[LOGO] FEDERATED INVESTORS
Since 1955
Liberty
U.S. Government
Money Market
Trust
16th Annual Report
March 31, 1996
Established 1980
MONEY MARKET
President's Message
Dear Shareholder:
I'm pleased to present the 16th Annual Report to Shareholders for Liberty U.S.
Government Money Market Trust, which covers the 12-month period from April 1,
1995, through March 31, 1996. The report begins with an interview with the
trust's portfolio manager, Susan R. Hill, Assistant Vice President, Federated
Advisers, and follows with a complete listing of the trust's holdings and its
financial statements.
As a shareholder in this money market mutual fund, your cash is working to
pursue income every day from a portfolio of short-term U.S. government
- -
securities. And, you have the comfort of knowing that the trust is managed to
keep the value of your investment at a stable $1.00 per share.* You also have
daily access to your invested cash.
During the 12-month period, dividends paid to Class A shareholders totaled
$0.05 per share, while dividends paid to Class B shareholders totaled $0.04
per share. At the end of the period, the trust's net assets stood at $706.9
million.
Thank you for selecting Liberty U.S. Government Money Market Trust
as a convenient investment for your ready cash. We welcome your
comments and suggestions.
Sincerely,
J. Christopher Donahue
President
May 15, 1996
* Although money market funds seek to maintain a stable net asset value of
$1.00, there is no assurance that they will be able to do so. An
investment in the trust is neither insured nor guaranteed by the U.S.
government.
Investment Review
Susan R. Hill, CFA
Assistant Vice President
Federated Advisers
Susan, let's begin with an overview of the interest rate
environment during the reporting period.
The annual reporting period brought about a shift in the direction of monetary
policy when, after raising the Federal funds target rate by 300 basis points
throughout 1994 and early 1995, the Federal Reserve Board (the "Fed") lowered
the Federal funds target rate from 6.00% to 5.75% in early July 1995. The Fed
cited a better-than-expected inflation outlook as the impetus behind the slight
easing in policy, although a sluggish manufacturing sector and lackluster
consumer spending were thought to have had an influence. As economic news
continued to point to slowing growth with benign inflation, the Fed lowered
the Federal funds target rate again on two more occasions, in late December
1995 and January 1996, bringing the target rate to 5.25%. The short end of the
government yield curve anticipated the policy moves from the Fed, and amid
indications of sluggish consumer and manufacturing sectors of the economy,
looked forward to additional eases in the not too distant future.
However, February and March of 1996 brought about a shift in market psychology
regarding the extent and direction of changes in monetary policy by the Fed.
Recovering from the harsh winter weather and spurred onward by lower interest
rates, the housing market and consumer spending breathed some life into the
economy, which had seemed on the verge of recession earlier in the year. The
market was then stunned in early March 1996 by the report of a 705,000
increase (later revised downward slightly to 631,000) in non-farm payroll jobs
for February 1996 the largest increase in over 12 years which caused the
- -
yields on short-term securities to rise by as many as 25 basis points on that
day alone. Now confronted with a much sturdier economy than previously
thought, the front end of the market retreated from its expectations for
additional easing from the Fed in the near future, and moved to pricing in
anticipation of a neutral policy from the Fed in the near term, and a
tightening in monetary policy by the Fed later in 1996. Yields on short-term
government securities reflected this rather volatile mood in the markets; the
yield on the three-month Treasury bill began the reporting period in April 1995
at 5.8%, declined to 4.9% by mid-February 1996, and ended March 1996 at close
to 5.2%.
Have you made any strategic changes to the trust's portfolio?
The trust remained targeted in a 40-day to 50-day average maturity target range
throughout the reporting period, and moved its positioning within that range
according to the relative value opportunities offered in the market.
When the short-end of the government markets seemed overly pessimistic with
respect to the health of the economy during the fourth quarter of 1995 and
early 1996, the average maturity of the trust drifted to the lower end of the
target range, as investments in overnight repurchase agreements were
attractive relative to fixed-rate securities. More recently, as the market now
appears to be overly optimistic with respect to economic strength, we moved
the average maturity of the trust toward the longer end of its range, as
fixed-rate securities once again appeared to offer relative value to overnight
investments. The trust's portfolio continued to be barbelled, combining a large
position in repurchase agreements and government agency floating-rate
securities with fixed-rate Treasury and government agency securities with
longer maturities of six to 12 months.
As we end the first quarter of 1996, what is your outlook on rates?
With estimates of growth in the first quarter in the 2% to 3% range, the
economy clearly appears to be on firmer footing than it was in the fourth
quarter of 1995, when gross domestic product grew at only 0.5%. As such, the
Fed should feel no urgency to lower short-term rates further. By the same
token, however, with areas of softness in the economy still evident and with
consumer indebtedness at very high levels, we believe that there appears to be
no danger of the economy overheating to any great extent. As long as inflation
remains benign, the Fed should be content to sit on the sidelines for the time
being until confronted with signs of undue strength or weakness in economic
growth. With a neutral monetary policy, short-term interest rates should trade
in a range in the near future driven largely by technical factors.
Liberty U.S. Government Money Market Trust
Portfolio of Investments
--------------------------------------------------------------------------------
March 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
-------------- -------------------------------------------------------------------------------- --------------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--40.1%
------------------------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK NOTES--2.6%
--------------------------------------------------------------------------------
$ 18,700,000 6.015%-6.050%, 6/3/1996-6/13/1996 $ 18,702,744
-------------------------------------------------------------------------------- --------------
FEDERAL HOME LOAN BANK, FLOATING RATE NOTES--3.4%
--------------------------------------------------------------------------------
24,000,000 (a)5.310%-5.330%, 4/1/1996 23,995,241
-------------------------------------------------------------------------------- --------------
FEDERAL HOME LOAN MORTGAGE CORP., DISCOUNT NOTE--0.7%
--------------------------------------------------------------------------------
5,000,000 (b)5.373%, 6/24/1996 4,939,333
-------------------------------------------------------------------------------- --------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION NOTES--2.9%
--------------------------------------------------------------------------------
20,800,000 5.410%-5.910%, 6/28/1996-12/6/1996 20,791,175
-------------------------------------------------------------------------------- --------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION, DISCOUNT NOTES--6.8%
--------------------------------------------------------------------------------
48,500,000 (b)5.250%-5.951%, 4/11/1996-12/23/1996 47,737,648
-------------------------------------------------------------------------------- --------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION, FLOATING RATE NOTES--4.6%
--------------------------------------------------------------------------------
32,600,000 (a)5.120%-5.535%, 4/1/1996-4/8/1996 32,575,429
-------------------------------------------------------------------------------- --------------
STUDENT LOAN MARKETING ASSOCIATION, FLOATING RATE NOTES--4.1%
--------------------------------------------------------------------------------
29,220,000 (a)5.270%-5.520%, 4/2/1996-4/8/1996 29,233,962
-------------------------------------------------------------------------------- --------------
GOVERNMENT GUARANTEED FLOATING RATE NOTES--1.2%
--------------------------------------------------------------------------------
8,332,000 (a)Overseas Private Investment Corp., 5.820%-6.170%, 4/2/1996 8,332,000
-------------------------------------------------------------------------------- --------------
UNITED STATES TREASURY BILLS--3.5%
--------------------------------------------------------------------------------
25,500,000 (b)4.996%-5.248%, 9/19/1996-3/6/1997 24,648,184
-------------------------------------------------------------------------------- --------------
UNITED STATES TREASURY NOTES--10.3%
--------------------------------------------------------------------------------
72,000,000 6.500%-8.000%, 5/15/1996-12/31/1996 72,647,435
-------------------------------------------------------------------------------- --------------
TOTAL SHORT-TERM U.S. GOVERNMENT OBLIGATIONS 283,603,151
-------------------------------------------------------------------------------- --------------
(C) REPURCHASE AGREEMENTS--59.3%
------------------------------------------------------------------------------------------------
2,000,000 Barclays de Zoete Wedd Securities, Inc., 5.450%, dated 3/29/1996, due 4/1/1996 2,000,000
--------------------------------------------------------------------------------
23,000,000 (d)CS First Boston Corp., 5.240%, dated 3/1/1996, due 4/3/1996 23,000,000
--------------------------------------------------------------------------------
20,000,000 Deutsche Bank Government Securities, Inc., 5.450%, dated
3/29/1996, due 4/1/1996 20,000,000
--------------------------------------------------------------------------------
30,000,000 Fuji Securities, Inc., 5.450%, dated 3/29/1996, due 4/1/1996 30,000,000
--------------------------------------------------------------------------------
</TABLE>
Liberty U.S. Government Money Market Trust
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
-------------- ------------------------------------------------------------------------------- --------------
(C) REPURCHASE AGREEMENTS--CONTINUED
------------------------------------------------------------------------------------------------
$ 30,000,000 Goldman, Sachs & Company, 5.500%, dated 3/29/1996, due 4/1/1996 $ 30,000,000
--------------------------------------------------------------------------------
30,000,000 Greenwich Capital Markets, Inc., 5.625%, dated 3/29/1996, due
4/1/1996 30,000,000
--------------------------------------------------------------------------------
19,000,000 (d)J.P. Morgan Securities, Inc., 5.300%, dated 3/12/1996, due 6/11/1996 19,000,000
--------------------------------------------------------------------------------
30,000,000 (d)Lehman Brothers, Inc., 5.300%, dated 3/8/1996, due 4/10/1996 30,000,000
--------------------------------------------------------------------------------
30,000,000 Morgan Stanley & Co., Inc., 5.600%, dated 3/29/1996, due 4/1/1996 30,000,000
--------------------------------------------------------------------------------
25,000,000 Nomura Securities International, Inc., 5.450%, dated 3/29/1996, due 4/1/1996 25,000,000
--------------------------------------------------------------------------------
155,000,000 PaineWebber, Inc., 5.450%, dated 3/29/1996, due 4/1/1996 155,000,000
--------------------------------------------------------------------------------
25,000,000 Swiss Bank Corp., 5.430%, dated 3/29/1996, due 4/1/1996 25,000,000
-------------------------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS 419,000,000
-------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $ 702,603,151
-------------------------------------------------------------------------------- --------------
</TABLE>
(a) Denotes variable rate securities which show current rate and next demand
date.
(b) Discount rate at time of purchase.
(c) The repurchase agreements are fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investments in the repurchase agreements are through
participation in joint accounts with other Federated funds.
(d) Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase
agreement within seven days if the creditworthiness of the issuer is
downgraded.
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($706,930,955) at March 31, 1996.
(See Notes which are an integral part of the Financial Statements)
Liberty U.S. Government Money Market Trust
Statement of Assets and Liabilities
--------------------------------------------------------------------------------
March 31, 1996
<TABLE>
<S> <C> <C>
ASSETS:
-------------------------------------------------------------------------------------------------
Investments in repurchase agreements $ 419,000,000
---------------------------------------------------------------------------------
Investments in securities 283,603,151
--------------------------------------------------------------------------------- --------------
Total investments in securities, at amortized cost and value $ 702,603,151
-------------------------------------------------------------------------------------------------
Cash 934,057
-------------------------------------------------------------------------------------------------
Income receivable 4,178,389
-------------------------------------------------------------------------------------------------
Receivable for shares sold 1,378,789
------------------------------------------------------------------------------------------------- --------------
Total assets 709,094,386
-------------------------------------------------------------------------------------------------
LIABILITIES:
-------------------------------------------------------------------------------------------------
Payable for shares redeemed 1,268,702
---------------------------------------------------------------------------------
Income distribution payable 232,369
---------------------------------------------------------------------------------
Accrued expenses 662,360
--------------------------------------------------------------------------------- --------------
Total liabilities 2,163,431
------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 706,930,955 shares outstanding $ 706,930,955
------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE and Offering Price Per Share:
-------------------------------------------------------------------------------------------------
CLASS A SHARES: ($697,472,048 / 697,472,048 shares outstanding) $1.00
------------------------------------------------------------------------------------------------- --------------
CLASS B SHARES: ($9,458,907 / 9,458,907 shares outstanding) $1.00
------------------------------------------------------------------------------------------------- --------------
REDEMPTION PROCEEDS PER SHARE:
-------------------------------------------------------------------------------------------------
CLASS A SHARES: $1.00
------------------------------------------------------------------------------------------------- --------------
CLASS B SHARES: (94.50 / 100 of $1.00)* $0.95
------------------------------------------------------------------------------------------------- --------------
</TABLE>
*Under certain limited conditions, a "Contingent Deferred Sales Charge" of up to
5.50%, may be imposed. See "How to Redeem Shares" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
Liberty U.S. Government Money Market Trust
Statement of Operations
--------------------------------------------------------------------------------
Year Ended March 31, 1996
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
---------------------------------------------------------------------------------------------------
Interest $ 41,433,083
---------------------------------------------------------------------------------------------------
EXPENSES:
------------------------------------------------------------------------------------
Investment advisory fee $ 3,471,524
------------------------------------------------------------------------------------
Administrative personnel and services fee 533,071
------------------------------------------------------------------------------------
Custodian fees 204,137
------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses 2,867,713
------------------------------------------------------------------------------------
Directors'/Trustees' fees 14,780
------------------------------------------------------------------------------------
Auditing fees 17,907
------------------------------------------------------------------------------------
Legal fees 4,592
------------------------------------------------------------------------------------
Portfolio accounting fees 116,294
------------------------------------------------------------------------------------
Distribution services fee--Class B Shares 21,112
------------------------------------------------------------------------------------
Shareholder services fee--Class A Shares 1,754,180
------------------------------------------------------------------------------------
Shareholder services fee--Class B Shares 7,037
------------------------------------------------------------------------------------
Share registration costs 46,645
------------------------------------------------------------------------------------
Printing and postage 103,330
------------------------------------------------------------------------------------
Insurance premiums 12,466
------------------------------------------------------------------------------------
Taxes 16,191
------------------------------------------------------------------------------------
Miscellaneous 7,897
------------------------------------------------------------------------------------ -------------
Total expenses 9,198,876
------------------------------------------------------------------------------------
Waivers--
------------------------------------------------------------------------------------
Waiver of shareholder services fee--Class A Shares $ (1,403,344)
---------------------------------------------------------------------
Waiver of shareholder services fee--Class B Shares (3,941)
--------------------------------------------------------------------- -------------
Total waivers (1,407,285)
------------------------------------------------------------------------------------ -------------
Net expenses 7,791,591
--------------------------------------------------------------------------------------------------- -------------
Net investment income $ 33,641,492
--------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Liberty U.S. Government Money Market Trust
Statement of Changes in Net Assets
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
--------------------------------------------------------------------------
OPERATIONS--
--------------------------------------------------------------------------
Net investment income $ 33,641,492 $ 28,923,432
-------------------------------------------------------------------------- ------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS--
--------------------------------------------------------------------------
Distributions from net investment income
--------------------------------------------------------------------------
Class A Shares (33,531,445) (28,922,672)
--------------------------------------------------------------------------
Class B Shares (110,047) (760)
-------------------------------------------------------------------------- ------------------ ------------------
Change in net assets resulting from distributions to
shareholders (33,641,492) (28,923,432)
-------------------------------------------------------------------------- ------------------ ------------------
SHARE TRANSACTIONS--
--------------------------------------------------------------------------
Proceeds from sale of shares 409,842,113 353,799,566
--------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
distributions declared 30,349,015 25,919,444
--------------------------------------------------------------------------
Cost of shares redeemed (448,703,213) (470,182,983)
-------------------------------------------------------------------------- ------------------ ------------------
Change in net assets resulting from share transactions (8,512,085) (90,463,973)
-------------------------------------------------------------------------- ------------------ ------------------
Change in net assets (8,512,085) (90,463,973)
--------------------------------------------------------------------------
NET ASSETS:
--------------------------------------------------------------------------
Beginning of period 715,443,040 805,907,013
-------------------------------------------------------------------------- ------------------ ------------------
End of period $ 706,930,955 $ 715,443,040
-------------------------------------------------------------------------- ------------------ ------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
Liberty U.S. Government Money Market Trust
Financial Highlights--Class A Shares
--------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-----------------------
INCOME FROM INVESTMENT
OPERATIONS
-----------------------
Net investment income 0.05 0.04 0.02 0.03 0.05 0.07 0.08 0.07 0.06
-----------------------
LESS DISTRIBUTIONS
-----------------------
Distributions from net
investment income (0.05) (0.04) (0.02) (0.03) (0.05) (0.07) (0.08) (0.07) (0.06)
----------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
----------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (A) 4.89% 3.93% 2.34% 2.71% 4.66% 7.11% 8.24% 7.44% 6.07%
-----------------------
RATIOS TO AVERAGE NET
ASSETS
-----------------------
Expenses 1.10% 1.12% 1.01% 1.04% 1.03% 1.01% 1.02% 1.01% 1.01%
-----------------------
Net investment income 4.78% 3.83% 2.31% 2.69% 4.59% 6.89% 7.94% 7.19% 5.90%
-----------------------
Expense waiver/
reimbursement (b) 0.20% -- -- -- -- -- -- -- --
-----------------------
SUPPLEMENTAL DATA
-----------------------
Net assets,
end of period
(000 omitted) $697,472 $715,257 $805,907 $919,883 $1,173,685 $1,393,380 $1,443,347 $1,386,704 $1,358,694
-----------------------
<CAPTION>
<S> <C>
1987
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00
-----------------------
INCOME FROM INVESTMENT
OPERATIONS
-----------------------
Net investment income 0.05
-----------------------
LESS DISTRIBUTIONS
-----------------------
Distributions from net
investment income (0.05)
----------------------- ---------
NET ASSET VALUE,
END OF PERIOD $ 1.00
----------------------- ---------
TOTAL RETURN (A) 5.48%
-----------------------
RATIOS TO AVERAGE NET
ASSETS
-----------------------
Expenses 1.01%
-----------------------
Net investment income 5.39%
-----------------------
Expense waiver/
reimbursement (b) --
-----------------------
SUPPLEMENTAL DATA
-----------------------
Net assets,
end of period
(000 omitted) $1,467,182
-----------------------
</TABLE>
(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Liberty U.S. Government Money Market Trust
Financial Highlights--Class B Shares
--------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1996 1995(A)
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------
Net investment income 0.04 0.01
---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------------------------------
Distributions from net investment income (0.04) (0.01)
--------------------------------------------------------------------------------------------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
--------------------------------------------------------------------------------------------- --------- -----------
TOTAL RETURN (B) 4.04% 1.14%
---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------
Expenses 1.91% 1.95%*
---------------------------------------------------------------------------------------------
Net investment income 3.91% 4.15%*
---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.14% --
---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $9,459 $186
---------------------------------------------------------------------------------------------
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 17, 1994 (date of initial
public offering) to March 31, 1995.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
Liberty U.S. Government Money Market Trust
Notes to Financial Statements
--------------------------------------------------------------------------------
March 31, 1996
(1) ORGANIZATION
Liberty U.S. Government Money Market Trust (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:
Class A Shares and Class B Shares. The investment objective of the Trust is
stability of principal and current income consistent with stability of
principal.
(2) 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--The Trust's use of the amortized cost method to
value its portfolio securities is in accordance with Rule 2a-7 under the
Act.
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.
(3) 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 March 31, 1996, capital paid-in aggregated $706,930,955. Transactions in
shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995
CLASS A SHARES SHARES SHARES
<S> <C> <C>
Shares sold 391,777,877 353,555,803
----------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 30,256,243 25,918,684
----------------------------------------------------------------------------------
Shares redeemed (439,818,708) (470,124,864)
---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from Class A share transactions (17,784,588) (90,650,377)
---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1996 1995 (A)
CLASS B SHARES SHARES SHARES
<S> <C> <C>
Shares sold 18,064,236 243,763
----------------------------------------------------------------------------------
Shares issued to shareholders in payment of distributions declared 92,772 760
----------------------------------------------------------------------------------
Shares redeemed (8,884,505) (58,119)
---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from Class B share transactions 9,272,503 186,404
---------------------------------------------------------------------------------- -------------- --------------
Net change resulting from share transactions (8,512,085) (90,463,973)
---------------------------------------------------------------------------------- -------------- --------------
</TABLE>
(a) Reflects operations for the period from December 17, 1994 (date of initial
public offering) to March 31, 1995.
Liberty U.S. Government Money Market Trust
--------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Federated Advisers, the Trust's investment adviser,
(the "Adviser"), receives for its services an annual investment advisory fee
based on the average daily net assets of the Trust as follows: .50% on the first
$500 million, .475% on the next $500 million, .45% on the next $500 million,
.425% on the next $500 million, and .40% thereafter.
ADMINISTRATIVE FEE--Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The fee paid to FServ is based on the level of average
aggregate daily net assets of all funds advised by subsidiaries of Federated
Investors for the period. The administrative fee received during the period of
the Administrative Services Agreement shall be at least $125,000 per portfolio
and $30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE--The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Trust will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Trust to finance activities intended to
result in the sale of the Trust's Class B Shares. The Plan provides that the
Trust may incur distribution expenses up to 0.75% of the average daily net
assets of the Class B Shares, annually, to compensate FSC.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with Federated Shareholder Services ("FSS"), the Trust will pay FSS up to 0.25%
of average daily net assets of the Trust for the period. The fee paid to FSS is
used to finance certain services for shareholders and to maintain shareholder
accounts. FSS may voluntarily choose to waive any portion of its fee. FSS can
modify or terminate this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--FServ, through its
subsidiary, Federated Shareholder Services Company serves as transfer and
dividend disbursing agent for the Trust. The fee paid to FServ is based on the
size, type, and number of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also 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.
Report of Independent Public Accountants
--------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST:
We have audited the accompanying statement of assets and liabilities of Liberty
U.S. Government Money Market Trust (a Massachusetts business trust), including
the schedule of portfolio investments, as of March 31, 1996, 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 the financial
highlights for each of the periods presented. 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 audit 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 March
31, 1996, by correspondence with the custodian. 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
Liberty U.S. Government Money Market Trust as of March 31, 1996, 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 the
periods presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
May 10, 1996
Trustees Officers
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<TABLE>
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. J. Christopher Donahue
William J. Copeland President
James E. Dowd Edward C. Gonzales
Lawrence D. Ellis, M.D. Executive Vice President
Edward L. Flaherty, Jr. John W. McGonigle
Edward C. Gonzales Executive Vice President and Secretary
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
John E. Murray, Jr. David M. Taylor
Wesley W. Posvar Treasurer
Marjorie P. Smuts Charles H. Field
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government, the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal. Although money market funds seek to
maintain a stable net asset value of $1.00 per share, there is no assurance that
they will be able to do so.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Trust's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
[LOGO] FEDERATED INVESTORS
Since 1955
Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors.
Cusip 531485100
Cusip 531485209
