SEMI-ANNUAL REPORT
President's Message
Dear Investor:
I'm pleased to present the Semi-Annual Report to Shareholders for Federated U.S.
Government Securities Fund: 5-10 Years. The report covers the six-month
reporting period ended August 31, 1999 and includes an investment review by the
fund's portfolio manager, a complete listing of holdings, and the financial
statements.
This mutual fund pursues total return consistent with current income through the
relative safety of a U.S. government portfolio.
During the reporting period, the fund's Institutional Shares produced a total
return of (1.51%) through paid income totaling $0.27 per share and a $0.42
decrease in net asset value. 1 Institutional Service Shares produced a total
return of (1.66%) through paid income totaling $0.25 per share and a net asset
value decrease of $0.42 per share.1 Net assets totaled $104.2 million on August
31, 1999.
Thank you for participating in the income opportunities of intermediate-
term government securities through Federated U.S. Government Securities
Fund: 5-10 Years. We welcome your comments and questions.
Sincerely,
[Graphic]
Glen R. Johnson
President
October 15, 1999
1 Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
Investment Review
Federated U.S. Government Securities Fund: 5-10 Years invests in
U.S. government securities which include U.S. Treasury and agency
obligations. The fund's dollar-weighted average portfolio duration is
managed within 20% of the dollar-weighted average portfolio duration of the
Merrill Lynch 5-10 Year Treasury Index. 1
U.S. Treasury yields increased significantly during the fund's semi-annual
reporting period, continuing the trend which began in the fourth quarter of
1998. Yields of 5-year and 10-year Treasury notes ended August 1999 at 5.87% and
5.97%, respectively, compared to 5.22% and 5.29% at the end of February 1999 and
the early October 1998 lows of 3.97% and 4.16%. While inflation remained
subdued, stronger than expected U.S. economic growth combined with global
economies showing signs of recovery fueled market fears of higher inflation.
Market expectations shifted dramatically from pricing in further Federal Reserve
Board (the "Fed") easing during the fourth quarter of 1998 to pricing in a
tighter Fed monetary policy. These expectations were realized on the last day of
June when the Federal Funds target rate was increased for the first time since
March 1997 from 4.75% to 5.00%. The Federal Funds target rate was increased
again to 5.25% in late August. Although the Fed is currently in a "wait and see"
mode, another tightening may be warranted if U.S. economic growth does not slow
to a sustainable pace.
Almost 10% of the Fund's Treasury position was shifted into agencies to take
advantage of dramatically wider agency yield spreads versus Treasurys during the
"flight to quality" environment of late summer/early fall 1998. Agencies
outperformed Treasurys during the first half of the fund's reporting period, but
the fund added agency obligations at attractive spread levels versus Treasurys
during the second half as they underperformed. Similar to 1998, agency issuance
has continued to exceed Treasury note and bond issuance.
While a further rise in interest rates should be limited, a significant decline
in interest rates is not expected until U.S. economic growth slows, absent an
unforeseen financial crisis. The average duration of the fund has remained
within its neutral range and ended the reporting period at 5.3 years. The fund's
Institutional Shares total return for the six months ended August 31, 1999 was
(1.51)% 2 versus (1.10)% for the Merrill Lynch 5- 10 Year Treasury Index.
1 The Merrill Lynch 5-10 Year Treasury Index is an unmanaged index tracking U.S.
government securities with maturities between 5 and 9.99 years. Investments
cannot be made in an index.
2 Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. The fund's Institutional Service Shares total return for the six months
ended August 31, 1999 was (1.66%).
Last Meeting of Shareholders
A Special Meeting of shareholders of Federated U.S. Government Securities Fund:
5-10 Years (the "Fund") was held on June 21, 1999. The following items were
approved by shareholders at this meeting.
AGENDA ITEM 1
Election of Trustees: 1
<TABLE>
<CAPTION>
SHARES VOTED SHARES
AFFIRMATIVELY WITHHELD
<S> <C> <C>
Nicholas P. Constantakis 7,116,588 26,614
John F. Cunningham 7,118,564 24,638
J. Christopher Donahue 7,118,564 24,638
Charles F. Mansfield, Jr. 7,118,564 24,638
John S. Walsh 7,118,564 24,638
</TABLE>
1 The following Trustees of the Fund continued their terms as Trustees of
the Fund: John F. Donahue, Thomas G. Bigley, John T. Conroy, Lawrence D.
Ellis, Peter E. Madden, John E. Murray, Jr., J.D., S.J.D., and Marjorie
Smuts.
AGENDA ITEM 2
To ratify the selection of Ernst & Young LLP as the Fund's independent auditors:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
7,102,283 10,256 30,662
</TABLE>
AGENDA ITEM 3
To make changes to the Fund's fundamental investment policies:
(a) To approve amending the Fund's fundamental investment policy regarding
diversification.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,968,775 99,636 57,338
</TABLE>
(b) To approve amending the Fund's fundamental investment policy regarding
borrowing money and issuing senior securities.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,923,389 139,002 63,357
</TABLE>
(c) To approve amending the Fund's fundamental investment policy regarding
investments in real estate.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,089,820 972,321 63,608
</TABLE>
(d) To approve amending the Fund's fundamental investment policy concerning
investments in commodities.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,071,224 988,018 66,507
</TABLE>
(e) To approve amending the Fund's fundamental investment policy regarding
lending.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,710,479 338,998 76,272
</TABLE>
(f) To approve amending the Fund's fundamental investment policy regarding
concentration of the Fund's investments in the securities of companies in the
same industry.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,826,643 240,900 58,206
</TABLE>
(g) To approve amending and making non-fundamental, the Fund's fundamental
investment policy regarding buying securities on margin.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,051,864 1,011,727 62,157
</TABLE>
(h) To approve amending and making non-fundamental, the Fund's fundamental
investment policy regarding pledging assets.
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,076,911 984,089 64,748
</TABLE>
AGENDA ITEM 4
To approve eliminating the Fund's fundamental investment policy on selling
securities short:
<TABLE>
<CAPTION>
SHARES VOTED SHARES VOTED SHARES
AFFIRMATIVELY NEGATIVELY ABSTAINING
<S> <C> <C>
5,079,694 985,675 60,379
</TABLE>
Portfolio of Investments
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY OBLIGATIONS-
69.9%
U.S. TREASURY BONDS-3.5%
$ 900,000 12.000%, 5/15/2005 $ 1,148,436
2,025,000 10.750%, 8/15/2005 2,477,790
TOTAL 3,626,226
U.S. TREASURY NOTES-66.4%
5,500,000 7.250%, 8/15/2004 5,788,090
5,550,000 7.875%, 11/15/2004 5,992,890
7,375,000 7.500%, 2/15/2005 7,851,941
9,600,000 6.500%, 8/15/2005 9,784,320
9,550,000 5.875%, 11/15/2005 9,441,894
4,500,000 5.625%, 2/15/2006 4,388,040
6,250,000 7.000%, 7/15/2006 6,532,438
10,500,000 6.500%, 10/15/2006 10,683,960
4,149,000 6.625%, 5/15/2007 4,257,745
4,500,000 6.125%, 8/15/2007 4,482,855
TOTAL 69,204,173
TOTAL U.S. TREASURY
OBLIGATIONS (IDENTIFIED
COST $75,221,865) 72,830,399
U.S. GOVERNMENT AGENCY
OBLIGATIONS-26.0%
FEDERAL HOME LOAN BANK-
26.0%
1,000,000 6.150%, 10/14/2004 976,190
2,750,000 6.900%, 2/7/2007 2,793,780
1,600,000 5.905%, 3/27/2008 1,493,792
2,500,000 5.925%, 4/9/2008 2,336,700
3,100,000 6.185%, 5/6/2008 2,947,976
3,800,000 5.800%, 9/2/2008 3,525,526
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY
OBLIGATIONS-continued
FEDERAL HOME LOAN BANK-
CONTINUED
$ 5,500,000 6.730%, 6/22/2009 $ 5,409,855
7,900,000 6.500%, 8/14/2009 7,639,616
TOTAL U.S. GOVERNMENT
AGENCY OBLIGATIONS
(IDENTIFIED
COST $28,406,934) 27,123,435
REPURCHASE AGREEMENT-3.3%
1
3,395,000 Societe Generale, New
York, 5.430%, dated
8/31/1999, due 9/1/1999
(AT AMORTIZED COST) 3,395,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$107,023,799) 2 $ 103,348,834
</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 $107,023,799. The
net unrealized depreciation of investments on a federal tax basis amounts to
$(3,674,965) which is comprised of $24,452 appreciation and $3,699,417
depreciation at August 31, 1999.
Note: The categories of investments are shown as a percentage of net assets
($104,192,964) at August 31, 1999.
See Notes which are an integral part of the Financial Statements
Statement of Assets and Liabilities
AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Total investments in
securities, at value
(identified and tax cost
$107,023,799) $ 103,348,834
Income receivable 1,293,517
Receivable for shares sold 10,127
Deferred organizational
costs 15,690
TOTAL ASSETS 104,668,168
LIABILITIES:
Income distribution
payable $ 475,204
TOTAL LIABILITIES 475,204
Net assets for 10,612,772
shares outstanding $ 104,192,964
NET ASSETS CONSIST OF:
Paid in capital $ 108,774,383
Net unrealized
depreciation of
investments (3,674,965 )
Accumulated net realized
loss on investments (903,134 )
Distributions in excess of
net investment income (3,320)
TOTAL NET ASSETS $ 104,192,964
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
INSTITUTIONAL SHARES:
$73,649,956 / 7,501,694
shares outstanding $9.82
INSTITUTIONAL SERVICE
SHARES:
$30,543,008 / 3,111,078
shares outstanding $9.82
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Operations
SIX MONTHS ENDED AUGUST 31, 1999 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 3,025,952
EXPENSES:
Investment advisory fee $ 270,690
Administrative personnel
and services fee 78,012
Custodian fees 3,920
Transfer and dividend
disbursing agent fees and
expenses 33,808
Directors'/Trustees' fees 6,543
Auditing fees 7,047
Legal fees 1,510
Portfolio accounting fees 30,035
Distribution services fee-
Institutional Service
Shares 35,888
Shareholder services fee-
Institutional Shares 99,457
Shareholder services fee-
Institutional Service
Shares 35,888
Share registration costs 21,517
Printing and postage 10,920
Insurance premiums 1,067
Miscellaneous 9,267
TOTAL EXPENSES 645,569
WAIVERS:
Waiver of investment
advisory fee $ (270,690)
Waiver of shareholder
services fee-Institutional
Shares (83,544)
Waiver of shareholder
services fee-Institutional
Service Shares (22,968)
Reimbursement of other
operating expenses (60,505)
TOTAL WAIVERS AND
REIMBURSEMENTS (437,707)
Net expenses 207,862
Net investment income 2,818,090
REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on
investments (1,018,947)
Net change in unrealized
depreciation of
investments (3,393,322)
Net realized and
unrealized loss on
investments (4,412,269)
Change in net assets
resulting from operations $ (1,594,179)
</TABLE>
See Notes which are an integral part of the Financial Statements
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR
(unaudited) ENDED
AUGUST 31, FEBRUARY 28,
1999 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:
Net investment income $ 2,818,090 $ 4,015,633
Net realized gain (loss) on
investments ($(1,018,947)
and $975,874,
respectively, as computed
for federal tax purposes) (1,018,947) 975,874
Net change in unrealized
depreciation (3,393,322) (1,346,997)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS (1,594,179) 3,644,510
DISTRIBUTIONS TO
SHAREHOLDERS:
Distributions from net
investment income
Institutional Shares (2,100,479) (3,382,017)
Institutional Service
Shares (717,623) (636,924)
Distributions from net
realized gains
Institutional Shares - (733,012)
Institutional Service
Shares - (211,273)
CHANGE IN NET ASSETS
RESULTING FROM
DISTRIBUTIONS
TO SHAREHOLDERS (2,818,102) (4,963,226)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 27,082,268 143,996,625
Net asset value of shares
issued to shareholders in
payment of
distributions declared 1,392,578 2,661,315
Cost of shares redeemed (32,576,451) (74,522,164)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS (4,101,605) 72,135,776
Change in net assets (8,513,886) 70,817,060
NET ASSETS:
Beginning of period 112,706,850 41,889,790
End of period $ 104,192,964 $ 112,706,850
</TABLE>
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
(unaudited) ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28, FEBRUARY 29,
1999 1999 1998 1997 1996 1
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.24 $10.22 $ 9.77 $ 9.98 $10.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.27 0.55 0.59 0.59 0.21
Net realized and
unrealized gain (loss) on
investments (0.42) 0.12 0.47 (0.21) (0.02)
TOTAL FROM
INVESTMENT OPERATIONS (0.15) 0.67 1.06 0.38 0.19
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.27) (0.55) (0.59) (0.59) (0.21)
Distributions from net
realized gain
on investments - (0.10) (0.02) - -
TOTAL DISTRIBUTIONS (0.27) (0.65) (0.61) (0.59) (0.21)
NET ASSET VALUE, END OF
PERIOD $ 9.82 $10.24 $10.22 $ 9.77 $ 9.98
TOTAL RETURN 2 (1.51%) 6.58% 11.09% 3.98% 1.85%
RATIOS TO AVERAGE NET
ASSETS:
Expenses 3 1.12% 4 1.24% 1.99% 4.08% 12.37% 4
Net investment income
(loss) 3 4.45% 4 4.33% 4.15% 2.11% (6.51%) 4
Expenses (after waivers
and reimbursements) 0.30% 4 0.30% 0.30% 0.13% 0.11% 4
Net investment income
(after waivers and
reimbursements) 5.27% 4 5.27% 5.84% 6.06% 5.75% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $73,650 $85,534 $39,712 $15,225 $4,181
Portfolio turnover 30% 85% 49% 57% 29%
</TABLE>
1 Reflects operations for the period from October 19, 1995 (date of initial
public investment) to February 29, 1996. For the period from September 5, 1995
(start of business) to October 18, 1995, the investment income was distributed
to the Fund's administrator.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Financial Highlights-Institutional Service Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED PERIOD
(unaudited) ENDED
AUGUST 31, YEAR ENDED FEBRUARY 28, FEBRUARY 29,
1999 1999 1998 1997 1996 1
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $10.24 $10.22 $ 9.77 $ 9.98 $10.00
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income 0.25 0.52 0.55 0.56 0.20
Net realized and
unrealized gain (loss) on
investments (0.42) 0.12 0.48 (0.21) (0.02)
TOTAL FROM
INVESTMENT OPERATIONS (0.17) 0.64 1.03 0.35 0.18
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.25) (0.52) (0.56) (0.56) (0.20)
Distributions from net
realized gain
on investments - (0.10) (0.02) - -
TOTAL DISTRIBUTIONS (0.25) (0.62) (0.58) (0.56) (0.20)
NET ASSET VALUE, END OF
PERIOD $ 9.82 $10.24 $10.22 $ 9.77 $ 9.98
TOTAL RETURN 2 (1.66%) 6.26% 10.76% 3.62% 1.75%
RATIOS TO AVERAGE NET
ASSETS:
Expenses 3 1.37% 4 1.43% 2.24% 4.33% 12.62% 4
Net investment income
(loss) 3 4.22% 4 4.04% 3.92% 1.84% (6.92%) 4
Expenses (after waivers
and reimbursements) 0.60% 4 0.60% 0.60% 0.47% 0.45% 4
Net investment income
(after waivers and
reimbursements) 4.99% 4 4.87% 5.56% 5.70% 5.25% 4
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $30,543 $27,173 $2,178 $1,782 $1,046
Portfolio turnover 30% 85% 49% 57% 29%
</TABLE>
1 Reflects operations for the period from October 19, 1995 (date of initial
public investment) to February 29, 1996. For the period from September 5, 1995
(start of business) to October 18, 1995, the investment income was distributed
to the Fund's administrator.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 During the period, certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
4 Computed on an annualized basis.
See Notes which are an integral part of the Financial Statements
Notes to Financial Statements
AUGUST 31, 1999 (UNAUDITED)
ORGANIZATION
Federated U.S. Government Securities Fund: 5-10 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 pursue total
return consistent with 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 60 days or less at
the time of purchase may be valued at amortized cost, which approximates fair
market value.
REPURCHASE AGREEMENTS
It is the policy of the Trust to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Trust's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Trust could receive less
than the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Distributions to shareholders are recorded on the ex- dividend
date.
FEDERAL TAXES
It is the Trust's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
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. At August 31, 1999 capital paid-in aggregated $108,774,383.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
INSTITUTIONAL SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,628,837 $ 16,449,226 10,372,039 $ 108,637,843
Shares issued to
shareholders in payment of
distributions declared 112,737 1,135,854 198,272 2,089,406
Shares redeemed (2,595,037) (26,237,277) (6,101,477) (64,110,294)
NET CHANGE RESULTING FROM
INSTITUTIONAL SHARE
TRANSACTIONS (853,463) $ (8,652,197) 4,468,834 $ 46,616,955
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
AUGUST 31, 1999 FEBRUARY 28, 1999
INSTITUTIONAL SERVICE
SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,057,789 $ 10,633,042 3,365,052 $ 35,358,782
Shares issued to
shareholders in payment of
distributions declared 25,498 256,724 53,863 571,909
Shares redeemed (626,667) (6,339,174) (977,573) (10,411,870)
NET CHANGE RESULTING FROM
INSTITUTIONAL SERVICE
SHARE TRANSACTIONS 456,620 $ 4,550,592 2,441,342 $ 25,518,821
NET CHANGE RESULTING FROM
SHARE TRANSACTIONS (396,843) $ (4,101,605) 6,910,176 $ 72,135,776
</TABLE>
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
0.50% of the Trust's average daily net assets. The Adviser may voluntarily
choose to waive any portion of its fee and reimburse certain operating expenses
of the Trust. The Adviser can modify or terminate this voluntary waiver and
reimbursement 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 Institutional Service
Shares may incur distribution expenses up to 0.25% of the average daily net
assets of the Institutional Service Shares annually, to compensate FSC.
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 shares 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 each Trust's average daily net assets for the
period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES
Organizational expenses of $42,365 were borne initially by FServ. The Trust has
agreed to reimburse FServ for the organizational expenses during the five-year
period following the effective date. For the period ended August 31, 1999, the
Fund paid $13,260 pursuant to this agreement.
GENERAL
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended August 31, 1999, were as follows:
<TABLE>
<CAPTION>
<S> <C>
Purchases $ 31,635,648
Sales $ 38,569,311
</TABLE>
YEAR 2000
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.
Trustees
JOHN F. DONAHUE
THOMAS G. BIGLEY
JOHN T. CONROY, JR.
NICHOLAS P. CONSTANTAKIS
JOHN F. CUNNINGHAM
J. CHRISTOPHER DONAHUE
LAWRENCE D. ELLIS, M.D.
PETER E. MADDEN
CHARLES F. MANSFIELD, JR.
JOHN E. MURRAY, JR., J.D., S.J.D.
MARJORIE P. SMUTS
JOHN S. WALSH
Officers
JOHN F. DONAHUE
Chairman
GLEN R. JOHNSON
President
J. CHRISTOPHER DONAHUE
Executive Vice President
EDWARD C. GONZALES
Executive Vice President
JOHN W. MCGONIGLE
Executive Vice President and Secretary
RICHARD B. FISHER
Vice President
RICHARD J. THOMAS
Treasurer
C. GRANT ANDERSON
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the trust's prospectuses which contain facts
concerning its objective and policies, management fees, expenses, and other
information.
[Graphic]
Federated
World-Class Investment Manager
SEMI-ANNUAL REPORT
Federated U.S. Government Securities Fund: 5-10 Years
SEMI-ANNUAL REPORT TO SHAREHOLDERS
AUGUST 31, 1999
[Graphic]
Federated
Federated U.S. Government Securities Fund: 5-10 Years
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
WWW.FEDERATEDINVESTORS.COM
Federated Securities Corp., Distributor
Cusip 31428S107
Cusip 31428S206
G01393-01 (10/99)
[Graphic]
