[Graphic]
Federated Investors
Liberty U.S. Government Money Market Trust
17th Annual Report
March 31, 1997
Established 1980
Dear Shareholder:
The Liberty U.S. Government Money Market Trust was established in
1980, and I am pleased to present the 17th Annual Report to
Shareholders. The report covers the 12-month period from April 1,
1996, through March 31, 1997. The report begins with an interview with
the trust's portfolio manager, Susan R. Hill, Vice President,
Federated Advisers, and follows with a complete listing of the trust's
holdings and its financial statements.
This money market fund keeps your ready cash working -- and accessible
- -- every day through a professionally managed portfolio of U.S.
government money market 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.*
Over the 12-month reporting period, Class A and Class B shareholders
each received dividends totaling $0.04 per share from the trust's
portfolio. At the end of the reporting period, the trust's net assets
stood at more than $687 million.
Thank you for using Liberty U.S. Government Money Market Trust as a
convenient way to pursue daily income on your ready cash. We welcome
your comments and suggestions.
Sincerely,
[Graphic]
J. Christopher Donahue
President
May 15, 1997
* 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. An investment in this fund is neither insured nor
guaranteed by the U.S.
government.
[Graphic]
Susan R. Hill, CFA
Vice President
Federated Advisers
[Graphic]
WHAT IS YOUR ANALYSIS OF THE INTEREST RATE ENVIRONMENT DURING THE
12-MONTH FISCAL YEAR?
Although it did not occur until near the very end of the reporting
period, the fiscal year was marked by the first change in monetary
policy in over a year. On March 25, 1997, the Federal Reserve Board
(the "Fed"), in the face of stronger than expected demand, voted to
raise the federal funds target rate from 5.25% to 5.50%. The move was
viewed as being preemptive against the threat of future inflationary
pressures, possibly brought about by tight labor market conditions.
Until that point, movements in interest rates reflected shifting
market sentiment about the need for the Fed to move to a more
restrictive policy. The second quarter of 1996 was characterized by
much stronger than expected growth and fueled by consumer spending and
housing. Signs of slower growth began to emerge in the third quarter
of 1996, temporarily allaying market fears about inflation, but then
picked up once again through the fourth quarter of 1996 and into 1997.
With inflation still appearing to be benign, the market tolerated the
pace of growth over this period. However, Fed Chairman Alan
Greenspan's Humphrey-Hawkins Testimony before Congress in late
February marked a turning point for the short-term government market
- -- and the bond and equity markets as well. At the meeting, his
relatively hawkish statements revealed fears at the Fed that the
transitory factors, which had been keeping inflation under control in
the face of fairly robust growth, may be coming to an end. The ensuing
weeks brought continued evidence of persistent strength, which ended
in the Fed's action at the Federal Open Market Committee in late
March.
For most of the reporting period, movements in short-term interest
rates bounced back and forth as sentiment swayed regarding the need
for a more restrictive policy. The yield on the six-month Treasury
bill, for example, rose from 5.00% at the beginning of April to 5.50%
in early June as conviction grew that the next change in monetary
policy might be a tightening. The next few months were characterized
by significant market volatility and debate over the sustainability of
the economy. Interest rate movements reflected the uncertainty -- the
yield on the six-month Treasury bill rose to 5.60% in early July, fell
to 5.30% by early August, rose to 5.60% by early September, and,
finally, fell to 5.25% by the end of the month. Rates then traded
within a range over the fourth quarter and into early 1997 -- with the
six-month Treasury bill moving between 5.20% to 5.40% -- as the
continued friendly inflation picture provided some comfort to market
participants. Finally, rates began to rise in late February, and by
the time the Fed tightened in late March, had built in much of the
expectation regarding the move. The six-month bill rose steadily from
5.20% to close at 5.60% by the end of the reporting period.
[Graphic]
WHAT WERE YOUR STRATEGIES FOR LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
DURING THE REPORTING PERIOD?
As signs of economic strength became more apparent, we lowered the
average maturity target range of the trust from between 40 and 50 days
to between 35 and 45 days in early June, and remained in that range
throughout the remainder of the reporting period. As expectation of an
imminent Fed tightening grew in the first quarter of 1997, we moved
the average maturity of the portfolio to the lower half of the target
range in anticipation of higher interest rates.
Once an average maturity range is targeted, the portfolio seeks to
maximize performance through ongoing relative value analysis. The
trust reduced its exposure to the Treasury market in favor of
government agency securities, as the yield advantage offered in this
sector proved attractive. The trust's portfolio remained barbelled in
structure, which combined a significant portion in repurchase
agreements and floating rate securities with purchases of longer-term
securities with six- to twelve-month Treasury and government agency
securities. This portfolio structure continued to provide a
competitive yield.
[Graphic]
WHAT IS YOUR OUTLOOK FOR RATES FOR THE BALANCE OF 1997?
Although current expectations are that the Fed will find cause to
tighten monetary policy further in 1997 -- perhaps as soon as in the
second quarter -- it is also anticipated that the overall tightening
cycle will not be long in terms of magnitude or duration. The
preemptive move by the Fed should help to preclude the need for more
aggressive action down the road by preventing the buildup of
inflationary pressures. We would look to see moderately higher
short-term interest rates throughout the course of the year, but not
to the extent evidenced in the last tightening cycle in 1994. As such,
we will likely continue in our modestly defensive stance for the
portfolio until market conditions indicate otherwise.
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
PORTFOLIO OF INVESTMENTS
MARCH 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS -- 37.7%
$ 4,000,000 Federal Farm Credit Bank
Note -- 0.6%
5.60%, 6/3/1997 $ 3,999,031
4,000,000 (a)Federal Farm Credit Bank,
Discount Note -- 0.6%
5.38%, 5/27/1997 3,967,831
13,000,000 (b)Federal Farm Credit Bank,
Floating Rate Note -- 1.9%
5.39%, 5/1/1997 12,989,808
9,700,000 Federal Home Loan Bank
Notes -- 1.4%
5.46% - 5.71%, 11/18/1997 9,692,835
- 3/24/1998
11,500,000 (a)Federal Home Loan Bank,
Discount Notes -- 1.7%
5.45% - 5.48%, 6/30/1997 - 11,336,150
7/15/1997
12,500,000 (b)Federal Home Loan Bank,
Floating Rate Notes -- 1.8%
5.35% - 5.56%, 4/21/1997 - 12,492,124
6/4/1997
7,000,000 Federal Home Loan Mortgage
Corp. Notes -- 1.0%
5.64% - 5.72%, 8/28/1997 - 6,992,279
3/17/1998
3,000,000 Federal National Mortgage
Association Note -- 0.4%
5.79%, 3/25/1998 2,994,292
65,750,000 (a)Federal National Mortgage
Association, Discount Notes
-- 9.5%
5.17% - 5.27%, 4/10/1997 - 65,105,746
7/14/1997
52,600,000 (b)Federal National Mortgage
Association, Floating Rate
Notes -- 7.7%
5.293% - 5.61%, 4/2/1997 - 52,591,448
4/17/1997
3,000,000 Student Loan Marketing
Association Note -- 0.4%
5.62%, 6/30/1997 2,997,360
20,000,000 (b)Student Loan Marketing
Association, Floating Rate
Notes -- 2.9%
5.60% - 5.66%, 4/8/1997 19,996,600
</TABLE>
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS--CONTINUED
$ 1,250,000 (b)Government Guaranteed
Floating Rate Notes -- 0.2%
Trinidad Nitrogen Co, $ 1,250,000
6.11%, 4/8/1997
2,290,000 (b)Government Guaranteed
Floating Rate Notes -- 0.3%
Overseas Private 2,290,000
Investment Corp., 6.55%,
4/8/1997
2,000,000 (a)United States Treasury
Bill -- 0.3%
5.30%, 3/5/1998 1,900,478
48,000,000 United States Treasury
Notes -- 7.0%
5.625% - 7.875%, 6/30/1997 48,249,080
- 2/15/1998
TOTAL SHORT-TERM U.S. 258,845,062
GOVERNMENT OBLIGATIONS
(C)REPURCHASE AGREEMENTS -- 61.4%
30,000,000 Bear, Stearns and Co., 30,000,000
6.50%, dated 3/31/1997,
due 4/1/1997
30,000,000 CIBC Wood Gundy Securities
Corp., 6.50%, dated
3/31/1997, due
4/1/1997 30,000,000
40,000,000 Fuji Government 40,000,000
Securities, Inc., 6.50%,
dated 3/31/1997, due
4/1/1997
30,000,000 Goldman, Sachs & Company, 30,000,000
6.55%, dated 3/31/1997,
due 4/1/1997
30,000,000 Greenwich Capital Markets, 30,000,000
Inc., 6.55%, dated
3/31/1997, due 4/1/1997
10,000,000 (d)Merrill Lynch, Pierce,
Fenner and Smith, 5.33%,
dated 3/6/1997,
due 4/7/1997 10,000,000
10,000,000 (d)Merrill Lynch, Pierce,
Fenner and Smith, 5.34%,
dated 1/30/1997,
due 4/1/1997 10,000,000
10,000,000 Merrill Lynch, Pierce,
Fenner and Smith, 6.50%,
dated 3/31/1997,
due 4/1/1997 10,000,000
30,000,000 Morgan Stanley Group, 30,000,000
Inc., 6.50%, dated
3/31/1997, due 4/1/1997
</TABLE>
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS--CONTINUED
$ 125,000,000 PaineWebber Group, Inc., $ 125,000,000
6.50%, dated 3/31/1997,
due 4/1/1997
30,000,000 Prudential Securities, 30,000,000
Inc., 6.55%, dated
3/31/1997, due 4/1/1997
16,800,000 Swiss Bank Capital 16,800,000
Markets, 6.42%, dated
3/31/1997, due 4/1/1997
10,000,000 (d)UBS Securities, Inc., 10,000,000
5.35%, dated 1/30/1997, due
4/1/1997
20,000,000 UBS Securities, Inc., 20,000,000
6.50%, dated 3/31/1997,
due 4/1/1997
TOTAL REPURCHASE 421,800,000
AGREEMENTS
TOTAL INVESTMENTS (AT $ 680,645,062
AMORTIZED COST)(E)
</TABLE>
(a) Discount rate at time of purchase.
(b) Denotes variable rate securities with current rate and next demand
date.
(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.
(e) Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($687,068,116) at March 31, 1997.
(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, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $421,800,000
Investments in securities 258,845,062
Total investments in securities, at amortized cost and $ 680,645,062
value
Cash 2,184,162
Income receivable 2,102,039
Receivable for shares sold 4,638,438
Total assets 689,569,701
LIABILITIES:
Payable for shares redeemed 1,975,663
Income distribution payable 228,017
Accrued expenses 297,905
Total liabilities 2,501,585
NET ASSETS for 687,068,116 shares outstanding $ 687,068,116
NET ASSET VALUE AND OFFERING PRICE PER SHARE:
CLASS A SHARES: $658,730,775 / 658,730,775 shares $1.00
outstanding
CLASS B SHARES: $28,337,341 / 28,337,341 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 "Contingent Deferred Sales Charge" 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, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 36,192,470
EXPENSES:
Investment advisory fee $ 3,311,087
Administrative personnel and services 506,849
fee
Custodian fees 143,455
Transfer and dividend disbursing agent 3,029,995
fees and expenses
Directors'/Trustees' fees 20,203
Auditing fees 15,188
Legal fees 4,915
Portfolio accounting fees 119,206
Distribution services fee -- Class B 59,570
Shares
Shareholder services fee -- Class A 1,657,031
Shares
Shareholder services fee -- Class B 19,857
Shares
Share registration costs 67,559
Printing and postage 147,756
Insurance premiums 8,234
Taxes 20,663
Miscellaneous 8,592
Total expenses 9,140,160
Waivers --
Waiver of investment advisory fee $ (620,370)
Waiver of shareholder services fee (1,325,625)
-- Class A Shares
Waiver of shareholder services fee (11,120)
-- Class B Shares
Total waivers (1,957,115)
Net expenses 7,183,045
Net investment income $ 29,009,425
</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,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 29,009,425 $ 33,641,492
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Class A Shares (28,724,728) (33,531,445)
Class B Shares (284,697) (110,047)
Change in net assets resulting from
distributions
to shareholders (29,009,425) (33,641,492)
SHARE TRANSACTIONS --
Proceeds from sale of shares 542,845,500 409,842,113
Net asset value of shares issued to shareholders
in
payment of distributions declared 28,470,910 30,349,015
Cost of shares redeemed (591,179,249) (448,703,213)
Change in net assets resulting from share (19,862,839) (8,512,085)
transactions
Change in net assets (19,862,839) (8,512,085)
NET ASSETS:
Beginning of period 706,930,955 715,443,040
End of period $ 687,068,116 $ 706,930,955
</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,
1997 1996 1995 1994 1993 1992 1991
1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C> <C>
NET ASSET VALUE,
BEGINNING OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
Net investment 0.04 0.05 0.04 0.02 0.03 0.05 0.07
0.08 0.07 0.06
income
LESS DISTRIBUTIONS
Distributions
from
net investment (0.04) (0.05) (0.04) (0.02) (0.03) (0.05) (0.07)
(0.08) (0.07) (0.06)
income
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $
1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 4.43% 4.89% 3.93% 2.34% 2.71% 4.66% 7.11%
8.24% 7.44% 6.07%
RATIOS TO AVERAGE
NET ASSETS
Expenses 1.06% 1.10% 1.12% 1.01% 1.04% 1.03% 1.01%
1.02% 1.01% 1.01%
Net investment 4.33% 4.78% 3.83% 2.31% 2.69% 4.59% 6.89%
7.94% 7.19% 5.90%
income
Expense waiver/
reimbursement(b) 0.29% 0.20% -- -- -- -- --
- -- -- --
SUPPLEMENTAL DATA
Net assets, end
of period
(000 omitted) $658,731 $697,472 $715,257 $805,907 $919,883 $1,173,685 $1,393,380
$1,443,347 $1,386,704 $1,358,694
</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,
1997 1996 1995(A)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 0.04 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.04) (0.04) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 3.59% 4.04% 1.14%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.87% 1.91% 1.95%*
Net investment income 3.58% 3.91% 4.15%*
Expense waiver/reimbursement(c) 0.23% 0.14% --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $28,337 $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, 1997
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
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.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1997 1996
CLASS A SHARES SHARES SHARES
<S> <C> <C>
Shares sold 503,677,965
391,777,877
Shares issued to shareholders in payment of distributions declared 28,224,483
30,256,243
Shares redeemed (570,643,721)
(439,818,708)
Net change resulting from Class A Share transactions (38,741,273)
(17,784,588)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
1997 1996
CLASS B SHARES SHARES SHARES
<S> <C> <C>
Shares sold 39,167,535
18,064,236
Shares issued to shareholders in payment of distributions declared 246,427
92,772
Shares redeemed (20,535,528)
(8,884,505)
Net change resulting from Class B Share transactions 18,878,434
9,272,503
Net change resulting from share transactions (19,862,839)
(8,512,085)
</TABLE>
At March 31, 1997, capital paid-in aggregated $687,068,116.
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: 0.50% on the first $500 million, 0.475% on the next
$500 million, 0.45% on the next $500 million, 0.425% on the next $500
million, and 0.40% thereafter.
The Adviser may voluntarily choose to waive any portion of its fee.
The Adviser can modify or terminate this voluntary waiver at any time
at its sole discretion.
ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Trust with
administrative personnel and services. The fee paid to FServ is based
on the level of average aggregate daily net assets of all funds
advised by subsidiaries of Federated Investors for the period. The
administrative fee received during the period of the Administrative
Services Agreement shall be at least $125,000 per portfolio and
$30,000 per each additional class of shares.
DISTRIBUTION SERVICES FEE -- The Trust has adopted a Distribution Plan
(the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of
the Plan, the Trust will compensate Federated Securities Corp.
("FSC"), the principal distributor, from the net assets of the Trust
to finance activities intended to result in the sale of the Trust's
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
("FSSC") serves as transfer and dividend disbursing agent for the
Trust. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES -- FServ maintains the Trust's accounting
records for which it receives a fee. The fee is based on the level of
the Trust's average daily net assets for the period, plus
out-of-pocket expenses.
GENERAL -- Certain of the Officers and Trustees of the Trust are
Officers and Directors or Trustees of the above companies.
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 of investments,
as of March 31, 1997, 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 audit 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, 1997, by
correspondence with the custodian and brokers. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Liberty U.S. Government Money Market Trust as of
March 31, 1997, 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 financial highlights for the period presented, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Pittsburgh, Pennsylvania
April 24, 1997
TRUSTEES
John F. Donahue
Thomas G. Bigley
John T. Conroy, Jr.
William J. Copeland
James E. Dowd
Lawrence D. Ellis, M.D.
Edward L. Flaherty, Jr.
Edward C. Gonzales
Peter E. Madden
Gregor F. Meyer
John E. Murray, Jr.
Wesley W. Posvar
Marjorie P. Smuts
OFFICERS
John F. Donahue
Chairman
J. Christopher Donahue
President
Edward C. Gonzales
Executive Vice President
John W. McGonigle
Executive Vice President, Treasurer, and Secretary
Richard B. Fisher
Vice President
S. Elliott Cohan
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. 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.
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Cusip 531485100
Cusip 531485209
8042603 (5/97)
