[logo] FEDERATED INVESTORS
Fund for
U.S. Government
Securities, Inc.
26th Semi-Annual Report
September 30, 1995
Established 1969
FIXED INCOME
President's Message
- ------------------------------------------------------------------------------
Dear Fellow Shareholder:
I am pleased to present the 26th Semi-Annual Report for Fund for U.S.
Government Securities, Inc., which covers the six-month period from
April 1, 1995, to September 30, 1995.
This report begins with an interview with the fund's portfolio manager
Kathy Foody-Malus, Vice President, Federated Advisers. Following her
comments are a complete listing of the holdings in the fund's
portfolio, investment performance graphs, and the financial statements.
In addition, Financial Highlights tables have been included for Class A
Shares, Class B Shares, and Class C Shares.
An attractive level of current income for shareholders is the fund's
goal. To pursue this goal, the fund invests primarily in
short-to-intermediate term U.S. government mortgage-backed securities
and U.S. 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.*
As of September 30, 1995, the fund's portfolio as a percentage of net
assets consisted of the following:
Federal Home Loan Mortgage Corp. 2.9% $ 43,561,912
Federal National Mortgage Association 12.9% $ 196,520,061
Government National Mortgage Association 68.0% $1,032,231,808
Repurchase Agreements 20.5% $ 311,080,000
Treasury Notes 14.3% $ 216,629,900
In July of this year, the Federal Reserve Board lowered short-term
interest rates from 6% to 5.75%. This followed seven increases that had
doubled those same rates between early 1994 and early 1995. Just as
those increases had depressed bond prices, July's interest rate
decrease boosted bond prices across the U.S. government bond market.
The present level of bond prices reflects attractive investment value
and return--in other words, a "buyer's market."
During the six-month period, the fund's net asset value rose 2.47% from
$7.67 on April 1, 1995 to $7.86 on September 30, 1995. Fund assets also
increased by $35.6 million to reach over $1.5 billion on September 30,
1995.
Dividends paid per share during the reporting period totaled $0.29 for
Class A Shares, $0.26 for Class B Shares, and $0.26 for Class C Shares.
We are optimistic that most of the interest rate increases are now
behind us. We believe that the remainder of 1995 and 1996 should be
more favorable for mortgage-backed securities selected for the fund.
As always, we welcome your comments and suggestions.
Very sincerely yours,
J. Christopher Donahue
President
November 15, 1995
*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 monthly for
developments that could cause changes in ratings. The rating itself
does not remove market risks.
Investment Review
- ------------------------------------------------------------------------------
Kathy Foody-Malus
Vice President
Federated Advisers
How would you define Fund for U.S. Government Securities, Inc. against
the broad array of fixed-income investments?
The fund is defined as a short-to-intermediate bond fund, which means
it can be compared to a four-to five-year U.S. Treasury note. The
fund's holdings of U.S. Treasury notes and GNMAs represent the majority
of its investments. The fund invests in other U.S. government and
agency paper for the express purpose of creating income and offering
lower volatility in the fund's net asset value.
What are the fund's vital statistics and investment objective?
As of September 30, 1995, total net assets were $1.5 billion, and the
average 30-day SEC yield of Class A Shares was 6.05%* based on the
offering price of $8.23. The 30-day SEC yield for Class B and Class C
Shares was 5.52% and 5.49%,* respectively. For the twelve months ended
September 30, 1995, the Class A Shares' average annual one-year,
five-year and ten-year total returns based on offering price were
5.96%, 6.23% and 7.48%,* respectively. Class B Shares' average annual
one-year and since inception (7/26/94) returns were 4.42% and 4.31%,*
respectively. Class C Shares' average annual one-year and since
inception (4/27/93) returns were 9.06% and 3.42%,
respectively.*
For the twelve months ended September 30, 1995, the Lipper Mortgage
Fund Average, which is not adjusted to reflect sales charges, was
11.68%. The fund is rated AAAf, the highest mutual fund credit rating
of Standard & Poor's Rating Group, and will continue to provide monthly
cash flow and daily liquidity while seeking competitive yields.**
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when
redeemed, may be worth more or less than their original cost.
** 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 monthly for
developments that could cause changes in ratings. The rating itself
does not remove market risks.
Can you comment on the interest rate environment over the six-month
period?
During the semi-annual reporting period, interest rates declined across
the entire yield curve. The decline in interest rates was in response
to weaker economic data such as the industrial sector data via new
factory orders and the purchasing manager's index.
Offsetting the weakness in the industrial sector was the employment
picture which showed much stronger monthly employment data as well as
weekly initial claims. The critical key to the U.S. economy remains the
consumer. For example, the recent housing rebound reflects the lure of
lower interest rates. However, given the late stage of the business
cycle, the odds are against housing continuing to remain strong.
Although economic data has been quite mixed, the U.S. Treasury market
during this time period has chosen to focus on the economic data which
has shown signs of a weakening economy.
How did investors respond to this, and how did mortgage-backed
securities ultimately perform?
Mortgage securities performed well relative to U.S. Treasuries in the
first quarter of 1995, and then underperformed their U.S. Treasury
counterparts during the second quarter. With the U.S. Treasury market
rallying during this time period, spreads on mortgage securities were
widening because of an increase in volatility, heightened prepayment
fears, and investor selling of mortgage securities in an attempt to
keep positively convex securities in their portfolios. However, as the
third quarter started, the risk return profile in mortgages shifted in
their favor. Over the quarter, mortgage securities across the board
performed extremely well versus similar duration U.S. Treasuries.
Performance in the mortgage market going forward will continue to be
driven strongly by market direction.
U.S. Treasuries currently represent approximately 15% of the fund's
portfolio. Would you explain their role in the fund's strategy?
The Treasury position acts as a hedge against mortgage prepayments and
helps cushion overall performance by adding predictable cash flows.
Current investment strategy emphasizes a diversified range of coupons
averaging 8.32% and offering a weighted average effective duration of
3.7 years. Considering the fund's total portfolio, it will have price
volatility similar to an intermediate-term government security as well
as daily liquidity and U.S. government/agency guarantees.
What's your outlook now?
Throughout different time periods of 1995, interest rate volatility has
been the driving force in the performance of the mortgage market. Over
the next six months, barring a major interest rate rally, which
Federated does not anticipate, the mortgage market should perform well.
Interest rate volatility has been on the decline, and this trend should
continue moving forward. The mortgage market should also benefit from
lower levels of mortgage originations coupled with wider yield spreads
which will attract demand.
How are you structuring the portfolio to reflect this outlook?
The current structure of the portfolio calls for a neutral duration
strategy. With the mortgage to U.S. Treasury relationship having been
very market directional, the bias has been to favor current coupon
mortgage securities and U.S. Treasuries in the ten-year area of the
yield curve.
Portfolio structure continues to favor an overweighted position in
mortgage-backed securities as they are expected to provide good
long-term value versus other fixed-income assets. The assessment of
mortgage security value resides in the belief that volatility is on the
decline, future supply levels are limited, and prepayment risk will be
less onerous than first thought.
Could you please comment on the recent dividend reduction for Fund for
U.S. Government Securities, Inc.?
The recent dividend reduction, which virtually all intermediate-term
mortgage funds experienced, was due to a decline of more than 2% in
intermediate-term interest rates that began early in 1995. In this rate
environment, we're reinvesting the principal from higher-yielding
securities in securities currently yielding 6-1/2% to 7%. The fund
still offers a competitive yield of about 1% over intermediate-term
U.S. Treasury notes.
Two Ways You May Seek to Invest for Success in
Fund for U.S. Government Securities, Inc.
- ------------------------------------------------------------------------------
Initial Investment:
If you had made an initial investment of $26,000 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 $176,578 on 9/30/95. You would have earned a
7.65%* average annual total return for the 26-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 9/30/95, the Class A Shares' average annual one-year, five-year,
and ten-year total returns were 5.96%, 6.23%, and 7.48%, respectively.
Class B Shares' average annual one-year and since inception (7/26/94)
total returns were 4.42% and 4.31%, respectively. Class C Shares'
average annual one-year and since inception (4/27/93) were 9.06% and
3.42%, respectively.*
Graphic representation "A" omitted. See Appendix.
* The total return stated takes into account the 4.50% sales charge for
Class A Shares, the 5.50% contingent deferred sales charge for Class B
Shares and the 1.00% contingent deferred sales charge for Class C
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 26 years (reinvesting all dividends and
capital gains) grew to $87,378.
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 $26,000, but your account would have reached a total
value of $87,378* by 9/30/95. You would have earned an average annual
total return of 8.08%.
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 "B" omitted. See Appendix.
* 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.--
Hypothetical Investor Profile: Investing for Current Income
- ------------------------------------------------------------------------------
Ten years ago, on September 30, 1985, Anne and Denny Laughlin, an
imaginary working couple with no children, had to decide how to invest
a $100,000 inheritance from her late father's estate. They chose Fund
for U.S. Government Securities, Inc. because it invests in government
securities which traditionally are some of the safest, most
credit-worthy securities issued in America.
They like the way they can use their Fund for U.S. Government
Securities, Inc. account for an occasional extravagance--like a $50,000
Jaguar--without touching their original principal.
The Laughlin's account totaled $207,327 as of 9/30/95 for a total
return of 7.56%.
Graphic representation "C" omitted. See Appendix.
This hypothetical scenario is provided for illustrative purposes only
and does not represent the result obtained by any particular
shareholder. Past performance does not guarantee future results.
Fund for U.S. Government Securities, Inc.
Portfolio of Investments
- --------------------------------------------------------------------------------
September 30, 1995 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ------------------------------------------------------------------------------ ----------------
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--98.1%
- ----------------------------------------------------------------------------------------------
(A)FEDERAL HOME LOAN MORTGAGE CORP. PC--2.9%
------------------------------------------------------------------------------
$ 431,528 12.50%, 7/1/2011-4/1/2013 $ 484,519
------------------------------------------------------------------------------
61,501 12.00%, 3/1/2015 68,630
------------------------------------------------------------------------------
9,223,712 11.00%, 6/1/2010-7/1/2019 10,144,734
------------------------------------------------------------------------------
11,146,692 10.50%, 2/1/2020-10/1/2020 12,146,216
------------------------------------------------------------------------------
21,000,000 7.00%, 9/1/2025 20,717,813
------------------------------------------------------------------------------ ----------------
Total 43,561,912
------------------------------------------------------------------------------ ----------------
(a)FEDERAL NATIONAL MORTGAGE ASSOCIATION--12.9%
------------------------------------------------------------------------------
3,477,840 11.50%, 11/1/2015 3,884,260
------------------------------------------------------------------------------
25,409,604 11.00%, 9/1/2010--5/1/2023 28,204,406
------------------------------------------------------------------------------
15,000,000 (b)7.50%, 9/1/2025 15,098,250
------------------------------------------------------------------------------
30,000,000 (b)7.00%, 9/1/2025 30,299,700
------------------------------------------------------------------------------
79,084,563 7.00%, 8/1/2025-9/1/2025 77,848,292
------------------------------------------------------------------------------
41,773,321 6.50%, 6/1/2009-9/1/2010 41,185,153
------------------------------------------------------------------------------ ----------------
Total 196,520,061
------------------------------------------------------------------------------ ----------------
(a)GOVERNMENT NATIONAL MORTGAGE ASSOCIATION MPT--68.0%
------------------------------------------------------------------------------
2,324,335 13.00%, 12/15/2010-12/15/2014 2,678,658
------------------------------------------------------------------------------
2,564,170 12.50%, 2/15/2011-7/20/2015 2,936,452
------------------------------------------------------------------------------
18,429,867 12.00%, 5/15/2011-1/15/2016 20,874,339
------------------------------------------------------------------------------
20,624,726 11.50%, 3/15/2010-9/15/2018 23,182,366
------------------------------------------------------------------------------
15,436,258 11.00%, 12/15/2009-10/15/2019 17,246,045
------------------------------------------------------------------------------
22,370,326 10.50%, 1/15/2014-9/15/2019 24,663,060
------------------------------------------------------------------------------
80,353,232 10.00%, 4/15/2016-1/15/2021 87,602,447
------------------------------------------------------------------------------
122,962,087 9.50%, 9/15/2016-1/15/2025 131,980,176
------------------------------------------------------------------------------
125,470,159 9.00%, 11/15/2019-1/15/2025 132,677,510
------------------------------------------------------------------------------
90,602,548 8.50%, 5/15/2021-1/15/2025 94,457,979
------------------------------------------------------------------------------
612,421 8.20%, 6/15/2012-5/15/2013 619,108
------------------------------------------------------------------------------
</TABLE>
Fund for U.S. Government Securities, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ------------------------------------------------------------------------------ ----------------
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--CONTINUED
- ----------------------------------------------------------------------------------------------
(a)GOVERNMENT NATIONAL MORTGAGE ASSOCIATION MPT--CONTINUED
------------------------------------------------------------------------------
$ 205,258,337 8.00%, 8/15/2022-9/15/2025 $ 211,091,779
------------------------------------------------------------------------------
85,000,000 (b)7.50%, 9/15/2025 85,849,150
------------------------------------------------------------------------------
58,643,447 7.50%, 1/15/2023-9/15/2023 59,229,295
------------------------------------------------------------------------------
137,000,000 (b)7.0%, 9/15/2025 135,457,380
------------------------------------------------------------------------------
1,705,265 7.0%, 7/15/2023-6/15/2024 1,686,064
------------------------------------------------------------------------------ ----------------
Total 1,032,231,808
------------------------------------------------------------------------------ ----------------
U.S. TREASURY NOTES--14.3%
------------------------------------------------------------------------------
70,000,000 7.875%, 11/15/2004 77,906,500
------------------------------------------------------------------------------
85,000,000 7.50%, 11/15/2001-2/15/2005 92,432,600
------------------------------------------------------------------------------
30,000,000 7.25%, 5/15/2004 32,051,400
------------------------------------------------------------------------------
8,000,000 6.75%, 6/30/1999 8,202,800
------------------------------------------------------------------------------
6,000,000 6.25%, 2/15/2003 6,036,600
------------------------------------------------------------------------------ ----------------
Total 216,629,900
------------------------------------------------------------------------------ ----------------
TOTAL LONG-TERM U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $1,463,705,678) 1,488,943,681
------------------------------------------------------------------------------ ----------------
(C)REPURCHASE AGREEMENTS--20.5%
- ----------------------------------------------------------------------------------------------
19,080,000 J.P. Morgan Securities, Inc., 6.48%, dated 9/29/1995, due 10/2/1995 19,080,000
------------------------------------------------------------------------------
30,000,000 (d)Goldman, Sachs & Co., 5.74%, dated 9/18/1995, due 10/18/1995 30,000,000
------------------------------------------------------------------------------
20,000,000 (d)Goldman, Sachs & Co., 5.74%, dated 9/20/1995, due 10/19/1995 20,000,000
------------------------------------------------------------------------------
25,000,000 (d)Goldman, Sachs & Co., 5.74%, dated 9/20/1995, due 10/23/1995 25,000,000
------------------------------------------------------------------------------
15,000,000 (d)Merrill Lynch Government Securities, Inc., 5.73%, dated
9/14/1995, due 10/16/1995 15,000,000
------------------------------------------------------------------------------
</TABLE>
Fund for U.S. Government Securities, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
- -------------- ------------------------------------------------------------------------------ ----------------
(C)REPURCHASE AGREEMENTS--CONTINUED
- ----------------------------------------------------------------------------------------------
$ 202,000,000 (d)Swiss Bank Corp., New York, 5.73%, dated 9/19/1995, due
10/19/1995 $ 202,000,000
------------------------------------------------------------------------------ ----------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) 311,080,000
------------------------------------------------------------------------------ ----------------
TOTAL INVESTMENTS (IDENTIFIED COST $1,774,785,678)(E) $ 1,800,023,681
------------------------------------------------------------------------------ ----------------
</TABLE>
(a) Because of monthly principal payments, the average lives of the Government
National Association Modified Pass-Through Securities (based upon FHA/VA
historical experience), Federal Home Loan Mortgage Corp. Participation
Certificates, and Federal National Mortgage Association Pass-Through
Securities are less than the stated maturities.
(b) These securities are subject to dollar roll transactions.
(c) The repurchase agreements are fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.
(d) 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.
(e) The cost of investments for federal tax purposes amounts to $1,774,785,678.
The unrealized appreciation of investments on a federal tax basis amounts
to $25,238,003 which is comprised of $26,482,236 appreciation and
$1,244,233 depreciation at September 30, 1995.
Note: The categories of investments are shown as a percentage of net assets
($1,518,094,997) at September 30, 1995.
The following acronyms are used throughout this portfolio:
MPT--Modified Pass Through
PC--Participation Certificate
(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, 1995 (unaudited)
<TABLE>
<S> <C> <C>
ASSETS:
- --------------------------------------------------------------------------------------------------
Investments in securities $1,488,943,681
- -----------------------------------------------------------------------------------
Investments in repurchase agreements 311,080,000
- ----------------------------------------------------------------------------------- -------------
Total investments in securities, at value (identified and tax cost $1,774,785,678) $1,800,023,681
- --------------------------------------------------------------------------------------------------
Income receivable 12,504,848
- --------------------------------------------------------------------------------------------------
Receivable for investments sold 100,002,744
- --------------------------------------------------------------------------------------------------
Receivable for shares sold 1,332,962
- -------------------------------------------------------------------------------------------------- -------------
Total assets 1,913,864,235
- --------------------------------------------------------------------------------------------------
LIABILITIES:
- -----------------------------------------------------------------------------------
Payable to bank $ 200,251
- -----------------------------------------------------------------------------------
Payable for investments purchased 94,809,757
- -----------------------------------------------------------------------------------
Payable for shares redeemed 443,321
- -----------------------------------------------------------------------------------
Income distribution payable 9,165,093
- -----------------------------------------------------------------------------------
Payable for dollar roll transactions 290,717,376
- -----------------------------------------------------------------------------------
Accrued expenses 433,440
- ----------------------------------------------------------------------------------- -------------
Total liabilities 395,769,238
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS for 193,093,296 shares outstanding $1,518,094,997
- -------------------------------------------------------------------------------------------------- -------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------------------------
Paid in capital $1,689,935,154
- --------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 25,238,003
- --------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (206,003,394)
- --------------------------------------------------------------------------------------------------
Undistributed net investment income 8,925,234
- -------------------------------------------------------------------------------------------------- -------------
Total Net Assets $1,518,094,997
- -------------------------------------------------------------------------------------------------- -------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
- --------------------------------------------------------------------------------------------------
CLASS A SHARES:
- --------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($1,371,117,085 / 174,398,618 shares outstanding) $7.86
- -------------------------------------------------------------------------------------------------- -------------
Offering Price Per Share (100/95.50 of $7.86)* $8.23
- -------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share $7.86
- -------------------------------------------------------------------------------------------------- -------------
CLASS B SHARES:
- --------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($69,037,892 / 8,782,546 shares outstanding) $7.86
- -------------------------------------------------------------------------------------------------- -------------
Offering Price Per Share $7.86
- -------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share (94.50/100 of $7.86)** $7.43
- -------------------------------------------------------------------------------------------------- -------------
CLASS C SHARES:
- --------------------------------------------------------------------------------------------------
Net Asset Value Per Share ($77,940,020 / 9,912,132 shares outstanding) $7.86
- -------------------------------------------------------------------------------------------------- -------------
Offering Price Per Share $7.86
- -------------------------------------------------------------------------------------------------- -------------
Redemption Proceeds Per Share (99.00/100 of $7.86)** $7.78
- -------------------------------------------------------------------------------------------------- -------------
</TABLE>
*See "What Shares Cost" in the Prospectus.
**See "Contingent Deferred Sales Charge" 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, 1995 (unaudited)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------------------
Interest (net of dollar roll expense of $8,411,687) $ 60,621,166
- --------------------------------------------------------------------------------------------------- -------------
EXPENSES:
- -------------------------------------------------------------------------------------
Investment advisory fee $ 4,577,644
- -------------------------------------------------------------------------------------
Administrative personnel and services fee 573,331
- -------------------------------------------------------------------------------------
Custodian fees 119,504
- -------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 650,263
- -------------------------------------------------------------------------------------
Directors'/Trustees' fees 12,817
- -------------------------------------------------------------------------------------
Auditing fees 10,065
- -------------------------------------------------------------------------------------
Legal fees 12,759
- -------------------------------------------------------------------------------------
Portfolio accounting fees 89,923
- -------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 197,898
- -------------------------------------------------------------------------------------
Distribution services fee--Class C Shares 300,337
- -------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 1,727,354
- -------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 65,966
- -------------------------------------------------------------------------------------
Shareholder services fee--Class C Shares 100,112
- -------------------------------------------------------------------------------------
Share registration costs 40,422
- -------------------------------------------------------------------------------------
Printing and postage 76,407
- -------------------------------------------------------------------------------------
Insurance premiums 11,405
- -------------------------------------------------------------------------------------
Taxes 177,244
- -------------------------------------------------------------------------------------
Miscellaneous 10,038
- ------------------------------------------------------------------------------------- ------------
Total expenses 8,753,489
- -------------------------------------------------------------------------------------
Waivers--
- ------------------------------------------------------------------------
Waiver of investment advisory fee $ (280,513)
- ------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares (690,941)
- ------------------------------------------------------------------------
Waiver of shareholder services fee--Class B Shares (10,555)
- ------------------------------------------------------------------------
Waiver of shareholder services fee--Class C Shares (5,352)
- ------------------------------------------------------------------------ -----------
Total waivers (987,361)
- ------------------------------------------------------------------------------------- ------------
Net expenses 7,766,128
- --------------------------------------------------------------------------------------------------- -------------
Net investment income 52,855,038
- --------------------------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------------------
Net realized gain on investments 4,822,039
- ---------------------------------------------------------------------------------------------------
Net change in unrealized appreciation of investments 34,538,419
- --------------------------------------------------------------------------------------------------- -------------
Net realized and unrealized gain on investments 39,360,458
- --------------------------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ 92,215,496
- --------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
(UNAUDITED) YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------------------------
Net investment income $ 52,855,038 $ 116,006,999
- -------------------------------------------------------------------------
Net realized gain (loss) on investments ($4,822,039 net gain
and $123,323,419 net loss, respectively, as computed for
federal tax purposes) 4,822,039 (94,672,552)
- -------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) 34,538,419 42,533,141
- ------------------------------------------------------------------------- --------------------- ----------------
Change in net assets resulting from operations 92,215,496 63,867,588
- ------------------------------------------------------------------------- --------------------- ----------------
NET EQUALIZATION CREDITS (DEBITS)-- (378,935) (2,842,296)
- ------------------------------------------------------------------------- --------------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------------------------
Distributions from net investment income
- -------------------------------------------------------------------------
Class A Shares (50,627,727) (106,507,664)
- -------------------------------------------------------------------------
Class B Shares (1,839,004) (782,408)
- -------------------------------------------------------------------------
Class C Shares (2,607,393) (5,907,635)
- -------------------------------------------------------------------------
Select Shares -- (31,388)
- -------------------------------------------------------------------------
Distributions in excess of net investment income
- -------------------------------------------------------------------------
Class B Shares -- (56,577)(a)
- ------------------------------------------------------------------------- --------------------- ----------------
Change in net assets resulting from distributions
to shareholders (55,074,124) (113,285,672)
- ------------------------------------------------------------------------- --------------------- ----------------
SHARE TRANSACTIONS--
- -------------------------------------------------------------------------
Proceeds from sale of shares 92,806,931 145,070,864
- -------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment
of distributions declared 28,299,978 70,938,753
- -------------------------------------------------------------------------
Cost of shares redeemed (122,279,475) (479,721,960)
- ------------------------------------------------------------------------- --------------------- ----------------
Change in net assets resulting from share transactions (1,172,566) (263,712,343)
- ------------------------------------------------------------------------- --------------------- ----------------
Change in net assets 35,589,871 (315,972,723)
- -------------------------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------------------------
Beginning of period 1,482,505,126 1,798,477,849
- ------------------------------------------------------------------------- --------------------- ----------------
End of period (including undistributed net investment income of
$8,925,234 and $11,523,255, respectively) $ 1,518,094,997 $ 1,482,505,126
- ------------------------------------------------------------------------- --------------------- ----------------
</TABLE>
(a) Distributions in excess of net investment income were a result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
(See Notes which are an integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Statement of Cash Flows
- --------------------------------------------------------------------------------
Six Months Ended September 30, 1995
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 92,215,496
- -------------------------------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS TO CASH
PROVIDED BY OPERATING ACTIVITIES:
- -------------------------------------------------------------------------------------------------
Net increase in investments (including $25,238,003 of unrealized appreciation) (57,835,110)
- -------------------------------------------------------------------------------------------------
Increase in income receivable (282,183)
- -------------------------------------------------------------------------------------------------
Increase in receivable for investments sold (27,478,583)
- -------------------------------------------------------------------------------------------------
Increase in payable for investments purchased 36,811,563
- -------------------------------------------------------------------------------------------------
Decrease in accrued expenses (123,199)
- -------------------------------------------------------------------------------------------------
Increase in payable to bank 200,251
- ------------------------------------------------------------------------------------------------- ---------------
Cash provided by operating activities 43,508,235
- ------------------------------------------------------------------------------------------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------------------------------------------------------------------
Net proceeds from the sale of shares 93,824,926
- -------------------------------------------------------------------------------------------------
Net cost of shares redeemed (124,402,821)
- -------------------------------------------------------------------------------------------------
Equalization (debits) credits (378,935)
- -------------------------------------------------------------------------------------------------
Increase on payable for dollar roll transactions 8,558,289
- -------------------------------------------------------------------------------------------------
Distributions paid (21,112,869)
- ------------------------------------------------------------------------------------------------- ---------------
Cash used in financing activities (43,511,410)
- ------------------------------------------------------------------------------------------------- ---------------
Decrease in cash (3,175)
- ------------------------------------------------------------------------------------------------- ---------------
Cash at beginning of period 3,175
- ------------------------------------------------------------------------------------------------- ---------------
Cash at end of period $ 0
- ------------------------------------------------------------------------------------------------- ---------------
</TABLE>
(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>
SIX MONTHS
ENDED
(UNAUDITED)
SEPT. 30, YEAR ENDED MARCH 31,
1995 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.67 $ 7.89 $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56
- ---------------------
INCOME FROM
INVESTMENT OPERATIONS
- ---------------------
Net investment
income 0.28 0.57 0.63 0.71 0.75 0.77 0.78 0.76 0.78
- ---------------------
Net realized and
unrealized gain
(loss) on
investments 0.20 (0.23) (0.61) (0.03) 0.08 0.19 0.21 (0.40) (0.15)
- --------------------- ----- --------- --------- --------- --------- --------- --------- --------- ---------
Total from
investment
operations 0.48 0.34 0.02 0.68 0.83 0.96 0.99 0.36 0.63
- --------------------- ----- --------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- ---------------------
Distributions from
net investment
income (0.29) (0.56) (0.63) (0.69) (0.73) (0.78) (0.77) (0.76) (0.78)
- --------------------- ----- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE, END
OF PERIOD $ 7.86 $ 7.67 $ 7.89 $ 8.50 $ 8.51 $ 8.41 $ 8.23 $ 8.01 $ 8.41
- --------------------- ----- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (A) 6.31% 4.59% 0.13% 8.31% 10.20% 12.12% 12.59% 4.47% 7.66%
- ---------------------
RATIOS TO AVERAGE NET
ASSETS
- ---------------------
Expenses 0.95%* 0.95% 0.88% 0.83% 0.91% 0.97% 0.96% 0.96% 0.96%
- ---------------------
Net investment
income 7.03%* 7.41% 7.50% 8.33% 8.69% 9.21% 9.32% 9.22% 9.31%
- ---------------------
Expense waiver/
reimbursement (b) 0.14%* 0.02% -- -- -- -- 0.04% -- 0.01%
- ---------------------
SUPPLEMENTAL DATA
- ---------------------
Net assets,
end of period
(000 omitted) $1,371,117 $1,367,710 $1,693,293 $1,844,712 $1,384,117 $1,133,017 $1,039,493 $1,054,055 $1,150,395
- ---------------------
Portfolio turnover 207% 154% 149% 52% 43% 27% 98% 83% 72%
- ---------------------
<CAPTION>
<S> <C>
1987
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.77
- ---------------------
INCOME FROM
INVESTMENT OPERATIONS
- ---------------------
Net investment
income 0.80
- ---------------------
Net realized and
unrealized gain
(loss) on
investments (0.21)
- --------------------- ---------
Total from
investment
operations 0.59
- --------------------- ---------
LESS DISTRIBUTIONS
- ---------------------
Distributions from
net investment
income (0.80)
- --------------------- ---------
NET ASSET VALUE, END
OF PERIOD $ 8.56
- --------------------- ---------
TOTAL RETURN (A) 7.23%
- ---------------------
RATIOS TO AVERAGE NET
ASSETS
- ---------------------
Expenses 0.95%
- ---------------------
Net investment
income 9.24%
- ---------------------
Expense waiver/
reimbursement (b) 0.05%
- ---------------------
SUPPLEMENTAL DATA
- ---------------------
Net assets,
end of period
(000 omitted) $1,193,389
- ---------------------
Portfolio turnover 135%
- ---------------------
</TABLE>
* Computed on an annualized basis.
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(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 B Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
SEPTEMBER 30, MARCH 31,
1995 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.67 $ 7.75
- -------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------
Net investment income 0.25 0.37
- -------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.20 (0.06)
- ------------------------------------------------------------------------------- ------- -------
Total from investment operations 0.45 0.31
- ------------------------------------------------------------------------------- ------- -------
LESS DISTRIBUTIONS
- -------------------------------------------------------------------------------
Distributions from net investment income (0.26) (0.37)
- -------------------------------------------------------------------------------
Distributions in excess of net investment income -- (0.02)(b)
- ------------------------------------------------------------------------------- ------- -------
Total distributions (0.26) (0.39)
- ------------------------------------------------------------------------------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 7.86 $ 7.67
- ------------------------------------------------------------------------------- ------- -------
TOTAL RETURN (C) 5.91% 4.13%
- -------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -------------------------------------------------------------------------------
Expenses 1.76%* 1.76%*
- -------------------------------------------------------------------------------
Net investment income 6.24%* 7.02%*
- -------------------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.07%* 0.06%*
- -------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $69,038 $34,276
- -------------------------------------------------------------------------------
Portfolio turnover 207% 154%
- -------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 25, 1994 (date of initial
public investment) to March 31, 1995.
(b) Distributions in excess of net investment income were a result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) 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>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
SEPTEMBER 30, MARCH 31,
1995 1995 1994(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.67 $ 7.89 $ 8.54
- -----------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------
Net investment income 0.25 0.51 0.54
- -----------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.20 (0.23) (0.63)
- ----------------------------------------------------------------------- ------- ------- --------
Total from investment operations 0.45 0.28 (0.09)
- ----------------------------------------------------------------------- ------- ------- --------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------
Distributions from net investment income (0.26) (0.50) (0.54)
- -----------------------------------------------------------------------
Distributions in excess of net investment income -- -- (0.02)(b)
- ----------------------------------------------------------------------- ------- ------- --------
Total distributions (0.26) (0.50) (0.56)
- ----------------------------------------------------------------------- ------- ------- --------
NET ASSET VALUE, END OF PERIOD $ 7.86 $ 7.67 $ 7.89
- ----------------------------------------------------------------------- ------- ------- --------
TOTAL RETURN (C) 5.88% 3.72% (1.17)%
- -----------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------
Expenses 1.78%* 1.79% 1.81%*
- -----------------------------------------------------------------------
Net investment income 6.20%* 6.56% 6.45%*
- -----------------------------------------------------------------------
Expense waiver/reimbursement (d) 0.05%* 0.02% --
- -----------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------
Net assets, end of period (000 omitted) $77,940 $80,519 $103,433
- -----------------------------------------------------------------------
Portfolio turnover 207% 154% 149%
- -----------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 26, 1993 (date of initial
public offering) to March 31, 1994.]
(b) Distributions in excess of net investment income were a result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) 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--Select Shares
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
<S> <C> <C>
1995(A) 1994(B)
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.90 $ 8.24
- -----------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------
Net investment income 0.17 0.13
- -----------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.15) (0.33)
- ----------------------------------------------------------------------------------------- --------- ---------
Total from investment operations 0.02 (0.20)
- ----------------------------------------------------------------------------------------- --------- ---------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------
Distributions from net investment income (0.16) (0.13)
- -----------------------------------------------------------------------------------------
Distributions in excess of net investment income -- (0.01)(c)
- ----------------------------------------------------------------------------------------- --------- ---------
Total distributions (0.16) (0.14)
- ----------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 7.76 $ 7.90
- ----------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN (D) 0.28% (2.51)%
- -----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------
Expenses 1.80%* 1.81%*
- -----------------------------------------------------------------------------------------
Net investment income 6.09%* 6.65%*
- -----------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) -- $1,751
- -----------------------------------------------------------------------------------------
Portfolio turnover 154% 149%
- -----------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from April 1, 1994 to July 29, 1994
(date Select Shares ceased operations).]
(b) Reflects operations for the period from January 15, 1994 (date of initial
public investment) to March 31, 1994.
(c) Distributions in excess of net investment income were a result of certain
book and tax timing differences. These distributions do not represent a
return of capital for federal income tax purposes.
(d) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(See Notes which are an integral part of the Financial Statements)
Fund for U.S. Government Securities, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 1995 (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. The Fund offers 3 classes of shares:
Class A Shares, Class B Shares, and Class C Shares.
Previously, the Fund provided 4 classes of shares ("Class A", "Class B", "Class
C" and "Select"). As of July 29, 1994, the Fund's Select Shares were no longer
offered and were reclassified as 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.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
REPURCHASE AGREEMENTS--It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System, or to have segregated within the
custodian bank's vault, all securities held as collateral under repurchase
agreement transactions. Additionally, procedures have been established by
the Fund to monitor, on a daily basis, the market value of each repurchase
agreement's collateral to ensure that the value of collateral at least
equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Directors (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.
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.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
Fund for U.S. Government Securities, Inc.
- --------------------------------------------------------------------------------
At March 31, 1995, the Fund, for federal tax purposes, had a capital loss
carryforward of $190,448,348, which will reduce the Fund's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
1996 $ 21,945,640
1997 $ 13,496,695
1999 $ 4,037,707
2000 $ 2,560,450
2001 $ 5,923,640
2002 $ 19,160,797
2003 $123,323,419
</TABLE>
Additionally, net capital losses of $20,377,085 attributable to security
transactions incurred
after October 31, 1994 are treated as arising on April 1, 1995, the first
day of the Fund's next taxable year.
EQUALIZATION--The Fund follows the accounting practice known as
equalization. With equalization, a portion of the proceeds from sales and
costs of redemptions of fund shares (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 Fund shares.
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.
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 sells 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 investments, which may enhance the
Fund's current yield and total return.
STATEMENT OF CASH FLOWS--Information on financial transactions which have
been settled through the receipt or disbursement of cash is presented in
the Fund's Statement of Cash Flows. The cash amount shown in the Statement
of Cash Flows is the amount reported as
Fund for U.S. Government Securities, Inc.
- --------------------------------------------------------------------------------
cash in the Fund's Statement of Assets and Liabilities and represents cash
on hand in its custodian bank account and does not include any short-term
investments at September 30, 1995.
OTHER--Investment transactions are accounted for on the trade date.
3. CAPITAL STOCK
At September 30, 1995, par value shares ($0.001 per share) authorized were as
follows:
<TABLE>
<CAPTION>
NO. OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A 750,000,000
Class B 500,000,000
Class C 750,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 5,946,325 $ 42,927,476 11,722,674 $ 89,460,417
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 3,424,468 26,551,919 8,973,807 68,149,188
- --------------------------------------------------
Shares redeemed (13,294,501) (99,855,235) (56,859,738) (433,752,920)
- -------------------------------------------------- ------------- -------------- ------------- ---------------
Net change resulting from
Class A share transactions (3,923,708) $ (30,375,840) (36,163,257) $ (276,143,315)
- -------------------------------------------------- ------------- -------------- ------------- ---------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995*
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 5,289,899 $ 41,403,463 4,664,234 $ 35,599,952
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 104,560 817,410 63,077 479,778
- --------------------------------------------------
Shares redeemed (1,080,958) (8,462,660) (258,267) (1,965,937)
- -------------------------------------------------- ------------- -------------- ------------- ---------------
Net change resulting from
Class B share transactions 4,313,501 $ 33,758,213 4,469,044 $ 34,113,793
- -------------------------------------------------- ------------- -------------- ------------- ---------------
</TABLE>
* For the period from July 25, 1994 (date of initial public offering) to March
31, 1995.
Fund for U.S. Government Securities, Inc.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995
<S> <C> <C> <C> <C>
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 1,081,553 $ 8,475,992 2,299,459 $ 17,762,992
- --------------------------------------------------
Shares reclassified from Select Shares 214,402 1,663,760
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared 119,109 930,649 300,203 2,298,084
- --------------------------------------------------
Shares redeemed (1,783,417) (13,961,580) (5,426,379) (41,597,151)
- -------------------------------------------------- ------------- -------------- ------------- ---------------
Net change resulting from
Class C share transactions (582,755) $ (4,554,939) (2,612,315) $ (19,872,315)
- -------------------------------------------------- ------------- -------------- ------------- ---------------
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 MARCH 31, 1995**
SELECT SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold -- -- 75,117 $ 583,743
- --------------------------------------------------
Shares issued to shareholders in payment of
distributions declared -- -- 1,522 11,703
- --------------------------------------------------
Shares redeemed -- -- (84,014) (742,192)
- --------------------------------------------------
Shares reclassified to Class C Shares -- -- (214,402) (1,663,760)
- -------------------------------------------------- ------------- -------------- ------------- ---------------
Net change resulting from
Class A share transactions -- -- (221,777) $ (1,810,506)
- -------------------------------------------------- ------------- -------------- ------------- ---------------
Net change resulting from
share transactions (192,962) $ (1,172,566) (34,528,278) $ (263,712,343)
- -------------------------------------------------- ------------- -------------- ------------- ---------------
</TABLE>
** For the period from April 1, 1994 to July 29, 1994 the date the Select shares
were reclassified to Class C shares.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Fund's investment adviser, (the
"Adviser"), receives for its services an annual investment advisory fee equal to
(a) a maximum of .25 of 1% of the average daily net assets of the Fund, and (b)
4.5% of the gross income of the Fund, excluding capital gains or losses.
The Adviser may voluntarily choose to waive any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. This fee is based on the level of average aggregate
daily net assets of all funds advised by subsidiaries of
Fund for U.S. Government Securities, Inc.
- --------------------------------------------------------------------------------
Federated Investors for the period. The administrative fee received during the
period of the Administrative Services Agreement shall be at least $125,000 per
portfolio and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will
compensate Federated Securities Corp., the principal distributor, from the net
assets of the Fund to finance activities intended to result in the sale of the
Fund's Class B and Class C shares. The Plan provides that the Fund may incur
distribution expenses according to the following schedule annually, to
compensate Federated Securities Corp.
<TABLE>
<CAPTION>
% OF AVG. DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class B 0.75 of 1%
Class C 0.75 of 1%
</TABLE>
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Fund will pay FSS up to .25 of
1% of daily average net assets of the Fund for the period. This fee is to obtain
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive a portion of this fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AGENT FEES--Federated Services Company serves as transfer and dividend
disbursing agent for the Fund. This fee is based on the size, type, and number
of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--Federated Services Company maintains the Fund's
accounting records for which it receives a fee. The fee is based on the level of
the Fund's average daily net assets for the period, plus out-of-pocket expenses.
GENERAL--Certain of the Officers and Directors of the Corporation are Officers
and Directors or Trustees of the above companies.
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended
September 30, 1995, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------------------------------------------
PURCHASES $ 3,093,526,614
- ------------------------------------------------------------------------------------------------ ----------------
SALES $ 3,051,116,695
- ------------------------------------------------------------------------------------------------ ----------------
</TABLE>
Directors Officers
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Edward C. Gonzales
James E. Dowd Executive Vice President
Lawrence D. Ellis, M.D. John W. McGonigle
Edward L. Flaherty, Jr. Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts 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 U.S. government, 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 FUNDS
SINCE 19955 Where Experts Invest
Federated Securities Corp. is the distributor of the fund
A Subsidiary of Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 360799100
Cusip 360799209
Cusip 360799407
8110105 (11/95) [recycled logo]
APPENDIX
A. The graphic presentation here displayed consists of a legend in the upper
left quadrant of the chart indicating the components of the corresponding line
graph. The color-coded line graph is a visual representation of the narrative
text above it, which shows that an initial investment of $26,000 on 10/06/69 in
Fund for U.S. Government Securities, Inc. would have grown to $176,578 by
09/30/95. The "x" axis reflects the cost of the investment, the "y" axis
reflects computation periods from 1969 through 1995, and the right margin of the
chart reflects a total investment range from $0 to $180,000. The chart further
indicates the ending value attributable to principal, as well as the ending
value attributable to reinvested income.
B. The graphic presentation here displayed consists of a legend in the upper
left quadrant of the chart indicating the components of the corresponding line
graph. The color-coded line graph is a visual representation of the narrative
text above it, which shows that, beginning on 10/06/69, twenty-six annual
investments of $1,000 in Fund for U.S. Government Securities, Inc. would have
grown to $87,378 by 09/30/95. The "x" axis reflects the cost of the investment,
the "y" axis reflects computation periods from 1969 through 1995, and the right
margin of the chart reflects a total investment range from $0 to $90,000. The
chart further indicates the ending value attributable to principal, as well as
the ending value attributable to reinvested income.
C. The graphic presentation here displayed consists of a legend in the upper
left quadrant of the chart indicating the components of the corresponding line
graph. The color-coded line graph is a visual representation of the narrative
text above it, which shows that an initial investment of $100,000 on 09/30/85 in
Fund for U.S. Government Securities, Inc., would have grown to $207,327 by
09/30/95. The "x" axis reflects the cost of the investment, the "y" axis
reflects computation periods from 1985 through 1995, and the right margin of the
chart reflects a total investment range from $0 to $220,000. The chart further
indicates the ending value attributable to principal, as well as the ending
