PRESIDENT'S MESSAGE
- --------------------------------------------------------------------------------
Dear Investor:
I am pleased to present the Semi-Annual Report to Shareholders for Federated
GNMA Trust. The Report covers the six-month period ended July 31, 1995 and
includes the fund's Investment Review, Financial Statements, and Portfolio of
Investments.
In pursuit of income, the fund's portfolio invests primarily in a diversified
portfolio of Government National Mortgage Association ("GNMA") securities.
Dividends paid by the fund during this period totaled $0.40 per share for
Institutional Shares and $0.39 per share for Institutional Service Shares. The
fund's net asset value ended the period at $11.09. Over the six-month period,
the total return for Institutional Shares and Institutional Service Shares was
8.35% and 8.25%, respectively.* Total net assets stood at $1.53 billion on the
last day of the period.
Thank you for selecting Federated GNMA Trust as a prudent way to pursue
investment income. Your questions and comments are always welcome.
Sincerely,
[GLEN R. JOHNSON SIGNATURE]
Glen R. Johnson
President
September 15, 1995
* PERFORMANCE QUOTED REPRESENTS PAST PERFORMANCE. INVESTMENT RETURN AND
PRINCIPAL VALUE WILL FLUCTUATE, SO THAT AN INVESTOR'S SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
1
INVESTMENT REVIEW
- --------------------------------------------------------------------------------
The Federated GNMA Trust (the "Trust"), is designed for shareholders seeking
participation in a professionally managed portfolio of GNMAs. GNMAs are
guaranteed as to the payment of principal and interest by the Government
National Mortgage Association. (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 4.4 years, which is neutral to the Salomon Brothers GNMA Index* single-family
aggregate market weighted average effective duration. The bias for the neutral
duration to the Salomon GNMA Index was accomplished by barbelling around the
mortgage coupons most susceptible to potential upcoming prepayment activity.
This strategy gave the Trust, during the six-month reporting period, a total
return of 8.35% for Institutional Shares and 8.25% for Institutional Service
Shares** versus the Salomon Index return of 8.75% and the Merrill Lynch 10-Year
Treasury Index* return of 11.44%.
Current asset allocation reflects 95% GNMA mortgage securities with a
diversified range of coupons averaging 8%. The last six months have presented
the opportunity for the Trust to favor selective purchases of discount and
current coupon GNMA securities. The Trust also maintained exposure to the
seasoned premium sector over new premium issues. The seasoned premiums have
better convexity than comparable coupon new issues and they have less exposure
to interest rate volatility.
We believe that the outlook for the next six months appears very positive. GNMA
securities seem poised to continue their strong performance due in large part to
anticipated declines in interest rate volatility and a modest supply of new
securities. Given this scenario, the Trust will continue to overweight GNMA
securities to offer investors competitive income distributions and total return
over time.
As of July 31, 1995, total net assets were $1.5 billion and the average 30-day
net yield as calculated under Securities and Exchange Commission guidelines was
7.10% for Institutional Shares and 6.90% for Institutional Service Shares.**
Rated AAAf/a+ by Standard & Poor's, for credit and risk qualities, the Trust
remains committed to competitive yields and daily liquidity.***
*THIS INDEX IS UNMANAGED.
**DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NOT INDICATIVE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, SO WHEN SHARES
ARE REDEEMED THEY MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST.
*** RATINGS ARE SUBJECT TO CHANGE.
2
FEDERATED GNMA TRUST
PORTFOLIO OF INVESTMENTS
JULY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
VALUE
- ---------------- ---------------------------------------------------------
- --- --------------
<C> <S>
<C>
LONG-TERM GOVERNMENT OBLIGATIONS--115.2%
- --------------------------------------------------------------------------------
- ---
(a) GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--97.0%
---------------------------------------------------------
- ---
$ 83,835,000 (b) 6.50%, 1/1/2099
$ 79,589,596
---------------------------------------------------------
- ---
292,895,062 (b) 7.00%, 2/15/2024
285,842,148
---------------------------------------------------------
- ---
235,353,873 7.50%, 5/15/2022 - 2/15/2023
235,355,132
---------------------------------------------------------
- ---
269,917,852 (b) 8.00%, 3/15/2017 - 8/15/2024
275,756,499
---------------------------------------------------------
- ---
145,324,354 8.50%, 5/15/2021 - 11/15/2024
150,846,830
---------------------------------------------------------
- ---
196,495,248 (b) 9.00%, 1/20/2020 - 7/15/2025
207,156,418
---------------------------------------------------------
- ---
71,589,018 9.50%, 10/15/2016 - 8/15/2021
76,659,503
---------------------------------------------------------
- ---
70,201,881 (b) 10.00%, 2/15/2018 - 12/20/2020
76,439,325
---------------------------------------------------------
- ---
10,894,626 10.50%, 7/15/2017 - 6/15/2018
11,990,734
---------------------------------------------------------
- ---
20,579,270 11.00%, 9/15/2013
22,868,508
---------------------------------------------------------
- ---
15,776,693 11.50%, 1/15/2013
17,684,411
---------------------------------------------------------
- ---
25,967,092 12.00%, 7/15/2015
29,383,063
---------------------------------------------------------
- ---
11,792,226 12.50%, 5/15/2014
13,461,415
---------------------------------------------------------
- ---
1,638,370 13.00%, 10/15/2013
1,888,713
---------------------------------------------------------
- ---
2,093,118 13.50%, 10/15/2012
2,424,061
---------------------------------------------------------
- --- --------------
TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
(IDENTIFIED COST $1,467,337,851)
1,487,346,356
---------------------------------------------------------
- --- --------------
U.S. TREASURY NOTES--3.1%
---------------------------------------------------------
- ---
50,000,000 5.75%, 8/15/2003 (IDENTIFIED COST $45,792,969)
47,893,000
---------------------------------------------------------
- --- --------------
(c) Repurchase Agreements--15.1%
- --------------------------------------------------------------------------------
- ---
27,900,000 (d) CS First Boston Corp., 5.76%, dated 7/25/1995, due
8/21/1995 27,900,000
---------------------------------------------------------
- ---
32,500,000 (d) CS First Boston Corp., 5.76%, dated 7/25/1995, due
8/24/1995 32,500,000
---------------------------------------------------------
- ---
90,000,000 (d) Goldman, Sachs & Co., 5.75%, dated 7/20/1995, due
8/21/1995 90,000,000
---------------------------------------------------------
- ---
50,000,000 (d) Goldman, Sachs & Co., 5.755%, dated 7/25/1995, due
8/21/1995 50,000,000
---------------------------------------------------------
- ---
</TABLE>
3
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
VALUE
- ---------------- ---------------------------------------------------------
- --- --------------
<C> <S>
<C>
REPURCHASE AGREEMENTS--CONTINUED
- --------------------------------------------------------------------------------
- ---
$ 1,035,000 J.P. Morgan Securities, Inc., 5.84%, dated 7/31/1995, due
8/1/1995
$ 1,035,000
---------------------------------------------------------
- ---
30,000,000 Swiss Bank Corp., New York, 5.82%, dated 7/31/1995, due
8/1/1995
30,000,000
---------------------------------------------------------
- --- --------------
TOTAL REPURCHASE AGREEMENTS (AT AMORTIZED COST)
231,435,000
---------------------------------------------------------
- --- --------------
TOTAL INVESTMENTS (IDENTIFIED COST $1,744,565,820)(e)
$1,766,674,356
---------------------------------------------------------
- --- --------------
- --------------
<FN>
(a) 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.
(b) Includes securities with a market value of $165,446,976 subject to Dollar
Roll transactions.
(c) 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 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) The cost of investments for federal tax purposes amounts to $1,744,565,820.
The net unrealized appreciation on a federal tax cost basis amounts to
$22,108,536, which is comprised of $37,149,292 appreciation and $15,040,756
depreciation at July 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($1,534,071,881) at at July 31, 1995.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
4
FEDERATED GNMA TRUST
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S>
<C> <C>
ASSETS:
- --------------------------------------------------------------------------------
Investments in repurchase agreements
$ 231,435,000
- --------------------------------------------------------------------------------
Investments in securities
1,535,239,356
- --------------------------------------------------------------------------------
- --------------
Total investments in securities, at value (identified and tax cost
$1,744,565,820)
$1,766,674,356
- --------------------------------------------------------------------------------
- -----------------
Cash
12,189
- --------------------------------------------------------------------------------
- -----------------
Receivable for shares sold
353,779
- --------------------------------------------------------------------------------
- ----------------- --------------
Total assets
1,767,040,324
- --------------------------------------------------------------------------------
- -----------------
LIABILITIES:
- --------------------------------------------------------------------------------
- -----------------
Payable for investments purchased
32,412,153
- --------------------------------------------------------------------------------
Payable for shares redeemed
1,894,740
- --------------------------------------------------------------------------------
Income distribution payable
6,471,746
- --------------------------------------------------------------------------------
Payable for dollar roll transactions
192,004,497
- --------------------------------------------------------------------------------
Accrued expenses
185,307
- --------------------------------------------------------------------------------
- --------------
Total liabilities
232,968,443
- --------------------------------------------------------------------------------
- ----------------- --------------
NET ASSETS for 138,346,225 shares outstanding
$1,534,071,881
- --------------------------------------------------------------------------------
- ----------------- --------------
- --------------
NET ASSETS CONSIST OF:
- --------------------------------------------------------------------------------
- -----------------
Paid in capital
$1,696,821,423
- --------------------------------------------------------------------------------
- -----------------
Net unrealized appreciation of investments
22,108,536
- --------------------------------------------------------------------------------
- -----------------
Accumulated net realized loss on investments
(184,858,078)
- --------------------------------------------------------------------------------
- ----------------- --------------
Total Net Assets
$1,534,071,881
- --------------------------------------------------------------------------------
- ----------------- --------------
- --------------
NET ASSET VALUE, Offering Price and Redemption Proceeds Per Share:
- --------------------------------------------------------------------------------
- -----------------
INSTITUTIONAL SHARES:
- --------------------------------------------------------------------------------
- -----------------
$1,411,584,103 DIVIDED BY 127,299,856 shares outstanding
$ 11.09
- --------------------------------------------------------------------------------
- ----------------- --------------
- --------------
INSTITUTIONAL SERVICE SHARES:
- --------------------------------------------------------------------------------
- -----------------
$122,487,778 DIVIDED BY 11,046,369 shares outstanding
$ 11.09
- --------------------------------------------------------------------------------
- ----------------- --------------
- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
5
FEDERATED GNMA TRUST
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JULY 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
<C>
INVESTMENT INCOME:
- --------------------------------------------------------------------------------
- --------
Interest (net of dollar roll expense of $5,073,935)
$ 61,577,410
- --------------------------------------------------------------------------------
- --------
EXPENSES:
- --------------------------------------------------------------------------------
- --------
Investment advisory fee $
3,119,488
- --------------------------------------------------------------------------
Administrative personnel and services fee
590,363
- --------------------------------------------------------------------------
Custodian fees
207,566
- --------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses
247,326
- --------------------------------------------------------------------------
Directors'/Trustees' fees
9,000
- --------------------------------------------------------------------------
Auditing fees
8,430
- --------------------------------------------------------------------------
Legal fees
10,909
- --------------------------------------------------------------------------
Portfolio accounting fees
86,366
- --------------------------------------------------------------------------
Distribution services fee--Institutional Service Shares
152,481
- --------------------------------------------------------------------------
Shareholder services fee--Institutional Shares
1,734,001
- --------------------------------------------------------------------------
Shareholder services fee--Institutional Service Shares
152,217
- --------------------------------------------------------------------------
Share registration costs
13,144
- --------------------------------------------------------------------------
Printing and postage
13,869
- --------------------------------------------------------------------------
Insurance premiums
20,428
- --------------------------------------------------------------------------
Taxes
43,218
- --------------------------------------------------------------------------
Miscellaneous
8,074
- -------------------------------------------------------------------------- ---
- --------
Total expenses
6,416,880
- --------------------------------------------------------------------------
Waivers--
- ------------------------------------------------------------
Waiver of distribution services fee--Institutional Service
Shares $ (140,762)
- ------------------------------------------------------------
Waiver of shareholder services fee--Institutional Shares (1,374,561)
- ------------------------------------------------------------
Waiver of shareholder services fee--Institutional Service
Shares (11,456)
- ------------------------------------------------------------ -----------
Total waivers
(1,526,779)
- -------------------------------------------------------------------------- ---
- --------
Net expenses
4,890,101
- --------------------------------------------------------------------------------
- -------- ------------
Net investment income
56,687,309
- --------------------------------------------------------------------------------
- -------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- --------------------------------------------------------------------------------
- --------
Net realized gain (loss) on investments
7,166,443
- --------------------------------------------------------------------------------
- --------
Net change in unrealized appreciation (depreciation) of investments
61,790,516
- --------------------------------------------------------------------------------
- -------- ------------
Net realized and unrealized gain on investments
68,956,959
- --------------------------------------------------------------------------------
- -------- ------------
Change in net assets resulting from operations
$125,644,268
- --------------------------------------------------------------------------------
- -------- ------------
- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
6
FEDERATED GNMA TRUST
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31, 1995
YEAR ENDED
(UNAUDITED)
JANUARY 31, 1995
------------------ ---
- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -------------------------------------------------------
OPERATIONS--
- -------------------------------------------------------
Net investment income $ 56,687,309 $
130,962,667
- -------------------------------------------------------
Net realized gain (loss) on investments ($7,166,443 net
gain and $71,738,355 net loss, respectively, as
computed for federal tax purposes) 7,166,443
(97,737,729)
- -------------------------------------------------------
Net change in unrealized appreciation (depreciation) 61,790,516
(77,177,049)
- ------------------------------------------------------- ------------------ ---
- -------------
Change in net assets resulting from operations 125,644,268
(43,952,111)
- ------------------------------------------------------- ------------------ ---
- -------------
DISTRIBUTIONS TO SHAREHOLDERS--
- -------------------------------------------------------
Distributions from net investment income:
- -------------------------------------------------------
Institutional Shares (52,642,233)
(121,679,721)
- -------------------------------------------------------
Institutional Service Shares (4,075,200)
(9,282,945)
- ------------------------------------------------------- ------------------ ---
- -------------
Change in net assets resulting from distributions
to shareholders (56,717,433)
(130,962,666)
- ------------------------------------------------------- ------------------ ---
- -------------
SHARE TRANSACTIONS--
- -------------------------------------------------------
Proceeds from sale of shares 133,889,421
398,304,925
- -------------------------------------------------------
Net asset value of shares issued to shareholders in
payment of distributions declared 15,951,501
33,750,837
- -------------------------------------------------------
Cost of shares redeemed (247,196,448)
(742,374,713)
- ------------------------------------------------------- ------------------ ---
- -------------
Change in net assets resulting from share
transactions (97,355,526)
(310,318,951)
- ------------------------------------------------------- ------------------ ---
- -------------
Change in net assets (28,428,691)
(485,233,728)
- -------------------------------------------------------
NET ASSETS:
- -------------------------------------------------------
Beginning of period 1,562,500,572
2,047,734,300
- ------------------------------------------------------- ------------------ ---
- -------------
End of period $1,534,071,881
$1,562,500,572
- ------------------------------------------------------- ------------------ ---
- -------------
------------------ ---
- -------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
7
FEDERATED GNMA TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JULY 31, YEAR
ENDED JANUARY 31,
1995 ------------------------
- ---------------------------------------
(UNAUDITED) 1995
1994 1993 1992
------------ ------------ -------
- ----- ------------ ------------
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.61 $11.64
$11.80 $11.64 $11.29
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 0.40 0.82
0.85 0.93 0.98
- -----------------------------------
Net realized and unrealized gain
(loss) on investments 0.48 (1.03)
(0.16) 0.16 0.35
- ----------------------------------- ------ ------ -----
- - ------ ------
Total from investment operations 0.88 (0.21)
0.69 1.09 1.33
- ----------------------------------- ------ ------ -----
- - ------ ------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (0.40) (0.82)
(0.85) (0.93) (0.98)
- -----------------------------------
Distributions from net realized
gain on investment transactions -- -- --
- -- --
- ----------------------------------- ------ ------ -----
- - ------ ------
Total distributions (0.40) (0.82)
(0.85) (0.93) (0.98)
- ----------------------------------- ------ ------ -----
- - ------ ------
NET ASSET VALUE, END OF PERIOD $11.09 $10.61
$11.64 $11.80 $11.64
- ----------------------------------- ------ ------ -----
- - ------ ------
------ ------ -----
- - ------ ------
TOTAL RETURN (b) 8.35% (1.71%)
6.02% 9.78% 12.25%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 0.61%(a) 0.56%
0.51% 0.51% 0.51%
- -----------------------------------
Net investment income 7.28%(a) 7.51%
7.22% 7.98% 8.54%
- -----------------------------------
Expense waiver/ reimbursement (c) 0.19%(a) 0.00%
0.00% 0.00% 0.00%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000
omitted) $1,411,584 $1,442,074
$1,910,500 $1,770,169 $1,333,930
- -----------------------------------
Portfolio turnover 23% 136%
117% 33% 57%
- -----------------------------------
<CAPTION>
1991 1990 1989
1988 1987
------------ ------------ ---------
- --- ------------ ------------
<S> <C> <C> <C>
<C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $10.97 $10.70 $11.08
$11.46 $11.35
- -----------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------
Net investment income 1.00 1.00 1.01
1.04 1.11
- -----------------------------------
Net realized and unrealized gain
(loss) on investments 0.32 0.27 (0.38)
(0.38) 0.14
- ----------------------------------- ------ ------ ------
- ------ ------
Total from investment operations 1.32 1.27 0.63
0.66 1.25
- ----------------------------------- ------ ------ ------
- ------ ------
LESS DISTRIBUTIONS
- -----------------------------------
Distributions from net investment
income (1.00) (1.00) (1.01)
(1.04) (1.11)
- -----------------------------------
Distributions from net realized
gain on investment transactions -- -- --
- -- (0.03)
- ----------------------------------- ------ ------ ------
- ------ ------
Total distributions (1.00) (1.00) (1.01)
(1.04) (1.14)
- ----------------------------------- ------ ------ ------
- ------ ------
NET ASSET VALUE, END OF PERIOD $11.29 $10.97 $10.70
$11.08 $11.46
- ----------------------------------- ------ ------ ------
- ------ ------
------ ------ ------
- ------ ------
TOTAL RETURN (b) 12.65% 12.33% 5.99%
6.29% 11.53%
- -----------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------
Expenses 0.52% 0.52% 0.53%
0.52% 0.51%
- -----------------------------------
Net investment income 9.08% 9.19% 9.33%
9.51% 9.66%
- -----------------------------------
Expense waiver/ reimbursement (c) 0.00% 0.00% 0.00%
0.00% 0.00%
- -----------------------------------
SUPPLEMENTAL DATA
- -----------------------------------
Net assets, end of period (000
omitted) $1,268,706 $1,312,780
$1,710,890 $2,111,559 $2,515,127
- -----------------------------------
Portfolio turnover 48% 27% 40%
45% 100%
- -----------------------------------
<FN>
(a) Computed on an annualized basis.
(b) Based on net asset value, which does not reflect the sales load 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.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
8
FEDERATED GNMA TRUST
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JULY 31,
YEAR ENDED JANUARY 31,
1995 -
- -------------------------------------
(UNAUDITED)
1995 1994 1993(A)
------------ -
- ----------- ------------ --------
<S> <C>
<C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.61
$11.64 $11.80 $11.71
- ------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------
Net investment income 0.41
0.79 0.82 0.61
- ------------------------------------------------------------
Net realized and unrealized gain (loss) on investments 0.46
(1.03) (0.16) 0.09
- ------------------------------------------------------------ ------
- ------ ------ --------
Total from investment operations 0.87
(0.24) 0.66 0.70
- ------------------------------------------------------------ ------
- ------ ------ --------
LESS DISTRIBUTIONS
- ------------------------------------------------------------
Distributions from net investment income (0.39)
(0.79) (0.82) (0.61)
- ------------------------------------------------------------ ------
- ------ ------ --------
NET ASSET VALUE, END OF PERIOD $11.09
$10.61 $11.64 $11.80
- ------------------------------------------------------------ ------
- ------ ------ --------
------
- ------ ------ --------
TOTAL RETURN (b) 8.25%
(1.92%) 5.76% 5.62%
- ------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------------------------------
Expenses 0.81%(d)
0.77% 0.76% 0.76%(d)
- ------------------------------------------------------------
Net investment income 7.08%(d)
7.32% 6.97% 7.57%(d)
- ------------------------------------------------------------
Expense waiver/reimbursement (c) 0.25%(d)
0.14% -- --
- ------------------------------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------------------------------
Net assets, end of period (000 omitted) $122,488
$120,427 $137,235 $50,166
- ------------------------------------------------------------
Portfolio turnover 23%
136% 117% 33%
- ------------------------------------------------------------
<FN>
(a) Reflects operations for the period from June 18, 1992 (date of initial
public investment) to January 31, 1993.
(b) Based on net asset value, which does not reflect the sales load 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.
(d) Computed on an annualized basis.
</TABLE>
(See Notes which are an integral part of the Financial Statements)
9
FEDERATED GNMA TRUST
NOTES TO FINANCIAL STATEMENTS
JULY 31, 1995 (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 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. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
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. At January 31, 1995, the Trust,
for federal tax purposes, had a capital loss carryforward of $155,539,638,
which will reduce the Trust's taxable income arising from future net
realized gain on investments, if any, to the extent
10
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
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), 2001 ($5,182,436), and 2003
($71,738,355). Additionally, net capital losses of $36,484,883 attributable
to security transactions incurred after October 31, 1994 are treated as
arising on February 1, 1995, the first day of the Trust's next taxable year.
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.
DOLLAR ROLL TRANSACTIONS--The Trust enters into dollar roll transactions,
with respect to mortgage securities, issued by Government National Mortgage
Association, Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, in which the Trust sells 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.
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 Trust shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31, YEAR ENDED
1995
JANUARY 31, 1995
------------------
- -------- --------------------------
INSTITUTIONAL SHARES SHARES
AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ ----------- -----
- -------- ----------- -------------
<S> <C> <C>
<C> <C>
Shares sold 11,345,826 $
123,939,606 33,458,790 $ 365,277,979
- ------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 1,172,580
12,849,978 2,556,101 27,566,855
- ------------------------------------------------------------
Shares redeemed (21,076,351)
(230,843,183) (64,291,288) (698,723,436)
- ------------------------------------------------------------ ----------- -----
- -------- ----------- -------------
Net change resulting from Institutional share transactions (8,557,945) $
(94,053,599) (28,276,397) $(305,878,602)
- ------------------------------------------------------------ ----------- -----
- -------- ----------- -------------
----------- -----
- -------- ----------- -------------
</TABLE>
11
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JULY 31, YEAR ENDED
1995
JANUARY 31, 1995
------------------
- -------- --------------------------
INSTITUTIONAL SERVICE SHARES SHARES
AMOUNT SHARES AMOUNT
- ------------------------------------------------------------ ----------- -----
- -------- ----------- -------------
Shares sold 910,792 $
9,949,815 3,007,210 $ 33,026,946
<S> <C> <C>
<C> <C>
- ------------------------------------------------------------
Shares issued to shareholders in payment of distributions
declared 282,944
3,101,523 573,520 6,183,982
- ------------------------------------------------------------
Shares redeemed (1,492,875)
(16,353,265) (4,025,344) (43,651,277)
- ------------------------------------------------------------ ----------- -----
- -------- ----------- -------------
Net change resulting from Institutional Service share
transactions (299,139) $
(3,301,927) (444,614) $ (4,440,349)
- ------------------------------------------------------------ ----------- -----
- -------- ----------- -------------
----------- -----
- -------- ----------- -------------
Net change resulting from Trust share transactions (8,857,084) $
(97,355,526) (28,721,011) $(310,318,951)
- ------------------------------------------------------------ ----------- -----
- -------- ----------- -------------
----------- -----
- -------- ----------- -------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT 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.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. 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 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.
SHAREHOLDER SERVICES FEE--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 daily net assets of the Trust for the period.
This fee is to obtain certain services for shareholders and to maintain the
shareholder accounts. FSS may voluntarily choose to waive a portion of its
fee. FSS can modify or terminate this voluntary waiver at any time at its
sole discretion.
12
FEDERATED GNMA TRUST
- --------------------------------------------------------------------------------
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Trust. This fee 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
Trustees or Directors of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities and in kind
contributions, for the six months ended July 31, 1995, were as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
<S> <C>
PURCHASES
$397,168,727
- ---------------------------------------------------------------------- --------
- ----
SALES
$355,224,841
- ---------------------------------------------------------------------- --------
- ----
</TABLE>
13
<TABLE>
<CAPTION>
TRUSTEES OFFICERS
- ---------------------------------------------------------
<S> <C>
John F. Donahue John F. Donahue
Thomas G. Bigley CHAIRMAN
John T. Conroy, Jr. Glen R. Johnson
William J. Copeland PRESIDENT
James E. Dowd J. Christopher Donahue
Lawrence D. Ellis, M.D. EXECUTIVE VICE PRESIDENT
Edward L. Flaherty, Jr. Edward C. Gonzales
Peter E. Madden EXECUTIVE VICE PRESIDENT
Gregor F. Meyer John W. McGonigle
John E. Murray, Jr. EXECUTIVE VICE PRESIDENT AND
Wesley W. Posvar SECRETARY
Marjorie P. Smuts Richard B. Fisher
VICE PRESIDENT
David M. Taylor
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
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.
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.
14
- --------------------------------------------------------------------------------
FEDERATED
- --------------------------------------------------------------------------------
GNMA
- --------------------------------------------------------------------------------
TRUST
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT
TO SHAREHOLDERS
JULY 31, 1995
[FEDERATED LOGO] ----------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
--------------------------------------------------------
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
-------------------------------------------------------------------------
[RECYCLED LOGO]
RECYCLED
PAPER
314184102
314184201
8083002 (9/95)
---------------------------------------------------
