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Federated Investors
Federated
Fund for
U.S. Government Securities, Inc.
(formerly, Fund for U.S. Government Securities,
Inc.)
27th ANNUAL REPORT
MARCH 31, 1996
ESTABLISHED 1969
INCOME
President's Message
Dear Fellow Shareholder:
I am pleased to present the 27th Annual Report for Federated Fund for U.S.
Government Securities, Inc., formerly known as Fund for U.S. Government
Securities, Inc. The fund's name now begins with "Federated" to make it easy
for investors to locate all Federated Funds in newspapers and other
publications.
This report covers the 12-month period from April 1, 1995 to March 31, 1996.
It begins with a discussion with the fund's portfolio manager, Kathy Foody-
Malus, Vice President of Federated Advisers. Following this discussion are
three additional items of shareholder interest. First is a series of graphs
which display the fund's performance with income dividends reinvested, and
the investment results of making additional investments in the fund shares
with dividends reinvested. Second is a complete listing of the fund's
holdings. Third is the publication of 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 and U.S.
Treasury notes and 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 March 31, 1996, fund assets were invested in these types of securities:
<TABLE>
<S> <C>
Government National Mortgage Association (GNMA) 67.9%
Federal Home Loan Mortgage Corporation (FHLMC) 12.7%
Federal National Mortgage Association (FNMA) 9.7%
U.S. Treasury Notes 8.0%
</TABLE>
* An AAAf rating means that the fund's portfolio holdings and
counterparties provide extremely strong protection against losses from
credit defaults. This rating, however, does not remove market risks.
Ratings are subject to change.
Consistent with the U.S. government bond market environment during the 12-
month reporting period ended March 31, 1996, the fund's performance was as
follows:**
<TABLE>
<CAPTION>
INCOME
TOTAL RETURN DISTRIBUTION NET ASSET VALUE INCREASE
<S> <C> <C> <C>
Class A Shares 8.77% $0.55 $7.67 to $7.78 = 1%
Class B Shares 7.90% $0.49 $7.67 to $7.78 = 1%
Class C Shares 7.85% $0.48 $7.67 to $7.78 = 1%
</TABLE>
Over the 12-month reporting period, fund net assets increased from $1.48
billion on April 1, 1995 to $1.50 billion on March 31, 1996.
Thank you for pursuing income opportunities through Federated Fund for U.S.
Government Securities, Inc. Remember, reinvesting your dividends is a
convenient way to build the value of your account-and help your shares
increase through the benefit of monthly compounding.
Sincerely,
J. Christopher Donahue
President
May 15, 1996
** Performance quoted is based on net asset value. Past performance is
not indicative of future results. Investment return and principal
value will fluctuate, so when shares are redeemed, they may be worth
more or less than the original cost. Total returns for the period
(based on offering price) for Class A Shares, Class B Shares, and
Class C Shares were 3.89%, 2.11%, and 6.74%, respectively.
Investment Review
CAN YOU GIVE US A REVIEW OF THE ECONOMY OVER THE PAST 12 MONTHS AND ITS
POSITIVE IMPACT ON THE BOND MARKET OVERALL?
The overall performance of the bond market in 1995 was most welcome. Fixed
income investors can attribute this performance to the work of the Federal
Reserve Board (the "Fed") toward achieving the elusive "soft landing." Their
handiwork began in 1994 with six tightening moves and was completed with one
more in the first quarter of 1995. This trend was reversed in mid-1995 with
three easings by the end of the fund's fiscal year. Although the sharp
slowdown in the first quarter of 1995 raised concerns over a potential "hard
landing," the overall read on the economy for 1995 showed a mixture of
moderate growth and low inflation combined with anticipation of a deficit
reduction package.
As 1996 unfolds, the U.S. economy is moving according to the Fed's
scenario which describes a pick up in growth, with less room for further
improvement on inflation, and a reduced likelihood of any further major
declines on interest rates. In other words, we believe 1996 should be a very
good year for investors in spread product, particularly mortgage-backed
securities.
HOW DID INVESTORS RESPOND TO THIS, AND HOW DID MORTGAGE-BACKED SECURITIES
ULTIMATELY PERFORM?
The dominant trend in the mortgage market over the last
15 months continued to be the market directional mortgage/Treasury basis
trade. Throughout 1995, mortgage to Treasury spreads have widened in market
rallies and narrowed in market sell-offs. Over the entire year, mortgages
generally underperformed equivalent duration Treasurys due to the greater-
than-200 basis point rally in the Treasury market.
However, looking forward, we believe the picture is very positive for
mortgages in 1996. The prepayment and supply picture has become
positive due to the recent rise in interest rates. The near-term technicals
are favorable given increased participation of financial institutions as
their credit demands slow in combination with continuing strong support by
the governmental agencies in the growth of their investment portfolios and
the crossover buyer enticed by the yield spread advantage.
Overall, we feel that the outlook for the mortgage market on a technical and
fundamental basis is quite positive as we move through 1996.
IN THIS ENVIRONMENT, HOW DID FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES,
INC. PERFORM FOR SHAREHOLDERS DURING THE 12-MONTH REPORTING PERIOD ENDED
MARCH 31, 1996?
The fund's Class A Shares provided a dividend stream of $0.55 per share over
the last fiscal year. The net annual total return of the one-year period
ended March 31, 1996, for Class A Shares was 8.77% based on net asset value.
The price per Class A Share fluctuated from a low of $7.67 to a high of $7.78
at the end of the reporting period. On March 31, 1996, the net annual total
returns based on net asset value for Class B Shares and Class C Shares were
7.90% and 7.85%, respectively.*
WHAT IS THE FUND'S CURRENT WEIGHTING IN MORTGAGE-BACKED AND TREASURY
SECURITIES, AND WHY?
The current structure of Federated Fund for U.S. Government Securities, Inc.
has neutral duration of 4.2 years to the Lehman Mortgage Index.** Portfolio
structure continues to favor an overweighted position in mortgage-backed
securities due to management's belief of good long-term value versus
comparable government securities.
The Treasury position currently represents 10% of overall assets and acts as
a hedge against mortgage duration drift due to prepayment activity. As of
March 31, 1996, the portfolio composition was:
<TABLE>
<CAPTION>
<S> <C>
Government National Mortgage Association (GNMA) 67.9%
Federal Home Loan Mortgage Corporation (FHLMC) 12.7%
Federal National Mortgage Association (FNMA) 9.7%
U.S. Treasury Notes 8.0%
</TABLE>
* Performance quoted represents past performance and is not
indicative of future results. Investment return and principal value
will fluctuate, so when shares are redeemed, they may be worth more or
less than the original cost. Total returns for the period (based on
offering price) for Class A Shares, Class B Shares, and Class C Shares
were 3.89%, 2.11%, and 6.74%, respectively.
** Lehman Brothers Mortgage-Backed Securities Index is a universe
of fixed rate securities backed by mortgage pools of Government
National Mortgage Association (GNMA), Federal Home Loan Mortgage Corp.
(FHLMC), and Federal National Mortgage Association (FNMA). This index
is unmanaged. Actual investments cannot be made in an index.
COULD YOU PLEASE COMMENT ON THE RECENT DIVIDEND REDUCTION FOR FEDERATED FUND
FOR U.S. GOVERNMENT SECURITIES, INC.?
Dividends are dependent on two primary determining factors: current market
reinvestment rates and fund portfolio structure. This fund's portfolio
structure represents a combination of mortgage-backed securities and U.S.
Treasurys on the intermediate portion of the yield curve. In addition,
reinvestment decisions still represents cash flows from seasoned, higher
yielding mortgage securities and bond swaps related to the current lower rate
environment.
When one combines this with the belief that any portfolio of securities will
lag market moves in both directions, there are usually periods in which
current market interest rate levels gap current distribution levels. Despite
the dividend reduction, the fund's distribution stream allows investors a
yield pick-up of 1% over comparable intermediate U.S. Treasury notes.
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 HAVE BEEN WORTH $187,608 ON 3/31/96. YOU WOULD HAVE EARNED A 7.59%*
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 3/31/96, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were 3.89%, 5.35%, and 7.06%, respectively. Class B
Shares' average annual one-year and since inception (7/25/94) total returns
were 2.11% and 4.12%, respectively. Class C Shares' average annual one-year
and since inception (4/26/93) total returns were 6.74% and 3.48%,
respectively.
[GRAPHIC-SEE APPENDIX]
* Total return represents the change in the value of an investment in
Class A Shares after reinvesting all income and capital gains, and
takes into account the 4.50% sales charge applicable to an initial
investment in Class A Shares.
Data quoted represents past performance and does not guarantee
future results. Investment return and principal value will fluctuate
so an investor's shares, when redeemed, may be worth more or less than
their original cost.
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 $90,374 BY 3/31/96.
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 $90,374* by 3/31/96. You would have earned an average annual total return
of 7.98%.
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-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 March 31, 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
historically have been 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 the $50,000
Jaguar they bought this August to celebrate their 10th anniversary-without
touching their original principal.
The Laughlin's account totaled $199,271 as of 3/31/96 for a total return of
7.14%.*
[GRAPHIC-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.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
A HISTORY OF SOLID EARNINGS-EIGHTEEN 10-YEAR PERIODS
$10,000 INVESTED WITH DISTRIBUTIONS REINVESTED
How a $10,000 investment grew during each 10-year period since fund inception.
This chart shows what your account would be worth had you invested $10,000 in
Class A Shares at the beginning of these consecutive decades.
OVER EVERY 10-YEAR PERIOD SINCE THE FUND'S INCEPTION, A $10,000 INVESTMENT IN
ITS CLASS A SHARES (WITH ALL DIVIDENDS AND CAPITAL GAINS REINVESTED) GREW IN
VALUE. At the end of each decade, no investor would have lost money.
[GRAPHIC-SEE APPENDIX]
* This 10-year period is October 6, 1969 through March 31, 1979.
For each time period shown, share price fluctuated.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
SERVING A WIDE RANGE OF INVESTORS
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC. APPEALS TO A BROAD RANGE
OF INVESTORS SEEKING ATTRACTIVE MONTHLY INCOME AND RELATIVE SAFETY.
The fund invests primarily in some of the most creditworthy securities issued
in America. Fund shares are not guaranteed, but the securities comprising the
portfolio are guaranteed as to the timely payment of interest and principal
by the U.S. government, its agencies or instrumentalities.
[GRAPHIC-SEE APPENDIX]
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
PORTFOLIO UPDATE
The chart shows the percentage of fund assets diversified across different
types of U.S. government securities.
[GRAPHIC-SEE APPENDIX]
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
(CLASS A SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES,
INC. (CLASS A SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Fund for U.S. Government Securities, Inc. (Class A Shares) (the
"Fund") from March 31, 1986 to March 31, 1996, compared to the Lehman
Brothers 5-Year Treasury Bellwether Index (LB5YRTBI)+, the Salomon
Brothers 15-Year Mortgage Index (SB15YRMI)+ and the Lipper U.S.
Mortgage Funds Average (LUSMFA).++
[GRAPHIC-SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MUTUAL FUNDS ARE NOT
OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 4.50% ($10,000 investment minus
$450 sales charge = $9,550). The fund's performance assumes the
reinvestment of all dividends and distributions. The LB5YRTBI,
SB15YRMI and the LUSMFA have been adjusted to reflect reinvestment of
dividends on securities in the indices and average.
** For this illustration, the SB15YRMI began performance on April 1,
1986. The SB15YRMI was assigned a beginning value of $11,219, the
value of the fund on March 31, 1986.
*** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The LB5YRTBI and the SB15YRMI are not adjusted to reflect sales
charges, expenses, or other fees that the SEC requires to be reflected
in the fund's performance. The indices are unmanaged.
++ The LUSMFA represents the average of the total returns reported
by all of the mutual funds designated by Lipper Analytical Services,
Inc. as falling in the respective category, and is not adjusted to
reflect any sales charges. However, these total returns are reported
net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
(CLASS B SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES,
INC. (CLASS B SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Fund for U.S. Government Securities, Inc. (Class B Shares) (the
"Fund") from July 26, 1994 (start of performance) to March 31, 1996 compared
to the Lehman Brothers 5-Year Treasury Bellwether Index (LB5YRTBI)+, the
Salomon Brothers 15-Year Mortgage Index (SB15YRMI)+, and the Lipper U.S.
Mortgage Funds Average (LUSMFA)++.
[GRAPHIC-SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT
OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The
ending value of the fund reflects a 5.50% contingent deferred sales
charge on any redemption less than one year from the purchase date.
The fund's performance assumes the reinvestment of all dividends and
distributions. The LB5YRTBI, the SB15YRMI, and the LUSMFA have been
adjusted to reflect reinvestment of dividends on securities in the
indices and average.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The LB5YRTBI and the SB15YRMI are not adjusted to reflect sales
charges, expenses, or other fees that the SEC requires to
be reflected in the fund's performance. These indices are unmanaged.
++ The LUSMFA represents the average of the total returns reported
by all of the mutual funds designated by Lipper Analytical Services,
Inc. as falling into the category and is not adjusted to reflect any
sales charges. However, these total returns are reported net of
expenses or other fees that the SEC requires to be reflected in a
fund's performance.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
(CLASS C SHARES)
GROWTH OF $10,000 INVESTED IN FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES,
INC. (CLASS C SHARES)
The graph below illustrates the hypothetical investment of $10,000 in the
Federated Fund for U.S. Government Securities, Inc. (Class C Shares) (the
"Fund") from April 27, 1993 (start of performance) to March 31, 1996 compared
to the Lehman Brothers 5-Year Treasury Bellwether Index (LB5YRTBI)+, the
Salomon Brothers 15-Year Mortgage Index (SB15YRMI)+, and the Lipper U.S.
Mortgage Funds Average (LUSMFA)++.
[GRAPHIC-SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY
MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT
OBLIGATIONS OF OR GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund. The
ending value of the fund reflects a 1.00% contingent deferred sales
charge on any redemption less than one year from the purchase date.
The fund's performance assumes the reinvestment of all dividends and
distributions. The LB5YRTBI, the SB15YRMI, and LUSMFA have been
adjusted to reflect reinvestment of dividends on securities in the
indices and average.
** Total return quoted reflects all applicable sales charges and
contingent deferred sales charges.
+ The LB5YRTBI and the SB15YRMI are not adjusted to reflect sales
charges, expenses, or other fees that the SEC requires to
be reflected in the fund's performance. These indices are unmanaged.
++ The LUSMFA represents the average of the total returns
reported by all of the mutual funds designated by Lipper Analytical
Services, Inc. as falling into the category and is not adjusted to
reflect any sales charges. However, these total returns are reported
net of expenses or other fees that the SEC requires to be reflected in
a fund's performance.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
PORTFOLIO OF INVESTMENTS
MARCH 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM U.S. GOVERNMENT OBLIGATIONS-100.2%
(A)FEDERAL HOME LOAN MORTGAGE CORP. PC-12.7%
$ 38,000,000 (b)6.500%, 4/1/2011 $ 37,227,460
65,528,953 7.000%, 12/1/2025-2/1/2026 63,951,016
14,442,124 7.500%, 5/1/2025-12/1/2025 14,419,306
20,364,040 8.000%, 6/1/2025-11/1/2025 20,745,459
32,000,000 8.500%, 4/1/2026 33,109,440
21,000,000 9.000%, 4/1/2026 22,010,310
Total 191,462,991
(A)FEDERAL NATIONAL MORTGAGE ASSOCIATION-9.7%
20,000,000 (b)6.000%, 4/1/2011 19,168,400
40,985,992 6.500%, 6/1/2009-12/1/2025 39,435,002
22,500,000 (b)6.500%, 12/1/2025 22,014,450
283,861 7.000%, 11/1/2010 283,324
63,225,968 8.000%, 12/1/2025 64,370,990
559,921 11.000%, 10/1/2010 625,000
Total 145,897,166
(A)GOVERNMENT NATIONAL MORTGAGE ASSOCIATION MPT-67.9%
67,320,000 6.500%, 3/15/2026 63,785,027
78,292,890 7.000%, 7/15/2023-4/15/2026 76,261,190
138,000,000 (b)7.000%, 4/15/2026 134,418,900
202,262,627 7.500%, 11/15/2022-2/15/2026 201,943,052
147,502,361 8.000%, 8/15/2022-4/15/2026 150,633,836
602,480 8.200%, 6/15/2012-5/15/2013 604,727
59,816,882 8.500%, 5/15/2021-4/15/2026 62,332,324
19,000,000 (b)8.500%, 4/15/2026 19,955,014
98,249,164 9.000%, 1/15/2020-7/15/2025 104,285,832
50,094,847 9.500%, 9/15/2016-12/15/2024 54,409,154
</TABLE>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, 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
$ 68,498,954 10.000%, 4/15/2016-1/15/2021 $ 75,497,492
19,659,045 10.500%, 1/15/2014-9/15/2019 21,852,012
12,002,220 11.000%, 12/15/2009-10/15/2019 13,468,532
17,543,315 11.500%, 3/15/2010-9/15/2018 19,911,487
14,527,695 12.000%, 5/15/2011-1/15/2016 16,652,080
1,939,961 12.500%, 2/15/2011-5/15/2015 2,243,041
2,187,217 13.000%, 1/15/2011-12/15/2014 2,531,722
Total 1,020,785,422
U.S. TREASURY BONDS-1.9%
8,500,000 8.125%, 8/15/2019 9,735,815
5,500,000 8.750%, 5/15/2017 6,657,750
10,000,000 9.250%, 2/15/2016 12,618,200
Total 29,011,765
U.S. TREASURY NOTES-8.0%
5,400,000 5.375%, 11/30/1997 5,369,004
22,600,000 5.500%, 11/15/1998 22,386,430
34,000,000 6.125%, 9/30/2000 34,040,800
29,500,000 7.250%, 2/15/1998 30,255,495
26,000,000 7.500%, 11/15/2001-2/15/2005 27,796,200
Total 119,847,929
TOTAL LONG-TERM U.S. GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $1,508,391,514) 1,507,005,273
</TABLE>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS-18.5%
$ 20,380,000 BT Securities Corporation, 5.430%, dated 3/29/1996,
due 4/1/1996 $ 20,380,000
50,000,000 (d)CS First Boston Corporation, 5.270%, dated 3/19/1996,
due 4/11/1996 50,000,000
20,000,000 (d)CS First Boston Corporation, 5.270%, dated 3/19/1996,
due 4/18/1996 20,000,000
20,000,000 (d)Goldman, Sachs & Company, 5.150%, dated 3/18/1996,
due 4/16/1996 20,000,000
22,500,000 (d)Goldman, Sachs & Company, 5.170%, dated 3/18/1996,
due 4/16/1996 22,500,000
19,000,000 (d)Goldman, Sachs & Company, 5.170%, dated 3/19/1996,
due 4/18/1996 19,000,000
20,000,000 (d)Goldman, Sachs & Company, 5.180%, dated 3/18/1996,
due 4/16/1996 20,000,000
8,000,000 (d)Goldman, Sachs & Company, 5.200%, dated 3/18/1996,
due 4/16/1996 8,000,000
68,000,000 (d)Goldman, Sachs & Company, 5.210%, dated 3/19/1996,
due 4/18/1996 68,000,000
30,000,000 (d)Morgan Stanley & Co., Incorporated, 5.170%,
dated 3/18/1996, due 4/16/1996 30,000,000
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) $ 277,880,000
TOTAL INVESTMENTS (IDENTIFIED COST $1,786,271,514)(E) $ 1,784,885,273
</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 if the
creditworthiness of the issuer is downgraded.
(e) The cost of investments for federal tax purposes amounts to
$1,786,271,514. The net unrealized depreciation of investments on a
federal tax basis amounts to $1,386,241 which is comprised of
$9,648,051 appreciation and $11,034,292 depreciation at March 31,
1996.
Note: The categories of investments are shown as a percentage of net
assets ($1,503,390,310) at March 31, 1996.
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)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities $ 1,507,005,273
Investments in repurchase agreements 277,880,000
Total investments in securities, at value (identified and tax
cost, $1,786,271,514) $ 1,784,885,273
Cash 103,288
Receivable for investments sold 44,063,646
Income receivable 10,438,989
Receivable for shares sold 1,502,486
Total assets 1,840,993,682
LIABILITIES:
Payable for dollar roll transactions 237,450,701
Payable for investments purchased 94,557,191
Income distribution payable 2,900,446
Payable for shares redeemed 1,998,740
Accrued expenses 696,294
Total liabilities 337,603,372
Net Assets for 193,258,340 shares outstanding $ 1,503,390,310
NET ASSETS CONSIST OF:
Paid in capital 1,671,480,228
Net unrealized depreciation of investments (1,386,241)
Accumulated net realized loss on investments (173,146,468)
Undistributed net investment income 6,442,791
Total Net Assets $ 1,503,390,310
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($1,330,271,874 / 171,003,431 shares outstanding) $7.78
Offering Price Per Share (100/95.50 of $7.78)* $8.15
Redemption Proceeds Per Share $7.78
CLASS B SHARES:
Net Asset Value Per Share ($93,168,991 / 11,977,944 shares outstanding) $7.78
Offering Price Per Share $7.78
Redemption Proceeds Per Share (94.50/100 of $7.78)** $7.35
CLASS C SHARES:
Net Asset Value Per Share ($79,949,445 / 10,276,965 shares outstanding) $7.78
Offering Price Per Share $7.78
Redemption Proceeds Per Share (99/100 of $7.78)** $7.70
</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
YEAR ENDED MARCH 31, 1996
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense $13,379,094) $ 118,204,745
EXPENSES:
Investment advisory fee $ 8,731,709
Administrative personnel and services fee 1,153,399
Custodian fees 289,596
Transfer and dividend disbursing agent fees and expenses 1,387,995
Directors'/Trustees' fees 26,485
Auditing fees 20,382
Legal fees 12,127
Portfolio accounting fees 158,089
Distribution services fee-Class B Shares 510,328
Distribution services fee-Class C Shares 603,258
Shareholder services fee-Class A Shares 3,439,544
Shareholder services fee-Class B Shares 170,109
Shareholder services fee-Class C Shares 201,086
Share registration costs 72,130
Printing and postage 146,669
Insurance premiums 22,416
Taxes 354,525
Miscellaneous 14,297
Total expenses 17,314,144
Waivers-
Waiver of investment advisory fee $ (142,099)
Waiver of shareholder services fee-Class A Shares (1,375,818)
Waiver of shareholder services fee-Class B Shares (18,357)
Waiver of shareholder services fee-Class C Shares (7,341)
Total waivers (1,543,615)
Net expenses 15,770,529
Net investment income 102,434,216
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 15,733,325
Net change in unrealized depreciation of investments 7,914,175
Net realized and unrealized gain on investments 23,647,500
Change in net assets resulting from operations $ 126,081,716
</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>
YEAR ENDED MARCH 31,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations-
Net investment income $ 102,434,216 $ 116,006,999
Net realized gain (loss) on investments ($4,621,860 net loss and
$123,323,419 net loss, respectively, as computed for federal tax purposes) 15,733,325 (94,672,552)
Net change in unrealized appreciation (depreciation) 7,914,175 42,533,141
Change in assets resulting from operations 126,081,716 63,867,588
NET EQUALIZATION CREDITS/(DEBITS) (663,008) (2,842,296)
DISTRIBUTIONS TO SHAREHOLDERS-
Distributions from net investment income
Class A Shares (95,810,418) (106,507,664)
Class B Shares (4,295,610) (782,408)
Class C Shares (4,916,823) (5,907,635)
Select Shares - (31,388)
Distributions in excess of net investment income
Class B Shares - (56,577)
Change in net assets resulting from distributions to shareholders (105,022,851) (113,285,672)
SHARE TRANSACTIONS-
Proceeds from sale of shares 203,854,783 145,070,864
Net asset value of shares issued to shareholders in payment of
distributions declared 65,198,244 70,938,753
Cost of shares redeemed (268,563,700) (479,721,960)
Change in net assets resulting from share transactions 489,327 (263,712,343)
Change in net assets 20,855,184 (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 $6,442,791 and $11,523,255, respectively) $ 1,503,390,310 $ 1,482,505,126
</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 CASH FLOWS
YEAR ENDED MARCH 31, 1996
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 126,081,716
ADJUSTMENTS TO RECONCILE NET INCREASE IN NET ASSETS FROM OPERATIONS
TO CASH PROVIDED BY OPERATING ACTIVITIES:
Net increase in investments
(including $ 7,914,175 decrease in unrealized depreciation ) (42,696,702)
Decrease in income receivable 1,783,676
Decrease in receivable for investments sold 28,460,515
Increase in payable for investments purchased 36,558,997
Increase in accrued expenses 139,655
Cash provided by operating activities 150,327,857
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the sale of shares 204,703,254
Net cost of shares redeemed (269,131,627)
Equalization (debits) credits (663,008)
Decrease in payable for dollar roll transactions (44,708,386)
Distributions paid (40,427,977)
Cash used in financing activities (150,227,744)
Increase in cash 100,113
Cash at beginning of period 3,175
Cash at end of period $ 103,288
</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>
YEAR ENDED MARCH 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 7.67 $ 7.89 $ 8.50 $ 8.51 $ 8.41
INCOME FROM
INVESTMENT OPERATIONS
Net investment income 0.54 0.57 0.63 0.71 0.75
Net realized and unrealized
gain (loss) on investments 0.12 (0.23) (0.61) (0.03) 0.08
Total from investment
operations 0.66 0.34 0.02 0.68 0.83
LESS DISTRIBUTIONS
Distributions to shareholders
from net investment income (0.55) (0.56) (0.63) (0.69) (0.73)
NET ASSET VALUE, END OF PERIOD $ 7.78 $ 7.67 $ 7.89 $ 8.50 $ 8.51
TOTAL RETURN(A) 8.77% 4.59% 0.13% 8.31% 10.20%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.95% 0.95% 0.88% 0.83% 0.91%
Net investment income 6.80% 7.41% 7.50% 8.33% 8.69%
Expense waiver/
reimbursement(b) 0.11% 0.02% - - -
SUPPLEMENTAL DATA
Net assets, end
of period (000 omitted) $1,330,272 $1,367,710 $1,693,293 $1,844,712 $1,384,117
Portfolio turnover 157% 154% 149% 52% 43%
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1991 1990 1989 1988 1987
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 8.23 $ 8.01 $ 8.41 $ 8.56 $ 8.77
INCOME FROM
INVESTMENT OPERATIONS
Net investment income 0.77 0.78 0.76 0.78 0.80
Net realized and unrealized
gain (loss) on investments 0.19 0.21 (0.40) (0.15) (0.21)
Total from investment
operations 0.96 0.99 0.36 0.63 0.59
LESS DISTRIBUTIONS
Distributions to shareholders
from net investment income (0.78) (0.77) (0.76) (0.78) (0.80)
NET ASSET VALUE, END OF PERIOD $ 8.41 $ 8.23 $ 8.01 $ 8.41 $ 8.56
TOTAL RETURN(A) 12.12% 12.59% 4.47% 7.66% 7.23%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.97% 0.96% 0.96% 0.96% 0.95%
Net investment income 9.21% 9.32% 9.22% 9.31% 9.24%
Expense waiver/
reimbursement(b) - 0.04% - 0.01% 0.05%
SUPPLEMENTAL DATA
Net assets, end
of period
(000 omitted) $1,133,017 $1,039,493 $1,054,055 $1,150,395 $1,193,389
Portfolio turnover 27% 98% 83% 72% 135%
</TABLE>
(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>
YEAR ENDED
MARCH 31,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.67 $ 7.75
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.49 0.37
Net realized and unrealized gain (loss) on investments 0.11 (0.06)
Total from investment operations 0.60 0.31
LESS DISTRIBUTIONS
Distributions from net investment income (0.49) (0.37)
Distributions in excess of net investment income(b) - (0.02)
Total distributions (0.49) (0.39)
NET ASSET VALUE, END OF PERIOD $ 7.78 $ 7.67
TOTAL RETURN(C) 7.90% 4.13%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.78% 1.76%*
Net investment income 5.93% 7.02%*
Expense waiver/reimbursement(d) 0.04% 0.06%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $93,169 $34,276
Portfolio turnover 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>
YEAR ENDED
MARCH 31,
1996 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 0.47 0.51 0.54
Net realized and unrealized gain (loss) on investments 0.12 (0.23) (0.63)
Total from investment operations 0.59 0.28 (0.09)
LESS DISTRIBUTIONS
Distributions from net investment income (0.48) (0.50) (0.54)
Distributions in excess of net investment income(b) - - (0.02)
Total distributions (0.48) (0.50) (0.56)
NET ASSET VALUE, END OF PERIOD $ 7.78 $ 7.67 $ 7.89
TOTAL RETURN(C) 7.85% 3.72% (1.17%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.79% 1.79% 1.81%*
Net investment income 5.96% 6.56% 6.45%*
Expense waiver/reimbursement(d) 0.02% 0.02% -
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $79,949 $80,519 $103,433
Portfolio turnover 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.)
FINANCIAL HIGHLIGHTS-SELECT SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MARCH 31,
1995(A) 1994(B)
<S> <C> <C>
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(c) - (0.01)
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 and were reclassified as
Class C Shares).
(b) Reflects operations for the period from January 15, 1994
(date of initial public offering) 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)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
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.
Effective March 31, 1996, the shareholders approved a change in the name of the
Fund from Fund for U.S. Government Securities, Inc. to Federated Fund for U.S.
Government Securities, Inc.
Effective July 29, 1994, the Fund's Select Shares ceased operations 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-U.S. government 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.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS-Interest income and
expenses are accrued daily. Bond premium and discount, if applicable,
are amortized as required by the Internal Revenue Code, as amended (the
"Code"). Distributions to shareholders are recorded on the ex-dividend
date.
Distributions in excess of net investment income were the result of
certain book and tax timing differences. These distributions do not
represent a return of capital for federal income tax purposes.
Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted
accounting principles. These differences are primarily due to differing
treatments for expiring capital loss carryforwards and accumulated
equalization and have been reclassified as follows:
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED NET UNDISTRIBUTED
PAID-IN CAPITAL REALIZED LOSS NET INVESTMENT INCOME
<C> <C> <C>
($ 20,116,819) ($ 21,945,640) ($1,828,821)
</TABLE>
Net investment income, net realized gains/losses, and net assets were
not affected by this reclassification.
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.
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 YEAR EXPIRATION AMOUNT
<S> <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>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
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 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 March 31, 1996.
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.
3. CAPITAL STOCK
At March 31, 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>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 14,028,935 $ 109,836,978 11,722,674 $ 89,460,417
Shares issued to shareholders in payment
of distributions declared 7,725,001 60,313,945 8,973,807 68,149,188
Shares redeemed (29,072,831) (227,106,948) (56,859,738) (433,752,920)
Net change resulting from Class A share
transactions (7,318,895) $ (56,956,025) (36,163,257) $ (276,143,315)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995(A)
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 9,233,866 $ 72,641,142 4,664,234 $ 35,599,952
Shares issued to shareholders in payment
of distributions declared 309,614 2,434,786 63,077 479,778
Shares redeemed (2,034,581) (16,019,590) (258,267) (1,965,937)
Net change resulting from Class B share
transactions 7,508,899 $ 59,056,338 4,469,044 $ 34,113,793
</TABLE>
(a) For the period from July 25, 1994 (date of initial public offering) to
March 31, 1995.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 2,705,784 $ 21,376,663 2,299,459 $ 17,762,992
Shares reclassifed from Select Shares - - 214,402 1,663,760
Shares issued to shareholders in payment
of distributions declared 311,557 2,449,513 300,203 2,298,084
Shares redeemed (3,235,263) (25,437,162) (5,426,379) (41,597,151)
Net change resulting from Class C share
transactions (217,922) $ (1,610,986) (2,612,315) $ (19,872,315)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995(B)
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 Select Shares
transactions - $ - (221,777) $ (1,810,506)
Net change resulting from share
transactions (27,918) $ 489,327 (34,528,305) $ (263,712,343)
</TABLE>
(b) 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 0.25% 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.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
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>
% OF AVG. DAILY
SHARE CLASS NAME NET ASSETS OF CLASS
<S> <C>
Class B Shares 0.75%
Class C Shares 0.75%
</TABLE>
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 daily average 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 AGENT AND DIVIDEND DISBURSING AGENT FEES-FServ, through its
subsidiary, Federated Shareholder Services Company serves as transfer
and dividend disbursing agent for the Fund. The fee paid to FServ 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.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
(FORMERLY, FUND FOR U.S. GOVERNMENT SECURITIES, INC.)
5. INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended March 31, 1996, were as follows:
<TABLE>
<S> <C>
PURCHASES $ 3,166,887,710
SALES $ 2,344,906,601
</TABLE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Fund for U.S. Government
Securities, Inc. (formerly, Fund for U.S. Government Securities, Inc.) as of
March 31, 1996, the related statement of operations and cash flows for the
year then ended, the statements of changes in net assets for the years ended
March 31, 1996 and 1995, and the financial highlights for the periods
presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of the
securities owned at March 31, 1996 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Fund for
U.S. Government Securities, Inc. as of March 31, 1996, the results of its
operations, its cash flows, the changes in its net assets, and its financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
Deloitte & Touche, LLP
Pittsburgh, Pennsylvania
May 17, 1996
DIRECTORS OFFICERS
<TABLE>
<S> <S>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
J. Christopher Donahue Richard B. Fisher
James E. Dowd Vice President
Lawrence D. Ellis, M.D. Edward C. Gonzales
Edward L. Flaherty, Jr. Executive Vice President
Peter E. Madden John W. McGonigle
Gregor F. Meyer Executive Vice President and Secretary
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 Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 314182106
Cusip 314182205
Cusip 314182304
8042505 (5/96)
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 darker shaded portion
represents Reinvested Income and the lighter shaded portion represents the
Principal Value of $27,000 Investment (2,579 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 10/4/76, would have a
reinvested total worth of $187,608/23,988 Shares on 3/31/96. The "x" axis
reflects tri-annual computation periods from 10/6/69 to 3/31/96. The right
margin of the chart reflects the ending values of a hypothetical investment
of $27,000 in the Fund measured in increments of $50,000 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 darker shaded portion
represents Reinvested Income and the lighter shaded portion represents the
Principal Value of all your $1,000 Investments (totaling $27,000 by 3/31/96).
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 $90,374/11,555 Shares
on 3/31/96. The "x" axis reflects tri-annual computation periods from 10/6/69
through 3/31/96. The right margin reflects the ending values of a
hypothetical annual investment of $1,000 in the Fund measured in increments
of $20,000 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 darker shaded portion
represents the value of Reinvested Income the lighter shaded portion
represents the Principal Value of $100,000 Investment (10,977 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 the Class A
Shares of Federated Fund for U.S. Government Securities, Inc. on 3/31/86,
would have a reinvested total worth of $199,271/25,479 Shares on 3/31/96. The
"x" axis reflects annual computation periods from 3/31/86 to 3/31/96. The
right margin reflects the ending values of a hypothetical investment of
$100,000 in the Fund measured in $50,000 increments ranging from $0 to
$200,000.
D. The graphic representation here displayed, consists of a chart entitled "A
History of Investment Growth." The following chart shows what an account
would be worth had an investor invested $10,000 in Class A Shares at the
beginning of these consecutive decades:
April 1- Initial Number Dividends and Total Ending Value
March 31 of Shares Capital Gains Shares of Shares
Reinvested
1969-1979 955 $8,163 1,858 $16,797
1970-1980 951 7,432 1,981 14,302
1971-1981 866 6,993 1,838 13,218
1972-1982 907 7,349 1,997 13,460
1973-1984 935 10,113 2,120 18,085
1974-1984 991 10,995 2,319 19,132
1975-1985 1007 12,169 2,461 20,598
1976-1986 988 13,416 2,518 16,506
1977-1987 978 13,523 2,556 17,152
1978-1988 1015 14,314 2.717 16,005
1979-1989 1056 14,552 2,873 18,055
1980-1990 1323 18,900 3,619 25,405
1981-1991 1328 19,932 3,634 26,605
1982-1992 1416 20,128 3,782 31,044
1983-1993 1120 15,490 2,942 24,563
1984-1994 1157 14,218 2,959 23,689
1985-1995 1141 12,590 2,782 23,482
1986-1996 1089 11,256 2,528 19,187
E. The graphic representation here displayed consists of a list entitled
"Some of the Fund's Major Shareholder Groups." The list includes the
following investment groups and their dollar amounts invested in Federated
Fund for U.S. Government Securities, Inc.:
Individuals and Joint Tenants $865,907,160
Trusts 164,568,719
IRAs 122,102,969
Corporations 51,240,007
Clubs/Fraternal Organizations 20,160,278
Churches/Religious Organizations 11,601,996
Custodians (under Uniform Gift
to Minors Act) 7,770,279
F. The graphic representation here displayed consists of a pie chart entitled
"Portfolio Overview as of March 31, 1996." The color-coded chart shows the
following portfolio rating distributions:
GNMA 57.19%
FHLMC 10.73%
U.S. Treasurys 8.34%
FNMA 8.17%
Repurchase Agreements 1.14%
Repurchase Agreements
(securities held as collateral
for dollar roll transactions) 14.43%
G. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line graph.
Federated Fund for U.S. Government Securities Fund, Inc. (Class A Shares)
(the "Fund") is represented by a solid black line. Lehman Brothers 5-Year
Treasury Bellwether Index (LB5YRTBI) is represented by a dotted line. Salomon
Brothers 15-Year Mortgage Index (SB15YRMI) is represented by a series of
dashes separated by dots. Lipper U.S. Mortgage Funds Average (LUSMFA) is
represented by a series of dashes. The line graph is a visual representation
of a comparison of a change in value of a hypothetical $10,000 investment in
the Fund, LB5YRTBI, SB15YRMI, and LUSMFA. The "x" axis reflects annual
computation periods from 3/31/86 to 3/31/96. The "y" axis reflects the cost
of investment in $4,000 increments ranging from $8,000 to $24,000. The right
margin reflects the ending values of the hypothetical investment in the Fund
as compared to the LB5YRTBI, SB15YRMI, and LUSMFA; the ending values are
$19,768, $20,542, $23,297, and $20,876, respectively. Below the legend is the
Average Annual Total Returns for the 1 Year, 5 Year, 10 Year, and Start of
Performance (10/6/69) periods ended March 31, 1996; the total returns listed
are 3.89%, 5.35%, 7.06%, and 7.59%, respectively.
H. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line graph.
Federated Fund for U.S. Government Securities Fund, Inc. (Class B Shares)
(the "Fund") is represented by a solid black line. Lehman Brothers 5-Year
Treasury Bellwether Index (LB5YRTBI) is represented by a dotted line. Lipper
U.S. Mortgage Funds Average (LUSMFA) is represented by a series of dashes.
Salomon Brothers 15-Year Mortgage Index (SB15YRMI) is represented by a series
of dashes separated by dots. The line graph is a visual representation of a
comparison of a change in value of a hypothetical $10,000 investment in the
Fund, LB5YRTBI, LUSMFA, and SB15YRMI. The "x" axis reflects annual
computation periods from 7/26/94 to 3/31/96. The "y" axis reflects the cost
of investment in $1,000 increments ranging from $10,000 to $12,000. The right
margin reflects the ending values of the hypothetical investment in the Fund
as compared to the LB5YRTBI, LUSMFA, and SB15YRMI; the ending values are
$10,700, $11,381, $11,315, and $11,644, respectively. Below the legend is the
Average Annual Total Returns for the 1 Year and Start of Performance
(7/26/94) periods ended March 31, 1996; the total returns listed are 2.11%,
and 4.12%, respectively.
I. The graphic representation here displayed consists of a boxed legend in
the bottom center indicating the components of the corresponding line graph.
Federated Fund for U.S. Government Securities Fund, Inc. (Class C Shares)
(the "Fund") is represented by a solid black line. Lehman Brothers 5-Year
Treasury Bellwether Index (LB5YRTBI) is represented by a dotted line. Lipper
U.S. Mortgage Funds Average (LUSMFA) is represented by a series of dashes.
Salomon Brothers 15-Year Mortgage Index (SB15YRMI) is represented by a series
of dashes separated by dots. The line graph is a visual representation of a
comparison of a change in value of a hypothetical $10,000 investment in the
Fund, LB5YRTBI, LUSMFA, and SB15YRMI. The "x" axis reflects annual
computation periods from 4/27/93 to 3/31/96. The "y" axis reflects the cost
of investment in $2,000 increments ranging from $8,000 to $12,000. The right
margin reflects the ending values of the hypothetical investment in the Fund
as compared to the LB5YRTBI, LUSMFA, and SB15YRMI; the ending values are
$11,055, $11,5911, $11,435, and $11,878, respectively. Below the legend is
the Average Annual Total Returns for the 1 Year and Start of Performance
(4/27/93) periods ended March 31, 1996; the total returns listed are 6.74%,
