shares are subject to a
minimum initial investment of $500, unless the investment is in a retirement
account, in which case the minimum investment is $50. Class A Shares are not
distributed pursuant to a Rule 12b-1 Plan, and therefore are not subject to a
distribution services fee.

Class C Shares are sold primarily to customers of financial institutions at net
asset value with no initial sales charge. Investments in Class C Shares are
distributed pursuant to a Rule 12b-1 Plan adopted by the Fund whereby the
distributor is paid a fee of up to .75 of 1%, in addition to a Shareholder
Services Plan of up to 0.25 of 1% of the Class C Shares' average daily net
assets. Investments in Class C Shares are subject to a minimum initial
investment of $1,500, unless the investment is in a retirement account, in which
case the minimum investment is $50.

The amount of dividends payable to Class A Shares will generally exceed that of
Class B Shares and Class C Shares by the difference between Class Expenses borne
by shares of each respective class.

The stated advisory fee is the same for all three classes of shares.

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
FINANCIAL HIGHLIGHTS
CLASS C SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1994*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 8.54
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------
Net investment income 0.54
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.63)
- --------------------------------------------------------------------------------------------------- ---------------
Total from investment operations (0.09)
- ---------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- ---------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.54)
- ---------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.02)***
- --------------------------------------------------------------------------------------------------- ---------------
Total distributions (0.56)
- --------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE, END OF PERIOD $ 7.89
- --------------------------------------------------------------------------------------------------- ---------------
TOTAL RETURN** (1.17)%
- ---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ---------------------------------------------------------------------------------------------------
Expenses 1.81%(a)
- ---------------------------------------------------------------------------------------------------
Net investment income 6.45%(a)
- ---------------------------------------------------------------------------------------------------
Expense waiver/reimbursement --
- ---------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $103,433
- ---------------------------------------------------------------------------------------------------
Portfolio turnover rate 149 %
- ---------------------------------------------------------------------------------------------------
</TABLE>

* Reflects operations for the period from April 26, 1993 (date of initial
public offering) to March 31, 1994.

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

(a) Computed on an annualized basis.

Further information about the Fund's performance is contained in the Fund's
Annual Report dated March 31, 1994, which can be obtained free of charge.

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
FINANCIAL HIGHLIGHTS
CLASS A SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Deloitte & Touche, the Fund's public
independent public auditors. Their report dated May 13, 1994 on the Fund's
financial statements for each of the ten years for the period ended March 31,
1994 is included in the Annual Report dated March 31, 1994, which is
incorporated by reference.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985*
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77 $ 8.37 $ 7.74
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 0.63 0.71 0.75 0.77 0.78 0.76 0.78 0.80 0.93 0.74
- --------------------
Net realized and
unrealized
gain/(loss) on
investments (0.61) (0.03) 0.08 0.19 0.21 (0.40) (0.15) (0.21) 0.46 0.64
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
Total from
investment
operations 0.02 0.68 0.83 0.96 0.99 0.36 0.63 0.59 1.39 1.38
- --------------------
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders from
net investment
income (0.63) (0.69) (0.73) (0.78) (0.77) (0.76) (0.78) (0.80) (0.99) (0.75)
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
NET ASSET VALUE, END
OF PERIOD $ 7.89 $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77 $ 8.37
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- -----------
TOTAL RETURN** 0.13% 8.31% 10.20% 12.12% 12.59% 4.47% 7.66% 7.23% 17.42% 18.39%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 0.88% 0.83% 0.91% 0.97% 0.96% 0.96% 0.96% 0.95% 0.91% 0.89%(a)
- --------------------
Net investment
income 7.50% 8.33% 8.69% 9.21% 9.32% 9.22% 9.31% 9.24% 10.51% 12.11%(a)
- --------------------
Expense waiver/
reimbursement -- -- -- -- 0.04% -- 0.01% 0.05% 0.13% 0.55%(a)
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets, end of
period
(000 omitted) $1,693,293 $1,844,712 $1,384,117 $1,133,017 $1,039,493 $1,054,055 $1,150,395 $1,193,389 $761,290 $156,834
- --------------------
Portfolio turnover
rate 149% 52% 43% 27% 98% 83% 72% 135% 179% 121%
- --------------------

<CAPTION>
JUNE 30,
1984
<S> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.45
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 0.92
- --------------------
Net realized and
unrealized
gain/(loss) on
investments (0.72)
- -------------------- -----------
Total from
investment
operations 0.20
- --------------------
LESS DISTRIBUTIONS
- --------------------
Dividends to
shareholders from
net investment
income (0.91)
- -------------------- -----------
NET ASSET VALUE, END
OF PERIOD $ 7.74
- -------------------- -----------
TOTAL RETURN** 2.27%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 1.15%
- --------------------
Net investment
income 11.16%
- --------------------
Expense waiver/
reimbursement 0.24%
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets, end of
period
(000 omitted) $47,215
- --------------------
Portfolio turnover
rate 117%
- --------------------
</TABLE>

* For the nine months ended March 31, 1985. The Fund changed its fiscal
year-end from June 30 to March 31, effective March 1, 1985.

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

(a)Computed on an annualized basis.

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

Further information about the Fund's performance is contained in the Fund's
Annual Report dated, March 31, 1994 which can be obtained free of charge.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.
CLASS B SHARES
PROSPECTUS

An Open-End, Diversified
Management Investment Company

August , 1994

8062807A-B (8/94)

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
COMBINED STATEMENT OF ADDITIONAL INFORMATION

This Combined Statement of Additional Information should be read with
the respective prospectus for Class A Shares, Class B Shares and Class
C Shares of Fund for U.S. Government Securities, Inc. (the "Fund")
dated August __, 1994. This Statement is not a prospectus itself. To
receive a copy of the prospectus for any class, write or call the
Fund.

LIBERTY CENTER
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated August __, 1994

[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------

INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------

Types of Investments 1
Stripped Mortgage-Related Securities 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 1
Lending of Portfolio Securities 2
Portfolio Turnover 2
Investment Limitations 2

THE FUNDS 3
- ---------------------------------------------------------------

Fund Ownership 3

INVESTMENT ADVISORY SERVICES 3
- ---------------------------------------------------------------

Adviser to the Fund 3
Advisory Fees 4

ADMINISTRATIVE SERVICES 4
- ---------------------------------------------------------------

BROKERAGE TRANSACTIONS 4
- ---------------------------------------------------------------

PURCHASING SHARES 5
- ---------------------------------------------------------------

Distribution of Shares 5

Distribution Plan (Class B and
Class C Shares Only)

and Shareholder Services Plans 5
Conversion to Federal Funds 5
Purchases by Sales Representatives, Fund
Directors, and Employees 5

DETERMINING NET ASSET VALUE 6
- ---------------------------------------------------------------

DETERMINING MARKET VALUE OF SECURITIES 6

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

REDEEMING SHARES 6
- ---------------------------------------------------------------

TAX STATUS 6
- ---------------------------------------------------------------

The Fund's Tax Status 6
Shareholder's Tax Status 6

TOTAL RETURN 6
- ---------------------------------------------------------------

YIELD 7
- ---------------------------------------------------------------

PERFORMANCE COMPARISONS 7
- ---------------------------------------------------------------

FINANCIAL STATEMENTS 8
- ---------------------------------------------------------------

GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------

The Fund was incorporated under the laws of the State of Maryland on June 9,
1969. On April 28, 1992, the shareholders of the Fund voted to permit the Fund
to offer separate series and classes of Shares. Shares of the Fund are offered
in three Classes, known as Class A Shares, Class B Shares, and Class C Shares
(individually, and collectively referred to as "Shares" as the context may
require). This statement of additional information relates to all three classes
of the above-mentioned Shares.

INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------

The Fund's investment objective is to provide current income. Current income
includes, in general, discount earned on U.S. Treasury bills and agency discount
notes, interest earned on all other U.S. government securities, and short-term
capital gains.

TYPES OF INVESTMENTS

The Fund invests only in U.S. government securities which are primary or direct
obligations of the U.S. government or its agencies or instrumentalities or which
are guaranteed by the U.S. government, its agencies or instrumentalities and in
certain collateralized mortgage obligations ("CMOs"). This investment policy and
the objective stated above cannot be changed without approval of shareholders.

STRIPPED MORTGAGE-RELATED SECURITIES

Some of the mortgage-related securities purchased by the Fund may represent an
interest solely in the principal repayments or solely in the interest payments
on mortgage-backed securities (stripped mortgage-backed securities or "SMBSs").
Due to the possibility of prepayments on the underlying mortgages, SMBSs may be
more interest-rate sensitive than other securities purchased by the Fund. If
prevailing interest rates fall below the level at which SMBSs were issued, there
may be substantial prepayments on the underlying mortgages, leading to the
relatively early prepayments of principal-only SMBSs and a reduction in the
amount of payments made to holders of interest-only SMBSs. It is possible that
the Fund might not recover its original investment on interest-only SMBSs if
there are substantial prepayments on the underlying mortgages. Therefore,
interest-only SMBSs generally increase in value as interest rates rise and
decrease in value as interest rates fall, counter to changes in value
experienced by most fixed income securities. The Fund's adviser intends to use
this characteristic of interest-only SMBSs to reduce the effects of interest
rate changes on the value of the Fund's portfolio, while continuing to pursue
current income.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in
when-issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.

These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. As a matter of investment practice which may be
changed without shareholder approval, settlement dates will occur within 120
days after entering into these transactions. The market values of the securities
purchased may vary from the purchase prices.

No fees or others expenses, other than normal transactions costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated at the trade date. These securities are marked to
market daily and maintained until the transaction is settled. The Fund may
engage in these transactions to an extent that would cause the segregation of an
amount up to 20% of the total value of its assets.

REPURCHASE AGREEMENTS

Repurchase Agreements are arrangements in which banks, broker/dealers, and other
recognized financial institutions sell U.S. government securities or
certificates of deposit to the fund and agreed at the time of sale to repurchase
them at a mutually agreed upon time and price. The Fund or its custodian will
take possession of the securities subject to repurchase agreements, and these
securities will be marked to market daily. To the extent that the original
seller does not repurchase the securities from the Fund, the Fund could receive
less than the repurchase price on any sale of such securities. In the event that
such a defaulting seller filed for bankruptcy or became insolvent, disposition
of such securities by the Fund might be delayed pending court action. The Fund
believes that under the regular procedures normally in effect for custody of the
Fund's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Fund and allow retention or
disposition of such securities. The Fund will only enter into repurchase
agreements with banks and other recognized financial institutions such as
broker/dealers which are deemed by the Fund's adviser to be creditworthy
pursuant to guidelines established by the Directors.

LENDING OF PORTFOLIO SECURITIES

The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any interest paid
on such securities. Loans are subject to termination at the option of the Fund
or the borrower. The Fund may pay reasonable administrative and custodial fees
in connection with a loan.

PORTFOLIO TURNOVER

The Fund's policy of managing its portfolio of U.S. government securities,
including the sale of securities held for a short period of time, to achieve its
investment objective of current income may result in high portfolio turnover.
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. For the fiscal years ended March 31, 1994,
1993, and 1992, the portfolio turnover rates were 149%, 52% and 43%,
respectively.

INVESTMENT LIMITATIONS

The Fund will not change any of the investment limitations described below
without approval of shareholders.

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities. The Fund may purchase and
dispose of U.S. government securities and CMOs before they are issued and
may also purchase and dispose of them on a delayed delivery basis.

BORROWING MONEY

In extraordinary or emergency situations, the Fund may borrow amounts not
in excess of 10% of its total assets taken at cost.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate its securities.

INVESTING IN COMMODITIES AND MINERALS

The Fund will not purchase or sell commodities or commodity contracts.

UNDERWRITING

The Fund will not underwrite any issue of securities.

BUYING OR SELLING REAL ESTATE

The Fund will not buy or sell real estate.

LENDING CASH OR SECURITIES

The Fund will not lend any 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 or Charter.

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

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund will not own securities of open-end investment companies, own
more than 3% of the total outstanding voting stock of any closed-end
investment company, invest more than 5% of its total assets in any
closed-end investment company, or invest more than 10% of its total
assets in closed-end investment companies in general. The Fund will
purchase securities of closed-end investment companies only in open-
market transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities are
acquired in a merger, consolidation, or acquisition of assets. The Fund
will initially bear its proportionate share of any fees and expenses paid
by open-end Funds in addition to the fees and expenses payable directly
by the Fund.

Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of 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.

With regard to "Selling Short and Buying on Margin", as described in the
above limitation, as an investment practice, the Fund intends to limit
such transactions to circumstances authorized for federal credit unions
under Section 107 of the Federal Credit Union Act and Part 703 of the
National Credit Union Administration regulations.

In order to comply with certain state restrictions, the Fund will not
invest in real estate limited partnerships or oil, gas, or mineral
leases.

The Fund did not borrow money in excess of 5% of the value of its net
assets during the last fiscal year and has no present intent to do so in
the coming fiscal year.

THE FUNDS
- --------------------------------------------------------------------------------

"The Funds" and "Funds" mean the following investment companies: American
Leaders Fund, Inc.; Annuity Management Series; Automated Cash Management Trust;
Automated Government Money Trust; California Municipal Cash Trust; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co.
Daily Passport Cash Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated Growth Trust;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government Bond Fund; First Priorty
Funds; Fixed Income Securities, Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fund for U.S. Government Securities, Inc.; Government Income Securities, Inc.;
High Yield Cash Trust; Insight Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities Fund, Inc.;
Liberty U.S. Government Money Market Trust; Liberty Term Trust, Inc. - 1999;
Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed Series Trust; Mark Twain
Funds; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; New York Municipal Cash Trust;
111 Corcoran Funds; Peachtree Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term Municipal Trust; Signet Select
Funds; Star Funds; The Starburst Funds; The Starburst Funds II; Stock and Bond
Fund, Inc.; Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments Trust;
Trademark Funds; Trust for Financial Institutions; Trust For Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; and World Investment Series, Inc.

FUND OWNERSHIP

As of May 9, 1994, there were no shareholders of record who owned 5% or more of
the outstanding Class A Shares of the Fund.

Merrill Lynch Pierce Fenner & Smith (as record owner holding Class C shares for
its clients), Jacksonville, Florida, owned approximately 5,374,245 shares (41%)
of the Fund as of May 9, 1994.

INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------

ADVISER TO THE FUND

The Fund's investment adviser is Federated Advisers (the "Adviser"). It is a
subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue. John F. Donahue, is
Chairman and Trustee of Federated Advisers, Chairman and Trustee of Federated
Investors, and Chairman and Director of the Fund. John A. Staley, IV, is
President and Trustee, Federated Advisers, Vice President and Trustee, Federated
Investors, Executive Vice President, Federated Securities Corp., and Vice
President of the Fund. J. Christopher Donahue is Trustee of Federated Advisers,
President and Trustee, Federated Investors, President and Trustee, Federated
Administrative Services, Trustee, Federated Services Company and President and
Director of the Fund. John W. McGonigle is Vice President, Secretary and Trustee
of Federated Advisers, Trustee, Vice President, Secretary and General Counsel,
Federated Investors, Executive Vice President, Secretary and Trustee, Federated
Administrative Services, Trustee, Federated Services Company, Executive Vice
President and Director, Federated Securities Corp., and Vice President and
Secretary of the Fund.

The adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon it by its contract with the Fund.

ADVISORY FEES

For its advisory services, Federated Advisers receives an annual investment
advisory fee as described in the respective prospectus for Class A Shares, Class
B Shares, and Class C Shares. During the fiscal years ended March 31, 1994, 1993
and 1992, the Fund's adviser earned $11,548,068, $10,204,383, and $8,308,696,
respectively.

STATE EXPENSE LIMITATIONS

The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the adviser will reimburse the
Fund for its expenses over the limitation.

If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.

This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.

ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------

Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus. Prior to March 1, 1994, Federated Administrative Services, Inc.,
also a subsidiary of Federated Investors, served as the Fund's administrator.
(For puposes of this Statement of Additional Information, Federated
Administrative Services and Federated Administrative Services, Inc., may
hereinafter collectively be referred to as, the "Administrators". For the fiscal
years ended March 31, 1994, the Administrators collectively earned $1,358,170.
For the fiscal years ended March 31, 1993, and 1992, Federated Administrative
Services, Inc., earned $953,665, and $897,160, respectively. John A. Staley, IV,
an officer of the Corporation and Dr. Henry J. Gailliot, an officer of Federated
Advisers, the adviser to the Fund, each hold approximately 15% and 20%,
respectively, of the outstanding common stock and serve as directors of
Commercial Data Services, Inc., a company which provides computer processing
services to Federated Administrative Services, Inc., and Federated
Administrative Services.

BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Board of Directors.

The adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the adviser
and may include:

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.

The adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.

Research services provided by brokers may be used by the adviser or by
affiliates of Federated Investors in advising Federated Funds and other
accounts. To the extent that receipt of these services may supplant services for
which the adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses.

For the fiscal years ended March 31, 1994, 1993 and 1992, the Fund paid no
brokerage commissions on brokerage transactions.

PURCHASING SHARES
- --------------------------------------------------------------------------------

Except under certain circumstances described in the prospectus, Shares are sold
at their net asset value (plus a sales charge on Class A Shares only) on days
the New York Stock Exchange is open for business. The procedure for purchasing
Shares is explained in the respective prospectus under "Investing in Class A
Shares," "Investing in Class B Shares," and "Investing in Class C Shares."

DISTRIBUTION OF SHARES

Federated Securities Corp. is the principal distributor for Shares. For the
fiscal years ended March 31, 1994, 1993 and 1992, prior to the creation of
separate classes of shares, the distributor was paid $3,894,642, $9,233,462 and
$5,174,823, respectively. During the same periods, the Distributor retained
$486,297, $974,516, and $742,252, respectively, after dealer concessions.

DISTRIBUTION PLAN (CLASS B AND CLASS C SHARES ONLY) AND SHAREHOLDER SERVICES
PLANS

These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services as appropriate, to stimulate
distribution activities and to cause services to be provided to shareholders by
a representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.

By adopting the Distribution Plan (Class B and Class C Shares only), the Board
of Directors expects that the Class B and Class C Shares of the Fund will be
able to achieve a more predictable flow of cash for investment purposes and to
meet redemptions. This will facilitate more efficient portfolio management and
assist the Fund in pursuing its investment objectives. By identifying potential
investors whose needs are served by the Fund's objectives, and properly
servicing these accounts, it may be possible to curb sharp fluctuations in rates
of redemptions and sales.

Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; and (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.

For the fiscal period ended March 31, 1994, payments in the amount of $456,268
were made pursuant to the Distribution Plan (Class C Shares only), all of which
was paid to the financial institutions. In addition, for this period, payments
in the amount of $1,399,887 were made pursuant to the Shareholder Services Plan
(Class C Shares only).

CONVERSION TO FEDERAL FUNDS

It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. Federated Services Company acts as the shareholder's agent in
depositing checks and converting them to federal funds.

PURCHASES BY SALES REPRESENTATIVES, FUND DIRECTORS, AND EMPLOYEES

Directors, employees, and sales representatives of the Fund, Federated Advisers,
and Federated Securities Corp. or their affiliates, or any investment dealer who
has a sales agreement with Federated Securities Corp. and their spouses and
children under 21, may buy Class A shares at net asset value without a sales
charge. Shares may also be sold without a sales charge to trusts or pension or
profit-sharing plans for these people.

These sales are made with the purchaser's written assurance that the purchase is
for investment purposes and that the securities will not be resold except
through redemption by the Fund.

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

Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the respective prospectus.

DETERMINING MARKET VALUE OF SECURITIES
- --------------------------------------------------------------------------------

Market values of the Fund's portfolio securities are determined as follows:

according to the last sale price on a national securities exchange, if
available;

in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices and for bonds and other fixed
income securities, as determined by an independent pricing service; or

for short-term obligations according to the prices as furnished by an
independent pricing service or for short-term obligations with remaining
maturities of 60 days or less at the time of purchase at amortized cost, or at
fair value as determined in good faith by the Board of Directors.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider yield, quality, coupon
rate, maturity, type of issue, trading characteristics, and other market data.

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

The Fund redeems shares at the next computed net asset value, less any
applicable contingent deferred sales charge, after the Fund receives the
redemption request. Redemption procedures are explained in the respective
prospectus under "Redeeming Class A Shares," "Redeeming Class B Shares," and
"Redeeming Class C Shares." Although the transfer agent does not charge for
telephone redemptions, it reserves the right to charge a fee for the cost of
wire-transferred redemptions of less than $5,000.

Class B and Class C Shares, redeemed within one to four years of purchase may be
subject to a contingent deferred sales charge. The amount of the contingent
deferred sales charge is based upon the amount of the administrative fee paid at
the time of purchase by the distributor to the financial institution for
services rendered, and the length of time the investor remains a shareholder in
the Fund. Should financial institutions elect to receive an amount less than the
administrative fee that is stated in the prospectus for servicing a particular
shareholder, the contingent deferred sales charge and/or holding period for that
particular shareholder will be reduced accordingly.

TAX STATUS
- --------------------------------------------------------------------------------

THE FUND'S TAX STATUS

The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:

derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;

derive less than 30% of its gross income from the sale of securities held less
than three months;

invest in securities within certain statutory limits; and

distribute to its shareholders at least 90% of its net income earned during the
year.

At March 31, 1994, the Fund had a capital loss carryover of $86,702,357 for
federal income tax purposes which will reduce the Fund's taxable income arising
from future net realized gain on investments.

SHAREHOLDERS' TAX STATUS

Shareholders are subject to federal income tax on dividends and capital gains
received as cash or additional shares. No portion of any income dividend paid by
the Fund is eligible for the dividends received deduction available to
corporations. These dividends, and any short-term capital gains, are taxable as
ordinary income.

CAPITAL GAINS

Shareholders will pay federal tax at capital gains rates on long-term
capital gains distributed to them regardless of how long they have held
Fund shares.

TOTAL RETURN
- --------------------------------------------------------------------------------

The Fund's average annual total return for Class A Shares for the one-year,
five-year, and ten-year periods ended March 31, 1994, were (4.37%), 7.57%, and
8.65%, respectively.

The Fund's cumulative total return for Class C Shares for the period from April
26, 1993 (date of initial public offering) to March 31, 1994 was (2.17%).

The average annual total return for each class of Shares of the Fund is the
average compounded rate of return for a given period that would equate a $1,000
initial investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned at the
end of the period by the net asset value 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
load adjusted over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions. Any applicable contingent
deferred sales charge deducted from the ending value of the investment based on
the lesser of the original purchase price or the net asset value of shares
redeemed.

Cumulative total return reflects the Class C Shares' total performance over a
specific period of time. This total return assumes and is reduced by the payment
of the maximum sales load and contingent deferred sales charge, if applicable.
The Class C Investment Shares' total return is representative of only eleven
months of investment activity since the start of performance.

YIELD
- --------------------------------------------------------------------------------

The Fund's yields for Class A Shares and Class C Shares were 5.32% and 4.73%,
respectively, for the thirty-day period ended March 31, 1994.

The yield for each class of Shares of the Fund is determined by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by any class of Shares over a thirty-day period by the
maximum offering price per share of the respective class on the last day of the
period. This value is annualized using semi-annual compounding. This means that
the amount of income generated during the thirty-day period is assumed to be
generated each month over a 12-month period and is reinvested every six months.
The yield does not necessarily reflect income actually earned by the Fund
because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to the shareholders.

To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in any class
of Shares, the performance will be reduced for those shareholders paying those
fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------

The performance of each of the classes of Shares depends upon such variables as:

portfolio quality;

average portfolio maturity;

type of instruments in which the portfolio is invested;

changes in interest rates and market value of portfolio securities;

changes in the Fund's or any class of Shares' expenses; and

various other factors.

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

Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:

SHEARSON LEHMAN GOVERNMENT (LT) INDEX, for example, is an index composed of
bonds issued by the U.S. government or its agencies which have at least $1
million outstanding in principal and which have maturities of ten years or
longer. Index figures are total return figures calculated monthly.

SALOMON BROTHERS 15 YEAR MORTGAGE BACKED SECURITIES INDEX includes the average
of all 15 year mortgage securities which include Federal Home Loan Mortgage
Corp. (Freddie Mac), Federal National Mortgage Association (Fannie Mae), and
Government National Mortgage Association (GNMA).

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.
mortgage funds category in advertising and sales literature.

LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is comprised of approximately
5,000 issues which include non-convertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed-rate,
non-convertible domestic bonds of companies in industry, public utilities, and
finance. Tracked by Shearson Lehman, the index has an average maturity of nine
years. It calculates total returns for one month, three month, twelve month,
and ten year periods, and year-to-date.

MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

Advertisements and other sales literature for any class of Shares may quote
total returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in any
of the class of Shares based on monthly reinvestment of dividends over a
specified period of time.

From time to time as it deems appropriate, the Fund may advertise the
performance of any class of Shares using charts, graphs and descriptions,
compared to Federally insured bank products including certificates of deposit
and time deposits and to money market funds using the Lipper Analytical Services
money market instruments average. In addition, advertising and sales literature
for the Fund may use charts and graphs to illustrate the principals of
dollar-cost averaging and may disclose the amount of dividends paid by the Fund
over certain periods of time.

Advertisements may quote performance information which does not reflect the
effect of the sales charge on Class A Shares.

FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------

The Financial Statements for the fiscal year end March 31, 1994, are
incorporated herein by reference to the Annual Report of the Fund dated March
31, 1994; (File Nos. 2-33490 and 811-1890). A copy of this report may be
obtained without charge by contacting the Fund at the address listed in any of
the prospectuses.

8062807B (5/94)

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits:

(a) Financial Statements. [Incorporated by reference
to the Annual Report of Registrant dated March 3l,
l994; File Nos. 2-33490 and 811-1890 (Class A
Shares and Class C Shares)]; [To be filed by
amendment (Class B Shares)];
(b) Exhibits and Consents:
(1) Articles of Incorporation of the Registrant
as amended (1.,3.,4.,5.,6.);
(2) (i)Copy of By-Laws of the Registrant
as amended (1.,3.,4.,6.);
(ii) Paper Copy of Amendment to By-
Laws effective August 28, 1987 (7.);
(3) Not applicable;
(4) (i) Copy of Specimen Certificate for
Class A Shares of Capital Stock of the
Registrant +;
(ii) Copy of Specimen Certificate for
Class B Shares of Capital Stock of the
Registrant +;
(iii) Copy of Specimen Certificate for
Class C Shares of Capital Stock of the
Registrant +;
(5) Conformed Copy of the new Investment Advisory
Contract of the Registrant (8.);
(6) Conformed Copy of Distributor's Contract of
the Registrant +;
(7) Not applicable;
(8) Conformed Copy of Custodian Agreement of the
Registrant +;

+ All exhibits have been filed electronically.

1. Response is incorporated by reference to Registrant's
Registration Statement on Form S-5 filed on June 13,
1969.(File No. 2-33490 and File No. 811-1890)
3. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 36 filed on August 29, 1983.(File
No. 2-33490 and File No. 811-1890)
4. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 40 filed on March 29, 1985.(File No.
2-33490 and File No. 811-1890)
5. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 42 filed on May 19, 1986.(File No. 2-
33490 and File No. 811-1890)
6. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 44 filed on July 14, 1987.(File No.
2-33490 and File No. 811-1890)
7. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 46 filed on July 19, 1988.(File
No. 2-33490 and File No. 81-1890)
8. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 49 filed on July 28, 1989.(File No.
2-33490 and File No. 811-1890)
10. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 55 filed on July 23, 1992.(File No.
2-33490 and File No. 811-1890)
11. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 56 filed on February 17, 1993.(File
No. 2-33490 and File No. 811-1890)
(9) (i) Conformed Copy of Transfer Agency
and Service Agreement +;
(ii) Copy of Proposed Form of
Shareholder Services Agreement (11.);
(iii) Conformed Copy of Shareholder
Services Plan +;
(10) Not applicable;
(11) Conformed Copy of Consent of Independent
Public Accountants +;
(12) Not applicable;
(13) Not applicable;
(14) Paper Copy of IRA Plan of the Registrant
(4.);
(15) (i) Conformed Copy of Rule 12b-1
Plan of the Registrant +;
(ii) Paper Copy of Dealer
Agreement of the Registrant (4);
(16) Paper Copy of Schedule for Computation
of Yield Calculation (6.);
(17) Conformed Copy of Power of Attorney +;
(18) Not Appplicable;

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

None.

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of May 9, 1994 __

Shares of Capital Stock
($1.00 par value)
Class A Shares 81,845
Class B Shares N/A
Class C Shares 2,042

Item 27. Indemnification: (10.)

Item 28. Business and Other Connections of Investment Adviser:

For a description of the other business of the
investment adviser, see the section entitled "Fund
Information - Management of the Fund" in Part A. The
affiliations with the Registrant of four of the
Trustees and one of the Officers of the investment
adviser are included in Part A of this Registration
Statement under "Management of the Fund - Officers and
Directors." The remaining Trustee of the investment
adviser, his positions 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.

+ All exhibits have been filed electronically.

4. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 40 filed on March 29, 1985.(File No.
2-33490 and File No. 811-1890)
6. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 44 filed on July 14, 1987.(File No.
2-33490 and File No. 811-1890)
11. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 56 filed on February 17, 1993.(File
No. 2-33490 and File No. 811-1890)
The remaining Officers of the investment adviser are:
Mark L. Mallon, William D. Dawson, III, and J. Thomas
Madden, Executive Vice Presidents; Henry J. Gailliot,
Senior Vice President-Economist; Peter R. Anderson,
Gary Madich and J. Alan Minteer, Senior Vice
Presidents; Randall A. Bauer, Jonathan C. Conley,
Deborah A. Cunningham, Mark Durbiano, Roger A. Early,
Kathleen Foody-Malus, David C. Francis, Thomas M.
Franks, Edward C. Gonzales, Jeff A. Kozemchek, Marian
R. Marinack, John W.
McGonigle, Gregory M. Melvin, Susan M. Nason, Mary Jo
Ochson, Robert J. Ostrowski, Charles A. Ritter, and
Christopher H. Wiles, Vice Presidents, Edward C.
Gonzales, Treasurer, and John W. McGonigle, Secretary.
The business address of each of the Officers of the
investment adviser is Federated Investors Tower,
Pittsburgh, PA 15222-3779. These individuals are also
officers of a majority of the investment advisers to
the Funds listed in Part B of this Registration
Statement under "The Funds."

Item 29. Principal Underwriters:

(a) Federated Securities Corp., the Distributor
for shares of the Registrant, also acts as
principal underwriter for the following open-end
investment companies: A.T. Ohio Tax-Free Money
Fund; Alexander Hamilton Funds; American Leaders
Fund, Inc.; Annuity Management Series; Automated
Cash Management Trust; Automated Government Money
Trust; BankSouth Select Funds; BayFunds; The
Biltmore Funds; The Biltmore Municipal Funds; The
Boulevard Funds; California Municipal Cash Trust;
Cambridge Series Trust; Cash Trust Series, Inc.;
Cash Trust Series II; DG Investor Series; Edward D.
Jones & Co. Daily Passport Cash Trust; FT Series,
Inc.; Federated ARMs Fund; Federated Exchange
Fund, Ltd.; Federated GNMA Trust; Federated
Government Trust; Federated Growth Trust; Federated
High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index
Trust; Federated Intermediate Government Trust;
Federated Master Trust; Federated Municipal Trust;
Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust;
Federated U.S. Government Bond Fund; Financial
Reserves Fund; First Priority Funds; First Union
Funds; Fixed Income Securities, Inc.; Fortress
Adjustable Rate U.S. Government Fund, Inc.;
Fortress Municipal Income Fund, Inc.; Fortress
Utility Fund, Inc.; Fountain Square Funds;
Government Income Securities, Inc.; High Yield Cash
Trust; Independence One Mutual Funds; Insight
Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; Investment
Series Funds, Inc.; Investment Series Trust;
Liberty Equity Income Fund, Inc.; Liberty High
Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government
Money Market Trust; Liberty Utility Fund, Inc.;
Liquid Cash Trust; Mark Twain Funds; Marshall
Funds, Inc.; Money Market Management, Inc.; Money
Market Obligations Trust; Money Market Trust; The
Monitor Funds; Municipal Securities Income Trust;
New York Municipal Cash Trust; 111 Corcoran Funds;
The Planters Funds; Portage Funds; RIMCO Monument
Funds; The Shawmut Funds; Short-Term Municipal
Trust; Signet Select Funds; SouthTrust Vulcan
Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Tower Mutual Funds; Trademark
Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury
Obligations; Vision Fiduciary Funds, Inc.; and
Vision Group of Funds, Inc.

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

(b)

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

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

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

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

John A. Staley, IV Executive Vice President Vice
President
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.

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

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

Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.

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

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

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

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

(b)

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

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

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

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

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

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

James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

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

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

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

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

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

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

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

David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

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

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

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

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

Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

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

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

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

Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779

Item 30. Location of Accounts and Records:

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

Registrant Federated Investors Tower
Pittsburgh, Pennsylvania 15222-
3779

Federated Services Company P.O. Box 8604
("Transfer Agent, Dividend Boston, Massachusetts 02266-8604
Disbursing Agent and Portfolio
Recordkeeper")

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

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

State Street Bank and Trust Company P.O. Box 8604
("Custodian") Boston, Massachusetts 02266-8604

Item 31. Management Services: Not applicable.

Item 32. Undertakings:

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

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.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant, FUND FOR
U.S. GOVERNMENT SECURITIES, INC. has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 25th day of
May, 1994.

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
May 25, 1994

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

NAME TITLE DATE

By: /s/Charles H. Field
Charles H. Field Attorney In Fact May 25, 1994
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

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

J. Christopher Donohue* President

Edward C. Gonzales* Vice President and Treasurer
(Principal Financial and
Accounting Officer)

John T. Conroy, Jr.* Director

William J. Copeland* Director

James E. Dowd* Director

Lawrence D. Ellis, M.D.* Director

Edward L. Flaherty, Jr.* Director

Peter E. Madden* Director

Gregor F. Meyer* Director

Wesley W. Posvar* Director

Marjorie P. Smuts* Director

* By Power of Attorney

Exhibit 11 under Form N-1A
Exhibit 23 under Item
601/Reg S-K

DELOITTE & TOUCHE

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in this Post-
Effective Amendment No. 60 to Registration Statement No. 2-
33490 of FUND FOR U.S. GOVERNMENT SECURITIES, INC. of our
report dated May 13, 1994, appearing in the Annual Report to
Shareholders for the year ended March 31, 1994, and to the
references to us under the heading "Financial Highlights" in
the Prospectus, which is a part of such Registration
Statement.

By: DELOITTE & TOUCHE
Deloitte & Touche
Certified Public Accountants

Boston, Massachusetts
May 24, 1994

Exhibit 17 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 Fund for U.S. Government Securities, Inc. and
the Assistant General Counsel of Federated Investors, and
each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution
for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with
the Securities and Exchange Commission pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934
and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure
system known as EDGAR; and to file the same, with all
exhibits thereto and other documents 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
thereiwth, as fully to all intents and purposes as each of
them might or could do in person, hereby ratifying and
purposes as each of them might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue
thereof.

SIGNATURES TITLE DATE

/s/ John F. Donahue Chairman 7/10/92
John F. Donahue (Chief Executive Officer)
and Director

/s/ J. Christopher Donahue President and Director 7/10/92
J. Christopher Donahue

/s/ Edward C. Gonzales Vice President & Treasurer 7/10/92
(Principal Financial and
Accounting Officer)

/s/ William J. Copeland Director 7/10/92
William J. Copeland

/s/ James E. Dowd Director 7/10/92
James E. Dowd

/s/ Lawrence D. Ellis, M.D. Director 7/10/92
Lawrence D. Ellis, M.D.

/s/ Edward L. Flaherty, Jr. Director 7/10/92
Edward L. Flaherty, Jr.

/s/ Gregor F. Meyer Director 7/10/92
Gregor F. Meyer

/s/ Marjorie P. Smuts Director 7/10/92
Marjorie P. Smuts

/s/ Peter E. Madden Director 7/10/92
Peter E. Madden

/s/ John T. Conroy, Jr. Director 7/10/92
John T. Conroy, Jr.

Sworn to and subscribed before me this 10th day of July,
1992.

/s/ Elaine T Polens
Notary Public

Exhibit 4(i) under Form N-1A
Exhibit 3(c)(i) under Item 601/Reg. S-K

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

(CLASS A SHARES)
PORTFOLIO

Number Shares
_____ _____

Account No. Alpha CodeIncorporated Under the See Reverse Side
for
Laws of the State of Certain
Definitions
Maryland

THIS IS TO CERTIFY THAT is the owner of

CUSIP 360799100

Fully Paid and Non-Assessable Shares of Common Stock of FUND FOR
U.S. GOVERNMENT SECURITIES, INC. (Class A Shares) hereafter
called the "Fund", transferable on the books of the Fund by the
owner in person or by duly authorized attorney upon surrender of
this certificate properly endorsed.

The shares represented hereby are issued and shall be held
subject to the provisions of the Articles of Incorporation and
By-Laws of the Fund and all amendments thereto, all of which the
holder by acceptance hereof assents.

This Certificate is not valid unless countersigned by the
Transfer Agent.

IN WITNESS WHEREOF, the Fund has caused this Certificate to
be signed in its name by its proper officers and to be sealed
with its seal.

Dated: FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Corporate Seal
1969
Maryland

/s/ J. Christopher Donahue
/s/ John F. Donahue
President Chairman

Countersigned: FEDERATED
SERVICES COMPANY (Boston)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the
face of this Certificate, shall be construed as though they were
written out in full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF
GIFT MIN ACT-...Custodian...
TEN ENT - as tenants by the entireties
(Cust) (Minors)
JT TEN - as joint tenants with right
of under Uniform Gifts to Minors
survivorship and not as tenants
Act.............................
in common (State)

Additional abbreviations may also be used though not in the
above list.

For value received__________ hereby sell, assign, and
transfer unto

Please insert social security or other
identifying number of assignee

______________________________________

________________________________________________________________
_____________
(Please print or typewrite name and address, including zip code,
of assignee)

________________________________________________________________
_____________

________________________________________________________________
______ shares

of common stock represented by the within Certificate, and do

hereby irrevocably constitute and appoint

__________________________________________

________________________________________________________________

_____________

to transfer the said shares on the books of the within named

Fund with full power of substitution in the premises.

Dated______________________
NOTICE:___________________________
___
The signature to this assignment
must correspond with the name as
written upon the face of the
certificate in every particular,
without alteration or enlargement
or any change whatever.

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by an (color) one-half inch
border.

B. The number in the upper left-hand corner and the number
of shares in the upper right-hand corner are outlined by
octagonal boxes.

C. The cusip number in the middle right-hand area of the
page is boxed.

D. The Maryland corporate seal appears in the bottom middle
of the page.

Page Two

The social security or other identifying number of the
assignee appears in a box in the top-third upper-left area of
the page.

Exhibit 4(ii) under Form N-1A
Exhibit 3(c)(ii) under Item 601/Reg. S-K

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

(CLASS B SHARES)
PORTFOLIO

Number Shares
_____ _____

Account No. Alpha CodeIncorporated Under the See Reverse Side
for
Laws of the State of Certain
Definitions
Maryland

THIS IS TO CERTIFY THAT is the owner of

CUSIP (to be applied for)

Fully Paid and Non-Assessable Shares of Common Stock of FUND FOR
U.S. GOVERNMENT SECURITIES, INC. (Class B Shares) hereafter
called the "Fund", transferable on the books of the Fund by the
owner in person or by duly authorized attorney upon surrender of
this certificate properly endorsed.

This Certificate is not valid unless countersigned by the
Transfer Agent.

IN WITNESS WHEREOF, the Fund has caused this Certificate to
be signed in its name by its proper officers and to be sealed
with its seal.

Dated: FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Corporate Seal
1969
Maryland

/s/ J. Christopher Donahue
/s/ John F. Donahue
President Chairman

Additional abbreviations may also be used though not in the
above list.

For value received__________ hereby sell, assign, and
transfer unto

Please insert social security or other
identifying number of assignee

______________________________________

________________________________________________________________
_____________
(Please print or typewrite name and address, including zip code,
of assignee)

________________________________________________________________
_____________

________________________________________________________________
______ shares

of common stock represented by the within Certificate, and do

hereby irrevocably constitute and appoint

__________________________________________

________________________________________________________________

_____________

to transfer the said shares on the books of the within named

Fund with full power of substitution in the premises.

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by an (color) one-half inch
border.

B. The number in the upper left-hand corner and the number
of shares in the upper right-hand corner are outlined by
octagonal boxes.

C. The cusip number in the middle right-hand area of the
page is boxed.

D. The Maryland corporate seal appears in the bottom middle
of the page.

Page Two

The social security or other identifying number of the
assignee appears in a box in the top-third upper-left area of
the page.

Exhibit 4(iii) under Form N-1A
Exhibit 3(c)(iii) under Item 601/Reg. S-K

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

(CLASS C SHARES)
PORTFOLIO

Number Shares
_____ _____

Account No. Alpha CodeIncorporated Under the See Reverse Side
for
Laws of the State of Certain
Definitions
Maryland

THIS IS TO CERTIFY THAT is the owner of

CUSIP 360799209

Fully Paid and Non-Assessable Shares of Common Stock of FUND FOR
U.S. GOVERNMENT SECURITIES, INC. (Class C Shares) hereafter
called the "Fund", transferable on the books of the Fund by the
owner in person or by duly authorized attorney upon surrender of
this certificate properly endorsed.

This Certificate is not valid unless countersigned by the
Transfer Agent.

IN WITNESS WHEREOF, the Fund has caused this Certificate to
be signed in its name by its proper officers and to be sealed
with its seal.

Dated: FUND FOR U.S. GOVERNMENT SECURITIES, INC.
Corporate Seal
1969
Maryland

/s/ J. Christopher Donahue
/s/ John F. Donahue
President Chairman

Additional abbreviations may also be used though not in the
above list.

For value received__________ hereby sell, assign, and
transfer unto

Please insert social security or other
identifying number of assignee

______________________________________

________________________________________________________________
_____________
(Please print or typewrite name and address, including zip code,
of assignee)

________________________________________________________________
_____________

________________________________________________________________
______ shares

of common stock represented by the within Certificate, and do

hereby irrevocably constitute and appoint

__________________________________________

________________________________________________________________

_____________

to transfer the said shares on the books of the within named

Fund with full power of substitution in the premises.

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by an (color) one-half inch
border.

B. The number in the upper left-hand corner and the number
of shares in the upper right-hand corner are outlined by
octagonal boxes.

C. The cusip number in the middle right-hand area of the
page is boxed.

D. The Maryland corporate seal appears in the bottom middle
of the page.

Page Two

The social security or other identifying number of the
assignee appears in a box in the top-third upper-left area of
the page.

-1-
Exhibit 6 under Form N-1A
Exhibit 1(i) under Item 601/Reg. S-K

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
DISTRIBUTOR'S CONTRACT

AGREEMENT made this 1st day of March, 1993, by and
between FUND FOR U.S. GOVERNMENT SECURITIES, INC. (the
"Corporation"), a Maryland Corporation, and FEDERATED
SECURITIES CORP. ("FSC"), a Pennsylvania Corporation.

In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties
hereto as follows:

1 The Corporation hereby appoints FSC as its agent
to sell and distribute shares of the Corporation which may
be offered in one or more series (the "Funds") consisting of
one or more classes (the "Classes") of shares (the
"Shares"), as described and set forth on one or more
exhibits to this Agreement, at the current offering price
thereof as described and set forth in the current
Prospectuses of the Corporation. FSC hereby accepts such
appointment and agrees to provide such other services for
the Corporation, if any, and accept such compensation from
the Corporation, if any, as set forth in the applicable
exhibit to this Agreement.

2 The sale of any Shares may be suspended without
prior notice whenever in the judgment of the Corporation it
is in its best interest to do so.

3 Neither FSC nor any other person is authorized by
the Corporation to give any information or to make any
representation relative to any Shares other than those
contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the
Securities and Exchange Commission, as the same may be
amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the
Corporation. FSC agrees that any other information or
representations other than those specified above which it or
any dealer or other person who purchases Shares through FSC
may make in connection with the offer or sale of Shares,
shall be made entirely without liability on the part of the
Corporation. No person or dealer, other than FSC, is
authorized to act as agent for the Corporation for any
purpose. FSC agrees that in offering or selling Shares as
agent of the Corporation, it will, in all respects, duly
conform to all applicable state and federal laws and the
rules and regulations of the National Association of
Securities Dealers, Inc., including its Rules of Fair
Practice. FSC will submit to the Corporation copies of all
sales literature before using the same and will not use such
sales literature if disapproved by the Corporation.

4. This Agreement is effective with respect to each
Class as of the date of execution of the applicable exhibit
and shall continue in effect with respect to each Class
presently set forth on an exhibit and any subsequent Classes
added pursuant to an exhibit during the initial term of this
Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such
continuance is approved at least annually by the Directors
of the Corporation including a majority of the members of
the Board of Directors of the Corporation who are not
interested persons of the Corporation and have no direct or
indirect financial interest in the operation of any
Distribution Plan relating to the Corporation or in any
related documents to such Plan ("Disinterested Directors")
cast in person at a meeting called for that purpose. If a
Class is added after the first annual approval by the
Directors as described above, this Agreement will be
effective as to that Class upon execution of the applicable
exhibit and will continue in effect until the next annual
approval of this Agreement by the Directors and thereafter
for successive periods of one year, subject to approval as
described above.

5. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of
any penalty, by the vote of a majority of the Disinterested
Directors or by a majority of the outstanding voting
securities of the particular Fund or Class on not more than
sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to
a particular Fund or Class by FSC on sixty (60) days'
written notice to the Corporation.

6. This Agreement may not be assigned by FSC and
shall automatically terminate in the event of an assignment
by FSC as defined in the Investment Company Act of 1940, as
amended, provided, however, that FSC may employ such other
person, persons, corporation or corporations as it shall
determine in order to assist it in carrying out its duties
under this Agreement.

7. FSC shall not be liable to the Corporation 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 by this
Agreement.

8. This Agreement may be amended at any time by
mutual agreement in writing of all the parties hereto,
provided that such amendment is approved by the Directors of
the Corporation including a majority of the Disinterested
Directors of the Corporation cast in person at a meeting
called for that purpose.

9. This Agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of
Pennsylvania.

10. (a) Subject to the conditions set forth below,
the Corporation agrees to indemnify and hold harmless FSC
and each person, if any, who controls FSC within the meaning
of Section 15 of the Securities Act of 1933 and Section 20
of the Securities Act of 1934, as amended, against any and
all loss, liability, claim, damage and expense whatsoever
(including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing
or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based
upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any
Prospectuses or SAIs (as from time to time amended and
supplemented) or the omission or alleged omission therefrom
of a material fact required to be stated therein or
necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon
and in conformity with written information furnished to the
Corporation about FSC by or on behalf of FSC expressly for
use in the Registration Statement, any Prospectuses and SAIs
or any amendment or supplement thereof.

If any action is brought against FSC or any
controlling person thereof with respect to which indemnity
may be sought against the Corporation pursuant to the
foregoing paragraph, FSC shall promptly notify the
Corporation in writing of the institution of such action and
the Corporation shall assume the defense of such action,
including the employment of counsel selected by the
Corporation and payment of expenses. FSC or any such
controlling person thereof shall have the right to employ
separate counsel in any such case, but the fees and expenses
of such counsel shall be at the expense of FSC or such
controlling person unless the employment of such counsel
shall have been authorized in writing by the Corporation in
connection with the defense of such action or the
Corporation shall not have employed counsel to have charge
of the defense of such action, in any of which events such
fees and expenses shall be borne by the Corporation.
Anything in this paragraph to the contrary notwithstanding,
the Corporation shall not be liable for any settlement of
any such claim of action effected without its written
consent. The Corporation agrees promptly to notify FSC of
the commencement of any litigation or proceedings against
the Corporation or any of its officers or Directors or
controlling persons in connection with the issue and sale of
Shares or in connection with the Registration Statement,
Prospectuses, or SAIs.

(b) FSC agrees to indemnify and hold harmless the
Corporation, each of its Directors, each of its officers who
have signed the Registration Statement and each other
person, if any, who controls the Corporation within the
meaning of Section 15 of the Securities Act of 1933, but
only with respect to statements or omissions, if any, made
in the Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof in reliance upon, and in
conformity with, information furnished to the Corporation
about FSC by or on behalf of FSC expressly for use in the
Registration Statement or any Prospectus, SAI, or any
amendment or supplement thereof. In case any action shall
be brought against the Corporation or any other person so
indemnified based on the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof, and
with respect to which indemnity may be sought against FSC,
FSC shall have the rights and duties given to the
Corporation, and the Corporation and each other person so
indemnified shall have the rights and duties given to FSC by
the provisions of subsection (a) above.

(c) Nothing herein contained shall be deemed to
protect any person against liability to the Corporation or
its shareholders to which such person would otherwise be
subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of the duties of such person
or by reason of the reckless disregard by such person of the
obligations and duties of such person under this Agreement.

(d) Insofar as indemnification for liabilities
may be permitted pursuant to Section 17 of the Investment
Company Act of 1940, as amended, for Directors, officers,
FSC and controlling persons of the Corporation by the
Corporation pursuant to this Agreement, the Corporation is
aware of the position of the Securities and Exchange
Commission as set forth in the Investment Company Act
Release No. IC-11330. Therefore, the Corporation undertakes
that in addition to complying with the applicable provisions
of this Agreement, in the absence of a final decision on the
merits by a court or other body before which the proceeding
was brought, that an indemnification payment will not be
made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by
a majority vote of a quorum of non-party Disinterested
Directors, or (ii) by independent legal counsel in a written
opinion that the indemnitee was not liable for an act of
willful misfeasance, bad faith, gross negligence or reckless
disregard of duties. The Corporation further undertakes
that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate)
against an officer, Director, FSC or controlling person of
the Corporation will not be made absent the fulfillment of
at least one of the following conditions: (i) the indemnitee
provides security for his undertaking; (ii) the Corporation
is insured against losses arising by reason of any lawful
advances; or (iii) a majority of a quorum of non-party
Disinterested Directors or independent legal counsel in a
written opinion makes a factual determination that there is
reason to believe the indemnitee will be entitled to
indemnification.

11. If at any time the Shares of any Fund are offered
in two or more Classes, FSC agrees to adopt compliance
standards as to when a class of shares may be sold to
particular investors.

12. This Agreement will become binding on the parties
hereto upon the execution of the attached exhibits to the
Agreement.
Exhibit A
to the
Distributor's Contract

Fund for U.S. Government Securities, Inc.

Class A Shares

In consideration of the mutual covenants set forth in
the Distributor's Contract dated March 1, 1993, between Fund
for U.S. Government Securities, Inc. and Federated
Securities Corp., Fund for U.S. Government Securities, Inc.
executes and delivers this Exhibit on behalf of the Funds,
and with respect to the separate Class of Shares thereof,
first set forth in this Exhibit.

Witness the due execution hereof this 1st day of March,
1993.

ATTEST: FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

/s/ John W. McGonigle By:/s/ J. Christopher Donahue
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/s/ S. Elliott Cohan By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
Exhibit B
to the
Distributor's Contract

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

Class C Shares

The following provisions are hereby incorporated and
made part of the Distributor's Contract dated the 1st day of
March, 1993, between Fund for U.S. Government Securities,
Inc. and Federated Securities Corp. with respect to Classes
of the Funds set forth above.

1. The Corporation hereby appoints FSC to engage in
activities principally intended to result in the sale of
shares of the above-listed Classes ("Shares"). Pursuant to
this appointment, FSC is authorized to select a group of
brokers ("Brokers") to sell Shares at the current offering
price thereof as described and set forth in the respective
prospectuses of the Corporation, and to render
administrative support services to the Corporation and its
shareholders. In addition, FSC is authorized to select a
group of administrators ("Administrators") to render
administrative support services to the Corporation and its
shareholders.

2. Administrative support services may include, but
are not limited to, the following functions: 1) account
openings: the Broker or Administrator communicates account
openings via computer terminals located on the Broker's or
Administrator's premises; 2) account closings: the Broker
or Administrator communicates account closings via computer
terminals; 3) enter purchase transactions: purchase
transactions are entered through the Broker's or
Administrator's own personal computer or through the use of
a toll-free telephone number; 4) enter redemption
transactions: Broker or Administrator enters redemption
transactions in the same manner as purchases; 5) account
maintenance: Broker or Administrator provides or arranges
to provide accounting support for all transactions. Broker
or Administrator also wires funds and receives funds for
Corporation share purchases and redemptions, confirms and
reconciles all transactions, reviews the activity in the
Corporation's accounts, and provides training and
supervision of its personnel; 6) interest posting: Broker
or Administrator posts and reinvests dividends to the
Corporation's accounts; 7) prospectus and shareholder
reports: Broker or Administrator maintains and distributes
current copies of prospectuses and shareholder reports; 8)
advertisements: the Broker or Administrator continuously
advertises the availability of its services and products; 9)
customer lists: the Broker or Administrator continuously
provides names of potential customers; 10) design services:
the Broker or Administrator continuously designs material to
send to customers and develops methods of making such
materials accessible to customers; and 11) consultation
services: the Broker or Administrator continuously provides
information about the product needs of customers.

3. During the term of this Agreement, the Corporation
will pay FSC for services pursuant to this Agreement, a
monthly fee computed at the annual rate of .75 of 1% of the
average aggregate net asset value of the shares of the Class
C Shares and Select Shares held during the month. For the
month in which this Agreement becomes effective or
terminates, there shall be an appropriate proration of any
fee payable on the basis of the number of days that the
Agreement is in effect during the month.

4. FSC may from time-to-time and for such periods as
it deems appropriate reduce its compensation to the extent
any Classes' expenses exceed such lower expense limitation
as FSC may, by notice to the Corporation, voluntarily
declare to be effective.

5. FSC will enter into separate written agreements
with various firms to provide certain of the services set
forth in Paragraph 1 herein. FSC, in its sole discretion,
may pay Brokers and Administrators a periodic fee in respect
of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon
which such fees will be paid shall be determined from time
to time by FSC in its sole discretion.

6. FSC will prepare reports to the Board of Directors
of the Corporation on a quarterly basis showing amounts
expended hereunder including amounts paid to Brokers and
Administrators and the purpose for such payments.

Witness the due execution hereof this 4th day of May,
1993.

ATTEST: FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

/s/ John W. McGonigle By:/s/ J. Christopher Donahue
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/s/ S. Elliott Cohan By:/s/ Edward C. Gonzales
Secretary President
(SEAL)

Exhibit C
to the
Distributor's Contract

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

Select Shares

In consideration of the mutual covenants set forth in
the Distributor's Contract dated March 1, 1993, between Fund
for U.S. Government Securities, Inc. and Federated
Securities Corp., Fund for U.S. Government Securities, Inc.
executes and delivers this Exhibit on behalf of the Funds,
and with respect to the separate Classes of Shares thereof,
first set forth in this Exhibit.

Witness the due execution hereof this 1st day of
December, 1993.

ATTEST: FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

/s/ John W. McGonigle By:/s/ J. Christopher Donahue
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/s/ S. Elliott Cohan By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
Exhibit D
to the
Distributor's Contract

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

Class B Shares

3. During the term of this Agreement, the Corporation
will pay FSC for services pursuant to this Agreement, a
monthly fee computed at the annual rate of .75 of 1% of the
average aggregate net asset value of the shares of the Class
B Shares held during the month. For the month in which this
Agreement becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the
number of days that the Agreement is in effect during the
month.

In consideration of the mutual covenants set forth in
the Distributor's Contract dated March 1, 1993, between Fund
for U.S. Government Securities, Inc. and Federated
Securities Corp., Fund for U.S. Government Securities, Inc.
executes and delivers this Exhibit on behalf of the Funds,
and with respect to the separate Classes of Shares thereof,
first set forth in this Exhibit.

Witness the due execution hereof this 1st day of June,
1994.

ATTEST: FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

By:
Secretary President
(SEAL)

Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

CUSTODIAN CONTRACT
Between

FEDERATED INVESTMENT COMPANIES
and
STATE STREET BANK AND TRUST COMPANY
and
FEDERATED SERVICES COMPANY

TABLE OF CONTENTS

Page
1. Employment of Custodian and Property to be Held by It 1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 6
2.5 Payments for Shares 7
2.6 Availability of Federal Funds 7
2.7 Collection of Income 7
2.8 Payment of Fund Moneys 8
2.9 Liability for Payment in Advance of
Receipt of Securities Purchased. 9
2.10 Payments for Repurchases or Redemptions
of Shares of a Fund 9
2.11 Appointment of Agents 10
2.12 Deposit of Fund Assets in Securities System 10
2.13 Segregated Account 12
2.14 Joint Repurchase Agreements 13
2.15 Ownership Certificates for Tax Purposes 13
2.16 Proxies 13
2.17 Communications Relating to Fund Portfolio
Securities 13
2.18 Proper Instructions 14
2.19 Actions Permitted Without Express Authority 14
2.20 Evidence of Authority 15
2.21 Notice to Trust by Custodian Regarding
Cash Movement. 15
3. Duties of Custodian With Respect to the Books of
Account and
Calculation of Net Asset Value and Net Income 15
4. Records 16
5. Opinion of Funds' Independent Public
Accountants/Auditors 16
6. Reports to Trust by Independent Public
Accountants/Auditors 17
7. Compensation of Custodian 17
8. Responsibility of Custodian 17
9. Effective Period, Termination and Amendment 19
10. Successor Custodian 20
11. Interpretive and Additional Provisions 21
12. Massachusetts Law to Apply 22
13. Notices 22
14. Counterparts 22
15. Limitations of Liability 22

CUSTODIAN CONTRACT

This Contract between those INVESTMENT COMPANIES listed on
Exhibit 1, as it may be amended from time to time, (the
"Trust"), which may be Massachusetts business trusts or
Maryland corporations or have such other form of
organization as may be indicated, on behalf of the
portfolios (hereinafter collectively called the "Funds" and
individually referred to as a "Fund") of the Trust, having
its principal place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, and STATE
STREET BANK AND TRUST COMPANY, a Massachusetts trust
company, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian", and FEDERATED SERVICES COMPANY, a
Delaware Fusiness trust company, having its principal place
of business at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, hereinafter called ("Company").

WITNESSETH: That in consideration of the mutual covenants a
nd agreements hereinafter contained, the parties hereto
agree as follows:

1. Employment of Custodian and Property to be Held by It

The Trust hereby employs the Custodian as the custodian
of the assets of each of the Funds of the Trust. Except
as otherwise expressly provided herein, the securities
and other assets of each of the Funds shall be segregated
from the assets of each of the other Funds and from all
other persons and entities. The Trust will deliver to
the Custodian all securities and cash owned by the Funds
and all payments of income, payments of principal or
capital distributions received by them with respect to
all securities owned by the Funds from time to time, and
the cash consideration received by them for shares
("Shares") of beneficial interest/capital stock of the
Funds as may be issued or sold from time to time. The
Custodian shall not be responsible for any property of
the Funds held or received by the Funds and not delivered
to the Custodian.

Upon receipt of "Proper Instructions" (within the meaning
of Section 2.18), the Custodian shall from time to time
employ one or more sub-custodians upon the terms
specified in the Proper Instructions, provided that the
Custodian shall have no more or less responsibility or
liability to the Trust or any of the Funds on account of
any actions or omissions of any sub-custodian so employed
than any such sub-custodian has to the Custodian.

2.Duties of the Custodian With Respect to Property of the Fu
nds Held by the Custodian

2.1Holding Securities. The Custodian shall hold and phys
ically segregate for the account of each Fund all non-
cash property, including all securities owned by each
Fund, other than securities which are maintained
pursuant to Section 2.12 in a clearing agency which
acts as a securities depository or in a book-entry
system authorized by the U.S. Department of the
Treasury, collectively referred to herein as
"Securities System", or securities which are subject
to a joint repurchase agreement with affiliated funds
pursuant to Section 2.14. The Custodian shall
maintain records of all receipts, deliveries and
locations of such securities, together with a current
inventory thereof, and shall conduct periodic
physical inspections of certificates representing
stocks, bonds and other securities held by it under
this Contract in such manner as the Custodian shall
determine from time to time to be advisable in order
to verify the accuracy of such inventory. With
respect to securities held by any agent appointed
pursuant to Section 2.11 hereof, and with respect to
securities held by any sub-custodian appointed
pursuant to Section 1 hereof, the Custodian may rely
upon certificates from such agent as to the holdings
of such agent and from such sub-custodian as to the
holdings of such sub-custodian, it being understood
that such reliance in no way relieves the Custodian
of its responsibilities under this Contract. The
Custodian will promptly report to the Trust the
results of such inspections, indicating any shortages
or discrepancies uncovered thereby, and take
appropriate action to remedy any such shortages or
discrepancies.

2.2Delivery of Securities. The Custodian shall release a
nd deliver securities owned by a Fund held by the
Custodian or in a Securities System account of the
Custodian only upon receipt of Proper Instructions,
which may be continuing instructions when deemed
appropriate by the parties, and only in the following
cases:

(1)Upon sale of such securities for the account of a
Fund and receipt of payment therefor;

(2)Upon the receipt of payment in connection with any
repurchase agreement related to such securities
entered into by the Trust;

(3)In the case of a sale effected through a Securitie
s System, in accordance with the provisions of
Section 2.12 hereof;

(4)To the depository agent in connection with tender
or other similar offers for portfolio securities
of a Fund, in accordance with the provisions of
Section 2.17 hereof;

(5)To the issuer thereof or its agent when such secur
ities are called, redeemed, retired or otherwise
become payable; provided that, in any such case,
the cash or other consideration is to be
delivered to the Custodian;

(6)To the issuer thereof, or its agent, for transfer
into the name of a Fund or into the name of any
nominee or nominees of the Custodian or into the
name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or
nominee name of any sub-custodian appointed
pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other
evidence representing the same aggregate face
amount or number of units; provided that, in any
such case, the new securities are to be delivered
to the Custodian;

(7)Upon the sale of such securities for the account o
f a Fund, to the broker or its clearing agent,
against a receipt, for examination in accordance
with "street delivery custom"; provided that in
any such case, the Custodian shall have no
responsibility or liability for any loss arising
from the delivery of such securities prior to
receiving payment for such securities except as
may arise from the Custodian's own failure to act
in accordance with the standard of reasonable
care or any higher standard of care imposed upon
the Custodian by any applicable law or regulation
if such above-stated standard of reasonable care
were not part of this Contract;

(8)For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization,
reorganization or readjustment of the securities
of the issuer of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit agreement;
provided that, in any such case, the new
securities and cash, if any, are to be delivered
to the Custodian;

(9)In the case of warrants, rights or similar securit
ies, the surrender thereof in the exercise of
such warrants, rights or similar securities or
the surrender of interim receipts or temporary
securities for definitive securities; provided
that, in any such case, the new securities and
cash, if any, are to be delivered to the
Custodian;

(10)For delivery in connection with any loans of port
folio securities of a Fund, but only against
receipt of adequate collateral in the form of (a)
cash, in an amount specified by the Trust, (b)
certificated securities of a description
specified by the Trust, registered in the name of
the Fund or in the name of a nominee of the
Custodian referred to in Section 2.3 hereof or in
proper form for transfer, or (c) securities of a
description specified by the Trust, transferred
through a Securities System in accordance with
Section 2.12 hereof;

(11)For delivery as security in connection with any b
orrowings requiring a pledge of assets by a Fund,
but only against receipt of amounts borrowed,
except that in cases where additional collateral
is required to secure a borrowing already made,
further securities may be released for the
purpose;

(12)For delivery in accordance with the provisions of
any agreement among the Trust or a Fund, the
Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934, as amended,
(the "Exchange Act") and a member of The National
Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The
Options Clearing Corporation and of any
registered national securities exchange, or of
any similar organization or organizations,
regarding escrow or other arrangements in
connection with transactions for a Fund;

(13)For delivery in accordance with the provisions of
any agreement among the Trust or a Fund, the
Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act,
relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any
Contract Market, or any similar organization or
organizations, regarding account deposits in
connection with transaction for a Fund;

(14)Upon receipt of instructions from the transfer ag
ent ("Transfer Agent") for a Fund, for delivery
to such Transfer Agent or to the holders of
shares in connection with distributions in kind,
in satisfaction of requests by holders of Shares
for repurchase or redemption; and

(15)For any other proper corporate purpose, but only
upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of
the Executive Committee of the Trust on behalf of
a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant
Secretary, specifying the securities to be
delivered, setting forth the purpose for which
such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of
such securities shall be made.

2.3 Registration of Securities. Securities held by the C
ustodian (other than bearer securities) shall be
registered in the name of a particular Fund or in the
name of any nominee of the Fund or of any nominee of
the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has
authorized in writing the appointment of a nominee to
be used in common with other registered investment
companies affiliated with the Fund, or in the name or
nominee name of any agent appointed pursuant to
Section 2.11 or in the name or nominee name of any
sub-custodian appointed pursuant to Section 1. All
securities accepted by the Custodian on behalf of a
Fund under the terms of this Contract shall be in
"street name" or other good delivery form.

2.4 Bank Accounts. The Custodian shall open and maintain
a separate bank account or accounts in the name of
each Fund, subject only to draft or order by the
Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received
by it from or for the account of each Fund, other
than cash maintained in a joint repurchase account
with other affiliated funds pursuant to Section 2.14
of this Contract or by a particular Fund in a bank
account established and used in accordance with
Rule 17f-3 under the Investment Company Act of 1940,
as amended, (the "1940 Act"). Funds held by the
Custodian for a Fund may be deposited by it to its
credit as Custodian in the Banking Department of the
Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or
trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank
or trust company and the funds to be deposited with
each such bank or trust company shall be approved by
vote of a majority of the Board of Trustees/Directors
("Board") of the Trust. Such funds shall be
deposited by the Custodian in its capacity as
Custodian for the Fund and shall be withdrawable by
the Custodian only in that capacity. If requested by
the Trust, the Custodian shall furnish the Trust, not
later than twenty (20) days after the last business
day of each month, an internal reconciliation of the
closing balance as of that day in all accounts
described in this section to the balance shown on the
daily cash report for that day rendered to the Trust.

2.5Payments for Shares. The Custodian shall make such ar
rangements with the Transfer Agent of each Fund, as
will enable the Custodian to receive the cash
consideration due to each Fund and will deposit into
each Fund's account such payments as are received
from the Transfer Agent. The Custodian will provide
timely notification to the Trust and the Transfer
Agent of any receipt by it of payments for Shares of
the respective Fund.

2.6Availability of Federal Funds. Upon mutual agreement
between the Trust and the Custodian, the Custodian
shall make federal funds available to the Funds as of
specified times agreed upon from time to time by the
Trust and the Custodian in the amount of checks,
clearing house funds, and other non-federal funds
received in payment for Shares of the Funds which are
deposited into the Funds' accounts.

2.7 Collection of Income.

(1)The Custodian shall collect on a timely basis all
income and other payments with respect to
registered securities held hereunder to which
each Fund shall be entitled either by law or
pursuant to custom in the securities business,
and shall collect on a timely basis all income
and other payments with respect to bearer
securities if, on the date of payment by the
issuer, such securities are held by the Custodian
or its agent thereof and shall credit such
income, as collected, to each Fund's custodian
account. Without limiting the generality of the
foregoing, the Custodian shall detach and present
for payment all coupons and other income items
requiring presentation as and when they become
due and shall collect interest when due on
securities held hereunder. The collection of
income due the Funds on securities loaned
pursuant to the provisions of Section 2.2 (10)
shall be the responsibility of the Trust. The
Custodian will have no duty or responsibility in
connection therewith, other than to provide the
Trust with such information or data as may be
necessary to assist the Trust in arranging for
the timely delivery to the Custodian of the
income to which each Fund is properly entitled.

(2)The Custodian shall promptly notify the Trust when
ever income due on securities is not collected in
due course and will provide the Trust with
monthly reports of the status of past due income
unless the parties otherwise agree.

2.8Payment of Fund Moneys. Upon receipt of Proper Instru
ctions, which may be continuing instructions when
deemed appropriate by the parties, the Custodian
shall pay out moneys of each Fund in the following
cases only:

(1)Upon the purchase of securities, futures contracts
or options on futures contracts for the account
of a Fund but only (a) against the delivery of
such securities, or evidence of title to futures
contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the
United States or abroad which is qualified under
the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this
purpose) registered in the name of the Fund or in
the name of a nominee of the Custodian referred
to in Section 2.3 hereof or in proper form for
transfer, (b) in the case of a purchase effected
through a Securities System, in accordance with
the conditions set forth in Section 2.12 hereof
or (c) in the case of repurchase agreements
entered into between the Trust and any other
party, (i) against delivery of the securities
either in certificate form or through an entry
crediting the Custodian's account at the Federal
Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase for
the account of the Fund of securities owned by
the Custodian along with written evidence of the
agreement by the Custodian to repurchase such
securities from the Fund;

(2)In connection with conversion, exchange or surrend
er of securities owned by a Fund as set forth in
Section 2.2 hereof;

(3)For the redemption or repurchase of Shares of a Fu
nd issued by the Trust as set forth in Section
2.10 hereof;

(4)For the payment of any expense or liability incurr
ed by a Fund, including but not limited to the
following payments for the account of the Fund:
interest; taxes; management, accounting, transfer
agent and legal fees; and operating expenses of
the Fund, whether or not such expenses are to be
in whole or part capitalized or treated as
deferred expenses;

(5)For the payment of any dividends on Shares of a Fu
nd declared pursuant to the governing documents
of the Trust;

(6)For payment of the amount of dividends received in
respect of securities sold short;

(7)For any other proper purpose, but only upon receip
t of, in addition to Proper Instructions, a
certified copy of a resolution of the Executive
Committee of the Trust on behalf of a Fund
signed by an officer of the Trust and certified
by its Secretary or an Assistant Secretary,
specifying the amount of such payment, setting
forth the purpose for which such payment is to be
made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom
such payment is to be made.

2.9Liability for Payment in Advance of Receipt of Securit
ies Purchased. In any and every case where payment
for purchase of securities for the account of a Fund
is made by the Custodian in advance of receipt of the
securities purchased, in the absence of specific
written instructions from the Trust to so pay in
advance, the Custodian shall be absolutely liable to
the Fund for such securities to the same extent as if
the securities had been received by the Custodian.

2.10Payments for Repurchases or Redemptions of Shares of
a Fund. From such funds as may be available for the
purpose of repurchasing or redeeming Shares of a
Fund, but subject to the limitations of the
Declaration of Trust/Articles of Incorporation and
any applicable votes of the Board of the Trust
pursuant thereto, the Custodian shall, upon receipt
of instructions from the Transfer Agent, make funds
available for payment to holders of shares of such
Fund who have delivered to the Transfer Agent a
request for redemption or repurchase of their shares
including without limitation through bank drafts,
automated clearinghouse facilities, or by other
means. In connection with the redemption or
repurchase of Shares of the Funds, the Custodian is
authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a
commercial bank designated by the redeeming
shareholders.

2.11Appointment of Agents. The Custodian may at any time
or times in its discretion appoint (and may at any
time remove) any other bank or trust company which is
itself qualified under the 1940 Act and any
applicable state law or regulation, to act as a
custodian, as its agent to carry out such of the
provisions of this Section 2 as the Custodian may
from time to time direct; provided, however, that the
appointment of any agent shall not relieve the
Custodian of its responsibilities or liabilities
hereunder.

2.12Deposit of Fund Assets in Securities System. The Cus
todian may deposit and/or maintain securities owned
by the Funds in a clearing agency registered with the
Securities and Exchange Commission ("SEC") under
Section 17A of the Exchange Act, which acts as a
securities depository, or in the book-entry system
authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to
herein as "Securities System" in accordance with
applicable Federal Reserve Board and SEC rules and
regulations, if any, and subject to the following
provisions:

(1)The Custodian may keep securities of each Fund in a Securities System
provided that such securities are represented in an account
("Account")
of the Custodian in the Securities System which shall not include any
assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;

(2)The records of the Custodian with respect to securities of the Funds
which are maintained in a Securities System shall identify by book-
entry those securities belonging to each Fund;

(3)The Custodian shall pay for securities purchased for the account of
each
Fund upon (i) receipt of advice from the Securities System that such
securities have been transferred to the Account, and (ii) the making
of
an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Fund. The Custodian shall transfer
securities sold for the account of a Fund upon (i) receipt of advice
from the Securities System that payment for such securities has been
transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Fund. Copies of all advices from the Securities
System
of transfers of securities for the account of a Fund shall identify
the
Fund, be maintained for the Fund by the Custodian and be provided to
the Trust at its request. Upon request, the Custodian shall furnish
the Trust confirmation of each transfer to or from the account of a
Fund in the form of a written advice or notice and shall furnish to
the
Trust copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of a Fund.

(4)The Custodian shall provide the Trust with any report obtained by the
Custodian on the Securities System's accounting system, internal
accounting control and procedures for safeguarding securities
deposited
in the Securities System;

(5)The Custodian shall have received the initial certificate, required by
Section 9 hereof;

(6)Anything to the contrary in this Contract notwithstanding, the
Custodian
shall be liable to the Trust for any loss or damage to a Fund
resulting
from use of the Securities System by reason of any negligence,
misfeasance or misconduct of the Custodian or any of its agents or of
any of its or their employees or from failure of the Custodian or any
such agent to enforce effectively such rights as it may have against
the Securities System; at the election of the Trust, it shall be
entitled to be subrogated to the rights of the Custodian with respect
to any claim against the Securities System or any other person which
the Custodian may have as a consequence of any such loss or damage if
and to the extent that a Fund has not been made whole for any such
loss
or damage.

(7)The authorization contained in this Section 2.12 shall not relieve the
Custodian from using reasonable care and diligence in making use of
any
Securities System.

2.13Segregated Account. The Custodian shall upon receipt
of Proper Instructions establish and maintain a
segregated account or accounts for and on behalf of
each Fund, into which account or accounts may be
transferred cash and/or securities, including
securities maintained in an account by the Custodian
pursuant to Section 2.12 hereof, (i) in accordance
with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under
the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with
the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the
Commodity Futures Trading Commission or any
registered contract market), or of any similar
organization or organizations, regarding escrow or
other arrangements in connection with transactions
for a Fund, (ii) for purpose of segregating cash or
government securities in connection with options
purchased, sold or written for a Fund or commodity
futures contracts or options thereon purchased or
sold for a Fund, (iii) for the purpose of compliance
by the Trust or a Fund with the procedures required
by any release or releases of the SEC relating to the
maintenance of segregated accounts by registered
investment companies and (iv) for other proper
corporate purposes, but only, in the case of clause
(iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the
Board or of the Executive Committee signed by an
officer of the Trust and certified by the Secretary
or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.

2.14Joint Repurchase Agreements. Upon the receipt of Pro
per Instructions, the Custodian shall deposit and/or
maintain any assets of a Fund and any affiliated
funds which are subject to joint repurchase
transactions in an account established solely for
such transactions for the Fund and its affiliated
funds. For purposes of this Section 2.14,
"affiliated funds" shall include all investment
companies and their portfolios for which subsidiaries
or affiliates of Federated Investors serve as
investment advisers, distributors or administrators
in accordance with applicable exemptive orders from
the SEC. The requirements of segregation set forth
in Section 2.1 shall be deemed to be waived with
respect to such assets.

2.15Ownership Certificates for Tax Purposes. The Custodi
an shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in
connection with receipt of income or other payments
with respect to securities of a Fund held by it and
in connection with transfers of securities.

2.16Proxies. The Custodian shall, with respect to the se
curities held hereunder, cause to be promptly
executed by the registered holder of such securities,
if the securities are registered otherwise than in
the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which
such proxies are to be voted, and shall promptly
deliver to the Trust such proxies, all proxy
soliciting materials and all notices relating to such
securities.

2.17Communications Relating to Fund Portfolio Securities.
The Custodian shall transmit promptly to the Trust
all written information (including, without
limitation, pendency of calls and maturities of
securities and expirations of rights in connection
therewith and notices of exercise of call and put
options written by the Fund and the maturity of
futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the
securities being held for the Fund. With respect to
tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written
information received by the Custodian from issuers of
the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or
exchange offer. If the Trust desires to take action
with respect to any tender offer, exchange offer or
any other similar transaction, the Trust shall notify
the Custodian in writing at least three business days
prior to the date on which the Custodian is to take
such action. However, the Custodian shall
nevertheless exercise its best efforts to take such
action in the event that notification is received
three business days or less prior to the date on
which action is required.

2.18Proper Instructions. Proper Instructions as used thr
oughout this Section 2 means a writing signed or
initialed by one or more person or persons as the
Board shall have from time to time authorized. Each
such writing shall set forth the specific transaction
or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the
Custodian reasonably believes them to have been given
by a person previously authorized in Proper
Instructions to give such instructions with respect
to the transaction involved, and (b) the Trust
promptly causes such oral instructions to be
confirmed in writing. Upon receipt of a certificate
of the Secretary or an Assistant Secretary as to the
authorization by the Board of the Trust accompanied
by a detailed description of procedures approved by
the Board, Proper Instructions may include
communications effected directly between electro-
mechanical or electronic devices provided that the
Board and the Custodian are satisfied that such
procedures afford adequate safeguards for a Fund's
assets.

2.19Actions Permitted Without Express Authority. The Cus
todian may in its discretion, without express
authority from the Trust:

(1)make payments to itself or others for minor expens
es of handling securities or other similar items
relating to its duties under this Contract,
provided that all such payments shall be
accounted for to the Trust in such form that it
may be allocated to the affected Fund;

(2)surrender securities in temporary form for securit
ies in definitive form;

(3)endorse for collection, in the name of a Fund, che
cks, drafts and other negotiable instruments; and

(4)in general, attend to all non-discretionary detail
s in connection with the sale, exchange,
substitution, purchase, transfer and other
dealings with the securities and property of each
Fund except as otherwise directed by the Trust.

2.20Evidence of Authority. The Custodian shall be protec
ted in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper
reasonably believed by it to be genuine and to have
been properly executed on behalf of a Fund. The
Custodian may receive and accept a certified copy of
a vote of the Board of the Trust as conclusive
evidence (a) of the authority of any person to act in
accordance with such vote or (b) of any determination
of or any action by the Board pursuant to the
Declaration of Trust/Articles of Incorporation as
described in such vote, and such vote may be
considered as in full force and effect until receipt
by the Custodian of written notice to the contrary.

2.21Notice to Trust by Custodian Regarding Cash Movement.
The Custodian will provide timely notification to the
Trust of any receipt of cash, income or payments to
the Trust and the release of cash or payment by the
Trust.

3.Duties of Custodian With Respect to the Books of Account a
nd Calculation of Net Asset Value and Net Income.

The Custodian shall cooperate with and supply necessary info
rmation to the entity or entities appointed by the Board
of the Trust to keep the books of account of each Fund
and/or compute the net asset value per share of the
outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such
books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also
calculate daily the net income of a Fund as described in
the Fund's currently effective prospectus and Statement
of Additional Information ("Prospectus") and shall advise
the Trust and the Transfer Agent daily of the total
amounts of such net income and, if instructed in writing
by an officer of the Trust to do so, shall advise the
Transfer Agent periodically of the division of such net
income among its various components. The calculations of
the net asset value per share and the daily income of a
Fund shall be made at the time or times described from
time to time in the Fund's currently effective
Prospectus.

4. Records.

The Custodian shall create and maintain all records
relating to its activities and obligations under this
Contract in such manner as will meet the obligations of
the Trust and the Funds under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-
1 and 31a-2 thereunder, and specifically including
identified cost records used for tax purposes. All such
records shall be the property of the Trust and shall at
all times during the regular business hours of the
Custodian be open for inspection by duly authorized
officers, employees or agents of the Trust and employees
and agents of the SEC. In the event of termination of
this Contract, the Custodian will deliver all such
records to the Trust, to a successor Custodian, or to
such other person as the Trust may direct. The Custodian
shall supply daily to the Trust a tabulation of
securities owned by a Fund and held by the Custodian and
shall, when requested to do so by the Trust and for such
compensation as shall be agreed upon between the Trust
and the Custodian, include certificate numbers in such
tabulations.

5. Opinion of Funds' Independent Public
Accountants/Auditors.

The Custodian shall take all reasonable action, as the
Trust may from time to time request, to obtain from year
to year favorable opinions from each Fund's independent
public accountants/auditors with respect to its
activities hereunder in connection with the preparation
of the Fund's registration statement, periodic reports,
or any other reports to the SEC and with respect to any
other requirements of such Commission.

6. Reports to Trust by Independent Public
Accountants/Auditors.

The Custodian shall provide the Trust, at such times as
the Trust may reasonably require, with reports by
independent public accountants/auditors for each Fund on
the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts
and options on futures contracts, including securities
deposited and/or maintained in a Securities System,
relating to the services provided by the Custodian for
the Fund under this Contract; such reports shall be of
sufficient scope and in sufficient detail, as may
reasonably be required by the Trust, to provide
reasonable assurance that any material inadequacies would
be disclosed by such examination and, if there are no
such inadequacies, the reports shall so state.

7. Compensation of Custodian.

The Custodian shall be entitled to reasonable
compensation for its services and expenses as Custodian,
as agreed upon from time to time between Company and the
Custodian.

8. Responsibility of Custodian.

The Custodian shall be held to a standard of reasonable
care in carrying out the provisions of this Contract;
provided, however, that the Custodian shall be held to
any higher standard of care which would be imposed upon
the Custodian by any applicable law or regulation if such
above stated standard of reasonable care was not part of
this Contract. The Custodian shall be entitled to rely
on and may act upon advice of counsel (who may be counsel
for the Trust) on all matters, and shall be without
liability for any action reasonably taken or omitted
pursuant to such advice, provided that such action is not
in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence.
Subject to the limitations set forth in Section 15
hereof, the Custodian shall be kept indemnified by the
Trust but only from the assets of the Fund involved in
the issue at hand and be without liability for any action
taken or thing done by it in carrying out the terms and
provisions of this Contract in accordance with the above
standards.

In order that the indemnification provisions contained in
this Section 8 shall apply, however, it is understood
that if in any case the Trust may be asked to indemnify
or save the Custodian harmless, the Trust shall be fully
and promptly advised of all pertinent facts concerning
the situation in question, and it is further understood
that the Custodian will use all reasonable care to
identify and notify the Trust promptly concerning any
situation which presents or appears likely to present the
probability of such a claim for indemnification. The
Trust shall have the option to defend the Custodian
against any claim which may be the subject of this
indemnification, and in the event that the Trust so
elects it will so notify the Custodian and thereupon the
Trust shall take over complete defense of the claim, and
the Custodian shall in such situation initiate no further
legal or other expenses for which it shall seek
indemnification under this Section. The Custodian shall
in no case confess any claim or make any compromise in
any case in which the Trust will be asked to indemnify
the Custodian except with the Trust's prior written
consent.

Notwithstanding the foregoing, the responsibility of the
Custodian with respect to redemptions effected by check
shall be in accordance with a separate Agreement entered
into between the Custodian and the Trust.

If the Trust requires the Custodian to take any action
with respect to securities, which action involves the
payment of money or which action may, in the reasonable
opinion of the Custodian, result in the Custodian or its
nominee assigned to a Fund being liable for the payment
of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to
requiring the Custodian to take such action, to provide
indemnity to the Custodian in an amount and form
satisfactory to the Custodian.

Subject to the limitations set forth in Section 15
hereof, the Trust agrees to indemnify and hold harmless
the Custodian and its nominee from and against all taxes,
charges, expenses, assessments, claims and liabilities
(including counsel fees) (referred to herein as
authorized charges) incurred or assessed against it or
its nominee in connection with the performance of this
Contract, except such as may arise from it or its
nominee's own failure to act in accordance with the
standard of reasonable care or any higher standard of
care which would be imposed upon the Custodian by any
applicable law or regulation if such above-stated
standard of reasonable care were not part of this
Contract. To secure any authorized charges and any
advances of cash or securities made by the Custodian to
or for the benefit of a Fund for any purpose which
results in the Fund incurring an overdraft at the end of
any business day or for extraordinary or emergency
purposes during any business day, the Trust hereby grants
to the Custodian a security interest in and pledges to
the Custodian securities held for the Fund by the
Custodian, in an amount not to exceed 10 percent of the
Fund's gross assets, the specific securities to be
designated in writing from time to time by the Trust or
the Fund's investment adviser. Should the Trust fail to
make such designation, or should it instruct the
Custodian to make advances exceeding the percentage
amount set forth above and should the Custodian do so,
the Trust hereby agrees that the Custodian shall have a
security interest in all securities or other property
purchased for a Fund with the advances by the Custodian,
which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of
the Trust instructing their purchase shall be considered
the requisite description and designation of the property
so pledged for purposes of the requirements of the
Uniform Commercial Code. Should the Trust fail to cause
a Fund to repay promptly any authorized charges or
advances of cash or securities, subject to the provision
of the second paragraph of this Section 8 regarding
indemnification, the Custodian shall be entitled to use
available cash and to dispose of pledged securities and
property as is necessary to repay any such advances.

9. Effective Period, Termination and Amendment.

This Contract shall become effective as of its execution,
shall continue in full force and effect until terminated
as hereinafter provided, may be amended at any time by
mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing
delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than sixty
(60) days after the date of such delivery or mailing;
provided, however that the Custodian shall not act under
Section 2.12 hereof in the absence of receipt of an
initial certificate of the Secretary or an Assistant
Secretary that the Board of the Trust has approved the
initial use of a particular Securities System as required
in each case by Rule 17f-4 under the 1940 Act; provided
further, however, that the Trust shall not amend or
terminate this Contract in contravention of any
applicable federal or state regulations, or any provision
of the Declaration of Trust/Articles of Incorporation,
and further provided, that the Trust may at any time by
action of its Board (i) substitute another bank or trust
company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a
conservator or receiver for the Custodian by the
appropriate banking regulatory agency or upon the
happening of a like event at the direction of an
appropriate regulatory agency or court of competent
jurisdiction.

Upon termination of the Contract, the Trust shall pay to
the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the
Custodian for its costs, expenses and disbursements.

10. Successor Custodian.

If a successor custodian shall be appointed by the Board
of the Trust, the Custodian shall, upon termination,
deliver to such successor custodian at the office of the
Custodian, duly endorsed and in the form for transfer,
all securities then held by it hereunder for each Fund
and shall transfer to separate accounts of the successor
custodian all of each Fund's securities held in a
Securities System.

If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a
certified copy of a vote of the Board of the Trust,
deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with
such vote.

In the event that no written order designating a
successor custodian or certified copy of a vote of the
Board shall have been delivered to the Custodian on or
before the date when such termination shall become
effective, then the Custodian shall have the right to
deliver to a bank or trust company, which is a "bank" as
defined in the 1940 Act, (delete "doing business ...
Massachusetts" unless SSBT is the Custodian) doing
business in Boston, Massachusetts, of its own selection,
having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not
less than $100,000,000, all securities, funds and other
properties held by the Custodian and all instruments held
by the Custodian relative thereto and all other property
held by it under this Contract for each Fund and to
transfer to separate accounts of such successor
custodian all of each Fund's securities held in any
Securities System. Thereafter, such bank or trust
company shall be the successor of the Custodian under
this Contract.

In the event that securities, funds and other properties
remain in the possession of the Custodian after the date
of termination hereof owing to failure of the Trust to
procure the certified copy of the vote referred to or of
the Board to appoint a successor custodian, the Custodian
shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of
such securities, funds and other properties and the
provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force
and effect.

11. Interpretive and Additional Provisions.

In connection with the operation of this Contract, the
Custodian and the Trust may from time to time agree on
such provisions interpretive of or in addition to the
provisions of this Contract as may in their joint opinion
be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be
in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional
provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of
Trust/Articles of Incorporation. No interpretive or
additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this
Contract.

12. Massachusetts Law to Apply.

This Contract shall be construed and the provisions
thereof interpreted under and in accordance with laws of
The Commonwealth of Massachusetts.

13. Notices.

Except as otherwise specifically provided herein, Notices
and other writings delivered or mailed postage prepaid to
the Trust at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, or to the Custodian at address
for SSBT only: 225 Franklin Street, Boston,
Massachusetts, 02110, or to such other address as the
Trust or the Custodian may hereafter specify, shall be
deemed to have been properly delivered or given hereunder
to the respective address.

14. Counterparts.

This Contract may be executed simultaneously in two or
more counterparts, each of which shall be deemed an
original.

15. Limitations of Liability.

The Custodian is expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust of those Trusts which are business
trusts and agrees that the obligations and liabilities
assumed by the Trust and any Fund pursuant to this
Contract, including, without limitation, any obligation
or liability to indemnify the Custodian pursuant to
Section 8 hereof, shall be limited in any case to the
relevant Fund and its assets and that the Custodian shall
not seek satisfaction of any such obligation from the
shareholders of the relevant Fund, from any other Fund or
its shareholders or from the Trustees, Officers,
employees or agents of the Trust, or any of them. In
addition, in connection with the discharge and
satisfaction of any claim made by the Custodian against
the Trust, for whatever reasons, involving more than one
Fund, the Trust shall have the exclusive right to
determine the appropriate allocations of liability for
any such claim between or among the Funds.

IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder
affixed effective as of the 1st day of December, 1993.

ATTEST: INVESTMENT COMPANIES (Except those
listed below)

/s/John G. McGonigle_________ By /s/John G. Donahue_____________
John G. McGonigle John F. Donahue
Secretary Chairman

ATTEST: STATE STREET BANK AND TRUST
COMPANY

/s/ Ed McKenzie______________ By /s/ F. J. Sidoti,
Jr._________________
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President

ATTEST: FEDERATED SERVICES COMPANIY

/s/ Jeannette Fisher-Garber______ By /s/ James J.
Dolan________________
Jeannette Fisher-Garber James J. Dolan
Secretary President

EXHIBIT 1
Table
s c c
CONTRACT FEE
DATE INVESTMENT COMPANY SCHEDULE

12/1/93 111 Corcoran Funds 2
12/1/93 111 Corcoran Bond Fund 2
12/1/93 111 Corcoran North Carolina Municipal Securities Fund 2
12/13/93 Alexander Hamilton Funds 2
12/13/93 Alexander Hamilton Government Income Fund 2
12/13/93 Alexander Hamilton Equity Growth and Income Fund 2
12/13/93 Alexander Hamilton Fund 2
12/1/93 American Leaders Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Shares 1
12/1/93 Automated Cash Management Trust 1
12/1/93 Automated Government Money Trust 1
12/1/93 California Municipal Cash Trust 1
Cambridge Series Trust 1
Has a separate Cambridge Capital Growth Portfolio 1
contract with Class A 1
SSB - included Class B 1
for fee infor- Cambridge Government Income Portfolio 1
mation purposes Class A 1
only Class B 1
Cambridge Growth Portfolio 1
Class A 1
Class B 1
Cambridge Income and Growth Portfolio 1
Class A 1
Class B 1
Cambridge Municipal Income Portfolio 1
Class A 1
Class B 1
12/1/93 Cash Trust Series, Inc. 1
12/1/93 Government Cash Series 1
12/1/93 Municipal Cash Series 1
12/1/93 Prime Cash Series 1
12/1/93 Treasury Cash Series 1
12/1/93 Cash Trust Series II 1
12/1/93 Municipal Cash Series II 1
12/1/93 Treasury Cash Series II 1
12/1/93 DG Investor Series 2
12/1/93 DG Equity Fund 2
12/1/93 DG Government Income Fund 2
12/1/93 DG Limited Term Government Income Fund 2
12/1/93 DG Municipal Income Fund 2
12/1/93 DG U.S. Government Money Market Fund 2
12/1/93 Edward D. Jones & Co. Daily Passport Cash Trust 1
12/1/93 Federated ARMs Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated U.S. Government Bond Fund 1
12/1/93 Federated Exchange Fund, Ltd. 1
12/1/93 Federated GNMA Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Government Trust 1
12/1/93 Automated Government Cash Reserves 1
12/1/93 Automated Treasury Cash Reserves 1
12/1/93 U.S. Treasury Cash Reserves 1
12/1/93 Federated Growth Trust 1
12/1/93 Federated High Yield Trust 1
12/1/93 Federated Income Securities Trust 1
12/1/93 Federated Short-Term Income Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Income Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Index Trust 1
12/1/93 Max-Cap Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Mid-Cap Fund 1
12/1/93 Mini-Cap Fund 1
12/1/93 Federated Intermediate Government Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Investment Funds 1
12/1/93 Growth Portfolio 1
12/1/93 High Quality Bond Portfolio 1
12/1/93 Pennsylvania Intermediate Municipal Income Portfolio 1
12/1/93 Value Equity Portfolio 1
12/1/93 Federated Master Trust 1
12/1/93 Federated Municipal Trust 1
12/1/93 Alabama Municipal Cash Trust 1
12/1/93 Connecticut Municipal Cash Trust 1
12/1/93 Institutional Service Shares 1
3/2/94 Maryland Municipal Cash Trust 1
12/1/93 Massachusetts Municipal Cash Trust 1
12/1/93 BayFund Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Minnesota Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Shares 1
12/1/93 New Jersey Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Ohio Municipal Cash Trust 1
12/1/93 Cash II Shares 1
12/1/93 Institutional Shares 1
12/1/93 Pennsylvania Municipal Cash Trust 1
12/1/93 Cash Series Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Virginia Municipal Cash Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Intermediate Government Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Intermediate Municipal Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Federated Short-Term U.S. Government Trust 1
12/1/93 Federated Stock Trust 1
12/1/93 Federated Tax-Free Trust 1
12/1/93 Financial Reserves Fund 1
Has a separate First Union Funds
contract with (*Not effective or currently not being offered) 1
SSB - included First Union Balanced Portfolio 1
for fee infor- Class B Investment Shares 1
mation purposes Class C Investment Shares 1
only Trust Shares 1
First Union Fixed Income Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Florida Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Georgia Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union High Grade Tax Free Portfolio (2/28/94
formerly First Union Insured Tax-Free Portfolio) 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Managed Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union Maryland Municipal Bond Portfolio* 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Money Market Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union North Carolina Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares* 1
First Union South Carolina Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Tax-Free Money Market Portfolio 1
Class B Investment Shares 1
Class C Investment Shares* 1
Trust Shares 1
First Union Tennessee Municipal Bond Portfolio* 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Treasury Money Market Portfolio 1
Class B Investment Shares 1
Class C Investment Shares* 1
Trust Shares 1
First Union U.S. Government Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Utility Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Value Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
First Union Virginia Municipal Bond Portfolio 1
Class B Investment Shares 1
Class C Investment Shares 1
Trust Shares 1
12/1/93 Fixed Income Securities, Inc. 1
12/1/93 Limited Term Fund 1
12/1/93 Fortress Shares 1
12/1/93 Investment Shares 1
12/1/93 Limited Term Municipal Fund 1
12/1/93 Fortress Shares 1
12/1/93 Investment Shares 1
12/1/93 Multi-State Municipal Income Fund 1
12/1/93 Limited Maturity Government Fund 1
4/12/94 Stategic Income Fund 1
4/12/94 Class A Shares 1
4/12/94 Class C Shares 1
4/12/94 Fortress Shares 1
12/1/93 Fortress Adjustable Rate U.S. Government Fund, Inc. 1
12/1/93 Fortress Municipal Income Fund, Inc. 1
12/1/93 Fortress Utility Fund, Inc. 1
12/1/93 International Series, Inc. 1
12/1/93 International Equity Fund 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 International Income Fund 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fund for U.S. Government Securities, Inc. 1
12/1/93 Class A Shares 1
5/19/94 Class B Shares 1
12/1/93 Class C Shares 1
12/1/93 Government Income Securities, Inc. 1
Separate contract Independence One Mutual Funds
with SSB - (*Fund not effective or currently on hold). 1
included for Independence One Equity Fund* 1
fee information Investment Shares 1
purposes only Trust Shares 1
Independence One Michigan Municipal Cash Fund 1
Investment Shares 1
Trust Shares* 1
Independence One Prime Money Market Fund 1
Investment Shares 1
Trust Shares* 1
Independence One U.S. Government Securities Fund 1
Investment Shares 1
Trust Shares 1
Independence One U.S. Treasury Money Market
Fund 1
1/11/94 Insight Institutional Series, Inc.
1/11/94 Insight Adjustable Rate Mortgage Fund 1
1/11/94 Insight Limited Term Income Fund 1
1/11/94 Insight Limited Term Municipal Fund 1
1/11/94 Insight U.S. Government Fund 1
12/15/93 Insurance Management Series
12/15/93 U.S. Government Bond Fund 1
12/15/93 Corporate Bond Fund 1
12/15/93 Utility Fund 1
12/15/93 Equity Growth & Income Fund 1
12/15/93 Prime Money Fund 1
12/1/93 Intermediate Municipal Trust 1
12/1/93 Intermediate Municipal Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Ohio Intermediate Municipal Trust 1
12/1/93 Pennsylvania Intermediate Municipal Trust 1
2/16/94 California Intermediate Municipal Trust 1
12/1/93 Investment Series Fund, Inc. 1
12/1/93 Capital Growth Fund 1
12/1/93 Investment Shares 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Bond Fund 1
12/1/93 Investment Series Trust 1
12/1/93 High Quality Stock Fund 1
12/1/93 Municipal Securities Income Fund 1
12/1/93 U.S. Government Bond Fund 1
12/1/93 Liberty Equity Income Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Fortress Shares 1
12/1/93 Liberty High Income Bond Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liberty Municipal Securities Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liberty Term Trust, Inc. - 1999 1
12/1/93 Liberty U.S. Government Money Market Trust 1
12/1/93 Liberty Utility Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Liquid Cash Trust 1
3/11/94 Managed Series Trust 1
3/11/94 Federated Managed Income Fund 1
3/11/94 Select Shares 1
3/11/94 Institutional Service Shares 1
3/11/94 Federated Managed Growth Fund 1
3/11/94 Select Shares 1
3/11/94 Institutional Service Shares 1
3/11/94 Federated Managed Growth and Income Fund 1
3/11/94 Select Shares 1
3/11/94 Institutional Service Shares 1
3/11/94 Federated Managed Aggressive Growth Fund 1
3/11/94 Select Shares 1
Institutional Service Shares 1
12/1/93 Money Market Management, Inc. 1
12/1/93 Money Market Trust 1
12/1/93 Money Market Obligations Trust 1
12/1/93 Government Obligations Fund 1
12/1/93 Prime Obligations Fund 1
12/1/93 Tax-Free Obligations Fund 1
12/1/93 Treasury Obligations Fund 1
12/1/93 Municipal Securities Income Trust 1
12/1/93 California Municipal Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Florida Municipal Income Fund 1
12/1/93 Maryland Municipal Income Fund 1
12/1/93 Michigan Municipal Income Fund 1
12/1/93 New Jersey Municipal Income Fund 1
12/1/93 New York Municipal Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Ohio Municipal Income Fund 1
12/1/93 Fortress Shares 1
12/1/93 Trust Shares 1
12/1/93 Pennsylvania Municipal Income Fund 1
12/1/93 Investment Shares 1
12/1/93 Trust Shares 1
12/1/93 Income shares 1
12/1/93 Texas Municipal Income Fund 1
12/1/93 Virginia Municipal Income Fund 1
12/1/93 New York Municipal Cash Trust 1
12/1/93 Cash II Shares 1
12/1/93 Institutional Service Shares 1
12/1/93 Portage Funds 2
12/1/93 Portage Government Money Market Fund 2
12/1/93 Investment Shares 2
12/1/93 Trust Shares 2
12/1/93 SouthTrust Vulcan Funds 2
12/1/93 Bond Fund 2
12/1/93 Stock Fund 2
12/1/93 Treasury Obligations Money Market Fund 2
12/1/93 Stock and Bond Fund, Inc. 1
12/1/93 Class A Shares 1
12/1/93 Class C Shares 1
12/1/93 Tax-Free Instruments Trust 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 The Boulevard Funds 2
12/1/93 Boulevard Blue Chip Growth Fund 2
12/1/93 Boulevard Managed Income Fund 2
12/1/93 Boulevard Managed Municipal Fund 2
12/1/93 Boulevard Strategic Balanced Fund 2
12/1/93 The Planters Funds 2
12/1/93 Tennessee Tax-Free Bond Fund 2
Has a separate Tower Mutual Funds 1
contract with Tower U.S. Government Income Fund 1
SSB - included Tower Capital Appreciation Fund 1
for fee infor- Tower Cash Reserve Fund 1
mation purposes Tower Louisiana Municipal Income Fund 1
only Tower Total Return Bond Fund 1
Tower U.S. Treasury Money Market Fund 1
12/1/93 Trademark Funds 2
12/1/93 Trademark Equity Fund 2
12/1/93 Trademark Government Income Fund 2
12/1/93 Trademark Kentucky Municipal Bond Fund 2
12/1/93 Trademark Short-Intermediate Government Fund 2
12/1/93 Trust for Financial Institutions 1
12/1/93 Government Qualifying Liquidity Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Short-Term Government Qualifying Liquidity Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Government Money Market Fund 1
12/1/93 Institutional Service Shares 1
12/1/93 Institutional Shares 1
12/1/93 Trust for Government Cash Reserves 1
12/1/93 Trust for Short-Term U.S. Government Securities 1
12/1/93 Trust for U.S. Treasury Obligations 1
Has separate Vision Fiduciary Funds, Inc. 1
contracts with Vision Fiduciary Money Market Fund 1
SSB - included Vision Group of Funds, Inc. 1
for fee informa- Vision Growth and Income Fund 1
tion purposes Vision Money Market Fund 1
only Vision New York Tax-Free Fund 1
Vision New York Tax-Free Money Market Fund 1
Vision Treasury Money Market Fund 1
Vision U.S. Government Securities Fund 1
2/24/94 World Investment Series, Inc. 1
2/24/94 World Utility Fund 1
2/24/94 Class A Shares 1
2/24/94 Fortress Shares 1

Schedule 1

STATE STREET BANK
CUSTODY /
PORTFOLIO RECORD KEEPING
FEE SCHEDULE

Federated Investors
- Federated Funds -

I. Custody Services

Maintain Custody of fund assets. Settle portfolio purchases
and sales. Report buy and sell fails. Determine and
collect portfolio income. Make cash disbursements and
report cash transactions. Monitor corporate actions.

ANNUAL FEES

ASSET

First $500 Million 1.0 Basis Point
Excess .5 Basis Point

Minimum fee per year $15,000
Maximum fee per year $90,000
Wire Fees $2.70 per wire
Settlements:
Each DTC Commercial Paper $9.00
Each DTC Transaction $9.00
Each Federal Reserve Book Entry Transaction (Repo) $4.50
Each Repo with Banks Other than State Street Bank $7.50
Each Physical Transaction (NY/Boston, Private Placement)
$21.75
Each Option Written/Exercised/Expired $18.75
Each Stock Loan Transaction $12.00
Each Book Entry Muni (Sub-custody) Transaction $15.00
Index Fund/ETD Cost + 15%
II. Portfolio Record keeping / Fund Accounting Services

Maintain investment ledgers, provide selected portfolio
transactions, position and income reports. Maintain general
ledger and capital stock accounts. Prepare daily trial
balance. Provide selected general ledger reports.
Calculate net asset value daily. Securities yield or market
value quotations will be provided to State Street by the
fund or via State Street Bank automated pricing services.

ANNUAL FEES

ASSET

First $250 Million 2.0 Basis Points
Next $250 Million 1.5Basis Points
Next $250 Million 1.0 Basis Point
Excess .5 Basis Point

Minimum fee per year $39,000
Maximum fee per year $120,000
Additional class of shares per year $12,000

III. Multicurrency Horizon Remote Service

July 1, 1993 - July 1, 1995 No Charge

Post July 1, 1995 $5,000 per portfolio
per year
$ 500 per portfolio
per year
for each additional
class

IV. Out-Of-Pocket Expenses

Pricing Fees
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
Travel and setup expenses related to Horizon Remote
Lease and multiplex switching lines related to Horizon
Remote

V. Special Services

Fees for activities of a non-recurring nature such as fund
consolidation or reorganization, extraordinary security
shipments and the preparation of special reports will be
subject to negotiation.

VI. Coupon Clipping

Monitoring for calls and processing for each monthly issue
held

Monthly Charge $5.00

VII. Balance Credit

A balance credit equal to 75% of the average balance in the
custodian account for the month billed times the 30-day T-
Bill Rate on the last Monday of the month billed will be
applied against Section I through V above.

VIII. Term of the Contract

The parties agree that this fee schedule shall become
effective June 1, 1993 and will remain in effect until it is
revised as a result of negotiations initiated by either
party.

FEDERATED SERVICES CO. STATE STREET BANK & TRUST CO.

By James J. Dolan By: Frank J. Sidoti, Jr.
President Vice President
January 24, 1994 December 15, 1993

Schedule 2

STATE STREET BANK
CUSTODY FEE SCHEDULE

Federated Investors
- Bank Proprietary Funds -

I. Custody Services

ANNUAL FEES

ASSET

First $500 Million 1.0 Basis Point
Excess .5 Basis Point

Minimum fee per year $15,000
Wire Fees $2.70 per wire
Settlements:
Each DTC Commercial Paper $9.00
Each DTC Transaction $9.00
Each Federal Reserve Book Entry Transaction (Repo) $4.50
Each Repo with Banks Other than State Street Bank $7.50
Each Physical Transaction (NY/Boston, Private Placement)
$21.75
Each Option Written/Exercised/Expired $18.75
Each Stock LoanTransaction $12.00
Each Book Entry Muni (Sub-custody) Transaction $15.00
Index Fund/ETD Cost + 15%

II. Multicurrency Horizon Remote Service

July 1, 1993 - July 1, 1995 No Charge

Post July 1, 1995 $5,000 per portfolio
per year
$ 500 per portfolio
per year
for each additional
class

III. Out-Of-Pocket Expenses

Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.

IV. Special Services

Fees for activities of a non-recurring nature such as fund
consolidation or reorganization, extraordinary security
shipments and the preparation of special reports will be
subject to negotiation.

V. Coupon Clipping

Monitoring for calls and processing for each monthly issue
held

Monthly Charge $5.00

VI. Balance Credit

VII. Term of the Contract

The parties agree that this fee schedule shall become
effective June 1, 1993 and will remain in effect until it is
revised as a result of negotiations initiated by either
party.

FEDERATED SERVICES CO. STATE STREET BANK & TRUST CO.

By James J. Dolan By: Frank J. Sidoti, Jr.
President Vice President
January 24, 1994 December 15, 1993

FSCO Services Providers Contract8 Page 1 May 25, 1994

Exhibit 9(i) under Form N-1A
Exhibit 10(i) under Item 601/Reg. S-K

AGREEMENT
for
FUND ACCOUNTING,
SHAREHOLDER RECORDKEEPING,
and
CUSTODY SERVICES PROCUREMENT

AGREEMENT made as of the 1st day of December, 1993, by and between
those investment companies listed on Exhibit 1 as may be amended from
time to time, having their principal office and place of business at
Federated Investors Tower, Pittsburgh, PA 15222-3779 (the "Trust"), on
behalf of the portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") of the Trust, and FEDERATED SERVICES COMPANY, a
Delaware business trust, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-
3779 (the "Company").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended
(the "1940 Act"), with authorized and issued shares of capital stock or
beneficial interest ("Shares"); and
WHEREAS, the Trust wishes to retain the Company to provide certain
pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes"), and the
Company is willing to furnish such services; and
WHEREAS, the Trust desires to appoint the Company as its transfer
agent, dividend disbursing agent, and agent in connection with certain
other activities, and the Company desires to accept such appointment; and
WHEREAS, the Trust desires to appoint the Company as its agent to
select, negotiate and subcontract for custodian services from an approved
list of qualified banks and the Company desires to accept such
appointment; and
WHEREAS, from time to time the Trust may desire and may instruct the
Company to subcontract for the performance of certain of its duties and
responsibilities hereunder to State Street Bank and Trust Company or
another agent (the "Agent"); and
WHEREAS, the words Trust and Fund may be used interchangeably for
those investment companies consisting of only one portfolio;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: Fund Accounting.
Article 1. Appointment.
The Trust hereby appoints the Company to provide certain pricing and
accounting services to the Funds, and/or the Classes, for the period and
on the terms set forth in this Agreement. The Company accepts such
appointment and agrees to furnish the services herein set forth in return
for the compensation as provided in Article 3 of this Section.
Article 2. The Company and Duties.
Subject to the supervision and control of the Trust's Board of
Trustees or Directors ("Board"), the Company will assist the Trust with
regard to fund accounting for the Trust, and/or the Funds, and/or the
Classes, and in connection therewith undertakes to perform the following
specific services;
A. Value the assets of the Funds and determine the net asset value per
share of each Fund and/or Class, at the time and in the manner from
time to time determined by the Board and as set forth in the
Prospectus and Statement of Additional Information ("Prospectus")
of each Fund;
B. Calculate the net income of each of the Funds, if any;
C. Calculate capital gains or losses of each of the Funds resulting
from sale or disposition of assets, if any;
D. Maintain the general ledger and other accounts, books and financial
records of the Trust, including for each Fund, and/or Class, as
required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
E. Preserve for the periods prescribed by Rule 31a-2 under the 1940
Act the records to be maintained by Rule 31a-1 under the 1940 Act
in connection with the services provided by the Company. The
Company further agrees that all such records it maintains for the
Trust are the property of the Trust and further agrees to surrender
promptly to the Trust such records upon the Trust's request;
F. At the request of the Trust, prepare various reports or other
financial documents required by federal, state and other applicable
laws and regulations; and
G. Such other similar services as may be reasonably requested by the
Trust.
Article 3. Compensation and Allocation of Expenses.
A. The Funds will compensate the Company for its services rendered
pursuant to Section One of this Agreement in accordance with the
fees set forth on Fee Schedules A ("A1, A2, A3 etc..."), annexed
hereto and incorporated herein, as may be added or amended from
time to time. Such fees do not include out-of-pocket disbursements
of the Company for which the Funds shall reimburse the Company upon
receipt of a separate invoice. Out-of-pocket disbursements shall
include, but shall not be limited to, the items specified in
Schedules B ("B1, B2, B3, etc..."), annexed hereto and incorporated
herein, as may be added or amended from time to time. Schedules B
may be modified by the Company upon not less than thirty days'
prior written notice to the Trust.
B. The Fund and/or the Class, and not the Company, shall bear the cost
of: custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes
and fees payable to federal, state and other governmental agencies;
fees of Trustees or Directors of the Trust; independent auditors
expenses; Federated Administrative Services and/or Federated
Administrative Services, Inc. legal and audit department expenses
billed to Federated Services Company for work performed related to
the Trust, the Funds, or the Classes; law firm expenses; or other
expenses not specified in this Article 3 which may be properly
payable by the Funds and/or classes.
C. The Company will send an invoice to each of the Funds as soon as
practicable after the end of each month. Each invoice will provide
detailed information about the compensation and out-of-pocket
expenses in accordance with Schedules A and Schedules B. The Funds
and or the Classes will pay to the Company the amount of such
invoice within 30 days of receipt of the invoices.
D. Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedules A revised Schedules dated and signed
by a duly authorized officer of the Trust and/or the Funds and a
duly authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement
with respect to a Fund or a Class to the end of the initial month
shall be prorated according to the proportion that such period
bears to the full month period. Upon any termination of this
Agreement before the end of any month, the fee for such period
shall be prorated according to the proportion which such period
bears to the full month period. For purposes of determining fees
payable to the Company, the value of the Fund's net assets shall be
computed at the time and in the manner specified in the Fund's
Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited to
assist it in performing services under this Section One. Such
person or persons may be third-party service providers, or they may
be officers and employees who are employed by both the Company and
the Funds. The compensation of such person or persons shall be
paid by the Company and no obligation shall be incurred on behalf
of the Trust, the Funds, or the Classes in such respect.
SECTION TWO: Shareholder Recordkeeping.
Article 4. Terms of Appointment.
Subject to the terms and conditions set forth in this Agreement, the
Trust hereby appoints the Company to act as, and the Company agrees to
act as, transfer agent and dividend disbursing agent for each Fund's
Shares, and agent in connection with any accumulation, open-account or
similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic investment
plan or periodic withdrawal program.
As used throughout this Agreement, a "Proper Instruction" means a
writing signed or initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such writing shall set
forth the specific transaction or type of transaction involved. Oral
instructions will be deemed to be Proper Instructions if (a) the Company
reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with respect
to the transaction involved, and (b) the Trust, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trust, or the
Fund, and the Company are satisfied that such procedures afford adequate
safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
Article 5. Duties of the Company.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Trust as
to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase
of shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the "Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and
hold such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate
to the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as
Dividend Disbursing Agent for the Funds in accordance with the
provisions of its governing document and the then-current
Prospectus of the Fund. The Company shall prepare and mail or
credit income, capital gain, or any other payments to
Shareholders. As the Dividend Disbursing Agent, the Company
shall, on or before the payment date of any such distribution,
notify the Custodian of the estimated amount required to pay
any portion of said distribution which is payable in cash and
request the Custodian to make available sufficient funds for
the cash amount to be paid out. The Company shall reconcile
the amounts so requested and the amounts actually received
with the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits shall be made to
the Shareholder's account, for certificated Funds and/or
Classes, delivered where requested; and
(2) The Company shall maintain records of account for each Fund
and Class and advise the Trust, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company
by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds
from the Custodian with respect to any redemption, the Company
shall pay or cause to be paid the redemption proceeds in the
manner instructed by the redeeming Shareholders, pursuant to
procedures described in the then-current Prospectus of the
Fund.
(3) If any certificate returned for redemption or other request
for redemption does not comply with the procedures for
redemption approved by the Fund, the Company shall promptly
notify the Shareholder of such fact, together with the reason
therefor, and shall effect such redemption at the price
applicable to the date and time of receipt of documents
complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the
total number of Shares of the Fund and/or Class which are
authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Company shall also provide the
Fund on a regular basis or upon reasonable request with the
total number of Shares which are authorized and issued and
outstanding, but shall have no obligation when recording the
issuance of Shares, except as otherwise set forth herein, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Trust or the Fund to include a record for each Shareholder's
account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall
forthwith upon the Fund's demand, turn over to the Fund and
cease to retain in the Company's files, records and documents
created and maintained by the Company pursuant to this
Agreement, which are no longer needed by the Company in
performance of its services or for its protection. If not so
turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of
creation, during the first two of which such documents will be
in readily accessible form. At the end of the six year
period, such records and documents will either be turned over
to the Fund or destroyed in accordance with Proper
Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies,
and, if required, mail to Shareholders, such notices for
reporting dividends and distributions paid as are required to
be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state
income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth
above, the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, agent
in connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program),
including but not limited to: maintaining all
Shareholder accounts, mailing Shareholder reports and
Prospectuses to current Shareholders, withholding taxes
on accounts subject to back-up or other withholding
(including non-resident alien accounts), preparing and
filing reports on U.S. Treasury Department Form 1099 and
other appropriate forms required with respect to
dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation
forms and statements of account to Shareholders for all
purchases and redemptions of Shares and other confirmable
transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and
providing Shareholder account information; and
(b) provide a system which will enable the Fund to monitor
the total number of Shares of each Fund and/or Class sold
in each state ("blue sky reporting"). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's and/or Class's state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail
proxy cards and other material supplied to it by the Fund in
connection with Shareholder Meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for
the preparation or use, and for keeping account of, such
certificates, forms and devices.
Article 6. Duties of the Trust.
A. Compliance
The Trust or Fund assume full responsibility for the preparation,
contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of
the Securities Act of 1933, as amended (the "1933 Act"), the 1940
Act and any laws, rules and regulations of government authorities
having jurisdiction.
B. Share Certificates
The Trust shall supply the Company with a sufficient supply of
blank Share certificates and from time to time shall renew such
supply upon request of the Company. Such blank Share certificates
shall be properly signed, manually or by facsimile, if authorized
by the Trust and shall bear the seal of the Trust or facsimile
thereof; and notwithstanding the death, resignation or removal of
any officer of the Trust authorized to sign certificates, the
Company may continue to countersign certificates which bear the
manual or facsimile signature of such officer until otherwise
directed by the Trust.
C. Distributions
The Fund shall promptly inform the Company of the declaration of
any dividend or distribution on account of any Fund's shares.
Article 7. Compensation and Expenses.
A. Annual Fee
For performance by the Company pursuant to Section Two of this
Agreement, the Trust and/or the Fund agree to pay the Company an
annual maintenance fee for each Shareholder account as set out in
Schedules C ("C1, C2, C3 etc..."), attached hereto, as may be added
or amended from time to time. Such fees may be changed from time
to time subject to written agreement between the Trust and the
Company. Pursuant to information in the Fund Prospectus or other
information or instructions from the Fund, the Company may sub-
divide any Fund into Classes or other sub-components for
recordkeeping purposes. The Company will charge the Fund the fees
set forth on Schedule C for each such Class or sub-component the
same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Trust
and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items set out
in Schedules D ("D1, D2, D3 etc..."), attached hereto, as may be
added or amended from time to time. In addition, any other
expenses incurred by the Company at the request or with the consent
of the Trust and/or the Fund, will be reimbursed by the appropriate
Fund.
C. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to the Trust or each of the Funds as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket
expenses in accordance with Schedules C and Schedules D. The Trust
or the Funds will pay to the Company the amount of such invoice
within 30 days following the receipt of the invoices.
Article 8. Assignment of Shareholder Recordkeeping.
Except as provided below, no right or obligation under this Section
Two may be assigned by either party without the written consent of
the other party.
(1) This Agreement shall inure to the benefit of and be binding
upon the parties and their respective permitted successors and
assigns.
(2) The Company may without further consent on the part of the
Trust subcontract for the performance hereof with (A) State
Street Bank and its subsidiary, Boston Financial Data
Services, Inc., a Massachusetts Trust ("BFDS"), which is duly
registered as a transfer agent pursuant to Section 17A(c)(1)
of the Securities Exchange Act of 1934, as amended, or any
succeeding statute ("Section 17A(c)(1)"), or (B) a BFDS
subsidiary duly registered as a transfer agent pursuant to
Section 17A(c)(1), or (C) a BFDS affiliate, or (D) such other
provider of services duly registered as a transfer agent under
Section 17A(c)(1) as Company shall select; provided, however,
that the Company shall be as fully responsible to the Trust
for the acts and omissions of any subcontractor as it is for
its own acts and omissions; or
(3) The Company shall upon instruction from the Trust subcontract
for the performance hereof with an Agent selected by the
Trust, other than BFDS or a provider of services selected by
Company, as described in (2) above; provided, however, that
the Company shall in no way be responsible to the Trust for
the acts and omissions of the Agent.
SECTION THREE: Custody Services Procurement
Article 9. Appointment.
The Trust hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets
the criteria established in Section 17(f) of the 1940 Act and (ii)
has been approved by the Board as eligible for selection by the
Company as a custodian (the "Eligible Custodian"). The Company
accepts such appointment.
Article 10. The Company and Its Duties.
Subject to the review, supervision and control of the Board, the
Company shall:
(1) evaluate the nature and the quality of the custodial services
provided by the Eligible Custodian;
(2) employ the Eligible Custodian to serve on behalf of the Trust
as Custodian of the Trust's assets substantially on the terms
set forth as the form of agreement in Exhibit 2;
(3) negotiate and enter into agreements with the Custodians for
the benefit of the Trust, with the Trust as a party to each
such agreement. The Company shall not be a party to any
agreement with any such Custodian;
(4) establish procedures to monitor the nature and the quality of
the services provided by the Custodians;
(5) continuously monitor the nature and the quality of services
provided by the Custodians; and
(6) periodically provide to the Trust (i) written reports on the
activities and services of the Custodians; (ii) the nature and
amount of disbursement made on account of the Trust with
respect to each custodial agreement; and (iii) such other
information as the Board shall reasonably request to enable it
to fulfill its duties and obligations under Sections 17(f) and
36(b) of the 1940 Act and other duties and obligations
thereof.
Article 11. Fees and Expenses.
A. Annual Fee
For the performance by the Company pursuant to Section Three of
this Agreement, the Trust and/or the Fund agree to pay the Company
an annual fee as set forth in Schedule E, attached hereto.
B. Payment
The Company shall send an invoice with respect to fees and
reimbursable expenses to each of the Trust/or Fund as soon as
practicable at the end of each month. Each invoice will provide
detailed information about the Compensation and out-of-pocket
expenses in occurrence with Schedule E. The Trust and/or Fund will
pay to the Company the amount of such invoice within 30 days
following the receipt of the invoice.
Article 12. Representations.
The Company represents and warrants that it has obtained all
required approvals from all government or regulatory authorities
necessary to enter into this arrangement and to provide the
services contemplated in Section Three of this Agreement.
SECTION FOUR: General Provisions.
Article 13. Documents.
A. In connection with the appointment of the Company under this
Agreement, the Trust shall file with the Company the following
documents:
(1) A copy of the Charter and By-Laws of the Trust and all
amendments thereto;
(2) A copy of the resolution of the Board of the Trust authorizing
this Agreement;
(3) Specimens of all forms of outstanding Share certificates of
the Trust or the Funds in the forms approved by the Board of
the Trust with a certificate of the Secretary of the Trust as
to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Trust authorizing the
original issuance of each Fund's, and/or Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document
and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board authorizing
officers to give Proper Instructions to the Custodian and
agents for fund accountant, custody services procurement, and
shareholder recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such
forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or appropriate
in the proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
Article 14. Representations and Warranties.
A. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing and in good
standing under the laws of the State of Delaware.
(2) It is duly qualified to carry on its business in the State of
Delaware.
(3) It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
(4) All requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations under
this Agreement.
(5) It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement.
(6) It is in compliance with federal securities law requirements
and in good standing as a transfer agent.
B. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Trust is an open-end investment company registered under
the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made
and will continue to be made, with respect to all Shares of
each Fund being offered for sale.
Article 15. Indemnification.
A. Indemnification by Trust
The Company shall not be responsible for and the Trust or Fund
shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents employees and affiliates,
harmless against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liabilities arising out of or
attributable to:
(1) The acts or omissions of any Custodian,
(2) The Trust's or Fund's refusal or failure to comply with the
terms of this Agreement, or which arise out of the Trust's or
The Fund's lack of good faith, negligence or willful
misconduct or which arise out of the breach of any
representation or warranty of the Trust or Fund hereunder or
otherwise.
(3) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of the
Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and
Shareholder account information; or
(b) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Trust.
(4) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the Trust
or the Fund.
(5) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares
be registered in such state or in violation of any stop order
or other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
state.
Provided, however, that the Company shall not be protected by
this Article 15.A. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
gross negligence or reckless disregard of its duties.
B. Indemnification by the Company
The Company shall indemnify and hold the Trust or each Fund
harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising
out of or attributable to any action or failure or omission to act
by the Company as a result of the Company's willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties.
C. Reliance
At any time the Company may apply to any officer of the Trust or
Fund for instructions, and may consult with legal counsel with
respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and
its agents or subcontractors shall not be liable and shall be
indemnified by the Trust or the appropriate Fund for any action
reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such
action is not in violation of applicable federal or state laws or
regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which
are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Trust or the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 15 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with respect
to all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior
written consent.
Article 16. Termination of Agreement.
This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other. Should the Trust
exercise its rights to terminate, all out-of-pocket expenses
associated with the movement of records and materials will be borne
by the Trust or the appropriate Fund. Additionally, the Company
reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Article 15
shall survive the termination of this Agreement.
Article 17. Amendment.
This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 18. Interpretive and Additional Provisions.
In connection with the operation of this Agreement, the Company and
the Trust may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Agreement
as may in their joint opinion be consistent with the general tenor
of this Agreement. Any such interpretive or additional provisions
shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions
shall contravene any applicable federal or state regulations or any
provision of the Charter. No interpretive or additional provisions
made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
Article 19. Governing Law.
This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the
Commonwealth of Massachusetts
Article 20. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to the Company at Federated Investors Tower, Pittsburgh,
Pennsylvania, 15222-3779, or to such other address as the Trust or
the Company may hereafter specify, shall be deemed to have been
properly delivered or given hereunder to the respective address.
Article 21. Counterparts.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
Article 22. Limitations of Liability of Trustees and Shareholders of
the Trust.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Trust and signed by an authorized officer of
the Trust, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose
any liability on any of them personally, and the obligations of
this Agreement are not binding upon any of the Trustees or
Shareholders of the Trust, but bind only the appropriate property
of the Fund, or Class, as provided in the Declaration of Trust.
Article 23. Limitations of Liability of Trustees and Shareholders of
the Company.
The execution and delivery of this Agreement have been authorized
by the Trustees of the Company and signed by an authorized officer
of the Company, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall
be deemed to have been made by any of them individually or to
impose any liability on any of them personally, and the obligations
of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the property of the
Company as provided in the Declaration of Trust.
Article 24. Assignment.
This Agreement and the rights and duties hereunder shall not be
assignable with respect to the Trust or the Funds by either of the
parties hereto except by the specific written consent of the other
party.
Article 25. Merger of Agreement.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the
subject hereof whether oral or written.
Article 26. Successor Agent.
If a successor agent for the Trust shall be appointed by the Trust,
the Company shall upon termination of this Agreement deliver to
such successor agent at the office of the Company all properties of
the Trust held by it hereunder. If no such successor agent shall
be appointed, the Company shall at its office upon receipt of
Proper Instructions deliver such properties in accordance with such
instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or
before the date when such termination shall become effective, then
the Company shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$2,000,000, all properties held by the Company under this
Agreement. Thereafter, such bank or trust company shall be the
successor of the Company under this Agreement.
Article 27. Force Majeure.
The Company shall have no liability for cessation of services
hereunder or any damages resulting therefrom to the Fund as a
result of work stoppage, power or other mechanical failure, natural
disaster, governmental action, communication disruption or other
impossibility of performance.
Article 28. Assignment; Successors.
This Agreement shall not be assigned by either party without the
prior written consent of the other party, except that either party
may assign to a successor all of or a substantial portion of its
business, or to a party controlling, controlled by, or under common
control with such party. Nothing in this Article 28 shall prevent
the Company from delegating its responsibilities to another entity
to the extent provided herein.
Article 29. Severability.
In the event any provision of this Agreement is held illegal, void
or unenforceable, the balance shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and year first
above written.

ATTEST: INVESTMENT COMPANIES (listed on Exhibit 1)

/s/ John W. McGonigle_______ By:__/s/ John F. Donahue___
John W. McGonigle John F. Donahue
Secretary Chairman

ATTEST: FEDERATED SERVICES COMPANY

/s/ Jeannette Fisher-Garber By:_/s/ James J. Dolan_____
Jeannette Fisher-Garber James J. Dolan
Secretary President
Schedule A
Fund Accounting
Fee Schedule

I. Portfolio Record Keeping/Fund Accounting Services
Maintain investment ledgers, provide selected portfolio transactions,
position and income reports. Maintain general ledger and capital stock
accounts. Prepare daily trial balance. Provide selected general ledger
reports. Calculate net asset value daily. Securities yield or market
value quotations will be provided to State Street by the fund or via
State Street Bank automated pricing services.
ANNUAL FEES
ASSET
First $250 Million 2.0 Basis Points
Next $250 Million 1.5 Basis Points
Next $250 Million 1.0 Basis Point
Excess .5 Basis Point
Minimum fee per year $39,000
Additional class of shares per year $12,000
II. Special Services
Fees for activities of a non-recurring nature such as fund consolidation
or reorganization, extraordinary security shipments and the preparation
of special reports will be subject to negotiation.
III. Term of the Contract
The parties agree that this fee schedule shall become effective June 1,
1993 and will remain in effect until it is revised as a result of
negotiations initiated by either party.
Schedule A1
Fund Accounting
Fee Schedule

Annual
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
Schedule B
Out-of-Pocket Expenses
Fund Accounting
Out-of-pocket expenses include, but are not limited to, the
following:
- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telephones
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific System Enhancements
- Access to the Shareholder Recordkeeping System
- Security Pricing Services
- Variable Rate Change Notification Services
- Paydown Factor Notification Services
Schedule C
- Federated Funds -
Fees and Expenses
Shareholder Recordkeeping

I. Annual Maintenance Charge
The annual maintenance charge includes the processing of all
transactions and correspondence. The fee is billable on a monthly basis
at the rate of 1/12 of the annual fee. A charge is made for an account
in the month that an account opens or closes.
Basic Annual per Account Fee
The individual per account charges will be billed as follows:
- Money Market Fund/Daily Accrual $16.65
- Money Market Fund/Sweep Account $10.00
- Fluctuating NAV/Daily Accrual
Non FundServe $16.65
Non Networked FundServe $14.65
- CDSC/Declared Dividend
Non FundServe $13.75
Non Networked FundServe $11.75
Networking Levels 1, 2, and 4 $11.75
Networking Level 3 $9.00
- Declared Dividend
Non FundServe $8.75
Non Networked FundServe $6.75
Networked FundServe Levels 1, 2, 3, and 4 $6.75
Taxpayer Identification Processing (TIN)
The charge for TIN solicitation includes maintenance and certification
and complies to all known government regulations regarding TIN
processing.
- Maintenance $.25 per item
- Certification $.10 per item
I. Annual Maintenance Charge (con't.)
Closed Account Fee $.10 per account per
month
(No fee assessed for $0 balance open accounts)
Minimum Charges
- The monthly maintenance charge for each fund will be the actual
account fees or $1000, whichever is greater.
- All funds will be subject to the minimum monthly fee of $1,000 except
that the minimum will be waived for the initial six months or until
the fund's net assets exceed $50,000,000, whichever occurs first.
- The "clone" funds will be subject to a monthly minimum fee of $600.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to: postage, forms,
telephone, microfilm, microfiche, and expenses incurred at the specific
direction of the fund. Postage for mass mailings is due seven days in
advance of the mailing date.
III. Payment
Payment is due thirty days after the date of the invoice.
Schedule C1
- Bank Proprietary Funds -
Fees and Expenses
Shareholder Recordkeeping

I. Annual Maintenance Charge
The annual maintenance charge includes the processing of all transactions
and correspondence. The fee is billable on a monthly basis at the rate
of 1/12 of the annual fee. A charge is made for an account in the month
that an account opens or closes.
Basic Annual per Account Fee
The individual per account charges will be billed as follows:
- Money Market Fund/Daily Accrual $16.65
- Money Market Fund/Sweep Account $10.00
- Fluctuating NAV/Daily Accrual
- Non FundServe $16.65
- Non Networked FundServe $14.65
- CDSC/Declared Dividend
- Non FundServe $13.75
- Non Networked FundServe $11.75
- Networking Levels 1, 2, and 4 $11.75
- Networking Level 3 $9.00
- Declared Dividend
- Non FundServe $8.75
- Non Networked FundServe $6.75
- Networked FundServe Levels 1, 2, 3, and 4 $6.75
Taxpayer Identification Processing (TIN)
The charge for TIN solicitation includes maintenance and certification
and complies to all known government regulations regarding TIN
processing.
- Maintenance $.25 per item
- Certification $.10 per item
I. Annual Maintenance Charge (con't.)
Closed Account Fee $.10 per account per
month
(No fee assessed for $0 balance open accounts)
Minimum Charges
- The monthly maintenance charge for each fund will be the actual
account fees or $2000, whichever is greater.
II. Out-of-Pocket Expenses
Out-of-pocket expenses include but are not limited to: postage, forms,
telephone, microfilm, microfiche, and expenses incurred at the specific
direction of the fund. Postage for mass mailings is due seven days in
advance of the mailing date.
III. Payment
Payment is due thirty days after the date of the invoice.

Schedule C2
- Bank Proprietary Funds -
Fees and Expenses
Shareholder Recordkeeping

I. Group I Services
Base Fee * (Annual fee per fund, class or other subdivision) $24,000
Account Fee* (Annual account charge)
(includes system access and funds control and reconcilement)
- Daily dividend fund $16.00
- Monthly dividend fund $10.00
- Quarterly dividend fund $10.00
- Contingent Deferred Sales Charge (Additionally) $5.00
(monthly and quarterly funds only)
- Closed Accounts* $1.20
Termination Fee (One time charge per fund, class or other subdivision)
$20,000
II. Group II Services
Other Account Fees* (Annual account charge - Services or features not covered
above)
- Account Activity Processing $3.50
(includes account establishment, transaction and maintenance processing)
- Account Servicing $4.50
(includes shareholder servicing and correspondence)
* All fees are annualized and will be prorated on a monthly basis for
billing purposes. Out-of-pocket expenses are not covered by these
fees.
SCHEDULE D
Out-of-Pocket Expenses Schedule

- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific Enhancements
- Disaster Recovery
SCHEDULE E
Fee Schedule

I. Custody Services
Maintain Custody of fund assets. Settle portfolio purchases and sales.
Report buy and sell fails. Determine and collect portfolio income. Make
cash disbursements and report cash transactions. Monitor corporate
actions.
ANNUAL FEES
ASSET
First $500 Million 1.0 Basis Point
Excess .5 Basis Point
Minimum fee per year $15,000
Wire Fees $2.70 per wire
Settlements:
o Each DTC Commercial Paper $9.00
o Each DTC Transaction $9.00
o Each Federal Reserve Book Entry Transaction (Repo) $4.50
o Each Repo with Banks Other than State Street Bank $7.50
o Each Physical Transaction (NY/Boston, Private Placement) $21.75
o Each Option Written/Exercised/Expired $18.75
o Each Stock Load Transaction $12.00
o Each Book Entry Muni (Sub-custody) Transaction $15.00
o Index Fund/ETD Cost + 15%
II. Out-Of-Pocket Expenses
Telephone
Postage & Insurance
Armored carrier costs
Legal fees
Supplies related to fund records
Processing validation certificates
Forms, envelopes, Xerox copies, supplies, etc.
III. Special Services
Fees for activities of a non-recurring nature such as fund consolidation or
reorganization, extraordinary security shipments and the preparation of
special reports will be subject to negotiation.
IV. Coupon Clipping
Monitoring for calls and processing for each monthly issue held
Monthly Charge $5.00
V. Balance Credit
A balance credit equal to 75% of the average balance in the custodian
account for the monthly billed times the 30-day T-Bill Rate on the last
Monday of the month billed will be applied against Section I through IV
above.
VI. Term of the Contract
The parties agree that this fee schedule shall become effective June 1,
1993 and will remain in effect until it is revised as a result of
negotiations initiated by either party.
EXHIBIT 1
FA=Fund Accounting
SR=Shareholder Recordkeeping
CSP=Custody Services Procurement

CONTRACT SERVICES RELEVANT
DATE INVESTMENT COMPANY PROVIDED SCHEDULES

12/1/93 111 Corcoran Fund
12/1/93 111 Corcoran Bond Fund FA, SR A,B,C1
12/1/93 111 Corcoran North Carolina Municipal Securities Fund FA, SR
A,B,C1
12/13/93 Alexander Hamilton Funds
12/13/93 Alexander Hamilton Government Income Fund FA,SR,CSP A,B,C2,D,E
12/13/93 Alexander Hamilton Equity Growth and Income Fund FA,SR,CSP A,B,C2,D,E
12/13/94 Alexander Hamilton Municipal Income Fund FA,SR,CSP A,B,C2,D,E
12/1/93 American Leaders Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Automated Cash Management Trust FA,SR,CSP A,B,C,E
12/1/93 Automated Government Money Trust FA,SR,CSP A,B,C,E
01/07/94 Peachtree Funds (2/11/94 effective/formerly BankSouth Select Funds)
01/07/94 Peachtree Select Georgia Tax-Free Income Fund FA,SR C2,D
01/07/94 Peachtree Select Government Money Market Fund FA,SR C2,D
01/07/94 Peachtree Select Prime Money Market Fund FA,SR C2,D
01/07/94 Peachtree Select Bond Fund FA,SR C2,D
01/07/94 Peachtree Select Equity Fund FA,SR C2,D
12/1/93 BayFunds
12/1/93 BayFunds Money Market Portfolio
12/1/93 Investment Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Bond Portfolio
1/1/94 Institutional Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Equity Portfolio
1/1/94 Institutional Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds Short-Term Yield Portfolio
1/1/94 Institutional Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 BayFunds U.S. Treasury Money Market Portfolio
1/1/94 Institutional Shares FA A1,B
12/1/93 Trust Shares FA A1,B
12/1/93 The Biltmore Funds
12/1/93 Biltmore Balanced Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Equity Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Fixed Income Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Equity Index Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Money Market Fund
12/1/93 Institutional Shares FA,SR A1,B,C2,D
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Biltmore Prime Cash Management Fund
12/1/93 Institutional Shares FA,SR A1,B,C2,D
12/1/93 Biltmore Quantitative Equity Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Short-Term Fixed Income Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Special Values Fund FA,SR A1,B,C2,D
12/1/93 Biltmore Tax-Free Money Market Fund
12/1/93 Institutional Shares FA,SR A1,B,C2,D
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Biltmore U.S. Treasury Money Market Fund
12/1/93 Institutional Shares FA,SR A1,B,C2,D
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 The Biltmore Municipal Funds
12/1/93 South Carolina Municipal Bond Fund FA,SR A1,B,C2,D
12/1/93 The Boulevard Funds
12/1/93 Boulevard Blue Chip Growth Fund FA,SR A1,B,C1
12/1/93 Boulevard Managed Income Fund FA,SR A1,B,C1
12/1/93 Boulevard Managed Municipal Fund FA,SR A1,B,C1
12/1/93 Boulevard Strategic Balanced Fund FA,SR A1,B,C1
12/1/93 California Municipal Cash Trust FA,SR,CSP A,B,C,E
12/1/93 Cash Trust Series, Inc.
12/1/93 Government Cash Series FA,SR,CSP A,B,C,E
12/1/93 Municipal Cash Series FA,SR,CSP A,B,C,E
12/1/93 Prime Cash Series FA,SR,CSP A,B,C,E
12/1/93 Treasury Cash Series FA,SR,CSP A,B,C,E
12/1/93 Cash Trust Series II
12/1/93 Municipal Cash Series II FA,SR,CSP A,B,C,E
12/1/93 Treasury Cash Series II FA,SR,CSP A,B,C,E
12/1/93 DG Investor Series
12/1/93 DG Equity Fund FA,SR A1,B,C2,D
12/1/93 DG Government Income Fund FA,SR A1,B,C2,D
12/1/93 DG Limited Term Government Income Fund FA,SR A1,B,C2,D
12/1/93 DG Municipal Income Fund FA,SR A1,B,C2,D
12/1/93 DG U.S. Government Money Market Fund FA,SR A1,B,C2,D
12/1/93 Federated ARMs Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated U.S. Government Bond Fund FA,SR,CSP A,B,C,E
12/1/93 Federated Exchange Fund, Ltd. FA,SR,CSP A,B,C,E
12/1/93 Federated GNMA Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Government Trust
12/1/93 Automated Government Cash Reserves FA,SR,CSP A,B,C,E
12/1/93 Automated Treasury Cash Reserves FA,SR,CSP A,B,C,E
12/1/93 U.S. Treasury Cash Reserves FA,SR,CSP A,B,C,E
12/1/93 Federated Growth Trust FA,SR,CSP A,B,C,E
12/1/93 Federated High Yield Trust FA,SR,CSP A,B,C,E
12/1/93 Federated Income Securities Trust
12/1/93 Federated Short-Term Income Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Intermediate Income Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Income Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Index Trust
12/1/93 Max-Cap Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Mid-Cap Fund FA,SR,CSP A,B,C,E
12/1/93 Mini-Cap Fund FA,SR,CSP A,B,C,E
12/1/93 Federated Intermediate Government Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Investment Funds
12/1/93 Growth Portfolio FA,SR,CSP A,B,C,E
12/1/93 High Quality Bond Portfolio FA,SR,CSP A,B,C,E
12/1/93 Pennsylvania Intermediate Municipal Income Portfolio FA,SR,CSP
A,B,C,E
12/1/93 Value Equity Portfolio FA,SR,CSP A,B,C,E
12/1/93 Federated Master Trust FA,SR,CSP A,B,C,E
12/1/93 Federated Municipal Trust
12/1/93 Alabama Municipal Cash Trust FA,SR,CSP A,B,C,E
12/1/93 Connecticut Municipal Cash Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
3/2/94 Maryland Municipal Cash Trust FA,SR,SCP A,B,C,E
12/1/93 Massachusetts Municipal Cash Trust
12/1/93 BayFund Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Minnesota Municipal Cash Trust
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 New Jersey Municipal Cash Trust
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Ohio Municipal Cash Trust
12/1/93 Cash II Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Pennsylvania Municipal Cash Trust
12/1/93 Cash Series Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Virginia Municipal Cash Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Short-Intermediate Government Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Short-Intermediate Municipal Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Short-Term U.S. Government Trust FA,SR,CSP A,B,C,E
12/1/93 Stock and Bond Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Federated Stock Trust FA,SR,CSP A,B,C,E
12/1/93 Federated Tax-Free Trust FA,SR,CSP A,B,C,E
12/1/93 Financial Reserves Fund FA A1,B
12/1/93 First Priority Funds
12/1/93 First Priority Equity Fund
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Trust Shares FA,SR A1,B,C2,D
12/1/93 First Priority Fixed Income Fund
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Trust Shares FA,SR A1,B,C2,D
12/1/93 First Priority Treasury Money Market Fund
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Trust Shares FA,SR A1,B,C2,D
12/1/93 First Priority Limited Maturity Government Fund FA,SR A1,B,C2,D
12/1/93 Fixed Income Securities, Inc.
12/1/93 Limited Term Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,E
12/1/93 Limited Term Municipal Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Investment Shares FA,SR,CSP A,B,C,E
12/1/93 Multi-State Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 Limited Maturity Government Fund FA,SR,CSP A,B,C,E
4/12/94 Strategic Income Fund
4/12/94 Class A Shares FA,SR,CSP A,B,C,E
4/12/94 Class C Shares FA,SR,CSP A,B,C,E
4/12/94 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Fortress Adjustable Rate U.S. Government Fund, Inc. FA,SR,CSP A,B,C,E
12/1/93 Fortress Municipal Income Fund, Inc. FA,SR,CSP A,B,C,E
12/1/93 Fortress Utility Fund, Inc. FA,SR,CSP A,B,C,E
12/1/93 FT Series, Inc.
12/1/93 International Equity Fund
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 International Income Fund
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Fund for U.S. Government Securities, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
5/19/94 Class B Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Government Income Securities, Inc. FA,SR,CSP A,B,C,E
4/8/94 Independence One Mutual Funds
4/8/94 Independence One Michigan Municipal Cash Fund SR C1,D
4/8/94 Independence One Prime Money Market Fund SR C1,D
4/8/94 Independence One U.S. Government Securities Fund
4/8/94 Investment Shares SR C1,D
4/8/94 Trust Shares SR C1,D
4/8/94 Independence One U.S. Treasury Money Market Fund SR C1,D
1/11/94 Insight Institutional Series, Inc.
1/11/94 Insight Adjustable Rate Mortgage Fund FA,SR,CSP A,B,C,E
1/11/94 Insight Limited Term Income Fund FA,SR,CSP A,B,C,E
1/11/94 Insight Limited Term Municipal Fund FA,SR,CSP A,B,C,E
1/11/94 Insight U.S. Government Fund FA,SR,CSP A,B,C,E
12/15/93 Insurance Management Series
12/15/93 U.S. Government Bond Fund FA,SR,CSP A,B,C,E
12/15/93 Corporate Bond Fund FA,SR,CSP A,B,C,E
12/15/93 Utility Fund FA,SR,CSP A,B,C,E
12/15/93 Equity Growth & Income Fund FA,SR,CSP A,B,C,E
12/15/93 Prime Money Fund FA,SR,CSP A,B,C,E
12/1/93 Intermediate Municipal Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Ohio Intermediate Municipal Trust FA,SR,CSP A,B,C,E
12/1/93 Pennsylvania Intermediate Municipal Trust FA,SR,CSP A,B,C,E
2/16/94 California Intermediate Municipal Trust FA,SR,CSP A,B,C,E
12/1/93 Investment Series Fund, Inc.
12/1/93 Capital Growth Fund
12/1/93 Investment Shares (Schedules C2 & D are for IRM) FA,SR,CSP
A,B,C,C2,D,E
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Fortress Bond Fund FA,SR,CSP A,B,C,E
12/1/93 Investment Series Trust
12/1/93 High Quality Stock Fund(Schedules C2 & D are for IRM) FA,SR,CSP
A,B,C,C2,D,E
12/1/93 Municipal Securities Income Fund FA,SR,CSP A,B,C,E
12/1/93 U.S. Government Bond Fund(Schedules C2 & D are for IRM) FA,SR,CSP
A,B,C,C2,D,E
12/1/93 Edward D. Jones & Co. Daily Passport Cash Trust FA,SR,CSP A,B,C,E
12/1/93 Liberty Equity Income Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Liberty High Income Bond Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Liberty Municipal Securities Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Liberty Term Trust, Inc. - 1999 FA,SR,CSP A,B,C,E
12/1/93 Liberty U.S. Government Money Market Trust FA,SR,CSP A,B,C,E
12/1/93 Liberty Utility Fund, Inc.
12/1/93 Class A Shares FA,SR,CSP A,B,C,E
12/1/93 Class C Shares FA,SR,CSP A,B,C,E
12/1/93 Liquid Cash Trust FA,SR,CSP A,B,C,E
3/11/94 Managed Series Trust
3/11/94 Federated Managed Income Fund
3/11/94 Select Shares FA,SR,CSP A,B,C,E
3/11/94 Institutional Service Shares FA,SR,CSP A,B,C,E
3/11/94 Federated Managed Growth Fund
3/11/94 Select Shares FA,SR,CSP A,B,C,E
3/11/94 Institutional Service Shares FA,SR,CSP A,B,C,E
3/11/94 Federated Managed Growth and Income Fund
3/11/94 Select Shares FA,SR,CSP A,B,C,E
3/11/94 Institutional Service Shares FA,SR,CSP A,B,C,E
3/11/94 Federated Managed Agressive Growth Fund
3/11/94 Select Shares FA,SR,CSP A,B,C,E
3/11/94 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Mark Twain Funds
12/1/93 Mark Twain Equity Portfolio FA,SR A,B,C2,D
12/1/93 Mark Twain Fixed Income Portfolio FA,SR A,B,C2,D
12/1/93 Mark Twain Government Money Market Portfolio
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 Mark Twain Municipal Income Portfolio FA,SR A,B,C2,D
12/1/93 Marshall Funds, Inc.
12/1/93 Marshall Government Income Fund FA,SR A1,B,C2,D
12/1/93 Marshall Intermediate Bond Fund FA,SR A1,B,C2,D
12/1/93 Marshall Money Market Fund
12/1/93 Investment Shares FA,SR A1,B,C2,D
12/1/93 Trust Shares FA,SR A1,B,C2,D
12/1/93 Marshall Short-Term Income Fund FA,SR A1,B,C2,D
12/1/93 Marshall Stock Fund FA,SR A1,B,C2,D
12/1/93 Marshall Tax-Free Money Market Fund FA,SR A1,B,C2,D
12/1/93 Marshall Balanced Fund FA,SR A1,B,C2,D
12/1/93 Marshall Equity Income Fund FA,SR A1,B,C2,D
12/1/93 Marshall Mid-Cap Stock Fund FA,SR A1,B,C2,D
12/1/93 Marshall Value Equity Fund FA,SR A1,B,C2,D
12/28/93 Marshall Short-Term Tax-Free Fund FA,SR A1,B,C2,D
12/28/93 Marshall Intermediate Tax-Free Fund FA,SR A1,B,C2,D
12/1/93 Money Market Management, Inc.(Schedules C2 & D are for IRM) FA,SR,CSP
A,B,C,C2,D,E
12/1/93 Money Market Trust FA,SR,CSP A,B,C,E
12/1/93 Money Market Obligations Trust
12/1/93 Government Obligations Fund FA,SR,CSP A1,B,C,E
12/1/93 Prime Obligations Fund FA,SR,CSP A1,B,C,E
12/1/93 Tax-Free Obligations Fund FA,SR,CSP A1,B,C,E
12/1/93 Treasury Obligations Fund FA,SR,CSP A1,B,C,E
12/1/93 Municipal Securities Income Trust
12/1/93 California Municipal Income Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Florida Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 Maryland Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 Michigan Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 New Jersey Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 New York Municipal Income Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Ohio Municipal Income Fund
12/1/93 Fortress Shares FA,SR,CSP A,B,C,E
12/1/93 Trust Shares FA,SR,CSP A,B,C,E
12/1/93 Pennsylvania Municipal Income Fund
12/1/93 Investment Shares FA,SR,CSP A,B,C,E
12/1/93 Trust Shares FA,SR,CSP A,B,C,E
12/1/93 Income shares FA,SR,CSP A,B,C,E
12/1/93 Texas Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 Virginia Municipal Income Fund FA,SR,CSP A,B,C,E
12/1/93 New York Municipal Cash Trust
12/1/93 Cash II Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 The Planters Funds
12/1/93 Tennessee Tax-Free Bond Fund FA,SR A1,B,C2,D
12/1/93 Portage Funds
12/1/93 Portage Government Money Market Fund
12/1/93 Investment Shares [INV.SH. MERGED INTO TRUST SH. 2/1/94]
12/1/93 Trust Shares SR C2,D
12/1/93 RIMCO Monument Funds
12/1/93 RIMCO Monument Bond Fund FA,SR A,B,C2,D
12/1/93 RIMCO Monument Prime Money Market Fund FA,SR A,B,C2,D
12/1/93 RIMCO Monument Stock Fund FA,SR A,B,C2,D
12/1/93 RIMCO Monument U.S. Treasury Money Market Fund FA,SR A,B,C2,D
12/1/93 Signet Select Funds
12/1/93 Maryland Municipal Bond Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 Treasury Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 U.S. Government Income Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 Value Equity Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 Virginia Municipal Bond Fund
12/1/93 Investment Shares FA,SR A,B,C1
12/1/93 Trust Shares FA,SR A,B,C1
12/1/93 The Shawmut Funds
12/1/93 The Shawmut Fixed Income Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Shawmut Growth Equity Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Shawmut Growth and Income Equity Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Shawmut Intermediate Government Income Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Shawmut Limited Term Income Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Shawmut Prime Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Shawmut Small Capitalization Equity Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Shawmut Connecticut Municipal Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Shawmut Connecticut Intermediate Municipal Income Fund FA,SR
A,B,C2,D
12/1/93 The Shawmut Massachusetts Municipal Money Market Fund FA,SR
A,B,C2,D
12/1/93 The Shawmut Massachusetts Intermediate Municipal
Income Fund FA,SR A,B,C2,D
12/1/93 Star Funds
5/16/94 Star Capital Appreciation Fund FA,SR A,B,C2,D
12/1/93 Star Prime Obligations Fund FA,SR A,B,C2,D
12/1/93 Star Relative Value Fund FA,SR A,B,C2,D
12/1/93 Star Tax-Free Money Market Fund FA,SR A,B,C2,D
12/1/93 Star Treasury Fund FA,SR A,B,C2,D
12/1/93 Star U.S. Government Income Fund FA,SR A,B,C2,D
12/1/93 The Stellar Fund FA,SR A,B,C2,D
12/1/93 Sunburst Funds
12/1/93 Sunburst Short-Intermediate Government Bond Fund FA,ST A,B,C2,D
12/1/93 Tax-Free Instruments Trust
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 The Monitor Funds
12/1/93 The Monitor Fixed Income Securities Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Growth Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Income Equity Fund SR C1
12/1/93 The Monitor Money Market Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Mortgage Securities Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Ohio Municipal Money Market Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Ohio Tax-Free Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Monitor Short/Intermediate Fixed Income
12/1/93 Securities Fund SR C1
12/1/93 The Monitor U.S. Treasury Money Market Fund
12/1/93 Investment Shares SR C1
12/1/93 Trust Shares SR C1
12/1/93 The Starburst Funds
12/1/93 The Starburst Government Income Fund FA,SR A,B,C2,D
12/1/93 The Starburst Government Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Starburst Money Market Fund
12/1/93 Investment Shares FA,SR A,B,C2,D
12/1/93 Trust Shares FA,SR A,B,C2,D
12/1/93 The Starburst Municipal Income Fund FA,SR A,B,C2,D
12/1/93 The Starburst Funds II
12/1/93 The Starburst Quality Income Fund FA,SR A,B,C2,D
3/9/94 Tower Mutual Funds
3/9/94 Cash Reserves Fund FA,SR A,B,C2,D
3/9/94 Capital Appreciation Fund FA,SR A,B,C2,D
3/9/94 Louisiana Municiapl Income Fund FA,SR A,B,C2,D
3/9/94 U.S. Goverment Income Fund FA,SR A,B,C2,D
3/9/94 Total Return Fund FA,SR A,B,C2,D
3/9/94 U.S. Treasury Money Market Fund FA,SR A,B,C2,D
12/1/93 Trademark Funds
12/1/93 Trademark Equity Fund FA,SR A,B,C2,D
12/1/93 Trademark Government Income Fund FA,SR A,B,C2,D
12/1/93 Trademark Kentucky Municipal Bond Fund FA,SR A,B,C2,D
12/1/93 Trademark Short-Intermediate Government Fund FA,SR A,B,C2,D
12/1/93 Trust for Financial Institutions
12/1/93 Government Qualifying Liquidity Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Short-Term Government Liquidity Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Government Money Market Fund
12/1/93 Institutional Service Shares FA,SR,CSP A,B,C,E
12/1/93 Institutional Shares FA,SR,CSP A,B,C,E
12/1/93 Trust for Government Cash Reserves FA,SR,CSP A,B,C,E
12/1/93 Trust for Short-Term U.S. Government Securities FA,SR,CSP A,B,C,E
12/1/93 Trust for U.S. Treasury Obligations FA,SR,CSP A,B,C,E
12/1/93 Vulcan Funds
12/1/93 Vulcan Bond Fund FA,SR A1,B,C2,D
12/1/93 Vulcan Stock Fund FA,SR A1,B,C2,D
12/1/93 Vulcan Treasury Obligations Money Market Fund FA,SR A1,B,C2,D
2/24/94 World Investment Series, Inc.
World Utility Fund
Class A Shares FA,SR,CSP A,B,C,E
Fortress Shares FA,SR,CSP A,B,C,E

-1-
Exhibit 9(iii) under Form N-1A
Exhibit 10(ii) under Item 601/Reg. S-K

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
SHAREHOLDER SERVICES PLAN

This Shareholder Services Plan ("Plan") is adopted as
of this 1st day of March, 1993, by the Board of Directors of
Fund for U.S. Government Securities, Inc. (the "Fund"), a
Maryland corporation with respect to certain classes of
shares ("Classes") of the portfolios of the Corporation
("the Funds") set forth in exhibits hereto.

1. This Plan is adopted to allow the Fund to make
payments as contemplated herein to obtain certain personal
services for shareholders and/or the maintenance of
shareholder accounts ("Services").

2. This Plan is designed to compensate broker/dealers
and other participating financial institutions and other
persons ("Providers") for providing services to the Fund and
its shareholders. The Plan will be administered by
Federated Administrative Services, Inc. ("FAS"). In
compensation for the services provided pursuant to this
Plan, Providers will be paid a monthly fee computed at the
annual rate not to exceed .25 of 1% of the average aggregate
net asset value of the shares of the Fund held during the
month.

3. Any payments made by the Funds to any Provider
pursuant to this Plan will be made pursuant to the
"Shareholder Services Agreement" entered into by FAS on
behalf of the Fund and the Provider. Providers which have
previously entered into "Administrative Agreements" or "Rule
12b-1 Agreements" with Federated Securities Corp. may be
compensated under this Plan for Services performed pursuant
to those Agreements until the Providers have executed a
"Shareholder Services Agreement" hereunder.

4. The Fund has the right (i) to select, in its sole
discretion, the Providers to participate in the Plan and
(ii) to terminate without cause and in its sole discretion
any Shareholder Services Agreement.

5. Quarterly in each year that this Plan remains in
effect, FAS shall prepare and furnish to the Board of
Directors of the Fund, and the Board of Directors shall
review, a written report of the amounts expended under the
Plan.

6. This Plan shall become effective (i) after
approval by majority votes of: (a) the Fund's Board of
Directors; and (b) the members of the Board of the
Corporation who are not interested persons of the
Corporation and have no direct or indirect financial
interest in the operation of the Corporation's Plan or in
any related documents to the Plan ("Disinterested
Directors"), cast in person at a meeting called for the
purpose of voting on the Plan; and (ii) upon execution of an
exhibit adopting this Plan.

7. This Plan shall remain in effect with respect to
each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the
initial year of this Plan for the period of one year from
the date set forth above and may be continued thereafter if
this Plan is approved with respect to each Class at least
annually by a majority of the Corporation's Board of
Directors and a majority of the Disinterested Directors,
cast in person at a meeting called for the purpose of voting
on such Plan. If this Plan is adopted with respect to a
class after the first annual approval by the Directors as
described above, this Plan will be effective as to that
Class upon execution of the applicable exhibit pursuant to
the provisions of paragraph 6(ii) above and will continue in
effect until the next annual approval of this Plan by the
Directors and thereafter for successive periods of one year
subject to approval as described above.

8. All material amendments to this Plan must be
approved by a vote of the Board of Directors of the Fund and
of the Disinterested Directors, cast in person at a meeting
called for the purpose of voting on it.

9. This Plan may be terminated at any time by: (a) a
majority vote of the Disinterested Directors; or (b) a vote
of a majority of the outstanding voting securities of the
Fund as defined in Section 2(a)(42) of the Act.

10. While this Plan shall be in effect, the selection
and nomination of Disinterested Directors of the Fund shall
be committed to the discretion of the Disinterested
Directors then in office.

11. All agreements with any person relating to the
implementation of this Plan shall be in writing and any
agreement related to this Plan shall be subject to
termination, without penalty, pursuant to the provisions of
Paragraph 9 herein.

12. This Plan shall be construed in accordance with
and governed by the laws of the Commonwealth of
Pennsylvania.

Witness the due execution hereof this 1st day of March,
1993.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:/s/ J. Christopher Donahue
President
EXHIBIT A
to the
Shareholder Services Plan

Fund for U.S. Government Securities, Inc.

Class A Shares

This Plan is adopted by Fund for U.S. Government
Securities, Inc. with respect to the Class of Shares of the
Corporation set forth above.

In compensation for the services provided pursuant to
this Plan, Providers will be paid a monthly fee computed at
the annual rate of .25 of 1% of the average aggregate net
asset value of the Class A Shares of Fund for U.S.
Government Securities, Inc. held during the month.

Witness the due execution hereof this 1st day of March,
1993.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:/s/ J. Christopher Donahue
President
EXHIBIT B
to the
Shareholder Services Plan

Fund for U.S. Government Securities, Inc.

Class C Shares

This Plan is adopted by Fund for U.S. Government
Securities, Inc. with respect to the Class of Shares of the
Corporation set forth above.

In compensation for the services provided pursuant to
this Plan, Providers will be paid a monthly fee computed at
the annual rate of .25 of 1% of the average aggregate net
asset value of the Class C Shares of Fund for U.S.
Government Securities, Inc. held during the month.

Witness the due execution hereof this 4th day of May,
1993.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:/s/ J. Christopher Donahue
President
EXHIBIT C
to the
Shareholder Services Plan

Fund for U.S. Government Securities, Inc.

Select Shares

This Plan is adopted by Fund for U.S. Government
Securities, Inc. with respect to the Class of Shares of the
Corporation set forth above.

In compensation for the services provided pursuant to
this Plan, Providers will be paid a monthly fee computed at
the annual rate of .25 of 1% of the average aggregate net
asset value of the Select Shares of Fund for U.S. Government
Securities, Inc. held during the month.

Witness the due execution hereof this 1st day of
December, 1993.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:/s/ J. Christopher Donahue
President
EXHIBIT D
to the
Shareholder Services Plan

Fund for U.S. Government Securities, Inc.

Class B Shares

This Plan is adopted by Fund for U.S. Government
Securities, Inc. with respect to the Class of Shares of the
Corporation set forth above.

In compensation for the services provided pursuant to
this Plan, Providers will be paid a monthly fee computed at
the annual rate of .25 of 1% of the average aggregate net
asset value of the Class B Shares of Fund for U.S.
Government Securities, Inc. held during the month.

Witness the due execution hereof this 1st day of June,
1994.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:/s/ J. Christopher Donahue
President

-1-
Exhibit 15 (i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

FUND FOR U.S. GOVERNMENT SECURITIES, INC.
RULE 12b-1 PLAN

This Plan ("Plan") is adopted as of this 4th day of
May, 1993, by the Board of Directors of Fund for U.S.
Government Securities, Inc. (the "Corporation"), a Maryland
corporation with respect to certain classes of shares
("Classes") of the portfolios of the Corporation (the
"Funds") set forth in exhibits hereto.

1. This Plan is adopted pursuant to Rule 12b-1 under
the Investment Company Act of 1940, as amended ("Act"), so
as to allow the Corporation to make payments as contemplated
herein, in conjunction with the distribution of Classes of
the Funds ("Shares").

2. This Plan is designed to finance activities of
Federated Securities Corp. ("FSC") principally intended to
result in the sale of Shares to include: (a) providing
incentives to financial institutions ("Institutions") to
sell Shares; (b) advertising and marketing of Shares to
include preparing, printing and distributing prospectuses
and sales literature to prospective shareholders and with
Institutions; and (c) implementing and operating the Plan.
In compensation for services provided pursuant to this Plan,
FSC will be paid a fee in respect of the following Classes
set forth on the applicable exhibit.

3. Any payment to FSC in accordance with this Plan
will be made pursuant to the "Distributor's Contract"
entered into by the Corporation and FSC. Any payments made
by FSC to Institutions with funds received as compensation
under this Plan will be made pursuant to the "Rule 12b-1
Agreement" entered into by FSC and the Institution.

4. FSC has the right (i) to select, in its sole
discretion, the Institutions to participate in the Plan and
(ii) to terminate without cause and in its sole discretion
any Rule 12b-1 Agreement.

5. Quarterly in each year that this Plan remains in
effect, FSC shall prepare and furnish to the Board of
Directors of the Corporation, and the Board of Directors
shall review, a written report of the amounts expended under
the Plan and the purpose for which such expenditures were
made.

6. This Plan shall become effective with respect to
each Class (i) after approval by majority votes of: (a) the
Corporation's Board of Directors; (b) the members of the
Board of the Corporation who are not interested persons of
the Corporation and have no direct or indirect financial
interest in the operation of the Corporation's Plan or in
any related documents to the Plan ("Disinterested
Directors"), cast in person at a meeting called for the
purpose of voting on the Plan; and (c) the outstanding
voting securities of the particular Class, as defined in
Section 2(a)(42) of the Act and (ii) upon execution of an
exhibit adopting this Plan with respect to such Class.

7. This Plan shall remain in effect with respect to
each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the
initial year of this Plan for the period of one year from
the date set forth above and may be continued thereafter if
this Plan is approved with respect to each Class at least
annually by a majority of the Corporation's Board of
Directors and a majority of the Disinterested Directors,
cast in person at a meeting called for the purpose of voting
on such Plan. If this Plan is adopted with respect to a
Class after the first annual approval by the Directors as
described above, this Plan will be effective as to that
Class upon execution of the applicable exhibit pursuant to
the provisions of paragraph 6(ii) above and will continue in
effect until the next annual approval of this Plan by the
Directors and thereafter for successive periods of one year
subject to approval as described above.

8. All material amendments to this Plan must be
approved by a vote of the Board of Directors of the
Corporation and of the Disinterested Directors, cast in
person at a meeting called for the purpose of voting on it.

9. This Plan may not be amended in order to increase
materially the costs which the Classes may bear for
distribution pursuant to the Plan without being approved by
a majority vote of the outstanding voting securities of the
Classes as defined in Section 2(a)(42) of the Act.

10. This Plan may be terminated with respect to a
particular Class at any time by: (a) a majority vote of the
Disinterested Directors; or (b) a vote of a majority of the
outstanding voting securities of the particular Class as
defined in Section 2(a)(42) of the Act; or (c) by FSC on 60
days' notice to the Corporation.

11. While this Plan shall be in effect, the selection
and nomination of Disinterested Directors of the Corporation
shall be committed to the discretion of the Disinterested
Directors then in office.

12. All agreements with any person relating to the
implementation of this Plan shall be in writing and any
agreement related to this Plan shall be subject to
termination, without penalty, pursuant to the provisions of
Paragraph 10 herein.

13. This Plan shall be construed in accordance with
and governed by the laws of the Commonwealth of
Pennsylvania.
EXHIBIT A
to the
12b-1 Plan

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

Class C Shares

This Plan is adopted by Fund for U.S. Government
Securities, Inc. with respect to the Class of Shares of the
Fund of the Corporation set forth above.

In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net asset
value of the Class C Shares of Fund for U.S. Government
Securities, Inc. held during the month.

Witness the due execution hereof this 4th day of May,
1993.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:/s/ J. Christopher Donahue
President
EXHIBIT B
to the
12b-1 Plan

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

Select Shares

This Plan is adopted by Fund for U.S. Government
Securities, Inc. with respect to the Class of Shares of the
Fund of the Corporation set forth above.

In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net asset
value of the Select Shares of Fund for U.S. Government
Securities, Inc. held during the month.

Witness the due execution hereof this 1st day of
December, 1993.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:/s/ J. Christopher Donahue
President
EXHIBIT C
to the
12b-1 Plan

FUND FOR U.S. GOVERNMENT SECURITIES, INC.

Class B Shares

This Plan is adopted by Fund for U.S. Government
Securities, Inc. with respect to the Class of Shares of the
Fund of the Corporation set forth above.

In compensation for the services provided pursuant to
this Plan, FSC will be paid a monthly fee computed at the
annual rate of .75 of 1% of the average aggregate net asset
value of the Class B Shares of Fund for U.S. Government
Securities, Inc. held during the month.

Witness the due execution hereof this 1st day of June,
1994.

FUND FOR U.S. GOVERNMENT
SECURITIES, INC.

By:
President