- --------------------------------------------------------------------------------
FEDERATED
- --------------------------------------------------------------------------------
GNMA
- --------------------------------------------------------------------------------
TRUST
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1994
---------------------------------------------------
FEDERATED SECURITIES CORP.
(LOGO)
- ---------------------------------------------
---------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
---------------------------------------------------
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
314184102
314184201 -----------------------------------------------
8083002 (7/94)
PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Federated
GNMA Trust (the "Trust"). The report covers the six-month period ended July 31,
1994, and includes the Trust's Investment Review, Portfolio of Investments, and
Financial Statements. In addition, Financial Highlights tables have been
included for Institutional Shares and Institutional Service Shares.
Over the six-month period, the Trust continued to pursue attractive income
through a diversified portfolio of long-term Government National Mortgage
Association ("GNMA") securities. In addition, the Trust held a minor position in
repurchase agreements. Dividends paid by the Trust during this period totaled
$67 million, or $0.40 per share for Institutional Shares and $0.39 per share for
Institutional Service Shares. The Trust's net asset value ended the period at
$10.89, while total net assets stood at $1.8 billion.
We appreciate your continued confidence in Federated GNMA Trust. As always, we
welcome your questions and comments.
Sincerely,
Glen R. Johnson
President
September 15, 1994
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The Federated GNMA Trust (the "Trust"), is designed for shareholders seeking
participation in a professionally managed portfolio of GNMAs guaranteed as to
the payment of principal and interest by the U.S. government. (Trust shares are
not guaranteed.) The Trust offers daily liquidity, credit control and other
advantages over comparable Treasuries while at the same time allowing investors
to avoid the complexities of managing a portfolio of mortgage-backed securities.
Shareholders receive a diversified portfolio managed under a set of highly
conservative disciplines.
The Trust is managed for specific maturity levels according to our assumptions
on market risk and volatility. Current strategy stresses an effective duration
of 4.8 years, which is slightly shorter than the Salomon Brothers GNMA
single-family aggregate market weighted average effective duration. This risk
profile coincides with the opinion that the economy is experiencing steady
growth and shortens the threat of added risk premiums due to rising inflation.
Current asset allocation reflects a 93% investment in GNMA mortgage securities
with a diversified range of coupons averaging 8%. During the last six months,
purchases favored current coupon GNMA securities. This sector has benefited from
the anticipated slowdown in prepayment rates. The attractive coupon stream from
these securities may enhance total return performance if the market continues
its bearish sentiment while at the same time offering a higher degree of
liquidity. The other 7% of the portfolio has been committed to the 10-year area
of the U.S. Treasury market. The U.S. Treasuries were purchased in lieu of
discount GNMA securities due to concern over prepayment speeds not fully
reflecting the extension risk in these discount GNMA. This overall strategy
pursues competitive income distributions and total return over time for
investors.
As of July 31, 1994, total net assets were $1.8 billion and the average 30-day
net yield as calculated under Securities and Exchange Commission guidelines was
7.15% for Institutional Shares and 6.95% for Institutional Service Shares.*
Rated AAAf by Standard & Poor's Ratings Group, the Trust remains committed to
pursuing competitive yields.**
* Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, redeemed, may
be worth more or less than their original cost.
** Ratings are subject to change.
FEDERATED GNMA TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ -------------------------------------------------------------- --------------
<C> <C> <S> <C>
LONG-TERM GOVERNMENT OBLIGATIONS--99.8%
- --------------------------------------------------------------------------------
* GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--92.8%
--------------------------------------------------------------
$ 25,382,306 6.00%, 4/20/2024-5/20/2024 $ 24,997,264
--------------------------------------------------------------
60,000,000 6.50%, 7/20/2024 60,000,000
--------------------------------------------------------------
252,458,700 7.00%, 2/15/2023-5/15/2024 237,230,391
--------------------------------------------------------------
277,235,834 7.50%, 5/15/2022-7/15/2024 269,176,588
--------------------------------------------------------------
287,267,122 8.00%, 3/15/2017-7/15/2024 286,759,134+
--------------------------------------------------------------
128,996,827 8.50%, 4/15/2017-6/15/2023 131,899,256
--------------------------------------------------------------
254,379,581 9.00%, 6/15/2016-12/15/2022 265,320,422
--------------------------------------------------------------
126,280,625 9.50%, 7/15/2009-8/15/2021 134,012,659
--------------------------------------------------------------
102,083,555 10.00%, 12/15/2010-8/15/2021 109,844,910
--------------------------------------------------------------
14,746,706 10.50%, 1/15/2016-8/15/2019 16,138,352
--------------------------------------------------------------
9,767,084 11.00%, 12/15/2009-10/15/2019 10,859,728
--------------------------------------------------------------
19,953,852 11.50%, 4/15/2010-4/15/2016 22,398,199
--------------------------------------------------------------
32,674,932 12.00%, 7/15/2011-12/15/2015 37,045,204
--------------------------------------------------------------
15,263,573 12.50%, 1/15/2010-6/15/2016 17,457,712
--------------------------------------------------------------
2,140,299 13.00%, 12/15/2010-3/15/2015 2,466,695
--------------------------------------------------------------
2,629,086 13.50%, 5/15/2010-8/15/2014 3,043,167
-------------------------------------------------------------- --------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(IDENTIFIED COST $1,667,703,210) 1,628,649,681
-------------------------------------------------------------- --------------
</TABLE>
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------ -------------------------------------------------------------- --------------
<C> <C> <S> <C>
LONG-TERM GOVERNMENT OBLIGATIONS--CONTINUED
- --------------------------------------------------------------------------------
UNITED STATES TREASURY NOTES--7.0%
--------------------------------------------------------------
$ 19,000,000 5.50%, 4/30/96 $ 18,882,580
--------------------------------------------------------------
13,000,000 5.75%, 8/15/2003 11,850,150
--------------------------------------------------------------
100,000,000 5.875%, 2/15/2004 91,606,000
-------------------------------------------------------------- --------------
TOTAL UNITED STATES TREASURY NOTES
(IDENTIFIED COST $123,554,375) 122,338,730
-------------------------------------------------------------- --------------
TOTAL LONG-TERM GOVERNMENT OBLIGATIONS
(IDENTIFIED COST $1,791,257,585) 1,750,988,411
-------------------------------------------------------------- --------------
(A) REPURCHASE AGREEMENTS--5.9%
- --------------------------------------------------------------------------------
4,015,000 J.P. Morgan Securities, Inc., 4.25%, dated 7/29/94, due 8/1/94 4,015,000
--------------------------------------------------------------
50,000,000 Kidder, Peabody & Co., Inc., 4.22%, dated 7/29/94, due 8/1/94 50,000,000
--------------------------------------------------------------
50,000,000 ** Nomura Securities International, Inc., 4.55%, dated 7/19/94,
due 8/18/94 50,000,000
-------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST) (NOTE 2B) 104,015,000
-------------------------------------------------------------- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $1,895,272,585) (NOTE 2A) $1,855,003,411++
-------------------------------------------------------------- --------------
</TABLE>
* Because of monthly principal payments, the average lives of the Government
National Mortgage Association Modified Pass-Through securities (based upon
FHA/VA historical experience) are less than the indicated periods.
** 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.
(a) Repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
These repurchase agreements participate in a joint account with other
Federated Funds.
+ Includes securities with a market value of $49,906,000 subject to Dollar Roll
transactions.
++ The cost of investments for federal tax purposes amounts to $1,895,272,585.
The net unrealized depreciation on a federal tax cost basis amounts to
$40,269,174, which is comprised of $13,617,410 appreciation and $53,886,584
depreciation at July 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($1,754,359,039) at July 31, 1994.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------------------------------------
Investments in securities, at value (identified and tax cost
$1,895,272,585) (Notes 2A and 2B) $1,855,003,411
- ------------------------------------------------------------------------------
Cash 16,735
- ------------------------------------------------------------------------------
Interest receivable 14,192,237
- ------------------------------------------------------------------------------
Receivable for Trust shares sold 5,908,261
- ------------------------------------------------------------------------------ --------------
Total assets 1,875,120,644
- ------------------------------------------------------------------------------
LIABILITIES:
- ------------------------------------------------------------------------------
Payable for investments purchased $60,127,396
- ----------------------------------------------------------------
Payable for dollar roll transactions (Note 2F) 49,693,381
- ----------------------------------------------------------------
Dividends payable 8,274,998
- ----------------------------------------------------------------
Payable for Trust shares redeemed 2,548,897
- ----------------------------------------------------------------
Accrued expenses 116,933
- ---------------------------------------------------------------- -----------
Total liabilities 120,761,605
- ------------------------------------------------------------------------------ --------------
NET ASSETS for 161,092,666 shares of beneficial interest outstanding $1,754,359,039
- ------------------------------------------------------------------------------ --------------
NET ASSETS CONSISTS OF:
- ------------------------------------------------------------------------------
Paid-in capital $1,941,110,831
- ------------------------------------------------------------------------------
Unrealized depreciation of investments (40,269,174)
- ------------------------------------------------------------------------------
Accumulated net realized loss on investments (146,482,618)
- ------------------------------------------------------------------------------ --------------
Total Net Assets $1,754,359,039
- ------------------------------------------------------------------------------ --------------
NET ASSET VALUE, Offering Price, and Redemption Proceeds Per Share
- ------------------------------------------------------------------------------
Institutional Shares (net assets of $1,626,934,639 / 149,392,209 shares of
beneficial interest outstanding) $10.89
- ------------------------------------------------------------------------------ --------------
Institutional Service Shares (net assets of $127,424,400 / 11,700,457 shares
of beneficial interest outstanding) $10.89
- ------------------------------------------------------------------------------ --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -------------------------------------------------------------------------------
Interest income (Note 2C) (net of interest expense of $702,521) $ 71,863,089
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Investment advisory fee* $3,684,411
- ------------------------------------------------------------------
Trustees' fees 14,324
- ------------------------------------------------------------------
Administrative personnel and services* 692,398
- ------------------------------------------------------------------
Custodian and portfolio accounting fees 166,283
- ------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses* 85,851
- ------------------------------------------------------------------
Shareholder services fee--Institutional Shares* 300,587
- ------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares* 132,661
- ------------------------------------------------------------------
Trust share registration costs 21,778
- ------------------------------------------------------------------
Distribution services fee* 164,625
- ------------------------------------------------------------------
Auditing fees 12,895
- ------------------------------------------------------------------
Legal fees 9,800
- ------------------------------------------------------------------
Printing and postage 10,000
- ------------------------------------------------------------------
Taxes 51,659
- ------------------------------------------------------------------
Insurance premiums 19,760
- ------------------------------------------------------------------
Miscellaneous 5,410
- ------------------------------------------------------------------ ----------
Total expenses 5,372,442
- ------------------------------------------------------------------
Deduct--Waiver of distribution services fee* 132,661
- ------------------------------------------------------------------ ----------
Net expenses 5,239,781
- ------------------------------------------------------------------------------- -------------
Net investment income 66,623,308
- ------------------------------------------------------------------------------- -------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- -------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis) (52,197,584)
- -------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on investments (77,764,243)
- ------------------------------------------------------------------------------- -------------
Net realized and unrealized gain(loss) on investments (129,961,827)
- ------------------------------------------------------------------------------- -------------
Change in net assets resulting from operations $ (63,338,519)
- ------------------------------------------------------------------------------- -------------
</TABLE>
* (See Note 4)
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------
1995* 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------------------------------
OPERATIONS--
- --------------------------------------------------------------
Net investment income $ 66,623,308 $ 147,205,704
- --------------------------------------------------------------
Net realized gain (loss) on investment transactions
($52,197,584 net loss and $18,860,608 net gain,
respectively, as computed for federal income tax purposes)
(Note 2D) (52,197,584) 12,114,105
- --------------------------------------------------------------
Net change in unrealized appreciation (depreciation) on
investments (77,764,243) (41,032,970)
- -------------------------------------------------------------- -------------- --------------
Change in net assets resulting from operations (63,338,519) 118,286,839
- -------------------------------------------------------------- -------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- --------------------------------------------------------------
Dividends to shareholders from net investment income:
- --------------------------------------------------------------
Institutional Shares (61,987,517) (139,286,614)
- --------------------------------------------------------------
Institutional Service Shares (4,635,791) (7,919,090)
- -------------------------------------------------------------- -------------- --------------
Change in net assets resulting from distributions to
shareholders (66,623,308) (147,205,704)
- -------------------------------------------------------------- -------------- --------------
TRUST SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- --------------------------------------------------------------
Proceeds from sale of shares 246,244,229 1,020,100,336
- --------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of
dividends declared 16,707,306 34,919,870
- --------------------------------------------------------------
Cost of shares redeemed (426,364,969) (798,702,252)
- -------------------------------------------------------------- -------------- --------------
Change in net assets resulting from Trust share
transactions (163,413,434) 256,317,954
- -------------------------------------------------------------- -------------- --------------
Change in net assets (293,375,261) 227,399,089
- --------------------------------------------------------------
NET ASSETS:
- --------------------------------------------------------------
Beginning of period 2,047,734,300 1,820,335,211
- -------------------------------------------------------------- -------------- --------------
End of period $1,754,359,039 $2,047,734,300
- -------------------------------------------------------------- -------------- --------------
</TABLE>
* Six months ended July 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
------------------------------------------------------------------------------------------------------------------
1995* 1994 1993 1992 1991 1990 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------
NET ASSET
VALUE,
BEGINNING
OF PERIOD $11.64 $11.80 $11.64 $11.29 $10.97 $10.70 $11.08 $11.46 $11.35 $10.77
- ----------
INCOME
FROM
INVESTMENT
OPERATIONS
- ----------
Net
investment
income 0.40 0.85 0.93 0.98 1.00 1.00 1.01 1.04 1.11 1.22
- ----------
Net
realized
and
unrealized
gain
(loss)
on
investments (0.75) (0.16) 0.16 0.35 0.32 0.27 (0.38) (0.38) 0.14 0.58
- ---------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
from
investment
operations (0.35) 0.69 1.09 1.33 1.32 1.27 0.63 0.66 1.25 1.80
- ---------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
LESS
DISTRIBUTIONS
- ----------
Dividends
to
shareholders
from net
investment
income (0.40) (0.85) (0.93) (0.98) (1.00) (1.00) (1.01) (1.04) (1.11) (1.22)
- ----------
Distributions
to
shareholders
from net
realized
gain on
investment
transactions -- -- -- -- -- -- -- -- (0.03) --
- ---------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total
distributions (0.40) (0.85) (0.93) (0.98) (1.00) (1.00) (1.01) (1.04) (1.14) (1.22)
- ---------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
NET ASSET
VALUE,
END OF
PERIOD $10.89 $11.64 $11.80 $11.64 $11.29 $10.97 $10.70 $11.08 $11.46 $11.35
- ---------- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
TOTAL
RETURN** (3.00%) 6.02% 9.78% 12.25% 12.65% 12.33% 5.99% 6.29% 11.53% 17.75%
- ----------
RATIOS TO
AVERAGE
NET ASSETS
- ----------
Expenses 0.55%(a) 0.51% 0.51% 0.51% 0.52% 0.52% 0.53% 0.52% 0.51% 0.61%
- ----------
Net
investment
income 7.25%(a) 7.22% 7.98% 8.54% 9.08% 9.19% 9.33% 9.51% 9.66% 11.01%
- ----------
SUPPLEMENTAL
DATA
- ----------
Net
assets,
end of
period
(000
omitted) $1,626,935 $1,910,500 $1,770,169 $1,333,930 $1,268,706 $1,312,780 $1,710,890 $2,111,559 $2,515,127
$569,404
- ----------
Portfolio
turnover
rate 64% 117% 33% 57% 48% 27% 40% 45% 100% 141%
- ----------
</TABLE>
* Six months ended July 31, 1994 (unaudited).
** Based on net asset value, which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------
1995** 1994 1993*
------ ------ ------
<S> <C> <C> <C>
- ------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $11.64 $11.80 $11.71
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.39 0.82 0.61
- ------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.75 ) (0.16) 0.09
- ------------------------------------------------------------ ----- ------ ------
Total from investment operations (0.36 ) 0.66 0.70
- ------------------------------------------------------------ ----- ------ ------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Dividends to shareholders from net investment income (0.39 ) (0.82) (0.61)
- ------------------------------------------------------------ ----- ------ ------
NET ASSET VALUE, END OF PERIOD $10.89 $11.64 $11.80
- ------------------------------------------------------------ ----- ------ ------
TOTAL RETURN*** (3.11 % ) 5.76% 5.62%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.77 %(a) 0.76% 0.76%(a)
- ------------------------------------------------------------
Net investment income 7.04 %(a) 6.97% 7.57%(a)
- ------------------------------------------------------------
Expense waiver/reimbursement (b) 0.20 %(a) -- --
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $127,424 $137,235 $50,166
- ------------------------------------------------------------
Portfolio turnover rate 64 % 117% 33%
- ------------------------------------------------------------
</TABLE>
* Reflects operations for the period from June 18, 1992 (date of initial
public investment) to January 31, 1993.
** Six months ended July 31, 1994 (unaudited).
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
FEDERATED GNMA TRUST
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
Federated GNMA Trust ("the Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as a diversified, open-end, no load,
management investment company. The Trust provides two classes of shares
Institutional Shares and Institutional Service Shares.
(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. The
policies are in conformity with generally accepted accounting principles.
<TABLE>
<S> <C>
A. INVESTMENT VALUATIONS--U.S. government obligations are generally valued at the mean
between the over-the-counter bid and asked prices as furnished by an independent pricing
service. Short-term securities with remaining maturities of sixty days or less may be
stated at amortized cost, which approximates value.
B. 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
in support of repurchase agreement investments. Additionally, procedures have been
established by the Trust to monitor, on a daily basis, the market value of each
repurchase agreement's underlying collateral to ensure the value of collateral at least
equals the principal amount of the repurchase agreement, including accrued interest.
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 guidelines 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.
C. 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.
D. 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 taxable income. Accordingly, no provisions for federal tax are
necessary. At January 31, 1994, the Trust, for federal tax purposes, had a capital loss
carryforward of $83,801,283, which will reduce the
</TABLE>
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Trust's taxable income arising from future net realized gain on investments, if any, to
the extent permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Trust of any liability
for federal tax. Pursuant to the Code, such capital loss carryforward will expire in
1996($31,912,913), 1997($18,028,171), 1998 ($14,893,518), 1999($13,784,245) and
2000($5,182,436). Additionally, net capital losses of $10,374,414 attributable to
security transactions incurred after October 31, 1993 are treated as arising on February
1, 1994, the first day of the Trust's next taxable year.
E. 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.
F. DOLLAR ROLL TRANSACTIONS--The Trust enters into dollar roll transactions, with respect
to mortgage securities issued by GNMA, FNMA and FHLMC, in which the Trust loans mortgage
securities to financial institutions and simultaneously agrees to accept substantially
similar (same type, coupon and maturity) securities at a later date at an agreed upon
price. Dollar roll transactions are short-term financing arrangements which will not
exceed twelve months. The Trust will use the proceeds generated from the transactions to
invest in short-term investments, which may enhance the Trust's current yield and total
return.
G. OTHER--Investment transactions are accounted for on the trade date.
</TABLE>
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
(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 Trust shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------------------------------------
1995* 1994
----------------------------- -----------------------------
INSTITUTIONAL SHARES SHARES DOLLARS SHARES DOLLARS
- ----------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 20,223,605 $ 224,866,891 75,001,659 $ 882,750,706
- -----------------------------------
Shares issued to shareholders in
payment of dividends declared 1,243,164 13,660,385 2,539,103 29,822,854
- -----------------------------------
Shares redeemed (36,208,758) (401,252,455) (63,483,695) (745,434,319)
- ----------------------------------- ----------- ------------- ----------- -------------
Net change resulting from
Institutional Share
transactions (14,741,989) $(162,725,179) 14,057,067 $ 167,139,241
- ----------------------------------- ----------- ------------- ----------- -------------
</TABLE>
* Six months ended July 31, 1994.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
--------------------------------------------------------------
1995* 1994
----------------------------- -----------------------------
INSTITUTIONAL SERVICE SHARES SHARES DOLLARS SHARES DOLLARS
- ----------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 1,908,017 $ 21,377,338 11,649,200 $ 137,349,630
- -----------------------------------
Shares issued to shareholders in
payment of dividends declared 277,370 3,046,921 434,613 5,097,016
- -----------------------------------
Shares redeemed (2,275,052) (25,112,514) (4,546,844) (53,267,933)
- ----------------------------------- ----------- ------------- ----------- -------------
Net change resulting from
Institutional Service Share
transactions (89,665) (688,255) 7,536,969 89,178,713
- ----------------------------------- ----------- ------------- ----------- -------------
Total net change
resulting from Trust
Share transactions (14,831,654) $(163,413,434) 21,594,036 $ 256,317,954
- ----------------------------------- ----------- ------------- ----------- -------------
</TABLE>
* Six months ended July 31, 1994.
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
ADVISORY FEE--Federated Management, the Trust's investment Adviser (the
"Adviser"), receives for its services an annual investment advisory fee equal to
.40 of 1% of the Trust's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee and reimburse certain operating expenses of
the Trust. The Adviser can modify or terminate this voluntary waiver and
reimbursement at any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Trust
administrative personnel and services. Prior to March 1, 1994, these services
were provided at approximate cost. Effective March 1, 1994, the FAS fee 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 AND SHAREHOLDER SERVICES FEE--The Trust has adopted a Distribution
Plan (the "Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the
Plan, the Trust will compensate Federated Securities Corp. ("FSC"), the
principal distributor, from the net assets of the Trust to finance activities
intended to result in the sale of the Trust's Institutional Service Shares. The
Plan provides that the Trust may incur distribution expenses up to .25 of 1% of
the average daily net assets of the Institutional Service Shares, annually, to
compensate FSC. The distributor may voluntarily choose to waive a portion of its
fee. The distributor can modify or terminate this voluntary waiver at any time
at its sole discretion.
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Trust will pay FSS up to .25 of 1% of average net assets
of the Trust for the period. This fee is to obtain certain personal services for
shareholders and to maintain the shareholder accounts.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Trust. The
FServ fee is based on the size, type, and number of accounts and transactions
made by shareholders.
Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the six
months ended July 31, 1994, were as follows:
<TABLE>
<S> <C>
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PURCHASES $1,287,257,923
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SALES $1,173,086,547
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</TABLE>
<TABLE>
<S> <C>
TRUSTEES OFFICERS
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John F. Donahue John F. Donahue
John T. Conroy, Jr. Chairman
William J. Copeland Glen R. Johnson
James E. Dowd President
Lawrence D. Ellis, M.D. J. Christopher Donahue
Edward L. Flaherty, Jr. Vice President
Peter E. Madden Richard B. Fisher
Gregor F. Meyer Vice President
Wesley W. Posvar Edward C. Gonzales
Marjorie P. Smuts Vice President and Treasurer
John W. McGonigle
Vice President and Secretary
David M. Taylor
Assistant Treasurer
J. Crilley Kelly
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 FDIC, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves risk,
including possible loss of principal.
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.
