[Logo] Federated Investors
Federated Fund for U.S. Government Securities, Inc.
(formerly, Fund for U.S. Government Securities, Inc.)
[Graphic]
27TH SEMI-ANNUAL REPORT
SEPTEMBER 30, 1996
ESTABLISHED 1969
INCOME
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
Federated Fund for U.S. Government Securities, Inc. was created in 1969,
and
I am pleased to present the 27th Semi-Annual Report.
This report covers the six-month period from April 1, 1996, through
September 30, 1996. It begins with an investment discussion with the fund's
portfolio manager, Kathy Foody-Malus, Vice President, Federated Advisers.
Following her discussion are graphs depicting the fund's long-term
investment performance, a complete list of the fund's broadly diversified
U.S. government bond portfolio holdings, and the fund's financial
statements.
To pursue an attractive level of income, the fund invests primarily in
short-to-intermediate term U.S. government mortgage-backed securities along
with U.S. Treasury notes and bonds. During the six-month reporting period,
the fund maintained a strong focus on mortgage-backed securities for their
good long-term value and their current yield spread over Treasurys. As of
September 30, 1996, 87.7% of the fund's $1.4 billion portfolio was invested
in Government National Mortgage Association securities, 10.3% was in U.S.
Treasurys, and the remainder was in short-term issues or overnight
repurchase agreements. The fund's portfolio maintained its AAAf rating by
Standard & Poor's Ratings Group, the highest rating given by this
independent mutual fund rating service.*
The public's perception regarding bonds during 1996 has been serious
concern
over inflation. This had a negative impact on prices across the bond
market.
Mortgage-backed bonds, however, were much less affected. Consistent with
the
bond market environment during the six-month period, the fund's total
return
(based on net asset value) and per share income performance was a modest
positive figure:**
<TABLE>
<CAPTION>
TOTAL RETURN INCOME
<S> <C> <C>
Class A Shares 2.06% $0.25
Class B Shares 1.62% $0.21
Class C Shares 1.63% $0.21
</TABLE>
Thank you for investing a portion of your wealth in Federated Fund for U.S.
Government Securities, Inc.
* An AAAf rating means that the fund's portfolio holdings and
counterparties
provide extremely strong protection against losses from credit defaults.
Ratings do not remove market risks and are subject to change.
** 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. Total returns for
the
period based on offering price for Class A Shares, Class B Shares, and
Class
C Shares were -2.58%, -3.91%, and 0.58%, respectively.
Federated has been active in the management of U.S. government bonds since
1969 -- 27 years where experience has been crucial in helping to provide
shareholders with income and liquidity. Those 27 years have seen interest
rates rise sharply from 1969 to 1980 and decline gradually from 1980 to
1996. We expect that interest rates will continue to trend downward.
Remember, reinvesting your earnings can be a convenient way to help build
the value of your account -- and help your shares increase through the
benefit of monthly compounding.
Sincerely,
[Graphic]
J. Christopher Donahue
President
November 15, 1996
INVESTMENT REVIEW
[Graphic]
Kathy Foody-Malus
Vice President
Federated Advisers
JUST WHEN 1994'S RATE ENVIRONMENT AND NEGATIVE BOND MARKET NEARLY FADED
FROM
MEMORY, 1996 SAW A RETURN OF RISING INTEREST RATES AND FALLING BOND PRICES
- -- WITHOUT ANY ACTION BY THE FEDERAL RESERVE BOARD. CAN YOU COMMENT?
The economy in the first few months of 1996, by all definitions, was
robust;
second quarter GDP was 4.8%, following first quarter GDP growth of 2.0%. On
a year-over-year basis, GDP growth was up 2.6% in the second quarter, which
was the highest quarter since the first quarter of 1995. As the second half
of 1996 started, the economic data being released initially showed signs of
weakness. However, this optimism was short-lived, as stronger economic
numbers surfaced in August that forced yields on Treasurys to year-to-date
highs. For example, both consumer outlays and factory output rebounded in
August from the early summer doldrums. The labor market has continued to
tighten as payroll growth on a year-to-date basis has averaged 236,000 per
month, and wage inflation is continuing to pick up.
These economic numbers, in combination with the revelation that the Federal
Reserve Board (the "Fed") assumed a tightening bias at the July meeting,
have bond market participants anticipating when the Fed will tighten
monetary policy. We anticipate continued gnashing of teeth and wringing of
hands by investors as to what course of action the Fed pursues over the
balance of 1996.
HOW HAVE MORTGAGE-BACKED SECURITIES FARED?
The year-to-date performance of the mortgage market has been stellar versus
other fixed-income asset classes. The mortgage market has benefited from a
continued decline in prepayment volatility. In order for the mortgage
market
to become concerned about prepayment pressures, interest rates on 10-year
U.S. Treasury notes would have to decline about 125 basis points. Other
factors -- such as two-thirds of the mortgage-backed securities selling at
a
discount, decreased issuance of fixed-rate mortgages, and tight spread
levels on asset-backed and corporate securities -- bode well for the
mortgage market.
Near-term performance prospects continue to appear favorable as the fourth
quarter begins. The technicals continue to look fair for the mortgage
market
due to a combination of low prepayment volatility and an anticipated
decline
in supply due to housing affordability and the fall/winter seasonal
effects.
IN THIS ENVIRONMENT, HOW DID FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES,
INC. PERFORM FOR SHAREHOLDERS DURING THE SIX-MONTH REPORTING PERIOD ENDED
SEPTEMBER 30, 1996?
The fund provided a dividend stream totaling $0.25 per Class A Shares,
$0.21
per Class B Shares, and $0.21 per Class C Shares. The Class A Shares' total
return, which is net of fund operating expenses, for the six-month fiscal
period ended September 30, 1996, was 2.06% based on net asset value. Total
returns for Class B Shares and Class C Shares based on net asset value were
1.62% and 1.63%, respectively.*
These returns compare to a total return of 1.45% for the Merrill Lynch
5-Year Treasury Note Index, and 2.09% for the Lipper General U.S. Mortgage
Funds Average.**
HOW MUCH OF THE FUND IS IN MORTGAGE-BACKED SECURITIES AND TREASURYS, AND
WHY? AND WHAT IS THE FUND'S CURRENT DURATION?
We continue to favor a strong position in mortgage-backed securities due to
our belief that they offer good long-term value versus comparable
government
securities.
The U.S. Treasury position currently represents 10% of overall assets, and
provides duration and positive upside potential to the overall portfolio.
As
of September 30, 1996, the portfolio composition was:
<TABLE>
<S> <C>
Government National Mortgage Association 87.7%
U.S. Treasurys 10.3%
Repurchase Agreements 2.0%
</TABLE>
The fund's current average effective duration is 4.2 years.
* 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. Total returns for the
period based on offering price for Class A Shares, Class B Shares, and
Class
C Shares were -2.58%, -3.91%, and 0.58%, respectively.
** The Merrill Lynch 5-Year Treasury Note Index is an unmanaged one-
security
index in which the current "on-the-run" note remains in the index until
a
new one is auctioned and settles. The only bonds eligible for inclusion
in
the index are auctioned U.S. Treasury notes with five years to maturity.
Investments cannot be made in an index. Lipper General U.S. Mortgage
Funds
Average represents the average of the total returns reported by all
mutual
funds designated by Lipper Analytical Services, Inc. as falling into the
U.S. Mortgage Funds category. The category contains funds that invest at
least 65% of assets in mortgages/securities issued or guaranteed as to
the
principal and interest by the U.S. government and certain federal
agencies.
Lipper figures do not reflect sales charges.
WHAT ARE THE REASONS THAT INVESTORS SHOULD BUY AND HOLD SHARES OF THIS
FUND?
Federated Fund for U.S. Government Securities, Inc. is designed for the
investor who wants exposure to the U.S. government market through
intermediate maturities. The portfolio is managed to pursue an attractive
income stream over comparable U.S. Treasury securities by blending
mortgage-backed securities and U.S. Treasurys.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $27,000 IN THE CLASS A SHARES OF
FEDERATED 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 $191,464 ON 9/30/96. YOU WOULD HAVE EARNED A 7.53%* AVERAGE
ANNUAL TOTAL RETURN FOR THE 27-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 9/30/96, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were -0.28%, 4.48%, and 6.94%, respectively. The
Class B Shares' average annual one-year and since inception (7/25/94) total
returns were -2.09% and 4.29%, respectively. The Class C Shares' average
annual one-year and since inception (4/26/93) total returns were 2.45% and
3.46%, 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 that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
ONE STEP AT A TIME:
$1,000 INVESTED EACH YEAR FOR 27 YEARS (REINVESTING ALL DIVIDENDS AND
CAPITAL GAINS) GREW TO $92,232.
With this approach, the key is consistency.
If you had started investing $1,000 annually in the Class A Shares of
Federated 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 $27,000, but your account would have reached a total
value of $92,232* by 9/30/96. 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, money, 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.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC. --
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR CURRENT INCOME
Ten years ago, on September 30, 1986, 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 Federated Fund for
U.S. Government Securities, Inc. because it invests in government
securities
which traditionally are some of the safest, most creditworthy securities
issued in America.*
They like the way they can use their Federated 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 $197,083 as of 9/30/96 for a total return of
7.02%.**
GRAPHIC REPRESENTATION `C'' OMITTED. SEE APPENDIX
* Fund shares are not guaranteed and their value will fluctuate.
** 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.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S>
<C>
LONG-TERM U.S. GOVERNMENT OBLIGATIONS -- 98.6%
(a)GOVERNMENT NATIONAL MORTGAGE ASSOCIATION MPT -- 88.3%
$ 13,764,323 6.000%, 1/15/2024
$ 12,495,252
90,202,183 6.500%, 2/15/2024-7/15/2024
84,394,064
276,227,097 7.000%, 7/15/2023-3/15/2026
266,626,708
261,332,348 7.500%, 12/15/2021-9/15/2026
258,225,107
264,111,285 8.000%, 1/15/2022-9/15/2026
266,665,242
514,276 8.200%, 6/15/2012-5/15/2013
516,626
93,107,530 8.500%, 5/15/2018-8/15/2026
95,801,089
104,407,828 9.000%, 12/15/2019-10/15/2026
109,470,943
42,201,464 9.500%, 9/15/2016-10/15/2026
45,491,169
3,200,000 (b) 9.500%, 10/15/2026
3,430,944
31,052,805 10.000%, 4/15/2016-8/15/2020
33,914,943
10,657,885 10.500%, 10/15/2015-9/15/2019
11,770,141
11,008,522 11.000%, 12/15/2009-10/15/2019
12,319,087
15,196,701 11.500%, 3/15/2010-9/15/2018
17,205,360
12,789,198 12.000%, 5/15/2011-1/15/2016
14,647,468
1,641,655 12.500%, 2/15/2011-5/15/2015
1,896,604
2,006,572 13.000%, 1/15/2011-12/15/2014
2,327,315
Total
1,237,198,062
(a)FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 0.0%
458,149 11.000%, 10/1/2010
511,115
U.S. TREASURY BONDS -- 2.4%
10,300,000 7.125%, 2/15/2023
10,377,353
10,900,000 8.125%, 8/15/2019
12,193,285
2,500,000 8.750%, 5/15/2017
2,956,325
6,030,000 9.250%, 2/15/2016
7,432,457
Total
32,959,420
</TABLE>
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
VALUE
<C> <S>
<C>
LONG-TERM U.S. GOVERNMENT OBLIGATIONS -- CONTINUED
U.S. TREASURY NOTES -- 7.9%
$ 18,200,000 5.250%, 12/31/1997
$ 18,064,227
20,000,000 5.500%, 11/15/1998
19,749,000
16,000,000 6.125%, 9/30/2000
15,844,480
17,400,000 6.500%, 5/31/2001
17,433,234
14,000,000 7.250%, 2/15/1998
14,233,380
24,600,000 7.500%, 11/15/2001-2/15/2005
25,810,723
Total
111,135,044
TOTAL LONG-TERM U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $1,381,921,385)
1,381,803,641
(C)REPURCHASE AGREEMENTS -- 2.1%
26,800,000 BT Securities Corporation, 5.720%, dated 9/30/1996, due
10/1/1996 26,800,000
3,200,000 (d) Morgan Stanley & Co., Incorporated, 5.410%, dated
9/24/1996,
due 10/23/1996
3,200,000
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST)
30,000,000
TOTAL INVESTMENTS (IDENTIFIED COST $1,411,921,385)(E)
$1,411,803,641
</TABLE>
(a) Because of monthly principal payments, the average lives of the
Government National Mortgage Association Modified Participation
Certificates and Federal National Mortgage Association Pass-Through
Securities are less than the indicated periods.
(b) This security is 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 if the creditworthiness of the issuer is
downgraded.
(e) The cost of investments for federal tax purposes amounts to
$1,411,921,385. The net unrealized depreciation of investments on a
federal tax basis amounts to $117,744 which is comprised of
$12,466,466 appreciation and $12,584,210 depreciation at September 30,
1996.
The following acronym is used throughout this portfolio:
MPT -- Modified Pass Through
Note: The categories of investments are shown as a percentage of net assets
($1,401,719,497) at September 30, 1996.
(See Notes which are an integral part of the Financial Statements)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<S>
<C> <C>
ASSETS:
Total investments in securities (identified and tax cost, $1,411,921,385)
$1,411,803,641
Cash
35,655
Income receivable
10,056,065
Receivable for investments sold
19,038,569
Receivable for shares sold
425,571
Total assets
1,441,359,501
LIABILITIES:
Payable for investments purchased
$27,956,810
Payable for shares redeemed
466,929
Income distribution payable
7,342,532
Payable for dollar roll transactions
3,460,448
Accrued expenses
413,285
Total liabilities
39,640,004
Net Assets for 182,271,120 shares outstanding
$1,401,719,497
NET ASSETS CONSIST OF:
Paid in capital
1,587,700,317
Net unrealized depreciation of investments
(117,744)
Accumulated net realized loss on investments
(193,584,429)
Undistributed net investment income
7,721,353
Total Net Assets
$1,401,719,497
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS
PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($1,234,296,232 / 160,500,243 shares
outstanding) $7.69
Offering Price Per Share (100/95.50 of $7.69)*
$8.05
Redemption Proceeds Per Share
$7.69
CLASS B SHARES:
Net Asset Value Per Share ($97,906,646 / 12,731,076 shares outstanding)
$7.69
Offering Price Per Share
$7.69
Redemption Proceeds Per Share (94.50/100 of $7.69)**
$7.27
CLASS C SHARES:
Net Asset Value Per Share ($69,516,619 / 9,039,801 shares outstanding)
$7.69
Offering Price Per Share
$7.69
Redemption Proceeds Per Share (99.00/100 of $7.69)**
$7.61
</TABLE>
* See "How to Purchase Shares" in the prospectus.
** See "Contingent Deferred Sales Charge" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<S> <C> <C>
<C>
INVESTMENT INCOME:
Interest (net of dollar roll expense of $4,122,032)
$54,711,656
EXPENSES:
Investment advisory fee
$4,042,966
Administrative personnel and services fee
546,470
Custodian fees
133,318
Transfer and dividend disbursing agent fees and expenses
677,818
Directors'/Trustees' fees
13,849
Auditing fees
10,503
Legal fees
3,999
Portfolio accounting fees
81,305
Distribution services fee -- Class B Shares
356,664
Distribution services fee -- Class C Shares
277,243
Shareholder services fee -- Class A Shares
1,595,809
Shareholder services fee -- Class B Shares
118,888
Shareholder services fee -- Class C Shares
92,414
Share registration costs
25,038
Printing and postage
73,699
Insurance premiums
11,681
Taxes
177,398
Miscellaneous
7,021
Total expenses
8,246,083
Waivers --
Waiver of shareholder services fee -- Class A Shares $(668,790)
Waiver of shareholder services fee -- Class B Shares (2,393)
Waiver of shareholder services fee -- Class C Shares (1,736)
Total waivers
(672,919)
Net expenses
7,573,164
Net investment income
47,138,492
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments
(20,437,961)
Net change in unrealized appreciation
1,268,499
of investments
Net realized and unrealized gain on investments
(19,169,462)
Change in net assets resulting from operations
$27,969,030
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(UNAUDITED) ENDED
SEPTEMBER 30, MARCH 31,
1996 1996
<S>
<C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income
$ 47,138,492 $ 102,434,216
Net realized gain (loss) on investments ($20,437,961 net
loss and $4,621,860 net loss, respectively, as computed for
federal tax purposes)
(20,437,961) 15,733,325
Net change in unrealized appreciation (depreciation)
1,268,499 7,914,175
Change in net assets resulting from operations
27,969,030 126,081,716
NET EQUALIZATION CREDITS/(DEBITS) --
(736,552) (663,008)
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Class A Shares
(40,456,658) (95,810,418)
Class B Shares
(2,640,566) (4,295,610)
Class C Shares
(2,026,156) (4,916,823)
Change in net assets resulting from distributions to shareholders
(45,123,380) (105,022,851)
SHARE TRANSACTIONS --
Proceeds from sale of shares
73,087,895 203,854,783
Net asset value of shares issued to shareholders in payment of
distributions declared
23,657,513 65,198,244
Cost of shares redeemed
(180,525,319) (268,563,700)
Change in net assets resulting from share transactions
(83,779,911) 489,327
Change in net assets
(101,670,813) 20,885,184
NET ASSETS:
Beginning of period
1,503,390,310 1,482,505,126
End of period (including undistributed net investment income of
$7,721,353 and $6,442,791, respectively)
$1,401,719,497 $1,503,390,310
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, 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)
SEPTEMBER 30,
YEAR ENDED MARCH 31,
1996 1996 1995 1994
1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 7.78 $ 7.67 $ 7.89 $ 8.50 $
8.51 $ 8.41 $ 8.23 $ 8.01
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.26 0.54 0.57 0.63
0.71 0.75 0.77 0.78
Net realized and
unrealized gain
(loss) on
investments (0.10) 0.12 (0.23) (0.61)
(0.03) 0.08 0.19 0.21
Total from
investment
operations 0.16 0.66 0.34 0.02
0.68 0.83 0.96 0.99
LESS DISTRIBUTIONS
Distributions
from net
investment
income (0.25) (0.55) (0.56) (0.63)
(0.69) (0.73) (0.78) (0.77)
NET ASSET VALUE,
END OF PERIOD $ 7.69 $ 7.78 $ 7.67 $ 7.89 $
8.50 $ 8.51 $ 8.41 $ 8.23
TOTAL RETURN(A) 2.06% 8.77% 4.59% 0.13%
8.31% 10.20% 12.12% 12.59%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.95%* 0.95% 0.95% 0.88%
0.83% 0.91% 0.97% 0.96%
Net investment
income 6.62%* 6.80% 7.41% 7.50%
8.33% 8.69% 9.21% 9.32%
Expense waiver/
reimbursement(b) 0.11%* 0.11% 0.02% -- -
- - -- -- 0.04%
SUPPLEMENTAL
DATA
Net assets,
end of period
(000 omitted) $1,234,296 $1,330,272 $1,367,710 $1,693,293
$1,844,712 $1,384,117 $1,133,017 $1,039,493
Portfolio
turnover 85% 157% 154% 149%
52% 43% 27% 98%
<CAPTION>
1989 1988 1987
<S> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD $ 8.41 $ 8.56 $ 8.77
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.76 0.78 0.80
Net realized and
unrealized gain
(loss) on
investments (0.40) (0.15) (0.21)
Total from
investment
operations 0.36 0.63 0.59
LESS DISTRIBUTIONS
Distributions
from net
investment
income (0.76) (0.78) (0.80)
NET ASSET VALUE,
END OF PERIOD $ 8.01 $ 8.41 $ 8.56
TOTAL RETURN(A) 4.47% 7.66% 7.23%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.96% 0.96% 0.95%
Net investment
income 9.22% 9.31% 9.24%
Expense waiver/
reimbursement(b) -- 0.01% 0.05%
SUPPLEMENTAL
DATA
Net assets,
end of period
(000 omitted) $1,054,055 $1,150,395 $1,193,389
Portfolio
turnover 83% 72% 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)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, 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,
1996 1996
1995(A)
<S> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.78 $ 7.67
$ 7.75
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.22 0.49
0.37
Net realized and unrealized gain (loss)
on investments (0.10) 0.11
(0.06)
Total from investment operations 0.12 0.60
0.31
LESS DISTRIBUTIONS
Distributions from net investment income (0.21) (0.49)
(0.37)
Distributions in excess of net
investment income(b) -- --
(0.02)
Total distributions (0.21) (0.49)
(0.39)
NET ASSET VALUE, END OF PERIOD $ 7.69 $ 7.78
$ 7.67
TOTAL RETURN(C) 1.62% 7.90%
4.13%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.80%* 1.78%
1.76%*
Net investment income 5.78%* 5.93%
7.02%*
Expense waiver/reimbursement(d) 0.01%* 0.04%
0.06%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $97,907 $93,169
$34,276
Portfolio turnover 85% 157%
154%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 25, 1994 (date of initial
public offering) 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)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, 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,
1996 1996
1995 1994(A)
<S> <C> <C> <C>
<C>
NET ASSET VALUE, BEGINNING OF $ 7.78 $ 7.67 $
7.89 $ 8.54
PERIOD
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.22 0.47
0.51 0.54
Net realized and unrealized (0.10) 0.12
(0.23) (0.63)
gain (loss) on investments
Total from investment operations 0.12 0.59
0.28 (0.09)
LESS DISTRIBUTIONS
Distributions from net investment
income (0.21) (0.48)
(0.50) (0.54)
Distributions in excess of net
investment income(b) -- --
- -- (0.02)
Total distributions (0.21) (0.48)
(0.50) (0.56)
NET ASSET VALUE, END OF PERIOD $ 7.69 $ 7.78 $
7.67 $ 7.89
TOTAL RETURN(C) 1.63% 7.85%
3.72% (1.17%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.80%* 1.79%
1.79% 1.81%*
Net investment income 5.77%* 5.96%
6.56% 6.45%*
Expense waiver/reimbursement(d) 0.01%* 0.02%
0.02% --
SUPPLEMENTAL DATA
Net assets, end of period
(000 omitted) $69,517 $79,949
$80,519 $103,433
Portfolio turnover 85% 157%
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)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 (UNAUDITED)
1. ORGANIZATION
Federated 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
three classes of shares: Class A Shares, Class B Shares, and Class C
Shares.
The investment objective of the Fund is to provide current income.
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 -- U.S. government securities, other fixed income
and
asset-backed securities, and unlisted securities and private placement
securities are generally valued at the mean of the latest bid and asked
price as furnished by an independent pricing service. Short-term
securities
are valued at the prices provided by an independent pricing service.
However, 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.
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.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
At March 31, 1996, the Fund, for federal tax purposes, had a capital
loss
carryforward of $173,124,568, 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 EXPIRATION
YEAR AMOUNT
<C> <C>
1997 $ 13,496,695
1999 $ 4,037,707
2000 $ 2,560,450
2001 $ 5,923,640
2002 $ 19,160,797
2003 $123,323,419
2004 $ 4,621,860
</TABLE>
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.
USE OF ESTIMATES -- The preparation of financial statements in
conformity
with generally accepted accounting principles requires management to
make
estimates and assumptions that affect the amounts of assets,
liabilities,
expenses and revenues reported in the financial statements. Actual
results
could differ from those estimated.
OTHER -- Investment transactions are accounted for on the trade date.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
3. CAPITAL STOCK
At September 30, 1996, par value shares ($ 0.001 per share) authorized were
as follows:
<TABLE>
<CAPTION>
# OF PAR VALUE
CLASS NAME CAPITAL STOCK AUTHORIZED
<S> <C>
Class A Shares 750,000,000
Class B Shares 500,000,000
Class C Shares 750,000,000
Total 2,000,000,000
</TABLE>
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, 1996 MARCH 31, 1996
CLASS A SHARES SHARES AMOUNT SHARES
AMOUNT
<S> <C> <C> <C> <C>
Shares sold 5,968,624 $ 45,584,370 14,028,935 $
109,836,978
Shares issued to
shareholders
in payment of
distributions
declared 2,814,269 21,411,280 7,725,001
60,313,945
Shares redeemed (19,286,081) (147,077,584) (29,072,831)
(227,106,948)
Net change
resulting
from Class A
Share transactions (10,503,188) $ (80,081,934) (7,318,895) $
(56,956,025)
<CAPTION>
SIX MONTHS ENDED YEAR
ENDED
SEPTEMBER 30, 1996 MARCH 31,
1996
CLASS B SHARES SHARES AMOUNT SHARES
AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,343,755 $ 18,064,294 9,233,866 $
72,641,142
Shares issued to
shareholders
in payment of
distributions
declared 168,263 1,290,140 309,614
2,434,786
Shares
redeemed (1,758,886) (13,525,641) (2,034,581)
(16,019,590)
Net change
resulting
from Class B
Share
transactions 753,132 $ 5,828,793 7,508,899 $
59,056,338
</TABLE>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR
ENDED
SEPTEMBER 30, 1996 MARCH 31,
1996
CLASS C SHARES SHARES AMOUNT SHARES
AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,224,771 $ 9,439,231 2,705,784 $
21,376,663
Shares issued to
shareholders in
payment of
distributions
declared 124,696 956,093 311,557
2,449,513
Shares redeemed (2,586,631) (19,922,094) (3,235,263)
(25,437,162)
Net change
resulting from
Class C Share
transactions (1,237,164) $ (9,526,770) (217,922) $
(1,610,986)
Net change
resulting from
share transactions (10,987,220) $ (83,779,911) (27,918)
$ 489,327
</TABLE>
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 0.25% of the average daily net
assets
of the Fund, and (b) 4.50% 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 Services Company ("FServ"), under the
Administrative Services Agreement, provides the Fund with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries
of
Federated Investors for the period. The administrative fee received
during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE -- The Fund has adopted a Distribution Plan
(the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan,
the Fund will compensate Federated Securities 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 B Shares and Class C Shares.
The
Plan provides that the Fund may incur distribution expenses according to
the
following schedule annually, to compensate FSC.
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE DAILY
SHARE CLASS NAME NET ASSETS
<S> <C>
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Fund will pay
FSS
up to 0.25% of average daily net assets of the Fund shares for the
period.
The fee paid to FSS is used to finance certain services for shareholders
and
to maintain shareholder accounts. FSS may voluntarily choose to waive
any
portion of its fee. FSS can modify or terminate this voluntary waiver at
any
time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- FServ,
through
its subsidiary, Federated Shareholder Services Company ("FSSC"), serves
as
transfer and dividend disbursing agent for the Fund. The fee paid to
FSSC is
based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Fund's accounting
records
for which it receives a fee. The fee is based on the level of the Fund's
average daily net assets for the period, plus out-of-pocket expenses.
GENERAL -- Certain of the Officers and 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
period ended September 30, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $1,199,852,013
SALES $1,325,221,755
</TABLE>
DIRECTORS
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
J. Christopher Donahue
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
S. Elliott Cohan
Assistant Secretary
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.
Federated Investors
[Graphic]
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
[Graphic]
Cusip 314182106
Cusip 314182205
Cusip 314182304
8110105 (11/96)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
APPENDIX
A. The graphic representation here displayed, entitled "Initial
Investment of $27,000", consists of a boxed legend in the upper left
quadrant indicating the components of the corresponding mountain chart.
The lighter shaded portion represents Reinvested Income and the darker
shaded portion represents the Principal Value of $27,000 Investment (2,578
Shares). The color-coded mountain chart is a visual representation of the
narrative text above it, which shows that an initial investment of $27,000
in the Class A Shares of Federated Fund for U.S. Government Securities,
Inc. on 10/6/69 would have a reinvested total worth of $191,464 on 9/30/96.
The "x" axis reflects biennial computation periods from 10/6/69 to 9/30/96.
The right margin of the chart reflects the ending values of a hypothetical
investment of $27,000 in the Fund measured in increments of $25,000 ranging
from $0 to $200,000.
B. The graphic representation here displayed, entitled "Yearly
Investments of $1,000", consists of a boxed legend in the upper left
quadrant indicating the components of the corresponding mountain chart.
The lighter shaded portion represents Reinvested Income and the darker
shaded portion represents the Principal Value of $1,000 Investments
(totaling $27,000 by 9/30/96). The color-coded mountain chart is a visual
representation of the narrative text above it, which shows that if you had
started investing $1,000 annually in the Class A Shares of Federated Fund
for U.S. Government Securities, Inc. on 10/6/69, you would have a
reinvested total worth of $92,232/11,930 Shares on 9/30/96. The "x" axis
reflects biennial computation periods from 10/6/69 to 9/30/96. The right
margin reflects the ending values of a hypothetical annual investment of
$1,000 in the Fund measured in increments of $10,000 ranging from $0 to
$100,000.
C. The graphic representation here displayed, entitled "Income Over
Time", consists of a boxed legend in the upper left quadrant indicating the
components of the corresponding mountain chart. The lighter shaded portion
represents the value of Reinvested Income and the darker shaded portion
represents the Principal Value of $100,000 Investment (11,173 Shares). The
color-coded mountain chart is a visual representation of the narrative text
above it, which shows that an original $100,000 investment in Federated
Fund for U.S. Government Securities, Inc. on 9/30/86 would have a
reinvested total worth of $197,083/25,492 Shares on 9/30/96. The "x" axis
reflects annual computation periods from 9/30/86 to 9/30/96. The right
margin reflects the ending values of a hypothetical investment of $100,000
in the Fund measured in $25,000 increments ranging from $0 to $200,000.
