FEDERATED U S GOVERNMENT SECURITIES FUND 1-3 YEARS, 485BPOS, 1999-04-26

FEDERATED U S GOVERNMENT SECURITIES FUND 1-3 YEARS
485BPOS, 1999-04-26

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1933 Act File No. 2-89028
1940 Act File No. 811-3947

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
------

Pre-Effective Amendment No. ________.....................

Post-Effective Amendment No. ___32___..................... X
----- ------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. __23 __ .........................................X
--- - ------

FEDERATED U.S. GOVERNMENT SECURITES FUND: 1-3 YEARS

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds

5800 Corporate Drive

Pittsburgh, Pennsylvania 15237-7000

(Address of Principal Executive Offices)

(412) 288-1900

(Registrant's Telephone Number)

John W. McGonigle, Esquire

Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, Pennsylvania 15222-3779

(Name and Address of Agent for Service)

(Notices should be sent to the Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
__ on _APRIL 30, 1999_ pursuant to paragraph (b)

60 days after filing pursuant to paragraph (a) (i) on ________________
pursuant to paragraph (a) (i) 75 days after filing pursuant to paragraph
(a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies to:

Matthew G. Maloney, Esquire
Dickstein, Shapiro, Morin & Oshinsky, LLP

2101 L Street, N.W.
Washington, D.C. 20037

PROSPECTUS

Federated U.S. Government Securities Fund:
1-3 Years

INSTITUTIONAL SHARES

A mutual fund seeking current income by investing in a portfolio of short-term
U.S. government securities.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

APRIL 30, 1999

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which the

Fund Invests? 5

What are the Specific Risks of Investing in the Fund? 5

What Do Shares Cost? 6

How is the Fund Sold? 6

How to Purchase Shares 6

How to Redeem Shares 7

Account and Share Information 9

Who Manages the Fund? 10

Financial Information 11

Report of Ernst & Young LLP, Independent Auditors 21

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide current income. While there is no
assurance that the Fund will achieve its investment objective, it endeavors to
do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests in a diversified, short-term portfolio of direct obligations of
the U.S. government, its agencies and instrumentalities. The Fund maintains a
dollar weighted average portfolio duration that is within 20 percent of the
weighted average portfolio duration of the Merrill Lynch 1-3 Year Treasury
Index. This index includes U.S. Treasury securities with maturities greater than
or equal to one year and less than three years.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factor that may reduce the Fund's returns
is changes in prevailing interest rates. An increase in interest rates may
result in a decrease in the value of Fund Shares.

The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or 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.

RISK/RETURN BAR CHART AND TABLE

[Graphic]

The bar chart shows the variability of the Fund's Institutional Shares total
returns on a calendar year-end basis.

The Fund's Institutional Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon net asset value.

The Fund's Institutional Shares total return from January 1, 1999 to March 31,
1999, was 0.45%.

Within the period shown in the Chart, the Fund's Institutional Shares highest
quarterly return was 4.56% (quarter ended June 30, 1989). Its lowest quarterly
return was (0.35%) (quarter ended March 31, 1994).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Institutional Shares Average Annual
Total Returns for the calendar periods ended December 31, 1998.

CALENDAR PERIOD FUND ML13YTI LSUSGFA
1 Year 6.40% 5.78% 5.82%
5 Years 5.42% 5.97% 5.04%
10 Years 6.66% 7.27% 6.56%

The table shows the Fund's Institutional Shares total returns averaged over a
period of years relative to the Merrill Lynch 1-3 Year Treasury Index (ML13YTI),
a broad-based market index and the Lipper Short U.S. Government Funds Average
(LSUSGFA), an average of funds with similar investment objectives. Indexes are
unmanaged, and it is not possible to invest directly in an index.

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.

What are the Fund's Fees and Expenses?

FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund's Institutional Shares.

<TABLE>
<Caption

SHAREHOLDER FEES

<S> <C>
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or
redemption proceeds, as applicable) None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other Distributions)
(as a percentage of offering price) None
Redemption Fee (as a percentage of amount
redeemed, if applicable) None
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 Expenses That are Deducted
From Fund Assets (as a percentage of average net assets)

Management Fee 2 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 3 0.25%
Other Expenses 0.16%
Total Annual Fund Operating Expenses 0.81%

1 Although not contractually obligated to do so, the adviser and shareholder
services provider waived certain amounts. These are shown below along with the
net expenses the Fund actually paid for the fiscal year ended February 28, 1999.

Total Waiver of Fund Expenses 0.27%
Total Actual Annual Fund Operating Expenses (after waivers) 0.54%

2 The adviser voluntary waived a portion of the management fee. The adviser can
terminate this voluntary waiver at any time. The management fee paid by the Fund
(after the voluntary waiver) was 0.38% for the fiscal year ended February 28,
1999.

3 The shareholder services fee for the Fund's Institutional Shares has been
voluntarily reduced. This voluntary reduction can be terminated at any time. The
shareholder services fee paid by the Fund (after the voluntary reduction) was
0.00% for the fiscal year ended February 28, 1999.

</TABLE>

EXAMPLE

The following Example is intended to help you compare the cost of investing in
the Fund's Institutional Shares with the cost of investing in other mutual
funds.

The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS as shown in the Table and remain the same. Although your actual costs
may be higher or lower, based on these assumptions your costs would be:

1 Year $ 83
3 Years $ 259
5 Years $ 450
10 Years $ 1,002

What are the Fund's Investment Strategies?

The Fund invests in a portfolio of direct obligations of the U.S. government,
its agencies and instrumentalities. The Fund's adviser actively manages its
portfolio, seeking to limit the interest rate risk taken by the Fund while
selecting investments that should offer enhanced returns based upon the
adviser's interest rate outlook.

The adviser manages the Fund's interest rate risk by limiting the
dollar-weighted average duration of its portfolio securities. "Duration"
measures the sensitivity of a security's price to changes in interest rates. The
greater a portfolio's average duration, the greater the change in the
portfolio's value in response to a change in market interest rates. As a matter
of investment policy, under normal market conditions, the adviser limits the
average duration of the portfolio to within 20% of the duration of the Merrill
Lynch 1-3 Year Treasury Index (the "Index"). This Index includes all U.S.
Treasury notes and bonds with maturities of one year or greater and less than
three years. This policy should prevent the volatility of the Fund's share price
from significantly exceeding the average volatility of short-term U.S. Treasury
securities.

The adviser uses three principal methods to enhance the portfolio's returns as
compared to the Index. First, the adviser tries to extend the portfolio's
average duration when it expects interest rates to fall and shorten the duration
when it expects interest rates to rise. This method seeks to enhance the returns
from favorable interest rate changes and reduce the effect of unfavorable
changes.

Second, in constructing a portfolio with a targeted average duration, the
adviser tries to combine individual portfolio securities with different
durations to take advantage of relative changes in interest rates. Relative
changes in interest rates may occur whenever longer-term interest rates move
more, less or in a different direction than shorter-term interest rates. As a
general matter, the adviser typically structures the portfolio in one of three
ways:

* A "bulleted" portfolio structure consists primarily of securities with
durations close to the portfolio's average duration. The adviser may use this
structure, for example, when it expects the difference between longer-term and
shorter-term interest rates to increase.

* A "barbelled" portfolio structure consists primarily of securities with
durations above and below the average duration. The adviser may use this
structure, for example, when it expects the difference between longer-term and
shorter-term interest rates to decrease.

* A "laddered" portfolio structure consists of securities with durations above,
below, and at the average duration. The adviser may use this structure, for
example, when it expects longer-term and shorter-term interest rates to change
by approximately the same amount.

Third, the adviser tries to obtain securities issued by agencies and
instrumentalities of the U.S. that it expects to provide better returns than
U.S. Treasury securities of comparable duration. The adviser generally uses
ongoing relative value analysis to compare current yield differences of
securities to their historical and expected yield differences.

The adviser's interest rate outlook is the most important factor in selecting
the methods used to manage the Fund's portfolio. The adviser formulates its
interest rate outlook by analyzing a variety of factors such as:

* current and expected U.S. economic growth;

* current and expected interest rates and inflation;

* the Federal Reserve Board's monetary policy; and

* changes in the supply of or demand for U.S. government securities.

In selecting individual securities, the adviser analyzes how the security should
perform in response to expected interest rate changes as compared to other
securities of comparable risk.

As a consequence of this strategy, most of the Fund's portfolio consists of
securities paying interest exempt from state taxation. The Fund also invests in
repurchase agreements for U.S. government securities. Although repurchase
agreements are collateralized by the same types of securities in which the Fund
invests, income from repurchase agreements is not exempt from state taxation.
The Fund uses repurchase agreements to invest cash balances and shorten
duration, so the amount of state taxable income may vary with market conditions.
See "Tax Information" for an explanation of how your investment in the Fund may
be taxed.

PORTFOLIO TURNOVER

The Fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the Fund to have an increased
portfolio turnover rate, which is likely to generate shorter-term gains (losses)
for its shareholders, which are taxed at a higher rate than longer-term gains
(losses). Actively trading portfolio securities increases the Fund's trading
costs and may have an adverse impact on the Fund's performance.

What are the Principal Securities in Which the Fund Invests?

The Fund invests in the following types of U.S. government securities:

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (GSE).

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged. Due to the Fund's average duration policy, it is expected to
have less interest rate risk than Federated U.S. Government Securities Fund: 2-5
Years, Federated U.S. Government Securities Fund: 5-10 Years, or Federated U.S.
Government Bond Fund, all of which have longer average durations than the Fund.

What Do Shares Cost?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. When the Fund receives your transaction request in proper form, it is
processed at the next calculated net asset value (NAV).

The Fund does not charge a front-end sales charge. NAV is determined at the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.

The Fund's Distributor markets the Shares described in this prospectus to
institutions acting in an agency or fiduciary capacity or to individuals
directly or through investment professionals.

The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

* Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the next calculated NAV if the investment professional forwards the order to the
Fund on the same day and the Fund receives payment within one business day. You
will become the owner of Shares and receive dividends when the Fund receives
your payment.

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

BY AUTOMATED CLEARING HOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

How to Redeem Shares

You should redeem Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional.

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time), you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed; and

* signatures of all Shareholders exactly as registered.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days; or

* a redemption is payable to someone other than the shareholder(s) of
record.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you
will receive periodic statements reporting all account activity, including
dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a capital gain distribution,
you will pay the full price for the Shares and then receive a portion of the
price back in the form of a taxable distribution, whether or not you reinvest
the distribution in Shares. Therefore, you should consider the tax implications
of purchasing Shares shortly before the Fund declares a capital gain. Contact
your investment professional or the Fund for information concerning when
dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, non- retirement
accounts may be closed if redemptions cause the account balance to fall below
the minimum initial investment amount. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.

Who Manages the Fund?

The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which total approximately $111 billion in assets as
of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.

THE FUND'S PORTFOLIO MANAGERS ARE:

SUSAN M. NASON

Susan M. Nason has been the Fund's portfolio manager since September 1991.
She is Vice President of the Fund. Ms. Nason joined Federated in 1987 and
has been a Senior Portfolio Manager and Senior Vice President of the Fund's
Adviser since 1997. Ms. Nason served as a Portfolio Manager and Vice
President of the Adviser from 1993 to 1997. Ms. Nason is a Chartered
Financial Analyst and received her M.S.I.A. concentrating in Finance from
Carnegie Mellon University.

ROBERT J. OSTROWSKI

Robert J. Ostrowski has been the Fund's portfolio manager since
September 1997. Mr. Ostrowski joined Federated in 1987 as an Investment
Analyst and became a Portfolio Manager in 1990. He has been a Senior Vice
President of the Fund's Adviser since September 1997 and served as Vice
President of the Fund's Adviser from 1996 to 1997. Prior to that, Mr.
Ostrowski served as a Vice President of a Federated advisory subsidiary
from 1993 to 1996. Mr. Ostrowski is a Chartered Financial Analyst. He
received his M.S. in Industrial Administration from Carnegie Mellon
University.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999, or may experience other date-related problems. The Year 2000 problem may
cause systems to process information incorrectly and could disrupt businesses,
such as the Fund, that rely on computers.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

The following Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. Some of the information is presented
on a per share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in the Fund, assuming reinvestment of any
dividends and capital gains.

This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in this prospectus.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 21.

YEAR ENDED FEBRUARY 28 OR 29 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,

BEGINNING OF PERIOD $10.41 $10.32 $10.38 $10.25 $10.46
INCOME FROM
INVESTMENT OPERATIONS:

Net investment income 0.50 0.56 0.54 0.61 0.52
Net realized and
unrealized gain (loss)
on investments 0.03 0.09 (0.06) 0.13 (0.21)
Total from investment
operations 0.53 0.65 0.48 0.74 0.31
LESS DISTRIBUTIONS:

Distributions from net

investment income (0.50) (0.56) (0.54) (0.61) (0.52)
NET ASSET VALUE,
END OF PERIOD $10.44 $10.41 $10.32 $10.38 $10.25
TOTAL RETURN 1 5.19% 6.41% 4.78% 7.41% 3.14%

RATIOS TO AVERAGE
NET ASSETS:

Expenses 0.54% 0.54% 0.54% 0.54% 0.54%
Net investment income 4.78% 5.36% 5.26% 5.91% 5.06%
Expense
waiver/reimbursement 2 0.27% 0.26% 0.27% 0.26% 0.02%
SUPPLEMENTAL DATA:
Net assets,
end of period

(000 omitted) $591,317 $597,549 $701,498 $697,692 $687,037
Portfolio turnover 207% 118% 145% 142% 265%

</TABLE>

1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

2 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

Portfolio of Investments
February 28, 1999

<TABLE>

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>

U.S. TREASURY NOTES-79.6%

$ 49,100,000 5.500%, 3/31/2000 $ 49,344,518
35,000,000 6.375%, 5/15/2000 35,518,700
64,000,000 5.375%, 6/30/2000 64,227,840
35,000,000 6.125%, 7/31/2000 35,477,050
43,743,000 6.000%, 8/15/2000 44,274,040
62,000,000 4.000%, 10/31/2000 60,874,080
35,000,000 5.750%, 11/15/2000 35,336,350
14,000,000 4.625%, 12/31/2000 13,873,720
20,000,000 6.500%, 5/31/2001 20,553,800
16,000,000 6.625%, 7/31/2001 16,516,800
41,000,000 6.500%, 8/31/2001 42,243,530
34,500,000 5.875%, 11/30/2001 35,093,745
56,000,000 6.125%, 12/31/2001 57,329,440
TOTAL U.S. TREASURY NOTES

(IDENTIFIED COST $514,216,951) 510,663,613
U.S. GOVERNMENT AGENCIES-18.9%

FEDERAL HOME LOAN BANKS-15.8%

25,000,000 5.470%, 8/17/2000 25,050,750
15,000,000 4.565%, 10/16/2000 14,821,200
15,650,000 5.750%, 4/30/2001 15,759,081
42,000,000 5.500%, 8/13/2001 42,091,560
4,000,000 4.660%, 10/15/2001 3,927,000
TOTAL 101,649,591
STUDENT LOAN MARKETING ASSOCIATION-3.1%
19,875,000 5.570%, 3/17/2000 19,947,742
TOTAL U.S. GOVERNMENT AGENCIES
(IDENTIFIED COST $122,609,335) 121,597,333
REPURCHASE AGREEMENT-0.8% 1
4,945,000 Societe Generale, New York,

4.750%, dated 2/26/1999, due 3/1/1999

(at amortized cost) 4,945,000

TOTAL INVESTMENTS

(IDENTIFIED COST $641,771,286) 2 $ 637,205,946

</TABLE>

1 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.

2 The cost of investments for federal tax purposes amounts to $641,771,286. The
net unrealized depreciation of investments on a federal tax basis amounts to
$4,565,340 which is comprised of $300,589 appreciation and $4,865,929
depreciation at February 28, 1999.

Note: The categories of investments are shown as a percentage of net assets
($641,844,431) at February 28, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities
February 28, 1999

<TABLE>

ASSETS:

Total investments in securities,

at value (identified cost $641,771,286) $ 637,205,946
Income receivable 8,105,616
Receivable for shares sold 419,566
TOTAL ASSETS 645,731,128
LIABILITIES:

Payable for shares redeemed $2,950,013
Income distribution payable 844,025
Accrued expenses 92,659
TOTAL LIABILITIES 3,886,697
Net assets for 61,452,173
shares outstanding $ 641,844,431
NET ASSETS CONSIST OF:

Paid in capital $ 653,161,990
Net unrealized depreciation
of investments (4,565,340)
Accumulated net realized
loss on investments (6,753,405)
Undistributed net
investment income 1,186
TOTAL NET ASSETS $ 641,844,431
NET ASSET VALUE,
OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$591,317,462 / 56,614,486
shares outstanding $10.44
INSTITUTIONAL SERVICE SHARES:
$50,526,969 / 4,837,687
shares outstanding $10.44

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

Year Ended February 28, 1999

<TABLE>

<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 33,978,435
EXPENSES:

Investment advisory fee $ 2,552,771
Administrative personnel
and services fee 481,197
Custodian fees 35,338
Transfer and dividend
disbursing agent fees
and expenses 256,988
Directors'/Trustees'

fees 17,232
Auditing fees 17,340
Legal fees 5,079
Portfolio accounting
fees 122,318
Distribution services
fee-Institutional
Service Shares 112,256
Shareholder services
fee-Institutional Shares 1,479,210
Shareholder services
fee-Institutional
Service Shares 112,256
Share registration costs 37,379
Printing and postage 32,596
Insurance premiums 6,400
Miscellaneous 18,643
TOTAL EXPENSES 5,287,003
WAIVERS:

Waiver of investment

advisory fee $ (108,959)
Waiver of distribution
services fee-
Institutional Service
Shares (107,765)
Waiver of shareholder
services fee-
Institutional Shares (1,479,210)
Waiver of shareholder
services fee-
Institutional Service
Shares (4,491)
TOTAL WAIVERS (1,700,425)
Net expenses 3,586,578
Net investment income 30,391,857
REALIZED AND UNREALIZED
GAIN (LOSS) ON

INVESTMENTS:
Net realized gain on

investments 9,929,322
Net change in unrealized
depreciation of
investments (7,348,852)
Net realized and
unrealized gain on
investments 2,580,470
Change in net assets
resulting from
operations $ 32,972,327

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

YEAR ENDED FEBRUARY 28 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:

OPERATIONS:

Net investment income $ 30,391,857 $ 36,690,854
Net realized gain on
investments ($9,929,322
and $2,033,001 net gain,
respectively, as
computed for federal tax
purposes) 9,929,322 2,018,431
Net change in unrealized
appreciation/(depreciation) (7,348,852) 3,542,439
CHANGE IN NET ASSETS
RESULTING FROM

OPERATIONS 32,972,327 42,251,724
DISTRIBUTIONS TO

SHAREHOLDERS:

Distributions from net
investment income

Institutional Shares (28,386,588) (35,155,560)
Institutional Service
Shares (2,004,083) (1,535,294)
CHANGE IN NET ASSETS
RESULTING FROM

DISTRIBUTIONS

TO SHAREHOLDERS (30,390,671) (36,690,854)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 359,154,546 302,726,969
Net asset value of shares
issued to shareholders
in payment of
distributions declared 17,500,177 18,874,038
Cost of shares redeemed (368,571,763) (426,661,455)
CHANGE IN NET ASSETS
RESULTING FROM SHARE

TRANSACTIONS 8,082,960 (105,060,448)
Change in net assets 10,664,616 (99,499,578)
NET ASSETS:

Beginning of period 631,179,815 730,679,393
End of period (including
undistributed net
investment income of $1,186
and $0, respectively) $ 641,844,431 $ 631,179,815
</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

FEBRUARY 28, 1999

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.

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 the expiration of a portion of the
capital loss carryforward. The following reclassifications have been made to the
financial statements.

INCREASE /(DECREASE)
ACCUMULATED NET

PAID-IN CAPITAL REALIZED GAIN/LOSS
$1,653 $(1,653)

Net investment income, net realized gains/ losses and net assets were not
affected by this reclassification.

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, 1999, the Trust, for federal tax purposes, had a capital loss
carryforward of $6,731,871, 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 in
2003.

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:

YEAR ENDED FEBRUARY 28 1999 1998
INSTITUTIONAL SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 31,049,321 $ 325,475,379 27,005,133 $ 279,621,175
Shares issued to
shareholders in payment
of distributions
declared 1,503,698 15,751,832 1,693,644 17,556,139
Shares redeemed (33,364,976) (349,913,867) (39,219,746) (406,462,678)
NET CHANGE RESULTING
FROM INSTITUTIONAL SHARE

TRANSACTIONS (811,957) $ (8,686,656) (10,520,969) $ (109,285,364)

YEAR ENDED FEBRUARY 28 1999 1998
INSTITUTIONAL
SERVICE SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,218,485 $ 33,679,167 2,230,331 $ 23,105,794
Shares issued to
shareholders in payment
of distributions
declared 166,786 1,748,345 127,126 1,317,899
Shares redeemed (1,779,649) (18,657,896) (1,951,903) (20,198,777)
NET CHANGE RESULTING
FROM INSTITUTIONAL

SERVICE

SHARE TRANSACTIONS 1,605,622 $ 16,769,616 405,554 $ 4,224,916
NET CHANGE RESULTING
FROM SHARE TRANSACTIONS 793,665 $ 8,082,960 (10,115,415) $ (105,060,448)
</TABLE>

At February 28, 1999, capital paid-in aggregated $653,161,990.

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

Federated Investment Management Company, 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, Inc. 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 Company ("FSSC"), the Trust will pay FSSC up to 0.25% of average daily
net assets of the Trust for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC 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, 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 February 28, 1999, were as follows:

Purchases $ 1,306,569,153
Sales $ 1,293,822,206

YEAR 2000 (UNAUDITED)

Similar to other financial organizations, the Trust could be adversely affected
if the computer systems used by the Trust's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Trust's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Trust's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Trust.

Report of Ernst & Young LLP, Independent Auditors

TO THE TRUSTEES AND SHAREHOLDERS OF

FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated U.S. Government Securities Fund: 1-3
Years as of February 28, 1999, and the related statement of operations for the
year then ended, the statement of changes in net assets for each of the two
years in the period then ended and financial highlights for each of the five
years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust'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 audits 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 securities owned as of
February 28, 1999, by correspondence with the custodian and brokers. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated U.S. Government Securities Fund: 1-3 Years at February 28, 1999, and
the results of its operations for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and the financial
highlights for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.

[Graphic]

Boston, Massachusetts
April 19, 1999

[Graphic]

Federated U.S. Government
Securities Fund: 1-3 Years

INSTITUTIONAL SHARES

APRIL 30, 1999

A Statement of Additional Information (SAI) dated April 30, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Fund's annual and semi-annual reports to
shareholders as they become available. The annual report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the annual report
and other information without charge, and make inquiries, call your investment
professional or the Fund

at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

[Graphic]
Federated

Federated U.S. Government Securities Fund: 1-3 Years
Federated Investors Funds
5800 Corporate Drive

Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-3947
Cusip 31428M100

8032806A-IS (4/99)

[Graphic]

PROSPECTUS

Federated U.S. Government Securities Fund: 1-3 Years

INSTITUTIONAL SERVICE SHARES

A mutual fund seeking current income by investing in a portfolio of short-term
U.S. government securities.

APRIL 30, 1999

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which the

Fund Invests? 5

What are the Specific Risks of Investing in the Fund? 5

What Do Shares Cost? 6

How is the Fund Sold? 6

How to Purchase Shares 6

How to Redeem and Exchange Shares 8

Account and Share Information 10

Who Manages the Fund? 11

Financial Information 12

Report of Ernst & Young LLP, Independent Auditors 22

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

RISK/RETURN BAR CHART AND TABLE

[Graphic]

The bar chart shows the variability of the Fund's Institutional Service Shares
on a calendar year-end basis.

The Fund's Institutional Service Shares are not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.

The Fund's Institutional Service Shares total return from January 1, 1999 to
March 31, 1999, was 0.39%.

Within the period shown in the Chart, the Fund's Institutional Service Shares
highest quarterly return was 2.97% (quarter ended March 31, 1995). Its lowest
quarterly return was (0.41%) (quarter ended March 31, 1994).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Institutional Service Shares Average
Annual Total Returns for the calendar period ended December 31, 1998.

CALENDAR PERIOD FUND ML13YTI LSUSGFA
1 Year 6.14% 5.78% 5.82%
5 Years 5.16% 5.97% 5.04%
Start of Performance 1 5.06% 6.02% 5.15%

The table shows the Fund's Institutional Service Shares total returns averaged
over a period of years relative to the Merrill Lynch 1-3 Year Treasury Index
(ML13YTI), a broad-based market index and the Lipper Short U.S. Government Funds
Average (LSUSGFA), an average of funds with similar investment objectives.
Indexes are unmanaged, and it is not possible to invest directly in an index.

1 The Fund's Institutional Service Shares start of performance date was May 30,
1992.

What are the Fund's Fees and Expenses?

FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund's Institutional Service Shares.

<TABLE>

SHAREHOLDER FEES

<S> <C>

Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a

percentage of offering price) None Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or redemption proceeds, as applicable)
None Maximum Sales Charge (Load) Imposed on

Reinvested Dividends (and other Distributions)

(as a percentage of offering price) None

Redemption Fee (as a percentage of amount

redeemed, if applicable) None

Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1

<S> <C>

Expenses That are Deducted From Fund
Assets (as a percentage of average net assets)

Management Fee 2 0.40%
Distribution (12b-1) Fee 3 0.25%
Shareholder Services Fee 4 0.25%
Other Expenses 0.16%
Total Annual Fund
Operating Expenses 1.06%

1 Although not contractually obligated to do so, the adviser, distributor, and
shareholder services provider waived certain amounts. These are shown below
along with the net expenses the Fund actually paid for the fiscal year ended
February 28, 1999.

Total Waiver of Fund Expenses 0.27%
Total Actual Annual Fund Operating Expenses (after waivers) 0.79%
2 The adviser voluntary waived a portion of the management fee. The adviser can
terminate this voluntary waiver at any time. The management fee paid by the Fund
(after the voluntary waiver) was 0.38% for the fiscal year ended February 28,
1999. 3 The distribution (12b-1) fee for the Fund's Institutional Service Shares
has been voluntarily reduced. This voluntary reduction can be terminted at any
time. The distribution (12b-1) fee paid by the Fund (after the voluntary
reduction) was 0.01% for the fiscal year ended February 28, 1999. 4 The
shareholder services fee for the Fund's Institutional Service Shares has been
voluntarily reduced. This voluntary reduction can be terminated at any time. The
shareholder services fee paid by the Fund (after the voluntary reduction) was
0.24% for the fiscal year ended February 28, 1999.

</TABLE>

EXAMPLE

The following Example is intended to help you compare the cost of investing in
the Fund's Insitutional Service Shares with the cost of investing in other
mutual funds.

The Example assumes that you invest $10,000 in the Fund's Insitutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses are BEFORE WAIVERS as
shown in the Table and remain the same. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:

1 Year $ 108
3 Years $ 337
5 Years $ 585
10 Years $ 1,294

What are the Fund's Investment Strategies?

* A "laddered" portfolio structure consists of securities with durations above,
below, and at the average duration. The adviser may use this structure, for
example, when it expects longer term and shorter term interest rates to change
by approximately the same amount.

* current and expected U.S. economic growth;

* current and expected interest rates and inflation;

* the Federal Reserve Board's monetary policy; and

* changes in the supply of or demand for U.S. government securities.

In selecting individual securities, the adviser analyzes how the security should
perform in response to expected interest rate changes as compared to other
securities of comparable risk.

PORTFOLIO TURNOVER

The fund actively trades its portfolio securities in an attempt to achieve its
investment objective. Active trading will cause the Fund to have an increased
portfolio turnover rate, which is likely to generate shorter term gains (losses)
for its shareholders, which are taxed at a higher rate than longer term gains
(losses). Actively trading portfolio securities increases the Fund's trading
costs and may have an adverse impact on the Fund's performance.

What are the Principal Securities in Which the Fund Invests?

The Fund invests in the following types of U.S. government securities:

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (GSE).

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to changes in
the interest rate paid by similar securities. However, market factors, such
as the demand for particular fixed income securities, may cause the price
of certain fixed income securities to fall while the prices of other
securities rise or remain unchanged. Due to the Fund's average duration
policy, it is expected to have less interest rate risk than Federated
U.S. Government Securities Fund: 2-5 Years, Federated U.S. Government
Securities Fund: 5-10 Years, or Federated U.S. Government Bond Fund, all of
which have longer average durations than the Fund.

What Do Shares Cost?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form,
it is processed at the next calculated net asset value (NAV).

The Fund does not charge a front-end sales charge. NAV is determined at the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Service Shares. Each share class
has different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.

The Fund's Distributor markets the Shares described in this prospectus to retail
and private banking customers of financial institutions or individuals, directly
or through investment professionals.

When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Institutional Service Shares. Because these
Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees.

How to Purchase Shares

You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company

Boston, MA

Dollar Amount of Wire

ABA Number 011000028

Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number

Nominee/Institution Name

Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The
redemption amount you will receive is based upon the next calculated NAV after
the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.

BY MAIL

You may redeem or exchange Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed or exchanged;

* signatures of all Shareholders exactly as registered; and

* IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days;

* a redemption is payable to someone other than the shareholder(s) of
record; or

* IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.

PAYMENT METHODS FOR REDEMPTIONS

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

EXCHANGE PRIVILEGES

You may exchange Shares of the Fund into Shares of the same class of another
Federated Fund. To do this, you must:

* ensure that the account registrations are identical;

* meet any minimum initial investment requirements; and

* receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

The Fund no longer issues share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption or exchange request. For
your protection, send your certificates by registered or certified mail, but do
not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges. In
addition, you will receive periodic statements reporting all account activity,
including dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, non- retirement
accounts may be closed if redemptions or exchanges cause the account balance to
fall below the minimum initial investment amount. Before an account is closed,
you will be notified and allowed 30 days to purchase additional Shares to meet
the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state, and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be primarily dividends. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.

Who Manages the Fund?

THE FUND'S PORTFOLIO MANAGERS ARE:

SUSAN M. NASON

ROBERT J. OSTROWSKI

ADVISORY FEES

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

This information has been audited by Ernst & Young LLP, whose report, along with
the Fund's audited financial statements, is included in this prospectus.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 22.

YEAR ENDED FEBRUARY 28 OR 29 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,

BEGINNING OF PERIOD $10.41 $10.32 $10.38 $10.25 $10.46
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income 0.47 0.53 0.52 0.59 0.50
Net realized and
unrealized gain (loss)
on investments 0.03 0.09 (0.06) 0.13 (0.21)
Total from investment
operations 0.50 0.62 0.46 0.72 0.29
LESS DISTRIBUTIONS:

Distributions from net

investment income (0.47) (0.53) (0.52) (0.59) (0.50)
NET ASSET VALUE, END OF

PERIOD $10.44 $10.41 $10.32 $10.38 $10.25
TOTAL RETURN 1 4.93% 6.15% 4.52% 7.14% 2.88%

RATIOS TO AVERAGE NET

ASSETS:

Expenses 0.79% 0.79% 0.79% 0.79% 0.79%
Net investment income 4.50% 5.11% 5.01% 5.68% 4.76%
Expense
waiver/reimbursement 2 0.27% 0.26% 0.27% 0.26% 0.25%
SUPPLEMENTAL DATA:
Net assets, end of period

(000 omitted) $50,527 $33,631 $29,181 $26,432 $29,208
Portfolio turnover 207% 118% 145% 142% 265%

</TABLE>

1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

2 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

Portfolio of Investments

FEBRUARY 28, 1999

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>

U.S. TREASURY NOTES-79.6%
$ 49,100,000 5.500%, 3/31/2000 $ 49,344,518
35,000,000 6.375%, 5/15/2000 35,518,700
64,000,000 5.375%, 6/30/2000 64,227,840
35,000,000 6.125%, 7/31/2000 35,477,050
43,743,000 6.000%, 8/15/2000 44,274,040
62,000,000 4.000%, 10/31/2000 60,874,080
35,000,000 5.750%, 11/15/2000 35,336,350
14,000,000 4.625%, 12/31/2000 13,873,720
20,000,000 6.500%, 5/31/2001 20,553,800
16,000,000 6.625%, 7/31/2001 16,516,800
41,000,000 6.500%, 8/31/2001 42,243,530
34,500,000 5.875%, 11/30/2001 35,093,745
56,000,000 6.125%, 12/31/2001 57,329,440
TOTAL U.S. TREASURY
NOTES (IDENTIFIED COST

$514,216,951) 510,663,613
U.S. GOVERNMENT

AGENCIES-18.9%
FEDERAL HOME LOAN BANKS-

15.8%

ASSOCIATION-3.1%

19,875,000 5.570%, 3/17/2000 19,947,742
TOTAL U.S. GOVERNMENT
AGENCIES (IDENTIFIED

COST $122,609,335) 121,597,333
REPURCHASE AGREEMENT-

0.8% 1

4,945,000 Societe Generale, New
York, 4.750%, dated
2/26/1999, due 3/1/1999

(at amortized cost) 4,945,000

TOTAL INVESTMENTS
(IDENTIFIED COST

$641,771,286) 2 $ 637,205,946

</TABLE>

Note: The categories of investments are shown as a percentage of net assets
($641,844,431) at February 28, 1999.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

FEBRUARY 28, 1999

<TABLE>

<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified cost
$641,771,286) $ 637,205,946
Income receivable 8,105,616
Receivable for shares
sold 419,566
TOTAL ASSETS 645,731,128
LIABILITIES:

Payable for shares
redeemed $2,950,013
Income distribution
payable 844,025
Accrued expenses 92,659

TOTAL LIABILITIES 3,886,697

Net assets for
61,452,173 shares

outstanding $ 641,844,431
NET ASSETS CONSIST OF:
Paid in capital $ 653,161,990
Net unrealized
depreciation of
investments (4,565,340)
Accumulated net realized
loss on investments (6,753,405)
Undistributed net
investment income 1,186
TOTAL NET ASSETS $ 641,844,431
NET ASSET VALUE,
OFFERING PRICE AND
REDEMPTION PROCEEDS PER

SHARE:
INSTITUTIONAL SHARES:

$591,317,462 /

56,614,486 shares

outstanding $10.44

INSTITUTIONAL SERVICE

SHARES:
$50,526,969 / 4,837,687

shares outstanding $10.44

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED FEBRUARY 28, 1999

<TABLE>

<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 33,978,435
EXPENSES:

Investment advisory fee $ 2,552,771
Administrative personnel
and services fee 481,197
Custodian fees 35,338
Transfer and dividend
disbursing agent fees
and expenses 256,988
Directors'/Trustees'

Waiver of investment

INVESTMENTS:
Net realized gain on

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

YEAR ENDED FEBRUARY 28 1999 1998
<S> <C> <C>
INCREASE (DECREASE) IN
NET ASSETS:

OPERATIONS:

OPERATIONS 32,972,327 42,251,724
DISTRIBUTIONS TO

SHAREHOLDERS:

Distributions from net
investment income

Institutional Shares (28,386,588) (35,155,560)
Institutional Service
Shares (2,004,083) (1,535,294)
CHANGE IN NET ASSETS
RESULTING FROM

DISTRIBUTIONS

TRANSACTIONS 8,082,960 (105,060,448)
Change in net assets 10,664,616 (99,499,578)
NET ASSETS:

Beginning of period 631,179,815 730,679,393
End of period (including
undistributed net
investment income of
$1,186

and $0, respectively) $ 641,844,431 $ 631,179,815

</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

FEBRUARY 28, 1999

ORGANIZATION

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

INCREASE/(DECREASE)

ACCUMULATED NET
PAID-IN CAPITAL REALIZED GAIN/LOSS
$1,653 $(1,653)

Net investment income, net realized gains/ losses and net assets were not
affected by this reclassification.

FEDERAL TAXES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

USE OF ESTIMATES

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:

TRANSACTIONS (811,957) $ (8,686,656) (10,520,969) $ (109,285,364)

YEAR ENDED FEBRUARY 28 1999 1998
INSTITUTIONAL SERVICE
SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 3,218,485 $ 33,679,167 2,230,331 $ 23,105,794
Shares issued to
shareholders in payment
of distributions
declared 166,786 1,748,345 127,126 1,317,899
Shares redeemed (1,779,649) (18,657,896) (1,951,903) (20,198,777)
NET CHANGE RESULTING
FROM INSTITUTIONAL

SERVICE

SHARE TRANSACTIONS 1,605,622 $ 16,769,616 405,554 $ 4,224,916
NET CHANGE RESULTING
FROM SHARE TRANSACTIONS 793,665 $ 8,082,960 (10,115,415) $ (105,060,448)

</TABLE>

At February 28, 1999, capital paid-in aggregated $653,161,990.

INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE

ADMINISTRATIVE FEE

DISTRIBUTION SERVICES FEE

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

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 February 28, 1999, were as follows:

Purchases $ 1,306,569,153
Sales $ 1,293,822,206

YEAR 2000 (UNAUDITED)

Report of Ernst & Young LLP, Independent Auditors

TO THE TRUSTEES AND SHAREHOLDERS OF
FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS:

[Graphic]

Boston, Massachusetts

April 19, 1999

Federated U.S. Government Securities Fund:
1-3 Years

INSTITUTIONAL SERVICE SHARES

APRIL 30, 1999

[Graphic]
Federated

Federated U.S. Government Securities Fund: 1-3 Years
Federated Investors Funds
5800 Corporate Drive

Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-3947

Cusip 31428M209

8032806A-SS (4/99)

[Graphic]

STATEMENT OF ADDITIONAL INFORMATION

Federated U.S. Government Securities Fund:

1-3 Years

INSTITUTIONAL SHARES

INSTITUTIONAL SERVICE SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectuses for Institutional Shares and
Institutional Service Shares of Federated U.S. Government Securities Fund:
1-3 Years, dated April 30, 1999. Obtain the prospectuses without charge by
calling 1-800-341-7400.

APRIL 30, 1999

[Graphic]

FEDERATED

WORLD-CLASS INVESTMENT MANAGER
Federated U.S. Government Securities Fund:
Federated Investors Funds
5800 Corporate Drive

Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

8032806B (4/99)

[Graphic]

CONTENTS

How is the Fund Organized? 1

Investment Strategy 1

Securities in Which the Fund Invests 1

What Do Shares Cost? 3

How is the Fund Sold? 3

Subaccounting Services 4

Redemption in Kind 4

Massachusetts Partnership Law 4

Account and Share Information 5

Tax Information 5

Who Manages and Provides Services to the Fund? 6

How Does the Fund Measure Performance? 9

Who is Federated Investors, Inc.? 10

Addresses 12

How is the Fund Organized?

The Fund is a diversified open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on January 3,
1984.

The Board of Trustees (the Board) has established two classes of shares of the
Fund, known as Institutional Shares and Institutional Service Shares (Shares).
This SAI relates to all classes of the above-mentioned Shares. The Fund changed
its name from Federated Short-Intermediate Government Trust to Federated U.S.
Government Securities Fund: 1-3 Years on April 13, 1995. The Fund's investment
adviser is Federated Investment Management Company (Adviser). Effective March
31, 1999, Federated Management, Adviser to the Fund, merged into Federated
Investment Management Company (formerly Federated Advisers).

Investment Strategy

The Fund's dollar-weighted average portfolio maturity may not exceed three
years. Further, the Fund is required to maintain a minimum weighted average
portfolio maturity of one year. The Adviser manages the portfolio by targeting a
dollar-weighted average duration that is consistent with the Fund's maturity
constraints because duration is a more accurate and useful measure of interest
rate risk.

Duration is a measure of the average time to receipt of cash from a bond. The
only instance in which duration is equal to time-to-maturity is a zero coupon
bond; where all cash is received at maturity. In the case of a coupon bond, cash
is received at least annually or semi-annually. In the case of a coupon bond
with a three-year maturity, the average time to receipt of cash should be
between 1 and 3. The formula for duration places more weight on the dates when
cash flows are relatively large. Since in the case of the three-year coupon
bond, most of the cash is received at the end of year 3, the average time to
receipt of cash will be closer to 3 than to 1.

The Adviser selects securities used to lengthen or shorten the portfolio's
average duration by comparing the returns currently offered by different
investments to their historical and expected returns.

Securities in Which the Fund Invests

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the types of securities in which the Fund invests:

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States government supports some GSEs with its full faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few GSEs
have no explicit financial support, but are regarded as having implied support
because the federal government sponsors their activities. Agency securities are
generally regarded as having low credit risks, but not as low as treasury
securities.

ZERO COUPON SECURITIES

Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the market and credit risks of a zero coupon security.

There are many forms of zero coupon securities. Some are issued at a discount
and are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. Treasury STRIPs are the most
common forms of stripped zero coupon securities. In addition, some securities
give the issuer the option to deliver additional securities in place of cash
interest payments, thereby increasing the amount payable at maturity. These are
referred to as pay-in-kind or PIK securities

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks.

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when-issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its Shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Delayed delivery transactions also involve credit risks in
the event of a counterparty default.

ASSET COVERAGE

In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations without entering into or offsetting derivative contract or
terminating a special transaction. This may cause the Fund to miss favorable
trading opportunities or to realize losses on derivatives contracts or special
transactions.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest its assets in securities of affiliated money market funds as
an efficient means of carrying out its investment policies and managing its
uninvested cash.

INVESTMENT RISKS

There are many factors which may effect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to interest rate
changes in the interest rate paid by for similar securities. Generally, when
interest rates rise, prices of fixed income securities fall. However, market
factors, such as the demand for particular fixed income securities, may cause
the price of certain fixed income securities to fall while the prices of other
securities rise or remain unchanged.

CREDIT RISKS

Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.

CALL RISKS

Call risk is the possibility that an issuer may redeem a fixed income security
before maturity (a call) at a price below its current market price. An increase
in the likelihood of a call may reduce the security's price.

If a fixed income security is called, the Fund may have to reinvest the proceeds
in other fixed income securities with lower interest rates, higher credit risks
or other less favorable characteristics.

FUNDAMENTAL INVESTMENT POLICIES

The Fund will invest only in U.S. government securities with remaining
maturities of three and one half years or less.

U.S. government securities include: (1) A variety of U.S. Treasury
obligations, which differ only in their interest rates, maturities and
times of issuance: (a) U.S. Treasury bills which have a maturity of one
year or less and (b) U.S. Treasury notes which have remaining maturities of
one to three and one-half years; (2) Obligations issued or guaranteed by
U.S. government agencies and instrumentalities which are supported by any
of the following: (a) the full faith and credit of the U.S. Treasury (such
as Government National Mortgage Association pass-through and modified
participation certificates); (b) the right of the issuer to borrow an
amount limited to a specific line of credit from the U.S. Treasury; (c)
discretionary authority of the U.S. government to purchase obligations of
the U.S. government agency or instrumentality; or (d) the credit of the
instrumentality.

The Fund may enter into repurchase agreements, under which the Fund may acquire
U.S government securities subject to an obligation of the seller to repurchase
and the Fund to resell the instrument at a fixed price, time and interest
payment.

Portfolio transactions are undertaken principally to accomplish the Fund's
objective in relation to movement in the general level of interest rates and to
invest new money obtained from the sale of Fund Shares and to meet redemptions
of Fund Shares. The Fund is free to dispose of portfolio securities at any time
when changes in circumstances or conditions make such a move desirable in light
of the investment objective and policies heretofore stated.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on margin
but may obtain such short-term credits as may be necessary for clearance of
purchases and sales of securities.

BORROWING MONEY

The Fund will not borrow money except as a temporary measure for extraordinary
or emergency purposes and then only in amounts not in excess of 5% of the value
of its total assets or in an amount up to one-third of the value of its total
assets, including the amount borrowed, in order to meet redemption requests
without immediately selling portfolio securities. This borrowing provision is
not for investment leverage but solely to facilitate management of the portfolio
by enabling the Fund to meet redemption requests when the liquidation of
portfolio securities would be inconvenient or disadvantageous.

Interest paid on borrowed funds will not be available for investment. The Fund
will liquidate any such borrowings as soon as possible and may not purchase any
portfolio securities while the borrowings are outstanding.

PLEDGING ASSETS

The Fund will not mortgage, pledge or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge or hypothecate
assets having a market value not exceeding 10% of the value of total assets at
the time of the borrowing.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except that it may purchase or hold
U.S. government securities, including repurchase agreements, permitted by its
investment objective and policies.

The above limitations cannot be changed unless authorized by the "vote of a
majority of its outstanding voting securities," as defined by the Investment
Company Act.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.

The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the last fiscal year and has no present intent to do so
in the coming fiscal year.

As a matter of operating policy, the Fund will not purchase any securities while
borrowings in excess of 5% of its total assets are outstanding.

PORTFOLIO TURNOVER

The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover will be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. During the fiscal years ended February 28, 1999
and 1998, the portfolio turnover rates were 207% and 118%, respectively.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

* for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

* for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and

* for all other securities at fair value as determined in good faith by the
Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

What Do Shares Cost?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund. The NAV for each class of
Shares may differ due to the variance in daily net income realized by each
class. Such variance will reflect only accrued net income to which the
shareholders of a particular class are entitled.

How is the Fund Sold?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.) offers Shares on a continuous, best-efforts basis.

RULE 12B-1 PLAN (INSTITUTIONAL SERVICE SHARES)

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per Share expenses and provide
cash for orderly portfolio management and Share redemptions. In addition, the
Fund's service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing

distribution-related or shareholder services such as sponsoring sales, providing
sales literature, conducting training seminars for employees and engineering
sales-related computer software programs and systems. Also, investment
professionals may be paid cash or promotional incentives, such as reimbursement
of certain expenses relating to attendance at informational meetings about the
Fund or other special events at recreational-type facilities, or items of
material value. These payments will be based upon the amount of Shares the
investment professional sells or may sell and/or upon the type and nature of
sales or marketing support furnished by the investment professional.

Subaccounting Services

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial or similar capacity may charge or pass through sub-accounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

Redemption in Kind

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

Massachusetts Partnership Law

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Fund. To protect its
shareholders, the Fund has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Fund.

In the unlikely event a shareholder is held personally liable for the Fund's
obligations, the Fund is required by the Declaration of Fund to use its property
to protect or compensate the shareholder. On request, the Fund will defend any
claim made and pay any judgment against a shareholder for any act or obligation
of the Fund. Therefore, financial loss resulting from liability as a shareholder
will occur only if the Fund itself cannot meet its obligations to indemnify
shareholders and pay judgments against them.

Account and Share Information

VOTING RIGHTS

Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Fund have
equal voting rights, except that in matters affecting only a particular class,
only Shares of that class are entitled to vote.

Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares of
all series entitled to vote.

As of April 6, 1999, the following shareholders owned of record, beneficially,
or both, 5% or more of outstanding Shares: Charles Schwab & Co. Inc., San
Francisco, CA owned approximately 5,268,741 Shares (11.40%) of the outstanding
Institutional Shares; Sheldon & Co. National City Bank, Cleveland, OH owned
approximately 5,066,546 Shares (10.97%) of the outstanding Institutional Shares;
Thrift Plan for Employees of the Federal Reserve System, New York, NY owned
approximately 3,520,826 Shares (7.62%) of the outstanding Institutional Shares.

Tax Information

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

Who Manages and Provides Services to the Fund?

BOARD OF TRUSTEES

The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.

As of April 6, 1999, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Shares.

An asterisk (*) denotes a Trustee who is deemed to be an interested person
as defined in the Investment Company Act of 1940. The following symbol (#)
denotes a Member of the Board's Executive Committee, which handles the
Board's responsibilities between its meetings.

<TABLE>
<CAPTION>
NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
John F. Donahue*+ Chief Executive Officer and $0 $0 for the Fund and
Birth Date: July 28, 1924 Director or Trustee of the 54 other investment
Federated Investors Tower Federated Fund Complex; companies in the
1001 Liberty Avenue Chairman and Director, Fund Complex
Pittsburgh, PA Federated Investors, Inc.;
CHAIRMAN AND TRUSTEE Chairman and Trustee,
Federated Investment Management Company;
Chairman and Director, Federated Investment
Counseling, and Federated Global Investment
Management Corp.; Chairman, Passport Research,
Ltd.

THOMAS G. BIGLEY Director or Trustee of the Federated Fund Complex; $1,413.15 $113,860.22 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Fund and
15 Old Timber Trail Hospital of Pittsburgh; formerly: Senior Partner, Ernst 54 other investment
Pittsburgh, PA & Young LLP; Director, MED 3000 Group, Inc.; companies in the
TRUSTEE Director, Member of Executive Committee, University Fund Complex
of Pittsburgh.

JOHN T. CONROY, JR. Director or Trustee of the Federated Fund Complex; $1,554.68 $125,264.48 for the
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior Fund and
Wood/IPC Commercial Dept. Vice President, John R. Wood and Associates, Inc., 54 other investment
John R. Wood Associates, Inc. Realtors; Partner or Trustee in private real estate companies in the
Realtors ventures in Southwest Florida; formerly: President, Fund Complex
3255 Tamiami Trial North Naples Property Management, Inc. and Northgate
Naples, FL Village Development Corporation.

TRUSTEE

NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund Complex; $1,413.15 $47,958.02 for the
Birth Date: September 3, 1939 formerly: Partner, Andersen Worldwide SC. Fund and
175 Woodshire Drive 39 other investment
Pittsburgh, PA companies in the
TRUSTEE Fund Complex
JOHN F. CUNNINGHAM++ Director or Trustee of some of the Federated Fund $263.86 $0 for the Fund and
Birth Date: March 5, 1943 Complex; Chairman, President and Chief Executive 43 other investment
353 El Brillo Way Officer, Cunningham & Co., Inc. ; Trustee Associate, companies in the
Palm Beach, FL Boston College; Director, EMC Corporation; formerly: Fund Complex
TRUSTEE Director, Redgate Communications.
Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,

Apollo Computer, Inc.

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund Complex; $1,413.15 $113,860.22 for the
Birth Date: October 11, 1932 Professor of Medicine, University of Pittsburgh; Fund and
3471 Fifth Avenue Medical Director, University of Pittsburgh Medical 54 other investment
Suite 1111 Center - Downtown; Hematologist, Oncologist and companies in the
Pittsburgh, PA Internist, University of Pittsburgh Medical Center; Fund Complex
TRUSTEE Member, National Board of Trustees, Leukemia
Society of America.

PETER E. MADDEN Director or Trustee of the Federated Fund Complex; $1,448.50 $113,860.22 for the
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Fund and
One Royal Palm Way Massachusetts General Court; President, State Street 54 other investment
100 Royal Palm Way Bank and Trust Company and State companies in the
Palm Beach, FL Street Corporation. Fund Complex
TRUSTEE Previous Positions: Director, VISA USA and VISA

International; Chairman and Director, Massachusetts
Bankers Association; Director, Depository Trust

Corporation.

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
JOHN E. MURRAY, JR., J.D., Director or Trustee of $1,448.50 $113,860.22 for the
S.J.D. the Federated Fund Complex; Fund and
Birth Date: December 20, 1932 President, Law Professor, 54 other investment
President, Duquesne University Duquesne University; companies in the
Pittsburgh, PA Consulting Partner, Fund Complex
TRUSTEE Mollica & Murray.
Previous Positions: Dean and
Professor of Law, University
of Pittsburgh School of Law;
Dean and Professor of Law,
Villanova University School of

Law.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund Complex; $1,413.15 $113,860.22 for the
Birth Date: June 21, 1935 Public Relations/Marketing/Conference Planning. Fund and
4905 Bayard Street Previous Positions: National Spokesperson, Aluminum 54 other investment
Pittsburgh, PA Company of America; business owner. companies in the
TRUSTEE Fund Complex
JOHN S. WALSH Director or Trustee of some of the Federated Fund $0 $0 for the Fund and
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc.; 40 other investment
2007 Sherwood Drive President and Director, Manufacturers Products, Inc.; companies in the
Valparaiso, IN President, Portable Heater Parts, a division of Fund Complex
TRUSTEE Manufacturers Products, Inc.; Director, Walsh & Kelly,
Inc.; formerly: Vice President, Walsh & Kelly, Inc.

GLEN R. JOHNSON Trustee, Federated Investors, Inc.; staff member, $0 $0 for the Fund and
Birth Date: May 2, 1929 Federated Securities Corp. 8 other investment
Federated Investors Tower companies in the
1001 Liberty Avenue Fund Complex
Pittsburgh, PA

PRESIDENT

J. CHRISTOPHER DONAHUE+ President or Executive Vice President of the Federated $0 $0 for the Fund and
Birth Date: April 11, 1949 Fund Complex; Director or Trustee of some of the 22 other investment
Federated Investors Tower Funds in the Federated Fund Complex; President and companies in the
1001 Liberty Avenue Director, Federated Investors, Inc.; President and Fund Complex
Pittsburgh, PA Trustee, Federated Investment Management
EXECUTIVE VICE PRESIDENT Company; President and Director, Federated
Investment Counseling and Federated Global
Investment Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated Services

Company.

EDWARD C. GONZALES Trustee or Director of some of the Funds in the $0 $0 for the Fund and
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive Vice 1 other investment
Federated Investors Tower President and Treasurer of some of the Funds in the company in the
1001 Liberty Avenue Federated Fund Complex; Vice Chairman, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; Vice President, Federated Investment
EXECUTIVE VICE PRESIDENT Management Company and Federated Investment
Counseling, Federated Global Investment
Management Corp. and Passport Research, Ltd.;
Executive Vice President and Director, Federated
Securities Corp.; Trustee, Federated Shareholder

Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the Fund and
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice President, 54 other investment
Federated Investors Tower Secretary and Director, Federated Investors, Inc.; companies in the
1001 Liberty Avenue Trustee, Federated Investment Management Fund Complex
Pittsburgh, PA Company; Director, Federated Investment Counseling
EXECUTIVE VICE PRESIDENT and Federated Global Investment Management Corp.;
AND SECRETARY Director, Federated Services Company; Director,

Federated Securities Corp.

RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the Fund and
Birth Date: June 17, 1954 President-Funds Financial Services Division, 54 other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various companies in the
1001 Liberty Avenue management positions within Funds Financial Fund Complex
Pittsburgh, PA Services Division of Federated Investors, Inc.

TREASURER

RICHARD B. FISHER President or Vice President of some of the Funds in $0 $0 for the Fund and
Birth Date: May 17, 1923 the Federated Fund Complex; Director or Trustee of 6 other investment
Federated Investors Tower some of the Funds in the Federated Fund Complex; companies in the
1001 Liberty Avenue Executive Vice President, Federated Investors, Inc.; Fund Complex
Pittsburgh, PA Chairman and Director, Federated Securities Corp.

VICE PRESIDENT

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
WILLIAM D. DAWSON, III Chief Investment Officer of $0 $0 for the Fund and
Birth Date: March 3, 1949 this Fund and various other 41 other investment
Federated Investors Tower Funds in the Federated Fund companies in the
1001 Liberty Avenue Complex; Executive Vice Fund Complex
Pittsburgh, PA President, Federated
CHIEF INVESTMENT OFFICER Investment Counseling,
Federated Global Investment
Management Corp., Federated
Investment Management Company
and Passport Research, Ltd.;
Registered Representative,
Federated Securities Corp.;
Portfolio Manager, Federated
Administrative Services; Vice
President, Federated
Investors, Inc.; formerly:
Executive Vice President and
Senior Vice President,
Federated Investment
Counseling Institutional
Portfolio Management Services
Division; Senior Vice
President, Federated
Investment Management Company
and Passport Research, Ltd.
SUSAN M. NASON Susan M. Nason has been the Fund's portfolio $0 $0 for the Fund and
Birth Date: August 29, 1961 manager since September 1991. She is Vice President 3 other investment
Federated Investors Tower of the Fund, Ms. Nason joined Federated in 1987 and companies in the
1001 Liberty Avenue has been a Senior Portfolio Manager and Senior Vice Fund Complex
Pittsburgh, PA President of the Fund's Adviser since 1997. Ms. Nason
VICE PRESIDENT served as a Portfolio Manager and Vice President of
the Adviser from 1993 to 1997. Ms. Nason is a
Chartered Financial Analyst and received her M.S.I.A.
concentrating in Finance from Carnegie Mellon

University.

</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Fund.

++ Mr. Cunningham became a member of the Board of Trustees on January 1, 1999.
He did not earn any fees for serving the Fund Complex since these fees are
reported as of the end of the last calendar year. He did not receive any fees as
of the fiscal year end of the Fund.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to the Fund or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Fund.

OTHER RELATED SERVICES

Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.

For the fiscal year ended, February 28, 1999, no brokerage commissions were paid
by the Fund.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:

AVERAGE AGGREGATE DAILY

MAXIMUM NET ASSETS OF THE FEDERATED ADMINISTRATIVE FEE FUNDS 0.150 of 1% on the
first $250 million 0.125 of 1% on the next $250 million 0.100 of 1% on the next
$250 million 0.075 of 1% on assets in excess of $750 million

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets plus out-of-pocket expenses.

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by

shareholders.

INDEPENDENT AUDITORS

Ernst & Young LLP is the independent public accountant for the Fund.

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED FEBRUARY 28 1999 1998 1997
Advisory Fee Earned $2,552,771 $2,742,606 $2,917,433
Advisory Fee Reduction 108,959 46,875 160,105
Brokerage Commissions - - -
Administrative Fee 481,197 517,508 551,185
12B-1 FEE

Institutional Service Shares 4,491 - -
SHAREHOLDER SERVICES FEE

Institutional Shares - - -
Institutional Service Shares 107,765 - -

Fees are allocated among Classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable Class of Shares.

How Does the Fund Measure Performance?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-, five- and ten-year periods ended February 28,
1999.

Yield given for the 30-day period ended February 28, 1999.

30-DAY

SHARE CLASS PERIOD 1 YEAR 5 YEARS 10 YEARS
INSTITUTIONAL SHARES:

Total Return N/A 5.19% 5.38% 6.55%
Yield 4.46% N/A N/A N/A

Total returns given for the one-, five- and since inception periods ended
February 28, 1999.

Yield given for the 30-day period ended February 28, 1999.

30-DAY SINCE INCEPTION
SHARE CLASS PERIOD 1 YEAR 5 YEARS ON MAY 30, 1992
INSTITUTIONAL
SERVICE SHARES:

Total Return N/A 4.93% 5.11% 4.90%
Yield 4.21% N/A N/A N/A

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD

The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by Shares because of certain adjustments required
by the SEC and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

* references to ratings, rankings and financial publications and/or
performance comparisons of Shares to certain indices;

* charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;

* discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Funds; and

* information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit and
Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors, such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:

MERRILL LYNCH 1-3 YEAR TREASURY INDEX

Merrill Lynch 1-3 Year Treasury Index is an unmanaged index tracking short-term
U.S. government securities with maturities between 1 and 2.99 years. The index
is produced by Merrill Lynch, Pierce, Fenner & Smith, Inc.

LEHMAN BROTHERS INTERMEDIATE GOVERNMENT INDEX

Lehman Brothers Intermediate Government Index is an unmanaged index comprised of
all publicly issued, non-convertible domestic debt of the U.S. government or any
agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with minimum outstanding
principal of $1 million and minimum maturity of one year and maximum maturity of
ten years are included.

MERRILL LYNCH 2-YEAR TREASURY CURVE INDEX

Merrill Lynch 2-Year Treasury Curve Index is comprised of the most recently
issued 2-year U.S. Treasury notes. Index returns are calculated as total returns
for periods of one, three, six, and twelve months as well as year-to-date.

MORNINGSTAR, INC.

Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

Who is Federated Investors, Inc.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state- of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

EQUITY FUNDS

In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles Federated's value- oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

CORPORATE BOND FUNDS

In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making-based on
intensive, diligent credit analysis-is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset-backed securities market, a market
totaling more than $209 billion.

GOVERNMENT FUNDS

In the government sector, as of December 31, 1998, Federated manages 9
mortgage-backed, 5 government/agency and 19 government money market mutual
funds, with assets approximating $5.3 billion, $1.8 billion and $41.6 billion,
respectively. Federated trades approximately $425 million in U.S. government and
mortgage-backed securities daily and places approximately $25 billion in
repurchase agreements each day. Federated introduced the first U.S. government
fund to invest in U.S. government bond securities in 1969. Federated has been a
major force in the short-and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.

MONEY MARKET FUNDS

In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield-
J. Thomas Madden; U.S. fixed income -William D. Dawson, III; and global
equities and fixed income-Henry A. Frantzen. The Chief Investment Officers
are Executive Vice Presidents of the Federated advisory companies.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

Federated meets the needs of approximately 900 institutional

clients nationwide by managing and servicing separate accounts and mutual funds
for a variety of purposes, including defined benefit and defined contribution
programs, cash management and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisers. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division, Federated Securities Corp.

BANK MARKETING

Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated Funds are available to consumers through major brokerage firms
nationwide-we have over 2,200 broker/dealer and bank broker/dealer relationships
across the country-supported by more wholesalers than any other mutual fund
distributor. Federated's service to financial professionals and institutions has
earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Sales Division, Federated Securities Corp.

Addresses

FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS

Institutional Shares
Institutional Service Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR

Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue

Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT AUDITORS

Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072

PART C. OTHER INFORMATION.

Item 23. EXHIBITS:

(a) (i) Conformed copy of the Amended and Restated Declaration
of Trust of the Registrant; (9) (ii) Conformed copy of
Amendment No. 3 to Declaration of Trust; (11)

(b) (i) Copy of the Amended By-laws of the Registrant; (11) (ii)
Copy of Amendment No. 1 to the By-Laws of the Registrant; (14) (iii) Copy of
Amendment No. 4 to the By-Laws of the Registrant; (15) (iv) Copy of Amendment
No. 5 to the By-Laws of the Registrant; (15) (v) Copy of Amendment No. 6 to the
By-Laws of the Registrant; (15)

(c) (i) Copy of Specimen Certificate of Shares of Beneficial
Interest of the Registrant; (11) (d) (i) Conformed copy of the
Investment Advisory Contract of the Registrant; (10) (e) (i)
Conformed copy of the Distributor's Contract of the Registrant;
(11)

(ii) The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds Sales and Service
Agreement; Mutual Funds Service Agreement; and Plan
Trustee/ Mutual Funds Service Agreement from Item
24 (b)(6) of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the Commission
on July 24, 1995. (File Numbers 33-38550

and 811-6269).
(f) Not applicable;

(g) (i) Conformed copy of the Custodian Agreement of the
Registrant; (11) (ii) Conformed copy of Custodian Fee
Schedule; (14)

__________________________

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 19 to its Registration Statement on Form N-1A filed February
26, 1993. (File Nos. 2-89028 and 811-3947).

10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 to its Registration Statement on Form N-1A filed April 27,
1994. (File Nos. 2-89028 and 811-3947).

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 to its Registration Statement on Form N-1A filed April 17,
1995. (File Nos. 2-89028 and 811-3947).

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 to its Registration Statement on Form N-1A filed April 24,
1998. (File Nos. 2-89028 and 811-3947).

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 to its Registration Statement on Form N-1A filed February
26, 1999. (File Nos. 2-89028 and 811-3947).

<PAGE>

(h) (i) The responses described in Item 23(e)(ii) are
hereby incorporated by reference.
(ii) Conformed copy of Amended and Restated Shareholder
Services Agreement; (14)

(iii) Conformed copy of Amended and Restated Agreement
for Fund Accounting Services, Administrative
Services, Transfer Agency Services, and Custody
Services Procurement; (15)

(iv) The Registrant hereby incorporates by reference the
conformed copy of Shareholder Services Sub-Contract
between Fidelity and Federated Shareholder Services
from Item 24(b)(9)(iii) of the Federated GNMA Trust
Registration Statement on Form N-1A, filed with the
Commission on March 25, 1996. (File Nos. 2-75670
and 811-3375).

(i) Copy of the Opinion of Counsel as to the Legality of the
Securities Being Registered; (13)
(j) Conformed copy of Consent of Independent Auditors; +
(k) Not applicable;
(l) Copy of Initial Capital Understanding; (14)
(m) (i) Conformed copy of Distribution Plan; (11)

(ii) The responses described in Item 23(e)(ii) are hereby
incorporated by reference; (n) Copy of Financial Data Schedules;
+

(o) The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment
Series, Inc. Registration Statement on Form N-1A, filed with the
Commission on January 26, 1996. (File Nos. 33-52149 and 811-07141);

- ---------------------

+ All exhibits have been filed electronically

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 to its Registration Statement on Form N-1A filed April 17,
1995. (File Nos. 2-89028 and 811-3947).

13. Response is incorporated by reference to Registrant's Pre- Effective
Amendment No. 1 to its Registration Statement on Form N-1A filed March 6,
1984. (File Nos. 2-89028 and 811-3947).

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 to its Registration Statement on Form N-1A filed

April 24, 1998. (File Nos. 2-89028 and 811-3947).

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 to its Registration Statement on Form N-1A filed February
26, 1999. (File Nos. 2-89028 and 811-3947).

<PAGE>

(p) (i) Conformed copy of Power of Attorney of the
Registrant;(15)
(ii) Conformed copy of Power of Attorney of Chief
Investment Officer of the Registrant; (15)
(iii) Conformed copy of Power of Attorney of Treasurer of the Registrant; (15)
(iv) Conformed copy of Power of Attorney of Trustee of the Registrant; (15)

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND:

None

Item 25. INDEMNIFICATION: (1)

Item 26. Business and Other Connections of Investment Adviser:

For a description of the other business of the investment
adviser, see the section entitled "Who Manages the Fund" in Part A.
The affiliations with the Registrant of four of theTrustees and one
of the Officers of the investment adviser are included in Part B of
this Registration Statement under "Who Manages and Provides Services
to the Fund." The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard), 107 W. Market Street, Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are:

Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden

Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham

- ---------------------

1. Response is incorporated by reference to Registrant's Post- Effective
Amendment No. 17 to its Registration Statement on Form N-1A filed March 31,
1992. (File No. 2-89028).

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 to its Registration Statement on Form N-1A filed February
26, 1999. (File Nos.

2-89028 and 811-3947).

Mark E. Durbiano
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
David A. Briggs
Micheal W. Casey
Robert E. Cauley
Kenneth J. Cody
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Marc Halperin
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
Stephen A. Keen
Robert M. Kowit
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
George B. Wright
Jolanta M. Wysocka

Assistant Vice Presidents: Nancy J. Belz
Lee R. Cunningham, II
James H. Davis, II
Jacqueline A. Drastal
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Farwell
Eamonn G. Folan
John T. Gentry
John W. Harris
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Matthew K. Stapen
Diane Tolby
Timothy G. Trebilcock
Leonardo A. Vila
Steven J. Wagner
Lori A. Wolff

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine M. Newcamp

Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the investment
companies in the Federated Fund Complex described in Part B of this
Registration Statement.

ITEM 27. PRINCIPAL UNDERWRITERS:

(a) Federated Securities Corp. the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-endinvestment
companies, including the Registrant:

Automated Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free
Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal Funds; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series
Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for
Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

(b)
<TABLE>
<CAPTION>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.

Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, President

1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Thomas P. Moretti Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

</TABLE>

Item 28. LOCATION OF ACCOUNTS AND RECORDS:

All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of the
following locations:
<TABLE>
<CAPTION>
<S> <C>
Registrant Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(Notices should be sent to the Agent at the above address)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Federated Shareholder P.O. Box 8600
Services Company Boston, MA 02266-8600
("Transfer Agent and

Dividend Disbursing Agent")

Federated Services Company Federated Investors Tower
("Administrator") 1001 Liberty Avenue

Pittsburgh, PA 15222-3779

<PAGE>

Federated Investment Management Federated Investors Tower
Company 1001 Liberty Avenue
("Adviser") Pittsburgh, PA 15222-3779

State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
("Custodian")

</TABLE>

Item 29. MANAGEMENT SERVICES: Not applicable.

Item 30. UNDERTAKINGS:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED U.S. GOVERNMENT
SECURITIES FUND: 1-3 YEARS certifies that it meets all of the requirements for
effectiveness of this Amendment to its Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 26th day of April, 1999.

FEDERATED U.S. GOVERNMENT SECURITIES FUND: 1-3 YEARS

BY: /s/ Karen M. Brownlee
Karen M. Brownlee, Assistant Secretary
Attorney in Fact for John F. Donahue

April 26, 1999

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE
By: /s/ Karen M. Brownlee Attorney In Fact April 26, 1999

Karen M. Brownlee For the Persons
ASSISTANT SECRETARY Listed Below

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

William D. Dawson, III* Chief Investment Officer

Glen R. Johnson* President

Richard J. Thomas* Treasurer (Principal Financial
and Accounting Officer)

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

Nicholas P. Constantakis* Trustee

John F. Cunningham* Trustee

Lawrence D. Ellis, M.D.* Trustee

Peter E. Madden* Trustee

John E. Murray, Jr. J.D., S.J.D.* Trustee

Marjorie P. Smuts* Trustee

* By Power of Attorney

Exhibit (j) under Form N-1A
Exhibit 23 under Item 601/Reg. S-K

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the references to our firm under the caption "Financial
Highlights" in the Prospectuses and to the use of our report dated April 19,
1999, in Post-Effective Amendment Number 32 to the Registration Statement (Form
N-1A No. 2-89028) of Federated U.S. Government Securities Fund: 1-3 Years dated
April 30, 1999.

/s/ Ernst & Young LLP

ERNST & YOUNG LLP

Boston, Massachusetts
April 26, 1999

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<PERIOD-END> FEB-28-1999
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<INVESTMENTS-AT-VALUE> 637,205,946
<RECEIVABLES> 8,525,182
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 645,731,128
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,886,697
<TOTAL-LIABILITIES> 3,886,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 653,161,990
<SHARES-COMMON-STOCK> 56,614,486
<SHARES-COMMON-PRIOR> 57,426,443
<ACCUMULATED-NII-CURRENT> 1,186
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,753,405)
<OVERDISTRIBUTION-GAINS> 0
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<DIVIDEND-INCOME> 0
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<NET-INVESTMENT-INCOME> 30,391,857
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<NET-CHANGE-FROM-OPS> 32,972,327
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<DISTRIBUTIONS-OF-INCOME> (28,386,588)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,049,321
<NUMBER-OF-SHARES-REDEEMED> (33,364,976)
<SHARES-REINVESTED> 1,503,698
<NET-CHANGE-IN-ASSETS> 10,664,616
<ACCUMULATED-NII-PRIOR> 0
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<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 5,287,003
<AVERAGE-NET-ASSETS> 593,248,192
<PER-SHARE-NAV-BEGIN> 10.410
<PER-SHARE-NII> 0.500
<PER-SHARE-GAIN-APPREC> 0.030
<PER-SHARE-DIVIDEND> (0.500)
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<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.440
<EXPENSE-RATIO> 0.54
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

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<ARTICLE> 6
<CIK> 0000739594

<NAME> FEDERATED US GOVT SECURITIES FUND: 1-3 YEARS

<NUMBER> 002

<NAME> FEDERATED US GOVT SECURITIES FUND: 1-3 YEARS-
INSTITUTIONAL SERVICE SHARES

<S> <C>
<PERIOD-TYPE> 12-MOS
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<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 641,771,286
<INVESTMENTS-AT-VALUE> 637,205,946
<RECEIVABLES> 8,525,182
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 645,731,128
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,886,697
<TOTAL-LIABILITIES> 3,886,697
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 653,161,990
<SHARES-COMMON-STOCK> 4,837,687
<SHARES-COMMON-PRIOR> 3,232,065
<ACCUMULATED-NII-CURRENT> 1,186
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (6,753,405)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4,565,340)
<NET-ASSETS> 641,844,431
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 33,978,435
<OTHER-INCOME> 0
<EXPENSES-NET> (3,586,578)
<NET-INVESTMENT-INCOME> 30,391,857
<REALIZED-GAINS-CURRENT> 9,929,322
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<NET-CHANGE-FROM-OPS> 32,972,327
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,004,083)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,218,485
<NUMBER-OF-SHARES-REDEEMED> (1,779,649)
<SHARES-REINVESTED> 166,786
<NET-CHANGE-IN-ASSETS> 10,664,616
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<GROSS-EXPENSE> 5,287,003
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<PER-SHARE-NAV-BEGIN> 10.410
<PER-SHARE-NII> 0.470
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</TABLE>