FEDERATED GNMA TRUST, 485BPOS, 2000-03-29

FEDERATED GNMA TRUST
485BPOS, 2000-03-29

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

Post-Effective Amendment No. 36 ..................... X
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and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
------

Amendment No. 32 .................................... X
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FEDERATED GNMA TRUST

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds
5800 Corporate Drive

Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire
1001 Liberty Avenue

Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notice should be sent to the Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b) _X on March 31,2000 pursuant
to paragraph (b) 60 days after filing pursuant to paragraph (a) (i) _ on
__________________pursuant to paragraph (a) (i) 75 days after filing pursuant to
paragraph (a)(ii) on _________________ pursuant to paragraph (a)(ii) of Rule
485.

If appropriate, check the following box:

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

Copies to:

Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L Street, N.W.
Washington, D.C. 20037

PROSPECTUS

Federated GNMA Trust

INSTITUTIONAL SHARES

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

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

NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE

MARCH 31, 2000

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which the

Fund Invests? 5

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

What Do Shares Cost? 8

How is the Fund Sold? 8

How to Purchase Shares 8

How to Redeem Shares 9

Account and Share Information 11

Who Manages the Fund? 12

Financial Information 12

Independent Auditors' Report 22

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

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

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

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

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

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

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

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

The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank, and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

RISK/RETURN BAR CHART AND TABLE

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 ten years.

The `y' axis reflects the "% Total Return" beginning with -5% and increasing in
increments of 5% up to 20%.

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
ten 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 Class for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1990 through 1999. The percentages noted are: 10.38%, 15.33%,
6.52%, 6.54%, (2.51%), 16.06%, 4.98%, 8.84%, 6.70% and 0.79%.

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

The Fund's shares are sold without a sales charge (load). The total returns
displayed above are based upon net asset value.

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

The Fund's Institutional Shares are sold without a sales charge (load). The
total returns displayed above are based upon net asset value.

Within the period shown in the Chart, the Fund's Institutional Shares highest
quarterly return was 5.55% (quarter ended December 31, 1990). Its lowest
quarterly return was (2.82%) (quarter ended March 31, 1994).

AVERAGE ANNUAL TOTAL RETURN TABLE

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

<TABLE>

CALENDAR PERIOD FUND SB30YRGI LGFA LBGNMA
<S> <C> <C> <C> <C>
1 Year 0.79% 2.01% 0.11% 1.90%
5 Years 7.36% 8.28% 7.02% 8.10%
10 Years 7.22% 8.05% 7.01% 7.89%

</TABLE>

Past performance is no guarantee of future results. This information provides
you with historical performance information so that you can analyze whether the
Fund's investment risks are balanced by its potential returns.

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
the Fund's Institutional Shares.

<TABLE>

SHAREHOLDER
FEES

<S>
<C>

Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price)
None
Maximum Deferred Sales Charge (Load) (as a percentage of
original
purchase price or redemption proceeds, as applicable)
None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends
(and other Distributions) (as a percentage of offering price).
None
Redemption Fee (as a percentage of amount redeemed, if applicable)
None
Exchange Fee
None

ANNUAL FUND OPERATING EXPENSES (Before Waiver)
1

Expenses That are Deducted From Fund Assets (as a percentage of average
net assets) Management Fee
0.40%

Distribution (12b-1) Fee
None
Shareholder Services Fee 2

0.25%

Other Expenses

0.14%

Total Annual Fund
Operating Expenses

0.79%

1 Although not contractually obligated to do so, the shareholder services
provider waived certain amounts. These are shown below along with the net
expenses the Fund actually paid for the fiscal year ended January 31, 2000.

Total Waiver of Fund Expenses

0.16%

Total Actual Annual Fund Operating Expenses (after waiver) 0.63% 2 The
shareholder services provider voluntarily waived a portion of the

shareholder services fee. The shareholder services provider can terminate this
voluntary waiver at any time. The shareholder services fee paid by the Fund's
Institutional Shares (after voluntary waiver) was 0.09% for the fiscal year
ended January 31, 2000.

</TABLE>

EXAMPLE

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

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

<TABLE>

<S> <C>
1 Year $ 81
3 Years $ 252
5 Years $ 439
10 Years $ 978

</TABLE>

What are the Fund's Investment Strategies?

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

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

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

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

* current and expected U.S. economic growth;

* current and expected interest rates and inflation;

* the Federal Reserve's monetary policy; and

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

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

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

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

TEMPORARY DEFENSIVE INVESTMENTS

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

PORTFOLIO TURNOVER

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

What are the Principal Securities in Which the Fund Invests?

FIXED INCOME SECURITIES

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.

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
may invest.

TREASURY SECURITIES

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

GNMA SECURITIES

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

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

MORTGAGE BACKED SECURITIES

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

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

SPECIAL TRANSACTIONS

DELAYED DELIVERY TRANSACTIONS

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

TO BE ANNOUNCED SECURITIES (TBAS)

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

DOLLAR ROLLS

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

REPURCHASE AGREEMENTS

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

ASSET COVERAGE

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

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

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

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

PREPAYMENT RISKS

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

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

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

What Do Shares Cost?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. When the Fund receives your transaction request in proper form (as
described in this prospectus) it is processed at the next calculated net asset
value (NAV). The Fund does not charge a front-end sales charge. NAV is
determined at the end of regular trading (normally 4:00 p.m. Eastern time) each
day the NYSE is open. The Fund generally values fixed income securities at the
last sale price on a national securities exchange, if available, otherwise, as
determined by an independent pricing service.

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, Federated Securities Corp., markets the Shares
described in this prospectus to institutions acting in an agency or
fiduciary capacity or to individuals directly or through investment
professionals.

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

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

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

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

DIRECTLY FROM THE FUND

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

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

You will become the owner of Shares and your Shares will be priced at the next
calculated NAV after the Fund receives your wire or your check. If your check
does not clear, your purchase will be canceled and you could be liable for any
losses or fees incurred by the Fund or Federated Shareholder Services Company,
the Fund's transfer agent.

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

BY WIRE

Send your wire to:

State Street Bank and Trust Company

Boston, MA

Dollar Amount of Wire

ABA Number 011000028

Attention: EDGEWIRE

Wire Order Number, Dealer Number or Group Number

Nominee/Institution Name

Fund Name and Number and Account Number

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

BY CHECK

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

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

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

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

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

BY AUTOMATED CLEARING HOUSE (ACH)

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

How to Redeem Shares

You should redeem Shares:

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

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

THROUGH AN INVESTMENT PROFESSIONAL

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

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.

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

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

BY MAIL

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

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

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

* amount to be redeemed; and

* signatures of all shareholders exactly as registered.

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

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

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

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

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

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

PAYMENT METHODS FOR REDEMPTIONS

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

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

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

REDEMPTION IN KIND

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

* to allow your purchase to clear;

* during periods of market volatility; or

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

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

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

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

SHARE CERTIFICATES

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

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

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

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

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

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

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

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

Who Manages the Fund?

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

The Adviser and other subsidiaries of Federated advise approximately 176 mutual
funds and separate accounts, which totaled approximately $125 billion in assets
as of December 31, 1999. 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.

THE FUND'S PORTFOLIO MANAGERS ARE:

TODD A. ABRAHAM

Todd A. Abraham has been the Fund's Portfolio Manager since March 1999. He
is Vice President of the Fund. Mr. Abraham has been a Portfolio Manager
since 1995 and a Vice President of the Fund's Adviser since 1997.
Mr. Abraham joined Federated in 1993 as an Investment Analyst and served as
Assistant Vice President from 1995 to 1997. Mr. Abraham served as a
Portfolio Analyst at Ryland Mortgage Co. from 1992 to 1993. Mr. Abraham is
a Chartered Financial Analyst and received his M.B.A. in Finance from
Loyola College.

KATHLEEN M. FOODY-MALUS

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

ADVISER FEES

The Adviser receives an annual investment adviser 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.

Financial Information

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years. 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.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED JANUARY 31 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $11.38 $11.38 $11.13 $11.34 $10.61
INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.69 0.70 0.73 0.74 0.78
Net realized and
unrealized gain (loss)
on investments (0.77) - 0.25 (0.21) 0.73
TOTAL FROM
INVESTMENT OPERATIONS (0.08) 0.70 0.98 0.53 1.51
LESS DISTRIBUTIONS:
Distributions from net

investment income (0.69) (0.70) (0.73) (0.74) (0.77)
Distributions in excess of
net investment income 1 - - - - (0.01)
TOTAL DISTRIBUTIONS (0.69) (0.70) (0.73) (0.74) (0.78)
NET ASSET VALUE, END OF
PERIOD $10.61 $11.38 $11.38 $11.13 $11.34
TOTAL RETURN 2 (0.73%) 6.30% 9.17% 4.97% 14.61%

RATIOS TO AVERAGE NET
ASSETS:

Expenses 0.63% 0.61% 0.60% 0.60% 0.60%
Net investment income 6.26% 6.13% 6.57% 6.74% 7.02%
Expense

waiver/reimbursement 3 0.16% 0.16% 0.18% 0.20% 0.20%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $830,719 $991,334 $1,087,227 $1,199,733 $1,352,894
Portfolio turnover 90% 104% 74% 63% 43%

</TABLE>

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

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

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

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

JANUARY 31, 2000

<TABLE>

PRINCIPAL

AMOUNT VALUE
<C> <S> <C>
LONG-TERM GOVERNMENT
OBLIGATIONS-99.1%
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION-99.1% 1
$ 32,401,477 6.000%, 11/15/2023 -
1/15/2029 $ 29,105,990
237,607,051 6.500%, 10/15/2023 -
4/15/2029 220,472,560
279,977,788 2 7.000%, 6/15/2027 -
6/15/2029 266,496,266
216,870,984 7.500%, 12/15/2023 -
1/15/2030 211,457,437
134,028,409 2 8.000%, 11/15/2027 -
12/15/2029 133,693,338
19,870,086 8.500%, 10/15/2029 -
1/15/2030 20,273,648
TOTAL LONG-TERM GOVERNMENT
OBLIGATIONS (IDENTIFIED
COST $922,836,019) 881,499,239
REPURCHASE AGREEMENTS-
21.9% 3
5,215,000 ABN AMRO Chicago Corp.,
5.790%, dated 1/31/2000,
due 2/1/2000 5,215,000
99,818,000 4, 5 Goldman Sachs Group, Inc.,
5.660%, dated 1/21/2000,
due 2/22/2000 99,818,000
90,000,000 4, 5 Morgan Stanley Dean Witter
& Co., 5.660%, dated

1/12/2000, due 2/22/2000 90,000,000
TOTAL REPURCHASE
AGREEMENTS (AT AMORTIZED
COST) 195,033,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$1,117,869,019) 6 $ 1,076,532,239

</TABLE>

1 Because of monthly principal payments, the average lives of the Government
National Mortgage Association Modified Pass-Through securities, (based upon
Federal Housing Authority/Veterans Administration historical experience) are
less than the stated maturities.

2 All or a portion of this security is subject to a future dollar roll
transaction.

3 The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investments in the repurchase agreements are through participation in joint
accounts with other Federated funds.

4 Although final maturity falls beyond seven days, a liquidity feature is
included in each transaction to permit termination of the repurchase agreement
within seven days if the creditworthiness of the issuer is downgraded.

5 Security held as collateral for future dollar roll transaction.

6 The cost of investments for federal tax purposes amounts to $1,117,872,019.
The net unrealized depreciation of investments on a federal tax basis amounts to
$41,339,780 which is comprised of $0 appreciation and $41,339,780 depreciation
at January 31, 2000.

Note: The categories of investments are shown as a percentage of net assets
($889,156,728) at January 31, 2000.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JANUARY 31, 2000

<TABLE>

<S> <C> <C>
ASSETS:
Investments in repurchase
agreements $ 195,033,000
Investments in securities 881,499,239
Total investments in
securities, at value
(identified cost
$1,117,869,019 and tax
cost $1,117,872,019) $ 1,076,532,239
Cash 1,607
Receivable for investments
sold 5,045,208
Income receivable 4,289,624
Receivable for shares sold 358,496
TOTAL ASSETS 1,086,227,174
LIABILITIES:
Payable for investments

purchased 4,949,663
Payable for shares
redeemed 2,181,034
Income distribution
payable 3,380,306
Payable for dollar roll
transactions 186,426,984
Accrued expenses 132,459
TOTAL LIABILITIES 197,070,446
Net assets for 83,797,306
shares outstanding $ 889,156,728
NET ASSETS CONSIST OF:
Paid-in capital $ 1,035,861,417
Net unrealized
depreciation of
investments (41,336,780)
Accumulated net realized
loss on investments (105,451,941)
Undistributed net
investment income 84,032
TOTAL NET ASSETS $ 889,156,728
NET ASSET VALUE, OFFERING
PRICE AND REDEMPTION
PROCEEDS PER SHARE
INSTITUTIONAL SHARES:
$830,718,527 / 78,289,946
shares outstanding $10.61
INSTITUTIONAL SERVICE
SHARES:
$58,438,201 / 5,507,360
shares outstanding $10.61

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED JANUARY 31, 2000

<TABLE>

<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar
roll expense of $3,750,400) $ 67,907,321
EXPENSES:
Investment adviser fee $ 3,939,408
Administrative personnel
and services fee 742,433
Custodian fees 75,237
Transfer and dividend
disbursing agent fees and
expenses 253,108
Directors'/Trustees' fees 15,985
Auditing fees 21,123
Legal fees 9,307
Portfolio accounting fees 162,158
Distribution services fee-
Institutional Service
Shares 165,678
Shareholder services fee-
Institutional Shares 2,296,455
Shareholder services fee-
Institutional Service
Shares 165,678
Share registration costs 31,565
Printing and postage 88,708
Insurance premiums 860
Miscellaneous 15,553
TOTAL EXPENSES 7,983,256
WAIVERS:
Waiver of distribution
services fee-Institutional

Service Shares $ (161,039)
Waiver of shareholder
services fee-Institutional
Shares (1,469,731)
Waiver of shareholder
services fee-Institutional
Service Shares (4,639)
TOTAL WAIVERS (1,635,409)
Net expenses 6,347,847
Net investment income 61,559,474
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on
investments (6,709,527)
Net change in unrealized
appreciation of investments (62,459,698)
Net realized and
unrealized loss on
investments (69,169,225)
Change in net assets
resulting from operations $ (7,609,751)

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED JANUARY 31 2000 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

TO SHAREHOLDERS (61,546,528) (67,946,888)
SHARE TRANSACTIONS:
Proceeds from sale of
shares 234,666,304 239,681,334
Net asset value of shares
issued to shareholders in
payment of
distributions declared 19,273,983 22,096,774
Cost of shares redeemed (351,116,281) (355,657,998)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS (97,175,994) (93,879,890)
Change in net assets (166,332,273) (93,604,167)
NET ASSETS:
Beginning of period 1,055,489,001 1,149,093,168
End of period (including
undistributed net
investment income of
$84,032 and $0,
respectively) $ 889,156,728 $ 1,055,489,001

</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JANUARY 31, 2000

ORGANIZATION

Federated GNMA Trust (the "Fund") is registered under the Investment Company Act
of 1940, as amended (the "Act"), as a diversified, open-end management
investment company. The Fund offers two classes of shares: Institutional Shares
and Institutional Service Shares. The Fund's investment objective is current
income.

SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.

INVESTMENT VALUATIONS

U.S. government securities are generally valued at the mean of the latest bid
and asked price as furnished by an independent pricing service. Short- term
securities are valued at the prices provided by an independent pricing service.
However, short-term securities with remaining maturities of 60 days or less at
the time of purchase may be valued at amortized cost, which approximates fair
market value.

REPURCHASE AGREEMENTS

It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement.

The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities. The Fund, along with
other affiliated investment companies, may utilize a joint trading account for
the purpose of entering into one or more repurchase agreements.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Non-cash dividends included in dividend income, if any,
are recorded at fair market value. The Fund offers multiple classes of shares,
which differ in their respective distribution and service fees. All shareholders
bear the common expenses of the Fund based on average daily net assets of each
class, without distinction between share classes. Dividends are declared
separately for each class. No class has preferential dividend rights;
differences in per share dividend rates are generally due to differences in
separate class expenses.

Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage-backed
securities. The following reclassifications have been made to the financial
statements.

<TABLE>

INCREASE (DECREASE)
ACCUMULATED NET REALIZED UNDISTRIBUTED NET
LOSS ON INVESTMENTS INVESTMENT INCOME
<S> <C>
$(78,566) $78,566

</TABLE>

Net investment income, net realized gains (losses), and net assets were not
affected by this reclassification.

FEDERAL TAXES

It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provision for federal tax is
necessary.

At January 31, 2000, the Fund, for federal tax purposes, had a capital loss
carryforward of $97,532,462, which will reduce the Fund's taxable income arising
from future net realized gain on investments, if any, to the extent permitted by
the Code, and thus will reduce the amount of the distributions to shareholders
which would otherwise be necessary to relieve the Fund of any liability for
federal tax. Pursuant to the Code, such capital loss carryforward will expire as
follows:

<TABLE>

EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2001 $ 3,972,484
2003 71,738,355
2004 21,821,623

</TABLE>

Additionally, net capital losses of $7,916,479 attributable to security
transactions after October 31, 1999, are treated as arising on February 1, 2000,
the first day of the Fund's next taxable year.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when- issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date. Losses may occur on these transactions due to changes in market
conditions or the failure of counterparties to perform under the contract.

DOLLAR ROLL TRANSACTIONS

The Fund enters into dollar roll transactions with respect to mortgage
securities issued by GNMA, in which the Fund sells mortgage securities to
financial institutions and simultaneously agrees to accept substantially similar
(same type, coupon and maturity) securities at a later date at an agreed upon
price. Dollar roll transactions involve "to be announced" securities and are
treated as short-term financing arrangements which will not exceed 12 months.
The Fund will use the proceeds generated from the transactions to invest in
short-term investments, which may enhance the Fund's current yield and total
return.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses and revenues reported in the
financial statements. Actual results could differ from those estimated.

OTHER

Investment transactions are accounted for on a trade date basis.

SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. Transactions in shares were as follows:

<TABLE>

YEAR ENDED JANUARY 31 2000
1999

INSTITUTIONAL SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>

Shares sold 19,316,782 $ 213,336,197 19,361,451 $ 219,785,865

Share Issued to
shareholders in payment of
distributions declared 1,535,596 16,849,298 1,742,970 19,791,254
Shares redeemed (29,637,287) (326,326,784) (29,566,047) (335,709,442)
NET CHANGE RESULTING FROM
INSTITUTIONAL SHARE
TRANSACTIONS (8,784,909) $ (96,141,289) (8,461,626) $ (96,132,323)

<CAPTION>
YEAR ENDED JANUARY 31 2000 1999

INSTITUTIONAL SERVICE
SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>

Shares sold 1,922,682 $ 21,330,107 1,752,306 $ 19,895,469

Shares issued to
shareholders in payment of
distributions declared 221,148 2,424,685 203,023 2,305,520
Shares redeemed (2,271,488) (24,789,497) (1,757,129) (19,948,556)
NET CHANGE RESULTING FROM
INSTITUTIONAL SERVICE
SHARE TRANSACTIONS (127,658) $ (1,034,705) 198,200 $ 2,252,433

NET CHANGE RESULTING FROM
SHARE TRANSACTIONS (8,912,567) $ (97,175,994) (8,263,426) $ (93,879,890)

</TABLE>

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

Federated Investment Management Company, the Fund's investment adviser (the
"Adviser"), receives for its services an annual investment adviser fee equal to
0.40% of the Fund's average daily net assets.

ADMINISTRATIVE FEE

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Fund with administrative personnel and services. The fee
paid to FServ is based on a scale that ranges from 0.15% to 0.075% of the
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors, Inc., subject to a $125,000 minimum per portfolio and
$30,000 per each additional class.

DISTRIBUTION SERVICES FEE

The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b- 1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to 0.25% of the average daily net assets of the
Institutional Service Shares annually to compensate FSC. FSC may voluntarily
choose to waive any portion of its fee. FSC can modify or terminate this
voluntary waiver at any time at its sole discretion.

SHAREHOLDER SERVICES FEE

Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services Company ("FSSC"), the Fund will pay FSSC up to 0.25% of average daily
net assets of the Fund for the period. The fee paid to FSSC is used to finance
certain services for shareholders and to maintain shareholder accounts. FSSC may
voluntarily choose to waive any portion of its fee. FSSC can modify or terminate
this voluntary waiver at any time at its sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

FServ, through its subsidiary FSSC, serves as transfer and dividend disbursing
agent for the Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.

PORTFOLIO ACCOUNTING FEES

FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

GENERAL

Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities (and in-kind
contributions), for the fiscal year ended January 31, 2000, were as follows:

<TABLE>

<S> <C>
Purchases $ 891,135,587
Sales $ 876,897,443

</TABLE>

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED GNMA TRUST

AND SHAREHOLDERS OF INSTITUTIONAL SHARES:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated GNMA Trust (the "Fund") as of January
31, 2000, and the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended January 31, 2000 and 1999
and the financial highlights for the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to provide reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned at January 31, 2000, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated GNMA Trust
as of January 31, 2000, the results of its operations, the changes in its net
assets and its financial highlights for the respective stated periods in
conformity with generally accepted accounting principles.

Deloitte & Touche LLP

Boston, Massachusetts

March 17, 2000

[Graphic]
Federated

World-Class Investment Manager

PROSPECTUS

Federated GNMA Trust

INSTITUTIONAL SHARES

MARCH 31, 2000

A Statement of Additional Information (SAI) dated March 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, Annual and Semi-Annual
Reports to shareholders as they become available. The Annual Report's Management
Discussion and Analysis discusses market conditions and investment strategies
that significantly affected the Fund's performance during its last fiscal year.
To obtain the SAI, Annual Report, Semi-Annual Report and other information
without charge, and make inquiries, call your investment professional or the
Fund at 1-800-341- 7400.

You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942- 8090 for
information on the Public Reference Room's operations and copying fees.

[Graphic]
Federated

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

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-3375

Cusip 314184102

8022901A-IS (3/00)

[Graphic]

STATEMENT OF ADDITIONAL INFORMATION
Federated GNMA Trust

INSTITUTIONAL SHARES

INSTITUTIONAL SERVICE SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Institutional Shares and
Institutional Service Shares for Federated GNMA Trust (Fund), dated March 31,
2000. Obtain the prospectuses and the Annual Report's Management Discussion and
Analysis without charge by calling 1-800-341-7400.

MARCH 31, 2000

[Graphic]
Federated

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

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

8022901B (3/00)

[Graphic]

CONTENTS

How is the Fund Organized? 1

Securities in Which the Fund Invests 1

What Do Shares Cost? 5

How is the Fund Sold? 5

Subaccounting Services 5

Redemption in Kind 5

Massachusetts Partnership Law 6

Account and Share Information 6

Tax Information 6

Who Manages and Provides Services to the Fund? 7

How Does the Fund Measure Performance? 10

Who is Federated Investors, Inc.? 12

Addresses 13

How is the Fund Organized?

The Fund is a diversified open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on December 10,
1981. The Board of Trustees (the Board) has established two classes of shares of
the Fund, known as Institutional Shares and Institutional Service Shares
(individually and collectively referred to as "Shares" as the context may
require). This SAI relates to both classes of shares. The Fund's investment
adviser is Federated Investment Management Company (Adviser). Effective March
31, 1999, Federated Management, former Adviser to the Fund, merged into
Federated Investment Management Company (formerly Federated Advisers).

Securities in Which the Fund Invests

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

SECURITIES DESCRIPTIONS AND TECHNIQUES

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.

AGENCY SECURITIES

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

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

MORTGAGE BACKED SECURITIES

COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS)

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

SEQUENTIAL CMOS

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

PACS, TACS AND COMPANION CLASSES

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

SPECIAL TRANSACTIONS

INTER-FUND BORROWING AND LENDING ARRANGEMENTS

The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. ("Federated funds") to lend and borrow money for certain
temporary purposes directly to and from other Federated funds. Participation in
this inter-fund lending program is voluntary for both borrowing and lending
funds, and an inter-fund loan is only made if it benefits each participating
fund. Federated administers the program according to procedures approved by the
Fund's Board, and the Board monitors the operation of the program. Any
inter-fund loan must comply with certain conditions set out in the exemption,
which are designed to assure fairness and protect all participating funds.

For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed" trades.
All inter-fund loans must be repaid in seven days or less. The Fund's
participation in this program must be consistent with its investment policies
and limitations, and must meet certain percentage tests. Inter- fund loans may
be made only when the rate of interest to be charged is more attractive to the
lending fund than market-competitive rates on overnight repurchase agreements
(the "Repo Rate") and more attractive to the borrowing fund than the rate of
interest that would be charged by an unaffiliated bank for short-term borrowings
(the "Bank Loan Rate"), as determined by the Board. The interest rate imposed on
inter-fund loans is the average of the Repo Rate and the Bank Loan Rate.

REPURCHASE AGREEMENTS

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

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

REVERSE REPURCHASE AGREEMENTS

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

DELAYED DELIVERY TRANSACTIONS

TO BE ANNOUNCED SECURITIES (TBAS)

DOLLAR ROLLS

SECURITIES LENDING

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

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

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

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

ASSET COVERAGE

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 affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

INTEREST RATE RISKS

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

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

PREPAYMENT RISKS

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

FUNDAMENTAL INVESTMENT POLICIES

The Fund will invest primarily in mortgage backed securities. Under normal
circumstances, at least 65% of the Fund's portfolio will be invested in
instruments issued or fully guaranteed as to principal and interest by GNMA. In
addition, to the extent that the Fund will invest in other mortgage backed
securities, as described below, these will be collateralized by GNMA
obligations. The investment objective may not be changed by the Fund's Trustees
without shareholder approval.

INVESTMENT LIMITATIONS

BORROWING MONEY AND ISSUING SENIOR SECURITIES

The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.

LENDING CASH OR SECURITIES

The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.

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; 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; and securities of other investment companies) if, as
a result, more than 5% of the value of its total assets would be invested in
securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.

INVESTING IN REAL ESTATE

The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.

INVESTING IN COMMODITIES

The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.

UNDERWRITING

The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.

The above limitations cannot be changed unless authorized by the Board and by
the "vote of a majority of its outstanding voting securities," as defined by the
Investment Company Act of 1940 (1940 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.

BUYING SECURITIES ON A MARGIN

The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities.

PLEDGING ASSETS

The Fund will not mortgage, pledge, or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash. It
should be noted that investment companies incur certain expenses, such as
management fees, and, therefore, any investment by the Fund in shares of other
investment companies may be subject to such duplicate expenses.

INVESTING IN ILLIQUID SECURITIES

The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 15% of the Fund's net assets.

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, 2000
and 1999, the portfolio turnover rates were 90% and 104%, respectively.

DETERMINING MARKET VALUE OF SECURITIES

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

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

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

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

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

What Do Shares Cost?

The 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.) offers Shares on a continuous, best-efforts basis.

RULE 12B-1 PLAN (INSTITUTIONAL SERVICE SHARES)

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

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

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

SHAREHOLDER SERVICES

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

SUPPLEMENTAL PAYMENTS

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

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

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.

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 1940 Act,
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.

Massachusetts Partnership Law

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

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

Account and Share Information

VOTING RIGHTS

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

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

As of March 2, 2000 the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares:
Charles Schwab & Co. Inc., San Francisco, CA, owned approximately
5,658,295.5390 shares (7.37%).

As of March 2, 2000 the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Institutional Service Shares: Charles Schwab &
Co. Inc., San Francisco, CA, owned approximately 418,163.5750 shares (7.80%);
Gold Tract 401K, Hartford, Connecticut, owned approximately 388,271.4800 shares
(7.25%); Ohio Comm. Development, Columbus, Ohio owned approximately 290,124.8680
shares (5.41%).

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

Tax Information

FEDERAL INCOME TAX

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

Who Manages and Provides Services to the Fund?

BOARD OF TRUSTEES

The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Federated Fund Complex is
comprised of 43 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.

As of March 2, 2000 the Fund's Board and Officers as a group owned approximately
less than 1% of the Fund's outstanding Institutional Shares and Institutional
Service Shares.

<TABLE>

NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*+# Chief Executive Officer $0 $0 for the Fund and
Birth Date: July 28, 1924 and Director or Trustee of 43 other investment
Federated Investors Tower the Federated Fund companies in the
1001 Liberty Avenue Complex; Chairman and Fund Complex
Pittsburgh, PA Director, Federated
CHAIRMAN AND TRUSTEE Investors, Inc.; Chairman,
Federated Investment
Management Company,
Federated Global
Investment Management
Corp. and Passport
Research, Ltd. ; formerly:
Trustee, Federated
Investment Management
Company and Chairman and
Director, Federated
Investment Counseling.
THOMAS G. BIGLEY Director or Trustee of $1,638.11 $116,760.63 for the
Birth Date: February 3, 1934 the Federated Fund Fund and 43 other
15 Old Timber Trail Complex; Director, Member investment companies
Pittsburgh, PA of Executive Committee, in the Fund Complex
TRUSTEE Children's Hospital of
Pittsburgh; Director,
Robroy Industries, Inc.
(coated steel conduits/
computer storage
equipment); formerly:
Senior Partner, Ernst &
Young LLP; Director, MED
3000 Group, Inc.
(physician practice
management); Director,
Member of Executive
Committee, University of
Pittsburgh.
JOHN T. CONROY, JR. Director or Trustee of the $1,802.21 $128,455.37 for the
Birth Date: June 23, 1937 Federated Fund Complex; Fund and 43 other
Grubb & Ellis/Investment Properties Corporation President, Investment investment companies
3201 Tamiami Trail North Properties Corporation; in the Fund Complex
Naples, FL Senior Vice President,
TRUSTEE John R. Wood and
Associates, Inc.,
Realtors; Partner or
Trustee in private real
estate ventures in
Southwest Florida;
formerly: President,
Naples Property
Management, Inc. and
Northgate Village
Development Corporation.
NICHOLAS P. CONSTANTAKIS Director or Trustee of the $1,638.11 $73,191.21 for the
Birth Date: September 3, 1939 Federated Fund Complex; Fund and 37 other
175 Woodshire Drive Director, Michael Baker investment companies
Pittsburgh, PA Corporation (engineering, in the Fund Complex
TRUSTEE construction, operations
and technical services);
formerly: Partner,
Andersen Worldwide SC.
JOHN F. CUNNINGHAM Director or Trustee of some $1,638.11 $93,190.48 for the
Birth Date: March 5, 1943 of the Federated Fund Fund and 37 other
353 El Brillo Way Complex; Chairman, investment companies
Palm Beach, FL President and Chief in the Fund Complex
TRUSTEE Executive Officer,
Cunningham & Co., Inc.
(strategic business
consulting); Trustee
Associate, Boston College;
Director, Iperia Corp.
(communications/software);
formerly: Director,
Redgate Communications and
EMC Corporation (computer
storage systems).
Previous Positions:
Chairman of the Board and
Chief Executive Officer,
Computer Consoles, Inc.;
President and Chief
Operating Officer, Wang
Laboratories; Director,
First National Bank of
Boston; Director, Apollo
Computer, Inc.
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the $1,638.11 $116,760.63 for the
Birth Date: October 11, 1932 Federated Fund Complex; Fund and 43 other
3471 Fifth Avenue Professor of Medicine, investment companies
Suite 1111 University of Pittsburgh; in the Fund Complex
Pittsburgh, PA Medical Director,
TRUSTEE University of Pittsburgh
Medical Center--Downtown;
Hematologist, Oncologist and
Internist, University of
Pittsburgh Medical Center;
Member, National Board of
Trustees, Leukemia Society
of America.

PETER E. MADDEN Director or Trustee of the $1,537.38 $109,153.60 for the
Birth Date: March 16, 1942 Federated Fund Complex; Fund and 43 other
One Royal Palm Way formerly: Representative, investment companies
100 Royal Palm Way Commonwealth of in the Fund Complex
Palm Beach, FL Massachusetts General
TRUSTEE Court; President, State
Street Bank and Trust
Company and State
Street Corporation.
Previous Positions:
Director, VISA USA and VISA
International; Chairman
and Director,
Massachusetts Bankers
Association; Director,
Depository Trust
Corporation; Director, The
Boston Stock Exchange.

<CAPTION>
NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
CHARLES F. MANSFIELD, JR. Director or Trustee of some $901.28 $102,573.91 for the
Birth Date: April 10, 1945 of the Federated Fund Fund and 40 other
80 South Road Complex; Executive Vice investment companies
Westhampton Beach, NY President, Legal and in the Fund Complex
TRUSTEE External Affairs, Dugan
Valva Contess, Inc.
(marketing,
communications, technology
and consulting); formerly:
Management Consultant.
Previous Positions: Chief
Executive Officer, PBTC
International Bank;
Partner, Arthur Young &
Company (now Ernst & Young
LLP); Chief Financial
Officer of Retail Banking
Sector, Chase Manhattan
Bank; Senior Vice
President, Marine Midland
Bank; Vice President,
Citibank; Assistant
Professor of Banking and
Finance, Frank G. Zarb
School of Business,
Hofstra University.
JOHN E. MURRAY, JR., J.D., S.J.D.# Director or Trustee of $1,802.21 $128,455.37 for the
Birth Date: December 20, 1932 the Federated Fund Fund and 43 other
President, Duquesne University Complex; President, Law investment companies
Pittsburgh, PA Professor, Duquesne in the Fund Complex
TRUSTEE University; Consulting
Partner, Mollica & Murray;
Director, Michael Baker
Corp. (engineering,
construction, operations
and technical services).
Previous Positions: Dean
and Professor of Law,
University of Pittsburgh
School of Law; Dean and
Professor of Law,
Villanova University
School of Law.
MARJORIE P. SMUTS Director or Trustee of the $1,638.11 $116,760.63 for the
Birth Date: June 21, 1935 Federated Fund Complex; Fund and 43 other
4905 Bayard Street Public Relations/ investment companies
Pittsburgh, PA Marketing/Conference in the Fund Complex
TRUSTEE Planning.
Previous Positions:
National Spokesperson,
Aluminum Company of
America; television
producer; business owner.
JOHN S. WALSH Director or Trustee of some $819.21 $94,536.85 for the
Birth Date: November 28, 1957 of the Federated Fund Fund and 39 other
2007 Sherwood Drive Complex; President and investment companies
Valparaiso, IN Director, Heat Wagon, Inc. in the Fund Complex
TRUSTEE (manufacturer of
construction temporary
heaters); President and
Director, Manufacturers
Products, Inc.
(distributor of portable
construction heaters);
President, Portable Heater
Parts, a division of
Manufacturers Products,
Inc.; Director, Walsh &
Kelly, Inc. (heavy highway
contractor); formerly:
Vice President, Walsh &
Kelly, Inc.
GLEN R. JOHNSON President of some of the $0 $0 for the Fund and
Birth Date: May 2, 1929 Funds in the Federated Fund 21 other investment
Federated Investors Tower Complex; Staff member, companies in the
1001 Liberty Avenue Federated Securities Fund Complex
Pittsburgh, PA Corp.; formerly: Trustee
PRESIDENT or Director of some of the
Funds in the Federated Fund
Complex.
J. CHRISTOPHER DONAHUE+* President or Executive $0 $0 for the Fund and
Birth Date: April 11, 1949 Vice President of the 30 other investment
Federated Investors Tower Federated Fund Complex; companies in the
1001 Liberty Avenue Director or Trustee of some Fund Complex
Pittsburgh, PA of the Funds in the
EXECUTIVE VICE PRESIDENT AND TRUSTEE Federated Fund Complex;
President, Chief Executive
Officer and Director,
Federated Investors, Inc.;
President, Chief Executive
Officer and Trustee,
Federated Investment
Management Company;
Trustee, Federated
Investment Counseling;
President, Chief Executive
Officer and Director,
Federated Global
Investment Management
Corp.; President and Chief
Executive Officer,
Passport Research, Ltd.;
Trustee, Federated
Shareholder Services
Company; Director,
Federated Services
Company; formerly:
President, Federated
Investment Counseling.
EDWARD C. GONZALES President, Executive Vice $0 $0 for the Fund and
Birth Date: October 22, 1930 President and Treasurer of 42 other investment
Federated Investors Tower some of the Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Fund Complex
Pittsburgh, PA Vice Chairman, Federated
EXECUTIVE VICE PRESIDENT Investors, Inc.; Trustee,
Federated Administrative
Services; formerly:
Trustee or Director of some
of the Funds in the
Federated Fund Complex;
CEO and Chairman,
Federated Administrative
Services; Vice President,
Federated Investment
Management Company,
Federated Investment
Counseling, Federated
Global Investment
Management Corp. and
Passport Research, Ltd.;
Director and Executive
Vice President, Federated
Securities Corp.;
Director, Federated
Services Company; Trustee,
Federated Shareholder
Services Company.
JOHN W. MCGONIGLE Executive Vice President $0 $0 for the Fund and
Birth Date: October 26, 1938 and Secretary of the 43 other investment
Federated Investors Tower Federated Fund Complex; companies in the
1001 Liberty Avenue Executive Vice President, Fund Complex
Pittsburgh, PA Secretary and Director, EXECUTIVE VICE PRESIDENT AND SECRETARY
Federated Investors, Inc.;

formerly: Trustee,
Federated Investment
Management Company and
Federated Investment
Counseling; Director,
Federated Global
Investment Management
Corp., Federated Services
Company and Federated
Securities Corp.

<CAPTION>
NAME TOTAL
BIRTH DATE AGGREGATE COMPENSATION
ADDRESS PRINCIPAL OCCUPATIONS COMPENSATION FROM FUND AND
POSITION WITH FUND FOR PAST FIVE YEARS FROM FUND FUND COMPLEX
<S> <C> <C> <C>
RICHARD J. THOMAS Treasurer of the Federated $0 $0 for the Fund and
Birth Date: June 17, 1954 Fund Complex; Senior Vice 43 other investment
Federated Investors Tower President, Federated companies in the
1001 Liberty Avenue Administrative Services; Fund Complex
Pittsburgh, PA formerly: Vice President,
TREASURER Federated Administrative
Services; held various
management positions within
Funds Financial Services
Division of Federated
Investors, Inc.

RICHARD B. FISHER President or Vice $0 $0 for the Fund and
Birth Date: May 17, 1923 President of some of the 41 other investment
Federated Investors Tower Funds in the Federated Fund companies in the
1001 Liberty Avenue Complex; Vice Chairman, Fund Complex
Pittsburgh, PA Federated Investors, Inc.;
VICE PRESIDENT Chairman, Federated
Securities Corp.;
formerly: Director or
Trustee of some of the
Funds in the Federated Fund
Complex,; Executive Vice
President, Federated
Investors, Inc. and
Director and Chief
Executive Officer,
Federated Securities Corp.
WILLIAM D. DAWSON III Chief Investment Officer $0 $0 for the Fund and
Birth Date: March 3, 1949 of this Fund and various 27 other investment
Federated Investors Tower other Funds in the companies in the
1001 Liberty Avenue Federated Fund Complex; Fund Complex
Pittsburgh, PA Executive Vice President,
CHIEF INVESTMENT OFFICER Federated Investment
Counseling, Federated
Global Investment
Management Corp.,
Federated Investment
Management Company and
Passport Research, Ltd.;
Director, Federated Global
Investment Management
Corp. and Federated
Investment Management
Company; Registered
Representative, Federated
Securities Corp.;
Portfolio Manager,
Federated Administrative
Services; Vice President,
Federated Investors, Inc.;
formerly: Executive Vice
President and Senior Vice
President, Federated
Investment Counseling
Institutional Portfolio
Management Services
Division; Senior Vice
President, Federated
Investment Management
Company and Passport
Research, Ltd.
TODD A. ABRAHAM Todd A. Abraham has been $0 $0 for the Fund and
Birth Date: February 10, 1966 the Fund's Portfolio 2 other investment
Federated Investors Tower Manager since March 1999. companies in the
1001 Liberty Avenue He is Vice President of the Fund Complex
Pittsburgh, PA Fund. Mr. Abraham has been
VICE PRESIDENT a Portfolio Manager since
1995 and a Vice President
of the Fund's investment
adviser since 1997.
Mr. Abraham joined
Federated in 1993 as an
Investment Analyst and
served as Assistant Vice
President from 1995 to
1997. Mr. Abraham is a
Chartered Financial
Analyst and received his
M.B.A. in Finance from
Loyola College.

</TABLE>

* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the1940 Act.

# A pound sign denotes a Member of the Board's Executive Committee, which
handles the Board's responsibilities between its meetings.

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

INVESTMENT ADVISER

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

The Adviser is a wholly owned subsidiary of Federated.

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

OTHER RELATED SERVICES

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

CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING

As required by SEC rules, the Fund, its Adviser, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, Fund Trustees, and certain other employees. Although they
do permit these people to trade in securities, including those that the Fund
could buy, they also contain significant safeguards designed to protect the Fund
and its shareholders from abuses in this area, such as requirements to obtain
prior approval for, and to report, particular transactions.

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. 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

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:

<TABLE>

MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE FEDERATED FUNDS
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million

</TABLE>

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

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

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

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

INDEPENDENT AUDITORS

The independent auditor for the Fund, Deloitte & Touche LLP, plans and performs
its audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES

<TABLE>

FOR THE YEAR ENDED JANUARY 31 2000 1999 1998
<S> <C> <C> <C>
Adviser Fee Earned $3,939,408 $4,438,230 $4,824,062
Administrative Fee 742,433 836,606 910,343
12B-1 FEE:
Institutional Service Shares 4,639
SHAREHOLDER SERVICES FEE:
Institutional Shares 826,724
Institutional Service Shares 161,039

</TABLE>

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

How Does the Fund Measure Performance?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC's) 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.

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 are given for the one-year, five-year, and ten-year or Start of
Performance periods ended January 31, 2000.

Yield is given for the 30-day period ended January 31, 2000.

<TABLE>

SHARE CLASS 30- DAY PERIOD 1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
INSTITUTIONAL SHARES:
Total Return N/A (0.73%) 6.75% 7.20%
Yield 6.43% N/A N/A N/A

<CAPTION>
START OF

PERFORMANCE

SHARE CLASS 30- DAY PERIOD 1 YEAR 5 YEARS ON MAY 30, 1992
<S> <C> <C> <C> <C>
INSTITUTIONAL SERVICE SHARES:
Total Return N/A (0.89%) 6.55% 5.58%
Yield 6.26% N/A N/A N/A

</TABLE>

TOTAL RETURN

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

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

YIELD

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

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

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

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

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

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

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

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

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

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

LIPPER ANALYTICAL SERVICES, INC.

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

MORNINGSTAR, INC.

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

LEHMAN BROTHERS GNMA INDEX

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

LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) INDEX

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

LEHMAN BROTHERS GOVERNMENT INDEX

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

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

10-YEAR TREASURY NOTES

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

Who is Federated Investors, Inc.?

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

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

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

In the municipal sector, as of December 31, 1999, Federated managed 12 bond
funds with approximately $2.0 billion in assets and 24 money market funds with
approximately $13.1 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 29 years' experience. As of
December 31, 1999, Federated managed 53 equity funds totaling approximately
$18.3 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, 1999, Federated managed 13
money market funds and 29 bond funds with assets approximating $35.7 billion and
$7.7 billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 27 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, 1999, Federated managed 9 mortgage
backed, 11 government/agency and 16 government money market mutual funds, with
assets approximating $4.7 billion, $1.6 billion and $34.1 billion, respectively.
Federated trades approximately $450 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 $43.8 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,
1999, Federated managed more than $83.0 billion in assets across 54 money market
funds, including 16 government, 13 prime, 24 municipal and 1 euro-denominated
with assets approximating $34.1 billion, $35.7 billion, $13.1 billion and $115
million, 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 1,160 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 Investment Management Company

Federated Investors Tower

1001 Liberty Avenue

Pittsburgh, PA 15222-3779

CUSTODIAN

State Street Bank and Trust Company

P.O. Box 8600

Boston, MA 02266-8600

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

INDEPENDENT AUDITORS

Deloitte & Touche LLP

200 Berkeley Street

Boston, MA 02116

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.

NOT FDIC INSURED
MAY LOSE VALUE
NO BANK GUARANTEE

MARCH 31, 2000

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 3

What are the Fund's Investment Strategies? 4

What are the Principal Securities in Which the

Fund Invests? 5

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

What Do Shares Cost? 7

How is the Fund Sold? 8

How to Purchase Shares 8

How to Redeem Shares 9

Account and Share Information 11

Who Manages the Fund? 12

Financial Information 12

Independent Auditors' Report 22

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

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

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

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 seven years.

The `y' axis reflects the "% Total Return" beginning with -5% and increasing in
increments of 5% up to 20%.

The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Fund's start of business through the calendar year
ended 1999. The light gray shaded chart features ten 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 Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1993
through 1999, The percentages noted are: 6.27%, (2.27%), 15.23%, 4.77%, 8.62%,
651% and 0.63%.

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

The Fund's shares are sold without a sales charge (load). The total returns
displayed above are based upon net asset value.

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

The Fund's Institutional Service Shares are sold without a sales charge (load).
The total returns displayed above are based upon net asset value.

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

AVERAGE ANNUAL TOTAL RETURN TABLE

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

<TABLE>

CALENDAR PERIOD FUND SB30YRGI LGFA LBGNMA
<S> <C> <C> <C> <C>
1 Year 0.63% 2.01% 0.11% 1.90%
5 Years 7.15% 8.28% 7.02% 8.10%
Start of Performance 1 5.78% 6.70% 5.90% 6.93%

</TABLE>

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

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
the Fund's Institutional Service Shares.

<TABLE>

SHAREHOLDER
FEES

<S> <C>

Fees Paid Directly From Your
Investment

Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None Maximum Deferred Sales Charge (Load) (as a percentage of original

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

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

0.14%

Total Annual Fund
Operating Expenses

1.04%

1 Although not contractually obligated to do so, the distributor and shareholder
services provider waived certain amounts. These are shown below along with the
net expenses the Fund actually paid for the fiscal year ended January 31, 2000.

Total Waivers of Fund Expenses

0.25%

Total Actual Annual Fund Operating Expenses (after waivers)
0.79%

2 The distributor voluntarily waived a portion of the distribution (12b-1) fee.
The distributor can terminate this voluntary waiver at any time. The
distribution (12b-1) fee paid by the Fund's Institutional Service Shares (after
voluntary waiver) was 0.01% for the fiscal year ended January 31, 2000. 3 The
shareholder services provider voluntarily waived a portion of the shareholder
services fee. The shareholder services provider can terminate this voluntary
waiver at any time. The shareholder services fee paid by the Fund's
Institutional Service Shares (after voluntary waiver) was 0.24% for the fiscal
year ended January 31, 2000.

</TABLE>

EXAMPLE

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

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

<TABLE>

<S> <C>
1 Year $ 106
3 Years $ 331
5 Years $ 574
10 Years $ 1,271

</TABLE>

What are the Fund's Investment Strategies?

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

* current and expected U.S. economic growth;

* current and expected interest rates and inflation;

* the Federal Reserve's monetary policy; and

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

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

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

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

TEMPORARY DEFENSIVE INVESTMENTS

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

PORTFOLIO TURNOVER

What are the Principal Securities in Which the Fund Invests?

FIXED INCOME SECURITIES

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

TREASURY SECURITIES

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

GNMA SECURITIES

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

MORTGAGE BACKED SECURITIES

SPECIAL TRANSACTIONS

DELAYED DELIVERY TRANSACTIONS

TO BE ANNOUNCED SECURITIES (TBAS)

DOLLAR ROLLS

REPURCHASE AGREEMENTS

ASSET COVERAGE

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

PREPAYMENT RISKS

What Do Shares Cost?

You can purchase, redeem or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form
(as described in this prospectus) it is processed at the next calculated net
asset value (NAV). The Fund does not charge a front-end sales charge. NAV is
determined at the end of regular trading (normally 4:00 p.m. Eastern time) each
day the NYSE is open. The Fund generally values fixed income securities at the
last sale price on a national securities exchange, if available, otherwise, as
determined by an independent pricing service.

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, Federated Securities Corp., 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 marketing fees.

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

* Establish an account with the investment professional; and

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

DIRECTLY FROM THE FUND

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

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

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

BY WIRE

Send your wire to:

State Street Bank and Trust Company

Boston, MA

Dollar Amount of Wire

ABA Number 011000028

Attention: EDGEWIRE

Wire Order Number, Dealer Number or Group Number

Nominee/Institution Name

Fund Name and Number and Account Number

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

BY CHECK

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

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

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

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

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

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

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

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

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.

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

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

BY MAIL

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

You will receive a redemption amount based on the next calculated NAV after the
Fund receives your written request in proper form.

Send requests by mail to:

Federated Shareholder Services Company

P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company

1099 Hingham Street

Rockland, MA 02370-3317

All requests must include:

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

* amount to be redeemed; and

* signatures of all shareholders exactly as registered.

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

SIGNATURE GUARANTEES

Signatures must be guaranteed if:

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

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

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

PAYMENT METHODS FOR REDEMPTIONS

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

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

REDEMPTION IN KIND

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

* to allow your purchase to clear;

* during periods of market volatility; or

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

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

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

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

SHARE CERTIFICATES

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

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 FUND'S PORTFOLIO MANAGERS ARE:

TODD A. ABRAHAM

KATHLEEN M. FOODY-MALUS

ADVISER FEES

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.

Financial Highlights

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>

YEAR ENDED JANUARY 31 2000 1999 1998 1997 1996

NET ASSET VALUE, BEGINNING
OF PERIOD $11.38 $11.38 $11.13 $11.34 $10.61

INCOME FROM INVESTMENT
OPERATIONS:
Net investment income 0.67 0.68 0.72 0.74 0.78

Net realized and
unrealized gain (loss)
on investments (0.77) - 0.24 (0.23) 0.71

TOTAL FROM INVESTMENT
OPERATIONS (0.10) 0.68 0.96 0.51 1.49
LESS DISTRIBUTIONS:
Distributions from net

investment income (0.67) (0.68) (0.71) (0.72) (0.76)

NET ASSET VALUE, END OF
PERIOD $10.61 $11.38 $11.38 $11.13 $11.34
TOTAL RETURN 1 (0.89%) 6.11% 8.95% 4.76% 14.39%

RATIOS TO AVERAGE NET
ASSETS:

Expenses 0.79% 0.77% 0.78% 0.80% 0.80%

Net investment income 6.10% 5.97% 6.39% 6.54% 6.82%

Expense

waiver/reimbursement 2 0.25% 0.25% 0.25% 0.25% 0.25%
SUPPLEMENTAL DATA:
Net assets, end of period
(000 omitted) $58,438 $64,155 $61,866 $73,857 $123,614

Portfolio turnover 90% 104% 74% 63% 43%

</TABLE>

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

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

See Notes which are an integral part of the Financial Statements

Portfolio of Investments

JANUARY 31, 2000

<TABLE>

PRINCIPAL

AMOUNT VALUE
<S> <C> <C>
LONG-TERM GOVERNMENT
OBLIGATIONS-99.1%
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION-99.1% 1
$ 32,401,477 6.000%, 11/15/2023 -
1/15/2029 $ 29,105,990
237,607,051 6.500%, 10/15/2023 -
4/15/2029 220,472,560
279,977,788 2 7.000%, 6/15/2027 -
6/15/2029 266,496,266
216,870,984 7.500%, 12/15/2023 -
1/15/2030 211,457,437
134,028,409 2 8.000%, 11/15/2027 -
12/15/2029 133,693,338
19,870,086 8.500%, 10/15/2029 -
1/15/2030 20,273,648
TOTAL LONG-TERM GOVERNMENT
OBLIGATIONS (IDENTIFIED
COST $922,836,019) 881,499,239
REPURCHASE AGREEMENTS-21.9% 3
5,215,000 ABN AMRO Chicago Corp.,
5.790%, dated 1/31/2000,
due 2/1/2000 5,215,000
99,818,000 4, 5 Goldman Sachs Group, Inc.,
5.660%, dated 1/21/2000,
due 2/22/2000 99,818,000
90,000,000 4, 5 Morgan Stanley Dean Witter
& Co., 5.660%, dated

1/12/2000, due 2/22/2000 90,000,000
TOTAL REPURCHASE
AGREEMENTS (AT AMORTIZED
COST) 195,033,000
TOTAL INVESTMENTS
(IDENTIFIED COST
$1,117,869,019) 6 $ 1,076,532,239

</TABLE>

2 All or a portion of this security is subject to a future dollar roll
transaction.

5 Security held as collateral for future dollar roll transaction.

Note: The categories of investments are shown as a percentage of net assets
($889,156,728) at January 31, 2000.

See Notes which are an integral part of the Financial Statements

Statement of Assets and Liabilities

JANUARY 31, 2000

<TABLE>

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Operations

YEAR ENDED JANUARY 31, 2000

<TABLE>

<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar
roll expense of
$3,750,400) $ 67,907,321
EXPENSES:
Investment adviser fee $ 3,939,408
Administrative personnel
and services fee 742,433
Custodian fees 75,237
Transfer and dividend
disbursing agent fees and
expenses 253,108
Directors'/Trustees' fees 15,985
Auditing fees 21,123
Legal fees 9,307
Portfolio accounting fees 162,158
Distribution services fee-
Institutional Service Shares 165,678
Shareholder services fee-
Institutional Shares 2,296,455
Shareholder services fee-
Institutional Service Shares 165,678
Share registration costs 31,565
Printing and postage 88,708
Insurance premiums 860
Miscellaneous 15,553
TOTAL EXPENSES 7,983,256
WAIVERS:
Waiver of distribution
services fee-Institutional

Service Shares $ (161,039)
Waiver of shareholder
services fee-Institutional
Shares (1,469,731)
Waiver of shareholder
services fee-Institutional
Service Shares (4,639)
TOTAL WAIVERS (1,635,409)
Net expenses 6,347,847
Net investment income 61,559,474
REALIZED AND UNREALIZED
LOSS ON INVESTMENTS:
Net realized loss on
investments (6,709,527)
Net change in unrealized
appreciation of
investments (62,459,698)
Net realized and
unrealized loss on
investments (69,169,225)
Change in net assets
resulting from operations $ (7,609,751)

</TABLE>

See Notes which are an integral part of the Financial Statements

Statement of Changes in Net Assets

<TABLE>

YEAR ENDED JANUARY 31 2000 1999
<S> <C> <C>
INCREASE (DECREASE) IN NET
ASSETS
OPERATIONS:

Net investment income $ 61,559,474 $ 67,946,888
Net realized gain (loss) on
investments ($1,209,952
and $12,165,305,
respectively, as computed
for federal tax purposes) (6,709,527) 12,243,870
Net change in unrealized
appreciation of investments (62,459,698) (11,968,147)
CHANGE IN NET ASSETS
RESULTING FROM OPERATIONS (7,609,751) 68,222,611
DISTRIBUTIONS TO SHAREHOLDERS:
Distributions from net
investment income
Institutional Shares (57,498,764) (64,170,667)
Institutional Service Shares (4,047,764) (3,776,221)
CHANGE IN NET ASSETS
RESULTING FROM DISTRIBUTIONS
TO SHAREHOLDERS (61,546,528) (67,946,888)
SHARE TRANSACTIONS:
Proceeds from sale of shares 234,666,304 239,681,334
Net asset value of shares
issued to shareholders in
payment of
distributions declared 19,273,983 22,096,774
Cost of shares redeemed (351,116,281) (355,657,998)
CHANGE IN NET ASSETS
RESULTING FROM SHARE
TRANSACTIONS (97,175,994) (93,879,890)
Change in net assets (166,332,273) (93,604,167)
NET ASSETS:
Beginning of period 1,055,489,001 1,149,093,168
End of period (including
undistributed net
investment income of
$84,032 and $0, respectively) $ 889,156,728 $ 1,055,489,001

</TABLE>

See Notes which are an integral part of the Financial Statements

Notes to Financial Statements

JANUARY 31, 2000

ORGANIZATION

SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT VALUATIONS

REPURCHASE AGREEMENTS

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS

<TABLE>

INCREASE (DECREASE)
ACCUMULATED NET REALIZED UNDISTRIBUTED NET
LOSS ON INVESTMENTS INVESTMENT INCOME
<S> <C>
$(78,566) $78,566

</TABLE>

Net investment income, net realized gains (losses), and net assets were not
affected by this reclassification.

FEDERAL TAXES

<TABLE>

EXPIRATION YEAR EXPIRATION AMOUNT
<S> <C>
2001 $ 3,972,484
2003 71,738,355
2004 21,821,623

</TABLE>

Additionally, net capital losses of $7,916,479 attributable to security
transactions after October 31, 1999, are treated as arising on February 1, 2000,
the first day of the Fund's next taxable year.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

DOLLAR ROLL TRANSACTIONS

USE OF ESTIMATES

OTHER

Investment transactions are accounted for on a trade date basis.

SHARES OF BENEFICIAL INTEREST

<TABLE>

YEAR ENDED JANUARY 31 2000 1999

INSTITUTIONAL SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>

Shares sold 19,316,782 $ 213,336,197 19,361,451 $ 219,785,865

<CAPTION>
YEAR ENDED JANUARY 31 2000 1999

INSTITUTIONAL SERVICE
SHARES: SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>

Shares sold 1,922,682 $ 21,330,107 1,752,306 $ 19,895,469

NET CHANGE RESULTING FROM
SHARE TRANSACTIONS (8,912,567) $ (97,175,994) (8,263,426) $ (93,879,890)

</TABLE>

INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISER FEE

ADMINISTRATIVE FEE

Federated Services Company ("FServ"), under the Administrative Services
Agreement, provides the Funds with administrative personnel and services. The
fee paid to FServ is based on a scale that ranges from 0.15% to 0.075% of the
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors, Inc., subject to a $125,000 minimum per portfolio and
$30,000 per each additional class.

DISTRIBUTION SERVICES FEE

SHAREHOLDER SERVICES FEE

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES

PORTFOLIO ACCOUNTING FEES

FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.

GENERAL

Certain of the Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.

INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities (and in-kind
contributions), for the fiscal year ended January 31, 2000, were as follows:

<TABLE>

<S> <C>
Purchases $ 891,135,587
Sales $ 876,897,443

</TABLE>

Independent Auditors' Report

TO THE BOARD OF TRUSTEES OF FEDERATED GNMA TRUST

AND SHAREHOLDERS OF INSTITUTIONAL SERVICE SHARES:

Deloitte & Touche LLP

Boston, Massachusetts

March 17, 2000

[Graphic]
Federated

World-Class Investment Manager

PROSPECTUS

Federated GNMA Trust

INSTITUTIONAL SERVICE SHARES

MARCH 31, 2000

A Statement of Additional Information (SAI) dated March 31, 2000, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Fund's SAI, and Annual and
Semi-Annual Reports to shareholders as they become available. The Annual
Report's Management Discussion and Analysis discusses market conditions and
investment strategies that significantly affected the Fund's performance during
its last fiscal year. To obtain the SAI, Annual Report, Semi-Annual Report and
other information without charge, and make inquiries, call your investment
professional or the Fund at 1-800-341- 7400.

[Graphic]
Federated

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

1-800-341-7400
WWW.FEDERATEDINVESTORS.COM

Federated Securities Corp., Distributor

Investment Company Act File No. 811-3375

Cusip 314184201

8022901A-SS (3/00)

[Graphic]

PART C. OTHER INFORMATION

Item 23. EXHIBITS:
---------
(a) Conformed copy of the Amended Declaration of Trust of the
Registrant; (14)
(b) Copy of the Amended By-Laws of the Registrant;(8)
(i) Copy of Amendment No. 6 to the By-Laws; (19)
(ii) Copy of Amendment No. 7 to the By-Laws; (19)
(iii) Copy of Amendment No. 8 to the By-Laws; (19)
(iv) Copy of Amendment No. 9 to the By-Laws; (19)
(c) (i) Copy of Specimen Certificate for Shares of Capital
Stock for Institutional Shares of the Registrant; (17)
(ii) Copy of Specimen Certificate for Shares of Capital
Stock for Institutional Service Shares of the Registrant; (17)
(d) Conformed copy of Investment Advisory Contract of the Registrant;
(17)

(e) (i) Conformed copy of Distributor's Contract of the
Registrant; (17) (ii) The Registrant hereby incorporates
the conformed copy of the specimen Mutual Funds Sales
and Service Agreement; Mutual Funds Service Agreement;
and Plan Trustee Mutual Funds Service Agreement from
Item 24(b)(6) of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the Commission on
July 24, 1995. (File Numbers 33-3850 and 811-6269);

(f) Not applicable;
(g) (i) Conformed copy of the Custodian Agreement of the
Registrant; (15)

(ii) Conformed copy of Custodian Fee Schedule of the
Registrant; (18)

- ---------------------------------------------------------------

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

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

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

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

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

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

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

(i) Conformed copy of the Opinion and Consent of Counsel as to
legality of shares being registered; (15)
(j) Conformed copy of Consent of Independent Auditors; +
(k) Not applicable;
(l) Conformed copy of Initial Capital Understanding; (2)
- ------------------------------------------------------------------------
+ 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)

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

(m) Conformed copy of Distribution Plan of the Registrant; (17)

(n) The Registrant hereby incorporates the conformed copy of the specimen
Multiple Class Plan from Item 24(b)(18) of the World Investment Series,
Inc. Registration Statement on Form N-1A, filed with the Commission on
January 26, 1996. (File Nos. 33-52149 and 811-07141)

(o) (i) Conformed copy of Power of Attorney; (+)

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

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

(iv) Conformed copy of Power of Attorney of Nicholas P. Constantakis a
Trustee of the Registrant; +

(v) Conformed copy of Power of Attorney of John F. Cunningham a Trustee of
the Registrant; +

(vi) Conformed copy of Power of Attorney of Charles F. Mansfield, Jr. a
Trustee of the Registrant;+

(vii)Conformed copy of Power of Attorney of John S. Walsh a Trustee of the
Registrant; +

(p) The Registrant hereby incorporates the conformed copy of the Code of Ethics
for Access Persons from Item 23(p) of the Money Market Obligations Trust
Registration Statement on Form N-1A filed with the
Commission on February 25, 2000. (File Nos. 33-31602 and 811-5950).

- ----------------- ..............
+ All exhibits have been filed electronically.

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

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

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
Trustees of the investment adviser and, in parentheses, their principal
occupations are: Thomas R. Donahue, (Chief Financial Officer, Federated
Investors, Inc.), 1001 Liberty Avenue, Pittsburgh, PA, 15222-3779 and Mark
D. Olson (Partner, Wilson, Halbrook & Bayard), 107 W. Market Street,
Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are:

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

Senior Vice Presidents: Joseph M. Balestrino
David A. Briggs
Jonathan C. Conley
Deborah A. Cunningham
Michael P. Donnelly
Linda A. Duessel
Mark E. Durbiano
James E. Grefenstette
Jeffrey A. Kozemchak

- -----------------

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)

Senior Vice Presidents: Sandra L. McInerney
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski
Bernard A. Picchi
Peter Vutz

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
Randall S. Bauer
G. Andrew Bonnewell
Micheal W. Casey
Robert E. Cauley
Alexandre de Bethmann
B. Anthony Delserone, Jr.
Donald T. Ellenberger
Eamonn G. Folan
Kathleen M. Foody-Malus
Thomas M. Franks
Marc Halperin
John W. Harris
Patricia L. Heagy
Susan R. Hill
William R. Jamison
Constantine J. Kartsonas
Robert M. Kowit
Richard J. Lazarchic
Steven J. Lehman
Marian R. Marinack
Christopher Matyszewski
William M. Painter
Jeffrey A. Petro

Item 26. Business and Other Connections of Investment Adviser (continued):

Vice Presidents Keith J. Sabol
Frank Semack
Aash M. Shah
Michael W. Sirianni, Jr.
Christopher Smith
Edward J. Tiedge
Leonardo A. Vila
Paige M. Wilhelm
Lori A. Wolff
George B. Wright

Assistant Vice Presidents: Catherine A. Arendas
Arminda Aviles
Nancy J. Belz
James R. Crea, Jr.
Karol M. Krummie
Lee R. Cunningham, II
James H. Davis, II
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
Gary E. Falwell
John T. Gentry
Nikola A. Ivanov
Nathan H. Kehm
John C. Kerber
Grant K. McKay
Natalie F. Metz
Thomas Mitchell
Joseph M. Natoli
Trent Nevills
Bob Nolte
Mary Kay Pavuk
John Quartarolo
Rae Ann Rice
Roberto Sanchez-Dahl, Sr.
Sarath Sathkumara
James W. Schaub
John Sidawi
Matthew K. Stapen
Diane R. Startari
Diane Tolby
Timothy G. Trebilcock
Leonarda A. Vila
Steven J. Wagner

Secretary: G. Andrew Bonnewell

Treasurer: Thomas R. Donahue

Assistant Secretaries: C. Grant Anderson
Karen M. Brownlee
Leslie K. Ross

Assistant Treasurer: Denis McAuley, III

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

Item 27. PRINCIPAL UNDERWRITERS:
-----------------------

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

Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund,
Inc.; Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core
Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fixed Income Securities, Inc.; Federated Fund for U.S. Government Securities,
Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.;
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 Investment
Series Funds, Inc.; Federated Managed Allocation Portfolios; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated
Municipal Securities Income Trust; Federated Short-Term Municipal 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.; FirstMerit Funds; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Marshall Funds, Inc.; Money Market Obligations Trust; Regions
Funds; RIGGS Funds; SouthTrust Funds; Tax-Free Instruments Trust; The Wachovia
Funds; The Wachovia Municipal Funds; Vision Group of Funds, Inc.; and World
Investment Series, Inc.;

(b)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Robert J. Deuberry 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

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

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

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

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

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

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

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

Anthony J. Harper 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

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

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

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

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

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

Amy Michalisyn 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

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

Thomas A. Peter 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

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

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

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

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

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

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

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

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

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

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

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

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

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

Donald C. Edwards 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

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

Ernest L. Linane 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

Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Victor R. Siclari 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 P.O. Box 8600
----------------
("Transfer Agent and Boston, MA
Dividend Disbursing Agent") 02266-8600

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

FEDERATED INVESTMENT
MANAGEMENT COMPANY Federated Investors Tower
("Adviser") Pittsburgh, PA
15222-3779

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

Item 29. MANAGEMENT SERVICES: Not applicable.
-------------------

Item 30. UNDERTAKINGS:
------------

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED GNMA TRUST, certifies
that it meets all of the requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, duly authorized, in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 29th day of March, 2000.

FEDERATED GNMA TRUST

BY: /s/ C. Grant Anderson
C. Grant Anderson, Assistant Secretary
Attorney in Fact for John F. Donahue
March 29, 2000

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

NAME TITLE DATE
---- ----- ----

By: /s/ C. Grant Anderson Attorney In Fact March 29, 2000
C. Grant Anderson For the Persons
ASSISTANT SECRETARY Listed Below

NAME TITLE

John F. Donahue* Chairman and Trustee
(Chief Investment Officer)
Glen R. Johnson* President

J. Christopher Donahue* Executive Vice President
and Trustee

Richard J. Thomas* Treasurer
(Principal Financial and

Accounting Officer)

William D. Dawson, III* Chief Investment Officer

Thomas G.Bigley* Trustee

John T. Conroy, Jr*. Trustee

Nicholas P. Constantakis* Trustee

John F. Cunningham* Trustee

Lawrence D. Ellis, M.D.* Trustee

Peter E. Madden* Trustee

Charles F. Mansfield, Jr.* Trustee

John E. Murray, Jr*. Trustee

Marjorie P. Smuts* Trustee

John S. Walsh* Trustee

* By Power of Attorney

Exhibit 23 under Form N-1A
Exhibit j under Item 601/Reg. S-K

INDEPENDENT AUDITORS' CONSENT

We consent to the use in Post-Effective Amendment No. 32 to Registration
Statement 2-75670 of GNMA Trust of our report dated January 17, 2000 appearing
in the Prospectus, which is a part of such Registration Statement, and to the
reference to us under the heading "Financial Highlights" in such Prospectus.

Boston, Massachusetts
March 27, 2000

Exhibit (o)(i) under Form 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/ JOHN F. DONAHUE Chairman and Trustee February 23, 2000
- -------------------
John F. Donahue (Chief Executive Officer)

/S/ GLEN R. JOHNSON President February 23, 2000
- -------------------
Glen R. Johnson

/S/ J. CHRISTOPHER DONAHUE Executive Vice President February 23, 2000
- --------------------------
J. Christopher Donahue and Trustee

/S/ RICHARD J. THOMAS Treasurer February 23, 2000
- ---------------------
Richard J. Thomas (Principal Financial and
Accounting Officer)

/S/ THOMAS G. BIGLEY Trustee February 23, 2000
- --------------------
Thomas G. Bigley

/S/ JOHN T. CONROY, JR. Trustee February 23, 2000
- ----------------------
John T. Conroy, Jr.

/S/LAWRENCE D. ELLIS, M.D. Trustee February 23, 2000
- --------------------------
Lawrence D. Ellis, M.D.

/S/ PETER E. MADDEN Trustee February 23, 2000
- -------------------
Peter E. Madden

/S/ JOHN E. MURRAY Trustee February 23, 2000
- -------------------
John E. Murray

/S/ MARJORIE P. SMUTS Trustee February 23, 2000
- ---------------------
Marjorie P. Smuts

Sworn to and subscribed before me this 23rd day of February, 2000.

/S/ JANICE L. VANDENBERG

Janice L. Vandenberg

Exhibit (o)(ii) under Form N-1A
Exhibit (24) under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE
- ---------- ----- ----

/S/ WILLIAM D. DAWSON, III Chief Investment Officer February 23, 2000
- --------------------------
William D. Dawson, III

Sworn to and subscribed before me this 23rd day of February, 2000.

/S/ JANICE L. VANDENBERG

Janice L. Vandenberg

Exhibit (o)(iii) under Form N-1A
Exhibit (24) under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE
- ----------- ----- ----

/S/ NICHOLAS P. CONSTANTAKIS Trustee February 23, 2000
- ----------------------------
Nicholas P. Constantakis

Sworn to and subscribed before me this 23rd day of February, 2000.

/S/JANICE L. VANDENBERG

Janice L. Vandenberg

Exhibit (o)(iv) under Form N-1A
Exhibit (24) under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE
- ---------- ----- ----

/S/JOHN S. WALSH Trustee February 23, 2000
- ----------------
John S. Walsh

Sworn to and subscribed before me this 23rd day of February, 2000.

/S/JANICE L. VANDENBERG

Janice L. Vandenberg

Exhibit (o)(v) under Form N-1A
Exhibit (24) under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/S/ CHARLES F. MANSFIELD, JR. Trustee February 23, 2000
Charles F. Mansfield, Jr.

Sworn to and subscribed before me this 23rd day of February, 2000.

/S/JANICE L. VANDENBERG

Janice L. Vandenberg

Exhibit (o)(vi) under Form N-1A
Exhibit (24) under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/S/ JOHN F. CUNNINGHAM. Trustee February 23, 2000
John F. Cunningham

Sworn to and subscribed before me this 23rd day of February, 2000.

/S/JANICE L. VANDENBERG
Janice L. Vandenberg