N-CSRS 1 gov25ncsrform.htm 
                                  United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form N-CSR
                   Certified Shareholder Report of Registered
                         Management Investment Companies




                                    811-3387

                      (Investment Company Act File Number)


              Federated U.S. Government Securities Fund: 2-5 Years
         ---------------------------------------------------------------

               (Exact Name of Registrant as Specified in Charter)



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


                                 (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)






                        Date of Fiscal Year End: 1/31/06
                                     -------


               Date of Reporting Period: Six months ended 7/31/05
                            ------------------------








Item 1.           Reports to Stockholders

Federated
World-Class Investment Manager

Federated U.S. Government Securities Fund: 2-5 Years

SEMI-ANNUAL SHAREHOLDER REPORT

July 31, 2005

Institutional Shares
Institutional Service Shares
Class K Shares

FINANCIAL HIGHLIGHTS
SHAREHOLDER EXPENSE EXAMPLE
PORTFOLIO OF INVESTMENTS SUMMARY TABLES
PORTFOLIO OF INVESTMENTS
STATEMENT OF ASSETS AND LIABILITIES
STATEMENT OF OPERATIONS
STATEMENT OF CHANGES IN NET ASSETS
NOTES TO FINANCIAL STATEMENTS
BOARD REVIEW OF ADVISORY CONTRACT
VOTING PROXIES ON FUND PORTFOLIO SECURITIES
QUARTERLY PORTFOLIO SCHEDULE

Not FDIC Insured * May Lose Value * No Bank Guarantee

Federated Investors 50 Years of Growth & Innovation

Financial Highlights - Institutional Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)		 Year Ended January 31,
   
 7/31/2005
   
 2005
   
 2004
   
 2003
   
 2002
   
 2001
Net Asset Value, Beginning of Period
$11.26 $11.54 $11.61 $11.10 $10.87 $10.25
Income From Investment Operations:
Net investment income
 0.21 0.41 0.40 0.49 0.55 0.60
Net realized and unrealized gain (loss) on investments
(0.20
 )
(0.29
 )
(0.07
 )
0.51
0.23
0.62
   TOTAL FROM INVESTMENT OPERATIONS
0.01
0.12
0.33
1.00
0.78
1.22
Less Distributions:
Distributions from net investment income
(0.21
 )
(0.40
 )
(0.40
 )
(0.49
 )
(0.55
 )
(0.60
 )
Net Asset Value, End of Period
$11.06
$11.26
$11.54
$11.61
$11.10
$10.87
Total Return 1
0.11
 %
1.10
 %
2.88
 %
9.19
 %
7.35
 %
12.30
 %
Ratios to Average Net Assets:
Expenses
0.58
 % 2
0.59
 %
0.57
 %
0.57
 %
0.57
 %
0.57
 %
Net investment income
3.82
 % 2
3.55
 %
3.44
 %
4.29
 %
5.00
 %
5.75
 %
Expense waiver/reimbursement 3
0.15
 % 2
0.25
 %
0.24
 %
0.25
 %
0.24
 %
0.24
 %
Supplemental Data:
Net assets, end of period (000 omitted)
$691,666
$733,782
$798,927
$784,439
$595,909
$548,808
Portfolio turnover
41
 %
66
 %
52
 %
31
 %
66
 %
77
 %

1 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

2 Computed on an annualized basis.

3 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights - Institutional Service Shares

(For a Share Outstanding Throughout Each Period)

Six Months
Ended
(unaudited)		 Year Ended January 31,
   
 7/31/2005
   
 2005
   
 2004
   
 2003
   
 2002
   
 2001
Net Asset Value, Beginning of Period
$11.26 $11.54 $11.61 $11.10 $10.87 $10.25
Income From Investment Operations:
Net investment income
 0.20 0.38 0.37 0.46 0.52 0.58
Net realized and unrealized gain (loss) on investments
(0.20
 )
(0.28
 )
(0.07
 )
0.51
0.24
0.62
   TOTAL FROM INVESTMENT OPERATIONS
0.00
0.10
0.30
0.97
0.76
1.20
Less Distributions:
Distributions from net investment income
(0.20
 )
(0.38
 )
(0.37
 )
(0.46
 )
(0.53
 )
(0.58
 )
Net Asset Value, End of Period
$11.06
$11.26
$11.54
$11.61
$11.10
$10.87
Total Return 1
(0.01)
 %
0.84
 %
2.63
 %
8.92
 %
7.08
 %
12.02
 %
Ratios to Average Net Assets:
Expenses
0.81
 % 2
0.84
 %
0.81
 %
0.81
 %
0.81
 %
0.82
 %
Net investment income
3.58
 % 2
3.29
 %
3.21
 %
4.02
 %
4.76
 %
5.50
 %
Expense waiver/reimbursement 3
0.26
 % 2
0.25
 %
0.25
 %
0.26
 %
0.25
 %
0.24
 %
Supplemental Data:
Net assets, end of period (000 omitted)
$95,645
$101,602
$115,257
$114,335
$61,271
$47,727
Portfolio turnover
41
 %
66
 %
52
 %
31
 %
66
 %
77
 %

1 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

2 Computed on an annualized basis.

3 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

See Notes which are an integral part of the Financial Statements

Financial Highlights - Class K Shares

(For a Share Outstanding Throughout Each Period)

   
 Six Months
Ended
(unaudited)
7/31/2005
   
Year
Ended
1/31/2005
   
Period
Ended
1/31/2004
1
Net Asset Value, Beginning of Period
$11.26 $11.54 $11.61
Income From Investment Operations:
Net investment income
 0.17 0.34 0.25
Net realized and unrealized loss on investments
(0.20
 )
(0.30
 )
(0.07
 )
   TOTAL FROM INVESTMENT OPERATIONS
(0.03
 )
0.04
0.18
Less Distributions:
Distributions from net investment income
(0.17
 )
(0.32
 )
(0.25
 )
Net Asset Value, End of Period
$11.06
$11.26
$11.54
Total Return 2
(0.25
 )%
0.37
 %
1.60
 %
Ratios to Average Net Assets:
Expenses
1.30
 % 3
1.30
 %
1.30
 % 3
Net investment income
3.11
 % 3
2.84
 %
2.79
 % 3
Expense waiver/reimbursement 4
0.00
 % 3,5
0.00
 % 5
0.00
 % 3,5
Supplemental Data:
Net assets, end of period (000 omitted)
$989
$977
$2,270
Portfolio turnover
41
 %
66
 %
52
 % 6

1 Reflects operations for the period from April 8, 2003 (start of performance) to January 31, 2004.

2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year are not annualized.

3 Computed on an annualized basis.

4 This voluntary expense decrease is reflected in both the expense and the net investment income ratios shown above.

5 Represents less than 0.01%.

6 Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the year ended January 31, 2004.

See Notes which are an integral part of the Financial Statements

Shareholder Expense Example

As a shareholder of the Fund, you incur ongoing costs, including management fees; to the extent applicable, distribution (12b-1) fees and/or shareholder services fees; and other Fund expenses. This Example is intended to help you to understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from February 1, 2005 to July 31, 2005.

ACTUAL EXPENSES

The first section of the table below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section under the heading entitled "Expenses Paid During Period" to estimate the expenses attributable to your investment during this period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second section of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are provided to enable you to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.

   
 Beginning
Account Value
2/1/2005
   
 Ending
Account Value
7/31/2005
   
 Expenses Paid
During Period 1
Actual:
Institutional Shares
$1,000
$1,001.10
$2.88
Institutional Service Shares
$1,000
$ 999.90
$4.02
Class K Shares
$1,000
$ 997.50
$6.44
Hypothetical (assuming a 5% return before expenses):
Institutional Shares
$1,000
$1,021.92
$2.91
Institutional Service Shares
$1,000
$1,020.78
$4.06
Class K Shares
$1,000
$1,018.35
$6.51

1 Expenses are equal to the Fund's annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The annualized expense ratios are as follows:

Institutional Shares
   
 0.58%
Institutional Service Shares
0.81%
Class K Shares
1.30%

Portfolio of Investments Summary Tables

At July 31, 2005, the Fund's portfolio composition 1 was as follows:

Sector
   
 Percentage of
Total Net Assets
U.S. Treasury Securities
84.7
 %
U.S. Government Agency Securities
14.0
 %
Repurchase Agreements--Cash
0.5
 %
Repurchase Agreements--Collateral 2
49.6
 %
Other Assets and Liabilities--Net 3
(48.8
 )%
   TOTAL
100.0
%

At July 31, 2005, the Fund's effective maturity 4 schedule was as follows:

Securities with an
Effective Maturity of:
   
 Percentage of
Total Net Assets
Less than 2 Years
25.5
 %
2-5 Years
64.4
 %
Greater than 5 Years
9.3
 %
Repurchase Agreements--Collateral 2
49.6
 %
Other Assets and Liabilities--Net 3
(48.8
 )%
   TOTAL
100.0
%

1 See the Fund's Prospectus for a description of the principal types of securities in which the Fund invests.

2 Includes repurchase agreements purchased with cash collateral or proceeds received in securities lending transactions, as well as cash covering when issued and delayed delivery transactions.

3 See Statement of Assets and Liabilities.

4 For callable investments "effective maturity" is the unexpired period until the earliest date the investment is subject to prepayment or repurchase by the issuer (and market conditions indicate that the issuer will exercise such option). For variable rate investments "effective maturity" is the unexpired period until the date of the earliest interest rate adjustment. For all other investments "effective maturity" is the unexpired period until final maturity.

Portfolio of Investments

July 31, 2005 (unaudited)

Principal
Amount
   
   
Value
U.S. TREASURY--84.7%
$ 27,500,000 1 6.250%, 2/15/2007
 $ 28,458,100
49,000,000 1 4.375%, 5/15/2007
 49,337,120
29,280,000 6.625%, 5/15/2007
 30,602,285
79,000,000 1 3.125%, 4/15/2009
 76,346,390
34,000,000 3.875%, 5/15/2009
 33,718,480
33,500,000 1 4.000%, 6/15/2009
 33,363,990
16,000,000 3.625%, 7/15/2009
 15,707,520
70,000,000 1 3.500%, 8/15/2009
 68,326,300
42,500,000 3.375%, 10/15/2009
 41,264,950
22,000,000 1 3.500%, 12/15/2009
 21,453,520
41,000,000 1 3.625%, 1/15/2010
 40,160,730
41,000,000 1 3.500%, 2/15/2010
 39,911,040
25,000,000 6.500%, 2/15/2010
 27,410,250
5,000,000 4.000%, 3/15/2010
 4,969,550
52,000,000 1 4.000%, 4/15/2010
 51,666,680
32,000,000 1 3.875%, 5/15/2010
 31,615,040
23,000,000 1 5.000%, 8/15/2011
 24,042,130
24,868,520 3.000%, 7/15/2012
 26,819,207
17,000,000 13.250%, 5/15/2014
22,418,750
   TOTAL U.S. TREASURY (IDENTIFIED COST $672,549,645)
667,592,032
GOVERNMENT AGENCIES--14.0%
29,000,000 Federal Home Loan Bank System, 7.250%, 2/15/2007
 30,326,170
21,000,000 Federal Home Loan Mortgage Corp., 4.875%, 3/15/2007
 21,235,200
10,000,000 Federal Home Loan Bank System, 4.875%, 5/15/2007
 10,122,500
25,000,000 Federal Home Loan Bank System, 7.625%, 5/15/2007
 26,478,500
22,000,000 Federal Home Loan Bank System, 4.250%, 6/11/2010
21,795,840
   TOTAL GOVERNMENT AGENCIES (IDENTIFIED COST $107,060,945)
109,958,210
Principal
Amount
   
   
Value
REPURCHASE AGREEMENTS--50.1%
$ 3,788,000 Interest in $2,000,000,000 joint repurchase agreement with Deutsche Bank Securities, Inc., 3.32%, dated 7/29/2005, to be repurchased at $3,789,048 on 8/1/2005, collateralized by U.S. Government Agency Obligations with various maturities to 8/1/2035, collateral market value $2,049,630,426
$ 3,788,000
196,371,000 Interest in $3,500,000,000 joint repurchase agreement with Barclays Capital, Inc., 3.32%, dated 7/29/2005, to be repurchased at $196,425,329 on 8/1/2005, collateralized by U.S. Government Agency Obligations with various maturities to 1/15/2030, collateral market value $3,570,988,296 (held as collateral for securities lending)
 196,371,000
195,000,000 Interest in $750,000,000 joint repurchase agreement with Morgan Stanley and Co., Inc., 3.32%, dated 7/29/2005, to be repurchased at $195,053,950 on 8/1/2005, collateralized by U.S. Government Agency Obligations with various maturities to 11/1/2042, collateral market value $775,004,391 (held as collateral for securities lending)
195,000,000
   TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST)
395,159,000
   TOTAL INVESTMENTS--148.8%
(IDENTIFIED COST $1,174,769,590) 2
1,172,709,242
   OTHER ASSETS AND LIABILITIES NET--(48.8)%
(384,408,742
 )
   TOTAL NET ASSETS--100%
$
 788,300,500

1 Certain principal amounts or shares are temporarily on loan to unaffiliated broker/dealers.

2 The cost of investments for federal tax purposes amounts to $1,174,769,590.

Note: The categories of investments are shown as a percentage of total net assets at July 31, 2005.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

July 31, 2005 (unaudited)

Assets:
      
Investments in securities
 $ 777,550,242
Investments in repurchase agreements
395,159,000
Total investments in securities, at value, including $375,645,770 of securities loaned (identified cost $1,174,769,590)
 $ 1,172,709,242
Cash
 700
Income receivable
 10,075,704
Receivable for shares sold
358,867
   TOTAL ASSETS
1,183,144,513
Liabilities:
Payable for shares redeemed
 $ 2,392,862
Income distribution payable
 892,988
Payable for shareholder services fee (Note 5)
 26,384
Payable for distribution services fee (Note 5)
 482
Payable for collateral due to broker
 391,371,000
Accrued expenses
160,297
   TOTAL LIABILITIES
394,844,013
Net assets for 71,269,136 shares outstanding
$
 788,300,500
Net Assets Consist of:
Paid-in capital
 $ 799,347,605
Net unrealized depreciation of investments
(2,060,348 )
Accumulated net realized loss on investments
(8,925,043 )
Distributions in excess of net investment income
(61,714
 )
   TOTAL NET ASSETS
$
 788,300,500
Net Asset Value, Offering Price and Redemption Proceeds per Share
Institutional Shares:
$691,666,215 ÷ 62,532,552 shares outstanding, no par value, unlimited shares authorized
$11.06
Institutional Service Shares:
$95,645,005 ÷ 8,647,144 shares outstanding, no par value, unlimited shares authorized
$11.06
Class K Shares:
$989,280 ÷ 89,440 shares outstanding, no par value, unlimited shares authorized
$11.06

See Notes which are an integral part of the Financial Statements

Statement of Operations

Six Months Ended July 31, 2005 (unaudited)

Investment Income:
         
Interest (including income on securities loaned of $452,948)
$
 17,639,474
Expenses:
Investment adviser fee (Note 5)
 $ 1,605,358
Administrative personnel and services fee (Note 5)
 322,011
Custodian fees
 20,317
Transfer and dividend disbursing agent fees and expenses-- Institutional Shares
 176,056
Transfer and dividend disbursing agent fees and expenses--Institutional Service Shares
 22,995
Transfer and dividend disbursing agent fees and expenses--Class K Shares
 1,564
Directors'/Trustees' fees
 8,240
Auditing fees
 8,009
Legal fees
 4,479
Portfolio accounting fees
 66,220
Distribution services fee--Institutional Service Shares (Note 5)
 125,354
Distribution services fee--Class K Shares (Note 5)
 2,817
Shareholder services fee--Institutional Shares (Note 5)
 537,620
Shareholder services fee--Institutional Service Shares (Note 5)
 124,126
Share registration costs
 26,689
Printing and postage
 20,405
Insurance premiums
 7,346
Miscellaneous
9,494
   TOTAL EXPENSES
3,089,100
Waivers (Note 5):
Waiver of administrative personnel and services fee
 $ (16,190 )
Waiver of distribution services fee--Institutional Service Shares
 (125,354 )
Waiver of shareholder services fee--Institutional Shares
(502,556
 )
   TOTAL WAIVERS
(644,100
 )
Net expenses
2,445,000
Net investment income
15,194,474
Realized and Unrealized Loss on Investments:
Net realized loss on investments
 (330,314 )
Net change in unrealized appreciation of investments
(14,012,284
 )
Net realized and unrealized loss on investments
(14,342,598
 )
Change in net assets resulting from operations
$
 851,876

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

   
Six Months
Ended
(unaudited)
7/31/2005
   

Year Ended
1/31/2005
Increase (Decrease) in Net Assets
Operations:
Net investment income
 $ 15,194,474 $ 30,640,206
Net realized gain (loss) on investments
(330,314 ) 1,821,400
Net change in unrealized appreciation/depreciation on investments
(14,012,284
 )
(24,224,077
 )
   CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
851,876
8,237,529
Distributions to Shareholders:
Distributions from net investment income
Institutional Shares
 (13,444,767 ) (27,090,884 )
Institutional Service Shares
 (1,806,860 ) (3,393,015 )
Class K Shares
(17,698
 )
(79,926
 )
   CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
(15,269,325
 )
(30,563,825
 )
Share Transactions:
Proceeds from sale of shares
 98,177,922 302,159,435
Net asset value of shares issued to shareholders in payment of distributions declared
 9,445,249 18,655,069
Cost of shares redeemed
(141,266,474
 )
(378,581,064
 )
   CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
(33,643,303
 )
(57,766,560
 )
Change in net assets
(48,060,752
 )
(80,092,856
 )
Net Assets:
Beginning of period
836,361,252
916,454,108
End of period (including undistributed (distributions in excess of) net investment income of $(61,714) and $13,137, respectively)
$
 788,300,500
$
 836,361,252

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

July 31, 2005 (unaudited)

1. ORGANIZATION

Federated U.S. Government Securities Fund: 2-5 Years (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund's investment objective is to provide current income. The Fund offers three classes of shares: Institutional Shares, Institutional Service Shares, and Class K Shares.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. These policies are in conformity with generally accepted accounting principles (GAAP) in the United States of America.

Investment Valuation

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. Securities for which no quotations are readily available are valued at fair value as determined in accordance with procedures established by and under general supervision of the Board of Trustees (the "Trustees").

Repurchase Agreements

It is the policy of the Fund to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System, or to have segregated within the custodian bank's vault, all securities held as collateral under repurchase agreement transactions. Additionally, procedures have been established by the Fund to monitor, on a daily basis, the market value of each repurchase agreement's collateral to ensure that the value of the collateral at least equals the repurchase price to be paid under the repurchase agreement.

The Fund will only enter into repurchase agreements with banks and other recognized financial institutions, such as broker/dealers, which are deemed by the Fund's adviser to be creditworthy pursuant to the guidelines and/or standards reviewed or established by the Trustees. Risks may arise from the potential inability of counterparties to honor the terms of the repurchase agreement. Accordingly, the Fund could receive less than the repurchase price on the sale of collateral securities. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into one or more repurchase agreements.

Investment Income, Gains and Losses, Expenses and Distributions

Interest income and expenses are accrued daily. Dividend income and distributions to shareholders are recorded on the ex-dividend date. Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that each class bears certain expenses unique to that class such as transfer and dividend disbursing agent, distribution and shareholder services fees. Dividends are declared separately for each class. No class has preferential dividend rights; differences in per share dividend rates are generally due to differences in separate class expenses.

Premium and Discount Amortization

All premiums and discounts are amortized/accreted.

Federal Taxes

It is the Fund's policy to comply with the Subchapter M provision of the Internal Revenue Code (the "Code") and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is necessary.

When-Issued and Delayed Delivery Transactions

The Fund may engage in when-issued or delayed delivery transactions. The Fund records when-issued securities on the trade date and maintains security positions such that sufficient liquid assets will be available to make payment for the securities purchased. Securities purchased on a when-issued or delayed delivery basis are marked to market daily and begin earning interest on the settlement date. Losses may occur on these transactions due to changes in market conditions or the failure of counterparties to perform under the contract.

Securities Lending

The Fund participates in a securities lending program providing for the lending of corporate bonds, equity and government securities to qualified brokers. The Fund normally receives cash collateral for securities loaned that is invested in short-term securities including repurchase agreements. Collateral is maintained at a minimum level of 102% of the market value on investments loaned, plus interest, if applicable. Earnings on collateral are allocated between the securities lending agent, as a fee for its services under the program, and the Fund, according to agreed-upon rates.

As of July 31, 2005, the securities subject to this type of arrangement and related collateral were as follows:

Market Value of
Securities Loaned
   
 Market Value
of Collateral
$375,645,770
$391,371,000

Use of Estimates

The preparation of financial statements in conformity with GAAP 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 a trade date basis. Realized gains and losses from investment transactions are recorded on an identified cost basis.

3. SHARES OF BENEFICIAL INTEREST

The following tables summarize share activity:
Six Months Ended
7/31/2005
Year Ended
1/31/2005
Institutional Shares:
Shares
Amount
Shares
Amount
Shares sold
 6,722,441 $ 75,015,433 21,614,754 $ 246,327,776
Shares issued to shareholders in payment of distributions declared
720,124 8,027,615

1,407,584 16,026,700
Shares redeemed
(10,084,841
 )
(112,516,643
 )
(27,080,057
 )
(308,289,928
 )
   NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS

(2,642,276
 )
$
 (29,473,595
 )
(4,057,719
 )
$
 (45,935,452
 )
   
 Six Months Ended
7/31/2005
   
 Year Ended
1/31/2005
Institutional Service Shares:
   
 Shares
   
Amount
   
 Shares
   
Amount
Shares sold
 2,003,686 $ 22,370,791 4,658,543 $ 53,150,749
Shares issued to shareholders in payment of distributions declared
125,588

1,400,321
224,002 2,550,212
Shares redeemed
(2,506,519
 )
(27,972,873
 )
(5,846,187
 )
(66,315,761
 )
   NET CHANGE RESULTING FROM INSTITUTIONAL SERVICE SHARE TRANSACTIONS

(377,245
 )

$
 (4,201,761
 )
(963,642
 )
$
 (10,614,800
 )
   
 Six Months Ended
7/31/2005
   
 Year Ended
1/31/2005
Class K Shares:
   
 Shares
   
Amount
   
 Shares
   
Amount
Shares sold
 70,753 $ 791,698 232,963 $ 2,680,910
Shares issued to shareholders in payment of distributions declared
 1,552 17,313 6,857 78,157
Shares redeemed
(69,660
 )
(776,958
 )
(349,709
 )
(3,975,375
 )
   NET CHANGE RESULTING FROM CLASS K SHARE TRANSACTIONS

2,645


$
 32,053

(109,889
 )
$
 (1,216,308
 )
   NET CHANGE RESULTING FROM SHARE TRANSACTIONS

(3,016,876
 )

$
 (33,643,303
 )
(5,131,250
 )
$
 (57,766,560
 )

4. FEDERAL TAX INFORMATION

At July 31, 2005, the cost of investments for federal tax purposes was $1,174,769,590. The net unrealized depreciation of investments for federal tax purposes was $2,060,348. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $4,415,125 and net unrealized depreciation from investments for those securities having an excess of cost over value of $6,475,473.

At January 31, 2005, the Fund had a capital loss carryforward of $8,268,073 which will reduce the Fund's taxable income arising from future net realized gain on investments, if any, to the extent permitted by the Code, and thus will reduce the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal tax. Pursuant to the Code, such capital loss carryforward will expire in 2009.

5. INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

Investment Adviser Fee

Federated Investment Management Company, the Fund's investment adviser (the "Adviser"), receives for its services an annual investment adviser fee equal to 0.40% of the Fund'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 Administrative Services (FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of all Federated funds as specified below:

Maximum
Administrative Fee
   
 Average Aggregate Daily Net Assets
of the Federated Funds
0.150%
on the first $5 billion
0.125%
on the next $5 billion
0.100%
on the next $10 billion
0.075%
on assets in excess of $20 billion

The administrative fee received during any fiscal year shall be at least $150,000 per portfolio and $40,000 per each additional class of Shares. FAS may voluntarily choose to waive any portion of its fee. FAS can modify or terminate this voluntary waiver at any time at its sole discretion.

Distribution Services Fee

The Fund has adopted a Distribution Plan (the "Plan"), pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the Fund will compensate Federated Securities Corp. (FSC), the principal distributor, from the daily net assets of the Fund's Institutional Service Shares and Class K Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses according to the following schedule annually, to compensate FSC:

Share Class Name
   
 Percentage of Average Daily
Net Assets of Class
Institutional Service Shares
0.25%
Class K Shares
0.50%

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. Rather than paying investment professionals directly, the Fund may pay fees to FSC and FSC will use the fees to compensate investment professionals. For the six months ended July 31, 2005, FSC retained $767 of fees paid by the Fund.

Shareholder Services Fee

Under the terms of a Shareholder Services Agreement with Federated Shareholder Services Company (FSSC), the Fund will pay FSSC up to 0.25% of the average daily net assets of the Fund's Institutional Shares and Institutional Service Shares. 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. Rather than paying investment professionals directly, the Fund may pay fees to FSSC and FSSC will use the fees to compensate investment professionals. For the six months ended July 31, 2005, FSSC did not retain any fees paid by the Fund.

General

Certain of the Officers and Trustees of the Fund are Officers and Directors or Trustees of the above companies.

6. LEGAL PROCEEDINGS

Beginning in October 2003, Federated Investors, Inc. and various subsidiaries thereof (including the advisers and distributor for various investment companies, collectively, "Federated"), along with various investment companies sponsored by Federated (Funds) were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees. The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys' fees and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

Board Review of Advisory Contract

As required by the 1940 Act, the Fund's Board has reviewed the Fund's investment advisory contract. The Board's decision to approve the contract reflects the exercise of its business judgment on whether to continue the existing arrangements. During its review of the contract, the Board considers many factors, among the most material of which are: the Fund's investment objectives and long-term performance; the Adviser's management philosophy, investment and operating strategies, personnel and processes; the preferences and expectations of Fund shareholders and their relative sophistication; the continuing state of competition in the mutual fund industry; the range of comparable fees for similar funds in the mutual fund industry; the range and quality of services provided to the Fund and its shareholders by the Federated organization in addition to investment advisory services; and the Fund's relationship to the Federated family of funds.

In its decision to appoint or renew an Adviser, the Board is mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a decision to terminate or not renew an advisory contract. In particular, the Board recognizes that most shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and in the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's "selection" or approval of the Adviser must reflect the fact that it is the shareholders who have effectively selected the Adviser by virtue of having invested in the Fund. The Board also considers the compensation and benefits received by the Adviser. This includes fees received for services provided to the Fund by other entities in the Federated organization and research services received by the Adviser from brokers that execute fund trades, as well as advisory fees. In this regard, the Board is aware that various courts have interpreted provisions of the 1940 Act and have indicated in their decisions that the following factors may be relevant to an Adviser's fiduciary duty with respect to its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser, including the performance of the Fund; the Adviser's cost of providing the services; the extent to which the Adviser may realize "economies of scale" as the Fund grows larger; any indirect benefits that may accrue to the Adviser and its affiliates as a result of the Adviser's relationship with the Fund; performance and expenses of comparable funds; and the extent to which the independent Board members are fully informed about all facts bearing on the Adviser's service and fee. The Fund's Board is aware of these factors and is guided by them in its review of the Fund's advisory contract to the extent they are appropriate and relevant, as discussed further below.

The Board considers and weighs these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and is assisted in its deliberations by the advice of independent legal counsel. In this regard, the Board requests and receives substantial and detailed information about the Fund and the Federated organization. Federated provides much of this information at each regular meeting of the Board, and furnishes additional reports in connection with the particular meeting at which the Board's formal review of the advisory contract occurs. In between regularly scheduled meetings, the Board may receive information on particular matters as the need arises. Thus, the Board's evaluation of an advisory contract is informed by reports covering such matters as: the Adviser's investment philosophy, personnel, and processes; operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses, as well as in relationship to its particular investment program and certain competitor or "peer group" funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities; the nature and extent of the advisory and other services provided to the Fund by the Adviser and its affiliates; compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The evaluation process is evolutionary, reflecting continually developing considerations. The criteria considered and the emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.

With respect to the Fund's performance and expenses in particular, the Board has found the use of comparisons to other mutual funds with comparable investment programs to be particularly useful, given the high degree of competition in the mutual fund business. The Board focuses on comparisons with other similar mutual funds (rather than non-mutual fund products or services) because, simply put, they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of investment vehicle already chosen by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in the precise marketplace in which the Fund competes. The Fund's ability to deliver competitive performance when compared to its peer group may be a useful indicator of how the Adviser is executing on the Fund's investment program, which would in turn assist the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services are such as to warrant continuation of the advisory contract.

The Board also receives financial information about Federated, including reports on the compensation and benefits Federated derives from its relationships with the Federated funds. These reports cover not only the fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds' administrator). The reports also discuss any indirect benefit Federated may derive from its receipt of research services from brokers who execute Federated fund trades as well as waivers of fees and/or reimbursements of expenses. In order for a fund to be competitive in the marketplace, Federated and its affiliates frequently waive fees and/or reimburse expenses. Although the Board considers the profitability of the Federated organization as a whole, it does not evaluate, on a fund-by-fund basis, Federated's "profitability" and/or "costs" (which would include an assessment as to whether "economies of scale" would be realized if the fund were to grow to some sufficient size). In the Board's view, the cost of performing advisory services on a fund-specific basis is both difficult to estimate satisfactorily and a relatively minor consideration in its overall evaluation. Analyzing isolated funds would require constructed allocations of the costs of shared resources and operations based on artificial assumptions that are inconsistent with the existing relationships within a large and diversified family of funds that receive advisory and other services from the same organization. Although the Board is always eager to discover any genuine "economies of scale," its experience has been that such "economies" are likely to arise only when a fund grows dramatically, and becomes and remains very large in size. Even in these instances, the presence of expense limitations (if any) may offset any perceived economies. As suggested above, the Board considers the information it receives about the Fund's performance and expenses as compared to an appropriate set of similar competing funds to be more relevant.

The Board bases its decision to approve an advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified above are relevant to every Federated fund, nor does the Board consider any one of them to be determinative. With respect to the factors that are relevant, the Board's decision to approve the contract reflects its determination that Federated's performance and actions provide a satisfactory basis to support the decision to continue the existing arrangements.

Voting Proxies on Fund Portfolio Securities

A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on "Form N-PX" of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available through Federated's website. Go to FederatedInvestors.com, select "Products," select the "Prospectuses and Regulatory Reports" link, then select the Fund to access the link to Form N-PX. This information is also available from the EDGAR database on the SEC's Internet site at www.sec.gov.

Quarterly Portfolio Schedule

The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on "Form N-Q." These filings are available on the SEC's website at www.sec.gov and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the "Products" section of the Federated Investors website at FederatedInvestors.com by clicking on "Portfolio Holdings" and selecting the name of the Fund, or by selecting the name of the Fund and clicking on "Portfolio Holdings." You must register on the website the first time you wish to access this information.

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 Fund's prospectus, which contains facts concerning its objective and policies, management fees, expenses, and other information.

IMPORTANT NOTICE ABOUT FUND DOCUMENT DELIVERY

In an effort to reduce costs and avoid duplicate mailings, the Fund(s) intend to deliver a single copy of certain documents to each household in which more than one shareholder of the Fund(s) resides (so-called "householding"), as permitted by applicable rules. The Fund's "householding" program covers its/their Prospectus and Statement of Additional Information, and supplements to each, as well as Semi-Annual and Annual Shareholder Reports and any Proxies or information statements. Shareholders must give their written consent to participate in the "householding" program. The Fund is also permitted to treat a shareholder as having given consent ("implied consent") if (i) shareholders with the same last name, or believed to be members of the same family, reside at the same street address or receive mail at the same post office box, (ii) the Fund gives notice of its intent to "household" at least sixty (60) days before it begins "householding" and (iii) none of the shareholders in the household have notified the Fund(s) or their agent of the desire to "opt out" of "householding." Shareholders who have granted written consent, or have been deemed to have granted implied consent, can revoke that consent and opt out of "householding" at any time: shareholders who purchased shares through an intermediary should contact their representative; other shareholders may call the Fund at 1-800-341-7400.

Federated World-Class Investment Manager

Federated Securities Corp., Distributor

Cusip 31428P103
Cusip 31428P202
Cusip 31428P301

8082202 (9/05)

Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.

Item 2.           Code of Ethics

                  Not Applicable

Item 3.           Audit Committee Financial Expert

                  Not Applicable

Item 4.           Principal Accountant Fees and Services

                  Not Applicable

Item 5.           Audit Committee of Listed Registrants

                  Not Applicable

Item 6.           Schedule of Investments

                  Not Applicable

Item 7.           Disclosure of Proxy Voting Policies and Procedures for Closed-
                  End Management Investment Companies

                  Not Applicable

Item 8.           Portfolio Managers of Closed-End Management Investment
                  Companies

                  Not Applicable

Item 9.           Purchases of Equity Securities by Closed-End Management
                  Investment Company and Affiliated Purchasers

                  Not Applicable

Item 10.          Submission of Matters to a Vote of Security Holders

                  Not Applicable

Item 11.          Controls and Procedures

(a) The registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule 30a-3(c)
under the Act) are effective in design and operation and are sufficient to form
the basis of the certifications required by Rule 30a-(2) under the Act, based on
their evaluation of these disclosure controls and procedures within 90 days of
the filing date of this report on Form N-CSR.

(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act) during the last fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.

Item 12.          Exhibits













SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

Registrant        Federated U.S. Government Securities Fund: 2-5 Years

By                /S/ Richard J. Thomas
                  Richard J. Thomas, Principal Financial Officer


Date              September 14, 2005


Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.


By                /S/ J. Christopher Donahue
                  J. Christopher Donahue, Principal Executive Officer

Date              September 14, 2005


By                /S/ Richard J. Thomas
                  Richard J. Thomas, Principal Financial Officer


Date              September 14, 2005