PRESIDENT'S MESSAGE
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders of Federated U.S.
Government Securities Fund: 1-3 Years. The report covers the six-month reporting
period ended August 31, 1997, and includes an investment review by the fund's
portfolio manager, a complete list of portfolio investments, and the financial
statements.
This mutual fund is designed to pursue current income with limited principal
risk through a portfolio of shorter-maturity government securities. At the end
of the reporting period, the portfolio was invested in U.S. Treasury notes.
During the reporting period, the fund's Institutional Shares paid income
totaling $0.28 per share and Institutional Service Shares paid income totaling
$0.27 per share. The fund's share price of each share class increased by $0.04.
Total return for the reporting period was 3.15% for Institutional Shares and
3.02% for Institutional Service Shares.* Total net
assets reached $663.8 million on August 31, 1997.
Thank you for participating in the income opportunities of short-term
government securities through Federated U.S. Government Securities Fund: 1-3
Years. We welcome your comments and questions.
Sincerely,
[Graphic]
Glen R. Johnson
President
October 15, 1997
* 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.
INVESTMENT REVIEW
Federated U.S. Government Securities Fund: 1-3 Years represents a fully-invested
participation in those obligations of the U.S. Treasury and certain government
agencies which have a maximum maturity of 3 1/2 years and an average maturity of
1 1/2 to 2 years. Since the fund's February 28, 1997 fiscal year end, the fund
has remained fully invested in U.S. Treasury securities. Standard & Poor's has
maintained the fund's "AAAf" credit rating.*
During the first half of the fund's semi-annual reporting period, fixed income
performance reflected stronger economic growth combined with subdued inflation.
After remaining on hold for over a year and citing persisting strength in demand
as increasing the risk of inflationary imbalances, the Federal Reserve Board
(the "Fed") increased the federal funds target rate from 5.25% to 5.50% near the
end of March 1997. This was the first tightening of monetary policy in over two
years. The 2-year Treasury note yield increased from 6.09% at the end of
February 1997 to 6.54% near the end of April 1997 as the short to intermediate
portion of the yield curve transitioned from pricing in a status quo to a more
restrictive Fed monetary policy.
U.S. Treasury yields declined during the second half of the fund's reporting
period, more than offsetting the preceding interest rate rise. Although the
economy continued to grow at an above-trend rate, economic growth slowed from
the 4.9% rate during the first quarter of 1997, to 3.3% in the second quarter of
1997, due to a decline in consumer demand. Consumer prices increased at only a
1.6% annual rate through August 1997, year to date. Slower economic growth
combined with continued benign inflation allowed the Fed's monetary policy to
remain status quo, and as market expectations shifted from a tighter monetary
policy back to one on hold, the 2-year Treasury note yield declined to 5.96% at
the end of August 1997. Recently, the front end of the yield curve has traded
within a narrow range given that Fed monetary policy should remain on hold in
the near term. The fund's average maturity/duration has been managed within its
neutral range and was 1.7/1.6 years at the end of August 1997.
The fund's net total return for the six months ended August 31, 1997, was 3.15%
and 3.02%** for Institutional Shares and Institutional Service Shares,
respectively, compared to 3.12% for the Merrill Lynch 1-Year Treasury Index and
3.40% for the Merrill Lynch 2-Year Treasury Index.+
* "AAAf" rated fund 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 Merrill Lynch 1-Year Treasury Index is an unmanaged index tracking
1-year U.S. government securities. The Merrill Lynch 2-Year Treasury Index
is an unmanaged index tracking 2-year U.S. government securities. Both
indices are produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.
Investments cannot be made in an index.
PORTFOLIO OF INVESTMENTS
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-INTERMEDIATE TERM OBLIGATIONS--98.5%
U.S. TREASURY NOTES--98.5%
$ 5,000,000 6.125%, 3/31/1998 $ 5,016,950
5,000,000 7.875%, 4/15/1998 5,069,000
33,000,000 6.250%, 7/31/1998 33,161,700
35,000,000 6.125%, 8/31/1998 35,133,000
67,260,000 6.000%, 9/30/1998 67,428,150
20,000,000 4.750%, 10/31/1998 19,760,600
50,000,000 5.500%, 11/15/1998 49,805,000
30,000,000 5.625%, 11/30/1998 29,928,600
15,000,000 5.750%, 12/31/1998 14,984,700
20,000,000 5.000%, 2/15/1999 19,760,200
43,000,000 6.250%, 3/31/1999 43,226,180
38,270,000 6.375%, 4/30/1999 38,542,865
25,000,000 6.250%, 5/31/1999 25,128,750
20,000,000 6.750%, 5/31/1999 20,266,400
20,000,000 6.875%, 7/31/1999 20,326,600
15,000,000 6.000%, 8/15/1999 15,009,450
15,000,000 7.125%, 9/30/1999 15,335,700
25,000,000 7.500%, 10/31/1999 25,752,250
90,000,000 5.875%, 11/15/1999 89,766,900
15,000,000 7.750%, 11/30/1999 15,539,250
25,000,000 5.875%, 2/15/2000 24,909,000
15,000,000 6.375%, 5/15/2000 15,114,750
25,000,000 6.000%, 8/15/2000 24,952,750
Total Short-Intermediate Term Obligations(identified cost $652,695,042) 653,918,745
(A)REPURCHASE AGREEMENT--0.2%
1,575,000 BT Securities Corp., 5.580%, dated 8/29/1997,
due 9/2/1997 (at amortized cost) 1,575,000
Total Investments (identified cost $654,270,042)(b) $ 655,493,745
</TABLE>
(a) The repurchase agreement is fully collateralized by U.S. Treasury
obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(b) The cost of investments for federal tax purposes amounts to $654,270,042.
The net unrealized appreciation of investments on a federal tax basis
amounts to $1,223,703 which is comprised of $1,909,697 appreciation and
$685,994 depreciation at August 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($663,792,416) at August 31, 1997.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value
(identified and tax cost $654,270,042) $ 655,493,745
Income receivable 11,204,835
Receivable for shares sold 428,630
Total assets 667,127,210
LIABILITIES:
Payable for shares redeemed $ 16,572
Income distribution payable 2,986,932
Payable to Bank 227,273
Accrued expenses 104,017
Total liabilities 3,334,794
NET ASSETS for 64,100,965 shares outstanding $ 663,792,416
NET ASSETS CONSIST OF:
Paid in capital $ 744,108,950
Net unrealized appreciation of investments 1,223,703
Accumulated net realized loss on investments (81,540,237)
Total Net Assets $ 663,792,416
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$634,477,908 / 61,270,075 shares outstanding $10.36
INSTITUTIONAL SERVICE SHARES:
$29,314,508 / 2,830,890 shares outstanding $10.36
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
SIX MONTHS ENDED AUGUST 31, 1997 (UNAUDITED)
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 21,448,964
EXPENSES:
Investment advisory fee $ 1,446,499
Administrative personnel and services fee 273,027
Custodian fees 16,893
Transfer and dividend disbursing agent fees and expenses 109,738
Directors'/Trustees' fees 11,011
Auditing fees 8,709
Legal fees 4,875
Portfolio accounting fees 60,326
Distribution services fee--Institutional Service Shares 36,484
Shareholder services fee--Institutional Shares 867,578
Shareholder services fee--Institutional Service Shares 36,484
Share registration costs 20,078
Printing and postage 10,024
Insurance premiums 5,269
Taxes 57
Miscellaneous 5,810
Total expenses 2,912,862
Waivers --
Waiver of investment advisory fee $ (4,028) Waiver of distribution services
fee--Institutional Service Shares (35,024) Waiver of shareholder services
fee--Institutional Shares (867,578) Waiver of shareholder services
fee--Institutional Service Shares (1,459)
Total waivers (908,089)
Net expenses 2,004,773
Net investment income 19,444,191
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 326,448
Net change in unrealized appreciation of investments 1,982,630
Net realized and unrealized gain on investments 2,309,078
Change in net assets resulting from operations $ 21,753,269
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
(UNAUDITED) FEBRUARY 28,
AUGUST 31, 1997 1997
<S>
<C>
<C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 19,444,191 $ 38,315,986
Net realized gain (loss) on investments ($326,448 and
$2,407,185 net gains, respectively, as computed for
federal tax purposes) 326,448 2,407,185
Net change in unrealized appreciation/depreciation 1,982,630 (6,065,113)
Change in net assets resulting from operations 21,753,269 34,658,058
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (18,698,165) (36,995,327)
Institutional Service Shares (746,026) (1,320,659)
Change in net assets resulting from distributions
to shareholders (19,444,191) (38,315,986)
SHARE TRANSACTIONS--
Proceeds from sale of shares 155,483,190 322,523,461
Net asset value of shares issued to shareholders in
payment of distributions declared 8,102,615 17,987,684
Cost of shares redeemed (232,781,860) (330,297,708)
Change in net assets resulting from share
transactions (69,196,055) 10,213,437
Change in net assets (66,886,977) 6,555,509
NET ASSETS:
Beginning of period 730,679,393 724,123,884
End of period $ 663,792,416 $ 730,679,393
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28, OR 29,
1997 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.32 $10.38 $10.25 $10.46 $10.53 $10.34
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.28 0.54 0.61 0.52 0.37 0.48
Net realized and unrealized gain (loss)
on investments 0.04 (0.06) 0.13 (0.21) (0.07) 0.19
Total from investment operations 0.32 0.48 0.74 0.31 0.30 0.67
LESS DISTRIBUTIONS
Distributions from net investment income (0.28) (0.54) (0.61) (0.52) (0.37) (0.48)
NET ASSET VALUE, END OF PERIOD $10.36 $10.32 $10.38 $10.25 $10.46 $10.53
TOTAL RETURN(A) 3.15% 4.78% 7.41% 3.14% 2.93% 6.64%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.54%* 0.54% 0.54% 0.54% 0.51% 0.49%
Net investment income 5.39%* 5.26% 5.91% 5.06% 3.56% 4.63%
Expense waiver/reimbursement(b) 0.25%* 0.27% 0.26% 0.02% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $634,478 $701,498 $697,692 $687,037 $858,556 $1,034,374
Portfolio turnover 55% 145% 142% 265% 150% 132%
</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)
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28, OR 29,
1997 1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.32 $10.38 $10.25 $10.46 $10.53 $10.37
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.27 0.52 0.59 0.50 0.35 0.34
Net realized and unrealized gain (loss) on
investments 0.04 (0.06) 0.13 (0.21 (0.07) 0.16
Total from investment operations 0.31 0.46 0.72 0.29 0.28 0.50
LESS DISTRIBUTIONS
Distributions from net investment income (0.27) (0.52) (0.59) (0.50) (0.35) (0.34)
NET ASSET VALUE, END OF PERIOD $10.36 $10.32 $10.38 $10.25 $10.46 $10.53
TOTAL RETURN(B) 3.02% 4.52% 7.14% 2.88% 2.68% 4.28%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.79%* 0.79% 0.79% 0.79% 0.76% 0.74%*
Net investment income 5.14%* 5.01% 5.68% 4.76% 3.33% 4.14%*
Expense waiver/reimbursement(c) 0.25%* 0.27% 0.26% 0.25% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $29,315 $29,181 $26,432 $29,208 $39,905 $72,722
Portfolio turnover 55% 145% 142% 265% 150% 132%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from May 29, 1992 (date of initial public
investment) to February 28, 1993.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) 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)
NOTES TO FINANCIAL STATEMENTS
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
AUGUST 31, 1997 (UNAUDITED)
ORGANIZATION
Federated U.S. Government Securities Fund: 1-3 Years (the "Trust") is
registered under the Investment Company Act of 1940, as amended (the "Act"),
as a diversified, open-end management investment company. The Trust offers
two classes of shares: Institutional Shares and Institutional Service
Shares. The investment objective of the Trust is to provide current income.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Trust 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 Trust 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 Trust 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 Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/ dealers, which are deemed by
the Trust's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Trust 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 Trust'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 February 28, 1997, the Trust, for federal tax purposes, had a capital loss
carryforward of $81,866,685, which will reduce the Trust'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 Trust of any
liability for federal tax. Pursuant to the Code, such capital loss carryforward
will expire as follows:
EXPIRATION YEAR EXPIRATION AMOUNT
1998 $65,200,181
2003 16,666,504
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Trust may engage in when-issued or delayed delivery transactions. The Trust
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.
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.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 13,956,198 $ 143,902,476 29,434,341 $ 303,822,056
Shares issued to shareholders in
payment of distributions declared 731,564 7,552,187 1,630,031 16,817,409
Shares redeemed (21,365,099) (220,696,046) (30,345,659) (313,337,852)
Net change resulting from
Institutional Share transactions (6,677,337) $ (69,241,383) 718,713 $ 7,301,613
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1997 FEBRUARY 28, 1997
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,122,880 $ 11,580,714 1,810,402 $ 18,701,405
Shares issued to shareholders in
payment of distributions declared 53,324 550,428 113,428 1,170,275
Shares redeemed (1,171,825) (12,085,814) (1,644,276) (16,959,856)
Net change resulting from
Institutional Service Share transactions 4,379 $45,328 279,554 $ 2,911,824
Net change resulting from share transactions (6,672,958) $ (69,196,055) 998,267 $ 10,213,437
</TABLE>
INVESTMENT ADVISORY FEE AND
OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Trust's investment adviser (the "Adviser"), receives
for its services an annual investment advisory fee equal to 0.40% of the Trust's
average daily net assets. 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 Trust 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 Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Trust will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Trust to finance activities intended to result in the sale of the Trust's
Institutional Service Shares. The Plan provides that the Trust may incur
distribution expenses up to 0.25% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC. FSC may voluntarily
choose to waive any portion of its fee. FSC can modify or terminate this
voluntary waiver at any time at its sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Trust will pay FSS up to 0.25% of average daily net assets
of the Trust 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. For the period ended
August 31, 1997, Institutional Shares fully waived its shareholder services fee.
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 Trust. 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 Trust's accounting records for which it receives a fee. The
fee is based on the level of the Trust's average daily net assets for the
period, plus out-of-pocket expenses.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1997, were as follows:
PURCHASES $386,734,435
SALES $453,449,217
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
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
Glen R. Johnson
President
J. Christopher Donahue
Executive Vice President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
Karen M. Brownlee
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 risk, including possible
loss of principal. This report is authorized for distribution to prospective
investors only when preceded or accompanied by the trust's prospectus which
contains facts concerning its objective and policies, management fees, expenses
and other information.
[Graphic]
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
AUGUST 31, 1997
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 31428M100
Cusip 31428M209
G01436-01 (10/97)
[Graphic]
