FEDERATED GNMA TRUST, 485APOS, 1999-01-28

FEDERATED GNMA TRUST
485APOS, 1999-01-28

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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. 33 .......................... X
------ ------

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 29 .........................................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)
_ on _____________ pursuant to paragraph (b)

60 days after filing pursuant to paragraph (a) (i)
X on MARCH 31, 1999 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.

CONTENTS

Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Fund?
Financial Information

March 31, 1999

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The investment objective of the Fund 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 primarily in fixed income
securities issued or guaranteed by the Government National Mortgage Association,
including mortgage backed securities. The Fund may invest up to 35% of its
assets in U.S. Treasury securities. 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:

changes in prevailing interest rates and

increased prepayments of mortgages.

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

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Institutional Shares as of the calendar
year-end for each of 10 years. The `y' axis reflects the "% Total Return"
beginning with -4.00% and increasing in increments of 2.00% up to 18.00%. The
`x' axis represents calculation periods for the last ten calendar years of the
Institutional Shares, beginning with 1989. The light gray shaded chart features
10 distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the
Institutional Shares for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1989 through 1998. The percentages
noted are: 15.06%, 10.38%, 15.33%, 6.52%, 6.54%, -2.51%, 16.06%, 4.98%, 8.84%,
and 6.70%

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

1 YEAR 5 YEARS 10 YEARS
Institutional Shares 6.70% 6.64% %
Lehman Brothers 30-Year GNMA Index
Saloman Brothers 30-Year GNMA Index
Lipper GNMA Funds Average

The bar chart shows the variability of the Fund's Institutional Shares'
total returns on a yearly basis.

The Fund is compared to Lehman Brothers GNMA Index, Saloman Brothers
30-Year GNMA Index and Lipper GNMA Funds Average for the calendar periods ending
January 31, 1999. The table shows the Fund's total returns averaged over a
period of years relative to Lehman Brothers 30-Year GNMA Index, Salomon Brothers
30-Year GNMA Index and the Lipper GNMA Funds Average, a broad-based market
index. Past performance does not necessarily predict future performance. This
information provides you with historical performance 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>
<CAPTION>

SHAREHOLDER FEES
<S> <C>
FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering None
price)
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase None
price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other None
Distributions) (as a percentage of offering price).
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (BEFORE WAIVERS)(1)

EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Management Fee 0.40%
Distribution (12b-1) Fee(2) None
Shareholder Services Fee (3) 0.25%
Other Expenses(4) 0.15%
TOTAL ANNUAL FUND OPERATING EXPENSES 0.80%
- ------------------------------------- - -----
</TABLE>

1 Although not contractually obligated to do so, the distributor will waive
certain amounts. These are shown below along with the net expenses the Fund
would ACTUALLY PAID for the fiscal year ended January 31, 1999.

Waivers of Fund Expenses 0.20%
Total Actual Annual Fund Operating Expenses (after waivers) 0.60%

2 Institutional Shares did not pay or accrue the distribution (12b-1) fee
during the fiscal year ended 1/31/99. Institutional Shares has no present
intention of paying or accruing the distribution (12b-1) fee during the
year ended January 31, 2000.

3 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 voluntary reduction) was
0.05% for the year ended January 31, 1999.

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 in the Table and remain the same. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:

SHARE CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
$61 $192 $335 $750
- -----------------------------------

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The adviser manages the portfolio by targeting a dollar weighted average
duration. Duration measures the price sensitivity of a portfolio of fixed income
securities to changes in interest rates. Under ordinary market conditions, the
Fund's duration, as determined by the adviser, will be within 25% of the Lehman
Brothers GNMA Index. The adviser adjusts the Fund's duration within this range
based upon its interest rate outlook. The adviser formulates its interest rate
outlook by analyzing a variety of factors, such as:

o current U.S. economic activity and the economic outlook,

o current short-term interest rates,

o the Federal Reserve Board's policies regarding short-term interest rates,
and

o potential effects of foreign economic activity on short-term interest
rates.

o The adviser generally shortens the portfolio's average duration when it
expects interest rates to rise and extends the duration when it expects
interest rates to fall.

The adviser selects GNMA securities used to lengthen or shorten the
portfolio's average duration by comparing the returns currently offered by
different investments to their historical and expected returns. In selecting
GNMA mortgage backed securities the analysis also focuses on the expected cash
flows from the pool of mortgages supporting the security. The Adviser attempts
to assess the relative returns and risks of these securities by analyzing how
the timing, amount and division of cash flows from the pool might change in
response to changing economic and market conditions.

In addition to buying mortgage backed securities outright, the Fund may
acquire securities on a "to be announced" basis in order to enhance yield. The
Fund engages in dollar roll transactions to increase income. The Fund uses
repurchase agreements to secure its obligations in these transactions.

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.

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 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 MARKET 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 pre-payments 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 MARKET
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
MARKET 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 MARKET
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.

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.

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 terminating a special transaction. This may cause the Fund to
miss favorable trading opportunities or to realize losses on special
transactions.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as
an efficient means of managing the Fund's uninvested cash

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

BOND MARKET RISKS

o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise,
prices of fixed income securities fall.

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

o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate
mortgages when mortgage rates fall. This results in the prepayment of
mortgage backed securities with higher interest rates. Conversely,
prepayments due to refinancings decrease when mortgage rates increase. This
extends the life of mortgage backed securities with lower interest rates.
Other factors can also lead to increases or decreases in prepayments.
Increases in prepayments of high interest rate mortgage backed securities,
or decreases in prepayments of lower interest rate mortgage backed
securities, may reduce their yield and price. These factors, particularly
the relationship between interest rates and mortgage prepayments, make the
price of mortgage backed securities more volatile than most other types of
fixed income securities with comparable credit risks.

o Mortgage backed securities generally compensate for greater prepayment risk
by paying a higher yield. The difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security is
perceived to have increased prepayment risk or less market demand. An
increase in the spread may cause the price of the security to decline.

o The Fund may have to reinvest the proceeds in other securities with lower
interest rates, higher prepayment risks, or other less favorable
characteristics.

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 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

o Establish an account with the investment professional; and

o Submit your purchase order to the investment professional before the end of
regular trading on the NYSE (normally 4 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

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

o 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:

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

o 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 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 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:

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

o amount to be redeemed;

o signatures of all Shareholders exactly as registered; and

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

SIGNATURE GUARANTEES
Signatures must be guaranteed if:

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

o your redemption will be sent to an address of record that was changed
within the last thirty days;

o a redemption is payable to someone other than the shareholder(s) of record;
or

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:

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

o 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:

o to allow your purchase to clear;

o during periods of market volatility; or

o 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 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

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 Management. 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:

Edward J. Tiedge has been the Fund's portfolio manager since October, 1995.
Mr. Tiedge joined Federated Investors in 1993 and has been a Portfolio Manager
and a Vice President of the Fund's investment adviser since January 1996. He
served as a Portfolio manager and an Assistant Vice President of the Fund's
investment adviser in 1995, and an Investment Analyst during 1993 and 1994. Mr.
Tiedge is a Chartered Financial Analyst and received his M.S. in Industrial
Administration from Carnegie Mellon University.

Kathleen M. Foody-Malus has been the Fund's portfolio manager since July,
1993. Ms. Foody-Malus joined Federated Investors in 1983 and has been a Senior
Portfolio Manager and a Senior Vice President of the Fund's investment advisor
since 1999. She was a Portfolio manager and a Vice President of the Fund's
investment adviser from 1993-1998. 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 200
mutual funds and separate accounts, which total more than $110 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. The Year 2000 problem may cause systems to process information
incorrectly and could disrupt businesses that rely on computers, like the Fund.

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 following 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 this
Prospectus.

(To be filed by amendment)

FEDERATED GNMA TRUST

INSTITUTIONAL SHARES

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 report to shareholders. The
annual report discusses market conditions and investment strategies that
significantly affected the Fund's performance during the last fiscal year. To
obtain the SAI, and other information without charge, 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.

INVESTMENT COMPANY ACT FILE NO. 811-3375
CUSIP 314184102

8022901A-IS (3/99)

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.

CONTENTS

March 31, 1999

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?

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:

o changes in prevailing interest rates and

o increased prepayments of mortgages.

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Institutional Service Shares as of the
calendar year-end for each of six years. The `y' axis reflects the "% Total
Return" beginning with -4.00% and increasing in increments of 2.00% up to
16.00%. The `x' axis represents calculation periods from the earliest calendar
year end of the Institutional Service Shares' start of business through the
calendar year ended 1998. The light gray shaded chart features six distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Institutional Service Shares for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1993 through 1998. The percentages noted are: 6.27%, -2.72%,
15.83%, 4.77%, 8.62%, and 6.51%. The Fund's Institutional Service Shares are not
sold subject to a sales charge (load). Hence, the total returns displayed above
are based upon the net asset value. Within the period shown in the Chart, the
Institutional Service Share'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

LIFE OF THE FUND (1) 1 YEAR 5 YEARS
Institutional Service Shares 6.58% 6.51% 6.43%
Lehman Brothers 30-Year
GNMA Index
Saloman Brothers 30-Year
GNMA Index
Lipper GNMA Funds Average

1 The Fund's Institutional Service Shares start of performance date was May
29, 1992. The bar chart shows the variability of the Fund's actual total
return on a yearly basis.

The Fund is compared to Lehman Brothers GNMA Index, Salomon Brothers
30-Year GNMA Index and Lipper GNMA Funds Average for the calendar periods ending
January 31, 1999. The table shows the Fund's total returns averaged over a
period of years relative to Lehman Brothers 30-Year GNMA Index, , Salomon
Brothers 30-Year GNMA Index and the Lipper GNMA Funds Average, a broad-based
market index. Past performance does not necessarily predict future performance.
This information provides you with historical performance 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 Service Shares.

SHAREHOLDER FEES

FEES PAID DIRECTLY FROM YOUR INVESTMENT
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of None
offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase None
price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other None
Distributions) (as a percentage of offering price).
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (BEFORE WAIVERS) (1)

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(4) 0.15%
Total Annual Fund Operating Expenses (Before Waivers) 1.05%

1 Although not contractually obligated to do so, the distributor will
reimburse certain amounts. These are shown below along with the net
expenses the Fund would ACTUALLY PAY for the fiscal year ended January 31,
1999.

Reimbursement of Fund Expenses 0.25%
Total Actual Annual Fund Operating Expenses (after waivers) 0.80%

</TABLE>

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
waivers) 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.

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 in the Table and remain the same. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
$82 $255 $444 $990
- -----------------------------------

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

o current U.S. economic activity and the economic outlook,

o current short-term interest rates,

o the Federal Reserve Board's policies regarding short-term interest rates,
and

o potential effects of foreign economic activity on short-term interest
rates.

The adviser generally shortens the portfolio's average duration when it
expects interest rates to rise and extends the duration when it expects interest
rates to fall.

TEMPORARY DEFENSIVE INVESTMENTS

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

FIXED INCOME 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.

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

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest in the securities of affiliated money market funds as
an efficient means of managing the Fund's uninvested cash

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

BOND MARKET RISKS

o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise,
prices of fixed income securities fall.

O 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

o The Fund may have to reinvest the proceeds in other securities with lower
interest rates, higher prepayment risks, or other less favorable
characteristics.

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 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, directly from
the Fund, or through an exchange from another Federated Fund. The Fund reserves
the right to reject any request to purchase or exchange Shares.

THROUGH AN INVESTMENT PROFESSIONAL

o 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

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

o 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).

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same Share class of
another Federated Fund. You must meet the minimum initial investment requirement
for purchasing Shares and both accounts must have identical registrations.

BY AUTOMATED CLEARING HOUSE (ACH)

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

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

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

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional
by the end of regular trading on the NYSE (normally 4 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 or exchange 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 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 or exchange 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:

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

o amount to be redeemed or exchanged;

o signatures of all Shareholders exactly as registered ; and

o IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

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

SIGNATURE GUARANTEES
Signatures must be guaranteed if:

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

o your redemption will be sent to an address of record that was changed
within the last thirty days;

o a redemption is payable to someone other than the shareholder(s) of record
; or

o IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.

PAYMENT METHODS FOR REDEMPTIONS

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

o 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:

o to allow your purchase to clear;

o during periods of market volatility; or

o 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.

EXCHANGE PRIVILEGES

You may exchange Shares of the Fund into Shares of the same class of
another Federated Fund. To do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction.

The Fund may modify or terminate the exchange privilege at any time. The
Fund's management or investment adviser may determine from the amount, frequency
and pattern of exchanges that a shareholder is engaged in excessive trading that
is detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.

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 or
exchanging Shares represented by certificates previously issued by the Fund, you
must return the certificates with your written redemption or exchange 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, redemptions and exchanges. In
addition, you will receive periodic statements reporting all account activity,
including dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, accounts
may be closed if redemptions or exchanges 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

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:

ADVISORY FEES

YEAR 2000 READINESS

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

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

(To be filed by amendment)

FEDERATED GNMA TRUST

INSTITUTIONAL SERVICE SHARES

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 report to shareholders. The
annual report discusses market conditions and investment strategies that
significantly affected the Fund's performance during the last fiscal year. To
obtain the SAI, the annual report, and other information without charge, call
your investment professional or the Fund at 1-800-341-7400.

INVESTMENT COMPANY ACT FILE NO. 811-3375
CUSIP 314184201

8022901A-SS(3/99)

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 Federated GNMA Trust (Fund),
dated March 31, 1999.

Obtain the prospectuses without charge by calling 1-800-341-7400.

March 31, 1999

CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Exchanging Securities for Shares
Redemption in Kind
Subaccounting Services
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Addresses

CUSIP 314184102

CUSIP 314184201

8022901 (3/99)

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.

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.

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 MARKET 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 MARKET RISKS for each CMO class.

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

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, Inc.

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 MARKET RISKS AND CREDIT RISKS.

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.

INVESTMENT RISKS

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

INVESTMENT RISKS

BOND MARKET RISKS

o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise,
prices of fixed income securities fall.

PREPAYMENT RISKS

o The Fund may have to reinvest the proceeds in other securities with lower
interest rates, higher prepayment risks, or other less favorable
characteristics.

CREDIT RISKS

O Credit risk includes the possibility that a party to a transaction
involving the Fund will fail to meet its obligations. This could cause the
Fund to lose the benefit of the transaction or prevent the Fund from
selling or buying other securities to implement its investment strategy.

o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the
Fund will lose money.

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 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 ____ and 75%, respectively.

DETERMINING MARKET VALUE OF SECURITIES

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

for equity securities, according to the last sale price in the market in
which they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;

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.

The Fund values futures contracts and options at their market values
established by the exchanges on which they are traded at the close of trading on
such exchanges. Options traded in the over-the-counter market are valued
according to the mean between the last bid and the last asked price for the
option as provided by an investment dealer or other financial institution that
deals in the option. The Board may determine in good faith that another method
of valuing such investments is necessary to appraise their fair market value.

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the
market value of all securities and other assets of the Fund.

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.), located at Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA 15222-3779, 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. Also, 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.

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Shares in exchange
for securities you own. The Fund reserves the right to determine whether to
accept your securities and the minimum market value to accept. The Fund will
value your securities in the same manner as it values its assets. This exchange
is treated as a sale of your securities for federal tax purposes.

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
Fund or class, only Shares of that Fund or 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 January 6, 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 5,197,783 shares
(5.95%).

As of January 6, 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 594,066 shares
(10.54%) and Charles Schwab & Co., San Francisco, California, owned
approximately 512,708 shares (9.09%).

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, birthdate, 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 two
funds and The Federated Fund Complex is comprised of 56 investment companies,
whose investment advisers are affiliated with the Fund's Adviser.

As of January 6, 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.

NAME
BIRTHDATE AGGREGATE TOTAL
ADDRESS COMPENSATION COMPENSATION
POSITION WITH TRUST PRINCIPAL OCCUPATIONS FROM TRUST FROM TRUST
FOR PAST 5 YEARS AND FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*+ Chief Executive Officer and Director or $0 $0 for the
Trustee of the Federated Fund Complex, Trust and
Chairman and Director, Federated Investors, 54 other

Birthdate: July 28, 1924 Inc.; Chairman and Trustee, Federated investment
Federated Investors Advisers, Federated Management, and companies
Tower Federated Research; Chairman and Director, in the Fund
1001 Liberty Avenue Federated Research Corp., and Federated Complex
Pittsburgh, PA Global Research Corp.; Chairman, Passport
CHAIRMAN AND TRUSTEE Research, Ltd.

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

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

TRUSTEE

- -------------------------
NICHOLAS CONSTANTAKIS++ Director or Trustee of the Federated Fund $ $47,958.02 for
Birthdate: September 3, Complex; formerly: Partner, Andersen the
1939 Worldwide SC. Trust and
175 Woodshire Drive 29 other
Pittsburgh, PA investment
TRUSTEE companies
in the Fund
Complex

- -------------------------
WILLIAM J. COPELAND Director or Trustee of the Federated Fund $ $125,264.48 for
Birthdate: July 4, 1918 Complex; Director and Member of the the
One PNC Plaza-23rd Floor Executive Committee, Michael Baker, Inc.; Trust and
Pittsburgh, PA formerly: Vice Chairman and Director, PNC 54 other
TRUSTEE Bank, N.A., and PNC Bank Corp.; Director, investment
Ryan Homes, Inc. companies
in the Fund

Previous Positions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

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

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.

JAMES E. DOWD, ESQ. Director or Trustee of the Federated Fund $ $125,264.48
Birthdate: May 18, 1922 Complex; Attorney-at-law; Director, The for the
571 Hayward Mill Road Emerging Germany Fund, Inc. Trust and
Concord, MA 56 other
TRUSTEE Previous Positions: President, Boston Stock investment
Exchange, Inc.; Regional Administrator, companies
United States Securities and Exchange in the Fund
Commission. Complex

LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $ $113,860.22
Birthdate: October 11, Complex; Professor of Medicine, University for the
1932 of Pittsburgh; Medical Director, University Trust and
3471 Fifth Avenue of Pittsburgh Medical Center - Downtown; 54 other
Suite 1111 Hematologist, Oncologist, and Internist, investment
Pittsburgh, PA University of Pittsburgh Medical companies
TRUSTEE Center ; Member, National Board of in the Fund
Trustees, Leukemia Society of America. Complex

EDWARD L. FLAHERTY, Director or Trustee of the Federated Fund $ $125,264.48
JR., ESQ. # Complex; Attorney, of Counsel, Miller, for the
Birthdate: June 18, 1924 Ament, Henny & Kochuba; Director Emeritus, Trust and
Miller, Ament, Henny & Eat'N Park Restaurants, Inc.; formerly: 56 other
Kochuba Counsel, Horizon Financial, F.A., Western investment
205 Ross Street Region; Partner, Meyer and Flaherty. companies
Pittsburgh, PA in the Fund
TRUSTEE Complex
PETER E. MADDEN Director or Trustee of the Federated Fund $ $113,860.22
Birthdate: March 16, Complex; formerly: Representative, for the
1942 Commonwealth of Massachusetts General Trust and
One Royal Palm Way Court; President, State Street Bank and 54 other
100 Royal Palm Way Trust Company and State Street Corporation. investment
Palm Beach, FL companies
TRUSTEE Previous Positions: Director, VISA USA and in the Fund
VISA International; Chairman and Director, Complex
Massachusetts Bankers Association;

Director, Depository Trust Corporation.

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

WESLEY W. POSVAR Director or Trustee of the Federated Fund $ $113,860.22
Birthdate: September Complex; President, World Society of for the
14, 1925 Ekistics (metropolitan planning), Athens; Trust and
1202 Cathedral of Professor, International Politics; 56 other
Learning Management Consultant; Trustee, Carnegie investment
University of Pittsburgh Endowment for International Peace, RAND companies
Pittsburgh, PA Corporation, Online Computer Library in the Fund
TRUSTEE Center, Inc., National Defense University Complex
and U.S. Space Foundation; President
Emeritus, University of Pittsburgh;
Founding Chairman, National Advisory
Council for Environmental Policy and
Technology, Federal Emergency Management
Advisory Board; Trustee, Czech Management

Center, Prague.

Previous Positions: Professor, United
States Military Academy; Professor, United
States Air Force Academy.

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

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

J. CHRISTOPHER DONAHUE+ President or Executive Vice President of $0 $0 for the
Birthdate: April 11, the Federated Fund Complex; Director or Trust and
1949 Trustee of some of the Funds in the 16 other
Federated Investors Federated Fund Complex; President and investment
Tower Director, Federated Investors, Inc.; companies
1001 Liberty Avenue President and Trustee, Federated Advisers, in the Fund
Pittsburgh, PA Federated Management, and Federated Complex
EXECUTIVE VICE PRESIDENT Research; President and Director, Federated
Research Corp. and Federated Global
Research 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 $0 $0 for the
Birthdate: October 22, the Federated Fund Complex; President, Trust and
1930 Executive Vice President and Treasurer of 1 other
Federated Investors some of the Funds in the Federated Fund investment
Tower Complex; Vice Chairman, Federated companies
1001 Liberty Avenue Investors, Inc.; Vice President, Federated in the Fund
Pittsburgh, PA Advisers, Federated Management, Federated Complex
EXECUTIVE VICE PRESIDENT Research, Federated Research Corp.,
Federated Global Research 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 $0 $0 for the
Birthdate: October 26, the Federated Fund Complex; Executive Vice Trust and
1938 President, Secretary, and Director, 54 other
Federated Investors Federated Investors, Inc.; Trustee, investment
Tower Federated Advisers, Federated Management, companies
1001 Liberty Avenue and Federated Research; Director, Federated in the Fund
Pittsburgh, PA Research Corp. and Federated Global Complex
EXECUTIVE VICE Research Corp.; Director, Federated
PRESIDENT AND SECRETARY Services Company; Director, Federated
Securities Corp.

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

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

WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the
Birthdate: March 3, 1949 various other Funds in the Federated Fund Trust and
Federated Investors Complex; Executive Vice President, 41 other
Tower Federated Investment Counseling, Federated investment
1001 Liberty Avenue Global Research Corp., Federated Advisers, companies
Pittsburgh, PA Federated Management, Federated Research, in the Fund
CHIEF INVESTMENT OFFICER and Passport Research, Ltd.; Registered Complex
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
Research Corp., Federated Advisers,
Federated Management, Federated Research,
and Passport Research, Ltd.

KATHLEEN M. FOODY-MALUS Kathleen M. Foody-Malus has been the Fund's $0 $0 for the
Birthdate: March 26, portfolio manager since July, 1993. She is Trust and
1960 Vice President of the Trust. Ms. 3 other
Federated Investors Foody-Malus joined Federated Investors in investment
Tower 1983 AND HAS BEEN A SENIOR PORTFOLIO companies
--------------------------------
1001 Liberty Avenue MANAGER AND A SENIOR VICE PRESIDENT OF THE in the Fund
-------------------------------------------
Pittsburgh, PA FUND'S INVESTMENT ADVISER SINCE . SHE Complex
------------------------------------------
VICE PRESIDENT WAS A PORTFOLIO MANAGER AND A VICE
----------------------------------
PRESIDENT OF THE FUND'S INVESTMENT ADVISER
FROM 1993 TO 199_. Ms. Foody-Malus received
her M.B.A. in Accounting/Finance from the
University of Pittsburgh.

EDWARD J. TIEDGE Edward J. Tiedge is Vice President of the $0 $0 for the
Birthdate: June 14, Trust. Mr. Tiedge joined Federated Trust and
1959 Investors in 1993 and has been A PORTFOLIO no other
------------
Federated Investors MANAGER AND A Vice President of the Fund's investment
-------------
Tower investment adviser since 1996. He served companies
1001 Liberty Avenue AS PORTFOLIO MANAGER AND an Assistant Vice in the Fund
------------------------
Pittsburgh, PA President of the Fund's investment adviser Complex
VICE PRESIDENT in 1995, and an Investment Analyst during
1993 and 1994. Mr. Tiedge is a Chartered

Financial Analyst and received his M.S. in

Industrial Administration from Carnegie
Mellon University.
</TABLE>

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

++ Mr. Constantakis became a member of the Board of Trustees on February
23, 1998. 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.

++ Mr. Cunningham became a member of the Board of Trustees/Directors 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 any fees as
of the fiscal year end of the Trust

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

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 PUBLIC ACCOUNTANTS

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

FEES PAID BY THE FUND FOR SERVICES

- -------------------------------- 1998 1997 1996
FOR THE YEAR ENDED JANUARY 31,

1998

Advisory Fee Earned $ $4,824,062 $5,451,836
- ---------------------------------
Advisory Fee Reduction $ $ $
- ---------------------------------
Administrative Fee $ $910,343 $1,030,132
- ---------------------------------
12b-1 Fee

- ---------------------------------
Institutional Services Shares $ $4,940 ----
- ---------------------------------
Shareholder Services Fee

- ---------------------------------
Institutional Shares $ ---- ----
- ---------------------------------
Institutional Service Shares $ ---- ----
- ---------------------------------

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-, five-, and ten-year period ended January
31, 1999.

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

30-DAY PERIOD 1 YEAR 5 YEARS 10 YEARS

INSTITUTIONAL SHARES

Total Return

Yield

30-DAY PERIOD 1 YEAR 5 YEARS
SINCE INCEPTION ON JUNE 18, 1992

INSTITUTIONAL SERVICE SHARES

Total Return

Yield

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 thirty-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 thirty-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:

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

o 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;

o 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

o 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. 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., 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 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 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 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--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.

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 Management
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 PUBLIC ACCOUNTANTS

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;+
(ii) Copy of Amendment No. 7 to the By-Laws;+
(iii) Copy of Amendment No. 8 to the By-Laws;+
(iv) Copy of Amendment No. 9 to the By-Laws;+

(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 23(e) 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)

+ All exhibits have been filed electronically.

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)

(h) (i) Conformed copy of Amended and Restated
Agreement for Fund Accounting Services,
Administrative Services, Shareholder Transfer Agency
Services and Custody Services Procurement; +
(ii) Conformed copy of Shareholder Services Agreement; +
(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;(17)
(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;(17)
(o) The Registrant hereby incorporates the conformed
copy of the specimen Multiple Class Plan from Item
23(o) 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;+

(ii) Conformed copy of Limited Power of Attorney; (17)
(iii) Conformed copy of Power of Attorney of
Chief Investment Officer of the Registrant; +
(iv) Conformed copy of Power of Attorney of Treasurer of the
Registrant; +
(v) Conformed copy of Power of Attorney of
Trustee of the Registrant;+

+ 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)

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: Josephn M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
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
David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
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)

James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Keith J. Sabol
Frank Semack
Aash M. Shah
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Marc Halperin

Assistant Vice Presidents: Nancy J. Belz
Robert E. Cauley
Lee R. Cunningham, II
B. Anthony Delserone, Jr.
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Michael W. Sirianni
Leonardo A. Vila
Lori A. Wolff
Gary Farwell

Secretary: Stephen A. Keen

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 Fund, 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; DG Investor Series; 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 FundsTrust 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.; 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
<S> <C> <C>
Richard B. Fisher Director, 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.

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

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

(b)

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

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

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

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
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

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

(b)

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

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

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

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

(b)

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

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

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

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

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

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

(b)

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

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Craig S. Gonzales 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

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

Michael W. Koenig 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

(b)

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

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

J. Michael Miller 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

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

(b)

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

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

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

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

(b)

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

BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

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

David L. Immonen 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 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

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 Federated Investors Tower
("Transfer Agent and 1001 Liberty Avenue
Dividend Disbursing Agent") Pittsburgh, PA 15222-3779

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

FEDERATED MANAGEMENT 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.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED GNMA TRUST, has duly
caused this Amendment to its Registration Statement to be signed on its behalf
by the undersigned, thereto duly authorized, in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 28th day of January, 1999.

FEDERATED GNMA TRUST

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

January 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 January 28,1999
ASSISTANT SECRETARY For the Persons

Listed Below

NAME TITLE

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

Glen R. Johnson* 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

Nicholis P. Constantakis* Trustee

William J. Copeland* Trustee

James E. Dowd, Esq.* Trustee

John F. Cunningham* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr., Esq.* Trustee

Peter E. Madden* Trustee

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

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

* By Power of Attorney

Exhibit b(i) under Form N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

Federated GNMA Trust

Amendment No. 6

to the By-Laws

Effective November 18, 1997

Delete Article III, Section 7 and replace with the following:

ACTION BY CONSENT OF THE BOARD OF TRUSTEES, EXECUTIVE COMMITTEE OR OTHER
COMMITTEE. Subject to Article V, Section 2 of these By-Laws, any action required
or permitted to be taken at any meeting of the Trustees, Executive Committee or
any other duly appointed Committee may be taken without a meeting if consents in
writing setting forth such action are signed by all members of the Board or such
committee and such consents are filed with the records of the Trust. In the
event of the death, removal, resignation or incapacity of any Board or committee
member prior to that Trustee signing such consent, the remaining Board or
committee members may re-constitute themselves as the entire Board or committee
until such time as the vacancy is filled in order to fulfill the requirement
that such consents be signed by all members of the Board of committee.

EXHIBIT B(II) UNDER FORM N-1A
EXHIBIT 3(II) UNDER ITEM 601/REG. S-K

FEDERATED GNMA TRUST

AMENDMENT #7

TO THE BY-LAWS

(EFFECTIVE FEBRUARY 23, 1998)

Delete Sections 1, 2 and 3 of Article I, OFFICERS AND THEIR ELECTION, and
replace with:

Section 1. OFFICERS. The Officers of the Trust shall be a President, one or
more Vice Presidents, a Treasurer, and a Secretary. The Board of Trustees, in
its discretion, may also elect or appoint a Chairman of the Board of Trustees
(who must be a Trustee) and other Officers or agents, including one or more
Assistant Vice Presidents, one or more Assistant Secretaries, and one or more
Assistant Treasurers. A Vice President, the Secretary or the Treasurer may
appoint an Assistant Vice President, an Assistant Secretary or an Assistant
Treasurer, respectively, to serve until the next election of Officers. Two or
more offices may be held by a single person except the offices of President and
Vice President may not be held by the same person concurrently. It shall not be
necessary for any Trustee or any Officer to be a holder of shares in any Series
or Class of the Trust.

Section 2. ELECTION OF OFFICERS. The Officers shall be elected annually by
the Trustees. Each Officer shall hold office for one year and until the election
and qualification of his successor, or until earlier resignation or removal. The
Chairman of the Board of Trustees, if there is one, shall be elected annually by
and from the Trustees, and serve until a successor is so elected and qualified,
or until earlier resignation or removal.

Section 3. RESIGNATIONS AND REMOVALS AND VACANCIES. Any Officer of the
Trust may resign at any time by filing a written resignation with the Board of
Trustees (or Chairman of the Trustees, if there is one), with the President, or
with the Secretary. Any such resignation shall take effect at the time specified
therein or, if no time is specified, at the time of receipt. Unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. Any Officer elected by the Board of Trustees or whose
appointment has been ratified by the Board of Trustees may be removed with or
without cause at any time by a majority vote of all of the Trustees. Any other
employee of the Trust may be removed or dismissed at any time by the President.
Any vacancy in any of the offices, whether by resignation, removal or otherwise,
may be filled for the unexpired portion of the term by the President. A vacancy
in the office of Assistant Vice President may be filled by a Vice President; in
the office of Assistant Secretary by the Secretary; or in the office of
Assistant Treasurer by the Treasurer. Any appointment to fill any vacancy shall
serve subject to ratification by the Board of Trustees at its next regular
meeting.

EXHIBIT B(III) UNDER FORM N-1A
EXHIBIT 3(II) UNDER ITEM 601/REG. S-K

FEDERATED GNMA TRUST

AMENDMENT #8

TO THE BY-LAWS

(EFFECTIVE FEBRUARY 27, 1998)

Delete Section 5 PROXIES of Article IV SHAREHOLDERS' MEETINGS, and replace
with the following:

Section 5. PROXIES. Any shareholder entitled to vote at any meeting of
shareholders may vote either in person, by telephone, by electronic means
including facsimile, or by proxy, but no proxy which is dated more than six
months before the meeting named therein shall be accepted unless otherwise
provided in the proxy. Every proxy shall be in writing, subscribed by the
shareholder or his duly authorized agent or be in such other form as may be
permitted by law, including documents conveyed by electronic transmission. Every
proxy shall be dated, but need not be sealed, witnessed or acknowledged. The
placing of a shareholder's name on a proxy or authorizing another to act as the
shareholder's agent, pursuant to telephone or electronically transmitted
instructions obtained in accordance with procedures reasonably designed to
verify that such instructions have been authorized by such shareholder, shall
constitute execution of a proxy by or on behalf of such shareholder. Where
Shares are held of record by more than one person, any co-owner or co-fiduciary
may execute the proxy or give authority to an agent, unless the Secretary of the
Trust is notified in writing by any co-owner or co-fiduciary that the joinder of
more than one is to be required. All proxies shall be filed with and verified by
the Secretary or an Assistant Secretary of the Trust, or the person acting as
Secretary of the Meeting. Unless otherwise specifically limited by their term,
all proxies shall entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of such meeting.

EXHIBIT B(IV) UNDER FORM N-1A
EXHIBIT 3(II) UNDER ITEM 601/REG. S-K

FEDERATED GNMA TRUST

AMENDMENT #9

TO THE BY-LAWS

(EFFECTIVE MAY 12, 1998)

Strike Section 3 - Place of Meeting of Article IV - Shareholders' Meetings
and replace it with the following:

Section 3. PLACE OF MEETING. Meetings of the shareholders of the Trust or a
particular Series or Class shall be held at such place within or without The
Commonwealth of Massachusetts as may be fixed from time to time by resolution of
the Trustees.

Strike Section 6 - Place of Meeting of Article V - Trustees' Meetings and
replace it with the following:

Section 6. PLACE OF MEETING. Meetings of the Trustees shall be held at such
place within or without The Commonwealth of Massachusetts as fixed from time to
time by resolution of the Trustees, or as the person or persons requesting said
meeting to be called may designate, but any meeting may adjourn to any other
place.

EXHIBIT H(I) UNDER FORM N-1A

EXHIBIT 10 UNDER ITEM 601/REG.S-K

AMENDED & RESTATED

AGREEMENT

FOR

FUND ACCOUNTING SERVICES,

ADMINISTRATIVE SERVICES,

TRANSFER AGENCY SERVICES

AND

CUSTODY SERVICES PROCUREMENT

AGREEMENT made as of March 1, 1996, and amended and restated as of
September 1, 1997, by and between those investment companies listed on Exhibit 1
as may be amended from time to time, having their principal office and place of
business at 1001 Liberty Avenue, Pittsburgh, PA 15222-3779 (the "Investment
Company"), on behalf of the portfolios (individually referred to herein as a
"Fund" and collectively as "Funds") of the Investment Company, and FEDERATED
SERVICES COMPANY, a Pennsylvania corporation, having its principal office and
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779 on behalf of itself and its subsidiaries (the "Company").

WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares");

WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so indicated
on Exhibit 1, and the Company desires
to accept such appointment;

WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein defined), if
so indicated on Exhibit, and the Company desires to accept such appointment;

WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer agency
services (as herein defined) if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept such
appointment; and

WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the Company
desires to accept such appointment; and

NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:

SECTION ONE: FUND ACCOUNTING.

ARTICLE 1. APPOINTMENT.

The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the period
and on the terms set forth in this Agreement. The Company accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Article 3 of this Section.

ARTICLE 2. THE COMPANY'S DUTIES.

Subject to the supervision and control of the Investment Company's Board of
Trustees or Directors ("Board"), the Company will assist the Investment Company
with regard to fund accounting for the Investment Company, and/or the Funds,
and/or the Classes, and in connection therewith undertakes to perform the
following specific services;

A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide a
price for a security which the Company believes should be available by
market quotation, the Company may obtain a price by calling brokers
designated by the investment adviser of the fund holding the security,
or if the adviser does not supply the names of such brokers, the
Company will attempt on its own to find brokers to price those
securities; thirdly, for securities for which no market price is
available, the Pricing Committee of the Board will determine a fair
value in good faith. Consistent with Rule 2a-4 of the 40 Act,
estimates may be used where necessary or appropriate. The Company's
obligations with regard to the prices received from outside pricing
services and designated brokers or other outside sources, is to
exercise reasonable care in the supervision of the pricing agent. The
Company is not the guarantor of the securities prices received from
such agents and the Company is not liable to the Fund for potential
errors in valuing a Fund's assets or calculating the net asset value
per share of such Fund or Class when the calculations are based upon
such prices. All of the above sources of prices used as described are
deemed by the Company to be authorized sources of security prices. The
Company provides daily to the adviser the securities prices used in
calculating the net asset value of the fund, for its use in preparing
exception reports for those prices on which the adviser has comment.
Further, upon receipt of the exception reports generated by the
adviser, the Company diligently pursues communication regarding
exception reports with the designated pricing agents;

B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board
and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;

C. Calculate the net income of each of the Funds, if any;

D. Calculate realized capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;

E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;

F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Investment
Company are the property of the Investment Company and further agrees
to surrender promptly to the Investment Company such records upon the
Investment Company's request;

G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and

H. Such other similar services as may be reasonably requested by the
Investment Company.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."

ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.

A. The Funds will compensate the Company for Fund Accounting Services in
accordance with the fees agreed upon from time to time between the
parties hereto. Such fees do not include out-of-pocket disbursements
of the Company for which the Funds shall reimburse the Company.
Out-of-pocket disbursements shall include, but shall not be limited
to, the items agreed upon between the parties from time to time.

B. The Fund and/or the Class, and not the Company, shall bear the cost
of: custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; Prospectuses, reports and notices;
administrative expenses; interest on borrowed money; brokerage
commissions; taxes and fees payable to federal, state and other
governmental agencies; fees of Trustees or Directors of the Investment
Company; independent auditors expenses; legal and audit department
expenses billed to the Company for work performed related to the
Investment Company, the Funds, or the Classes; law firm expenses;
organizational expenses; or other expenses not specified in this
Article 3 which may be properly payable by the Funds and/or Classes.

C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request of the
Company. The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.

D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.

E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the
full month period. Upon any termination of this Agreement before the
end of any month, the fee for such period shall be prorated according
to the proportion which such period bears to the full month period.
For purposes of determining fees payable to the Company, the value of
the Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.

F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in
performing Fund Accounting Services. Such person or persons may be
affiliates of the Company, third-party service providers, or they may
be officers and employees who are employed by both the Company and the
Investment Company; provided, however, that the Company shall be as
fully responsible to each Fund for the acts and omissions of any such
subcontractor as it is for its own acts and omissions. The
compensation of such person or persons shall be paid by the Company
and no obligation shall be incurred on behalf of the Investment
Company, the Funds, or the Classes in such respect.

SECTION TWO: ADMINISTRATIVE SERVICES.

ARTICLE 4. APPOINTMENT.

The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services set forth in
Article 5 of this Agreement in return for the compensation set forth in Article
9 of this Agreement.

ARTICLE 5. THE COMPANY'S DUTIES.

As Administrator, and subject to the supervision and control of the Board
and in accordance with Proper Instructions (as defined hereafter) from the
Investment Company, the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its portfolios:

A. prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the Charter (which has
already been prepared and filed), the By-laws and minutes of meetings
of the Board and Shareholders;

B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements
for the Investment Company and the Investment Company's shares and all
amendments thereto, reports to regulatory authorities and
shareholders, prospectuses, proxy statements, and such other documents
all as may be necessary to enable the Investment Company to make a
continuous offering of its shares;

C. prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Investment Company's
investment advisers and distributors, subject to any applicable
restrictions of the Board or the 1940 Act;

D. calculate performance data of the Investment Company for dissemination
to information services covering the investment company industry;

E. prepare and file the Investment Company's tax returns;

F. coordinate the layout and printing of publicly disseminated
prospectuses and reports;

G. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;

H. assist with the design, development, and operation of the Investment
Company and the Funds;

I. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who
will be responsible for the management of certain of the Investment
Company's affairs as determined by the Investment Company's Board; and

J. consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Two,
shall hereafter be referred to as "Administrative Services."

ARTICLE 6. RECORDS.

The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the Investment
Company. Where applicable, such records shall be maintained by the Company for
the periods and in the places required by Rule 31a-2 under the 1940 Act. The
books and records pertaining to the Investment Company which are in the
possession of the Company shall be the property of the Investment Company. The
Investment Company, or the Investment Company's authorized representatives,
shall have access to such books and records at all times during the Company's
normal business hours. Upon the reasonable request of the Investment Company,
copies of any such books and records shall be provided promptly by the Company
to the Investment Company or the Investment Company's authorized
representatives.

ARTICLE 7. DUTIES OF THE FUND.

The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all applicable
requirements the 1940 Act, the Internal Revenue Code, and any other laws, rules
and regulations of government authorities having jurisdiction.

ARTICLE 8. EXPENSES.

The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide the
Administrative Services to the Investment Company, including the compensation of
the Company employees who serve as trustees or directors or officers of the
Investment Company. The Investment Company shall be responsible for all other
expenses incurred by the Company on behalf of the Investment Company, including
without limitation postage and courier expenses, printing expenses, travel
expenses, registration fees, filing fees, fees of outside counsel and
independent auditors, or other professional services, organizational expenses,
insurance premiums, fees payable to persons who are not the Company's employees,
trade association dues, and other expenses properly payable by the Funds and/or
the Classes.

ARTICLE 9. COMPENSATION.

For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee at an annual rate per
Fund, as specified below.

The compensation and out of pocket expenses attributable to the Fund shall
be accrued by the Fund and paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will maintain
detailed information about the compensation and out of pocket expenses by the
Fund.

MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUNDS

.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million

(Average Daily Net Asset break-points are on a complex-wide basis)

However, in no event shall the administrative fee received during any year
of the Agreement be less than, or be paid at a rate less than would aggregate
$125,000 per Fund and $30,000 per Class. The minimum fee set forth above in this
Article 9 may increase annually upon each March 1 anniversary of this Agreement
over the minimum fee during the prior 12 months, as calculated under this
agreement, in an amount equal to the increase in Pennsylvania Consumer Price
Index (not to exceed 6% annually) as last reported by the U.S. Bureau of Labor
Statistics for the twelve months immediately preceding such anniversary.

ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.

A. The Company shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Investment Company in
connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
The Company shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Investment Company) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Any person, even though also
an officer, director, trustee, partner, employee or agent of the
Company, who may be or become an officer, director, trustee, partner,
employee or agent of the Investment Company, shall be deemed, when
rendering services to the Investment Company or acting on any business
of the Investment Company (other than services or business in
connection with the duties of the Company hereunder) to be rendering
such services to or acting solely for the Investment Company and not
as an officer, director, trustee, partner, employee or agent or one
under the control or direction of the Company even though paid by the
Company.

B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the above
standards. In order that the indemnification provisions contained in
this Article 10 shall apply, however, it is understood that if in any
case the Investment Company may be asked to indemnify or hold the
Company harmless, the Investment Company shall be fully and promptly
advised of all pertinent facts concerning the situation in question,
and it is further understood that the Company will use all reasonable
care to identify and notify the Investment Company promptly concerning
any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Investment
Company. The Investment Company shall have the option to defend the
Company against any claim which may be the subject of this
indemnification. In the event that the Investment Company so elects,
it will so notify the Company and thereupon the Investment Company
shall take over complete defense of the claim, and the Company shall
in such situation initiate no further legal or other expenses for
which it shall seek indemnification under this Article. The Company
shall in no case confess any claim or make any compromise in any case
in which the Investment Company will be asked to indemnify the Company
except with the Investment Company's written consent.

SECTION THREE: TRANSFER AGENCY SERVICES.

ARTICLE 11. TERMS OF APPOINTMENT.

Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company agrees
to act as, transfer agent and dividend disbursing agent for each Fund's Shares,
and agent in connection with any accumulation, open-account or similar plans
provided to the shareholders of any Fund ("Shareholder(s)"), including without
limitation any periodic investment plan or periodic withdrawal program.

ARTICLE 12. DUTIES OF THE COMPANY.

The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Investment Company as
to any Fund:

A. Purchases

(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefore to the custodian of the relevant Fund, (the
"Custodian"). The Company shall notify the Fund and the Custodian
on a daily basis of the total amount of orders and payments so
delivered.

(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.

(3) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to its
account upon receipt of the check or other order, promptly mail a
debit advice to the Shareholder, and notify the Fund and/or Class
of its action. In the event that the amount paid for such Shares
exceeds proceeds of the redemption of such Shares plus the amount
of any dividends paid with respect to such Shares, the Fund
and/the Class or its distributor will reimburse the Company on
the amount of such excess.

B. Distribution

(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions
of its governing document and the then-current Prospectus of the
Fund. The Company shall prepare and mail or credit income,
capital gain, or any other payments to Shareholders. As the
Dividend Disbursing Agent, the Company shall, on or before the
payment date of any such distribution, notify the Custodian of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be paid
out. The Company shall reconcile the amounts so requested and the
amounts actually received with the Custodian on a daily basis. If
a Shareholder is entitled to receive additional Shares by virtue
of any such distribution or dividend, appropriate credits shall
be made to the Shareholder's account; and

(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class and
its Shareholders as to the foregoing.

C. Redemptions and Transfers

(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall notify
the Funds on a daily basis of the total amount of redemption
requests processed and monies paid to the Company by the
Custodian for redemptions.

(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.

(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.

(4) The Company shall effect transfers of Shares by the registered
owners thereof.

(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.

D. Recordkeeping

(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number of Shares
which are authorized and issued and outstanding, but shall have
no obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole
responsibility of the Funds.

(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:

(a) Name, address and tax identification number (and whether
such number has been certified);

(b) Number of Shares held;

(d) Any stop or restraining order placed against the account;

(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;

(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current
maintenance of the account;

(g) Certificate numbers and denominations for any Shareholder
holding certificates;

(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.

(3) The Company shall preserve any such records required to be maintained
pursuant to the rules of the SEC for the periods prescribed in said
rules as specifically noted below. Such record retention shall be at
the expense of the Company, and such records may be inspected by the
Fund at reasonable times. The Company may, at its option at any time,
and shall forthwith upon the Fund's demand, turn over to the Fund and
cease to retain in the Company's files, records and documents created
and maintained by the Company pursuant to this Agreement, which are no
longer needed by the Company in performance of its services or for its
protection. If not so turned over to the Fund, such records and
documents will be retained by the Company for six years from the year
of creation, during the first two of which such documents will be in
readily accessible form. At the end of the six year period, such
records and documents will either be turned over to the Fund or
destroyed in accordance with Proper Instructions.

E. Confirmations/Reports

(1) The Company shall furnish to the Fund periodically the following
information:

(a) A copy of the transaction register;

(b) Dividend and reinvestment blotters;

(c) The total number of Shares issued and outstanding in each state for
"blue sky" purposes as determined according to Proper Instructions delivered
from time to time by the Fund to the Company;

(d) Shareholder lists and statistical information;

(e) Payments to third parties relating to distribution agreements,
allocations of sales loads, redemption fees, or other transaction- or
sales-related payments;

(f) Such other information as may be agreed upon from time to time.

(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if required, mail
to Shareholders, such notices for reporting dividends and distributions paid as
are required to be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state income tax laws,
rules and regulations.

(3) In addition to and not in lieu of the services set forth above, the
Company shall:

(a) Perform all of the customary services of a transfer agent, dividend
disbursing agent and, as relevant, agent in connection with accumulation,
open-account or similar plans (including without limitation any periodic
investment plan or periodic withdrawal program), including but not limited to:
maintaining all Shareholder accounts, mailing Shareholder reports and
Prospectuses to current Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien accounts), preparing
and filing reports on U.S. Treasury Department Form 1099 and other appropriate
forms required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases and redemptions of
Shares and other conformable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing Shareholder account
information; and

(b) provide a system which will enable the Fund to monitor the total number
of Shares of each Fund (and/or Class) sold in each state ("blue sky reporting").
The Fund shall by Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the blue sky reporting for
each state and (ii) verify the classification of transactions for each state on
the system prior to activation and thereafter monitor the daily activity for
each state. The responsibility of the Company for each Fund's (and/or Class's)
state blue sky registration status is limited solely to the recording of the
initial classification of transactions or accounts with regard to blue sky
compliance and the reporting of such transactions and accounts to the Fund as
provided above.

F. Other Duties

(1) The Company shall answer correspondence from Shareholders relating to
their Share accounts and such other correspondence as may from time to time be
addressed to the Company;

(2) The Company shall prepare Shareholder meeting lists, mail proxy cards
and other material supplied to it by the Fund in connection with Shareholder
meetings of each Fund; receive, examine and tabulate returned proxies, and
certify the vote of the Shareholders;

(3) The Company shall establish and maintain faclities and procedures for
safekeeping of check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such forms and
devices.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Three,
shall hereafter be referred to as "Transfer Agency Services."

ARTICLE 13. DUTIES OF THE INVESTMENT COMPANY.

A. Compliance

The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of the Securities
Act of 1933, as amended (the "1933 Act"), the 1940 Act and any laws, rules and
regulations of government authorities having jurisdiction.

B. Distributions

The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.

ARTICLE 14. COMPENSATION AND EXPENSES.

A. Annual Fee

For performance by the Company pursuant to Section Three of this Agreement,
the Investment Company and/or the Fund agree to pay the Company an annual
maintenance fee for each Shareholder account as agreed upon between the parties
and as may be added to or amended from time to time. Such fees may be changed
from time to time subject to written agreement between the Investment Company
and the Company. Pursuant to information in the Fund Prospectus or other
information or instructions from the Fund, the Company may sub-divide any Fund
into Classes or other sub-components for recordkeeping purposes. The Company
will charge the Fund the same fees for each such Class or sub-component the same
as if each were a Fund.

B. Reimbursements

In addition to the fee paid under Article 7A above, the Investment Company
and/or Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the parties,
as may be added to or amended from time to time. In addition, any other expenses
incurred by the Company at the request or with the consent of the Investment
Company and/or the Fund, will be reimbursed by the appropriate Fund.

C. Payment

The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and shall be
paid daily upon request of the Company. The Company will maintain detailed
information about the compensation and out-of-pocket expenses by Fund and Class.

D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized officer of the
Investment Company and/or the Funds and a duly authorized officer of the
Company.

SECTION FOUR: CUSTODY SERVICES PROCUREMENT.

ARTICLE 15. APPOINTMENT.

The Investment Company hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by the
Board as eligible for selection by the Company as a custodian (the "Eligible
Custodian"). The Company accepts such appointment.

ARTICLE 16. THE COMPANY AND ITS DUTIES.

Subject to the review, supervision and control of the Board, the Company
shall:

A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and has been
approved by the Board as being eligible for selection by the Company as an
Eligible Custodian; B. negotiate and enter into agreements with Eligible
Custodians for the benefit of the Investment Company, with the Investment
Company as a party to each such agreement. The Company may, as paying agent, be
a party to any agreement with any such Eligible Custodian;

C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;

D. monitor and evaluate the nature and the quality of services provided by
Eligible Custodians;

E. periodically provide to the Investment Company (i) written reports on
the activities and services of Eligible Custodians; (ii) the nature and amount
of disbursements made on account of the each Fund with respect to each custodial
agreement; and (iii) such other information as the Board shall reasonably
request to enable it to fulfill its duties and obligations under Sections 17(f)
and 36(b) of the 1940 Act and other duties and obligations thereof;

F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being charged
to the Fund by Eligible Custodian; and

The foregoing, along with any additional services that Company shall agree
in writing to perform for the Fund under this Section Four, shall hereafter be
referred to as "Custody Services Procurement."

ARTICLE 17. FEES AND EXPENSES.

A. Annual Fee

For the performance of Custody Services Procurement by the Company pursuant
to Section Four of this Agreement, the Investment Company and/or the Fund agree
to compensate the Company in accordance with the fees agreed upon from time to
time.

B. Reimbursements

In addition to the fee paid under Section 11A above, the Investment Company
and/or Fund agree to reimburse the Company for out-of-pocket expenses or
advances incurred by the Company for the items agreed upon between the parties,
as may be added to or amended from time to time. In addition, any other expenses
incurred by the Company at the request or with the consent of the Investment
Company and/or the Fund, will be reimbursed by the appropriate Fund.

C. Payment

D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized officer of the
Investment Company and/or the Funds and a duly authorized officer of the
Company.

ARTICLE 18. REPRESENTATIONS.

The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter into
this arrangement and to provide the services contemplated in Section Four of
this Agreement.

SECTION FIVE: GENERAL PROVISIONS.

ARTICLE 19. PROPER INSTRUCTIONS.

As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed to
be Proper Instructions if (a) the Company reasonably believes them to have been
given by a person previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b) the Investment
Company, or the Fund, and the Company promptly cause such oral instructions to
be confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Investment Company, or the Fund, and the Company are satisfied that such
procedures afford adequate safeguards for the Fund's assets. Proper Instructions
may only be amended in writing.

ARTICLE 20. ASSIGNMENT.

Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.

A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.

B. With regard to Transfer Agency Services, the Company may without further
consent on the part of the Investment Company subcontract for the performance of
Transfer Agency Services with

(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent pursuant to Section
17A(c)(1) of the Securities Exchange Act of 1934, as amended, or any succeeding
statute ("Section 17A(c)(1)"); or

(2) such other provider of services duly registered as a transfer agent
under Section 17A(c)(1) as Company shall select.

The Company shall be as fully responsible to the Investment Company for the
acts and omissions of any subcontractor as it is for its own acts and omissions.

C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further consent on the
part of the Investment Company subcontract for the performance of such services
with Federated Administrative Services, a wholly-owned subsidiary of the
Company.

D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with an Agent
selected by the Investment Company, other than as described in B. and C. above;
provided, however, that the Company shall in no way be responsible to the
Investment Company for the acts and omissions of the Agent.

ARTICLE 21. DOCUMENTS.

A. In connection with the appointment of the Company under this Agreement,
the Investment Company shall file with the Company the following documents:

(1) A copy of the Charter and By-Laws of the Investment Company and all
amendments thereto;

(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;

(3) Printed documentation from the recordkeeping system representing
outstanding Share certificates of the Investment Company or the Funds;

(4) All account application forms and other documents relating to
Shareholders accounts; and

(5) A copy of the current Prospectus for each Fund.

B. The Fund will also furnish from time to time the following documents:

(1) Each resolution of the Board of the Investment Company authorizing the
original issuance of each Fund's, and/or Class's Shares;

(2) Each Registration Statement filed with the SEC and amendments thereof
and orders relating thereto in effect with respect to the sale of Shares of any
Fund, and/or Class;

(3) A certified copy of each amendment to the governing document and the
By-Laws of the Investment Company;

(4) Certified copies of each vote of the Board authorizing officers to give
Proper Instructions to the Custodian and agents for fund accountant, custody
services procurement, and shareholder recordkeeping or transfer agency services;

(5) Such other certifications, documents or opinions which the Company may,
in its discretion, deem necessary or appropriate in the proper performance of
its duties; and

(6) Revisions to the Prospectus of each Fund.

ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company

The Company represents and warrants to the Fund that:

(1) it is a corporation duly organized and existing and in good standing
under the laws of the Commonwealth of Pennsylvania;

(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and in the
Commonwealth of
Pennsylvania;

(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;

(4) all requisite corporate proceedings have been taken to authorize it to
enter into and perform its obligations under this Agreement;

(5) it has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement;

(6) it is in compliance with federal securities law requirements and in
good standing as an administrator and fund accountant; and

B. Representations and Warranties of the Investment Company

The Investment Company represents and warrants to the Company that:

(1) It is an investment company duly organized and existing and in good
standing under the laws of its state of organization;

(2) It is empowered under applicable laws and by its Charter and By-Laws to
enter into and perform its obligations under this Agreement;

(3) All corporate proceedings required by said Charter and By-Laws have
been taken to authorize it to enter into and perform its obligations under this
Agreement;

(4) The Investment Company is an open-end investment company registered
under the 1940 Act; and

(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will continue to be
made, with respect to all Shares of each Fund being offered for sale.

ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.

A. Standard of Care

With regard to Sections One, Three and Four, the Company shall be held to a
standard of reasonable care in carrying out the provisions of this Contract. The
Company shall be entitled to rely on and may act upon advice of counsel (who may
be counsel for the Investment Company) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice,
provided that such action is not in violation of applicable federal or state
laws or regulations, and is in good faith and without negligence.

B. Indemnification by Investment Company

The Company shall not be responsible for and the Investment Company or Fund
shall indemnify and hold the Company, including its officers, directors,
shareholders and their agents, employees and affiliates, harmless against any
and all losses, damages, costs, charges, counsel fees, payments, expenses and
liabilities arising out of or attributable to:

(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or other
party contracted by or approved by the Investment Company or Fund,

(2) The reliance on or use by the Company or its agents or subcontractors
of information, records and documents in proper form which

(a) are received by the Company or its agents or subcontractors and
furnished to it by or on behalf of the Fund, its Shareholders or investors
regarding the purchase, redemption or transfer of Shares and Shareholder account
information;

(b) are received by the Company from independent pricing services or
sources for use in valuing the assets of the Funds; or

(c) are received by the Company or its agents or subcontractors from
Advisers, Sub-advisers or other third parties contracted by or approved by the
Investment Company of Fund for use in the performance of services under this
Agreement;

(d) have been prepared and/or maintained by the Fund or its affiliates or
any other person or firm on behalf of the Investment Company.

(3) The reliance on, or the carrying out by the Company or its agents or
subcontractors of Proper Instructions of the Investment Company or the Fund.

(4) The offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to
the offer or sale of such Shares in such state.

Provided, however, that the Company shall not be protected by this Article
23.B. from liability for any act or omission resulting from the Company's
willful misfeasance, bad faith, negligence or reckless disregard of its duties
or failure to meet the standard of care set forth in 23.A. above.

C. Reliance

At any time the Company may apply to any officer of the Investment Company
or Fund for instructions, and may consult with legal counsel with respect to any
matter arising in connection with the services to be performed by the Company
under this Agreement, and the Company and its agents or subcontractors shall not
be liable and shall be indemnified by the Investment Company or the appropriate
Fund for any action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such action is not in
violation of applicable federal or state laws or regulations. The Company, its
agents and subcontractors shall be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Investment Company or the Fund, and
the proper countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.

D. Notification

In order that the indemnification provisions contained in this Article 23
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.

ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.

This Agreement shall be effective from September 1, 1997, and shall
continue until February 28, 2003 (`Term"). Thereafter, the Agreement will
continue for 18 month terms. The Agreement can be terminated by either party
upon 18 months notice to be effective as of the end of such 18 month period. In
the event, however, of willful misfeasance, bad faith, negligence or reckless
disregard of its duties by the Company, the Investment Company has the right to
terminate the Agreement upon 60 days written notice, if Company has not cured
such willful misfeasance, bad faith, negligence or reckless disregard of its
duties within 60 days. The termination date for all original or after-added
Investment companies which are, or become, a party to this Agreement. shall be
coterminous. Investment Companies that merge or dissolve during the Term, shall
cease to be a party on the effective date of such merger or dissolution.

Should the Investment Company exercise its rights to terminate, all
out-of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Articles 10 and 23 shall
survive the termination of this Agreement.

ARTICLE 25. AMENDMENT.

This Agreement may be amended or modified by a written agreement executed
by both parties.

ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.

In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, PROVIDED that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Charter. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.

ARTICLE 27. GOVERNING LAW.

This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts

ARTICLE 28. NOTICES.

Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Investment Company at , , or
to the Company at Federated Investors Tower, Pittsburgh, Pennsylvania,
15222-3779, or to such other address as the Investment Company or the Company
may hereafter specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.

ARTICLE 29. COUNTERPARTS.

This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original. ARTICLE 30. LIMITATIONS OF LIABILITY
OF TRUSTEES AND SHAREHOLDERS OF THE COMPANY.

The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, and
the obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.

ARTICLE 31. MERGER OF AGREEMENT.

This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.

ARTICLE 32. SUCCESSOR AGENT.

If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement deliver
to such successor agent at the office of the Company all properties of the
Investment Company held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper Instructions
deliver such properties in accordance with such instructions.

In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement.

Thereafter, such bank or trust company shall be the successor of the
Company under this Agreement.

ARTICLE 33. FORCE MAJEURE.

The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.

ARTICLE 34. ASSIGNMENT; SUCCESSORS.

This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all of
or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing in
this Article 34 shall prevent the Company from delegating its responsibilities
to another entity to the extent provided herein.

ARTICLE 35. SEVERABILITY.

In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.

ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
INVESTMENT COMPANY.

The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any of
the Trustees or Shareholders of the Investment Company, but bind only the
property of the Fund, or Class, as provided in the Declaration of Trust.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.

INVESTMENT COMPANIES

(LISTED ON EXHIBIT 1)

By: /S/ S. ELLIOTT COHAN

Name: S. Elliott Cohan
Title: Assistant Secretary

FEDERATED SERVICES COMPANY

By: /S/ THOMAS J. WARD

Name: Thomas J. Ward
Title: Secretary

EXHIBIT 1

FEDERATED GNMA TRUST

Institutional Shares
Institutional Service Shares

EXHIBIT H(II)UNDER FORM N-1A
EXHIBIT 10 UNDER ITEM 10/ REG. S-K

SHAREHOLDER SERVICES AGREEMENT

THIS AGREEMENT, amended and restated as of the first day of September,
1995, (originally made and enterered into as of the first day of March, 1994),
by and between those investment companies listed on Exhibit 1, as may be amended
from time to time, having their principal office and place of business at 1001
Liberty Avenue, Pittsburgh, PA 15222-3779 and who have approved this form of
Agreement (individually referred to herein as a "Fund" and collectively as
"Funds") and Federated Shareholder Services, a Delaware business trust, having
its principal office and place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779 ("FSS").

1. The Funds hereby appoint FSS to render or cause to be rendered personal
services to shareholders of the Funds and/or the maintenance of accounts of
shareholders of the Funds ("Services"). In addition to providing Services
directly to shareholders of the Funds, FSS is hereby appointed the Funds' agent
to select, negotiate and subcontract for the performance of Services. FSS hereby
accepts such appointments. FSS agrees to provide or cause to be provided
Services which, in its best judgment (subject to supervision and control of the
Funds' Boards of Trustees or Directors, as applicable), are necessary or
desirable for shareholders of the Funds. FSS further agrees to provide the
Funds, upon request, a written description of the Services which FSS is
providing hereunder.

2. During the term of this Agreement, each Fund will pay FSS and FSS agrees
to accept as full compensation for its services rendered hereunder a fee at an
annual rate, calculated daily and payable monthly, up to 0.25% of 1% of average
net assets of each Fund.

For the payment period in which this Agreement becomes effective or
terminates with respect to any Fund, there shall be an appropriate proration of
the monthly fee on the basis of the number of days that this Agreement is in
effect with respect to such Fund during the month.

3. This Agreement shall continue in effect for one year from the date of
its execution, and thereafter for successive periods of one year only if the
form of this Agreement is approved at least annually by the Board of each Fund,
including a majority of the members of the Board of the Fund who are not
interested persons of the Fund ("Independent Board Members") cast in person at a
meeting called for that purpose.

4. Notwithstanding paragraph 3, this Agreement may be terminated as
follows:

(a) at any time, without the payment of any penalty, by the vote of a
majority of the Independent Board Members of any Fund or by a vote of a majority
of the outstanding voting securities of any Fund as defined in the Investment
Company Act of 1940 on sixty (60) days' written notice to the parties to this
Agreement;

(b) automatically in the event of the Agreement's assignment as defined in
the Investment Company Act of 1940; and

(c) by any party to the Agreement without cause by giving the other party
at least sixty (60) days' written notice of its intention to terminate.

5. FSS agrees to obtain any taxpayer identification number certification
from each shareholder of the Funds to which it provides Services that is
required under Section 3406 of the Internal Revenue Code, and any applicable
Treasury regulations, and to provide each Fund or its designee with timely
written notice of any failure to obtain such taxpayer identification number
certification in order to enable the implementation of any required backup
withholding.

6. FSS shall not be liable for any error of judgment or mistake of law or
for any loss suffered by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement. FSS
shall be entitled to rely on and may act upon advice of counsel (who may be
counsel for such Fund) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any person, even
though also an officer, trustee, partner, employee or agent of FSS, who may be
or become a member of such Fund's Board, officer, employee or agent of any Fund,
shall be deemed, when rendering services to such Fund or acting on any business
of such Fund (other than services or business in connection with the duties of
FSS hereunder) to be rendering such services to or acting solely for such Fund
and not as an officer, trustee, partner, employee or agent or one under the
control or direction of FSS even though paid by FSS.

This Section 6 shall survive termination of this Agreement.

7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination is
sought.

8. FSS is expressly put on notice of the limitation of liability as set
forth in the Declaration of Trust of each Fund that is a Massachusetts business
trust and agrees that the obligations assumed by each such Fund pursuant to this
Agreement shall be limited in any case to such Fund and its assets and that FSS
shall not seek satisfaction of any such obligations from the shareholders of
such Fund, the Trustees, Officers, Employees or Agents of such Fund, or any of
them.

9. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as such, and
neither such authorization by such Trustees nor such execution and delivery by
such officer shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, and the obligations of this
Agreement are not binding upon any of the Trustees or shareholders of FSS, but
bind only the trust property of FSS as provided in the Declaration of Trust of
FSS.

10. Notices of any kind to be given hereunder shall be in writing
(including facsimile communication) and shall be duly given if delivered to any
Fund and to such Fund at the following address:
, Attention: President and if delivered to FSS at
Federated Investors Tower, Pittsburgh, PA
15222-3779, Attention: President.

11. This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written. If any provision of this Agreement shall be held or
made invalid by a court or regulatory agency decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Sections 3 and 4, hereof, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and shall be governed by Pennsylvania law; provided,
however, that nothing herein shall be construed in a manner inconsistent with
the Investment Company Act of 1940 or any rule or regulation promulgated by the
Securities and Exchange Commission thereunder.

12. This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the same
instrument.

13. This Agreement shall not be assigned by any party without the prior
written consent of FSS in the case of assignment by any Fund, or of the Funds in
the case of assignment by FSS, except that any party may assign to a successor
all of or a substantial portion of its business to a party controlling,
controlled by, or under common control with such party. Nothing in this Section
14 shall prevent FSS from delegating its responsibilities to another entity to
the extent provided herein.

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

Attest: Investment Companies (listed on Exhibit 1)

/S/ JOHN W. MCGONIGLE By:/S/ JOHN F. DONAHUE
John W. McGonigle John F. Donahue
Secretary Chairman

Attest: Federated Shareholder Services

/S/ JOSEPH M. HUBER By: /S/ JOHN W. MCGONIGLE
Joseph M. Huber John W. McGonigle
Secretary President

EXHIBIT 1

FEDERATED GNMA TRUST

Institutional Shares
Institutional Service Shares

EXHIBIT P(I) UNDER FORM N-1A
EXHIBIT 24 UNDER ITEM 601/REG. S-K

POWER OF ATTORNEY

all capacities, to sign any and all documents to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, the
Securities Exchange Act of 1934 and the Investment Company Act of 1940, by means
of the Securities and Exchange Commission's electronic disclosure system known
as EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

SIGNATURES TITLE DATE

/S/JOHN F. DONAHUE Chairman March 6, 1998
- ---------------------------
John F. Donahue (Chief Executive Officer)

/S/GLEN R. JOHNSON President March 6, 1998

Glen R. Johnson

/S/JOHN W. MCGONIGLE Executive March 6, 1998
- ----------------------------
John W. McGonigle Vice President and Secretary
(Principal Financial and
Accounting Officer)

/S/THOMS G. BIGLEY Trustee March 6, 1998

Thomas G. Bigley

/S/ NICHOLAS P. CONSTANTAKIS Trustee March 6, 1998
- -----------------------------
Nicholas P. Constantakis

/S/JOHN T. CONROY, JR. Trustee March 6, 1998
- -------------------------------
John T. Conroy, Jr.

SIGNATURES TITLE DATE

/S/WILLIAM J. COPELAND Trustee March 6, 1998

William J. Copeland

/S/JAMES E. DOWD Trustee March 6, 1998

James E. Dowd

/S/LAWRENCE D. ELLIS, M.D. Trustee March 6, 1998
- ----------------------------------------
Lawrence D. Ellis, M.D.

/S/EDWARD L. FLAHERTY, JR. Trustee March 6, 1998
- ----------------------------------------
Edward L. Flaherty, Jr.

/S/PETER E. MADDEN Trustee March 6, 1998

Peter E. Madden

/S/JOHN E. MURRAY, JR. Trustee March 6, 1998
- ----------------------------------------
John E. Murray, Jr.

/S/WESLEY W. POSVAR Trustee March 6, 1998

Wesley W. Posvar

/S/MARJORIE P. SMUTS Trustee March 6, 1998

Marjorie P. Smuts

Sworn to and subscribed before me this 6th day of March, 1998

/S/ CHERI S. GOOD

Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001

Member, Pennsylvania Association of Notaries

EXHIBIT P(III) UNDER FOR N-1A
EXHIBIT 24 UNDER ITEM 601/REG. S-K

POWER OF ATTORNEY

Each person whose signature appears below hereby constitutes and appoints
the Secretary and Assistant Secretaries of FEDERATED GNMA TRUST and each of
them, their true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for them and in their names, place and stead, in
any and all capacities, to sign any and all documents to be filed with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, the
Securities Exchange Act of 1934 and the Investment Company Act of 1940, by means
of the Securities and Exchange Commission's electronic disclosure system known
as EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

SIGNATURES TITLE DATE

/S/ WILLIAM D. DAWSON, III Chief Investment Officer January 12, 1999
- ------------------------------
William D. Dawson, III

Sworn to and subscribed before me this 12th day of January, 1999

/S/ CHERI S. GOOD

Cheri S. Good

Notarial Seal
Cheri S. Good

Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

EXHIBIT P(IV) UNDER FORM N-1A
EXHIBIT 24 UNDER ITEM 601/REG. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/S/ RICHARD J. THOMAS Treasurer 12/11/98
Richard J. Thomas (Principal Financial and

Accounting Officer)

Sworn to and subscribed before me this 11th day of December, 1998

/S/CHERI S. GOOD

Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001

Member, Pennsylvania Association of Notaries

EXHIBIT P(V) UNDER FORM N-1A
EXHIBIT 24 UNDER ITEM 601/REG. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/S/ JOHN F. CUNNINGHAM TrusteeJanuary 13, 1999
- -----------------------
John F. Cunningham

Sworn to and subscribed before me this 13th day of January, 1999

/S/ CHERI S. GOOD

Cheri S. Good

Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001

Member, Pennsylvania Association of Notaries