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Liberty U.S. Government Money Market Trust
18TH ANNUAL REPORT
MARCH 31, 1998
ESTABLISHED 1980
Dear Shareholder:
Liberty U.S. Government Money Market Trust was created in 1980, and I am pleased
to present its 18th Annual Report. This report covers the 12-month period from
April 1, 1997 through March 31, 1998. It begins with an interview with portfolio
manager, Susan R. Hill, Vice President, Federated Advisers. Following her
discussion, you will find a complete listing of the trust's holdings and the
publication of the trust's financial statements.
This money market fund keeps your invested cash pursuing income--and
accessible--every day through a professionally managed portfolio of U.S.
government money market securities. This trust also offers you the comfort of
stability: it is managed to keep the value of your investment at a stable $1.00
per share, since its inception in 1980.*
Over the 12-month reporting period, the trust paid dividends totaling $0.05 per
share and $0.04 per share for Class A and B Shares, respectively. At the end of
the reporting period, the trust's net assets of more than $630 million were
invested across 29 securities.
Thank you for keeping your ready cash working for you on a daily basis with
Liberty U.S. Government Money Market Trust. As always, we welcome your
comments and suggestions.
Sincerely,
J. Christopher Donahue
President
May 15, 1998
* 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 the trust is not insured or guaranteed by the U.S. government.
WHAT IS YOUR REVIEW OF THE ECONOMIC AND INTEREST RATE ENVIRONMENT DURING THE
TRUST'S FISCAL YEAR ENDED MARCH 31, 1998?
During the trust's fiscal year, the Federal Reserve Board (the "Fed") kept
monetary policy unchanged despite robust economic growth in the U.S. The economy
posted a rate of growth of over 3% for the last three quarters of 1997, and
continued at this above-trend pace in 1998. Over most of the spring and summer
of last year, the continued benign inflation picture soothed a market that would
otherwise have been unsettled at such a vigorous pace of growth. Toward the end
of the third quarter of 1997, signs of tight labor markets began to build
expectations of a need for a tightening by the Fed as added insurance against
inflation. However, dramatic declines in the Asian equity markets in the fourth
quarter of 1997 curtailed this expectation, and overseas developments dominated
the rest of the year. Concern over the situation and its resulting impact on the
domestic economy abated somewhat by the end of the reporting period in March
1998. The Fed remained on hold, content to wait until the economic picture
became more clear.
Movements in short-term Treasury securities -- particularly Treasury bills --
were strongly influenced by technical factors over the reporting period. A
reduction in the overall size of Treasury bills due to improvement in the
federal budget deficit kept these securities well-bid and trading well below the
Fed Funds Target Rate. In addition, a periodic flight-to-quality to these
securities occurred by investors seeking a safe haven from the turmoil overseas
also drove yields lower. As a result, yields on short-term agency securities
better reflected the underlying economic and inflation fundamentals, and were
the preferred investment over the reporting period. The yield on the one-year
agency discount note, for example, began the reporting period at close to 6.00%.
This was on the heels of the last policy change by the Fed in late March 1997 --
a 25 basis point tightening to bring the Fed Funds Target Rate to its current
level of 5.50%. It declined steadily to 5.60% by July as inflation remained
friendly, and traded between 5.60% to 5.85% for the remainder of the year. The
yield then dropped to 5.40% by early January, as fears flourished that the
as-yet-unknown impact of the financial troubles in Asia on the domestic economy
might be greater than previously thought. The yield then rose to end the
reporting period close to 5.60% as growth continued strong.
DID YOU MAINTAIN A NEUTRAL AVERAGE MATURITY FOR THE TRUST DURING THE PERIOD?
The trust remained in a 35-45 day average maturity target range over the
reporting period, a neutral stance, and moved within that range according to
relative value opportunities. With the yield curve remaining quite flat, the
trust maintained a fairly significant portion of its portfolio in repurchase
agreements. The portfolio structure remained barbelled. Because of the technical
influences in the Treasury market, which kept that sector expensive, we
concentrated our purchases in U.S. government agency securities.
AS WE APPROACH MID-1998, WHERE DOES THE SHORT-TERM MARKET APPEAR TO BE HEADING?
The jury is still out on the extent of the impact that the crisis in Asian
economies will have on U.S. growth. As a result, the Fed, although certain to be
troubled by persistent above-trend growth in an environment where labor markets
are tight, will likely remain on hold until the effect is better known. Much of
this should be revealed over the second quarter of 1998. If the drag on the U.S.
economy is not as great as once feared, expectations of a need for Fed
tightening may then resurface. In the near term, however, market movements will
likely reflect technical factors as well as fundamental ones, with a reduction
in the supply of shorter term Treasury securities keeping the front end of the
market well-bid.
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
PORTFOLIO OF INVESTMENTS
MARCH 31, 1998
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
SHORT-TERM U.S.GOVERNMENT OBLIGATIONS --34.6%
$ 6,500,000 Federal Farm Credit Bank Notes -- 1.0%
5.50% - 5.60%, 10/1/1998 - 4/1/1999 $ 6,491,856
13,000,000 (a) Federal Farm Credit Bank Floating Rate Note
-- 2.1%
5.529%, 5/1/1998 12,995,916
19,600,000 Federal Home Loan Bank Notes -- 3.1%
5.50% - 6.025%, 4/15/1998 - 3/26/1999 19,596,746
12,000,000 (b) Federal Home Loan Bank, Discount Notes -- 1.9%
5.38% - 5.50%, 5/15/1998 - 6/22/1998 11,899,102
10,000,000 (a) Federal Home Loan Bank, Floating Rate Note --
1.6%
5.454%, 4/23/1998 9,996,781
9,000,000 (a) Federal Home Loan Mortgage Corp., Floating
Rate Note -- 1.4%
5.464%, 4/20/1998 8,998,425
5,000,000 Federal Home Loan Mortgage Corp. Notes --
0.8%
5.605% - 5.84%, 4/8/1998 - 3/12/1999 5,000,362
23,500,000 Federal National Mortgage Association Notes
-- 3.7%
5.36% - 7.00%, 4/17/1998 - 3/5/1999 23,503,701
66,000,000 (b) Federal National Mortgage Association,
Discount Notes -- 10.3%
5.30% - 5.555%, 4/9/1998 - 12/7/1998 64,894,993
34,000,000 (a) Federal National Mortgage Association,
Floating Rate Notes -- 5.4%
5.478% - 5.668%, 4/1/1998 - 4/17/1998 33,985,290
6,000,000 Student Loan Marketing Association Notes --
1.0%
5.58% - 5.83%, 10/29/1998 - 3/11/1999 5,999,665
9,000,000 (a) Student Loan Marketing Association, Floating
Rate Note -- 1.4%
5.688%, 4/7/1998 8,997,494
6,000,000 United States Treasury Notes -- 0.9%
5.875% - 6.250%, 7/31/1998 - 1/31/1999 6,012,274
TOTAL SHORT-TERM U.S. GOVERNMENT OBLIGATIONS 218,372,605
(C)REPURCHASE AGREEMENTS--67.6%
25,000,000 ABN AMRO Chicago Corp., 6.10%, dated 25,000,000
3/31/1998, due 4/1/1998
8,300,000 Barclays de Zoete Wedd Securities, Inc.,
5.95%, dated 3/31/1998,
due 4/1/1998 8,300,000
</TABLE>
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(C)REPURCHASE AGREEMENTS -- CONTINUED
$ 25,000,000 Bear, Stearns and Co., 6.05%, dated $ 25,000,000
3/31/1998, due 4/1/1998
14,000,000 (d) Chase Government Securities, Inc., 5.55%,
dated 1/20/1998,
due 4/20/1998 14,000,000
12,000,000 (d) Chase Government Securities, Inc., 5.55%,
dated 1/27/1998,
due 4/6/1998 12,000,000
100,000,000 Fuji Government Securities, Inc., 6.05%,
dated 3/31/1998,
due 4/1/1998 100,000,000
12,000,000 (d) Goldman Sachs Group, LP, 5.52%, dated 12,000,000
3/10/1998, due 5/11/1998
10,000,000 (d) Goldman Sachs Group, LP, 5.52%, dated 10,000,000
3/11/1998, due 5/11/1998
10,000,000 (d) Goldman Sachs Group, LP, 5.55%, dated 10,000,000
2/26/1998, due 4/27/1998
20,000,000 HSBC Securities, Inc., 6.05%, dated
3/31/1998, due 4/1/1998 20,000,000
15,000,000 (d) J.P. Morgan & Co., Inc., 5.52%, dated 15,000,000
3/11/1998, due 5/11/1998
15,000,000 (d) Lehman Brothers, Inc., 5.52%, dated 1/9/1998, 15,000,000
due 4/6/1998
100,000,000 PaineWebber Group, Inc., 6.05%, dated 100,000,000
3/31/1998, due 4/1/1998
20,000,000 Prudential Securities, Inc., 6.10%, dated 20,000,000
3/31/1998, due 4/1/1998
20,000,000 Toronto Dominion Securities (USA) Inc.,
6.10%, dated 3/31/1998, due 4/1/1998 20,000,000
20,000,000 UBS Securities, Inc., 6.05%, dated 3/31/1998, 20,000,000
due 4/1/1998
TOTAL REPURCHASE AGREEMENTS 426,300,000
TOTAL INVESTMENTS (AT AMORTIZED COST)(E) $ 644,672,605
</TABLE>
(a) Floating variable rate securities with the 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
($630,776,299) at March 31, 1998.
The following acronym is used throughout this portfolio:
LP --Limited Partnership
(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, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments in repurchase agreements $ 426,300,000
Investments in securities 218,372,605
Total investments in securities, at amortized cost and $ 644,672,605
value
Income receivable 1,966,221
Receivable for shares sold 1,080,606
Total assets 647,719,432
LIABILITIES:
Payable for investments purchased 3,495,202
Payable for shares redeemed 12,320,445
Income distribution payable 214,627
Payable to Bank 456,418
Accrued expenses 456,441
Total liabilities 16,943,133
NET ASSETS for 630,776,299 shares outstanding $ 630,776,299
NET ASSET VALUE AND OFFERING PRICE PER SHARE:
CLASS A SHARES: $611,630,078 / 611,630,078 shares $1.00
outstanding
CLASS B SHARES: $19,146,221 / 19,146,221 shares $1.00
outstanding
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, 1998
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 36,143,136
EXPENSES:
Investment advisory fee $ 3,175,542
Administrative personnel and services fee 484,666
Custodian fees 121,219
Transfer and dividend disbursing agent 2,454,893
fees and expenses
Directors'/Trustees' fees 19,985
Auditing fees 14,871
Legal fees 5,018
Portfolio accounting fees 118,126
Distribution services fee--Class B Shares 144,718
Shareholder services fee--Class A Shares 1,557,309
Shareholder services fee--Class B Shares 48,239
Share registration costs 69,037
Printing and postage 119,971
Insurance premiums 6,502
Taxes 16,969
Miscellaneous 8,487
Total expenses 8,365,552
Waivers --
Waiver of investment advisory fee $ (126,845) Waiver of shareholder services
fee--Class A Shares (1,245,847) Waiver of shareholder services fee--Class B
Shares (5,881)
Total waivers (1,378,573)
Net expenses 6,986,979
Net investment income $ 29,156,157
</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,
1998 1997
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 29,156,157 $ 29,009,425
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Class A Shares (28,452,044) (28,724,728)
Class B Shares (704,113) (284,697)
Change in net assets resulting from distributions to shareholders (29,156,157) (29,009,425)
SHARE TRANSACTIONS--
Proceeds from sale of shares 790,819,804 542,845,500
Net asset value of shares issued to shareholders in payment
of distributions declared 26,222,787 28,470,910
Cost of shares redeemed (873,334,408) (591,179,249)
Change in net assets resulting from share transactions (56,291,817) (19,862,839)
Change in net assets (56,291,817) (19,862,839)
NET ASSETS:
Beginning of period 687,068,116 706,930,955
End of period $ 630,776,299 $ 687,068,116
</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,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.04 0.05 0.04 0.02
LESS DISTRIBUTIONS
Distributions from net investment income (0.05) (0.04) (0.05) (0.04) (0.02)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(A) 4.67% 4.43% 4.89% 3.93% 2.34%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.06% 1.06% 1.10% 1.12% 1.01%
Net investment income 4.57% 4.33% 4.78% 3.83% 2.31%
Expense waiver/reimbursement(b) 0.22% 0.29% 0.20% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $611,630 $658,731 $697,472 $715,257 $805,907
</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,
1998 1997 1996 1995(A)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.04 0.04 0.04 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.04) (0.04) (0.04) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 3.71% 3.59% 4.04% 1.14%
RATIOS TO AVERAGE NET ASSETS
Expenses 1.98% 1.87% 1.91% 1.95%*
Net investment income 3.65% 3.58% 3.91% 4.15%*
Expense waiver/reimbursement(c) 0.05% 0.23% 0.14% --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $19,146 $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, 1998
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 uses the amortized cost method to value its
portfolio securities 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,
1998 1997
CLASS A SHARES SHARES SHARES
<S> <C> <C>
Shares sold 730,207,814 503,677,965
Shares issued to shareholders 25,602,143 28,224,483
in payment of distributions
declared
Shares redeemed (802,910,654) (570,643,721)
Net change resulting from (47,100,697) (38,741,273)
Class A Share transactions
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997
CLASS B SHARES SHARES SHARES
<S> <C> <C>
Shares sold 60,611,990 39,167,535
Shares issued to shareholders in 620,644 246,427
payment of distributions declared
Shares redeemed (70,423,754) (20,535,528)
Net change resulting from Class (9,191,120) 18,878,434
B Share transactions
Net change resulting from share (56,291,817) (19,862,839)
transactions
</TABLE>
At March 31, 1998, capital paid-in aggregated $630,776,299.
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 nets
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.
5. YEAR 2000 ISSUE
Similar to other financial organizations, the Trust could be adversely affected
if the computer systems used by the Trust's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Trust's Adviser and Administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Trust.
REPORT OF 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, 1998, 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, 1998, by
correspondence with the custodian and brokers. As to securities purchased but
not yet received, we requested confirmation from brokers and, when replies were
not received, we carried out other alternative procedures. 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, 1998, 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 13, 1998
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
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
Matthew S. Hardin
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 Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 531485100
Cusip 531485209
8042603 (5/98)
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