[Graphic]
Federated Fund for U.S. Government Securities, Inc.
28TH SEMI-ANNUAL REPORT
SEPTEMBER 30, 1997
ESTABLISHED 1969
PRESIDENT'S MESSAGE
[Graphic]
Dear Fellow Shareholder:
I am pleased to present the 28th Semi-Annual Report to shareholders for
Federated Fund for U.S. Government Securities, Inc., which was created in 1969.
This report covers the six-month reporting period from April 1, 1997, through
September 30, 1997. It begins with an investment discussion with the fund's
portfolio manager, Kathy Foody-Malus, Vice President, Federated Advisers.
Following her discussion are graphs showing the fund's long-term investment
performance, a complete listing of the fund's broadly diversified U.S.
government bond portfolio, 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 reporting period, the fund maintained a
strong focus on mortgage-backed securities for their good, long-term value and
their current yield.
As of September 30, 1997, 90% of the fund's $1.3 billion portfolio was invested
in Government National Mortgage Association (GNMA) securities, 8% was in U.S.
Treasuries, and the remainder was in other mortgage-backed securities,
short-term issues, and overnight repurchase agreements. The fund's average
effective duration was 3.2 years, and the weighted average coupon of its
holdings was 7.79%. The fund's portfolio maintained its AAAf rating by Standard
& Poor's, the highest rating given by this independent mutual fund rating
service.*
Over the six-month reporting period, the fund's performance (based on net asset
value) was consistent with that of the overall Treasury market as well as the
average U.S. government bond fund:**
TOTAL INCOME SHARE
RETURN DISTRIBUTIONS PRICE GROWTH
Class A Shares 6.46% $0.26 $7.65 to $7.88 = 3%
Class B Shares 5.87% $0.23 $7.66 to $7.88 = 3%
Class C Shares 5.99% $0.22 $7.66 to $7.89 = 3%
* An AAAf rating means that the fund's portfolio holdings and counterparties
provide extremely strong protection against losses from credit defaults. Ratings
are subject to change, and do not remove market risks.
** Performance quoted represents past performance and is not indicative of
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. The total returns for the period (based on offering price) for Class A, B,
and C Shares were 1.67%, 0.25%, and 4.92%, respectively.
I want to extend a warm welcome to former shareholders of William Penn U.S.
Government Securities Income Fund who are now shareholders of Federated Fund for
U.S. Government Securities, Inc. During the reporting period, the assets of
William Penn U.S. Government Securities Income Fund were merged with Federated
Fund for U.S. Government Securities, Inc.
Thank you for investing a portion of your wealth in this fund. 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, 1997
INVESTMENT REVIEW
[Graphic]
Kathy Foody-Malus
Vice President
Federated Advisers
[Graphic]
WHAT IS YOUR ANALYSIS OF THE CURRENT ECONOMIC SIGNALS AND THEIR EFFECT ON THE
BOND MARKET DURING THE FIRST SIX MONTHS OF THE FUND'S FISCAL YEAR?
The initial read on third quarter 1997 data portrays a textbook model economy of
balanced growth and moderate inflation. As the third quarter began, demand that
had appeared to have softened in the second quarter, based upon initial
releases, showed vigor. The pickup in spending has been reflected in increased
housing sales and manufacturing activity. Overall, the U.S. economy looks to be
advancing at a solid pace through the remainder of 1997.
This news, in combination with strong GDP growth, caused the U.S. bond market to
be skittish during the third quarter. In this environment, the U.S. Treasury
market continued to drift from data release to data release without any clear
conviction. Of course, any action by the Federal Reserve Board will be reflected
in the U.S. bond market.
For the first nine months of 1997, the mortgage sector outperformed the U.S.
Treasury market on a duration-adjusted basis by 106 basis points. An important
part of the mortgage out-performance has come from falling option volatility.
The decline in volatility allowed investors to more efficiently manage the call
risk of mortgage securities. The mortgage market also benefited from tightening
spreads versus comparable duration to U.S. Treasuries. Despite the tightening
yield spreads, mortgages remained attractive versus spreads on alternative
fixed-income products.
However, the third quarter produced many irregular relationships in the form of
declining interest rates, a flattening yield curve, real yields increasing, and
volatility declining. These conditions were not favorable for the mortgage
market, yet mortgages performed relatively well given this environment.
[Graphic]
AS MORTGAGE-BACKED SECURITIES CONTINUED TO BE A RELATIVELY BRIGHT SPOT IN
THE FIXED-INCOME MARKET, DID YOU MAINTAIN THE PORTFOLIO'S EMPHASIS ON THIS
SECTOR?
Yes. At the end of the reporting period, the portfolio was 90% weighted in
agency mortgage securities due to attractive valuations versus other
high-grade, fixed-income assets.
As of September 30, 1997, the portfolio composition was:
Government National Mortgage Association 90.7%
U.S. Treasury Obligations 8.0%
Federal National Mortgage Association 0.1%
Cash 7.5%
[Graphic]
HOW DID FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC. PERFORM FOR
SHAREHOLDERS IN TERMS OF TOTAL RETURN AND INCOME DURING THE FIRST SIX MONTHS
OF ITS FISCAL YEAR?
For the six-month reporting period that ended on September 30, 1997, investors
in the fund's Class A, B, and C Shares received a total net return of 6.46%,
5.87%, and 5.99%, respectively, based on net asset value.*
The fund's six-month returns were consistent with those of the 5-year
Treasury market overall and the average U.S. government mortgage fund. For
the six-month reporting period, in comparison, the Merrill Lynch 5-Year and
10-Year U.S. Treasury Note Indices returns were 6.24% and 9.03%,
respectively.** The total return for the Lipper U.S. Mortgage Fund Average
was 6.46%.+
In terms of income, the fund's Class A, B, and C Shares paid monthly dividends
totaling $0.26, $0.23, and $0.22 per share, respectively.
* Performance quoted represents past performance and is not indicative of 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. Total returns based on offering price for Class A, B, and C Shares were
1.67%, 0.25%, and 4.92%, respectively, for the reporting period.
** Merrill Lynch 5-Year and 10-Year Treasury Note Indices comprise the most
recently issued 5-year and 10-year U.S. Treasury notes. Index returns are
calculated as total returns for periods of 1, 3, 6, and 12 months as well as
year-to-date. Indices are unmanaged, and investments cannot be made in an index.
+ Lipper 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. This figures does not
reflect sales charges.
[Graphic]
AS WE LEAVE 1997, WHAT DO YOU SEE AHEAD FOR THE MORTGAGE-BACKED MARKET, AND WHAT
IS YOUR STRATEGY FOR THE FUND?
Going forward, the primary risk facing the mortgage market is a continuing rally
in the Treasury market. Currently, 75% of the mortgage market is priced above
par. If rates on the 10-year Treasury note were to decline by 35 basis points,
there would be a major refinancing wave. The strategy of the fund to guard
against the potential impact of such an occurrence is to favor collateral that
offers protection against prepayment risk. In addition, the fund plans to
continue to hold a position in U.S. Treasuries to enhance call protection.
TWO WAYS YOU MAY SEEK TO INVEST FOR SUCCESS IN
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
INITIAL INVESTMENT:
IF YOU HAD MADE AN INITIAL INVESTMENT OF $28,000 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 $217,224 ON 9/30/97. YOU WOULD HAVE EARNED A 7.60%* AVERAGE ANNUAL TOTAL
RETURN FOR THE 28-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 9/30/97, the Class A Shares' average annual one-year, five-year, and
ten-year total returns were 4.51%, 4.52%, and 7.52%, respectively. The Class B
Shares' average annual one-year and since inception (7/25/94) total returns were
2.73% and 5.97%, respectively. The Class C Shares' average annual one-year and
since inception (4/26/93) total returns were 7.51% and 4.60%, respectively.**
[Graphic]
* 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 intitial investment in Class A 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.
** The total returns stated take 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.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
ONE STEP AT A TIME:
$1,000 INVESTED EACH YEAR FOR 28 YEARS (REINVESTING ALL DIVIDENDS AND
CAPITAL GAINS) GREW TO $100,731.
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
$28,000, but your account would have reached a total value of $100,731* by
9/30/97. You would have earned an average annual total return of 7.91%.
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]
* This chart assumes that the subsequent annual investments are made on the last
day of each anniversary month. 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.
HYPOTHETICAL INVESTOR PROFILE: INVESTING FOR CURRENT INCOME
Ten years ago, on September 30, 1987, 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 $204,666 as of 9/30/97 for an average annual
total return of 7.49%.*
[Graphic]
* This hypothetical scenario is provided for illustrative purposes only and does
not represent the result obtained by any particular shareholder. Past
performance does not guarantee future results. Fund shares are not guaranteed
and their value will fluctuate.
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--98.8%
FEDERAL HOME LOAN MORTGAGE CORPORATION--0.0%
$ 9,370 11.000%, 12/1/2017 $ 10,372
56,359 11.750%, 1/1/2011 64,671
10,664 12.000%, 6/1/2000 11,335
23,664 12.500%, 5/1/2000 - 10/1/2012 25,226
9,226 12.750%, 1/1/2013 - 10/1/2013 10,622
65,480 13.000%, 11/1/1999 - 2/1/2015 74,712
63,194 13.250%, 3/1/2014 73,374
17,257 13.500%, 10/1/2013 20,067
44,573 13.750%, 1/1/2011 - 10/1/2011 52,074
341 14.000%, 12/1/2012 388
137,850 14.500%, 12/1/2011 - 10/1/2012 160,463
8,893 14.750%, 8/1/2011 10,363
4,097 15.500%, 8/1/2011 5,088
Total 518,755
FEDERAL NATIONAL MORTGAGE ASSOCIATION--0.1%
281,209 11.000%, 10/1/2010 316,043
6,168 11.750%, 10/1/2015 7,084
7,301 12.000%, 6/1/1998 - 1/1/2013 7,766
11,580 12.250%, 3/1/2005 - 8/1/2013 12,606
10,232 12.500%, 8/1/2013 11,872
103,881 12.750%, 10/1/2010 - 4/1/2015 119,839
42,048 13.000%, 6/1/2000 - 8/1/2015 48,054
203,089 13.500%, 10/1/2014 - 12/1/2014 237,423
3,551 13.750%, 6/1/2014 4,138
6,227 14.000%, 11/1/2014 7,295
</TABLE>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--CONTINUED
FEDERAL NATIONAL MORTGAGE ASSOCIATION--CONTINUED
$ 47,730 14.500%, 11/1/2012 $ 55,919
7,703 15.000%, 10/1/2012 9,024
Total 837,063
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--90.7%
105,616,750 6.500%, 11/15/2023 - 12/15/2025 103,805,269
243,364,062 7.000%, 7/15/2023 - 10/15/2027 244,017,844
277,057,363 (a)7.500%, 12/15/2021 - 10/15/2027 282,788,675
261,932,385 (a)8.000%, 5/15/2017 - 10/15/2027 271,914,507
79,040,665 (a)8.500%, 11/15/2017 - 10/15/2027 83,298,920
92,431,478 9.000%, 10/15/2017 - 11/15/2024 100,115,812
41,767,250 9.500%, 9/15/2016 - 9/15/2026 45,474,266
23,225,069 10.000%, 4/15/2016 - 8/15/2020 25,692,602
8,070,122 10.500%, 11/15/1997 - 10/15/2019 9,027,156
8,724,401 11.000%, 12/15/2009 - 10/15/2019 9,916,461
573 11.250%, 9/20/2015 648
11,560,321 11.500%, 10/20/1999 - 9/15/2018 13,457,517
76,731 11.750%, 7/15/2013 - 9/20/2015 87,492
9,790,713 12.000%, 2/20/1999 - 1/15/2016 11,418,925
1,262,356 12.500%, 7/15/1999 - 5/15/2015 1,484,515
7,311 12.750%, 11/15/1999 8,764
1,675,652 13.000%, 9/15/1999 - 12/15/2014 2,011,469
11,334 13.500%, 9/20/1999 11,751
25,252 13.750%, 9/15/2014 29,513
Total 1,204,562,106
</TABLE>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM U.S. GOVERNMENT OBLIGATIONS--CONTINUED
SMALL BUSINESS ADMINISTRATION--0.0%
$ 1,367,380 1.394%, 11/20/2003 $ 48,959
34,043 10.125%, 3/25/2000 34,858
Total 83,817
U.S. TREASURY BONDS AND NOTES--8.0%
15,000,000 5.750%, 12/31/1998 15,014,550
10,000,000 5.875%, 11/15/1999 10,011,500
7,000,000 6.125%, 9/30/2000 7,045,990
8,000,000 6.250%, 2/15/2003 8,080,400
14,000,000 6.375%, 4/30/1999 - 9/30/2001 14,165,690
10,400,000 6.500%, 5/31/2001 10,583,456
2,000,000 7.000%, 7/15/2006 2,109,220
10,000,000 7.125%, 2/15/2023 10,791,300
10,000,000 7.500%, 2/15/2005 10,797,200
4,000,000 8.000%, 8/15/1999 4,154,160
1,000,000 8.125%, 8/15/2019 1,190,990
10,000,000 8.750%, 5/15/2017 12,529,200
Total 106,473,656
TOTAL LONG-TERM U.S. GOVERNMENT
OBLIGATIONS
(IDENTIFIED COST $1,275,364,222) 1,312,475,397
</TABLE>
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(B)REPURCHASE AGREEMENTS--7.5%
$ 17,225,000 BT Securities Corp., 6.070%, dated $ 17,225,000
9/30/1997, due 10/1/1997
47,700,000 (c) Credit Suisse First Boston, 47,700,000
5.540%, dated 9/18/1997, due
10/20/1997
35,000,000 (c) UBS Securities, Inc., 5.540%, 35,000,000
dated 9/18/1997, due 10/20/1997
TOTAL REPURCHASE AGREEMENTS (AT 99,925,000
AMORTIZED COST)
TOTAL INVESTMENTS (IDENTIFIED $ 1,412,400,397
COST $1,375,289,222)(D)
</TABLE>
(a) This security is subject to dollar roll transactions.
(b) 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.
(c) 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.
(d) The cost of investments for federal tax purposes amounts to $1,375,289,222.
The net unrealized appreciation of investments on a federal tax basis amounts to
$37,111,175 which is comprised of $37,557,803 appreciation and $446,628
depreciation at September 30, 1997.
Note: The categories of investments are shown as a percentage of net assets
($1,328,204,434) at September 30, 1997.
(See Notes which are an integral part of the Financial Statements)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value $ 1,412,400,397
(identified and tax cost $1,375,289,222)
Income receivable 11,518,768
Receivable for investments sold 23,427,997
Receivable for shares sold 269,738
Prepaid expenses 190,241
Total assets 1,447,807,141
LIABILITIES:
Payable for investments purchased $ 72,391,669
Payable for shares redeemed 390,195
Income distribution payable 7,145,544
Payable to Bank 2,923,986
Payable for dollar roll transactions 36,040,283
Accrued expenses 711,030
Total liabilities 119,602,707
NET ASSETS for 168,563,602 shares outstanding $ 1,328,204,434
NET ASSETS CONSIST OF:
Paid in capital $ 1,471,790,466
Net unrealized appreciation of investments 37,111,175
Accumulated net realized loss on investments (183,904,207)
Undistributed net investment income 3,207,000
Total Net Assets $ 1,328,204,434
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
CLASS A SHARES:
Net Asset Value Per Share ($1,176,485,256 / $7.88
149,321,317 shares outstanding)
Offering Price Per Share (100/95.50 of $7.88)* $8.25
Redemption Proceeds Per Share $7.88
CLASS B SHARES:
Net Asset Value Per Share ($100,620,492 / $7.88
12,762,494 shares outstanding)
Offering Price Per Share $7.88
Redemption Proceeds Per Share (94.50/100 of $7.45
$7.88)**
CLASS C SHARES:
Net Asset Value Per Share ($51,098,686 / $7.89
6,479,791 shares outstanding)
Offering Price Per Share $7.89
Redemption Proceeds Per Share (99.00/100 of $7.81
$7.89)**
</TABLE>
* See "Purchasing 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.
STATEMENT OF OPERATIONS
SIX MONTHS ENDED SEPTEMBER 30, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense of $275,226) $ 50,503,621
EXPENSES:
Investment advisory fee $3,715,113
Administrative personnel and services fee 509,743
Custodian fees 58,355
Transfer and dividend disbursing agent fees and 662,275
expenses
Directors'/Trustees' fees 3,175
Auditing fees 10,940
Legal fees 14,969
Portfolio accounting fees 85,553
Distribution services fee--Class B Shares 377,686
Distribution services fee--Class C Shares 201,538
Shareholder services fee--Class A Shares 1,494,817
Shareholder services fee--Class B Shares 125,896
Shareholder services fee--Class C Shares 67,179
Share registration costs 23,696
Printing and postage 89,430
Insurance premiums 7,559
Taxes 118,975
Miscellaneous 14,882
Total expenses 7,581,781
Waivers --
Waiver of shareholder services fee--Class A $ (624,539)
Shares
Waiver of shareholder services fee--Class B (1,625)
Shares
Waiver of shareholder services fee--Class C (1,229)
Shares
Total waivers (627,393)
Net expenses 6,954,388
Net investment income 43,549,233
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (1,615,448)
Net change in unrealized appreciation of 41,247,169
investments
Net realized and unrealized gain on investments 39,631,721
Change in net assets resulting from $ 83,180,954
operations
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED) YEAR ENDED
SEPTEMBER 30, MARCH 31,
1997 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 43,549,233 $ 91,996,880
Net realized gain (loss) on
investments ($1,615,448 and
$20,479,836 net loss
respectively, as computed for
federal
tax purposes) (1,615,448) (22,638,986)
Net change in unrealized 41,247,169 (2,749,753)
appreciation/depreciation
Change in net assets 83,180,954 66,608,141
resulting from operations
NET EQUALIZATION CREDITS (426,711) (1,276,332)
(DEBITS)--
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net
investment income
Class A Shares (44,538,295) (80,122,258)
Class B Shares (2,884,234) (5,509,826)
Class C Shares (1,518,014) (3,782,566)
Change in net assets
resulting from
distributions
to shareholders (48,940,543) (89,414,650)
SHARE TRANSACTIONS--
Proceeds from sale of shares 90,557,046 153,017,859
Net asset value of shares
issued to shareholders in
payment
of distributions declared 27,901,581 55,974,907
Cost of shares redeemed (157,420,334) (354,947,794)
Change in net assets (38,961,707) (145,955,028)
resulting from share
transactions
Change in net assets (5,148,007) (170,037,869)
NET ASSETS:
Beginning of period 1,333,352,441 1,503,390,310
End of period (including
undistributed net investment
income
of $3,207,000 and $9,025,021, $ 1,328,204,434 $1,333,352,441
respectively)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED 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 YEAR ENDED MARCH 31,
30,
1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $ 7.65 $ 7.78 $ 7.67 $ 7.89 $ 8.50 $ 8.51
BEGINNING OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.22 0.51 0.54 0.57 0.63 0.71
Net realized and
unrealized gain (loss)
on investments 0.27 (0.14) 0.12 (0.23) (0.61) (0.03)
Total from investment 0.49 0.37 0.66 0.34 0.02 0.68
operations
LESS DISTRIBUTIONS
Distributions from net (0.26) (0.50) (0.55) (0.56) (0.63) (0.69)
investment income
NET ASSET VALUE, END OF $ 7.88 $ 7.65 $ 7.78 $ 7.67 $ 7.89 $ 8.50
PERIOD
TOTAL RETURN(A) 6.46% 4.88% 8.77% 4.59% 0.13% 8.31%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.93%* 0.95% 0.95% 0.95% 0.88% 0.83%
Net investment income 6.55%* 6.60% 6.80% 7.41% 7.50% 8.33%
Expense 0.10%* 0.12% 0.11% 0.02% -- --
waiver/reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end of $1,176,485 $1,177,071 $1,330,272 $1,367,710 $1,693,293 $1,844,712
period (000 omitted)
Portfolio turnover 28% 120% 157% 154% 149% 52%
</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.
FINANCIAL HIGHLIGHTS--CLASS B SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
SEPTEMBER 30, YEAR ENDED MARCH 31,
1997 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.66 $ 7.78 $ 7.67 $ 7.75
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.23 0.44 0.49 0.37
Net realized and unrealized gain (loss)
on investments 0.22 (0.13) 0.11 (0.06)
Total from investment operations 0.45 0.31 0.60 0.31
LESS DISTRIBUTIONS
Distributions from net investment income (0.23) (0.43) (0.49) (0.37)
Distributions in excess of net -- -- -- (0.02)
investment income(b)
Total distributions (0.23) (0.43) (0.49) (0.39)
NET ASSET VALUE, END OF PERIOD $ 7.88 $ 7.66 $ 7.78 $ 7.67
TOTAL RETURN(C) 5.87% 4.13% 7.90% 4.13%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.78%* 1.80% 1.78% 1.76%*
Net investment income 5.70%* 5.75% 5.93% 7.02%*
Expense waiver/reimbursement(d) 0.00%* 0.02% 0.04% 0.06%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $100,620 $100,439 $93,169 $34,276
Portfolio turnover 28% 120% 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.
FINANCIAL HIGHLIGHTS--CLASS C SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
(UNAUDITED)
SEPTEMBER YEAR ENDED MARCH
30, 31,
1997 1997 1996 1995 1994(A)(B)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF $ 7.66 $ 7.78 $ 7.67 $ 7.89 $ 8.54
PERIOD
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.22 0.45 0.47 0.51 0.54
Net realized and unrealized
gain (loss)
on investments 0.23 (0.13) 0.12 (0.23) (0.63)
Total from investment 0.45 0.32 0.59 0.28 (0.09)
operations
LESS DISTRIBUTIONS
Distributions from net
investment income (0.22) (0.44) (0.48) (0.50) (0.54)
Distributions in excess of net
investment income(c) -- -- -- -- (0.02)
Total distributions (0.22) (0.44) (0.48) (0.50) (0.56)
NET ASSET VALUE, END OF PERIOD $ 7.89 $ 7.66 $ 7.78 $ 7.67 $ 7.89
TOTAL RETURN(D) 5.99% 4.14% 7.85% 3.72% (1.17%)
RATIOS TO AVERAGE NET ASSETS
Expenses 1.78%* 1.80% 1.79% 1.79% 1.81%*
Net investment income 5.70%* 5.74% 5.96% 6.56% 6.45%*
Expense 0.00%* 0.02% 0.02% 0.02% --
waiver/reimbursement(e)
SUPPLEMENTAL DATA
Net assets, end of period (000 $51,099 $55,842 $79,949 $80,519 $103,433
omitted)
Portfolio turnover 28% 120% 157% 154% 149%
</TABLE>
* Computed on an annualized basis.
(a) As of July 29, 1994, Select Shares were no longer offered and were
reclassified as Class C Shares. For the year ended March 31, 1994, Select
Shares' net assets (000 omitted) were $1,751.
(b) Reflects operations for the period from April 26, 1993 (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.
(e) 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.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997 (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 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.
At March 31, 1997, the Fund, for federal tax purposes, had a capital loss
carryforward of $180,107,709 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:
EXPIRATION EXPIRATION
YEAR AMOUNT
1999 $ 4,037,707
2000 2,560,450
2001 5,923,640
2002 19,160,797
2003 123,323,419
2004 4,621,860
2005 20,479,836
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.
3. CAPITAL STOCK
At September 30, 1997, par value shares ($0.001 per share) authorized were as
follows:
NUMBER OF
PAR VALUE
CAPITAL STOCK
CLASS NAME AUTHORIZED
Class A 750,000,000
Class B 500,000,000
Class C 750,000,000
Total 2,000,000,000
Transactions in capital stock were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 MARCH 31, 1997
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 9,699,490 $ 74,932,373 13,802,678 $ 106,373,098
Shares issued to
shareholders in
payment of 2,651,956 25,853,175 6,594,535 50,648,967
distributions declared
Shares redeemed (16,869,832) (130,667,094) (37,560,941) (288,629,597)
Net change resulting
from Class A
Share transactions (4,518,386) $ (29,881,546) (17,163,728) $ (131,607,532)
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 MARCH 31, 1997
CLASS B SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,583,718 $ 12,375,055 4,065,970 $ 31,504,278
Shares issued to
shareholders in
payment of distributions 177,290 1,382,766 420,703 3,252,961
declared
Shares redeemed (2,115,025) (16,503,405) (3,348,106) (25,930,245)
Net change resulting from
Class B Share (354,017) $ (2,745,584) 1,138,567 $ 8,826,994
transactions
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 MARCH 31, 1997
CLASS C SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 415,504 $ 3,249,618 1,953,059 $ 15,140,483
Shares issued to
shareholders in
payment of distributions 85,350 665,640 268,312 2,072,979
declared
Shares redeemed (1,312,653) (10,249,835) (5,206,746) (40,387,952)
Net change resulting
from Class C
Share transactions (811,799) $ (6,334,577) (2,985,375) $ (23,174,490)
Net change resulting
from
share transactions (5,684,202) $ (38,961,707) (19,010,536) $ (145,955,028)
</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 and Class C Shares. The Plan provides
that the Fund may incur distribution expenses according to the following
schedule annually, to compensate FSC.
PERCENTAGE OF AVERAGE
SHARE CLASS NAME DAILY NET ASSETS OF CLASS
Class B Shares 0.75%
Class C Shares 0.75%
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, 1997, were as follows:
PURCHASES $481,713,970
SALES $373,885,096
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
Matthew S. Hardin
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.
[Graphic]
Cusip 314182106
Cusip 314182205
Cusip 314182304
8110105 (11/97)
[Graphic]
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES
A1. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 10/6/69
to 9/30/97. The "y" axis is measured in increments of $50,000 ranging from $0 to
$250,000 and indicates that the ending value of a hypothetical initial
investment of $28,000 in the fund's Class A Shares, assuming the reinvestment of
capital gains and dividends and the initial 4.50% sales charge, would have grown
to $217,224 on 9/30/97.
A2. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 10/6/69
to 9/30/97. The "y" axis is measured in increments of $20,000 ranging from $0 to
$120,000 and indicates that the ending value of hypothetical yearly investments
of $1,000 in the fund's Class A Shares, assuming the reinvestment of capital
gains and dividends, would have grown to $100,731 on 9/30/97.
A3. The graphic presentation here displayed consists of a boxed legend in the
upper left quadrant indicating the components of the corresponding mountain
chart. The color coded mountain chart is a visual representation of the
narrative text above it. The "x" axis reflects computation periods from 9/30/87
to 9/30/97. The "y" axis is measured in increments of $40,000 ranging from $0 to
$240,000 and indicates that the ending value of a hypothetical initial
investment of $100,000 in the fund's Class A Shares, assuming the reinvestment
of capital gains and dividends, would have grown to $204,666 on 9/30/97.
