Federated Investors, Inc.
United States
Securities and Exchange Commission
Washington, D.C. 20549
Form N-CSR
Certified Shareholder Report of
Registered Management Investment Companies
811-3375
(Investment Company Act File Number)
Federated GNMA Trust
_______________________________________________________________
(Exact Name of Registrant as Specified
in Charter)
Federated Investors Funds
4000 Ericsson Drive
Warrendale, Pennsylvania 15086-7561
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
(Notices should be sent to the Agent
for Service)
Date of Fiscal Year End: 01/31/2013
Date of Reporting Period: 01/31/2013
Item 1. Reports to Stockholders
Annual Shareholder
Report
January 31, 2013
Share Class
| Ticker
|
Institutional
| FGMAX
|
Service
| FGSSX
|
Not FDIC Insured • May Lose
Value • No Bank Guarantee
CONTENTS
| 1
|
| 5
|
| 6
|
| 9
|
| 11
|
| 12
|
| 13
|
| 14
|
| 23
|
| 24
|
| 26
|
| 31
|
| 36
|
| 36
|
Management's Discussion of
Fund
Performance (unaudited)
The Fund's total return, based on
net asset value, for the 12-month reporting period ended January 31, 2013, was 1.06% for the Institutional Shares and 0.99% for the Service Shares. The Barclays GNMA Index (BGNMA),1 the Fund's broad-based securities market index, returned 1.54% during the same period. The Fund's total return reflected actual cash flows, transaction costs and
other expenses not reflected in the total return of the BGNMA.
During the 12-month
reporting period, the most significant factors affecting the Funds performance relative to the BGNMA were: (a) duration;2 and (b) security selection.3
The following
discussion will focus on the performance of the Fund's Institutional Shares. The 1.06% total return consisted of 2.71% in taxable dividends and -1.65% in depreciation in the net asset value of the shares.
MARKET OVERVIEW
During the 12-month reporting
period, Treasury yields were volatile but ended the 12-month reporting period marginally lower than where they started. The European debt crisis continued to create uncertainty as governments struggled to bring down
long-term budget deficits while simultaneously seeking to restart economic growth. Additionally, economic growth in the U.S. remained tepid with only very slow job creation and continuing concerns about the ability of
the U.S. government to manage the growing national debt burden.
The Federal Reserve
(the “Fed”) extended its unconventional policy initiatives to provide additional monetary support to the economy. The Fed extended, by one year, the period when it expected to keep the federal funds target
rate at 0.00% to 0.25% until mid-2015. Historically, the Fed had not provided explicit long-term guidance for the future evolution of the federal funds target rate. The Fed continued to lengthen the average maturity
of the Treasury securities it owns by selling shorter maturity Treasuries and simultaneously buying an equal amount of longer maturity Treasuries in a move dubbed “Operation Twist” by the market. After
completing “Operation Twist” in the fall of 2012, the Fed announced an open-ended policy of Quantitative Easing by purchasing additional large quantities of government agency mortgage-backed securities and
long-term Treasuries. Finally, in December 2012, the Fed announced an explicit unemployment rate target of 6.5% before it would consider raising the federal funds target rate unless inflation rose beyond 2.5%.
Historically, the Fed had not announced such explicit targets for either unemployment or inflation. These highly unusual policy moves by the Fed were designed to be supportive of economic growth. While economic
expansion continued, the rate of growth was subdued, and the Fed remained focused on policy measures to help lower unemployment.
Annual Shareholder Report
The two- and
ten-year Treasury yields increased 5 and 19 basis points to 0.26% and 1.99%, respectively, during the 12-month reporting period.4
DURATION
Duration for the Fund was actively
managed relative to the BGNMA during the 12-month reporting period as rates were volatile. The active duration management contributed positively to Fund performance.
SECURITY SELECTION
During the 12-month reporting
period, the Fund had above-BGNMA exposure to securities with characteristics that limited prepayment risk, such as newly originated loans or loans with low balances. Mortgage prepayments in general remained elevated
during the reporting period as homeowners took advantage of historically low mortgage rates. The Fund's investments in securities with slower prepayments allowed the Fund to generate higher income relative to those in
the BGNMA. Security selection contributed positively to Fund performance.
1
| Barclays Capital changed the name of the BGNMA Index from “Barclays Capital GNMA Index” to “Barclays GNMA Index.” The BGNMA Index is an index comprised of all fixed securities mortgage pools
by GNMA, including GNMA Graduated Payment Mortgages. The index is unmanaged, and it is not possible to invest directly in an index.
|
2
| Duration is a measure of a security's price sensitivity to changes in interest rates. Securities with longer durations are more sensitive to changes in interest rates than other securities of shorter durations.
|
3
| The value of some mortgage-backed securities may be particularly sensitive to changes in prevailing interest rates, and although the securities are generally supported by some form of government or private
insurance, there is no assurance that private guarantors or insurers will meet their obligations.
|
4
| Bond prices are sensitive to changes in interest rates, and a rise in interest rates can cause a decline in their prices.
|
Annual Shareholder Report
FUND PERFORMANCE AND GROWTH OF A
$10,000 INVESTMENT
The Average Annual Total Return
table below shows returns for each class averaged over the stated periods. The graphs below illustrate the hypothetical investment of $10,0001 in the Federated GNMA Trust (the “Fund”) from January 31, 2003 to January 31, 2013, compared to the Barclays GNMA Index (BGNMA)1 and the Lipper GNMA Funds Average (LGNMAFA).1,2
Average Annual Total Returns for the Period Ended 1/31/2013
Share Class
| 1 Year
| 5 Years
| 10 Years
|
Institutional Shares
| 1.06%
| 4.70%
| 4.33%
|
Service Shares
| 0.99%
| 4.54%
| 4.18%
|
Performance data quoted represents
past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Mutual
fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month-end performance and after-tax returns, visit FederatedInvestors.com or call
1-800-341-7400. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Mutual funds are not obligations of or guaranteed by any bank
and are not federally insured.
Annual Shareholder Report
Growth of a $10,000
INVESTMENT–iNSTITUTIONAL SHARES
Growth of a $10,000
INVESTMENT–SERVICE SHARES
1
| The Fund's performance assumes the reinvestment of all dividends and distributions. Barclays Capital changed the name of the BGNMA Index from “Barclays Capital GNMA Index” to “Barclays GNMA
Index.” The BGNMA and the LGNMAFA have been adjusted to reflect reinvestment of dividends on securities in the index and the average. The BGNMA is not adjusted to reflect sales charges, expenses or other fees
that the Securities and Exchange Commission requires to be reflected in the Fund's performance. The BGNMA is unmanaged, and unlike the Fund, is not affected by cash flows. It is not possible to invest directly in an
index or average.
|
2
| The LGNMAFA represents the average of the total returns reported by all of the mutual funds designated by Lipper, Inc. as falling in the category indicated. These figures do not reflect sales charges. It is not
possible to invest directly in an index or average.
|
Annual Shareholder Report
Portfolio of Investments Summary
Table (unaudited)
At January 31, 2013, the Fund's
portfolio composition1 was as follows:
Type of Investment
| Percentage of
Total Net Assets
|
GNMA Mortgage-Backed Securities
| 101.4%
|
Repurchase Agreements—Collateral2
| 8.1%
|
Derivative Contracts3,4
| 0.0%
|
Other Assets and Liabilities—Net5
| (9.5)%
|
TOTAL
| 100.0%
|
1
| See the Fund's Prospectus and Statement of Additional Information for a description of the types of securities in which the Fund invests.
|
2
| Includes repurchase agreements purchased with cash collateral or proceeds received in dollar-roll transactions, as well as cash covering when-issued and delayed delivery transactions.
|
3
| Based upon net unrealized appreciation (depreciation) or value of the derivative contracts as applicable. Derivative contracts may consist of futures, forwards, options and swaps. The impact of a derivative contract
on the Fund's performance may be larger than its unrealized appreciation (depreciation) or value may indicate. In many cases, the notional value or amount of a derivative contract may provide a better indication of
the contract's significance to the portfolio. More complete information regarding the Fund's direct investments in derivative contracts, including unrealized appreciation (depreciation), value and notional values or
amounts of such contracts, can be found in the table at the end of the Portfolio of Investments included in this Report.
|
4
| Represents less than 0.1%.
|
5
| Assets, other than investments in securities and derivative contracts, less liabilities. See Statement of Assets and Liabilities.
|
Annual Shareholder Report
Portfolio of Investments
January 31, 2013
Principal
Amount
|
|
| Value
|
|
| Mortgage-Backed Securities—98.8%
|
|
|
| Government National Mortgage Association—98.8%1
|
|
$30,159,862
|
| 3.000%, 9/15/2042 - 1/15/2043
| $31,512,074
|
85,552,340
| 2
| 3.500%, 1/15/2042 - 11/15/2042
| 92,370,403
|
84,622,450
|
| 4.000%, 6/20/2041 - 2/15/2043
| 91,961,722
|
124,504,172
| 2
| 4.500%, 7/20/2039 - 3/15/2043
| 135,930,704
|
58,105,538
|
| 5.000%, 10/15/2033 - 3/15/2042
| 64,093,210
|
36,234,543
|
| 5.500%, 7/20/2033 - 7/20/2035
| 40,148,592
|
19,802,941
|
| 6.000%, 8/15/2031 - 12/20/2038
| 22,222,710
|
549,738
|
| 6.500%, 5/15/2027 - 1/20/2032
| 628,228
|
2,995,028
|
| 7.000%, 6/15/2027 - 1/15/2033
| 3,473,691
|
3,467,776
|
| 7.500%, 11/15/2027 - 5/15/2032
| 4,044,124
|
1,437,058
|
| 8.000%, 11/15/2027 - 8/15/2032
| 1,693,249
|
4,845
|
| 8.500%, 3/15/2030
| 5,285
|
|
| TOTAL MORTGAGE-BACKED SECURITIES
(IDENTIFIED COST $477,772,848)
| 488,083,992
|
|
| Collateralized Mortgage Obligations—2.6%
|
|
|
| Government National Mortgage Association—2.6%
|
|
7,454,306
| 3
| 0.605%, 8/20/2039, REMIC 2009-106 FG
| 7,470,425
|
5,195,012
| 3
| 0.855%, 3/20/2039, REMIC 2009-87 AF
| 5,249,669
|
|
| TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(IDENTIFIED COST $12,718,175)
| 12,720,094
|
|
| Repurchase Agreements—8.1%
|
|
13,600,000
| 3
| Interest in $3,875,000,000 joint repurchase agreement 0.16%, dated 1/31/2013 under which Bank of America, N.A. will repurchase securities
provided as collateral for $3,875,017,222 on 2/1/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency securities with
various maturities to 11/20/2042 and the market value of those underlying securities was $3,952,517,567.
| 13,600,000
|
Annual Shareholder Report
Principal
Amount
|
|
| Value
|
|
| Repurchase Agreements—continued
|
|
$26,541,000
| 3,4
| Interest in $184,331,000 joint repurchase agreement 0.11%, dated 1/22/2013 under which Deutsche Bank Securities, Inc. will repurchase
securities provided as collateral for $184,346,771 on 2/19/2013. The securities provided as collateral at the end of the period held with The Bank of New York Mellon, tri-party agent, were U.S. Government Agency
securities with various maturities to 2/1/2043 and the market value of those underlying securities was $188,023,366.
| $26,541,000
|
|
| TOTAL REPURCHASE AGREEMENTS
(AT COST)
| 40,141,000
|
|
| TOTAL INVESTMENTS—109.5%
(IDENTIFIED COST $530,632,023)5
| 540,945,086
|
|
| OTHER ASSETS AND LIABILITIES - NET—(9.5)%6
| (46,837,337)
|
|
| TOTAL NET ASSETS—100%
| $494,107,749
|
At January 31, 2013, the Fund had
the following outstanding futures contracts:
Description
| Number of
Contracts
| Notional
Value
| Expiration
Date
| Unrealized
Appreciation
|
7United States Treasury Notes 10-Year
Short Futures
| 120
| $15,753,750
| March 2013
| $116,918
|
Unrealized Appreciation on Futures
Contracts is included in “Other Assets and
Liabilities—Net.”
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 these To Be Announced Securities (TBAs) are subject to dollar-roll transactions.
|
3
| All or a portion of these securities are segregated pending settlement of dollar-roll transactions.
|
4
| Although the repurchase date is more than seven days after the date of purchase, the Fund has the right to terminate the repurchase agreement at any time with seven-days' notice.
|
5
| The cost of investments for federal tax purposes amounts to $529,641,954.
|
6
| Assets, other than investment in securities, less liabilities. See Statement of Assets and Liabilities.
|
7
| Non-income producing security.
|
Note: The categories of investments
are shown as a percentage of total net assets at January 31, 2013.
Various inputs are used in
determining the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1—
quoted prices in active markets for identical securities, including investment companies with daily net asset values, if applicable.
Level 2—
other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Also includes securities valued at amortized cost.
Level 3—
significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments).
Annual Shareholder Report
The inputs or methodology used for
valuing securities are not an indication of the risk associated with investing in those securities.
The following is a summary of the
inputs used, as of January 31, 2013, in valuing the Fund's assets carried at fair value:
Valuation Inputs
|
| Level 1—
Quoted
Prices and
Investments in
Mutual Funds
| Level 2—
Other
Significant
Observable
Inputs
| Level 3—
Significant
Unobservable
Inputs
| Total
|
Debt Securities:
|
|
|
|
|
Mortgage-Backed Securities
| $—
| $488,083,992
| $—
| $488,083,992
|
Collateralized Mortgage Obligations
| —
| 12,720,094
| —
| 12,720,094
|
Repurchase Agreements
| —
| 40,141,000
| —
| 40,141,000
|
TOTAL SECURITIES
| $—
| $540,945,086
| $—
| $540,945,086
|
OTHER FINANCIAL
INSTRUMENTS*
| $116,918
| $—
| $—
| $116,918
|
*
| Other financial instruments include futures contracts.
|
The following acronym is used
throughout this portfolio:
REMIC
| —Real Estate Mortgage Investment Conduit
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Financial Highlights–Institutional Shares
(For a Share Outstanding
Throughout Each Period)
Year Ended January 31
| 2013
| 2012
| 2011
| 2010
| 2009
|
Net Asset Value, Beginning of Period
| $11.55
| $11.27
| $11.24
| $11.02
| $11.03
|
Income From Investment Operations:
|
|
|
|
|
|
Net investment income
| 0.271
| 0.361
| 0.421
| 0.491
| 0.54
|
Net realized and unrealized gain (loss) on investments and futures contracts
| (0.15)
| 0.33
| 0.08
| 0.24
| (0.01)
|
TOTAL FROM INVESTMENT OPERATIONS
| 0.12
| 0.69
| 0.50
| 0.73
| 0.53
|
Less Distributions:
|
|
|
|
|
|
Distributions from net investment income
| (0.31)
| (0.41)
| (0.47)
| (0.51)
| (0.54)
|
Net Asset Value, End of Period
| $11.36
| $11.55
| $11.27
| $11.24
| $11.02
|
Total Return2
| 1.06%
| 6.26%
| 4.49%
| 6.77%
| 4.99%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
Net expenses
| 0.67%
| 0.66%
| 0.68%
| 0.65%
| 0.66%
|
Net investment income
| 2.38%
| 3.11%
| 3.72%
| 4.39%
| 4.84%
|
Expense waiver/reimbursement3
| 0.00%4
| 0.00%4
| 0.00%4
| 0.00%4
| 0.02%
|
Supplemental Data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
| $435,289
| $447,739
| $432,317
| $393,046
| $388,396
|
Portfolio turnover
| 257%
| 181%
| 173%
| 81%
| 82%
|
Portfolio turnover (excluding purchases and sales from dollar-roll transactions)
| 133%
| 29%
| 68%
| 39%
| 21%
|
1
| Per share numbers have been calculated using the average shares method.
|
2
| Based on net asset value.
|
3
| This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
|
4
| Represents less than 0.01%.
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Financial Highlights–Service Shares
(For a Share Outstanding
Throughout Each Period)
Year Ended January 31
| 2013
| 2012
| 2011
| 2010
| 2009
|
Net Asset Value, Beginning of Period
| $11.55
| $11.27
| $11.24
| $11.02
| $11.03
|
Income From Investment Operations:
|
|
|
|
|
|
Net investment income
| 0.251
| 0.341
| 0.411
| 0.471
| 0.51
|
Net realized and unrealized gain (loss) on investments and futures contracts
| (0.14)
| 0.34
| 0.07
| 0.24
| (0.00)2
|
TOTAL FROM INVESTMENT OPERATIONS
| 0.11
| 0.68
| 0.48
| 0.71
| 0.51
|
Less Distributions:
|
|
|
|
|
|
Distributions from net investment income
| (0.29)
| (0.40)
| (0.45)
| (0.49)
| (0.52)
|
Net Asset Value, End of Period
| $11.37
| $11.55
| $11.27
| $11.24
| $11.02
|
Total Return3
| 0.99%
| 6.09%
| 4.32%
| 6.58%
| 4.83%
|
Ratios to Average Net Assets:
|
|
|
|
|
|
Net expenses
| 0.83%
| 0.82%
| 0.84%
| 0.83%
| 0.82%
|
Net investment income
| 2.21%
| 2.96%
| 3.57%
| 4.19%
| 4.65%
|
Expense waiver/reimbursement4
| 0.02%
| 0.00%5
| 0.01%
| 0.07%
| 0.08%
|
Supplemental Data:
|
|
|
|
|
|
Net assets, end of period (000 omitted)
| $58,819
| $54,080
| $57,165
| $84,946
| $61,535
|
Portfolio turnover
| 257%
| 181%
| 173%
| 81%
| 82%
|
Portfolio turnover (excluding purchases and sales from dollar-roll transactions)
| 133%
| 29%
| 68%
| 39%
| 21%
|
1
| Per share numbers have been calculated using the average shares method.
|
2
| Represents less than $0.01.
|
3
| Based on net asset value.
|
4
| This expense decrease is reflected in both the net expense and the net investment income ratios shown above.
|
5
| Represents less than 0.01%.
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Assets and Liabilities
January 31, 2013
Assets:
|
|
|
Total investment in securities, at value (identified cost $530,632,023)
|
| $540,945,086
|
Cash
|
| 822
|
Restricted cash (Note 2)
|
| 132,000
|
Income receivable
|
| 1,575,377
|
Receivable for investments sold
|
| 18,572,451
|
Receivable for shares sold
|
| 562,177
|
TOTAL ASSETS
|
| 561,787,913
|
Liabilities:
|
|
|
Payable for investments purchased
| $66,784,897
|
|
Payable for shares redeemed
| 569,300
|
|
Payable for daily variation margin
| 11,250
|
|
Income distribution payable
| 198,359
|
|
Payable to adviser (Note 5)
| 1,272
|
|
Payable for shareholder services fee (Note 5)
| 34,160
|
|
Accrued expenses
| 80,926
|
|
TOTAL LIABILITIES
|
| 67,680,164
|
Net assets for 43,477,004 shares outstanding
|
| $494,107,749
|
Net Assets Consist of:
|
|
|
Paid-in capital
|
| $486,667,410
|
Net unrealized appreciation of investments and futures contracts
|
| 10,429,981
|
Accumulated net realized loss on investments and futures contracts
|
| (2,976,506)
|
Distributions in excess of net investment income
|
| (13,136)
|
TOTAL NET ASSETS
|
| $494,107,749
|
Net Asset Value, Offering Price and Redemption Proceeds Per Share
|
|
|
Institutional Shares:
|
|
|
$435,288,624 ÷ 38,301,603 shares outstanding, no par value, unlimited shares authorized
|
| $11.36
|
Service Shares:
|
|
|
$58,819,125 ÷ 5,175,401 shares outstanding, no par value, unlimited shares authorized
|
| $11.37
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Operations
Year Ended January 31, 2013
Investment Income:
|
|
|
|
Interest
|
|
| $15,064,232
|
Expenses:
|
|
|
|
Investment adviser fee (Note 5)
|
| $1,972,938
|
|
Administrative fee (Note 5)
|
| 384,851
|
|
Custodian fees
|
| 42,702
|
|
Transfer and dividend disbursing agent fees and expenses
|
| 263,114
|
|
Directors'/Trustees' fees
|
| 10,469
|
|
Auditing fees
|
| 24,450
|
|
Legal fees
|
| 8,624
|
|
Portfolio accounting fees
|
| 161,560
|
|
Shareholder services fee (Note 5)
|
| 392,275
|
|
Account administration fee (Note 2)
|
| 52,021
|
|
Share registration costs
|
| 87,805
|
|
Printing and postage
|
| 21,433
|
|
Insurance premiums
|
| 4,352
|
|
Miscellaneous
|
| 16,588
|
|
TOTAL EXPENSES
|
| 3,443,182
|
|
Waiver and Reimbursement (Note 5):
|
|
|
|
Waiver of administrative fee
| $(5,322)
|
|
|
Reimbursement of shareholder services fee
| (18,521)
|
|
|
TOTAL WAIVER AND REIMBURSEMENT
|
| (23,843)
|
|
Net expenses
|
|
| 3,419,339
|
Net investment income
|
|
| 11,644,893
|
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts:
|
|
|
|
Net realized gain on investments
|
|
| 15,382,889
|
Net realized loss on futures contracts
|
|
| (626,976)
|
Net change in unrealized appreciation of investments
|
|
| (21,684,234)
|
Net change in unrealized depreciation of futures contracts
|
|
| 429,722
|
Net realized and unrealized loss on investments and futures contracts
|
|
| (6,498,599)
|
Change in net assets resulting from operations
|
|
| $5,146,294
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Statement of Changes in Net Assets
Year Ended January 31, 2013
| 2013
| 2012
|
Increase (Decrease) in Net Assets
|
|
|
Operations:
|
|
|
Net investment income
| $11,644,893
| $15,373,343
|
Net realized gain on investments and futures contracts
| 14,755,913
| 5,457,113
|
Net change in unrealized appreciation/depreciation of investments and futures contracts
| (21,254,512)
| 9,166,128
|
CHANGE IN NET ASSETS RESULTING FROM OPERATIONS
| 5,146,294
| 29,996,584
|
Distributions to Shareholders:
|
|
|
Distributions from net investment income
|
|
|
Institutional Shares
| (11,845,711)
| (15,997,431)
|
Service Shares
| (1,434,310)
| (1,898,627)
|
CHANGE IN NET ASSETS RESULTING FROM DISTRIBUTIONS TO SHAREHOLDERS
| (13,280,021)
| (17,896,058)
|
Share Transactions:
|
|
|
Proceeds from sale of shares
| 113,510,599
| 111,097,187
|
Net asset value of shares issued to shareholders in payment of distributions declared
| 9,786,134
| 12,746,438
|
Cost of shares redeemed
| (122,874,337)
| (123,606,313)
|
CHANGE IN NET ASSETS RESULTING FROM SHARE TRANSACTIONS
| 422,396
| 237,312
|
Change in net assets
| (7,711,331)
| 12,337,838
|
Net Assets:
|
|
|
Beginning of period
| 501,819,080
| 489,481,242
|
End of period (including undistributed (distributions in excess of) net investment income of $(13,136) and $9,638, respectively)
| $494,107,749
| $501,819,080
|
See Notes which are an integral part
of the Financial Statements
Annual Shareholder Report
Notes to Financial Statements
January 31, 2013
1. 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 Service Shares. All shares of the Fund have equal rights with respect to voting, except on class-specific matters. The investment objective of the Fund is current income.
2. 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 U.S. generally accepted accounting principles (GAAP).
Investment Valuation
In calculating its net asset value
(NAV), the Fund generally values investments as follows:
■
| Fixed-income securities acquired with remaining maturities greater than 60 days are fair valued using price evaluations provided by a pricing service approved by the Fund's Board of Trustees (the “
Trustees”).
|
■
| Fixed-income securities acquired with remaining maturities of 60 days or less are valued at their cost (adjusted for the accretion of any discount or amortization of any premium), which approximates market value.
|
■
| Derivative contracts listed on exchanges are valued at their reported settlement or closing price.
|
■
| Over-the-counter (OTC) derivative contracts are fair valued using price evaluations provided by a pricing service approved by the Trustees.
|
■
| Shares of other mutual funds are valued based upon their reported NAVs.
|
■
| For securities that are fair valued in accordance with procedures established by and under the general supervision of the Trustees, certain factors may be considered such as: the purchase price of the security,
information obtained by contacting the issuer, analysis of the issuer's financial statements or other available documents, fundamental analytical data, the nature and duration of restrictions on disposition, the
movement of the market in which the security is normally traded and public trading in similar securities of the issuer or comparable issuers.
|
If the Fund cannot obtain a price or
price evaluation from a pricing service for an investment, the Fund may attempt to value the investment based upon the mean of bid and asked quotations or fair value the investment based on price evaluations, from one
or more dealers. If any price, quotation, price evaluation or other pricing source is not readily available when the NAV is calculated, the Fund uses the fair value of the investment determined in accordance with the
procedures described below. There can be no assurance that the Fund could purchase or sell an investment at the price used to calculate the Fund's NAV.
Fair Valuation and Significant
Events Procedures
The Trustees have appointed a
Valuation Committee comprised of officers of the Fund, Federated Investment Management Company (“Adviser”) and the Adviser's affiliated companies to determine fair value of securities and in overseeing the
calculation of the NAV. The Trustees have also authorized the use of pricing services recommended by the Valuation Committee to provide fair value evaluations of the current value of certain investments for
Annual Shareholder Report
purposes of calculating the NAV. The Valuation
Committee employs various methods for reviewing third-party pricing service evaluations including periodic reviews of third-party pricing services' policies, procedures and valuation methods (including key inputs and
assumptions), transactional back-testing, comparisons of evaluations of different pricing services, and review of price challenges by the Adviser based on recent market activity. In the event that market quotations
and price evaluations are not available for an investment, the Valuation Committee determines the fair value of the investment in accordance with procedures adopted by the Trustees. The Trustees periodically review
and approve the fair valuations made by the Valuation Committee and any changes made to the procedures.
Factors considered by
pricing services in evaluating an investment include the yields or prices of investments of comparable quality, coupon, maturity, call rights and other potential prepayments, terms and type, reported transactions,
indications as to values from dealers and general market conditions. Some pricing services provide a single price evaluation reflecting the bid-side of the market for an investment (a “bid” evaluation).
Other pricing services offer both bid evaluations and price evaluations indicative of a price between the prices bid and asked for the investment (a “mid” evaluation). The Fund normally uses bid
evaluations for U.S. Treasury and Agency securities and mortgage-backed securities. The Fund normally uses mid evaluations for other types of fixed-income securities and OTC derivative contracts. In the event that
market quotations and price evaluations are not available for an investment, the fair value of the investment is determined in accordance with procedures adopted by the Trustees.
The Trustees also
have adopted procedures requiring an investment to be priced at its fair value whenever the Adviser determines that a significant event affecting the value of the investment has occurred between the time as of which
the price of the investment would otherwise be determined and the time as of which the NAV is computed. An event is considered significant if there is both an affirmative expectation that the investment's value will
change in response to the event and a reasonable basis for quantifying the resulting change in value. Examples of significant events that may occur after the close of the principal market on which a security is
traded, or after the time of a price evaluation provided by a pricing service or a dealer, include:
■
| Political or other developments affecting the economy or markets in which an issuer conducts its operations or its securities are traded; and
|
■
| Announcements concerning matters such as acquisitions, recapitalizations, litigation developments, a natural disaster affecting the issuer's operations or regulatory changes or market developments affecting the
issuer's industry.
|
The Fund may seek to obtain more
current quotations or price evaluations from alternative pricing sources. If a reliable alternative pricing source is not available, the Fund will determine the fair value of the investment using another method
approved by the Trustees.
Repurchase Agreements
The Fund may invest in repurchase
agreements for short-term liquidity purposes. It is the policy of the Fund to require the other party to a repurchase agreement to transfer to the Fund's custodian or sub-custodian eligible securities or cash with a
market value (after transaction costs) at least equal to the repurchase price to be paid under the repurchase agreement. The eligible securities are transferred to accounts with the custodian or sub-custodian in which
the Fund holds a “securities entitlement” and exercises “control” as those terms are defined in the Uniform Commercial Code. The Fund has established procedures for monitoring the market value
of the transferred securities and requiring the transfer of
Annual Shareholder Report
additional eligible securities if necessary to
equal at least the repurchase price. These procedures also allow the other party to require securities to be transferred from the account to the extent that their market value exceeds the repurchase price or in
exchange for other eligible securities of equivalent market value.
The insolvency of the
other party or other failure to repurchase the securities may delay the disposition of the underlying securities or cause the Fund to receive less than the full repurchase price. Under the terms of the repurchase
agreement, any amounts received by the Fund in excess of the repurchase price and related transaction costs must be remitted to the other party.
The Fund may enter
into repurchase agreements in which eligible securities are transferred into joint trading accounts maintained by the custodian or sub-custodian for investment companies and other clients advised by the Fund's Adviser
and its affiliates. The Fund will participate on a pro rata basis with the other investment companies and clients in its share of the securities transferred under such repurchase agreements and in its share of
proceeds from any repurchase or other disposition of such securities.
Investment Income, Gains and
Losses, Expenses and Distributions
Investment transactions are
accounted for on a trade-date basis. Realized gains and losses from investment transactions are recorded on an identified-cost basis. Interest income and expenses are accrued daily. Dividend income and distributions
to shareholders are recorded on the ex-dividend date. Distributions of net investment income are declared daily and paid monthly. Non-cash dividends included in dividend income, if any, are recorded at fair value.
Investment income, realized and unrealized gains and losses, and certain fund-level expenses are allocated to each class based on relative average daily net assets, except that Institutional Shares and Service Shares
may bear distribution services fees, shareholder services fees and account administration fees unique to those classes. For the year ended January 31, 2013, account administration fees for the Fund were as follows:
| Account
Administration
Fees Incurred
|
Institutional Shares
| $8,313
|
Service Shares
| 43,708
|
TOTAL
| $52,021
|
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.
Premium and Discount
Amortization/Paydown Gains and Losses
All premiums and discounts on
fixed-income securities, other than mortgage-backed securities, are amortized/accreted using the effective interest rate method. Gains and losses realized on the principal payment of mortgage-backed securities
(paydown gains and losses) are classified as part of investment income.
Annual Shareholder Report
Federal Taxes
It is the Fund's policy to comply
with the Subchapter M provision of the Internal Revenue Code (the “Code”) and to distribute to shareholders each year substantially all of its income. Accordingly, no provision for federal income tax is
necessary. As of and during the year ended January 31, 2013, the Fund did not have a liability for any uncertain tax positions. The Fund recognizes interest and penalties, if any, related to tax liabilities as income
tax expense in the Statement of Operations. As of January 31, 2013, tax years 2010 through 2013 remain subject to examination by the Fund's major tax jurisdictions, which include the United States of America and the
Commonwealth of Massachusetts.
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.
The Fund may transact
in To Be Announced Securities (TBAs). As with other delayed delivery transactions, a seller agrees to issue TBAs 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 such as issuer, interest rate and terms of underlying mortgages. The Fund records TBAs on the trade date utilizing information associated with
the specified terms of the transaction as opposed to the specific mortgages. TBAs are marked to market daily and begin earning interest on the settlement date. Losses may occur due to the fact that the actual
underlying mortgages received may be less favorable than those anticipated by the Fund.
Futures Contracts
The Fund purchases and sells
financial futures contracts to manage cash flows, enhance yield, manage duration and to potentially reduce transaction costs. Upon entering into a financial futures contract with a broker, the Fund is required to
deposit in a segregated account a specified amount of cash or U.S. government securities which is shown as Restricted Cash in the Statement of Assets and Liabilities. Futures contracts are valued daily and unrealized
gains or losses are recorded in a “variation margin” account. Daily, the Fund receives from or pays to the broker a specified amount of cash based upon changes in the variation margin account. When a
contract is closed, the Fund recognizes a realized gain or loss. Futures contracts have market risks, including the risk that the change in the value of the contract may not correlate with the changes in the value of
the underlying securities. There is minimal counterparty risk to the Fund since futures are exchange traded and the exchange's clearinghouse, as counterparty to all exchange traded futures, guarantees the futures
against default.
Futures contracts
outstanding at period end are listed after the Fund's Portfolio of Investments.
The average notional
value of long and short futures contracts held by the Fund throughout the period was $42,387,500 and $25,350,380, respectively. This is based on amounts held as of each month-end throughout the fiscal period.
Annual Shareholder Report
Dollar-Roll Transactions
The Fund engages in dollar-roll
transactions in which the Fund sells mortgage-backed securities with a commitment to buy similar (same type, coupon and maturity), but not identical mortgage-backed securities on a future date. Both securities
involved are TBA mortgage-backed securities. The Fund treats dollar-roll transactions as purchases and sales. Dollar-rolls are subject to interest rate risks and credit risks.
Additional Disclosure Related to
Derivative Instruments
Fair Value of Derivative Instruments
|
|
| Liability
|
| Statement of
Assets and
Liabilities
Location
| Fair
Value
|
Derivatives not accounted for as hedging instruments under ASC Topic 815
|
|
|
Interest rate contracts
| Payable for daily variation margin
| $(116,918)*
|
*
| Includes cumulative appreciation of futures contracts as reported in the footnotes to the Portfolio of Investments. Only the current day's variation margin is reported within the Statement of Assets and Liabilities.
|
The Effect of Derivative
Instruments on the Statement of Operations for the Year Ended January 31, 2013
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
|
| Futures
|
Interest rate contracts
| $(626,976)
|
Change in Unrealized Appreciation or (Depreciation) on Derivatives Recognized in Income
|
| Futures
|
Interest rate contracts
| $429,722
|
Other
The preparation of financial
statements in conformity with GAAP 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.
Annual Shareholder Report
3. SHARES OF BENEFICIAL
INTEREST
The following tables summarize share
activity:
Year Ended January 31
| 2013
| 2012
|
Institutional Shares:
| Shares
| Amount
| Shares
| Amount
|
Shares sold
| 8,786,365
| $101,268,210
| 9,026,473
| $103,409,415
|
Shares issued to shareholders in payment of distributions declared
| 744,767
| 8,567,258
| 977,884
| 11,209,138
|
Shares redeemed
| (10,002,361)
| (115,102,809)
| (9,601,400)
| (109,960,902)
|
NET CHANGE RESULTING FROM INSTITUTIONAL SHARE TRANSACTIONS
| (471,229)
| $(5,267,341)
| 402,957
| $4,657,651
|
Year Ended January 31
| 2013
| 2012
|
Service Shares:
| Shares
| Amount
| Shares
| Amount
|
Shares sold
| 1,061,882
| $12,242,389
| 667,173
| $7,687,772
|
Shares issued to shareholders in payment of distributions declared
| 105,967
| 1,218,876
| 134,272
| 1,537,300
|
Shares redeemed
| (675,664)
| (7,771,528)
| (1,191,800)
| (13,645,411)
|
NET CHANGE RESULTING FROM SERVICE SHARE TRANSACTIONS
| 492,185
| $5,689,737
| (390,355)
| $(4,420,339)
|
NET CHANGE RESULTING FROM TOTAL FUND SHARE TRANSACTIONS
| 20,956
| $422,396
| 12,602
| $237,312
|
4. FEDERAL TAX INFORMATION
The timing and character of income
and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP. These differences are due to differing treatments for dollar-roll adjustments.
For the year ended
January 31, 2013, permanent differences identified and reclassified among the components of net assets were as follows:
Increase (Decrease)
|
Undistributed
Net Investment
Income (Loss)
| Accumulated
Net Realized
Gain (Loss)
|
$1,612,354
| $(1,612,354)
|
Net investment income (loss), net
realized gains (losses), and net assets were not affected by this reclassification.
The tax character of
distributions as reported on the Statement of Changes in Net Assets for the years ended January 31, 2013 and 2012, was as follows:
| 2013
| 2012
|
Ordinary income
| $13,280,021
| $17,896,058
|
Annual Shareholder Report
As of January 31, 2013, the
components of distributable earnings on a tax basis were as follows:
Undistributed ordinary income
| $(13,136)
|
Net unrealized appreciation
| $11,303,132
|
Capital loss carryforwards and deferrals
| $(3,849,657)
|
The difference between book-basis
and tax-basis net unrealized appreciation/depreciation is attributable in part to differing treatments for dollar-roll adjustments and the deferral of losses on wash sales.
At January 31, 2013,
the cost of investments for federal tax purposes was $529,641,954. The net unrealized appreciation of investments for federal tax purposes excluding any unrealized appreciation resulting from futures contracts was
$11,303,132. This consists of net unrealized appreciation from investments for those securities having an excess of value over cost of $15,631,747 and net unrealized depreciation from investments for those securities
having an excess of cost over value of $4,328,615.
At January 31, 2013,
the Fund had a capital loss carryforward of $3,757,491 which will reduce the Fund's taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code, thereby reducing
the amount of distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income tax. Pursuant to the Code, a net capital loss incurred in taxable years beginning
on or before December 22, 2010, is characterized as short-term and may be carried forward for a maximum of eight tax years (“Carryforward Limit”), whereas a net capital loss incurred in taxable years
beginning after December 22, 2010, retains its character as either short-term or long-term, does not expire and is required to be utilized prior to the losses which have a Carryforward Limit.
The following
schedule summarizes the Fund's capital loss carryforwards and expiration years:
Expiration Year
| Short-Term
| Long-Term
| Total
|
2016
| $3,757,491
| NA
| $3,757,491
|
The Fund used capital loss
carryforwards of $15,898,538 to offset capital gains realized during the year ended January 31, 2013.
Under current tax
regulations, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following fiscal year. As of January 31, 2013, for federal income tax purposes, post October
losses of $92,166 were deferred to February 1, 2013.
5. INVESTMENT ADVISER FEE AND
OTHER TRANSACTIONS WITH AFFILIATES
Investment Adviser Fee
The advisory agreement between the
Fund and the Adviser provides for an annual fee equal to 0.40% of the Fund's average daily net assets. Subject to the terms described in the Expense Limitation note, the Adviser may voluntarily choose to waive any
portion of its fee.
Annual Shareholder Report
Administrative Fee
Federated Administrative Services
(FAS), under the Administrative Services Agreement, provides the Fund with administrative personnel and services. The fee paid to FAS is based on the average aggregate daily net assets of certain Federated funds as
specified below, plus certain out-of-pocket expenses:
Administrative Fee
| Average Aggregate Daily Net Assets
of the Federated Funds
|
0.150%
| on the first $5 billion
|
0.125%
| on the next $5 billion
|
0.100%
| on the next $10 billion
|
0.075%
| on assets in excess of $20 billion
|
Prior to September 1, 2012, the
administrative fee received during any fiscal year was at least $150,000 per portfolio and $40,000 per each additional class of Shares. Subject to the terms described in the Expense Limitation note, FAS may
voluntarily choose to waive any portion of its fee. For the year ended January 31, 2013, FAS waived $5,322 of its fee. The net fee paid to FAS was 0.077% of average daily net assets of the Fund.
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 daily net assets of the
Fund's Service Shares to finance activities intended to result in the sale of these shares. The Plan provides that the Fund may incur distribution expenses at 0.05% of average daily net assets, annually, to compensate
FSC. Subject to the terms described in the Expense Limitation note, FSC may voluntarily choose to waive any portion of its fee. When FSC receives fees, it may pay some or all of them to financial intermediaries whose
customers purchase shares. For the year ended January 31, 2013, the Fund's Service Shares did not incur a distribution services fee; however, it may begin to incur this fee upon approval of the Trustees.
Shareholder Services Fee
The Fund may pay fees (“
Service Fees”) up to 0.25% of the average daily net assets of the Fund's Institutional Shares and Service Shares to financial intermediaries or to Federated Shareholder Services Company (FSSC) for providing
services to shareholders and maintaining shareholder accounts. Subject to the terms described in the Expense Limitation note, FSSC may voluntarily reimburse the Fund for Service Fees. For the year ended January 31,
2013, Service Fees for the Fund were as follows:
| Service
Fees
Incurred
| Service
Fees
Reimbursed
|
Institutional Shares
| $296,261
| $(7,407)
|
Service Shares
| 96,014
| (11,114)
|
TOTAL
| $392,275
| $(18,521)
|
For the year ended January 31, 2013,
FSSC did not receive any fees paid by the Fund.
Annual Shareholder Report
Expense Limitation
The Adviser and its affiliates
(which may include FSC, FAS and FSSC) have voluntarily agreed to waive their fees and/or reimburse expenses so that the total annual fund operating expenses (as shown in the financial highlights) paid by the Fund's
Institutional Shares and Service Shares (after the voluntary waivers and/or reimbursements) will not exceed 0.67% and 0.83% (the “Fee Limit”), respectively, up to but not including the later of (the “
Termination Date”): (a) April 1, 2014; or (b) the date of the Fund's next effective Prospectus. While the Adviser and its affiliates currently do not anticipate terminating or increasing these arrangements prior
to the Termination Date, these arrangements may only be terminated or the Fee Limit increased prior to the Termination Date with the agreement of the Trustees.
General
Certain Officers and Trustees of the
Fund are Officers and Directors or Trustees of the above companies.
6. Investment TRANSACTIONS
Purchases and sales of investments,
excluding long-term U.S. government securities and short-term obligations, for the year ended January 31, 2013, were as follows:
Purchases
| $—
|
Sales
| $10,299,134
|
7. LINE OF CREDIT
The Fund participates in a
$100,000,000 unsecured, uncommitted revolving line of credit (LOC) agreement with PNC Bank. The LOC was made available for extraordinary or emergency purposes, primarily for financing redemption payments. Borrowings
are charged interest at a rate offered to the Fund by PNC Bank at the time of the borrowing. As of January 31, 2013, there were no outstanding loans. During the year ended January 31, 2013, the Fund did not utilize
the LOC.
8. INTERFUND LENDING
Pursuant to an Exemptive Order
issued by the Securities and Exchange Commission, the Fund, along with other funds advised by subsidiaries of Federated Investors, Inc., may participate in an interfund lending program. This program provides an
alternative credit facility allowing the Fund to borrow from other participating affiliated funds. As of January 31, 2013, there were no outstanding loans. During the year ended January 31, 2013, the program was not
utilized.
Annual Shareholder Report
Report of Independent Registered
Public
Accounting Firm
TO THE BOARD OF TRUSTEES AND
SHAREHOLDERS OF federated gnMA TRUST:
We have audited the accompanying
statement of assets and liabilities of Federated GNMA Trust (the “Fund”), including the portfolio of investments, as of January 31, 2013, and the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. 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 audits.
We conducted our audits in
accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial
highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned
as of January 31, 2013, by correspondence with the custodian and others or by other appropriate auditing procedures where replies from others were not received. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial
statements and financial highlights referred to above present fairly, in all material respects, the financial position of Federated GNMA Trust at January 31, 2013, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted
accounting principles.
Boston, Massachusetts
March 25, 2013
Annual Shareholder Report
Shareholder Expense Example (unaudited)
As a shareholder of the Fund, you
incur ongoing costs, including management fees and to the extent applicable, distribution (12b-1) fees and/or shareholder services fees and other Fund expenses. This Example is intended to help you to understand your
ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. It is based on an investment of $1,000 invested at the beginning of the period
and held for the entire period from August 1, 2012 to January 31, 2013.
ACTUAL EXPENSES
The first section of the table
below provides information about actual account values and actual expenses. You may use the information in this section, together with the amount you invested, to estimate the expenses that you incurred over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first section under the heading entitled “Expenses Paid During Period” to estimate the expenses attributable to your investment during this period.
HYPOTHETICAL EXAMPLE FOR
COMPARISON PURPOSES
The second section of the table
below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. Thus, you should not use the hypothetical account values and expenses to estimate the actual ending account balance or your expenses for the period. Rather, these figures are required to be provided
to enable you to compare the ongoing costs of investing in the Fund with other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the
other funds.
Annual Shareholder Report
Please note that the
expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
| Beginning
Account Value
8/1/2012
| Ending
Account Value
1/31/2013
| Expenses Paid
During Period1
|
Actual:
|
|
|
|
Institutional Shares
| $1,000
| $995.20
| $3.36
|
Service Shares
| $1,000
| $995.30
| $4.16
|
Hypothetical (assuming a 5% return
before expenses):
|
|
|
|
Institutional Shares
| $1,000
| $1,021.77
| $3.40
|
Service Shares
| $1,000
| $1,020.96
| $4.22
|
1
| Expenses are equal to the Fund's annualized net expense ratios, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half-year period). The annualized net expense ratios
are as follows:
|
Institutional Shares
| 0.67%
|
Service Shares
| 0.83%
|
Annual Shareholder Report
Board of Trustees and Trust
Officers
The Board of Trustees is
responsible for managing the Trust's business affairs and for exercising all the Trust's powers except those reserved for the shareholders. The following tables give information about each Trustee and the senior
officers of the Fund. Where required, the tables separately list Trustees who are “interested persons” of the Fund (i.e., “Interested” Trustees) and those who are not (i.e., “
Independent” Trustees). Unless otherwise noted, the address of each person listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222. The address of all Independent Trustees listed is 4000
Ericsson Drive, Warrendale, PA 15086-7561; Attention: Mutual Fund Board. As of December 31, 2012, the Trust comprised one portfolio(s), and the Federated Fund Family consisted of 42 investment companies (comprising
137 portfolios). Unless otherwise noted, each Officer is elected annually. Unless otherwise noted, each Trustee oversees all portfolios in the Federated Fund Family and serves for an indefinite term. The Fund's
Statement of Additional Information includes additional information about Trust Trustees and is available, without charge and upon request, by calling 1-800-341-7400.
Interested TRUSTEES Background
Name
Birth Date
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years,
Other Directorships Held and Previous Position(s)
|
John F. Donahue*
Birth Date: July 28, 1924
Trustee
Began serving: December 1981
| Principal Occupations: Director or Trustee of the Federated Fund Family; Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund Family's Executive Committee.
Previous Positions: Chairman of the Federated Fund Family; Trustee, Federated Investment Management Company; Chairman and Director, Federated Investment Counseling.
|
J. Christopher Donahue*
Birth Date: April 11, 1949
President and Trustee
Began serving: July 1999
| Principal Occupations: Principal Executive Officer and President of the Federated Fund Family; Director or Trustee of some of the Funds in the Federated Fund Family; President, Chief Executive Officer and
Director, Federated Investors, Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; Chairman and Director, Federated Global Investment Management Corp.;
Chairman, Federated Equity Management Company of Pennsylvania and Passport Research, Ltd. (investment advisory subsidiary of Federated); Trustee, Federated Shareholder Services Company; Director, Federated Services
Company.
Previous Positions: President, Federated Investment Counseling; President and Chief Executive Officer, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport
Research, Ltd.
|
*
| Family relationships and reasons for “interested” status: John F. Donahue is the father of J. Christopher Donahue; both are “interested” due to their beneficial ownership of shares of
Federated Investors, Inc. and the positions they hold with Federated and its subsidiaries.
|
Annual Shareholder Report
INDEPENDENT TRUSTEES
Background
Name
Birth Date
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
|
John F. Cunningham
Birth Date: March 5, 1943
Trustee
Began serving: January 1999
| Principal Occupation: Director or Trustee of the Federated Fund Family.
Other Directorships Held: Chairman, President and Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston College.
Previous Positions: President and Chief Operating Officer, Wang Laboratories; Chairman of the Board and Chief Executive Officer, Computer Consoles, Inc.; Director, First National Bank of Boston; Director,
EMC Corporation (computer storage systems); Director, Apollo Computer, Inc.; Director, Redgate Communications.
Qualifications: Business management and director experience.
|
Maureen Lally-Green
Birth Date: July 5, 1949
Trustee
Began serving: August 2009
| Principal Occupations: Director or Trustee of the Federated Fund Family; Director, Office of Church Relations, and Associate General Secretary, Diocese of Pittsburgh; Adjunct Professor of Law, Duquesne
University School of Law.
Other Directorships Held: Director, Auberle; Member, Pennsylvania State Board of Education; Director, Saint Vincent College; Director, Ireland Institute of Pittsburgh; Chair and Director, UPMC Mercy Hospital;
Regent, St. Vincent Seminary; Director, Epilepsy Foundation of Western and Central Pennsylvania; Director, Saint Thomas More Society, Allegheny County; Director, Our Campaign for the Church Alive, Inc.
Previous Position: Pennsylvania Superior Court Judge.
Qualifications: Legal and director experience.
|
Peter E. Madden
Birth Date: March 16, 1942
Trustee
Began serving: August 1991
| Principal Occupation: Director or Trustee, and Chairman of the Board of Directors or Trustees, of the Federated Fund Family.
Previous Positions: Representative, Commonwealth of Massachusetts General Court; President, Chief Operating Officer and Director, State Street Bank and Trust Company and State Street Corporation (retired);
Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange.
Qualifications: Business management, mutual fund services and director experience.
|
Annual Shareholder Report
Name
Birth Date
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years,
Other Directorships Held, Previous Position(s) and Qualifications
|
Charles F. Mansfield, Jr.
Birth Date: April 10, 1945
Trustee
Began serving: January 1999
| Principal Occupations: Director or Trustee of the Federated Fund Family; 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, HSBC Bank USA (formerly Marine Midland Bank); Vice President, Citibank; Assistant Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra University; Executive Vice
President, DVC Group, Inc. (marketing, communications and technology).
Qualifications: Banking, business management, education and director experience.
|
Thomas M. O'Neill
Birth Date: June 14, 1951
Trustee
Began serving: October 2006
| Principal Occupations: Director or Trustee, Vice Chairman of the Audit Committee of the Federated Fund Family; Sole Proprietor, Navigator Management Company (investment and strategic consulting).
Other Directorships Held: Board of Overseers, Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College; Board of Directors, Medicines for Humanity; Board of Directors, The Golisano
Children's Museum of Naples, Florida.
Previous Positions: Chief Executive Officer and President, Managing Director and Chief Investment Officer, Fleet Investment Advisors; President and Chief Executive Officer, Aeltus Investment Management, Inc.;
General Partner, Hellman, Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam Companies, Boston, MA; Credit Analyst and Lending Officer, Fleet Bank; Director and Consultant, EZE Castle Software
(investment order management software); Director, Midway Pacific (lumber).
Qualifications: Business management, mutual fund, director and investment experience.
|
John S. Walsh
Birth Date: November 28, 1957
Trustee
Began serving: January 1999
| Principal Occupations: Director or Trustee, Chairman of the Audit Committee of the Federated Fund Family; President and Director, Heat Wagon, Inc. (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.
Previous Position: Vice President, Walsh & Kelly, Inc.
Qualifications: Business management and director experience.
|
Annual Shareholder Report
OFFICERS
Name
Birth Date
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years
and Previous Position(s)
|
John W. McGonigle
Birth Date: October 26, 1938
EXECUTIVE VICE PRESIDENT AND SECRETARY
Officer since: December 1981
| Principal Occupations: Executive Vice President and Secretary of the Federated Fund Family; Vice Chairman, Executive Vice President, Secretary and Director, Federated Investors, Inc.
Previous Positions: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated
Securities Corp.
|
Richard A. Novak
Birth Date: December 25, 1963
TREASURER
Officer since: January 2006
| Principal Occupations: Principal Financial Officer and Treasurer of the Federated Fund Family; Senior Vice President, Federated Administrative Services; Financial and Operations Principal for Federated
Securities Corp., Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
Previous Positions: Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company; held various financial management positions within The Mercy Hospital of Pittsburgh;
Auditor, Arthur Andersen & Co.
|
Richard B. Fisher
Birth Date: May 17, 1923
VICE PRESIDENT
Officer since: December 1981
| Principal Occupations: Vice Chairman or Vice President of some of the Funds in the Federated Fund Family; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Previous Positions: President and Director or Trustee of some of the Funds in the Federated Fund Family; Executive Vice President, Federated Investors, Inc.; Director and Chief Executive Officer, Federated
Securities Corp.
|
Peter J. Germain
Birth Date: September 3, 1959
CHIEF LEGAL OFFICER
Officer since: January 2005
| Principal Occupations: Mr. Germain is Chief Legal Officer of the Federated Fund Family. He is General Counsel and Vice President, Federated Investors, Inc.; President, Federated Administrative Services and
Federated Administrative Services, Inc.; Vice President, Federated Securities Corp.; Secretary, Federated Private Asset Management, Inc.; and Secretary, Retirement Plan Service Company of America. Mr. Germain joined
Federated in 1984 and is a member of the Pennsylvania Bar Association.
Previous Positions: Deputy General Counsel, Special Counsel, Managing Director of Mutual Fund Services, Federated Investors, Inc.; Senior Vice President, Federated Services Company; and Senior Corporate
Counsel, Federated Investors, Inc.
|
Brian P. Bouda
Birth Date: February 28, 1947
CHIEF COMPLIANCE OFFICER AND SENIOR VICE PRESIDENT
Officer since: August 2004
| Principal Occupations: Senior Vice President and Chief Compliance Officer of the Federated Fund Family; Vice President and Chief Compliance Officer of Federated Investors, Inc. and Chief Compliance Officer of
its subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
Previous Positions: Served in Senior Management positions with a large regional banking organization.
|
Annual Shareholder Report
Name
Birth Date
Positions Held with Fund
Date Service Began
| Principal Occupation(s) for Past Five Years
and Previous Position(s)
|
Robert J. Ostrowski
Birth Date: April 26, 1963
Chief Investment Officer
Officer since: May 2004
| Principal Occupations: Robert J. Ostrowski joined Federated in 1987 as an Investment Analyst and became a Portfolio Manager in 1990. He was named Chief Investment Officer of taxable fixed-income products in 2004
and also serves as a Senior Portfolio Manager. Mr. Ostrowski became an Executive Vice President of the Fund's Adviser in 2009 and served as a Senior Vice President of the Fund's Adviser from 1997 to 2009. Mr.
Ostrowski has received the Chartered Financial Analyst designation. He received his M.S. in Industrial Administration from Carnegie Mellon University.
|
Todd A. Abraham
Birth Date: February 10, 1966
VICE PRESIDENT
Officer since: November 1999
Portfolio Manager since: March 1999
| Principal Occupations: Todd A. Abraham has been the Fund's Portfolio Manager since March 1999. He is Vice President of the Trust with respect to the Fund. Mr. Abraham has been a Portfolio Manager since 1995, a
Vice President of the Fund's Adviser since 1997 and a Senior Vice President of the Fund's Adviser beginning 2007. Mr. Abraham joined Federated in 1993 as an Investment Analyst and served as Assistant Vice President of
the Fund's Adviser from 1995 to 1997. Mr. Abraham served as a Portfolio Analyst at Ryland Mortgage Co. from 1992-1993. Mr. Abraham has received the Chartered Financial Analyst designation and holds an M.B.A. in
Finance from Loyola College.
|
Liam O'Connell
Birth Date: October 17, 1976
Vice President
Officer since: June 2012
Portfolio Manager since: March 2011
| Principal Occupations: Liam O'Connell has been the Fund's Portfolio Manager since March 2011 . He is Vice President of the Trust with respect to the Fund. Mr. O'Connell joined Federated in September 2003 as an
Investment Analyst of the Fund's Adviser. He was named an Assistant Vice President of the Adviser in January 2005. From 2001 to 2003, Mr. O'Connell attended MIT's Sloan School of Management, receiving his M.B.A. Mr.
O'Connell served as an engineer with the Naval Surface Warfare Center from 1998 to 2001. Mr. O'Connell also holds a B.S. in Naval Architecture and Marine Engineering from the Webb Institute of Naval Architecture and
an M.S. from the Johns Hopkins University.
|
Annual Shareholder Report
Evaluation and Approval of
Advisory
Contract–May 2012
Federated GNMA Trust (the “
Fund”)
Following a review and
recommendation of approval by the Fund's independent trustees, the Fund's Board reviewed and approved at its May 2012 meetings the Fund's investment advisory contract for an additional one-year term. The Board's
decision regarding the contract reflects the exercise of its business judgment on whether to continue the existing arrangements.
In this connection,
the Federated Funds' Board had previously appointed a Senior Officer, whose duties include specified responsibilities relating to the process by which advisory fees are to be charged to a Federated fund. The Senior
Officer has the authority to retain consultants, experts, or staff as may be reasonably necessary to assist in the performance of his duties, reports directly to the Board, and may be terminated only with the approval
of a majority of the independent members of the Board. The Senior Officer prepared and furnished to the Board an independent, written evaluation that covered topics discussed below (the “Evaluation”). The
Board considered that Evaluation, along with other information, in deciding to approve the advisory contract.
The Board is also
familiar with and considered judicial decisions concerning allegedly excessive investment advisory fees, which have indicated that the following factors may be relevant to an Adviser's fiduciary duty with respect to
its receipt of compensation from a fund: the nature and quality of the services provided by the Adviser to a fund and its shareholders, including the performance and expenses of the fund and of comparable funds; the
Adviser's cost of providing the services, including the profitability to the Adviser of providing advisory services to a fund; the extent to which the Adviser may realize “economies of scale” as a fund
grows larger and, if such economies exist, whether they have been shared with a fund and its shareholders; any “fall-out financial benefits” that accrue to the Adviser because of its relationship with a
fund (including research services received from brokers that execute fund trades and any fees paid to affiliates of the Adviser for services rendered to a fund); comparative fee structures, including a comparison of
fees paid to the Adviser with those paid by similar funds; and the extent to which the Board members are fully informed about all facts the Board deems relevant to its consideration of the Adviser's services and fees.
Consistent with these judicial decisions, the Board also considered management fees (including any components thereof) charged to institutional and other clients of the Adviser for what might be viewed as like
services. The Board was aware of these factors and was guided by them in its review of the Fund's advisory contract to the extent it considered them to be appropriate and relevant, as discussed further below.
Annual Shareholder Report
The Board considered
and weighed these circumstances in light of its substantial accumulated experience in governing the Fund and working with Federated on matters relating to the Federated funds, and was assisted in its deliberations by
independent legal counsel. Throughout the year, and in connection with its May meetings, the Board requested and received substantial and detailed information about the Fund and the Federated organization that was in
addition to the extensive materials that comprise and accompany the Senior Officer's Evaluation. Federated provided much of this information at each regular meeting of the Board, and furnished additional substantial
information in connection with the May meeting at which the Board's formal review of the advisory contract occurred. At this May meeting, senior management of the Adviser also met with the independent trustees and
their counsel to discuss the materials presented and any other matters thought relevant by the Adviser or the trustees. Between regularly scheduled meetings, the Board also received information on particular matters
as the need arose. Thus, the Board's consideration of the advisory contract included review of the Senior Officer's Evaluation, accompanying data and additional information covering such matters as: the Adviser's
investment philosophy, revenue, profitability, personnel and processes; investment and operating strategies; the Fund's short- and long-term performance (in absolute terms, both on a gross basis and net of expenses,
as well as in relationship to its particular investment program and certain competitor or “peer group” funds and/or other benchmarks, as appropriate), and comments on the reasons for performance; the
Fund's investment objectives; the Fund's expenses (including the advisory fee itself and the overall expense structure of the Fund, both in absolute terms and relative to similar and/or competing funds, with due
regard for contractual or voluntary expense limitations); the use and allocation of brokerage commissions derived from trading the Fund's portfolio securities (if any); and the nature, quality and extent of the
advisory and other services provided to the Fund by the Adviser and its affiliates. The Board also considered the preferences and expectations of Fund shareholders; the entrepreneurial risk assumed by the Adviser in
sponsoring the funds; the continuing state of competition in the mutual fund industry and market practices; the range of comparable fees for similar funds in the mutual fund industry; the Fund's relationship to the
Federated family of funds which include a comprehensive array of funds with different investment objectives, policies and strategies which are available for exchange without the incurrence of additional sales charges;
compliance and audit reports concerning the Federated funds and the Federated companies that service them (including communications from regulatory agencies), as well as Federated's responses to any issues raised
therein; and relevant developments in the mutual fund industry and how the Federated funds and/or Federated are responding to them. The Board's evaluation process is evolutionary. The criteria considered and the
emphasis placed on relevant criteria change in recognition of changing circumstances in the mutual fund marketplace.
Annual Shareholder Report
While mindful that
courts have cautioned against giving such comparisons too much weight, the Board has found the use of comparisons of the Fund's fees and expenses to other mutual funds with comparable investment programs to be
relevant, given the high degree of competition in the mutual fund business. The Board focused on comparisons with other similar mutual funds more heavily than non-mutual fund products or services because it is
believed that they are more relevant. For example, other mutual funds are the products most like the Fund, they are readily available to Fund shareholders as alternative investment vehicles, and they are the type of
investment vehicle in fact chosen and maintained by the Fund's investors. The range of their fees and expenses therefore appears to be a generally reliable indication of what consumers have found to be reasonable in
the precise marketplace in which the Fund competes. In this regard, the Senior Officer has reviewed Federated's fees for providing advisory services to products outside the Federated family of funds (e.g.,
institutional and separate accounts). He concluded that mutual funds and institutional accounts are inherently different products. Those differences include, but are not limited to, different types of targeted
investors; being subject to different laws and regulations; different legal structures; different average account sizes; different associated costs; different portfolio management techniques made necessary by
different cash flows; and portfolio manager time spent in review of securities pricing. The Senior Officer did not consider these fee schedules to be determinative in judging the appropriateness of mutual fund
advisory contracts.
The Fund's ability
to deliver competitive performance when compared to its peer group was also deemed to be relevant by the Board as a useful indicator of how the Adviser is executing the Fund's investment program, which in turn
assisted the Board in reaching a conclusion that the nature, extent, and quality of the Adviser's investment management services were such as to warrant continuation of the advisory contract.
The Senior Officer
reviewed information compiled by Federated, using data supplied by independent fund ranking organizations, regarding the performance of, and fees charged by, other mutual funds, noting his view that comparisons to
fund peer groups are relevant in judging the reasonableness of proposed fees.
The Fund's
performance fell below the median of the relevant peer group for the one-year, three-year and five-year periods covered by the Evaluation. The Board discussed the Fund's performance with the Adviser and recognized the
efforts being undertaken by the Adviser. The Board will continue to monitor these efforts and the performance of the Fund.
The Board also
received financial information about Federated, including information regarding the compensation and benefits Federated derived from its relationships with the Federated funds. This information covered not only the
fees under the advisory contracts, but also fees received by Federated's subsidiaries for providing other services to the Federated funds under separate contracts (e.g., for serving as the Federated funds'
administrator). The
Annual Shareholder Report
information also detailed any indirect benefit
Federated may derive from its receipt of research services from brokers who execute Federated fund trades. In addition, the Board considered the fact that, in order for a fund to be competitive in the marketplace,
Federated and its affiliates frequently waived fees and/or reimbursed expenses and have disclosed to fund investors and/or indicated to the Board their intention to do so in the future, where appropriate. Moreover,
the Board receives regular reporting as to the institution or elimination of these voluntary waivers.
Federated furnished
information, requested by the Senior Officer, that reported revenues on a fund-by-fund basis and made estimates of the allocation of expenses on a fund-by-fund basis, using allocation methodologies specified by the
Senior Officer. The Senior Officer noted that, although they may apply consistent allocation processes, the inherent difficulties in allocating costs (and the unavoidable arbitrary aspects of that exercise) and the
lack of consensus on how to allocate those costs may render such allocation information unreliable. The allocation information was considered in the analysis by the Board but was determined to be of limited use.
The Board and the
Senior Officer also reviewed information compiled by Federated comparing profitability information for Federated to other publicly held fund management companies. In this regard, the Senior Officer noted the limited
availability of such information, but nonetheless concluded that Federated's profit margins did not appear to be excessive.
The Senior Officer's
Evaluation also discussed the notion of possible realization of “economies of scale” as a fund grows larger. The Board considered in this regard that the Adviser has made significant and long-term
investments in areas that support all of the Federated funds, such as personnel and processes for the portfolio management, shareholder services, compliance, internal audit, and risk management functions; and systems
technology; and that the benefits of these efforts (as well as any economies, should they exist) were likely to be enjoyed by the fund complex as a whole. Finally, the Board also noted the absence of any applicable
regulatory or industry guidelines on this subject, which (as discussed in the Senior Officer's Evaluation) is compounded by the lack of any common industry practice or general pattern with respect to structuring fund
advisory fees with “breakpoints” that serve to reduce the fee as the fund attains a certain size. The Senior Officer did not recommend institution of breakpoints in pricing Federated's fund advisory
services at this time.
It was noted in the
materials for the Board meeting that for the period covered by the Evaluation, the Fund's investment advisory fee, after waivers and expense reimbursements, if any, was below the median of the relevant peer group. The
Board reviewed the fees and other expenses of the Fund with the Adviser and was satisfied that the overall expense structure of the Fund remained competitive.
Annual Shareholder Report
The Senior Officer
noted that, considering the totality of the circumstances, and all of the factors referenced within his Evaluation, he had concluded that, subject to comments and recommendations made within his Evaluation, his
observations and the information accompanying the Evaluation supported a finding by the Board that the management fees for each of the funds was reasonable and that Federated appeared to provide appropriate advisory
and administrative services to the Fund for the fees paid. Under these circumstances, no changes were recommended to, and no objection was raised to, the continuation of the Fund's advisory contract.
In its decision to
continue an existing investment advisory contract, the Board was mindful of the potential disruptions of the Fund's operations and various risks, uncertainties and other effects that could occur as a result of a
decision to terminate or not renew an advisory contract. In particular, the Board recognized that many shareholders have invested in the Fund on the strength of the Adviser's industry standing and reputation and with
the expectation that the Adviser will have a continuing role in providing advisory services to the Fund. Thus, the Board's approval of the advisory contract reflected the fact that it is the shareholders who have
effectively selected the Adviser by virtue of having invested in the Fund. The Board concluded that, in light of the factors discussed above, including the nature, quality and scope of the services provided to the
Fund by the Adviser and its affiliates, continuation of the advisory contract was appropriate.
The Board based its
decision to approve the advisory contract on the totality of the circumstances and relevant factors and with a view to past and future long-term considerations. Not all of the factors and considerations identified
above were necessarily relevant to the Fund, nor did the Board consider any one of them to be determinative. With respect to the factors that were relevant, the Board's decision to approve the contract reflects its
determination that Federated's performance and actions provided a satisfactory basis to support the decision to continue the existing arrangements.
Annual Shareholder Report
Voting Proxies on Fund Portfolio
Securities
A description of the policies and
procedures that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund's portfolio is available, without charge and upon request, by calling 1-800-341-7400. A report on “
Form N-PX” of how the Fund voted any such proxies during the most recent 12-month period ended June 30 is available from Federated's website at FederatedInvestors.com. To access this information from the home
page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the Fund Overview page. On the Fund Overview page, select the “Literature and
Prospectuses” tab. At the bottom of that page, select “Proxy Voting Record Report (Form N-PX).” Form N-PX filings are also available at the SEC's website at www.sec.gov.
Quarterly Portfolio Schedule
The Fund files with the SEC a
complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on “Form N-Q.” These filings are available on the SEC's website at www.sec.gov and may be
reviewed and copied at the SEC's Public Reference Room in Washington, DC. (Call 1-800-SEC-0330 for information on the operation of the Public Reference Room.) You may also access this information from the “
Products” section of Federated's website at FederatedInvestors.com. From the home page, select “All” under “Asset Classes.” Select a fund name and share class, if applicable, to go to the
Fund Overview page. On the Fund Overview page, select the “Literature and Prospectuses” tab. At the bottom of that page, select “Form N-Q.”
Annual Shareholder Report
Mutual funds are not bank deposits
or obligations, are not guaranteed by any bank and are not insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other government agency. Investment
in mutual funds involves investment risk, including the possible loss of principal.
This Report is authorized for
distribution to prospective investors only when preceded or accompanied by the Fund's Prospectus, which contains facts concerning its objective and policies, management fees, expenses and other information.
Federated GNMA Trust
Federated Investors Funds
4000 Ericsson Drive
Warrendale, PA 15086-7561
Contact us at FederatedInvestors.com
or call 1-800-341-7400.
Federated Securities Corp.,
Distributor
CUSIP 314184102
CUSIP 314184201
30068 (3/13)
Federated is a registered trademark
of Federated Investors, Inc.
2013 ©Federated Investors, Inc.
Item 2. Code of Ethics
(a) As of the end of the period covered by this report,
the registrant has adopted a code of ethics (the "Section 406 Standards for Investment Companies - Ethical Standards for Principal
Executive and Financial Officers") that applies to the registrant's Principal Executive Officer and Principal Financial Officer;
the registrant's Principal Financial Officer also serves as the Principal Accounting Officer.
(c) Not Applicable
(d) Not Applicable
(e) Not Applicable
(f)(3) The registrant hereby undertakes to provide
any person, without charge, upon request, a copy of the code of ethics. To request a copy of the code of ethics, contact the registrant
at 1-800-341-7400, and ask for a copy of the Section 406 Standards for Investment Companies - Ethical Standards for Principal Executive
and Financial Officers.
Item 3. Audit Committee Financial Expert
The
registrant's Board has determined that each of the following members of the Board's Audit Committee is an “audit committee
financial expert,” and is "independent," for purposes of this Item: Charles F. Mansfield, Jr., Thomas
M. O'Neill and John S. Walsh.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees billed to the registrant
for the two most recent fiscal years:
Fiscal year ended 2013 - $25,450
Fiscal year ended 2012 - $24,450
(b) Audit-Related Fees billed to the registrant
for the two most recent fiscal years:
Fiscal year ended 2013 - $36
Fiscal year ended 2012 - $0
Travel to Audit Committee Meeting.
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(c) Tax Fees billed to the registrant for the
two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(d) All Other Fees billed to the registrant for
the two most recent fiscal years:
Fiscal year ended 2013 - $0
Fiscal year ended 2012 - $0
Amount requiring approval of the registrant’s
audit committee pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, $0 and $0 respectively.
(e)(1) Audit Committee Policies regarding Pre-approval
of Services.
The Audit Committee is required
to pre-approve audit and non-audit services performed by the independent auditor in order to assure that the provision of such
services do not impair the auditor’s independence. Unless a type of service to be provided by the independent auditor has
received general pre-approval, it will require specific pre-approval by the Audit Committee. Any proposed services exceeding pre-approved
cost levels will require specific pre-approval by the Audit Committee.
Certain services have the general
pre-approval of the Audit Committee. The term of the general pre-approval is 12 months from the date of pre-approval, unless the
Audit Committee specifically provides for a different period. The Audit Committee will annually review the services that may be
provided by the independent auditor without obtaining specific pre-approval from the Audit Committee and may grant general pre-approval
for such services. The Audit Committee will revise the list of general pre-approved services from time to time, based on subsequent
determinations. The Audit Committee will not delegate its responsibilities to pre-approve services performed by the independent
auditor to management.
The Audit Committee has delegated
pre-approval authority to its Chairman. The Chairman will report any pre-approval decisions to the Audit Committee at its next
scheduled meeting. The Committee will designate another member with such pre-approval authority when the Chairman is unavailable.
AUDIT SERVICES
The annual Audit services engagement
terms and fees will be subject to the specific pre-approval of the Audit Committee. The Audit Committee must approve any changes
in terms, conditions and fees resulting from changes in audit scope, registered investment company (RIC) structure or other matters.
In addition to the annual Audit
services engagement specifically approved by the Audit Committee, the Audit Committee may grant general pre-approval for other
Audit Services, which are those services that only the independent auditor reasonably can provide. The Audit Committee has pre-approved
certain Audit services, all other Audit services must be specifically pre-approved by the Audit Committee.
AUDIT-RELATED SERVICES
Audit-related services are assurance
and related services that are reasonably related to the performance of the audit or review of the Company’s financial statements
or that are traditionally performed by the independent auditor. The Audit Committee believes that the provision of Audit-related
services does not impair the independence of the auditor, and has pre-approved certain Audit-related services, all other Audit-related
services must be specifically pre-approved by the Audit Committee.
TAX SERVICES
The Audit Committee believes that
the independent auditor can provide Tax services to the Company such as tax compliance, tax planning and tax advice without impairing
the auditor’s independence. However, the Audit Committee will not permit the retention of the independent auditor in connection
with a transaction initially recommended by the independent auditor, the purpose of which may be tax avoidance and the tax treatment
of which may not be supported in the Internal Revenue Code and related regulations. The Audit Committee has pre-approved certain
Tax services, all Tax services involving large and complex transactions must be specifically pre-approved by the Audit Committee.
ALL OTHER SERVICES
With respect to the provision
of services other than audit, review or attest services the pre-approval requirement is waived if:
| (1) | The aggregate amount of all such services provided constitutes no
more than five percent of the total amount of revenues paid by the registrant, the registrant’s adviser (not including any
sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser),
and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to
the registrant to its accountant during the fiscal year in which the services are provided; |
| (2) | Such services were not recognized by the registrant, the registrant’s
adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant at the time of the engagement to be non-audit services; and |
| (3) | Such services are promptly brought to the attention of the Audit Committee
of the issuer and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee
who are members of the board of directors to whom authority to grant such approvals has been delegated by the Audit Committee. |
The Audit Committee may grant
general pre-approval to those permissible non-audit services classified as All Other services that it believes are routine and
recurring services, and would not impair the independence of the auditor.
The SEC’s rules and relevant
guidance should be consulted to determine the precise definitions of prohibited non-audit services and the applicability of exceptions
to certain of the prohibitions.
PRE-APPROVAL FEE LEVELS
Pre-approval fee levels for all
services to be provided by the independent auditor will be established annually by the Audit Committee. Any proposed services exceeding
these levels will require specific pre-approval by the Audit Committee.
PROCEDURES
Requests or applications to provide
services that require specific approval by the Audit Committee will be submitted to the Audit Committee by both the independent
auditor and the Principal Accounting Officer and/or Internal Auditor, and must include a joint statement as to whether, in their
view, the request or application is consistent with the SEC’s rules on auditor independence.
(e)(2) Percentage of services identified in items
4(b) through 4(d) that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation
S-X:
4(b)
Fiscal year ended 2013 – 0%
Fiscal year ended 2012 - 0%
Percentage of services provided to the registrants
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(c)
Fiscal year ended 2013
– 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrants
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X, 0% and 0% respectively.
4(d)
Fiscal year ended 2013
– 0%
Fiscal year ended 2012 – 0%
Percentage of services provided to the registrants
investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant that were approved by the registrants audit committee pursuant to paragraph (c)(7)(i)(C) of
Rule 2-01 of Regulation S-X, 0% and 0% respectively.
| (g) | Non-Audit Fees billed to the registrant, the registrant’s investment
adviser, and certain entities controlling, controlled by or under common control with the investment adviser: |
Fiscal year ended 2013
- $146,108
Fiscal year ended 2012 - $474,486
(h) The registrant’s Audit Committee has
considered that the provision of non-audit services that were rendered to the registrant’s adviser (not including any sub-adviser
whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity
controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal
accountant’s independence.
Item 5. Audit Committee of Listed Registrants
Not Applicable
Item 6. Schedule of Investments
(a) The registrant’s Schedule of Investments is included
as part of the Report to Stockholders filed under Item 1 of this form.
(b) Not Applicable; Fund had no divestments during the
reporting period covered since the previous Form N-CSR filing.
Item 7. Disclosure of
Proxy Voting Policies and Procedures for Closed-End Management Investment Companies
Item 8. Portfolio Managers
of Closed-End Management Investment Companies
Item 9. Purchases of Equity
Securities by Closed-End Management Investment Company and Affiliated Purchasers
Item 10. Submission of Matters to a Vote of Security
Holders
Not Applicable
Item 11. Controls and Procedures
(a) The registrant’s President and Treasurer have
concluded that the
registrant’s disclosure controls and procedures (as
defined in rule 30a-3(c) under the Act) are effective in design and operation and are sufficient to form the basis of the certifications
required by Rule 30a-(2) under the Act, based on their evaluation of these disclosure controls and procedures within 90 days of
the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant’s internal
control over financial reporting (as defined in rule 30a-3(d) under the Act) during the second fiscal quarter of the period covered
by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control
over financial reporting.
Item 12. Exhibits
(a)(1) Code of Ethics- Not Applicable to this Report.
(a)(2) Certifications of Principal Executive Officer and
Principal Financial Officer.
(a)(3) Not Applicable.
(b) Certifications pursuant to 18 U.S.C. Section 1350.
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant Federated GNMA Trust
By /S/ Richard A. Novak
Richard A. Novak, Principal Financial
Officer
Date March 21, 2013
Pursuant to the requirements of the Securities Exchange Act
of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
By /S/ J. Christopher Donahue
J. Christopher Donahue, Principal
Executive Officer
Date March 21, 2013
By /S/ Richard A. Novak
Richard A. Novak, Principal Financial
Officer
Date March 21, 2013