FEDERATED GNMA TRUST, 485BPOS, 1999-05-27

FEDERATED GNMA TRUST
485BPOS, 1999-05-27

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1933 Act File No. 2-75670
1940 Act File No. 811-3375

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----

Pre-Effective Amendment No. .........................

Post-Effective Amendment No. 35 .......................... X
------ ------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 31 .......................................... X
------ ------

FEDERATED GNMA TRUST

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds

5800 Corporate Drive

Pittsburgh, Pennsylvania 15237-7000

(Address of Principal Executive Offices)

(412) 288-1900

(Registrant's Telephone Number)

John W. McGonigle, Esquire

1001 liberty Avenue

Federated Investors Tower

Pittsburgh, Pennsylvania 15222-3779

(Name and Address of Agent for Service)

(Notice should be sent to the Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
_X on May 31, 1999 pursuant to paragraph (b)

60 days after filing pursuant to paragraph (a) (i)
_ on __________________pursuant to paragraph (a) (i)

75 days after filing pursuant to paragraph (a)(ii) on _________________
pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies to:

Matthew G. Maloney, Esquire

Dickstein Shapiro Morin & Oshinsky, LLP

2101 L Street, N.W.

Washington, D.C. 20037

PROSPECTUS

Federated GNMA Trust

INSTITUTIONAL SHARES

A mutual fund seeking current income by investing primarily in instruments
issued or guaranteed by the Government National Mortgage Association.

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

MAY 31, 1999

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which the Fund Invests? 5

What are the Specific Risks of Investing in the Fund? 7

What Do Shares Cost? 8

How is the Fund Sold? 8

How to Purchase Shares 8

How to Redeem Shares 10

Account and Share Information 11

Who Manages the Fund? 12

Financial Information 13

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is current income. While there is no assurance
that the Fund will achieve its investment objective, it endeavors to do so by
following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund pursues its objective by investing at least 65% of its assets in fixed
income securities issued or guaranteed by the Government National Mortgage
Association (GNMA), including mortgage backed securities. The Fund may invest up
to 35% of its assets in other direct or indirect obligations of the U.S.
government. The Fund limits its investments to those that would enable it to
qualify as a permissible investment for national banks and federal savings
associations.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

* INTEREST RATE RISK. Prices of the fixed-income securities in which the
Fund invests generally fall when interest rates rise; and

* PREPAYMENT RISKS. When homeowners prepay their mortgages in response to lower
interest rates, the Fund will be required to reinvest the proceeds at the lower
interest rates available. Also, when interest rates fall, the price of mortgage
securities may not rise to as great an extent as that of other fixed income
securities.

The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or 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.

RISK/RETURN BAR CHART AND TABLE

[Graphic]

The bar chart shows the variability of the Fund's Institutional Shares total
returns on a calendar year-end basis.

The Fund's Institutional Shares are not sold subject to a sales charge (load).
The total returns displayed above are based upon the net asset value.

The Fund's Institutional Shares total returns from January 1, 1999 to March
31,1999 was 0.76%.

Within the period shown in the Chart, the Fund's highest quarterly return was
8.68% (quarter ended June 30, 1989). Its lowest quarterly return was (2.82%)
(quarter ended March 31, 1994).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Institutional Shares Average Annual
Total Returns for the calendar periods ending December 31, 1999. The table shows
the Fund's total returns averaged over a period of years relative to Saloman
Brothers 30-Year GNMA Index (3-SB30YRGI) and the Lehman Brothers GNMA Index
(LBGNMA), broad based market indexes, and the Lipper GNMA Funds Average (LGFA),
an average of funds with similar investment objectives. Total returns for the
indexes shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance. Indexes are unmanaged, and
it is not possible to invest directly in an index.

<TABLE>

CALENDAR PERIOD FUND SB30YRGI LGFA LBGNMA
<S> <C> <C> <C> <C>
1 Year 6.70% 6.19% 6.44% 6.93%
5 Years 6.64% 7.57% 6.50% 7.38%
10 Years 8.65% 9.41% 8.81% 9.28%

</TABLE>

The Fund's Institutional Shares 30-Day Net Yield as of March 31, 1999 was 5.84%.
Investors may call the Fund at 1-800-341-7400 to acquire the current 30-day Net
Yield.

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.

What are the Fund's Fees and Expenses?

FEDERATED GNMA TRUST

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund's Institutional Shares.

<TABLE>

SHAREHOLDER FEES

<S> <C>

Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases

(as a percentage of offering price) None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or redemption proceeds,
as applicable) None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>

ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1 <S> Expenses That are Deducted
From Fund Assets (as a percentage of average net assets)

Management Fee 0.40%
Distribution (12b-1) Fee None
Shareholder Services Fee 2 0.25%
Other Expenses 0.12%
Total Annual Fund Operating Expenses 0.77%
1 Although not contractually obligated to do so, the shareholder services
provider waived certain amounts. These are shown below along with the net
expenses the Fund actually paid for the fiscal year ended January 31, 1999.
Total Waiver of Fund Expenses 0.16%
Total Actual Annual Fund Operating Expenses (after waivers) 0.61%
2 The shareholder services fee for Institutional Shares has been voluntarily
reduced. This voluntary reduction can be terminated at any time. The shareholder
services fee paid by the Fund (after the voluntary reduction) was 0.09% for the
year ended January 31, 1999.

</TABLE>

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's
Institutional Shares with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund's Institutional Shares
for the time periods indicated and then redeem all of your Shares at the end of
those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Shares operating expenses are BEFORE
WAIVERS as shown above and remain the same. Although your actual costs may be
higher or lower, based on these assumptions your costs would be:

<TABLE>
<S> <C>
1 Year $ 79
3 Years $ 246
5 Years $ 428
10 Years $ 954

</TABLE>

What are the Fund's Investment Strategies?

The Fund invests in a portfolio of U.S. government securities, at least 65% of
which are mortgage backed securities issued by GNMA. A description of the
various types of securities in which the Fund invests, and their risks,
immediately follows this strategy section.

The Adviser allocates the Fund's portfolio holdings between GNMA backed
securities and other U.S. government securities, such as U.S. Treasury
securities. Mortgage backed securities generally offer high relative yields
versus comparable U.S. Treasury securities to compensate for prepayment risk.
Prepayment risk is the unscheduled partial or complete payment of the principal
outstanding on a mortgage loan by the homeowner. One important reason for
prepayments is changes in market interest rates from the time of mortgage
origination. The Adviser actively manages the Fund's portfolio, seeking the
higher relative returns of mortgage backed securities while attempting to limit
the prepayment risk.

The Adviser attempts to manage the Fund's prepayment risk by selecting mortgage
backed securities with characteristics that make prepayments less likely. The
Adviser attempts to assess the relative returns and risks GNMA of mortgage
backed securities by analyzing how the timing, amount and division of cash flows
from the pool of mortgages underlying the security might change in response to
changing economic and market conditions.

The adviser selects securities with longer or shorter durations based on its
interest rate outlook. The Adviser generally shortens the portfolio's average
duration when it expects interest rates to rise, and extends duration when it
expects interest rates to fall. Duration measures the price sensitivity of a
portfolio of fixed income securities to changes in interest rates. The Adviser
formulates its interest rate outlook and otherwise attempts to anticipate
changes in economic and market conditions by analyzing a variety of factors such
as:

* current and expected U.S. economic growth;

* current and expected interest rates and inflation;

* the Federal Reserve's monetary policy; and

* changes in the supply of or demand for U.S. government securities.

There is no assurance that the adviser's efforts to forecast market interest
rates and assess the impact of market interest rates on particular securities
will be successful.

The Adviser may use collateralized mortgage obligations ("CMOs") with relatively
predictable cash flows (such as sequential pay, planned amortization class and
targeted amortization class), to reduce prepayment risk. The Fund will invest
only in CMOs that are collateralized by GNMA obligations. In addition, the
Adviser may use combinations CMOs, and CMOs and other GNMA mortgage backed
securities, to attempt to provide a higher yielding investment with lower
sensitivity to fluctuations in interest rates.

The Adviser may attempt to take advantage of current and potential yield
differentials existing from time to time between various mortgage backed
securities in order to increase the Fund's return. The Fund may also engage in
dollar roll transactions for their potential to enhance income.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash, cash items, and shorter-term, higher-quality debt
securities and similar obligations. It may do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause the Fund to give up greater investment returns to
maintain the safety of principal, that is, the original amount invested by
shareholders.

PORTFOLIO TURNOVER

Prepayments of mortgage backed securities will cause the Fund to have an
increased portfolio turnover rate. Portfolio turnover increases the Fund's
trading costs and may have an adverse impact on the Fund's performance.

What are the Principal Securities in Which the Fund Invests?

FIXED INCOME SECURITIES

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the principal types of fixed income securities in which
the Fund invests:

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States.

GNMA SECURITIES

GNMA securities are fixed income securities that are issued or guaranteed by
GNMA. The United States supports GNMA securities with its full faith and credit.

The Fund treats mortgage backed securities guaranteed by GNMA as GNMA
securities. Although GNMA guarantee protects against credit risks, it does not
reduce the interest rate and prepayment risks of these mortgage backed
securities.

MORTGAGE BACKED SECURITIES

Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates, maturities
and other terms. Mortgages may have fixed or adjustable interest rates.
Interests in pools of adjustable rate mortgages are known as ARMs.

Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer deducts
its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates receive a
pro rata share of all payments and prepayments from the underlying mortgages. As
a result, the holders assume all the prepayment risks of the underlying
mortgages.

SPECIAL TRANSACTIONS

DELAYED DELIVERY TRANSACTIONS

Delayed delivery transactions, including when issued transactions, are
arrangements in which the Fund buys securities for a set price, with payment and
delivery of the securities scheduled for a future time. During the period
between purchase and settlement, no payment is made by the Fund to the issuer
and no interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the price
of its shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund.

TO BE ANNOUNCED SECURITIES (TBAS)

As with other delayed delivery transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the particular
securities to be delivered. Instead, the Fund agrees to accept any security that
meets specified terms. For example, in a TBA mortgage backed transaction, the
Fund and the seller would agree upon the issuer, interest rate and terms of the
underlying mortgages. The seller would not identify the specific underlying
mortgages until it issues the security. TBA mortgage backed securities increase
interest rate risks because the underlying mortgages may be less favorable than
anticipated by the Fund.

DOLLAR ROLLS

Dollar rolls are transactions where the Fund sells mortgage backed securities
with a commitment to buy similar, but not identical, mortgage backed securities
on a future date at a lower price. Normally, one or both securities involved are
TBA mortgage backed securities. Dollar rolls are subject to interest rate risks
and credit risks.

REPURCHASE AGREEMENTS

Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest rate
on the underlying security. The Fund will enter into repurchase agreements only
with banks and other recognized financial institutions, such as securities
dealers, deemed creditworthy by the Adviser.

ASSET COVERAGE

In order to secure its obligations in connection with derivative contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

Interest rate changes have a greater affect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

PREPAYMENT RISKS

Unlike traditional fixed income securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount is due, payments on
mortgage backed securities include both interest and a partial payment of
principal. This partial payment of principal may be comprised of a scheduled
principal payment as well as an unscheduled payment from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans. These
unscheduled payments of principal can adversely affect the price and yield of
mortgage backed securities. For example, during periods of declining interest
rates, prepayments can be expected to accelerate, and the Fund would be required
to reinvest the proceeds at the lower interst rates then available. In addition,
like other interest-bearing securities, the values of mortgage backed securities
generally fall when interest rates rise.

Since rising interest rates generally result in decreased prepayments of
mortgage backed securities, this could cause mortgage securities to have greater
average lives than expected and their value may decline more than other fixed
income securities. Conversely, when interest rates fall, their potential for
capital appreciation is limited due to the existence of the prepayment feature.

Generally, mortgage backed securities compensate for greater prepayment risk by
paying a higher yield. The additional interest paid for risk is measured by the
difference between the yield of a mortgage backed security and the yield of a
U.S. Treasury security with a comparable weighted average life (the spread). An
increase in the spread will cause the price of the security to decline. Spreads
generally increase in response to adverse economic or market conditions.

What Do Shares Cost?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. When the Fund receives your transaction request in proper form, it is
processed at the next calculated net asset value (NAV).

The Fund does not charge a front-end sales charge. NAV is determined at the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.

The Fund's Distributor markets the Shares described in this prospectus to
institutions acting in an agency or fiduciary capacity or to individuals
directly or through investment professionals.

The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals
for marketing and servicing Shares. The Distributor is a subsidiary of
Federated Investors, Inc. (Federated).

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

* Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive
the next calculated NAV if the investment professional forwards the order to the
Fund on the same day and the Fund receives payment within one business day. You
will become the owner of Shares and receive dividends when the Fund receives
your payment.

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company

Boston, MA

Dollar Amount of Wire

ABA Number 011000028

Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number

Nominee/Institution Name

Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

BY AUTOMATED CLEARING HOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

How to Redeem Shares

You should redeem Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption
amount you will receive is based upon the next calculated NAV after the Fund
receives the order from your investment professional.

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time) you will receive a redemption amount based on that day's NAV.

If you call after 4 p.m. Eastern time your redemption will be wired to you the
following business day. You will receive that day's dividend.

BY MAIL

You may redeem Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed; and

* signatures of all shareholders exactly as registered.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days; or

* a redemption is payable to someone other than the Shareholder(s) of
record.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available if you complete the appropriate section
of the New Account Form or an Account Service Options Form. These payment
options require a signature guarantee if they were not established when the
account was opened:

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

The Fund no longer issues share certificates. If you are redeeming Shares
represented by certificates previously issued by the Fund, you must return the
certificates with your written redemption request. For your protection, send
your certificates by registered or certified mail, but do not endorse them.

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you
will receive periodic statements reporting all account activity, including
dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.

In addition, the Fund pays any capital gains at least annually. Your dividends
and capital gains distributions will be automatically reinvested in additional
Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a capital gain distribution,
you will pay the full price for the Shares and then receive a portion of the
price back in the form of a taxable distribution, whether or not you reinvest
the distribution in Shares. Therefore, you should consider the tax implications
of purchasing Shares shortly before the Fund declares a capital gain. Contact
your investment professional or the Fund for information concerning when
dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, accounts may be
closed if redemptions cause the account balance to fall below the minimum
initial investment amount. Before an account is closed, you will be notified and
allowed 30 days to purchase additional Shares to meet the minimum.

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state, and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be primarily dividends. Redemptions are
taxable sales. Please consult your tax adviser regarding your federal, state,
and local tax liability.

Who Manages the Fund?

The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

THE FUND'S PORTFOLIO MANAGERS ARE:

TODD A. ABRAHAM

Todd A. Abraham has been the Fund's portfolio manager since March 1999.
Mr. Abraham has been a Portfolio Manager since 1995 and a Vice President of
the Fund's Adviser since 1997. Mr. Abraham joined federated in 1993 as an
Investment Analyst and served as an Assistant Vice President from 1995 to
1997. Mr. Abraham is a Chartered Financial Analyst and received his M.B.A.

in finance from Loyola College.

KATHLEEN M. FOODY-MALUS

Kathleen M. Foody-Malus has been the Fund's portfolio manager since July
1993. Ms. Foody-Malus joined Federated in 1983 and has been a Senior
Portfolio Manager since 1996 and a Vice President of the Fund's Adviser
since 1993. She was a Portfolio Manager and a Vice President of the Fund's
Adviser from 1993 to 1996. Ms. Foody-Malus received her M.B.A. in
Accounting/Finance from the University of Pittsburgh.

The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which total approximately $111 billion in assets as
of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999, or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(To be filed by amendment)

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED JANUARY 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,

BEGINNING OF PERIOD $11.38 $11.13 $11.34 $10.61 $11.64
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income 0.70 0.73 0.74 0.78 0.82
Net realized and
unrealized gain (loss)
on investments - 0.25 (0.21) 0.73 (1.03)
TOTAL FROM

INVESTMENT OPERATIONS 0.70 0.98 0.53 1.51 (0.21)
LESS DISTRIBUTIONS:
Distributions from net
investment income (0.70) (0.73) (0.74) (0.77) (0.82)
Distributions in excess
of net investment income 1 - - - (0.01) -
TOTAL DISTRIBUTIONS (0.70) (0.73) (0.74) (0.78) (0.82)
NET ASSET VALUE, END OF

PERIOD $11.38 $11.38 $11.13 $11.34 $10.61
TOTAL RETURN 2 6.30% 9.17% 4.97% 14.61% (1.71%)

RATIOS TO AVERAGE NET ASSETS:

Expenses 0.61% 0.60% 0.60% 0.60% 0.56%
Net investment income 6.13% 6.57% 6.74% 7.02% 7.51%
Expense
waiver/reimbursement 3 0.16% 0.18% 0.20% 0.20% -
SUPPLEMENTAL DATA:
Net assets, end of period

(000 omitted) $991,334 $1,087,227 $1,199,733 $1,352,894 $1,442,074
Portfolio turnover 104% 74% 63% 43% 136%

</TABLE>

1 Distributions are determined in accordance with income tax regulations which
may differ from generally accepted accounting principles. These distributions
did not represent a return of capital for federal income tax purposes.

2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

3 This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated January 31, 1999, which can be obtained free of charge.

[Graphic]
Federated

World-Class Investment Manager

PROSPECTUS

Federated GNMA Trust

INSTITUTIONAL SHARES

MAY 31, 1999

A Statement of Additional Information (SAI) dated March 31, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is contained in the Fund's Annual and SemiAnnual Report to
shareholders as they become available. The Annual Report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the Annual Report,
Semi-Annual Report, and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

[Graphic]
Federated

Federated GNMA Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-3375

Cusip 314184102

8022901A-IS (5/99)

[Graphic]

PROSPECTUS

Federated GNMA Trust

INSTITUTIONAL SERVICE SHARES

A mutual fund seeking current income by investing primarily in instruments
issued or guaranteed by the Government National Mortgage Association.

MAY 31, 1999

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which the Fund Invests? 5

What are the Specific Risks of Investing in the Fund? 7

What Do Shares Cost? 8

How is the Fund Sold? 8

How to Purchase Shares 8

How to Redeem and Exchange Shares 10

Account and Share Information 12

Who Manages the Fund? 13

Financial Information 14

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund. The primary factors that may reduce the Fund's returns
include:

* INTEREST RATE RISK. Prices of the fixed-income securities in which the
Fund invests generally fall when interest rates rise; and

The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or 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.

RISK/RETURN BAR CHART AND TABLE

[Graphic]

The bar chart shows the variability of the Fund's Institutional Service Shares
total returns on a calendar year-end basis.

The Fund's Institutional Service Shares are not sold subject to a sales charge
(load). The total returns displayed above are based upon the net asset value.

The Fund's Institutional Service Shares total return from January 1, 1999 to
March 31, 1999 was 0.72%.

Within the period shown in the Chart, the Fund's highest quarterly return was
4.94% (quarter ended June 30, 1995). Its lowest quarterly return was (2.88%)
(quarter ended March 31, 1994).

AVERAGE ANNUAL TOTAL RETURN TABLE

The following table represents the Fund's Institutional Service Shares Average
Annual Total Returns for the calendar periods ending December 31, 1999. The
table shows the Fund's total returns averaged over a period of years relative to
Saloman Brothers 30-Year GNMA Index (SB30YRGI) and the Lehman Brothers GNMA
Index (LBGNMA), broad based market indexes, and the Lipper GNMA Funds Average
(LGFA), an average of funds with similar investment objectives. Total returns
for the indexes shown do not reflect sales charges, expenses or other fees that
the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.

<TABLE>

CALENDAR PERIOD FUND SB30YRGI LGFA LBGNMA
<S> <C> <C> <C> <C>
1 Year 6.51% 6.19% 6.44% 6.93%
5 Years 6.43% 7.57% 6.50% 7.38%
Start of Performance 1 6.58% 8.17% 8.81% 9.28%

</TABLE>

1 The Fund's Institutional Service Shares start of performance date was May 30,
1992.

The Fund's Institutional Service Shares 30-Day Net Yield as of March 31, 1999
was 5.68%. Investors may call the Fund at 1-800-341-7400 to acquire the current
30-day Net Yield.

What are the Fund's Fees and Expenses?

FEDERATED GNMA TRUST

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
Shares of the Fund's Institutional Services Shares.

<TABLE>

SHAREHOLDER FEES <C>

<S>

Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases

ANNUAL FUND OPERATING EXPENSES (Before Waivers) 1

<S> <C>
Expenses That are Deducted From Fund Assets
(as a percentage of average net assets)
Management Fee 0.40%
Distribution (12b-1) Fee 2 0.25%
Shareholder Services Fee 3 0.25%
Other Expenses 0.12%
Total Annual Fund Operating Expenses 1.02%
1 Although not contractually obligated to do so, the distributor and the
shareholder services provider waived certain amounts. These are shown
below along with the net expenses the Fund actually paid for the fiscal
year ended January 31, 1999.
Total Waiver of Fund Expenses 0.25%
Total Actual Annual Fund Operating Expenses (after waivers) 0.77%
2 The distribution (12b-1) fee for Institutional Service Shares has been
voluntarily reduced. This voluntary reduction can be terminated at any time. The
distribution (12b-1) fee paid by the Fund (after the voluntary reduction) was
0.01% for the year ended January 31, 1999. 3 The shareholder services fee for
Institutional Service Shares has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid by
the Fund (after the voluntary reduction) was 0.24% for the year ended January
31, 1999.

</TABLE>

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund's Institutional Service
Shares for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's Institutional Service Shares operating
expenses are BEFORE WAIVERS as shown above and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

1 Year $ 104
3 Years $ 325
5 Years $ 563
10 Years $ 1,248

</TABLE>

What are the Fund's Investment Strategies?

The Adviser allocates the Fund's portfolio holdings between GNMA mortgage backed
securities and other U.S. government securities, such as U.S. Treasury
securities. Mortgage backed securities generally offer higher relative yields
versus comparable U.S. Treasury securities to compensate for prepayment risk.
Prepayment risk is the unscheduled partial or complete payment of the principal
outstanding on a mortgage loan by the homeowner. One important reason for
prepayments is changes in market interest rates from the time of mortgage
origination. The Adviser actively manages the Fund's portfolio, seeking the
higher relative returns of mortgage backed securities while attempting to limit
the prepayment risk.

The Adviser attempts to manage the Fund's prepayment risk by selecting mortgage
backed securities with characteristics that make prepayments less likely. The
Adviser attempts to assess the relative returns and risks of GNMA mortgage
backed securities by analyzing how the timing, amount and division of cash flows
from the pool of mortgages underlying the security might change in response to
changing economic and market conditions.

The Adviser selects securities with longer or shorter durations based on its
interest rate outlook. The Adviser generally shortens the portfolio's average
duration when it expects interest rates to rise, and extends duration when it
expects interest rates to fall. Duration measures the price sensitivity of a
portfolio of fixed income securities to changes in interesr rates. The Adviser
formulates its interest rate outlook and otherwise attempts to anticipate
changes in economic and market conditions by analyzing a variety of factors such
as:

* current and expected U.S. economic growth;

* current and expected interest rates and inflation;

* the Federal reserve's monetary policy; and

* changes in the supply of or demand for U.S. government securities.

There is no assurance that the Adviser's efforts to forecast market interest
rates and assess the impact of market interest rates on particular securities
will be successful.

The Adviser may use collaterized mortgage obligations ("CMOs") with relatively
predictable cash flows (such as sequential pay, planned amortization class and
targeted amortization class), to reduce prepayment risk. The Fund will invest
only in CMOs that are collateralized by GNMA obligations. In addition, the
Adviser may use combinations of CMOs, and CMOs and other GNMA mortgage backed
securities, to attempt to provide a higher yielding investment with lower
sensitivity to fluctuations in interest rates.

Tha Adviser may attempt to take advantage of current and potential yield
differentials existing from time to time between various GNMA mortgage backed
securities in order to increase the Fund's return. The Fund may also engage in
dollar roll transactions for their potential to enhance income.

TEMPORARY DEFENSIVE INVESTMENTS

PORTFOLIO TURNOVER

What are the Principal Securities in Which the Fund Invests?

FIXED INCOME SECURITIES

The following describes the principal types of fixed income securities in which
the Fund invests:

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States.

GNMA SECURITIES

GNMA securities are fixed income securities that are issued or guaranteed by
GNMA. The United States supports GNMA securities with its full faith and credit.

MORTGAGE BACKED SECURITIES

SPECIAL TRANSACTIONS

DELAYED DELIVERY TRANSACTIONS

TO BE ANNOUNCED SECURITIES (TBAS)

DOLLAR ROLLS

REPURCHASE AGREEMENTS

ASSET COVERAGE

In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

PREPAYMENT RISKS

What Do Shares Cost?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form,
it is processed at the next calculated net asset value (NAV).

The Fund does not charge a front-end sales charge. NAV is determined at the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

How is the Fund Sold?

The Fund offers two share classes: Institutional Shares and Institutional
Service Shares, each representing interests in a single portfolio of securities.
This prospectus relates only to Institutional Service Shares. Each share class
has different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.

The Fund's Distributor markets the Shares described in this prospectus to
institutions and individuals, directly or through investment professionals.

When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to
the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Institutional Service Shares. Because these
Shares pay marketing fees on an ongoing basis, your investment cost may be
higher over time than other shares with different sales charges and marketing
fees.

How to Purchase Shares

You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

* Establish your account with the Fund by submitting a completed New
Account Form; and

* Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund
and the Shares will be priced at the next calculated NAV after the Fund receives
the order.

BY WIRE

Send your wire to:

State Street Bank and Trust Company

Boston, MA

Dollar Amount of Wire

ABA Number 011000028

Attention: EDGEWIRE

Wire Order Number, Dealer Number,

or Group Number

Nominee/Institution Name

Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone
other than you or The Federated Funds).

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

* through an investment professional if you purchased Shares through an
investment professional; or

* directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m.
Eastern time), you will receive a redemption amount based on that day's NAV.

If you call after 4:00 p.m. (Eastern time), your redemption will be wired to you
the following business day. You will receive that day's dividend.

BY MAIL

You may redeem Shares by mailing a written request to the Fund.

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form. Send requests by mail to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

* Fund Name and Share Class, account number and account registration;

* amount to be redeemed; and

* signatures of all shareholders exactly as registered.

Call your investment professional or the Fund if you need special instructions.

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

* your redemption will be sent to an address other than the address of
record;

* your redemption will be sent to an address of record that was changed
within the last 30 days; or

* a redemption is payable to someone other than the Shareholder(s) of
record.

PAYMENT METHODS FOR REDEMPTIONS

* an electronic transfer to your account at a financial institution that is
an ACH member; or

* wire payment to your account at a domestic commercial bank that is a Federal
Reserve System member.

REDEMPTION IN KIND

Although the Fund intends to pay Share redemptions in cash, it reserves the
right to pay the redemption price in whole or in part by a distribution of the
Fund's portfolio securities.

LIMITATIONS ON REDEMPTION PROCEEDS

Redemption proceeds normally are wired or mailed within one business day after
receiving a request in proper form. Payment may be delayed up to seven days:

* to allow your purchase to clear;

* during periods of market volatility; or

* when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

You will not accrue interest or dividends on uncashed checks from the Fund if
those checks are undeliverable and returned to the Fund.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

The Fund will record your telephone instructions. If the Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SHARE CERTIFICATES

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you
will receive periodic statements reporting all account activity, including
dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a taxable distribution, whether or not
you reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Dividends are taxable as ordinary income; capital gains
are taxable at different rates depending upon the length of time the Fund holds
its assets.

Fund distributions are expected to be primarily dividends. Redemptions and
exchanges are taxable sales. Please consult your tax adviser regarding your
federal, state, and local tax liability.

Who Manages the Fund?

THE FUND'S PORTFOLIO MANAGERS ARE:

TODD A. ABRAHAM

in Finance from Loyola College.

KATHLEEN M. FOODY-MALUS

ADVISORY FEES

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse affect on the Fund.

Financial Information

FINANCIAL HIGHLIGHTS

This information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(To be filed by amendment)

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED JANUARY 31 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,

BEGINNING OF PERIOD $11.38 $11.13 $11.34 $10.61 $11.64
INCOME FROM INVESTMENT
OPERATIONS:

Net investment income 0.68 0.72 0.74 0.78 0.79
Net realized and
unrealized gain (loss)
on investments - 0.24 (0.23) 0.71 (1.03)
TOTAL FROM INVESTMENT

OPERATIONS 0.68 0.96 0.51 1.49 (0.24)
LESS DISTRIBUTIONS:

Distributions from net

investment income (0.68) (0.71) (0.72) (0.76) (0.79)
NET ASSET VALUE, END OF

PERIOD $11.38 $11.38 $11.13 $11.34 $10.61
TOTAL RETURN 1 6.11% 8.95% 4.76% 14.39% (1.92%)

RATIOS TO AVERAGE NET

ASSETS:

Expenses 0.77% 0.78% 0.80% 0.80% 0.77%
Net investment income 5.97% 6.39% 6.54% 6.82% 7.32%
Expense
waiver/reimbursement 2 0.25% 0.25% 0.25% 0.25% 0.14%
SUPPLEMENTAL DATA:
Net assets, end of period

(000 omitted) $64,155 $61,866 $73,857 $123,614 $120,427
Portfolio turnover 104% 74% 63% 43% 136%

</TABLE>

1 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

2 This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

Further information about the Fund's performance is contained in the Fund's
Annual Report, dated January 31, 1999, which can be obtained free of charge.

[Graphic]
Federated

World-Class Investment Manager

PROSPECTUS

Federated GNMA Trust

INSTITUTIONAL SERVICE SHARES

MAY 31, 1999

A Statement of Additional Information (SAI) dated March 31, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund's investments is available in the Fund's Annual and SemiAnnual Reports to
shareholders as they become available. The Annual Report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the Annual Report,
Semi-Annual Report, and other information without charge, and make inquiries,
call your investment professional or the Fund at 1-800-341-7400.

[Graphic]
Federated

Federated GNMA Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-3375

Cusip 314184201

8022901A-SS (5/99)

[Graphic]

STATEMENT OF ADDITIONAL INFORMATION

Federated GNMA Trust

INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Institutional Shares and
Institutional Service Shares for Federated GNMA Trust (Fund), dated May 31,
1999. This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectuses or the Annual Report without charge by calling 1-800-341- 7400.

MAY 31, 1999

[Graphic]
Federated

World-Class Investment Manager
Federated GNMA Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

1-800-341-7400

WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

8022901B (5/99)

[Graphic]

CONTENTS

How is the Fund Organized? 1

Securities in Which the Fund Invests 1

What Do Shares Cost? 4

How is the Fund Sold? 4

Redemption in Kind 5

Subaccounting Services 5

Massachusetts Partnership Law 5

Account and Share Information 5

Tax Information 5

Who Manages and Provides Services to the Fund? 6

How Does the Fund Measure Performance? 9

Who is Federated Investors, Inc.? 10

Financial Information 12

Addresses 12

How is the Fund Organized?

The Fund is a diversified open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on December 10,
1981. The Fund's investment adviser is Federated Management (Adviser). Effective
March 31, 1999, Federated Management, Adviser to the Fund, merged into Federated
Investment Management Company (formerly

Federated Advisers).

Securities in Which the Fund Invests

In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED INCOME SECURITIES

Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

The following describes the types of fixed income securities in which the Fund
invests.

TREASURY SECURITIES

Treasury securities are direct obligations of the federal government of the
United States. Treasury securities are generally regarded as having the lowest
credit risks.

GNMA SECURITIES

GNMA securities are fixed income securities that are issued or guaranteed by
GNMA. The United States supports GNMA securities with its full faith and credit.

The Fund treats mortgage backed securities guaranteed by GNMA as GNMA
securities. Although GNMA guarantee protects against credit risks, it does not
reduce the market and prepayment risks of these mortgage backed securities.

AGENCY SECURITIES

Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs (e.g., Government National Mortgage Association) with
its full faith and credit. Other GSEs receive support through federal subsidies,
loans or other benefits. A few GSEs have no explicit financial support, but are
regarded as having implied support because the federal government sponsors their
activities. Agency securities are generally regarded as having low credit risks,
but not as low as treasury securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does not
reduce the interest rate and prepayment risks of these mortgage backed
securities.

MORTGAGE BACKED SECURITIES

Collateralized Mortgage Obligations (CMOs)

CMOs, including interests in real estate mortgage investment conduits (REMICs),
allocate payments and prepayments from an underlying pass-through certificate
among holders of different classes of mortgage backed securities. This creates
different prepayment and interest rate risks for each CMO class. The degree of
increased or decreased prepayment risks depends upon the structure of the CMOs.
However, the actual returns on any type of mortgage backed security depend upon
the performance of the underlying pool of mortgages, which no one can predict
and will vary among pools.

Sequential CMOs

In a sequential pay CMO, one class of CMOs receives all principal payments and
prepayments. The next class of CMOs receives all principal payments after the
first class is paid off. This process repeats for each sequential class of CMO.
As a result, each class of sequential pay CMOs reduces the prepayment risks of
subsequent classes.

PACs, TACs and Companion Classes

More sophisticated CMOs include planned amortization classes (PACs) and targeted
amortization classes (TACs). PACs and TACs are issued with companion classes.
PACs and TACs receive principal payments and prepayments at a specified rate.
The companion classes receive principal payments and prepayments in excess of
the specified rate. In addition, PACs will receive the companion classes' share
of principal payments, if necessary, to cover a shortfall in the prepayment
rate. This helps PACs and TACs to control prepayment risks by increasing the
risks to their companion classes.

SPECIAL TRANSACTIONS

REPURCHASE AGREEMENTS

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to credit risks. The Fund limits repurchase
agreements to dealers and banks to those rated in the highest rating category by
Standard and Poors.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

DELAYED DELIVERY TRANSACTIONS

TO BE ANNOUNCED SECURITIES (TBAS)

DOLLAR ROLLS

SECURITIES LENDING

The Fund may lend portfolio securities to borrowers that the Adviser deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the
market value of the loaned securities increases. Also, the borrower must pay the
Fund the equivalent of any dividends or interest received on the loaned
securities.

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but
it will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a
negotiated portion of the interest earned on the cash collateral to a securities
lending agent or broker.

Securities lending activities are subject to interest rate risks and credit
risks.

ASSET COVERAGE

INVESTMENT RISKS

There are many factors which may effect an investment in the Fund. The Fund's
principal risks are outlined below.

INTEREST RATE RISKS

* Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise,
prices of fixed income securities fall. However, market factors, such as the
demand for particular fixed income securities, may cause the price of certain
fixed income securities to fall while the prices of other securities rise or
remain unchanged.

* Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of a
fixed income security to changes in interest rates.

PREPAYMENT RISKS

Unlike traditional fixed income securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount is due, payments on
mortgage backed securities include both interest and a partial payment of
principal. This partial payment of principal may be comprised of a scheduled
principal payment as well as an unscheduled payment from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans. These
unscheduled payments of principal can adversely affect the price and yield of
mortgage backed securities. For example, during periods of declining interest
rates, prepayments can be expected to accelerate, and the Fund would be required
to reinvest the proceeds at the lower interest rates then available. In
addition, like other interest-bearing securities, the values of mortgage backed
securities generally fall when interest rates rise.

Generally, mortgage backed securities compensate for greater prepayment risk by
paying a higher yield. The additional interest paid for risk is measured by the
difference between the yield of a mortgage backed security and the yield of a
U.S. Treasury security and with a comparable weighted average life (the spread).
An increase in the spread will cause the price of the security to decline.
Spreads generally increase in response to adverse economic or market conditions.

FUNDAMENTAL INVESTMENT POLICIES

The Fund will invest primarily in mortgage backed securities. Under normal
circumstances, at least 65% of the Fund's portfolio will be invested in
instruments issued or fully guaranteed as to principal and interest by GNMA. In
addition, to the extent that the Fund will invest in other mortgage backed
securities, as described below, these will be collateralized by GNMA
obligations.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for clearance
of purchases and sales of portfolio securities.

BORROWING MONEY

The Fund will not borrow money directly or through reverse repurchase agreements
in amounts in excess of one-third of the value of its assets, including the
amounts borrowed.

The Fund will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary or emergency
measure or to facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio securities is deemed
to be inconvenient or disadvantageous. The Fund will not purchase any securities
while borrowings in excess of 5% of the value of its total assets are
outstanding.

ISSUING SENIOR SECURITIES

The Fund will not issue senior securities except as permitted by its investment
objective and policies.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge, or hypothecate
assets having a market value not exceeding the lesser of the dollar amount
borrowed or 10% of the value of total assets at the time of the borrowing.

LENDING CASH OR SECURITIES

The Fund will not lend any of its assets, except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the Fund from
purchasing or holding U.S. government obligations, money market instruments,
bonds, debentures, notes, certificates of indebtedness or other debt securities,
entering into repurchase agreements, or engaging in other transactions where
permitted by the Fund's investment objective, policies and limitations.

DIVERSIFICATION OF INVESTMENTS

With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash, cash items
or securities issued or guaranteed by the government of the United States or its
agencies or instrumentalities and repurchase agreements collateralized by U.S.
government securities) if as a result more than 5% of the value of its total
assets would be invested in the securities of that issuer.

INVESTING IN REAL ESTATE

The Fund will not buy or sell real estate, including limited partnership
interests in real estate, although it may invest in securities of companies
whose business involves the purchase or sale of real estate or in securities
which are secured by real estate or interests in real estate.

INVESTING IN COMMODITIES

The Fund will not purchase or sell commodities.

UNDERWRITING

The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of restricted securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations.

The above investment limitations cannot be changed unless authorized by the
"vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act. The following limitations, however, may be changed by
the Board without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may not invest in the securities of affiliated money market funds as an
efficient means of managing the Fund's uninvested cash.

INVESTING IN ILLIQUID SECURITIES

The Fund will not invest more than 15% of the value of its net assets in
illiquid securities, including repurchase agreements providing for settlement in
more than seven days after notice, and certain restricted securities not
determined by the Fundees to be liquid.

Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.

For the purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings and loan having capital, surplus and undivided
profits in excess of $100,000,000 at the time of investment to be "cash items."

PORTFOLIO TURNOVER

The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. During the fiscal years ended January 31, 1999
and 1998, the portfolio turnover rates were 104% and 74%, respectively.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Fund's portfolio securities are determined as follows:

* for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;

* for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as determined
in good faith by the Board; and

* for all other securities at fair value as determined in good faith by the
Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.

What Do Shares Cost?

The NAV for each class of Shares may differ due to the variance in daily net
income realized by each class. Such variance will reflect only accrued net
income to which the shareholders of a particular class are entitled.

How is the Fund Sold?

Under the Distributor's Contract with the Fund, the Distributor (Federated
Securities Corp.), offers Shares on a continuous, best-efforts basis.

RULE 12B-1 PLAN (INSTITUTIONAL SERVICE SHARES)

As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals such as banks,
broker/dealers, trust departments of banks, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. In
addition, the Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.

The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in
any one year may not be sufficient to cover the marketing- related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of
years to recoup these expenses.

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

Redemption in Kind

Although the Fund intends to pay Share redemptions in cash, it reserves the
right, as described below, to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.

Because the Fund has elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is obligated to pay Share redemptions to any one
shareholder in cash only up to the lesser of $250,000 or 1% of the net assets
represented by such Share class during any 90-day period.

Any Share redemption payment greater than this amount will also be in cash
unless the Fund's Board determines that payment should be in kind. In such a
case, the Fund will pay all or a portion of the remainder of the redemption in
portfolio securities, valued in the same way as the Fund determines its NAV. The
portfolio securities will be selected in a manner that the Fund's Board deems
fair and equitable and, to the extent available, such securities will be readily
marketable.

Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.

Subaccounting Services

Certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services that may be related to the ownership of Shares.
This information should, therefore, be read together with any agreement between
the customer and the investment professional about the services provided, the
fees charged for those services, and any restrictions and limitations imposed.

Massachusetts Partnership Law

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Fund. To protect its
shareholders, the Fund has filed legal documents with Massachusetts that
expressly disclaim the liability of its shareholders for acts or obligations of
the Fund.

In the unlikely event a shareholder is held personally liable for the Fund's
obligations, the Fund is required by the Declaration of Trust to use its
property to protect or compensate the shareholder. On request, the Fund will
defend any claim made and pay any judgment against a shareholder for any act or
obligation of the Fund. Therefore, financial loss resulting from liability as a
shareholder will occur only if the Fund itself cannot meet its obligations to
indemnify shareholders and pay judgments against them.

Account and Share Information

VOTING RIGHTS

Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All Shares of the Fund have
equal voting rights, except that in matters affecting only a particular class,
only Shares of that class are entitled to vote.

Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares of
all series entitled to vote.

As of May 7, 1999, the following shareholder owned of record, beneficially,
or both, 5% or more of outstanding Institutional Shares: Charles Schwab &
Co., San Francisco, California, owned approximately 5,366,403 shares

(6.34%).

As of May 7, 1999, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Institutional Service Shares: Trust Company of
St. Joseph, St. Joseph, MO, owned approximately 604,060 shares (10.12%) and
Charles Schwab & Co., San Francisco, California, owned approximately 475,391
shares (7.97%).

Tax Information

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

Who Manages and Provides Services to the Fund?

BOARD OF TRUSTEES

The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Fund is comprised of one
fund and The Federated Fund Complex is comprised of 56 investment companies,
whose investment advisers are affiliated with the Fund's Adviser.

As of May 7, 1999, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Shares.

An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. The following symbol (#) denotes
a Member of the Board's Executive Committee, which handles the Board's
responsibilities between its meetings.

<TABLE>

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*+ # Chief Executive Officer $0 $0 for the Fund and
Birth Date: July 28, 1924 and Director or Trustee of 54 other investment
Federated Investors Tower the Federated Fund companies in the
1001 Liberty Avenue Complex; Chairman and Fund Complex
Pittsburgh, PA Director, Federated
CHAIRMAN AND TRUSTEE Investors, Inc.; Chairman
and Trustee, Federated Investment
Management Company; Chairman and Director,
Federated Investment Counseling, and
Federated Global Investment Management
Corp.; Chairman, Passport Research, Ltd.

THOMAS G. BIGLEY Director or Trustee of the Federated Fund $1,770.42 $113,860.22 for the Fund
Birth Date: February 3, 1934 Complex; Director, Member of Executive and 54 other investment
15 Old Timber Trail Committee, Children's Hospital of Pittsburgh; companies in the
Pittsburgh, PA formerly: Senior Partner, Ernst & Young LLP; Fund Complex
TRUSTEE Director, MED 3000 Group, Inc.; Director,
Member of Executive Committee, University of

Pittsburgh.

JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $1,947.75 $125,264.48 for the Fund
Birth Date: June 23, 1937 Complex; President, Investment Properties and 54 other investment
Wood/IPC Commercial Dept. Corporation; Senior Vice President, companies in the
John R. Wood Associates, Inc. John R. Wood and Associates, Inc., Fund Complex
Realtors Realtors;Partner or
3255 Tamiami Trail North Trustee in private real estate
Naples, FL ventures in Southwest Florida; formerly:
TRUSTEE President, Naples Property Management,

Inc. and Northgate Village Development
Corporation.

NICHOLAS CONSTANTAKIS Director or Trustee of the Federated Fund $1,770.42 $47,958.02 for the Fund
Birth Date: September 3, 1939 Complex; formerly: Partner, Andersen and 29 other investment
175 Woodshire Drive Worldwide SC. companies in the
Pittsburgh, PA Fund Complex
TRUSTEE
WILLIAM J. COPELAND Director or Trustee of the Federated Fund $1,947.75 $125,264.48 for the Fund
Birth Date: July 4, 1918 Complex; Director and Member of the and 54 other investment
One PNC Plaza-23rd Floor Executive Committee, Michael Baker, Inc.; companies in the
Pittsburgh, PA formerly: Vice Chairman and Director, PNC Fund Complex
TRUSTEE Bank, N.A. and PNC Bank Corp.; Director,
Ryan Homes, Inc.
Previous Positions: Director, United
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman,
Pittsburgh Civic Light Opera.

JOHN F. CUNNINGHAM++ Director or Trustee of some of the Federated $ 0$0 for the Fund and
Birth Date: March 5, 1943 Fund Complex; Chairman, President and Chief 26 other investment
353 El Brillo Way Executive Officer, Cunningham & Co., Inc. ; companies in the
Palm Beach, FL Trustee Associate, Boston College; Director, Fund Complex
TRUSTEE EMC Corporation; formerly: Director, Redgate
Communications.

Previous Positions: Chairman of the Board and
Chief Executive Officer, Computer Consoles,
Inc.; President and Chief Operating Officer,
Wang Laboratories; Director, First National
Bank of Boston; Director, Apollo Computer,

Inc.

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $1,770.42 $113,860.22 for the Fund
Birth Date: October 11, 1932 Complex; Professor of Medicine, University of and 54 other investment
3471 Fifth Avenue Pittsburgh; Medical Director, University of companies in the
Suite 1111 Pittsburgh Medical Center-Downtown; Fund Complex

Pittsburgh, PA Hematologist, Oncologist, and Internist,
TRUSTEE University of Pittsburgh Medical Center;

Member, National Board of Trustees,
Leukemia Society of America.

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
PETER E. MADDEN Director or Trustee of $1,770.42 $113,860.22 for the Fund
Birth Date: March 16, 1942 the Federated Fund and 54 other investment
One Royal Palm Way Complex; formerly: companies in the
100 Royal Palm Way Representative, Fund Complex
Palm Beach, FL Commonwealth of
TRUSTEE Massachusetts General
Court; President, State
Street Bank and Trust
Company and State
Street Corporation.
Previous Positions:
Director, VISA USA and
VISA International;
Chairman and Director,
Massachusetts Bankers
Association; Director,
Depository Trust
Corporation.

JOHN E. MURRAY, JR., J.D., S.J.D. # Director or Trustee of the Federated Fund $1,770.42 $113,860.22 for the Fund
Birth Date: December 20, 1932 Complex; President, Law Professor, Duquesne and 54 other investment
President, Duquesne University University; Consulting Partner, Mollica & companies in the
Pittsburgh, PA Murray. Fund Complex
TRUSTEE Previous Positions: Dean and Professor of

Law, University of Pittsburgh School of
Law; Dean and Professor of Law, Villanova
University School of Law.

MARJORIE P. SMUTS Director or Trustee of the Federated Fund 1,770.42 $113,860.22 for the Fund
Birth Date: June 21, 1935 Complex; Public Relations/Marketing/ and 54 other investment
4905 Bayard Street Conference Planning. companies in the
Pittsburgh, PA Previous Positions: National Spokesperson, Fund Complex
TRUSTEE Aluminum Company of America; business
owner.

GLEN R. JOHNSON Trustee, Federated Investors, Inc.; staff $0 $0 for the Fund and
Birth Date: May 2, 1929 member, Federated Securities Corp. 8 other investment
Federated Investors Tower companies in the
1001 Liberty Avenue Fund Complex

Pittsburgh, PA

PRESIDENT

J. CHRISTOPHER DONAHUE+ President or Executive Vice President of the $0 $0 for the Fund and
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee 16 other investment
Federated Investors Tower of some of the Funds in the Federated Fund companies in the
1001 Liberty Avenue Complex; President and Director, Federated Fund Complex
Pittsburgh, PA Investors, Inc.; President and Trustee,

EXECUTIVE VICE PRESIDENT Federated Investment Management Company;
President and Director, Federated Investment
Counseling and Federated Global Investment
Management Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder
Services Company; Director, Federated
Services Company.
EDWARD C. GONZALES Trustee or Director of some of the Funds in the $0 $0 for the Fund and
Birth Date: October 22, 1930 Federated Fund Complex; President, Executive 1 other investment
Federated Investors Tower Vice President and Treasurer of some of the company in the
1001 Liberty Avenue Funds in the Federated Fund Complex; Vice Fund Complex
Pittsburgh, PA Chairman, Federated Investors, Inc.; Vice
EXECUTIVE VICE PRESIDENT President, Federated Investment Management
Company and Federated Investment
Counseling, Federated Global Investment
Management Corp. and Passport Research,
Ltd.; Executive Vice President and Director,
Federated Securities Corp.; Trustee, Federated
Shareholder Services Company.

JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0 $0 for the Fund and
Birth Date: October 26, 1938 Federated Fund Complex; Executive Vice 54 other investment
Federated Investors Tower President, Secretary, and Director, Federated companies in the
1001 Liberty Avenue Investors, Inc.; Trustee, Federated Investment Fund Complex
Pittsburgh, PA Management Company; Director, Federated
EXECUTIVE VICE PRESIDENT Investment Counseling and Federated Global
and SECRETARY Investment Management Corp.; Director,
Federated Services Company; Director,
Federated Securities Corp.

RICHARD J. THOMAS Treasurer of the Federated Fund Complex; Vice $0 $0 for the Fund and
Birth Date: June 17, 1954 President-Funds Financial Services Division, 54 other investment
Federated Investors Tower Federated Investors, Inc.; formerly: various companies in the
1001 Liberty Avenue management positions within Funds Financial Fund Complex
Pittsburgh, PA Services Division of Federated Investors, Inc.

TREASURER

RICHARD B. FISHER President or Vice President of some of the $0 $0 for the Fund and
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; 6 other investment
Federated Investors Tower Director or Trustee of some of the Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Executive Vice Fund Complex
Pittsburgh, PA President, Federated Investors, Inc.; Chairman

VICE PRESIDENT and Director, Federated Securities Corp.

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
WILLIAM D. DAWSON, III Chief Investment Officer $0 $0 for the Fund and
Birth Date: March 3, 1949 of this Fund and various 41 other investment
Federated Investors Tower other Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Fund Complex
Pittsburgh, PA Executive Vice President,
CHIEF INVESTMENT OFFICER Federated Investment

Counseling, Federated Global Investment
Management Corp., Federated Investment
Management Company and Passport Research,
Ltd.; Registered Representative, Federated
Securities Corp.; Portfolio Manager,
Federated Administrative Services; Vice
President, Federated Investors, Inc.;
formerly: Executive Vice President and
Senior Vice President, Federated Investment
Counseling Institutional Portfolio
Management Services Division; Senior Vice
President, Federated Investment Management
Company and Passport Research, Ltd.

TODD A. ABRAHAM Todd A. Abraham has been the Fund's $0 $0 for the Fund and
Birth Date: February 10, 1966 portfolio manager since March 1999. He is one other investment
Federated Investors Tower Vice President of the Fund. Mr. Abraham has company in the
1001 Liberty Avenue been a Portfolio Manager since 1995 and a Fund Complex.
Pittsburgh, PA Vice President of the Fund's investment
VICE PRESIDENT adviser since 1997. Mr. Abraham joined
Federated in 1993 as an Investment Analyst
and served as Assistant Vice President from
1995 to 1997. Mr. Abraham is a Chartered
Financial Analyst and received his M.B.A. in
Finance from Loyola College.

KATHLEEN M. FOODY-MALUS Kathleen M. Foody is Vice President of the $0 $0 for the Fund and
Birth Date: March 26, 1960 Fund. Ms. Foody-Malus joined Federated in 3 other investment
Federated Investors Tower 1983 and has been a Senior Portfolio Manager companies in the
1001 Liberty Avenue since 1996 and a Vice President of the Fund's Fund Complex
Pittsburgh, PA Adviser since 1993. She was a Portfolio
VICE PRESIDENT Manager and a Vice President of the Fund's
Adviser from 1993 to 1996. Ms. Foody-Malus
received her M.B.A. in Accounting/Finance
from the University of Pittsburgh.

</TABLE>

+ Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Fund.

++ Mr. Cunningham became a member of the Board of Trustees on January 1, 1999.
He did not earn any fees for serving the Fund Complex since these fees are
reported as of the end of the last calendar year. He did not receive any fees as
of the fiscal year end of the Fund.

INVESTMENT ADVISER

The Adviser conducts investment research and makes investment decisions for the
Fund.

The Adviser is a wholly owned subsidiary of Federated.

The Adviser shall not be liable to the Fund or any Fund shareholder for any
losses that may be sustained in the purchase, holding, or sale of any security
or for anything done or omitted by it, except acts or omissions involving
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties imposed upon it by its contract with the Fund.

OTHER RELATED SERVICES

Affiliates of the Adviser may, from time to time, provide certain electronic
equipment and software to institutional customers in order to facilitate the
purchase of Fund Shares offered by the Distributor.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.

RESEARCH SERVICES

Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
services for which the Adviser or its affiliates might otherwise have paid, it
would tend to reduce their expenses. The Adviser and its affiliates exercise
reasonable business judgment in selecting those brokers who offer brokerage and
research services to execute securities transactions. They determine in good
faith that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided.

Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

ADMINISTRATOR

Federated Services Company, a subsidiary of Federated, provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Fund. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
all Federated Funds as specified below:

MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS

<S> <C>

0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments for a fee based on
Fund assets, plus out-of-pocket expenses.

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by

shareholders.

INDEPENDENT AUDITORS

Deloitte & Touche LLP, Boston, Massachusetts, is the independent auditors for
the Fund.

FEES PAID BY THE FUND FOR SERVICES

FOR THE YEAR ENDED JANUARY 31 1999 1998 1997
<S> <C> <C> <C>
Advisory Fee Earned $4,438,230 $4,824,062 $5,451,836
Administrative Fee 836,606 910,343 1,030,132

12B-1 FEE:

Institutional Services Shares 4,446 4,940 -
SHAREHOLDER SERVICES FEE:
Institutional Shares 941,444 - -
Institutional Service Shares 154,329 - -
</TABLE>

Fees are allocated among classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable class of Shares.

How Does the Fund Measure Performance?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Unless otherwise stated, any quoted Share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded, would
increase the total return and yield. The performance of Shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in the
Fund's or any class of Shares' expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings
fluctuate daily. Both net earnings and offering price per Share are factors in
the computation of yield and total return.

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns give for the one-year, five-year, and ten-year period ended
January 31, 1999.

Yield given for the 30-day period ended January 31, 1999.

SHARE CLASS 30-DAY PERIOD 1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>

INSTITUTIONAL SHARES

Total Return 6.30% 6.53% 8.54%
Yield 5.84%
</TABLE>

START OF

PERFORMANCE

SHARE CLASS 30-DAY PERIOD 1 YEAR 5 YEARS ON MAY 30, 1992
<S> <C> <C> <C> <C>
INSTITUTIONAL SERVICE SHARES

Total Return 6.11% 6.32% 6.58%
Yield 5.68%
</TABLE>

TOTAL RETURN

Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD

The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering
price per Share on the last day of the period. This number is then annualized
using semi-annual compounding. This means that the amount of income generated
during the 30-day period is assumed to be generated each month over a 12-month
period and is reinvested every six months The yield does not necessarily reflect
income actually earned by Shares because of certain adjustments required by the
SEC and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

* references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

* charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;

* discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Funds; and

* information about the mutual fund industry from sources such as the Investment
Company Institute.

The Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.

The Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.

You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:

LIPPER ANALYTICAL SERVICES, INC.

Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specified period of time. From
time to time, the Fund will quote its Lipper ranking in the "GNMA Funds"
category in advertising and sales literature.

MORNINGSTAR, INC.

Morningstar, Inc., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

LEHMAN BROTHERS GNMA INDEX

Lehman Brothers GNMA Index is a total, comprehensive GNMA index comprised of
30-year GNMA pass-throughs, 15-year GNMA pass-throughs, and GNMA GPM's.

LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX

Lehman Brothers Government/Corporate (Total) Index is comprised of approximately
5,000 issues which include non-convertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed rate, nonconvertible
domestic bonds of companies in industry, public utilities and finance. The
average maturity of these bonds approximates nine years. Tracked by Lehman
Brothers Inc., the index calculates total returns for one-month, three-month,
twelve-month and ten-year periods and year-to-date.

LEHMAN BROTHERS GOVERNMENT INDEX

Lehman Brothers Government Index is an unmanaged index comprised of all publicly
issued, non-convertible domestic debt of the U.S. government, or any agency
thereof, or any quasi-federal corporation and of corporate debt guaranteed by
the U.S. government. Only notes and bonds with a minimum outstanding principal
of $1 million and a minimum maturity of one year are included.

In addition, the Fund will make comparisons to certain direct market securities
in which it is permitted to invest. The type of security that will be used for
such comparisons, and the source of its performance information is listed below.

10-YEAR TREASURY NOTES

10-Year Treasury Notes-Source: Salomon Brothers. Total returns are
calculated for periods of one, three, and twelve months.

Who is Federated Investors, Inc.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state- of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

EQUITY FUNDS

In the equity sector, Federated has more than 27 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value- oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

CORPORATE BOND FUNDS

In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making-based on
intensive, diligent credit analysis-is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset backed securities market, a market
totaling more than $209 billion.

GOVERNMENT FUNDS

In the government sector, as of December 31, 1998, Federated manages 9 mortgage
backed, 5 government/agency and 19 government money market mutual funds, with
assets approximating $5.3 billion, $1.8 billion and $41.6 billion, respectively.
Federated trades approximately $425 million in U.S. government and mortgage
backed securities daily and places approximately $25 billion in repurchase
agreements each day. Federated introduced the first U.S. government fund to
invest in U.S. government bond securities in 1969. Federated has been a major
force in the short- and intermediate-term government markets since 1982 and
currently manages approximately $43.2 billion in government funds within these
maturity ranges.

MONEY MARKET FUNDS

In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield-
J. Thomas Madden; U.S. fixed income-William D. Dawson, III; and global
equities and fixed income-Henry A. Frantzen. The Chief Investment Officers
are Executive Vice Presidents of the Federated advisory companies.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax exempt entities, foundations/endowments,
insurance companies, and investment and financial advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

BANK MARKETING

Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank holding
companies use Federated Funds in their clients' portfolios. The marketing effort
to trust clients is headed by Timothy C. Pillion, Senior Vice President, Bank
Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated Funds are available to consumers through major brokerage firms
nationwide-we have over 2,200 broker/dealer and bank broker/dealer relationships
across the country-supported by more wholesalers than any other mutual fund
distributor. Federated's service to financial professionals and institutions has
earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement. The
marketing effort to these firms is headed by James F. Getz, President,
Broker/Dealer Sales Division, Federated Securities Corp.

Financial Information

The Financial Statements for the Fund for the fiscal year ended January 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
Federated GNMA Trust dated March 31, 1999.

Addresses

FEDERATED GNMA TRUST

Institutional Shares
Institutional Service Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

DISTRIBUTOR

Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER

Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company
P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT AUDITORS

Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110-1617

PART C. OTHER INFORMATION

Item 23. EXHIBITS:

(a) Conformed copy of the Amended Declaration of Trust of the Registrant; (14)

(b) Copy of the Amended By-Laws of the Registrant;(8)
(i) Copy of Amendment No. 6 to the By-Laws; (19)
(ii) Copy of Amendment No. 7 to the By-Laws; (19)
(iii) Copy of Amendment No. 8 to the By-Laws; (19)
(iv) Copy of Amendment No. 9 to the By-Laws; (19)

(c) (i) Copy of Specimen Certificate for Shares of
Capital Stock for Institutional Shares of
the Registrant; (17)
(ii) Copy of Specimen Certificate for Shares of
Capital Stock for Institutional Service
Shares of the Registrant; (17)
(d) Conformed copy of Investment Advisory Contract of the
Registrant; (17) (e) (i) Conformed copy of Distributor's
Contract of the Registrant; (17)

(ii) The Registrant hereby incorporates the
conformed copy of the specimen Mutual Funds Sales
and Service Agreement; Mutual Funds Service
Agreement; and Plan Trustee Mutual Funds Service
Agreement from Item 24(b)(6) of the Cash Trust
Series II Registration Statement on Form N-1A,
filed with the Commission on July 24, 1995. (File
Numbers 33-3850 and 811-6269);

(f) Not applicable;

(g) (i) Conformed copy of the Custodian Agreement of
the Registrant; (15) (ii) Conformed copy of
Custodian Fee Schedule of the Registrant; (18)

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed March 22, 1988. (File Nos. 2-75670 and
811-3375)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 on Form N-1A filed March 24, 1993. (File Nos. 2-75670 and
811-3375)

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed March 30, 1995. (File Nos. 2-75670 and
811-3375)

17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed March 31, 1997. (File Nos. 2-75670 and
811-3375)

18. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 32 on Form N-1A filed April 1, 1998. (File Nos. 2-75670 and
811-3375)

19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 on Form N-1A filed January 28, 1999. (File Nos. 2- 75670
and 811-3375)

<PAGE>

(h) (i) Conformed copy of Amended and Restated
Agreement for Fund Accounting Services,
Administrative Services, Shareholder Transfer
Agency Services and Custody Services Procurement;
(19) (ii) Conformed copy of Shareholder Services
Agreement; (19) (iii) Conformed copy of Shareholder
Services Sub- Contract between Fidelity and
Federated Shareholder Services, on behalf of the
Registrant; (16) (iv) The responses described in
Item 23(e)(ii) are hereby incorporated by
reference.

(i) Conformed copy of the Opinion and Consent of
Counsel as to legality of shares being
registered; (15)
(j) Conformed copy of Consent of Independent
Auditors; +
(k) Not applicable;
(l) Conformed copy of Initial Capital
Understanding; (2)
(m) Conformed copy of Distribution Plan of the
Registrant; (17)
(n) Copy of Financial Data Schedules; (not included per
footnote 60 of Release No. 33-7684)
(o) The Registrant hereby incorporates the conformed
copy of the specimen Multiple Class Plan from Item
24(b)(18) of the World Investment Series, Inc.
Registration Statement on Form N-1A, filed with the
Commission on January 26, 1996. (File Nos. 33-52149
and 811-07141)

(p) (i) Conformed copy of Power of Attorney; (19)

(ii) Conformed copy of Limited Power of Attorney; (19)

(iii)Conformed copy of Power of Attorney of Chief Investment Officer of the
Registrant; (19)

(iv) Conformed copy of Power of Attorney of Treasurer of the Registrant; (19)

(v) Conformed copy of Power of Attorney of Trustee of the Registrant;(19)

+ All exhibits have been filed electronically.

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed February 11, 1982. (File Nos. 2-75670
and 811-3375)

15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 on Form N-1A filed March 30, 1995. (File Nos. 2-75670 and
811-3375)

16. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 on Form N-1A filed March 25, 1996. (File Nos. 2-75670 and
811-3375)

17. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 31 on Form N-1A filed March 31, 1997. (File Nos. 2-75670 and
811-3375)

19. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 33 on Form N-1A filed January 28, 1999. (File Nos. 2- 75670
and 811-3375)

<PAGE>

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
None.

Item 25. INDEMNIFICATION: (12)

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER:

For a description of the other business of the investment adviser,
see the section entitled "Who Manages the Fund" in Part A. The
affiliations with the Registrant of four of the Trustees and one of
the Officers of the investment adviser are included in Part B of this
Registration Statement under "Who Manages and Provides Services to
the Fund?" The remaining Trustee of the investment adviser, his
position with the investment adviser, and, in parentheses, his
principal occupation is: Mark D. Olson (Partner, Wilson, Halbrook &
Bayard), 107 W. Market Street, Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are:

Executive Vice Presidents: William D. Dawson, III
Henry A. Frantzen
J. Thomas Madden

Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Jeffrey A. Kozemchak
Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

Vice Presidents: Todd A. Abraham
J. Scott Albrecht

Arthur J. Barry
Randall S. Bauer
Micheal W. Casey
Robert E. Cauley
Kenneth J. Cody
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks

12. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No.19 on Form N-1A filed March 22, 1991. (File Nos. 2-75670 and
811-3375)

<PAGE>

Edward C. Gonzales
James E. Grefenstette
Marc Halperin
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Katsonis
Stephen A. Keen
Robert M. Kowit
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
William M. Painter
Jeffrey A. Petro
Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Peter Vutz
Paige M. Wilhelm
George B. Wright
Jolanta M. Wysocka

Assistant Vice Presidents: Nancy J. Belz
Lee R. Cunningham, II
James H. Davis, II
Jacqueline A. Drastal
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Farwell
John T. Gentry
John W. Harris
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
Ihab Salib
John Sheehy
Matthew K. Stapen
Diane Tolby
Timothy g. Trebilcock
Leonardo A. Vila
Steven J. Wagner
Lori A. Wolff

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. Newcamp

Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the investment
companies in the Federated Fund Complex described in Part B of this
Registration Statement.

Item 27. PRINCIPAL UNDERWRITERS:

(a)....Federated Securities Corp. the Distributor for shares of the Registrant,
acts as principal underwriter for the following open-end investment
companies, including the Registrant:

Automated Government Money Trust; Cash Trust Series II; Cash Trust Series, Inc.;
CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable
Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free
Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal Funds; Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series
Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for
Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Arthur L. Cherry Director, Federated Securities --
Federated Investors Tower Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard B. Fisher Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief

1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.

Treasurer, Federated
Securities Corp.

Thomas R. Donahue Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz Director, President- --
Federated Investors Tower Broker/Dealer, Federated

1001 Liberty Avenue Securities Corp.
Pittsburgh, PA 15222-3779

John B. Fisher Director and President- --
Federated Investors Tower Institutional Sales,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, President

1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew W. Brown Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark Carrol Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert J. Dueberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Dayna J. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas P. Moretti Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley, III Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

</TABLE>

<PAGE>

Item 28. LOCATION OF ACCOUNTS AND RECORDS:

All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31(a)-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:

Registrant.....................Federated Investors Tower
1001 Liberty Avenue
......Pittsburgh, PA
15222-3779

(Notices should be sent to the Agent for service at above address)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15227-7000

FEDERATED SHAREHOLDER

SERVICES COMPANY P.O. Box 8600
("Transfer Agent and Boston, MA
Dividend Disbursing Agent") 02266-8600

FEDERATED SERVICES COMPANY Federated Investors Tower
("Administrator") Pittsburgh, PA
15222-3779

FEDERATED INVESTMENT

MANAGEMENT COMPANY Federated Investors Tower
("Adviser") Pittsburgh, PA

15222-3779

STATE STREET BANK AND TRUST P.O. Box 8600
COMPANY ..Boston, MA
("Custodian") 02266-8600

Item 29. MANAGEMENT SERVICES: Not applicable.

Item 30. UNDERTAKINGS:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED GNMA TRUST, certifies
that it meets all of the requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 28th day of May, 1999.

FEDERATED GNMA TRUST

BY: /s/ Anthony R. Bosch
Anthony R. Bosch, Assistant Secretary
Attorney in Fact for John F. Donahue

May 28, 1999

Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:

NAME TITLE DATE

By: /s/Anthony R. Bosch

Anthony R. Bosch Attorney In Fact May 28 ,1999
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

John F. Donahue* Chairman and Trustee
(Chief Executive Officer)

Richard B. Fisher* President

Richard J. Thomas* Treasurer(Principal Financial and
Accounting Officer)

William D. Dawson III* Chief Investment Officer

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

Nicholas P. Constantakis* Trustee

William J. Copeland* Trustee

John F. Cunningham* Trustee

James E. Dowd, Esq.* Trustee

Lawrence D. Ellis, M.D.* Trustee

Peter E. Madden* Trustee

John E. Murray, Jr.,J.D.,S.J.D.* Trustee

Marjorie P. Smuts* Trustee

* By Power of Attorney

EXHIBIT J UNDER FORM N-1A
EXHIBIT 23 UNDER ITEM 601/ REG. S-K

INDEPENDENT AUDITORS' REPORT

To the Board of Trustees and Shareholders of
Federated GNMA Trust:

We consent to the use in Post-Effective Amendment No. 35 to Registration
Statement of Federated GNMA Trust of our report dated march 15, 1999 appearing
in the Prospectus, which is a part of such Registration Statement, and to the
reference to us under the heading "Financial Highlights" in such Prospectus.

/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Boston, Massachusetts

May 25, 1999