[LOGO] FEDERATED
FUND FOR
U.S. GOVERNMENT
SECURITIES, INC.
25th SEMI-ANNUAL REPORT
September 30, 1994
Established 1969
President's Message
Dear Fellow Shareholder:
I am pleased to present the Fund for U.S. Government Securities, Inc. (the
"Fund") Semi-Annual Report for the period from April 1, 1994, to September 30,
1994.
The report contains an interview with the Fund's portfolio manager, Gary
Madich, Senior Vice President of Federated Advisers. Following the interview,
you will find the Fund's Portfolio of Investments and Financial Statements.
To offer attractive current income, the Fund invests primarily in
short-to-intermediate term U.S. government mortgage-backed securities and
Treasury notes or bonds. The Fund is rated AAAf by Standard & Poor's Ratings
Group, the highest rating given by this independent mutual fund rating
service.^ While high quality is a hallmark of U.S. government securities, they
do have market risk.
The Fund's portfolio manager continues to use a conservative strategy that
pursues consistent long-term performance by investing in U.S. government
securities.
As of September 30, 1994, the Fund's portfolio consisted of the following
types of securities:
<TABLE>
<S> <C> <C>
Government National Mortgage Association 65.6% $1,021,896,098
Federal National Mortgage Association 9.7% $150,613,572
Federal Home Loan Mortgage Association 5.0% $78,393,444
Treasury bonds 9.2% $143,339,135
Collateralized Mortgage Obligations (CMO) 6.3% $97,540,275
</TABLE>
The Fund has achieved a record of success for over 25 years, as you will see
when you review the investment performance charts in this report. In the past
year, the U.S. bond market has experienced a sharp decline as a result of one
of the most rapid increases in short-term rates recorded in over 100 years. We
believe, however, that we have experienced most of the increases in interest
rates in the current attempt to curb inflation.
We appreciate your continued confidence in the Fund. In today's volatile
interest rate environment, the Fund's portfolio manager is using a cautious
approach in attempting to provide monthly income while offering some protection
for your principal. And, by reinvesting your dividends or purchasing additional
shares, you are accumulating more shares for future income.
As always, we invite your comments or questions.
Very sincerely yours,
J. Christopher Donahue
President
November 15, 1994
+ This rating is obtained after Standard & Poor's Ratings Group evaluates a
number of factors, including credit quality, market price exposure, and
management. They monitor the portfolio weekly for developments that could
cause changes in ratings.
Investment Review
Gary Madich, CFA
Senior Vice President,
Federated Advisers
As a result of the recent interest rate increases, bond fund net
asset values have declined for the first time for some investors. As a
professional money manager, what is your advice to these shareholders?
This is an opportune time for investors to compare a bond fund's investment
objectives to their own. If the dividends are appropriate and steady income is
your reason for owning shares of Fund for U.S. Government Securities, Inc.,
there should be little need to reposition your assets.
Remember, a bond fund offers diversification, which may tend to reduce rapid
and extreme fluctuations attributable to interest rate volatility
vis-a-vis individual bonds. Bond fund performance needs to be reviewed over
a complete interest rate cycle. Eventually, interest rates may move down again,
offering the potential to reverse losses.
U.S. bond funds like Fund for U.S. Government Securities, Inc. are managed
to provide regular dividends but do fluctuate in price and yields depending
upon their maturity structure. The reinvestment of dividends at lower share
prices accumulates additional shares, and as rates cycle down, total return may
increase. For the cyclical investor, volatility is what creates investment
performance and should be viewed as a friend, not an enemy. As long as the Fund
stays within its stated objectives and expected performance ranges, it would be
unrealistic to redeem shares just because the Fed is increasing interest rates.
Throughout the interest rate cycle, our goal is to manage the Fund in a
conservative, disciplined style focusing on income. We avoid higher risk
strategies such as leverage and derivatives. We do not like the risks in these
strategies.
What are the current trends in the U.S. government bond markets and how do
they relate to the management of the Fund?
Over the past six months, the Federal Reserve Board (the "Fed") has
continued its attempts to create an interest rate-neutral environment. In its
pre-emptive fight against inflation, the Fed raised the Federal Funds target
rate in March, April, May, and August for a total increase of 1.50%. As a
result, yields on intermediate government bonds have risen an average of 1.18%.
In the high-grade sector, aggregate mortgage security indices outperformed
comparable U.S. Treasurys over the past six months, despite price pressures
from higher rates.
Interest rate pressures continue to be the market's response to fears of
rising inflation and other signs of a relatively strong economy. We expect
tighter fiscal and monetary policies will moderate economic growth over the
next few quarters. In addition, because the bond market appears to have peaked
below oversold levels in October 1993, we expect the current bear market in
bonds will be mild to average in severity.
Would you describe the Fund's strategy and long-term management style?
The unusual severity of the first leg of the bear market has improved value
in the bond market. Moreover, the severity of the initial price declines and
improved value increase the probability of a less volatile market. Therefore,
in mid-July, we shifted the Fund's duration from defensive to a more neutral
position. This allows for the possibility of higher returns from a more
conservative bond position.
Sector and security allocations continue to favor mortgage-backed securities
because they offer value vis-a-vis U.S. Treasurys in both price and income.
Mortgage-backed securities offer strong fundamentals and technicals: low
supply, good demand, reduced prepayments, and upside potential. This translates
into potentially higher income, liquidity, and value. Mortgage-backed
securities concentrations are represented in the slight discount-to-premium
collateral markets and well-structured Level One collateralized mortgage
obligations (CMOs). U.S. Treasury notes with maturities of two to four years
and ten years are acting as diversification tools and surrogates to deep
discount mortgage securities. The portfolio structure anticipates sporadic
flattening of the government yield curve and favors a slight laddering of
maturities.
In summary, the Fund remains committed to a neutral risk profile, liquidity,
income generation and quality structure.
Two Ways You May Seek to Invest for Success in
Fund for U.S. Government Securities, Inc.
Initial Investment:
A $25,000 investment (reinvesting all dividends and capital gains) grew to
$153,028.
If you had invested $25,000 in the Class A Shares of Fund for U.S. Government
Securities, Inc. on 10/6/69, reinvested your dividends and capital gains, and
didn't redeem any shares, your account would be worth $153,028 on 9/30/94. You
would have earned a 7.52% average annual total return for the 25-year
investment lifespan--quite attractive for a government income fund, especially
during a time when the economic markets went through several cycles.*
One key to investing wisely is to reinvest all distributions in Fund shares.
This increases the number of shares on which you can earn future dividends,
and you gain the benefit of compounding.
As of 9/30/94, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were -6.38%, 5.85%, and 8.29%, respectively. Class B
Shares' total return since inception on 7/26/94 was -5.48%.
Class C Shares' one-year and since inception (4/26/93) total returns were
- -3.84% and -1.05%.
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX A
*Total return represents the change in the value of an investment in Class
A Shares after reinvesting all income and capital gains, and takes into
account the 4.5% sales load applicable to an intial investment in Class A
Shares.
Data quoted represents past performance and does not guarantee future
results. Investment return and principal value will fluctuate so an investor's
shares, when redeemed, may be worth more or less than their original cost.
Fund for U.S. Government Securities, Inc.
One Step at a Time:
$1,000 invested each year for 25 years (reinvesting all dividends and
capital gains) grew to $76,915.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of Fund
for U.S. Government Securities, Inc. on 10/6/69, reinvested your dividends and
capital gains, and didn't redeem any shares, you would have invested only
$25,000, but your account would have reached a total value of $76,915 by
9/30/94. You would have earned an average annual total return of 7.87%.*
A practical investment plan helps you pursue long-term performance from U.S.
government securities. Through systematic investing, you buy shares on a
regular basis and reinvest all earnings. This investment plan works for you
even if you invest only $1,000 annually. You can take it one step at a time.
Put time and compounding to work!
GRAPHIC REPRESENTATION OMITTED. SEE APPENDIX B
* No method of investing can guarantee a profit or protect against loss in
down markets. However, by investing regularly over time and buying shares at
various prices, investors can purchase more shares at lower prices. All
accumulated shares have the ability to pay income to the investor.
Because such a plan involves continuous investment, regardless of changing
price levels, the investor should consider whether or not to continue purchases
through periods of low price levels.
Fund for U.S. Government Securities, Inc.
Portfolio of Investments
- --------------------------------------------------------------------------------
September 30, 1994
(unaudited)
The obligations listed below are issued by the U.S. government, its agencies or
instrumentalities.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- ---------------- ----------------------------------------------------------------------------- ----------------
LONG-TERM GOVERNMENT OBLIGATIONS--95.8%
- -----------------------------------------------------------------------------------------------
*FEDERAL HOME LOAN MORTGAGE CORP. PC (30 YEAR)--5.0%
-----------------------------------------------------------------------------
$ 1,557,843 13.000%, 7/1/2015-10/1/2015 $ 1,746,233
-----------------------------------------------------------------------------
10,566,586 12.500%, 10/1/2009-12/1/2015 11,788,295
-----------------------------------------------------------------------------
4,726,499 12.000%, 7/1/2010-7/1/2019 5,226,461
-----------------------------------------------------------------------------
4,253,253 11.500%, 8/1/2012-5/1/2019 4,654,633
-----------------------------------------------------------------------------
12,081,390 11.000%, 6/1/2010-7/1/2019 13,038,310
-----------------------------------------------------------------------------
13,547,585 10.500%, 2/1/2020-10/1/2020 14,487,382
-----------------------------------------------------------------------------
4,206,643 9.500%, 1/1/2006 4,389,337
-----------------------------------------------------------------------------
21,917,078 9.000%, 8/1/2001-11/1/2016 22,496,509
-----------------------------------------------------------------------------
580,060 8.00%, 4/1/2024 566,284
----------------------------------------------------------------------------- ----------------
Total 78,393,444
----------------------------------------------------------------------------- ----------------
*FEDERAL HOME LOAN MORTGAGE CORP. REMIC--0.6%
-----------------------------------------------------------------------------
10,000,000 6.600%, Series 1559VH, 12/15/2021 8,797,300
----------------------------------------------------------------------------- ----------------
*FEDERAL NATIONAL MORTGAGE ASSOCIATION--9.7%
-----------------------------------------------------------------------------
1,703,880 13.000%, 6/1/2015 1,913,134
-----------------------------------------------------------------------------
6,034,222 12.500%, 3/1/2013-1/1/2016 6,790,919
-----------------------------------------------------------------------------
3,753,666 12.000%, 11/1/2010-1/1/2016 4,174,753
-----------------------------------------------------------------------------
5,675,647 11.500%, 11/1/2015-11/1/2019 6,285,140
-----------------------------------------------------------------------------
31,264,645 11.000%, 9/1/2010-5/1/2023 34,222,646
-----------------------------------------------------------------------------
4,199,178 10.500%, 12/1/2002-5/1/2005 4,420,937
-----------------------------------------------------------------------------
8,367,028 9.000%, 7/1/2001-4/1/2005 8,652,009
-----------------------------------------------------------------------------
86,311,829 8.000%, 11/1/2022-12/1/2023 84,154,034
----------------------------------------------------------------------------- ----------------
Total 150,613,572
----------------------------------------------------------------------------- ----------------
*FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC--5.7%
-----------------------------------------------------------------------------
7,630,000 9.300%, Series 90-20H, 1/25/2019 7,806,177
-----------------------------------------------------------------------------
10,000,000 9.000%, Series 90-116G, 11/25/2019 10,168,900
-----------------------------------------------------------------------------
6,425,000 8.700%, Series 90-2E, 12/25/2018 6,524,395
-----------------------------------------------------------------------------
8,329,000 8.700%, Series G89-1D, 11/25/2017 8,385,054
-----------------------------------------------------------------------------
13,000,000 7.000%, Series 93-155J, 12/25/2022 11,419,200
-----------------------------------------------------------------------------
9,000,000 6.750%, Series 93-163PY, 3/25/2022 7,864,470
-----------------------------------------------------------------------------
12,469,855 6.500%, Series 93-189PK, 3/25/2022 10,685,793
-----------------------------------------------------------------------------
23,004,000 6.500%, Series 93-187K, 8/25/2022 19,181,195
-----------------------------------------------------------------------------
7,497,000 6.150%, Series 93-160AG, 12/25/2020 6,707,791
----------------------------------------------------------------------------- ----------------
Total 88,742,975
----------------------------------------------------------------------------- ----------------
*GOVERNMENT NATIONAL MORTGAGE ASSOCIATION MPT--65.6%
-----------------------------------------------------------------------------
2,770,384 13.000%, 12/15/2010-12/15/2014 3,178,620
-----------------------------------------------------------------------------
3,059,454 12.500%, 2/15/2011-7/20/2015 3,488,834
-----------------------------------------------------------------------------
23,083,860 12.000%, 5/15/2011-1/15/2016 26,085,637
-----------------------------------------------------------------------------
26,593,915 11.500%, 3/15/2010-9/15/2018 29,823,222
-----------------------------------------------------------------------------
11,460,010 11.000%, 1/15/2010-10/15/2019 12,639,478
-----------------------------------------------------------------------------
26,769,445 10.500%, 1/15/2014-9/15/2019 29,161,831
-----------------------------------------------------------------------------
145,202,622 10.000%, 11/15/2009-12/15/2021 155,504,274
-----------------------------------------------------------------------------
126,356,282 9.500%, 9/15/2016-12/15/2021 132,729,907
-----------------------------------------------------------------------------
142,591,737 9.000%, 11/15/2019-8/20/2022 146,186,431
-----------------------------------------------------------------------------
221,704,778 **8.500%, 5/15/2021-9/15/2024 222,119,376
-----------------------------------------------------------------------------
631,083 8.200%, 6/15/2012-5/15/2013 601,895
-----------------------------------------------------------------------------
150,225,583 **8.000%, 7/15/2023-9/15/2024 145,718,815
-----------------------------------------------------------------------------
122,017,897 **7.500%, 1/15/2023-9/15/2024 114,657,778
----------------------------------------------------------------------------- ----------------
Total 1,021,896,098
----------------------------------------------------------------------------- ----------------
U.S. TREASURY NOTES--9.2%
-----------------------------------------------------------------------------
10,000,000 6.00%, 6/30/96 9,923,400
-----------------------------------------------------------------------------
20,000,000 6.25%, 8/31/96 19,878,000
-----------------------------------------------------------------------------
29,000,000 6.25% 2/15/2003 26,642,300
-----------------------------------------------------------------------------
39,500,000 6.50%, 9/30/96 39,435,195
-----------------------------------------------------------------------------
18,000,000 7.25%, 11/15/96 18,205,740
-----------------------------------------------------------------------------
30,000,000 7.25%, 8/15/2004 29,254,500
----------------------------------------------------------------------------- ----------------
Total 143,339,135
----------------------------------------------------------------------------- ----------------
1,477,068,937 TOTAL LONG-TERM GOVERNMENT OBLIGATIONS
(IDENTIFIED COST, $1,532,422,372) 1,491,782,524
----------------------------------------------------------------------------- ----------------
***REPURCHASE AGREEMENTS--19.4%
- -----------------------------------------------------------------------------------------------
145,000,000 BT Securities, Inc., 4.85%, dated 9/21/94, due 10/20/94 145,000,000
-----------------------------------------------------------------------------
50,000,000 Goldman, Sachs & Co., 4.85%, dated 9/30/94, due 10/3/94 50,000,000
-----------------------------------------------------------------------------
6,765,000 J.P. Morgan Securities, Inc., 4.90%, dated 9/30/94, due 10/3/94 6,765,000
-----------------------------------------------------------------------------
100,000,000 J.P. Morgan Securities, Inc., 4.80%, dated 9/21/94, due 10/20/94 100,000,000
----------------------------------------------------------------------------- ----------------
TOTAL REPURCHASE AGREEMENTS 301,765,000
----------------------------------------------------------------------------- ----------------
TOTAL INVESTMENTS (IDENTIFIED COST $1,834,187,372) $ 1,793,547,524+
----------------------------------------------------------------------------- ----------------
</TABLE>
*Because of monthly principal payments, the average life of the Government
National Association Modified Pass-Through securities (based upon FHA/VA
historical experience), Federal Home Loan Mortgage Corp. Participation
Certificates, Interest Only, REMICS, and Federal National Mortgage
Association
Pass-Through Securities is less than stated maturities.
**Includes securities with a market value of $238,888,090 subject to dollar
roll transactions.
***The repurchase agreements are fully collateralized by U.S. treasury
obligations based on market prices at the date of the portfolio. The
investments in repurchase agreements were through participation in joint
accounts with other Federated funds.
+Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days.
++The cost of investments for federal tax purposes amount to $1,834,187,372.
The net unrealized depreciation on a federal tax basis amounts to
$40,639,848, which is comprised of $7,731,927 appreciation and $48,371,775
depreciation as of September 30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($1,556,873,038) at September 30, 1994.
The following abbreviations are used in this portfolio:
MPT--Modified Pass-Through
PC--Participation Certificate
REMIC--Real Estate Mortgage Investment Conduit
(See Notes which are an integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 1994
(unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities $1,491,782,524
- -----------------------------------------------------------------------------------
Investments in repurchase agreements 301,765,000
- ----------------------------------------------------------------------------------- -------------
Total investments in securities, at value
(identified and tax cost, $1,834,187,372) $1,793,547,524
- --------------------------------------------------------------------------------------------------
Cash 8,843
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 38,052,611
- --------------------------------------------------------------------------------------------------
Interest receivable 12,243,271
- --------------------------------------------------------------------------------------------------
Receivable for capital stock sold 2,000,177
- -------------------------------------------------------------------------------------------------- -------------
Total assets 1,845,852,426
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------------------
Payable for dollar roll transactions 243,090,867
- -----------------------------------------------------------------------------------
Payable for investments purchased 39,456,356
- -----------------------------------------------------------------------------------
Dividends payable 3,416,647
- -----------------------------------------------------------------------------------
Payable for capital stock redeemed 2,945,928
- -----------------------------------------------------------------------------------
Accrued expenses 69,590
- ----------------------------------------------------------------------------------- -------------
Total liabilities 288,979,388
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 204,147,977 capital stock outstanding $1,556,873,038
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid-in capital $1,791,704,383
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (40,639,848)
- --------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments (205,014,974)
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 10,823,477
- -------------------------------------------------------------------------------------------------- -------------
Total Net Assets $1,556,873,038
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE:
- --------------------------------------------------------------------------------------------------
Class A Shares (net assets of $1,453,642,034 / 190,604,104 shares of capital stock outstanding) $7.63
- -------------------------------------------------------------------------------------------------- -------------
Class C Shares (net assets of $93,266,369 / 12,236,792 shares of capital stock outstanding) $7.62
- -------------------------------------------------------------------------------------------------- -------------
Class B Shares (net assets of $9,964,635 / 1,307,081 shares of capital stock outstanding) $7.62
- -------------------------------------------------------------------------------------------------- -------------
OFFERING PRICE PER SHARE:
- --------------------------------------------------------------------------------------------------
Class A Shares (100/95.5 of $7.63)* $7.99
- -------------------------------------------------------------------------------------------------- -------------
Class C Shares $7.62
- -------------------------------------------------------------------------------------------------- -------------
Class B Shares $7.62
- -------------------------------------------------------------------------------------------------- -------------
REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
Class A Shares $7.63
- -------------------------------------------------------------------------------------------------- -------------
Class C Shares (99/100 of $7.62)** $7.54
- -------------------------------------------------------------------------------------------------- -------------
Class B Shares (95/100 of $7.62)** $7.24
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "What Shares Cost" in the prospectus.
**See "Redeeming Shares" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Statement of Operations
- --------------------------------------------------------------------------------
Six Months Ended September 30, 1994
(unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------------------------
Interest income (Net of interest expense $3,605,388) $ 67,278,367
- -----------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------------------
Investment advisory fee $ 4,891,367
- ---------------------------------------------------------------------------------------
Directors' fees 11,500
- ---------------------------------------------------------------------------------------
Administrative personnel and services 631,202
- ---------------------------------------------------------------------------------------
Custodian and portfolio accounting fees 130,015
- ---------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 556,952
- ---------------------------------------------------------------------------------------
Capital stock registration costs 60,659
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 1,173,372
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 125,840
- ---------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 1,835
- ---------------------------------------------------------------------------------------
Taxes 190,217
- ---------------------------------------------------------------------------------------
Auditing fees 19,930
- ---------------------------------------------------------------------------------------
Legal fees 14,500
- ---------------------------------------------------------------------------------------
Printing and postage 160,000
- ---------------------------------------------------------------------------------------
Insurance premiums 15,879
- ---------------------------------------------------------------------------------------
Distribution services fees--Class C Shares 366,106
- ---------------------------------------------------------------------------------------
Distribution services fees--Class B Shares 5,504
- ---------------------------------------------------------------------------------------
Miscellaneous 8,000
- --------------------------------------------------------------------------------------- ------------
Total expenses 8,362,878
- ---------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------
Waiver of shareholder services fee--Class B Shares $ 143
- ----------------------------------------------------------------------------
Waiver of distribution services fee--Class B Shares 151 294
- ---------------------------------------------------------------------------- --------- ------------
Net expenses 8,362,584
- ----------------------------------------------------------------------------------------------------- --------------
Net investment income 58,915,783
- ----------------------------------------------------------------------------------------------------- --------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments (identified cost basis) (69,284,665)
- -----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 11,193,709
- ----------------------------------------------------------------------------------------------------- --------------
Net realized and unrealized gain (loss) on investments (58,090,956)
- ----------------------------------------------------------------------------------------------------- --------------
Change in net assets resulting from operations $ 824,827
- ----------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes which are integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
<S> <C> <C>
1995* 1994
------------ --------------
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------------------------
Net investment income $ 58,915,783 $ 144,648,918
- --------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($69,284,665 and $19,160,797
net loss, respectively, as computed for federal income tax
purposes) (69,284,665) (59,750,411)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments 11,193,709 (79,685,198)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from operations 824,827 5,213,309
- -------------------------------------------------------------------------------- --------------- ---------------
NET EQUALIZATION (DEBITS) CREDITS-- (1,817,606) (447,920)
- -------------------------------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS--
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income:
- --------------------------------------------------------------------------------
Class A Shares (54,667,612) (140,902,757)
- --------------------------------------------------------------------------------
Class C Shares (3,138,951) (4,025,216)
- --------------------------------------------------------------------------------
Class B Shares (51,704) --
- --------------------------------------------------------------------------------
Select Shares (30,881) (17,077)
- --------------------------------------------------------------------------------
Distributions in excess of net investment income:
- --------------------------------------------------------------------------------
Class C Shares -- (229,165)
- --------------------------------------------------------------------------------
Class B Shares (29,270) --
- --------------------------------------------------------------------------------
Select Shares (507) (1,839)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from distributions to shareholders (57,918,925) (145,176,054)
- -------------------------------------------------------------------------------- --------------- ---------------
CAPITAL STOCK TRANSACTIONS
(EXCLUSIVE OF AMOUNTS ALLOCATED TO NET INVESTMENT INCOME)--
- --------------------------------------------------------------------------------
Proceeds from sales of shares 76,041,358 627,866,467
- --------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of dividends declared 36,681,589 94,982,947
- --------------------------------------------------------------------------------
Cost of shares redeemed (295,416,054) (628,672,944)
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets resulting from Fund share transactions (182,693,107) 94,176,470
- -------------------------------------------------------------------------------- --------------- ---------------
Change in net assets (241,604,811) (46,234,195)
- --------------------------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------------------------
Beginning of period 1,798,477,849 1,844,712,044
- -------------------------------------------------------------------------------- --------------- ---------------
End of period (including undistributed net investment income of $10,823,477 and
$11,644,224, respectively) $ 1,556,873,038 $ 1,798,477,849
- -------------------------------------------------------------------------------- --------------- ---------------
</TABLE>
*Six months ended September 30, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
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,
1995* 1994 1993 1992 1991 1990 1989 1988 1987 1986
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 7.89 $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77 $ 8.37
- -----------------
INCOME FROM
INVESTMENT
OPERATIONS
- -----------------
Net investment
income 0.28 0.63 0.71 0.75 0.77 0.78 0.76 0.78 0.80 0.93
- -----------------
Net realized and
unrealized gain
(loss) on
investments (0.26) (0.61) (0.03) 0.08 0.19 0.21 (0.40) (0.15) (0.21) 0.46
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total from
investment
operations 0.02 0.02 0.68 0.83 0.96 0.99 0.36 0.63 0.59 1.39
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
LESS
DISTRIBUTIONS
- -----------------
Dividends to
shareholders
from net
investment
income (0.28) (0.63) (0.69) (0.73) (0.78) (0.77) (0.76) (0.78) (0.80) (0.99)
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 7.63 $ 7.89 $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN*** 0.21% 0.13% 8.31% 10.20% 12.12% 12.59% 4.47% 7.66% 7.23% 17.42%
- -----------------
RATIOS TO AVERAGE
NET ASSETS
- -----------------
Expenses 0.95%(a) 0.88% 0.83% 0.91% 0.97% 0.96% 0.96% 0.96% 0.95% 0.91%
- -----------------
Net investment
income 7.12%(a) 7.50% 8.33% 8.69% 9.21% 9.32% 9.22% 9.31% 9.24% 10.51%
- -----------------
Expense waiver/
reimbursement
(b) -- -- -- -- -- 0.04% -- 0.01% 0.05% 0.13%
- -----------------
SUPPLEMENTAL DATA
- -----------------
Net assets,
end of period
(000 omitted) $1,453,642 $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
- -----------------
Portfolio
turnover rate 84% 149% 52% 43% 27% 98% 83% 72% 135% 179%
- -----------------
<CAPTION>
1985**
<S> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 7.74
- -----------------
INCOME FROM
INVESTMENT
OPERATIONS
- -----------------
Net investment
income 0.74
- -----------------
Net realized and
unrealized gain
(loss) on
investments 0.64
- ----------------- -----
Total from
investment
operations 1.38
- ----------------- -----
LESS
DISTRIBUTIONS
- -----------------
Dividends to
shareholders
from net
investment
income (0.75)
- ----------------- -----
NET ASSET VALUE,
END OF PERIOD $ 8.37
- ----------------- -----
TOTAL RETURN*** 18.39%
- -----------------
RATIOS TO AVERAGE
NET ASSETS
- -----------------
Expenses 0.89%(a)
- -----------------
Net investment
income 12.11%(a)
- -----------------
Expense waiver/
reimbursement
(b) 0.55 %(a)
- -----------------
SUPPLEMENTAL DATA
- -----------------
Net assets,
end of period
(000 omitted) $156,834
- -----------------
Portfolio
turnover rate 121 %
- -----------------
</TABLE>
* For the six months ended September 30, 1994 (unaudited).
**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.
(See Notes which are an integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Financial Highlights--Class C Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
---------------------
<S> <C> <C>
1995* 1994**
--------- ---------
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.89 $ 8.54
- --------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------
Net investment income 0.24 0.54
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.27) (0.63)
- -------------------------------------------------------------------------------------------- --------- -----------
Total from investment operations (0.03) (0.09)
- -------------------------------------------------------------------------------------------- --------- -----------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.24) (0.54)
- --------------------------------------------------------------------------------------------
Distributions in excess of net investment income -- (0.02)****
- -------------------------------------------------------------------------------------------- --------- -----------
Total distributions (0.24) (0.56)
- -------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 7.62 $ 7.89
- -------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN*** (0.33%) (1.17%)
- --------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------
Expenses 1.78%(a) 1.81%(a)
- --------------------------------------------------------------------------------------------
Net investment income 6.30%(a) 6.45%(a)
- --------------------------------------------------------------------------------------------
Expense waiver/reimbursement -- --
- --------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $93,266 $103,433
- --------------------------------------------------------------------------------------------
Portfolio turnover rate 84% 149%
- --------------------------------------------------------------------------------------------
</TABLE>
* For the six months ended September 30, 1994 (unaudited).
** 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.
**** Distribution in excess of net investment income was a 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.
(See Notes which are an integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Financial Highlights--Class B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1995*
------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.75
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------
Net investment income 0.11
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.11)
- -------------------------------------------------------------------------------------------------- -------
Total from investment operations 0.00
- -------------------------------------------------------------------------------------------------- -------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.11)
- --------------------------------------------------------------------------------------------------
Distributions in excess of net investment income (0.02)***
- -------------------------------------------------------------------------------------------------- -------
Total distributions (0.13)
- -------------------------------------------------------------------------------------------------- -------
NET ASSET VALUE, END OF PERIOD $ 7.62
- -------------------------------------------------------------------------------------------------- -------
TOTAL RETURN** 0.00%
- --------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------------------------
Expenses 1.76%(a)
- --------------------------------------------------------------------------------------------------
Net investment income 7.05%(a)
- --------------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.04%(a)
- --------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,965
- --------------------------------------------------------------------------------------------------
Portfolio turnover rate 84 %
- --------------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from July 25, 1994 (date of initial public
offering) to September 30, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
*** Distribution in excess of net investment income was a 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.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 1994
(unaudited)
(1) ORGANIZATION
Fund for U.S. Government Securities, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "Act"), as a diversified,
open-end, management investment company. Effective July 29, 1994, the Fund's
Select Shares ceased operations and were reclassified as Class C Shares. The
fund provides three classes of shares: Class A Shares, Class B Shares, and Class
C Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--U.S. Government obligations are generally valued at
the mean between the over-the-counter bid and asked prices as furnished by
an independent pricing service. Short-term securities with remaining
maturities of sixty days or less may be stated at amortized cost, which
approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure the value of
collateral at least equals the principal amount of the repurchase
agreement, including accrued interest.
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. Risks may arise from the potential inability of
counterparties to honor the terms of the repurchase agreement. Accordingly,
the Fund could receive less than the repurchase price on the sale of
collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
distributions do not represent a return of capital for federal income tax
purposes.
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially
all of its taxable income. Accordingly, no provisions for federal tax are
necessary. At March 31, 1994, the Fund for federal tax purposes, had a
capital loss carryforward of $86,702,357 which will reduce the Fund's
taxable income arising from future net realized gain on investments, if
any, to the extent permitted by the Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income tax. Pursuant to the
Code, such capital loss carryforward will expire in 1995 ($19,577,428),
1996 ($21,945,640), 1997 ($13,496,695), 1999 ($4,037,707), 2000
($2,560,450), 2001 ($5,923,640) and 2002 ($19,160,797). Additionally, net
capital losses of $49,027,952 attributable to security transactions
incurred after October 31, 1993, are treated as arising on April 1, 1994,
the first day of the Fund's next taxable year.
E. EQUALIZATION--The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
redemptions of capital stock equivalent, on a per share basis, to the
amount of undistributed net investment income on the date of the
transaction is credited or charged to undistributed net investment income.
As a result, undistributed net investment income per share is unaffected by
sales or redemptions of capital stock.
F. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
G. DOLLAR ROLL TRANSACTIONS--The Fund enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA and FHLMC, in
which the Fund loans mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon
and maturity) securities at a later date at an agreed upon price. Dollar
roll transactions are short-term financing arrangements which will not
exceed twelve months. The Fund will use the proceeds generated from the
transactions to invest in short-term instruments which may enhance the
Fund's current yield and total return.
H. OTHER--Investment transactions are accounted for on the trade date.
(3) CAPITAL STOCK
At March 31, 1994, there were 2,000,000,000 shares of $0.001 par value capital
stock authorized. Of these shares, 750,000,000 have been designated as Class A
Shares of the Fund, 750,000,000 as Class C Shares of the Fund, and 500,000,000
have been designated as Class B Shares of the Fund. Transactions in capital
stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------
1995** 1994
----------------------------- ------------------------------
CLASS A SHARES SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares sold 6,701,552 $ 51,648,729 60,711,645 $ 505,623,646
- -------------------------------------------------
Shares issued to shareholders in payment of
dividends declared 4,605,955 35,332,701 11,340,281 93,265,264
- -------------------------------------------------
Shares redeemed (35,188,986) (271,318,945) (74,704,693) (616,470,022)
- ------------------------------------------------- ------------- --------------- ------------- ---------------
Net change resulting from Class A Share
transactions (23,881,479) ($ 184,337,515) (2,652,767) ($ 17,581,112)
- ------------------------------------------------- ------------- --------------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
-------------------------------------------------------------
1995** 1994*
----------------------------- ------------------------------
CLASS C SHARES SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares sold 1,770,273 $ 13,760,849 14,283,011 $ 119,562,252
- -----------------------------------------------
Shares issued to shareholders in
payment of dividends declared 167,035 1,289,050 206,053 1,707,156
- -----------------------------------------------
Shares redeemed (2,807,719) (21,766,130) (1,381,861) (11,322,332)
- ----------------------------------------------- ----------- -------------- ------------ --------------
Net change resulting from Class C Share
transactions (870,411) ($ 6,716,231) 13,107,203 $ 109,947,076
- ----------------------------------------------- ----------- -------------- ------------ --------------
</TABLE>
*For the period from April 26, 1993 (date of initial public offering) to March
31, 1994.
**Six months ended September 30, 1994.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------
1995*** 1994
----------------------- ------------------------------
CLASS B SHARES SHARES DOLLARS SHARES DOLLARS
- ------------------------------------------------ ----------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Shares sold 1,302,356 $ 10,048,037 -- $ --
- -----------------------------------------------------
Shares issued to shareholders in payment of dividends
declared 6,287 48,135 -- --
- -----------------------------------------------------
Shares redeemed (1,561) (12,005) -- --
- ----------------------------------------------------- ---------- ------------- ---------- ------------
Net change resulting from Class B Share transactions 1,307,082 $ 10,084,167 -- $ --
- ----------------------------------------------------- ---------- ------------- ---------- ------------
</TABLE>
***For the period from July 25, 1994 (date of initial public offering) to
September 30, 1994.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------------------
1995***** 1994****
------------------------------ ---------------------------
SELECT SHARES SHARES DOLLARS SHARES DOLLARS
- --------------------------------------------- ------------ -------------- ------------ -----------
<S> <C> <C> <C> <C>
Shares sold 75,117 $ 583,743 328,043 $ 2,680,569
- ----------------------------------------------
Shares issued to shareholders in
payment of dividends declared 1,522 11,703 1,307 10,527
- ----------------------------------------------
Shares redeemed (298,416) (2,318,974) (107,573) (880,590)
- ---------------------------------------------- ------------- --------------- ------------ -------------
Net change resulting from Select Share
transactions (221,777) ($ 1,723,528) 221,777 $ 1,810,506
- ---------------------------------------------- ------------- --------------- ------------ -------------
Net change resulting from capital stock
transactions (23,666,585) ($ 182,693,107) 10,676,213 $ 94,176,470
- ---------------------------------------------- ------------- --------------- ------------ -------------
</TABLE>
****For the period from January 15, 1994 (date of initial public offering) to
March 31, 1994.
*****For the period from April 1, 1994 to July 29, 1994.
**Six months ended September 30, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser
("Adviser"), receives for its services an annual investment advisory fee equal
to 0.60 of 1% of the Fund's average daily net assets.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with administrative personnel and services. The fee is based on the level of
average aggregate daily net
assets of all funds advised by subsidiaries of Federated Investors for the
period. The administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and $30,000 per each
additional class of shares.
DISTRIBUTION AND SERVICE PLAN--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund's Class C Shares and Class B Shares. The Plan
provides that the Fund may incur distribution expenses of up to 0.75 of 1% of
the average daily net assets of the Class C Shares and Class B Shares, annually,
to compensate FSC.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS") the Fund will pay FSS up to 0.25 of 1% of average net assets
for each class for the period. This fee is to obtain certain personal services
for shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. The fee
is based on the size, type and number of accounts and transactions made by
shareholders.
Certain of the Officers and Directors of the Fund are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended September 30, 1994 were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------
Purchases $ 1,356,821,640
- ------------------------------------------------------------------------------------------------ ----------------
Sales $ 1,473,044,268
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland J. Christopher Donahue
J. Christopher Donahue President
James E. Dowd Richard B. Fisher
Lawrence D. Ellis, M.D. Vice President
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden Vice President and Treasurer
Gregor F. Meyer John W. McGonigle
Wesley W. Posvar Vice President and Secretary
Marjorie P. Smuts David M. Taylor
Assistant Treasurer
Charles H. Field
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other government
agency. Investment in mutual funds involves investment risk, including
possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus, which contains facts
concerning its objective and policies, management fees, expenses and other
information.
[LOGO] FEDERATED SECURITIES CORP.
-------------------------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
360799100
360799209
360799407
81101505 (11/94)
APPENDIX A
The graphic presentation displayed here consists of a
three dimensional mountain chart which represents the change
in the value of a hypothetical $25,000 initial investment in
the Fund for U.S. Government Securities, Inc. The x-axis
represents time and is divided into twenty-five units. The
first unit represents the period of time from the Fund's
inception date of October 6, 1969, and increases in yearly
increments to the last unit representing 1994. The y-axis
represents dollar value and is divided into four equal units
with increments of $50,000. The values of the y-axis range
from $0 to $200,000.
The initial investment on October 6, 1969 is $25,000.
The total value of investment on September 30, 1994 was
$153,028. The key in the upper left hand corner of the
chart states that the principal value of an $25,000
investment is represented by blue shading and gray shading
represents reinvested income.
APPENDIX B
The graphic presentation displayed here consists of a
three dimensional mountain chart which represents the change
in the value of a hypothetical $25,000 investment ($1,000
invested each year for eight years) in the Liberty Equity
Income Fund, Inc., with all dividends and capital gains
reinvested. The x-axis represents time and is divided into
twenty-five units. The first unit represents the period of
time from the Fund's inception date of October 6, 1969, and
increases in yearly increments to the last unit representing
1994. The y-axis represents dollar value and is divided
into four equal units with increments of $20,000. The
values of the y-axis range from $0 to $80,000.
The total value of twenty-five consecutive annual
$1,000 investments on September 30, 1994 was $76,915. The
key in the upper left hand corner of the chart states that
the principal value of annual $1,000 investments is
represented by blue shading and gray shading represents
reinvested income.
