Money Market Obligations Trust May 20, 2005

497 1 forma.htm Money Market Obligations Trust May 20, 2005

Federated
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Liberty U.S. Government Money Market Trust

A Portfolio of Money Market Obligations Trust

PROSPECTUS

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May 2, 2005 (Revised May 20, 2005)

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CLASS C SHARES
CLASS F SHARES

A money market mutual fund seeking stability of principal and current income consistent with stability of principal by investing primarily in a portfolio of short-term U.S. Treasury and government agency securities.

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

Not FDIC Insured * May Lose Value * No Bank Guarantee

CONTENTS

Risk/Return Summary 1

What are the Fund's Fees and Expenses? 4

What are the Fund's Investment Strategies? 5

What are the Principal Securities in Which the Fund Invests? 6

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

What Do Shares Cost? 8

How is the Fund Sold? 10

How to Purchase Shares 11

How to Redeem and Exchange Shares 11

Account and Share Information 15

Who Manages the Fund? 17

Legal Proceedings 17

Financial Information 18

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund is a money market fund that seeks to maintain a stable net asset value (NAV) of $1.00 per Share. The Fund's investment objective is stability of principal and current income consistent with stability of principal. While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests primarily in a portfolio of short-term U.S. Treasury and government agency securities. These investments include repurchase agreements collateralized fully by U.S. Treasury and government agency securities. The Fund will have a dollar-weighted average portfolio maturity of 90 days or less.

The Fund intends to invest in the securities of U.S. government-sponsored entities (GSEs), including GSE securities that are not backed by the full faith and credit of the U.S. government, such as those issued by the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Federal Home Loan Bank System. These entities are, however, supported through federal subsidies, loans, or other benefits. The Fund may also invest in GSE securities that are supported by the full faith and credit of the U.S. government, such as those issued by the Government National Mortgage Association. Finally, the Fund may invest in a few GSE securities that have no explicit financial support, but which are regarded as having implied support because the federal government sponsors their activities. Such securities include those issued by the Farm Credit System and the Financing Corporation.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, even though the Fund is a money market fund that seeks to maintain a stable NAV, it is possible to lose money by investing in the Fund.

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

Risk/Return Bar Chart and Table

The total returns shown here are for Class A Shares which is another class of shares offered by Liberty U.S. Government Money Trust. Class A Shares are not offered in this prospectus for the Fund's Class C Shares and Class F Shares. The total returns for Class A Shares are disclosed here because Class C Shares and Class F Shares have only been offered since May 2, 2005. These total returns would be substantially similar to the annual returns for Class C Shares and Class F Shares over the same period and would differ only to the extent that the classes do not have the same expenses. It is anticipated that expenses of Class C Shares will exceed those of Class A Shares and Class F Shares will equal those of Class A Shares.

Historically, the Fund has maintained a constant $1.00 NAV per Share. The bar chart shows the variability of the Fund's Class A Shares total returns on a calendar year-end basis.

The Fund's Class A Shares are sold without a sales charge (load). The total returns displayed above are based upon NAV.

The Fund's Class A Shares total return for the three-month period from January 1, 2005 to March 31, 2005 was 0.38%.

Within the periods shown in the bar chart, the Fund's Class A Shares highest quarterly return was 1.44% (quarter ended December 30, 2000). Its lowest quarterly return was 0.04% (quarter ended June 30, 2004).

Average Annual Total Return Table

The following table represents the Fund's Class A Shares and Class B Shares Average Annual Total Returns for the calendar periods ended December 31, 2004.

Calendar Period	Class A	Class B¹
1 Year	0.48%	(5.46)%
5 Years	2.10%	1.04%
10 Years	3.32%	2.53%

The Fund's Class A Shares and Class B Shares 7-Day Net Yield as of December 31, 2004 were 1.31% and 0.41%. You may call the Fund at 1-800-341-7400 to acquire the current 7-Day Net Yield.

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

1 Class B Shares' Average Annual Total Return for the one-year and five year periods reflect deductions of the contingent deferred sales charges of 5.50% and 2.00%, respectively. For information concerning contingent deferred sales charges on Class C and Class F Shares see "Sales Charge When You Redeem."

What are the Fund's Fees and Expenses?

LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold Class C Shares and Class F Shares of the Fund.

Shareholder Fees	Class C	Class F
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)	None	None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	1.00%	1.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)	None	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None	None
Exchange Fee	None	None

Annual Fund Operating Expenses (Before Waivers)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²	0.50%	0.50%
Distribution (12b-1) Fee	0.75%	None
Shareholder Services Fee	0.25%	0.25%³
Other Expenses	0.44%	0.44%
Total Annual Fund Operating Expenses	1.94%	1.19%

1 The percentages shown are annualized based on expenses anticipated for the entire fiscal year ending July 31, 2005. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not contractually obligated to do so, the Adviser, distributor, and shareholder services provider expect to waive certain amounts. These are shown below along with the net expenses the Fund expects to pay for the fiscal year ending July 31, 2005.
Total Waivers of Fund Expenses	0.12%	0.27%
Total Expected Annualized Fund Operating Expenses (after waivers)	1.82%	0.92%
2 The maximum management fee is 0.500% of the first $500 million in average daily net assets, 0.475% of the second $500 million in average daily net assets, 0.450% of the third $500 million in average daily net assets, 0.425% of the fourth $500 million and 0.400% of average daily net assets in excess of $2 billion. The Adviser expects to voluntarily waive a portion of the management fee. The Adviser can terminate or adjust this voluntary waiver at any time. The management fee paid by the Fund (after the anticipated voluntary waiver) is expected to be 0.38% for the fiscal year ending July 31, 2005.
3 The shareholder services provider expects to voluntarily waive a portion of the shareholder services fee. The shareholder services provider can terminate or adjust this voluntary waiver at any time. The shareholder services fee paid by the Fund's Class F Shares (after the anticipated voluntary waiver) is expected to be 0.10%, for the fiscal year ending July 31, 2005.

EXAMPLE

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

The Example assumes that you invest $10,000 in the Fund's Class C Shares and Class F Shares for the time periods indicated and then redeem all of your Shares at the end of those periods. Expenses assuming no redemption are also shown. The Example also assumes that your investment has a 5% return each year and that the Fund's Class C Shares and Class F Shares operating expenses are before waivers as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

Share Class	1 Year	3 Years	5 Years	10 Years
Class C:
Expenses assuming redemption	$395	$703	$1,137	$2,342
Expenses assuming no redemption	$295	$703	$1,137	$2,342
Class F:
Expenses assuming redemption	$320	$574	$ 748	$1,529
Expenses assuming no redemption	$220	$474	$ 748	$1,529

What are the Fund's Investment Strategies?

The Fund invests primarily in a portfolio of U.S. Treasury and government agency securities maturing in 397 days or less. These investments include repurchase agreements collateralized fully by U.S. Treasury and government agency securities. The Fund will have a dollar-weighted average portfolio maturity of 90 days or less.

The Fund's investment adviser (Adviser), targets a dollar-weighted average portfolio maturity range based upon its interest rate outlook. The Adviser formulates its interest rate outlook by analyzing a variety of factors, such as:

current U.S. economic activity and the economic outlook;
current short-term interest rates;
the Federal Reserve Board's policies regarding short-term interest rates; and
the potential effects of foreign economic activity on U.S. short-term interest rates.

The Adviser generally shortens the portfolio's dollar-weighted average maturity when it expects interest rates to rise and extends the maturity when it expects interest rates to fall. This strategy seeks t o enhance the returns from favorable interest rate changes and to reduce the effect of unfavorable changes. The Adviser selects securities used to lengthen or shorten the portfolio's dollar-weighted average maturity by comparing the returns currently offered by different investments to their historical and expected returns.

Because the Fund refers to U.S. government investments in its name, it will notify shareholders at least 60 days in advance of any change in its investment policies that would enable the Fund to normally invest less than 80% of its assets in U.S. government investments.

What are the Principal Securities in Which the Fund Invests?

FIXED-INCOME SECURITIES

Fixed-income securities pay interest, dividends, or distributions at a specified rate. The rate may be a fixed percentage of the principal or adjusted periodically. In addition, the issuer of a fixed-income security must repay the principal amount of the security, normally within a specified time. The following describes the types of fixed-income securities in which the Fund may invest:

U.S. Treasury Securities

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

Agency Securities

Agency securities are issued or guaranteed by a federal agency or other government sponsored entity (GSE) acting under federal authority. Some GSE securities are supported by the full faith and credit of the United States. These include the Government National Mortgage Association, Small Business Administration, Farm Credit System Financial Assistance Corporation, Farmer's Home Administration, Federal Financing Bank, General Services Administration, Department of Housing and Urban Development, Export-Import Bank, Overseas Private Investment Corporation, and Washington Metropolitan Area Transit Authority Bonds.

Other GSE securities receive support through federal subsidies, loans, or other benefits. For example, the U.S. Treasury is authorized to purchase specified amounts of securities issued by (or otherwise make funds available to) the Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation, Federal National Mortgage Association, Student Loan Marketing Association, and Tennessee Valley Authority in support of such obligations.

A few GSE securities have no explicit financial support, but are regarded as having implied support because the federal government sponsors their activities. These include the Farm Credit System, Financing Corporation, and Resolution Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as Treasury securities.

A Fund treats mortgage-backed securities guaranteed by a GSE as if issued or guaranteed by a federal agency. Although such a guarantee protects against credit risks, it does not reduce market and prepayment risks.

REPURCHASE AGREEMENTS

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

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

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

Interest rate changes have a greater effect on the price of fixed-income securities with longer maturities. Money market funds try to minimize this risk by purchasing short-term securities.

CREDIT RISKS

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

What Do Shares Cost?

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The Fund's Class C Shares and Class F Shares are not available by direct purchase. They may be acquired exclusively through an exchange from the same share class of another Federated fund. You can exchange Shares into or out of the Fund or redeem Shares any day the New York Stock Exchange (NYSE) is open. The Fund attempts to stabilize the NAV of its Shares at $1.00 by valuing the portfolio securities using the amortized cost method. The Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The Fund does not charge a front-end sales charge.

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When the Fund receives your transaction request in proper form (as described in this prospectus), it is processed at the next determined NAV. NAV is determined at 3:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The following table summarizes the minimum required investment amount and the maximum sales charge, if any, that you will pay on an investment in the Fund. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions.

Shares Offered	Minimum Initial/Subsequent Investment Amounts¹	Maximum Sales Charges
Shares Offered	Minimum Initial/Subsequent Investment Amounts¹	Front-End Sales Charge	Contingent Deferred Sales Charge²
Class C	$1,500/$100	None	1.00%
Class F	$1,500/$100	None	1.00%

1 The minimum initial and subsequent investment amounts for retirement plans are $250 and $100, respectively. The minimum subsequent investment amounts for Systematic Investment Programs (SIPs) is $50. Investment professionals may impose higher or lower minimum investment requirements on their customers than those imposed by the Fund. Orders for $100,000 or more of Class B Shares or $1 million or more of Class C Shares will be invested in Class A Shares instead of Class B Shares or Class C Shares to maximize your return and minimize the sales charges and marketing fees. Accounts held in the name of an investment professional may be treated differently. After Class B Shares have been held for eight years from the date of purchase, they will automatically convert to Class A Shares on or about the last day of the following month. This conversion is a non-taxable event.

2 See "Sales Charge When You Redeem."

SALES CHARGE WHEN YOU REDEEM

Your redemption proceeds may be reduced by a sales charge, commonly referred to as a contingent deferred sales charge (CDSC).

To keep the sales charge as low as possible, the Fund redeems your Shares in this order:

Shares that are not subject to a CDSC; and
Shares held the longest. (To determine the number of years your Shares have been held, include the time you held shares of other Federated funds that have been exchanged for Shares of this Fund.)

The CDSC is then calculated using the Share price at the time of purchase or redemption, whichever is lower.

Class C Shares:
You will pay a 1% CDSC if you redeem Shares within 12 months of the purchase date.
Class F Shares:
Purchase Amount	Shares Held	CDSC
Up to $2 million	4 years or less	1.00%
$2 - but less than $5 million	2 years or less	0.50%
$5 million or more	1 year or less	0.25%

If your investment qualifies for a reduction or elimination of the CDSC, you or your investment professional must notify the Transfer Agent at the time of redemption. If the Transfer Agent is not notified, the CDSC will apply.

Contingent upon notification to the Transfer Agent, you will not be charged a CDSC when redeeming Shares:

following the death of the last surviving shareholder on the account or your post-purchase disability, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986. (The beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder on the account.);
representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70-1/2;
purchased within 120 days of a previous redemption of Shares, to the extent that the value of the Shares purchased was equal to or less than the value of the previous redemption;
purchased by Trustees and employees of the Fund, the Adviser, the Distributor and their affiliates, by employees of an investment professional that sells Shares according to a sales agreement with the Distributor, by the immediate family members of the above persons, and by trusts, pension, or profit-sharing plans for the above persons;
purchased through an investment professional that did not receive an advance commission on the purchase;
purchased with reinvested dividends or capital gains;
redeemed by the Fund when it closes an account for not meeting the minimum balance requirements;
purchased pursuant to the exchange privilege if the Shares were held for the applicable CDSC holding period. (The holding period on the shares purchased in the exchange will include the holding period of the shares sold in the exchange.); and

Class F Shares only

representing a total or partial distribution from a qualified plan, which does not include account transfers, rollovers, or redemptions for the purpose of reinvestment. For these purposes, qualified plan does not include an Individual Retirement Account, Keogh Plan, or custodial account following retirement.

How is the Fund Sold?

The Fund offers four Share classes: Class A Shares, Class B Shares, Class C Shares, and Class F Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Class C Shares and Class F Shares. All Share classes have different expenses which affect their performance. Contact your investment professional or call 1-800-341-7400 for more information concerning the other classes.

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

When the Distributor receives marketing fees and sales charges, it may pay some or all of them to investment professionals. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

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

SERVICE FEES

The Fund may pay fees (Service Fees) to financial institutions or to Federated Shareholder Services Company (FSSC), a subsidiary of Federated, for providing services to shareholders and maintaining shareholder accounts. Under certain agreements, rather than paying financial institutions directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial institutions.

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial institutions that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial institution or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Adviser). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund's prospectus because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial institution sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial institution. These payments may be in addition to payments made by the Fund to the financial institution under a Rule 12b-1 Plan and/or Service Fees arrangement. In connection with these payments, the financial institution may elevate the prominence or profile of the Fund and/or other Federated funds within the financial institution's organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial institution's organization. You can ask your financial institution for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

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The Fund's Class C Shares and Class F Shares are not available by direct purchase. They may be acquired exclusively through an exchange from the same share class of another Federated fund. You must meet the minimum initial investment requirement for purchasing Fund Shares and both accounts must have identical registrations. For information on how to purchase Class C or Class F Shares of the Fund by exchanging shares of the same class of another Federated fund, please see the "How to Redeem and Exchange Shares" section of the other Federated fund's prospectus.

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How to Redeem and Exchange Shares

You should redeem or exchange Shares:

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through an investment professional if you acquired your Fund Shares through an exchange of shares purchased through an investment professional; or

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directly from the Fund if you acquired your Fund Shares through an exchange of shares purchased directly from another Federated fund.

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THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional. Investment professionals are responsible for promptly submitting redemption or exchange requests to the Fund by electronic means permitted by the Fund, or according to the instructions in the sections "By Telephone" or "By Mail" below.

If your investment professional submits your redemption or exchange request electronically, your request will be processed and your proceeds will be paid pursuant to operating procedures established by the Fund. If your investment professional submits your redemption or exchange request by telephone or by mail, your request will be processed and your proceeds will be paid as outlined in the section "By Telephone" or the section "By Mail" below.

If you deal with an investment professional, you will have to follow the investment professional's procedures for transacting with the Fund. For more information about how to redeem or exchange Shares through your investment professional, you should contact your investment professional directly.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by calling the Fund at 1-800-341-7400. Your redemption or exchange request will be priced at the NAV next calculated after the request is received by the Fund. Receipt of a redemption or exchange order by an investment professional will be deemed receipt by the Fund to the extent that such investment professional has been duly authorized by the Fund to accept such orders.

If you call the Fund by 3:00 p.m. (Eastern time), and your redemption proceeds are wired to you the same day, you will not be entitled to that day's dividend.

If you call the Fund after 3:00 p.m. (Eastern time), you will be entitled to that day's dividend and your redemption proceeds will be sent to you the following business day.

By Mail

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

Your redemption or exchange request will be priced at the NAV next calculated after the Fund receives your written request in proper form. If your redemption proceeds are wired to you the same day your order is priced, you will not be entitled to that day's dividend. If a check for your redemption proceeds is mailed to you on the next business day after your request is priced, you will be entitled to dividends through the day on which the Fund priced your request.

Send requests by mail to:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

The Federated Funds
66 Brooks Drive
Braintree, MA 02184

All requests must include:

Fund Name and Share Class, account number, and account registration;
amount to be redeemed or exchanged;
signatures of all shareholders exactly as registered; and
if exchanging , the Fund Name and Share Class, account number, and account registration into which you are exchanging.

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

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program if:

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days;
a redemption is payable to someone other than the shareholder(s) of record; or
if exchanging (transferring) into another fund with a different shareholder registration.

A Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion signature guarantee from a bank or trust company, savings association, credit union or broker, dealer, or securities exchange member. A notary public cannot provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS

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

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets.

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

REDEMPTIONS FROM RETIREMENT ACCOUNTS

In the absence of your specific instructions, 10% of the value of your redemption from a retirement account in the Fund may be withheld for taxes. This withholding only applies to certain types of retirement accounts.

EXCHANGE PRIVILEGE

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

ensure that the account registrations are identical;
meet any minimum initial investment requirements; and
receive a prospectus for the fund into which you wish to exchange.

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

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund's frequent trading policies. See "Account and Share Information - Frequent Trading Policies."

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

You may automatically redeem or exchange Shares in a minimum amount of $100 on a regular basis. Complete the appropriate section of the New Account Form or an Account Service Options Form or contact your investment professional or the Fund. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Payments should not be considered yield or income.

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

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

Account and Share Information

ACCOUNT ACTIVITY

You will receive periodic statements reporting all account activity, including systematic transactions, dividends, and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares any dividends daily and pays them monthly to shareholders.

The Fund does not expect to realize any capital gains or losses. If capital gains or losses were to occur, they could result in an increase or decrease in dividends. The Fund pays any capital gains at least annually. Your dividends and capital gains distributions will be automatically reinvested in additional Shares without a sales charge, unless you elect cash payments.

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

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

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

FREQUENT TRADING POLICIES

Given the short-term nature of the Fund's investments and its use of the amortized cost method for calculating the NAV of Fund Shares, the Fund does not anticipate that in the normal case frequent or short-term trading into and out of the Fund will have significant adverse consequences for the Fund and its shareholders. For this reason and because the Fund is intended to be used as a liquid short-term investment, the Fund's Board has not adopted policies or procedures to discourage frequent or short-term trading of the Fund's Shares. However, the Fund may limit or terminate the availability of purchases or exchanges to a shareholder and may bar the shareholder from purchasing shares of other Federated funds if the Fund's management or Adviser determines from the amount, frequency, or pattern of purchases and redemptions or exchanges that the shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund's portfolio holdings is available in the "Products" section of Federated's website at FederatedInvestors.com . A complete listing of the Fund's portfolio holdings as of the end of each month is posted on the website 15 days (or the next business day) after the end of the month and remains posted until replaced by the information for the succeeding month. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include percentage breakdowns of the portfolio by credit quality tier, effective maturity range, and type of security.

To access this information from the "Products" section of the website, click on "Portfolio Holdings" and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the "Products" section, and from the Fund's page click on the "Portfolio Holdings" or "Composition" link. A user is required to register on the website the first time the user accesses this information.

You may also access from the "Products" section of the website portfolio information as of the end of the Fund's fiscal quarters. The Fund's annual and semi-annual reports, which contain complete listings of the Fund's portfolio holdings as of the end of the Fund's second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on "Prospectuses and Regulatory Reports" and selecting the link to the appropriate PDF. Complete listings of the Fund's portfolio holdings as of the end of the Fund's first and third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the "Products" section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC's website at www.sec.gov.

Who Manages the Fund?

The Board of Trustees (the "Board") governs the Fund. The Board selects and oversees the Adviser, Federated Investment Management Company. The Adviser manages the Fund's assets, including buying and selling portfolio securities. Federated Advisory Services Company (FASC), an affiliate of the Adviser, provides certain support services to the Adviser. The fee for these services is paid by the Adviser and not by the Fund. The address of the Adviser and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Adviser and other subsidiaries of Federated advise approximately 133 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $179 billion in assets as of December 31, 2004. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,385 employees. Federated provides investment products to more than 5,700 investment professionals and institutions.

ADVISORY FEES

The Adviser receives an annual investment advisory fee based on the Fund's average daily net assets as shown in the chart below. The Adviser may voluntarily waive a portion of its fee or reimburse the Fund for certain operating expenses.

Average Daily Net Assets		Fee as a Percentage of Average Daily Net Assets
First $500 million		0.500%
Second $500 million		0.475%
Third $500 million		0.450%
Fourth $500 million		0.425%
Over $2 billion		0.400%

Legal Proceedings

Like many other mutual fund companies, in September 2003, Federated Investors, Inc., the parent company of the Federated funds' advisers and distributor (collectively, "Federated"), received detailed requests for information on shareholder trading activities in the Federated funds (Funds) from the SEC, the New York State Attorney General, and the National Association of Securities Dealers. Since that time, Federated has received additional inquiries from regulatory authorities on these and related matters, and more such inquiries may be received in the future.

As a result of these inquiries, Federated and the Funds have conducted an internal investigation of the matters raised, which revealed instances in which a few investors were granted exceptions to Federated's internal procedures for limiting frequent transactions and that one of these investors made an additional investment in another Federated fund. The investigation has also identified inadequate procedures which permitted a limited number of investors (including several employees) to engage in undetected frequent trading activities and/or the placement and acceptance of orders to purchase shares of fluctuating net asset value funds after the funds' closing times. Federated has issued a series of press releases describing these matters in greater detail and emphasizing that it is committed to compensating the Funds for any detrimental impact these transactions may have had on them. In that regard, on February 3, 2004, Federated and the independent directors of the Funds announced the establishment by Federated of a restoration fund that is intended to cover any such detrimental impact. The press releases and related communications are available in the "About Us" section of Federated's website at FederatedInvestors.com , and any future press releases on this subject will also be posted there.

Shortly after Federated's first public announcement concerning the foregoing matters, and notwithstanding Federated's commitment to taking remedial actions, Federated and various Funds were named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders.

Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees, and seeking damages of unspecified amounts.

The Board of the Funds has retained the law firm of Dickstein Shapiro Morin & Oshinsky LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these recent lawsuits and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

Financial Information

FINANCIAL HIGHLIGHTS

The Fund's fiscal year end is July 31. As this is the Class' first fiscal year, financial information is not yet available.

A Statement of Additional Information (SAI) dated May 2, 2005, is incorporated by reference into this prospectus. Additional information about the Fund and its investments is contained in the Fund's SAI and Annual and Semi-Annual Reports to shareholders as they become available. The SAI contains a description of the Fund's policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your investment professional or the Fund at 1-800-341-7400.

These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated's website at FederatedInvestors.com.

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

Investment Company Act File No. 811-5950

Federated
World-Class Investment Manager

Liberty U.S. Government Money Market Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Cusip 608919817
Cusip 608919791

32423 (5/05)

Federated is a registered mark of Federated Investors, Inc. 2005 (c)Federated Investors, Inc.

LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST
A Portfolio of Money Market Obligations Trust

STATEMENT OF ADDITIONAL INFORMATION

SEPTEMBER 30, 2004 (REVISED MAY 2, 2005 AND REVISED MAY 20, 2005)

CLASS A SHARES
CLASS B SHARES
CLASS C SHARES
CLASS F SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this SAI in
conjunction with the prospectuses for Liberty U.S. Government Money Market Trust
(Fund), dated September 30, 2004 (Class A Shares and Class B Shares) and May 2, 2005
(Class C Shares and Class F Shares).

This SAI incorporates by reference the Fund's Annual Report. Obtain the prospectuses
or the Annual Report without charge by calling 1-800-341-7400.

CONTENTS

How is the Fund Organized?.............................1
--------------------------
Securities in Which the Fund Invests...................1
------------------------------------
What Do Shares Cost?...................................5
--------------------
How is the Fund Sold?...................................
--------------------------------------------------------
6
Subaccounting Services.................................8
----------------------
Redemption in Kind......................................
------------------
8
Massachusetts Partnership Law..........................8
-----------------------------
Account and Share Information..........................9
-----------------------------
Tax Information.........................................
---------------
9
Who Manages and Provides Services to the Fund?.........9
----------------------------------------------
How Does the Fund Measure Performance?................19
--------------------------------------
Who is Federated Investors, Inc.?.....................21
---------------------------------
Financial Information...................................
---------------------
22
Addresses ........................................23
--------------
Appendix ........................................24
--------------

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Money Market Obligations
Trust (Trust). The Trust is an open-end, management investment
company that was established under the laws of the Commonwealth
of Massachusetts on October 3, 1988. The Trust may offer separate
series of shares representing interests in separate portfolios of
securities. The Fund, which was established on August 30, 1979,
was reorganized as a portfolio of the Trust on July 30, 1999.
The Board of Trustees (the Board) has established four classes of
shares of the Fund, known as Class A Shares, Class B Shares, Class C
Shares and Class F Shares (Shares). This SAI relates all classes of
Shares. The Fund's investment adviser is Federated Investment
Management Company (Adviser).

SECURITIES IN WHICH THE FUND INVESTS

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

SECURITIES DESCRIPTIONS AND TECHNIQUES

FIXED-INCOME SECURITIES
Fixed-income securities pay interest, dividends or distributions at a
specified rate. The rate may be a fixed percentage of the principal or
adjusted periodically. In addition, the issuer of a fixed-income
security must repay the principal amount of the security, normally
within a specified time. Fixed-income securities provide more regular
income than equity securities. However, the returns on fixed-income
securities are limited and normally do not increase with the issuer's
earnings. This limits the potential appreciation of fixed-income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as
a percentage of its price. A security's yield will increase or decrease
depending upon whether it costs less (a discount) or more (a premium)
than the principal amount. If the issuer may redeem the security before
its scheduled maturity, the price and yield on a discount or premium
security may change based upon the probability of an early redemption.
Securities with higher risks generally have higher yields.
The following describes the types of fixed-income securities in which
the Fund may invest:

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

Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity (GSE) acting under federal authority. Some
GSE securities are supported by the full faith and credit of the United
States. These include the Government National Mortgage Association,
Small Business Administration, Farm Credit System Financial Assistance
Corporation, Farmer's Home Administration, Federal Financing Bank,
General Services Administration, Department of Housing and Urban
Development, Export-Import Bank, Overseas Private Investment
Corporation, and Washington Metropolitan Area Transit Authority Bonds.

Other GSE securities receive support through federal subsidies, loans
or other benefits. For example, the U.S. Treasury is authorized to
purchase specified amounts of securities issued by (or otherwise make
funds available to) the Federal Home Loan Bank System, Federal Home
Loan Mortgage Corporation, Federal National Mortgage Association,
Student Loan Marketing Association, and Tennessee Valley Authority in
support of such obligations.

A few GSE securities have no explicit financial support, but are
regarded as having implied support because the federal government
sponsors their activities. These include the Farm Credit System,
Financing Corporation, and Resolution Funding Corporation.

Investors regard agency securities as having low credit risks, but not
as low as Treasury securities.
The Fund treats mortgage-backed securities guaranteed by a GSE as if
issued or guaranteed by a federal agency.

Although such a guarantee protects against credit risks, it does not
reduce market and prepayment risks.

Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final
maturity unlike debt securities that provide periodic payments of
interest (referred to as a "coupon payment"). Investors buy zero coupon
securities at a price below the amount payable at maturity. The
difference between the purchase price and the amount paid at maturity
represents interest on the zero coupon security. Investors must wait
until maturity to receive interest and principal, which increases the
interest rate and credit risks of a zero coupon security.

Callable Securities
Certain fixed-income securities in which the Fund invests are callable
at the option of the issuer. Callable securities are subject to call
risks.

Mortgage Backed Securities
Mortgage backed securities represent interests in pools of mortgages.
The mortgages that comprise a pool normally have similar interest
rates, maturities and other terms. Mortgages may have fixed or
adjustable interest rates. Interests in pools of adjustable rate
mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have
extremely complicated terms. The simplest form of mortgage backed
securities are pass-through certificates. An issuer of pass-through
certificates gathers monthly payments from an underlying pool of
mortgages. Then, the issuer deducts its fees and expenses and passes
the balance of the payments onto the certificate holders once a month.
Holders of pass-through certificates receive a pro rata share of all
payments and prepayments from the underlying mortgages. As a result,
the holders assume all the prepayment risks of the underlying mortgages.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment
companies, including the securities of affiliated money market funds,
as an efficient means of carrying out its investment policies and
managing its uninvested cash. These other investment companies are
managed independently of the Fund and incur additional expenses.
Therefore, any such investment by the Fund may be subject to duplicate
expenses. However, the Adviser believes that the benefits and
efficiencies of this approach should outweigh the additional expenses.

SPECIAL TRANSACTIONS

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

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

Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a
security from a dealer or bank and agrees to sell the security back at
a mutually agreed-upon time and price. The repurchase price exceeds the
sale price, reflecting the Fund's return on the transaction. This
return is unrelated to the interest rate on the underlying security.
The Fund will enter into repurchase agreements only with banks and
other recognized financial institutions, such as securities dealers,
deemed creditworthy by the Adviser.
The Fund's custodian or subcustodian will take possession of the
securities subject to repurchase agreements. The Adviser or
subcustodian will monitor the value of the underlying security each day
to ensure that the value of the security always equals or exceeds the
repurchase price.
Repurchase agreements are subject to credit risks.

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

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

Securities Lending
The Fund may lend portfolio securities to borrowers that the Adviser
deems creditworthy. In return, the Fund receives cash or liquid
securities from the borrower as collateral. The borrower must furnish
additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Fund the equivalent of any
dividends or interest received on the loaned securities.
The Fund will reinvest cash collateral in securities that qualify as
an acceptable investment for the Fund. However, the Fund must pay
interest to the borrower for the use of cash collateral.
Loans are subject to termination at the option of the Fund or the
borrower. The Fund will not have the right to vote on securities while
they are on loan, but it will terminate a loan in anticipation of any
important vote. The Fund may pay administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest
earned on the cash collateral to a securities lending agent or broker.
Securities lending activities are subject to interest rate risks and
credit risks.

Asset Coverage
In order to secure its obligations in connection with special
transactions, the Fund will either own the underlying assets or set
aside readily marketable securities with a value that equals or exceeds
the Fund's obligations. Unless the Fund has other readily marketable
assets to set aside, it cannot trade assets used to secure such
obligations without terminating the special transaction. This may cause
the Fund to miss favorable trading opportunities or to realize losses
on special transactions.

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

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

Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level
of risk that exceeds the amount invested. Changes in the value of such
an investment magnify the Fund's risk of loss and potential for gain.

Call Risks
If a fixed-income security is called, the Fund may have to reinvest the
proceeds in other fixed-income securities with lower interest rates,
higher credit risks, or other less favorable characteristics.

Prepayment Risks
Unlike traditional fixed-income securities, which pay a fixed rate of
interest until maturity (when the entire principal amount is due)
payments on mortgage backed securities include both interest and a
partial payment of principal. Partial payment of principal may be
comprised of scheduled principal payments as well as unscheduled
payments from the voluntary prepayment, refinancing, or foreclosure of
the underlying loans. These unscheduled prepayments of principal create
risks that can adversely affect a fund holding mortgage backed
securities.
For example, when interest rates decline, the values of mortgage
backed securities generally rise. However, when interest rates decline,
unscheduled prepayments can be expected to accelerate, and the Fund
would be required to reinvest the proceeds of the prepayments at the
lower interest rates then available. Unscheduled prepayments would also
limit the potential for capital appreciation on mortgage backed
securities.
Conversely, when interest rates rise, the values of mortgage backed
securities generally fall. Since rising interest rates typically result
in decreased prepayments, this could lengthen the average lives of
mortgage backed securities, and cause their value to decline more than
traditional fixed-income securities.

FUNDAMENTAL INVESTMENT OBJECTIVE
The Fund's fundamental investment objective is stability of principal
and current income consistent with stability of principal. The
investment objective may not be changed by the Fund's Board without
shareholder approval.

INVESTMENT LIMITATIONS

Diversification
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities of any one issuer (other
than cash; cash items; securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities
and repurchase agreements collateralized by such U.S. government
securities; and securities of other investment companies) if, as a
result, more than 5% of the value of its total assets would be invested
in securities of that issuer, or the Fund would own more than 10% of
the outstanding voting securities of that issuer.

Concentration
The Fund will not make investments that will result in the
concentration of its investments in the securities of issuers primarily
engaged in the same industry. Government securities, municipal
securities and bank instruments are not deemed to constitute
an industry.

Borrowing Money and Issuing Senior Securities
The Fund may borrow money, directly or indirectly, and issue senior
securities to the maximum extent permitted under the Investment Company
Act of 1940, as amended (1940 Act).

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

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

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

Underwriting Securities
The Fund may not underwrite the securities of other issuers, except
that the Fund may engage in transactions involving the acquisition,
disposition or resale of its portfolio securities, under circumstances
where it may be considered to be an underwriter under the Securities
Act of 1933.
The above limitations cannot be changed unless authorized by the Board
and by the "vote of a majority of its outstanding voting securities,"
as defined by the 1940 Act. The following limitations, however, may be
changed by the Board without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes
effective.

Illiquid Securities
The Fund will not purchase securities for which there is no readily
available market, or enter into repurchase agreements or purchase time
deposits that the fund cannot dispose of within seven days, if
immediately after and as a result, the value of such securities would
exceed, in the aggregate, 10% of the Fund's net assets.

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

Pledging Assets
The Fund will not mortgage, pledge, or hypothecate any of its assets,
provided that this shall not apply to the transfer of securities in
connection with any permissible borrowing or to collateral arrangements
in connection with permissible activities.
For purposes of the above limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a
U.S. branch of a domestic bank or savings association having capital,
surplus and undivided profits in excess of $100,000,000 at the time of
investment to be "cash items." Except with respect to borrowing money,
if a percentage limitation is adhered to at the time of investment, a
later increase or decrease in percentage resulting from any change in
the value or net assets will not result in a violation of such
limitation.

REGULATORY COMPLIANCE
The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth
in the prospectus and this SAI, in order to comply with applicable laws
and regulations, including the provisions of and regulations under the
1940 Act. In particular, the Fund will comply with the various
requirements of Rule 2a-7 (the "Rule"), which regulates money market
mutual funds. The Fund will determine the effective maturity of its
investments according to the Rule. The Fund may change these
operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.

DETERMINING MARKET VALUE OF SECURITIES
The Board has decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for
amortization of premium or accumulation of discount rather than at
current market value. Accordingly, neither the amount of daily income
nor the net asset value (NAV) is affected by any unrealized
appreciation or depreciation of the portfolio. In periods of declining
interest rates, the indicated daily yield on Shares of the Fund
computed by dividing the annualized daily income on the Fund's
portfolio by the NAV computed as above may tend to be higher than a
similar computation made by using a method of valuation based upon
market prices and estimates. In periods of rising interest rates, the
opposite may be true.

The Fund's use of the amortized cost method of valuing portfolio
instruments depends on its compliance with certain conditions in the
Rule. Under the Rule, the Board must establish procedures reasonably
designed to stabilize the NAV per Share, as computed for purposes of
distribution and redemption, at $1.00 per Share, taking into account
current market conditions and the Fund's investment objective. The
procedures include monitoring the relationship between the amortized
cost value per Share and the NAV per Share based upon available
indications of market value. The Board will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between
the two values. The Board will take any steps it considers appropriate
(such as redemption in kind or shortening the average portfolio
maturity) to minimize any material dilution or other unfair results
arising from differences between the two methods of determining NAV.

WHAT DO SHARES COST?

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

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE ON CLASS B
SHARES
These reductions or eliminations are offered because: no sales
commissions have been advanced to the investment professional selling
Shares; the shareholder has already paid a Contingent Deferred Sales
Charge (CDSC); or nominal sales efforts are associated with the
original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no
CDSC will be imposed on redemptions:

o following the death or post-purchase disability, as defined in Section 72(m)(7)
of the Internal Revenue Code of 1986, of the last surviving
shareholder;

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained
the age of 70 1/2;

o of Shares that represent a reinvestment within 120 days of a previous
redemption;

o of Shares held by the Trustees, employees, and sales representatives of the
Fund, the Adviser, the Distributor and their affiliates; employees of
any investment professional that sells Shares according to a sales
agreement with the Distributor; and the immediate family members of
the above persons;

o of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party
administrator has entered into certain arrangements with the
Distributor or its affiliates, or any other investment professional,
to the extent that no payments were advanced for purchases made
through these entities;

o which are involuntary redemptions processed by the Fund because the accounts do
not meet the minimum balance requirements;

o which are qualifying redemptions of Class B Shares under a Systematic
Withdrawal Program.

To keep the sales charge as low as possible, the Fund redeems your
Shares in this order:

o Shares that are not subject to a CDSC; and

o Shares held the longest (to determine the number of years your Shares have been
held, include the time you held shares of other Federated funds that
have been exchanged for Shares of this Fund).

The CDSC is then calculated using the share price at the time of
purchase or redemption, whichever is lower.

HOW IS THE FUND SOLD?

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

ADVANCE COMMISSIONS
When an investment professional's customer purchases Shares, the
investment professional may receive an advance commission as follows:

Class A Shares (for purchases over $1 million)
Advance Commission
as a Percentage of
Purchase Amount Public Offering Price
First $1 million - $5 million 0.75%
Next $5 million - $20 million 0.50%
Over $20 million 0.25%

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

Advance commissions are calculated on a year by year basis based on
amounts invested during that year. Accordingly, with respect to
additional purchase amounts, the advance commission breakpoint resets
annually to the first breakpoint on the anniversary of the first
purchase.

Class A Share purchases under this program may be made by Letter of
Intent or by combining concurrent purchases. The above advance
commission will be paid only on those purchases that were not
previously subject to a front-end sales charge or dealer advance
commission. Certain retirement accounts may not be eligible for this
program.

Advance Commission
as a Percentage of
Class B Shares Public Offering
Price
All Purchase Amounts Up to 5.50%

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

Class C Shares and Class F Shares of the Fund are available only
through exchange from the same share class of another Federated fund.
While no advance commissions are paid on an exchange into the Fund from
another Federated fund, an advance commission may have been paid when
the shares of the other Federated fund were purchased, as described in
the Statement of Additional Information for the other Federated fund.

RULE 12B-1 PLAN (CLASS B SHARES AND CLASS C SHARES)
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor for activities principally intended to result in the sale
of Shares such as advertising and marketing of Shares (including
printing and distributing prospectuses and sales literature to
prospective shareholders and financial institutions) and providing
incentives to investment professionals to sell Shares. The Plan is
also designed to cover the cost of administrative services performed in
conjunction with the sale of Shares, including, but not limited to,
shareholder services, recordkeeping services and educational services,
as well as the costs of implementing and operating the Plan. The Rule
12b-1 Plan allows the Distributor to contract with investment
professionals to perform activities covered by the Plan. The Rule 12b-1
Plan is expected to benefit the Fund in a number of ways. For example,
it is anticipated that the Plan will help the Fund attract and retain
assets, thus providing cash for orderly portfolio management and Share
redemptions and possibly helping to stabilize or reduce other operating
expenses.

In addition, the Plan is integral to the multiple class structure of
the Fund, which promotes the sale of Shares by providing a range of
options to investors. The Fund's service providers that receive
asset-based fees also benefit from stable or increasing Fund assets.

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

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

Federated and its subsidiaries may benefit from arrangements where the
Rule 12b-1 Plan fees related to Class B Shares may be paid to third
parties who have provided the funds to make advance commission payments
to investment professionals.

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS
The Distributor may pay out of its own resources amounts (including
items of material value) to certain financial institutions. In some
cases, such payments may be made by, or funded from the resources of,
companies affiliated with the Distributor (including the Adviser).
While NASD regulations limit the sales charges that you may bear, there
are no limits with regard to the amounts that the Distributor may pay
out of its own resources. In addition to the payments which are
generally described herein and in the prospectus, the financial
institution also may receive payments under the Rule 12b-1 Plan and/or
Service Fees. In connection with these payments, the financial
institution may elevate the prominence or profile of the Fund and/or
other Federated funds within the financial institution's organization
by, for example, placement on a list of preferred or recommended funds,
and/or granting the Distributor preferential or enhanced opportunities
to promote the funds in various ways within the financial institution's
organization. You can ask your financial institution for information
about any payments it receives from the Distributor or the Federated
funds and any services provided.

The following examples illustrate the types of instances in which the
Distributor may make additional payments to financial institutions.

Supplemental Payments
The Distributor may make supplemental payments to certain financial
institutions that are holders or dealers of record for accounts in one
or more of the Federated funds. These payments may be based on such
factors as the number or value of Shares the financial institution
sells or may sell; the value of client assets invested; or the type and
nature of services or support furnished by the financial institution.

Processing Support Payments
The Distributor may make payments to financial institutions that sell
Federated fund shares to help offset their costs associated with client
account maintenance support, statement processing and transaction
processing. The types of payments that the Distributor may make under
this category include payment of ticket charges on a per transaction
basis; payment of networking fees; and payment for ancillary services
such as setting up funds on the financial institution's mutual fund
trading system.

Retirement Plan Program Servicing Payments
The Distributor may make payments to certain financial institutions who
sell Federated fund shares through retirement plan programs. A
financial institution may perform retirement plan program services
itself or may arrange with a third party to perform retirement plan
program services. In addition to participant recordkeeping, reporting,
or transaction processing, retirement plan program services may include
services rendered to a plan in connection with fund/investment
selection and monitoring; employee enrollment and education; plan
balance rollover or separation, or other similar services.

Other Benefits to Financial Institutions
From time to time, the Distributor, at its expense, may provide
additional compensation to financial institutions that sell or arrange
for the sale of Shares. Such compensation may include financial
assistance to financial institutions that enable the Distributor to
participate in or present at conferences or seminars, sales or training
programs for invited employees, client and investor events and other
financial institution-sponsored events.

The Distributor also may hold or sponsor, at its expense, sales events,
conferences and programs for employees or associated persons of
financial institutions and may pay the travel and lodging expenses of
attendees. The Distributor also may provide, at its expense, meals and
entertainment in conjunction with meetings with financial
institutions. Other compensation may be offered to the extent not
prohibited by applicable laws, regulations or the rules of any
self-regulatory agency, such as the NASD.

SUBACCOUNTING SERVICES

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

REDEMPTION IN KIND

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

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

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

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

MASSACHUSETTS PARTNERSHIP LAW

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

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

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote.

All Shares of the Trust have equal voting rights, except that in
matters affecting only a particular Fund or class, only Shares of that
Fund or class are entitled to vote.

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

As of April 19, 2005, there were no shareholders who owned of record,
beneficially, or both, 5% or more of outstanding Class A Shares. There
were no Class C or Class F Shares outstanding.

As of April 19, 2005, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Class B Shares:
Citigroup Global Markets, Inc., New York, NY, owned approximately
3,244,667 (5.03%).

TAX INFORMATION

FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal
Revenue Code (Code) applicable to regulated investment companies. If
these requirements are not met, it will not receive special tax
treatment and will be subject to federal corporate income tax.

The Fund will be treated as a single, separate entity for federal
income tax purposes so that income earned and capital gains and losses
realized by the Trust's other portfolios will be separate from those
realized by the Fund.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES
The Board 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 Board
member and the senior officers of the Fund. Where required, the tables
separately list Board members who are "interested persons" of the Fund
(i.e., "Interested" Board members) and those who are not (i.e.,
"Independent" Board members). Unless otherwise noted, the address of
each person listed is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA. As of December 31, 2004, the Trust comprised 44
portfolios, and the Federated Fund Complex consisted of 44 investment
companies (comprising 133 portfolios). Unless otherwise noted, each
Officer is elected annually. Unless otherwise noted, each Board member
oversees all portfolios in the Federated Fund Complex and serves for an
indefinite term.

As of April 19, 2005, the Fund's Board and Officers as a group owned
less than 1% of each class of the Fund's outstanding Shares.

INTERESTED TRUSTEES BACKGROUND AND COMPENSATION

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

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

Name Total
Birth Date Aggregate Compensation
Address Principal Occupation(s) for Past Five Compensation From Trust and
Positions Held with Years, Other Directorships Held and From Fund Federated
Trust Previous Position(s) (past fiscal Fund Complex
Date Service Began year) (past
calendar year)
Principal Occupations: Chairman and $0 $0
John F. Donahue* Director or Trustee of the Federated
Birth Date: July 28, Fund Complex; Chairman and Director,
1924 Federated Investors, Inc.
CHAIRMAN AND TRUSTEE
Began serving: Previous Positions: Trustee, Federated
October 1988 Investment Management Company and
Chairman and Director, Federated
Investment Counseling.

Principal Occupations: Principal $0 $0
J. Christopher Executive Officer and President of the
Donahue* Federated Fund Complex; Director or
Birth Date: April 11, Trustee of some of the Funds in the
1949 Federated Fund Complex; President, Chief
PRESIDENT AND TRUSTEE Executive Officer and Director,
Began serving: April Federated Investors, Inc.; Chairman and
1989 Trustee, Federated Investment Management
Company; Trustee, Federated Investment
Counseling; Chairman and Director,
Federated Global Investment Management
Corp.; Chairman, Federated Equity
Management Company of Pennsylvania,
Passport Research, Ltd. and Passport
Research II, Ltd.; 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.

Principal Occupations: Director or $353.87 $148,500
Lawrence D. Ellis, Trustee of the Federated Fund Complex;
M.D.* Professor of Medicine, University of
Birth Date: October Pittsburgh; Medical Director, University
11, 1932 of Pittsburgh Medical Center Downtown;
3471 Fifth Avenue Hematologist, Oncologist and Internist,
Suite 1111 University of Pittsburgh Medical Center.
Pittsburgh, PA
TRUSTEE Other Directorships Held: Member,
Began serving: National Board of Trustees, Leukemia
October 1988 Society of America.

Previous Positions: Trustee, University
of Pittsburgh; Director, University of
Pittsburgh Medical Center.

* Family relationships and reasons for "interested" status: John F. Donahue is the
father of J. Christopher Donahue; both are "interested" due to the positions they
hold with Federated and its subsidiaries. Lawrence D. Ellis, M.D. is "interested"
because his son-in-law is employed by the Fund's principal underwriter, Federated
Securities Corp.
--------------------------------------------------------------------------------------

INDEPENDENT TRUSTEES BACKGROUND AND COMPENSATION

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

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

Name Total
Birth Date Aggregate Compensation
Address Principal Occupation(s) for Compensation From Trust and
Positions Held with Past Five Years, Other From Fund Federated Fund
Trust Directorships Held and Previous (past fiscal year) Complex
Date Service Began Position(s) (past calendar
year)
Principal Occupation: Director $389.28 $163,350
Thomas G. Bigley or Trustee of the Federated
Birth Date: February 3, Fund Complex.
1934
15 Old Timber Trail Other Directorships Held:
Pittsburgh, PA Director, Member of Executive
TRUSTEE Committee, Children's Hospital
Began serving: November of Pittsburgh; Director,
1994 University of Pittsburgh.

Previous Position: Senior
Partner, Ernst &amp;amp;amp; Young LLP.

Principal Occupations: Director $389.28 $163,350
John T. Conroy, Jr. or Trustee of the Federated
Birth Date: June 23, Fund Complex; Chairman of the
1937 Board, Investment Properties
Investment Properties Corporation; Partner or Trustee
Corporation in private real estate ventures
3838 North Tamiami in Southwest Florida.
Trail
Suite 402 Previous Positions: President,
Naples, FL Investment Properties
TRUSTEE Corporation; Senior Vice
Began serving: August President, John R. Wood and
1991 Associates, Inc., Realtors;
President, Naples Property
Management, Inc. and Northgate
Village Development Corporation.

Principal Occupation: Director $389.28 $163,350
Nicholas P. Constantakis or Trustee of the Federated
Birth Date: September Fund Complex.
3, 1939
175 Woodshire Drive Other Directorships Held:
Pittsburgh, PA Director and Member of the
TRUSTEE Audit Committee, Michael Baker
Began serving: October Corporation (engineering and
1999 energy services worldwide).

Previous Position: Partner,
Anderson Worldwide SC.

Principal Occupation: Director $353.87 $148,500
John F. Cunningham or Trustee of the Federated
Birth Date: March 5, Fund Complex.
1943
353 El Brillo Way Other Directorships Held:
Palm Beach, FL Chairman, President and Chief
TRUSTEE Executive Officer, Cunningham &amp;amp;amp;
Began serving: January Co., Inc. (strategic business
1999 consulting); Trustee Associate,
Boston College.

Previous Positions: Director,
Redgate Communications and EMC
Corporation (computer storage
systems); Chairman of the Board
and Chief Executive Officer,
Computer Consoles, Inc.;
President and Chief Operating
Officer, Wang Laboratories;
Director, First National Bank
of Boston; Director, Apollo
Computer, Inc.

Principal Occupation: Director $353.87 $148,500
Peter E. Madden or Trustee of the Federated
Birth Date: March 16, Fund Complex.
1942
One Royal Palm Way Other Directorships Held: Board
100 Royal Palm Way of Overseers, Babson College.
Palm Beach, FL
TRUSTEE Previous Positions:
Began serving: August Representative, Commonwealth of
1991 Massachusetts General Court;
President, 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.

Principal Occupations: Director $389.28 $163,350
Charles F. Mansfield, or Trustee of the Federated
Jr. Fund Complex; Management
Birth Date: April 10, Consultant; Executive Vice
1945 President, DVC Group, Inc.
80 South Road (marketing, communications and
Westhampton Beach, NY technology) (prior to 9/1/00).
TRUSTEE
Began serving: January Previous Positions: Chief
1999 Executive Officer, PBTC
International Bank; Partner,
Arthur Young &amp;amp;amp; Company (now
Ernst &amp;amp;amp; 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.

Principal Occupations: Director $424.65 $178,200
John E. Murray, Jr., or Trustee of the Federated
J.D., S.J.D. Fund Complex; Chancellor and
Birth Date: December Law Professor, Duquesne
20, 1932 University; Partner, Murray,
Chancellor, Duquesne Hogue &amp;amp;amp; Lannis.
University
Pittsburgh, PA Other Directorships Held:
TRUSTEE Director, Michael Baker Corp.
Began serving: February (engineering, construction,
1995 operations and technical
services).

Previous Positions: President,
Duquesne University; Dean and
Professor of Law, University of
Pittsburgh School of Law; Dean
and Professor of Law, Villanova
University School of Law.

Principal Occupations: $353.87 $148,500
Marjorie P. Smuts Director or Trustee of the
Birth Date: June 21, Federated Fund Complex; Public
1935 Relations/Marketing
4905 Bayard Street Consultant/Conference
Pittsburgh, PA Coordinator.
TRUSTEE
Began serving: October Previous Positions: National
1988 Spokesperson, Aluminum Company
of America; television
producer; President, Marj
Palmer Assoc.; Owner, Scandia
Bord.

Principal Occupations: $353.87 $148,500
John S. Walsh Director or Trustee of the
Birth Date: November Federated Fund Complex;
28, 1957 President and Director, Heat
2604 William Drive Wagon, Inc. (manufacturer of
Valparaiso, IN construction temporary
TRUSTEE heaters); President and
Began serving: January Director, Manufacturers
1999 Products, Inc. (distributor of
portable construction heaters);
President, Portable Heater
Parts, a division of
Manufacturers Products, Inc.

Previous Position: Vice
President, Walsh &amp;amp;amp; Kelly, Inc.

OFFICERS**
--------------------------------------------------------------------------------------

-----------------------------------
Name
Birth Date
Address
Positions Held with Trust Principal Occupation(s) and Previous Position(s)
Date Service Began
Principal Occupations: Executive Vice President and
John W. McGonigle Secretary of the Federated Fund Complex; Executive
Birth Date: October 26, 1938 Vice President, Secretary and Director, Federated
EXECUTIVE VICE PRESIDENT AND Investors, Inc.
SECRETARY
Began serving: October 1988 Previous Positions: Trustee, Federated Investment
Management Company and Federated Investment
Counseling; Director, Federated Global Investment
Management Corp., Federated Services Company and
Federated Securities Corp.

Principal Occupations: Principal Financial Officer
Richard J. Thomas and Treasurer of the Federated Fund Complex; Senior
Birth Date: June 17, 1954 Vice President, Federated Administrative Services.
TREASURER
Began serving: November 1998 Previous Positions: Vice President, Federated
Administrative Services; held various management
positions within Funds Financial Services Division of
Federated Investors, Inc.

Principal Occupations: Vice Chairman or Vice
Richard B. Fisher President of some of the Funds in the Federated Fund
Birth Date: May 17, 1923 Complex; Vice Chairman, Federated Investors, Inc.;
VICE PRESIDENT Chairman, Federated Securities Corp.
Began serving: October 1988
Previous Positions: President and Director or Trustee
of some of the Funds in the Federated Fund Complex;
Executive Vice President, Federated Investors, Inc.
and Director and Chief Executive Officer, Federated
Securities Corp.

Deborah A. Cunningham Principal Occupations: Deborah A. Cunningham has
Birth Date: September 15, 1959 been the Fund's Portfolio Manager since January 1994.
CHIEF INVESTMENT OFFICER Ms. Cunningham was named Chief Investment Officer of
Began serving: May 2004 money market products in 2004. She joined Federated
in 1981 and has been a Senior Portfolio Manager and a
Senior Vice President of the Fund's Adviser since
1997. Ms. Cunningham is a Chartered Financial Analyst
and received her M.S.B.A. in Finance from Robert
Morris College.

Mary Jo Ochson ------------------------------------------------------
Birth Date: September 12, 1953 Principal Occupations: Ms. Ochson was named Chief
CHIEF INVESTMENT OFFICER AND VICE Investment Officer of tax-exempt fixed income
PRESIDENT products in 2004 and is a Vice President of the
Began serving: May 2004 Trust. She joined Federated in 1982 and has been a
Senior Portfolio Manager and a Senior Vice President
of the Fund's Adviser since 1996. Ms. Ochson is a
Chartered Financial Analyst and received her M.B.A.
in Finance from the University of Pittsburgh.

Susan R. Hill has been the Fund's Portfolio Manager
Susan R. Hill since July 1993. She is Vice President of the Trust.
Birth Date: June 20, 1963 Ms. Hill joined Federated in 1990 and has been a
VICE PRESIDENT Senior Portfolio Manager since 1993 and a Senior Vice
Began serving: May 2004 President of the Fund's Adviser since 2005. Ms. Hill
was a Portfolio Manager and an Assistant Vice
President of the Adviser from 1994 until 1997. Ms.
Hill is a Chartered Financial Analyst and received an
M.S. in Industrial Administration from Carnegie
Mellon University.

Jeff A. Kozemchak is Vice President of the Trust. Mr.
Jeff A. Kozemchak Kozemchak joined Federated in 1987 and has been a
Birth Date: January 15, 1960 Senior Portfolio Manager since 1996 and a Senior Vice
VICE PRESIDENT President of the Fund's Adviser since 1999. He was a
Began serving: May 2004 Portfolio Manager until 1996 and a Vice President of
the Fund's Adviser from 1993 to 1998. Mr. Kozemchak
is a Chartered Financial Analyst and received his
M.S. in Industrial Administration from Carnegie
Mellon University in 1987.

** Officers do not receive any compensation from the Fund.
--------------------------------------------------------------------------------------

COMMITTEES OF THE BOARD
Meetings Held
Board Committee During Last
Committee Members Committee Functions Fiscal Year
Executive In between meetings of the full Board, the Six
John F. Donahue Executive Committee generally may exercise
John E. Murray, all the powers of the full Board in the
Jr., J.D., S.J.D. management and direction of the business
and conduct of the affairs of the Trust in
such manner as the Executive Committee
shall deem to be in the best interests of
the Trust. However, the Executive
Committee cannot elect or remove Board
members, increase or decrease the number of
Trustees, elect or remove any Officer,
declare dividends, issue shares or
recommend to shareholders any action
requiring shareholder approval.

Audit The purposes of the Audit Committee are to Five
Thomas G. Bigley oversee the accounting and financial
John T. Conroy, reporting process of the Fund, the Fund`s
Jr. internal control over financial reporting,
Nicholas P. and the quality, integrity and independent
Constantakis audit of the Fund`s financial statements.
Charles F. The Committee also oversees or assists the
Mansfield, Jr. Board with the oversight of compliance with
legal requirements relating to those
matters, approves the engagement and
reviews the qualifications, independence
and performance of the Fund`s independent
registered public accounting firm, acts as
a liaison between the independent
registered public accounting firm and the
Board and reviews the Fund`s internal audit
function.

Nominating One
Thomas G. Bigley The Nominating Committee, whose members
John T. Conroy, consist of all Independent Trustees,
Jr. selects and nominates persons for election
Nicholas P. to the Fund`s Board when vacancies occur.
Constantakis The Committee will consider candidates
John F. Cunningham recommended by shareholders, Independent
Peter E. Madden Trustees, officers or employees of any of
Charles F. the Fund `s agents or service providers and
Mansfield, Jr. counsel to the Fund. Any shareholder who
John E. Murray, desires to have an individual considered
Jr. for nomination by the Committee must submit
Marjorie P. Smuts a recommendation in writing to the
John S. Walsh Secretary of the Fund, at the Fund 's
address appearing on the back cover of this
Statement of Additional Information. The
recommendation should include the name and
address of both the shareholder and the
candidate and detailed information
concerning the candidate's qualifications
and experience. In identifying and
evaluating candidates for consideration,
the Committee shall consider such factors
as it deems appropriate. Those factors
will ordinarily include: integrity,
intelligence, collegiality, judgment,
diversity, skill, business and other
experience, qualification as an
"Independent Trustee" the existence of
material relationships which may create the
appearance of a lack of independence,
financial or accounting knowledge and
experience, and dedication and willingness
to devote the time and attention necessary
to fulfill Board responsibilities.

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

BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE FEDERATED FAMILY OF INVESTMENT
COMPANIES AS OF DECEMBER 31, 2004
Aggregate Dollar Range of Shares Owned
---------------------------------------------
Dollar Range of in Federated Family of Investment Companies
Interested Shares Owned
Board Member Name in Fund
John F. Donahue None Over $100,000
J. Christopher Donahue $1 - $10,000 Over $100,000
Lawrence D. Ellis, M.D. $1 - $10,000 Over $100,000

Independent
Board Member Name
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. Constantakis None Over $100,000
John F. Cunningham None Over $100,000
Peter E. Madden None Over $100,000
Charles F. Mansfield, Jr. None $50,001 - $100,000
John E. Murray, Jr., None Over $100,000
J.D., S.J.D.
Marjorie P. Smuts None Over $100,000
John S. Walsh None Over $100,000

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

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

The Adviser is a wholly owned subsidiary of Federated.

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

As required by the 1940 Act, the Fund's Board has reviewed the Fund's
investment advisory contract. The Board's decision to approve the
contract reflects the exercise of its business judgment on whether to
continue the existing arrangements. During its review of the
contract, the Board considers many factors, among the most material of
which are: the Fund's investment objectives and long term performance;
the Adviser's management philosophy, personnel and processes; the
preferences and expectations of Fund shareholders and their relative
sophistication; the continuing state of competition in the mutual fund
industry; comparable fees in the mutual fund industry; the range and
quality of services provided to the Fund and its shareholders by the
Federated organization in addition to investment advisory services; and
the Fund's relationship to the Federated funds.

In assessing the Adviser's performance of its obligations, the Board
also considers whether there has occurred a circumstance or event that
would constitute a reason for it to not renew an advisory contract. In
this regard, the Board is 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 recognizes that most
shareholders have invested in the Fund on the strength of the Adviser's
industry standing and reputation and in the expectation that the
Adviser will have a continuing role in providing advisory services to
the Fund.

The Board also considers the compensation and benefits received by the
Adviser. This includes fees received for services provided to the Fund
by other entities in the Federated organization and research services
received by the Adviser from brokers that execute fund trades, as well
as advisory fees. In this regard, the Board is aware that various
courts have interpreted provisions of the 1940 Act and have indicated
in their decisions that the following factors may be relevant to an
Adviser's compensation: the nature and quality of the services
provided by the Adviser, including the performance of the Fund; the
Adviser's cost of providing the services; the extent to which the
Adviser may realize "economies of scale" as the Fund grows larger; any
indirect benefits that may accrue to the Adviser and its affiliates as
a result of the Adviser's relationship with the Fund; performance and
expenses of comparable funds; and the extent to which the independent
Board members are fully informed about all facts bearing on the
Adviser's service and fee. The Fund's Board is aware of these factors
and takes them into account in its review of the Fund's advisory
contract.

The Board considers and weighs 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 is
assisted in its deliberations by the advice of independent legal
counsel. In this regard, the Board requests and receives a significant
amount of information about the Fund and the Federated organization.
Federated provides much of this information at each regular meeting of
the Board, and furnishes additional reports in connection with the
particular meeting at which the Board's formal review of the advisory
contracts occurs. In between regularly scheduled meetings, the Board
may receive information on particular matters as the need arises.
Thus, the Board's evaluation of an advisory contract is informed by
reports covering such matters as: the Adviser's investment philosophy,
personnel, and processes; the Fund's short- and long-term performance
(in absolute terms as well as in relationship to its particular
investment program and certain competitor or "peer group" funds), and
comments on the reasons for performance; 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; the nature and extent of the advisory and
other services provided to the Fund by the Adviser and its affiliates;
compliance and audit reports concerning the Federated funds and the
Federated companies that service them; and relevant developments in the
mutual fund industry and how the Federated funds and/or Federated are
responding to them.

The Board also receives financial information about Federated,
including reports on the compensation and benefits Federated derives
from its relationships with the Federated funds. These reports cover
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 reports also discuss any indirect
benefit Federated may derive from its receipt of research services from
brokers who execute Federated fund trades.

The Board bases its decision to approve an 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 are relevant to every Federated fund,
nor does the Board consider any one of them to be determinative.
Because the totality of circumstances includes considering the
relationship of each Federated fund, the Board does not approach
consideration of every Federated fund's advisory contract as if that
were the only Federated fund.

Services Agreement
Federated Advisory Services Company, an affiliate of the Adviser,
provides certain support services to the Adviser. The fee for these
services is paid by the Adviser and not by the Fund.

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

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

VOTING PROXIES ON FUND PORTFOLIO SECURITIES
The Board has delegated to the Adviser authority to vote proxies on the
securities held in the Fund's portfolio. The Board has also approved
the Adviser's policies and procedures for voting the proxies, which are
described below.

Proxy Voting Policies
The Adviser's general policy is to cast proxy votes in favor of
proposals that the Adviser anticipates will enhance the long-term value
of the securities being voted. Generally, this will mean voting for
proposals that the Adviser believes will: improve the management of a
company; increase the rights or preferences of the voted securities;
and/or increase the chance that a premium offer would be made for the
company or for the voted securities.

The following examples illustrate how these general policies may apply
to proposals submitted by a company's board of directors. However,
whether the Adviser supports or opposes a proposal will always depend
on the specific circumstances described in the proxy statement and
other available information.

On matters of corporate governance, generally the Adviser will vote for
proposals to: require independent tabulation of proxies and/or
confidential voting by shareholders; reorganize in another jurisdiction
(unless it would reduce the rights or preferences of the securities
being voted); and repeal a shareholder rights plan (also known as a
"poison pill"). The Adviser will generally vote against the adoption
of such a plan (unless the plan is designed to facilitate, rather than
prevent, unsolicited offers for the company).

On matters of capital structure, generally the Adviser will vote:
against proposals to authorize or issue shares that are senior in
priority or voting rights to the securities being voted; for proposals
to grant preemptive rights to the securities being voted; and against
proposals to eliminate such preemptive rights.

On matters relating to management compensation, generally the Adviser
will vote: for stock incentive plans that align the recipients'
interests with the interests of shareholders without creating undue
dilution; and against proposals that would permit the amendment or
replacement of outstanding stock incentives with new stock incentives
having more favorable terms.

On matters relating to corporate transactions, the Adviser will vote
proxies relating to proposed mergers, capital reorganizations, and
similar transactions in accordance with the general policy, based upon
its analysis of the proposed transaction. The Adviser will vote
proxies in contested elections of directors in accordance with the
general policy, based upon its analysis of the opposing slates and
their respective proposed business strategies. Some transactions may
also involve proposed changes to the company's corporate governance,
capital structure or management compensation. The Adviser will vote on
such changes based on its evaluation of the proposed transaction or
contested election. In these circumstances, the Adviser may vote in a
manner contrary to the general practice for similar proposals made
outside the context of such a proposed transaction or change in the
board. For example, if the Adviser decides to vote against a proposed
transaction, it may vote for anti-takeover measures reasonably designed
to prevent the transaction, even though the Adviser typically votes
against such measures in other contexts.

The Adviser generally votes against proposals submitted by shareholders
without the favorable recommendation of a company's board. The Adviser
believes that a company's board should manage its business and
policies, and that shareholders who seek specific changes should strive
to convince the board of their merits or seek direct representation on
the board.

In addition, the Adviser will not vote if it determines that the
consequences or costs outweigh the potential benefit of voting. For
example, if a foreign market requires shareholders casting proxies to
retain the voted shares until the meeting date (thereby rendering the
shares "illiquid" for some period of time), the Adviser will not vote
proxies for such shares.

Proxy Voting Procedures
The Adviser has established a Proxy Voting Committee (Proxy Committee),
to exercise all voting discretion granted to the Adviser by the Board
in accordance with the proxy voting policies. The Adviser has hired
Investor Responsibility Research Center (IRRC) to obtain, vote, and
record proxies in accordance with the Proxy Committee's directions.
The Proxy Committee directs IRRC by means of Proxy Voting Guidelines,
and IRRC may vote any proxy as directed in the Proxy Voting Guidelines
without further direction from the Proxy Committee (and may make any
determinations required to implement the Proxy Voting Guidelines).
However, if the Proxy Voting Guidelines require case-by-case direction
for a proposal, IRRC will provide the Proxy Committee with all
information that it has obtained regarding the proposal and the Proxy
Committee will provide specific direction to IRRC. The Adviser's proxy
voting procedures generally permit the Proxy Committee to amend the
Proxy Voting Guidelines, or override the directions provided in such
Guidelines, whenever necessary to comply with the proxy voting
policies.

Conflicts of Interest
The Adviser has adopted procedures to address situations where a matter
on which a proxy is sought may present a potential conflict between the
interests of the Fund (and its shareholders) and those of the Adviser
or Distributor. This may occur where a significant business
relationship exists between the Adviser (or its affiliates) and a
company involved with a proxy vote. A company that is a proponent,
opponent, or the subject of a proxy vote, and which to the knowledge of
the Proxy Committee has this type of significant business relationship,
is referred to as an "Interested Company."

The Adviser has implemented the following procedures in order to avoid
concerns that the conflicting interests of the Adviser have influenced
proxy votes. Any employee of the Adviser who is contacted by an
Interested Company regarding proxies to be voted by the Adviser must
refer the Interested Company to a member of the Proxy Committee, and
must inform the Interested Company that the Proxy Committee has
exclusive authority to determine how the Adviser will vote. Any Proxy
Committee member contacted by an Interested Company must report it to
the full Proxy Committee and provide a written summary of the
communication. Under no circumstances will the Proxy Committee or any
member of the Proxy Committee make a commitment to an Interested
Company regarding the voting of proxies or disclose to an Interested
Company how the Proxy Committee has directed such proxies to be voted.
If the Proxy Voting Guidelines already provide specific direction on
the proposal in question, the Proxy Committee shall not alter or amend
such directions. If the Proxy Voting Guidelines require the Proxy
Committee to provide further direction, the Proxy Committee shall do so
in accordance with the proxy voting policies, without regard for the
interests of the Adviser with respect to the Interested Company. If
the Proxy Committee provides any direction as to the voting of proxies
relating to a proposal affecting an Interested Company, it must
disclose to the Fund's Board information regarding: the significant
business relationship; any material communication with the Interested
Company; the matter(s) voted on; and how, and why, the Adviser voted as
it did.

If the Fund holds shares of another investment company for which the
Adviser (or an affiliate) acts as an investment adviser, the Proxy
Committee will vote the Fund's proxies in the same proportion as the
votes cast by shareholders who are not clients of the Adviser at any
shareholders' meeting called by such investment company, unless
otherwise directed by the Board.

Proxy Voting Report
A report on "Form N-PX" of how the Fund voted any proxies during the
most recent 12-month period ended June 30 is available through
Federated's website. Go to FederatedInvestors.com; select "Products;"
select the Fund; then use the link to "Prospectuses and Regulatory
Reports" to access the link to Form N-PX.

PORTFOLIO HOLDINGS INFORMATION
Information concerning the Fund's portfolio holdings is available in
the "Products" section of Federated's website at
FederatedInvestors.com. A complete listing of the Fund's portfolio
holdings as of the end of each month is posted on the website 15 days
(or the next business day) after the end of the month and remains
posted until replaced by the information for the succeeding month.
Summary portfolio composition information as of the close of each
month is posted on the website 15 days (or the next business day)
after month-end and remains until replaced by the information for the
succeeding month. The summary portfolio composition information may
include percentage breakdowns of the portfolio by credit quality tier,
effective maturity range and type of security.

To access this information from the "Products" section of the website,
click on "Portfolio Holdings" and select the appropriate link opposite
the name of the Fund, or select the name of the Fund from the menus on
the "Products" section, and from the Fund's page click on the
"Portfolio Holdings" or "Composition" link. A user is required to
register on the website the first time the user accesses this
information.

You may also access from the "Products" section of the website
portfolio information as of the end of the Funds' fiscal quarters. The
Fund's annual and semiannual reports, which contain complete listings
of the Fund's portfolio holdings as of the end of the Fund's second and
fourth fiscal quarters, may be accessed by selecting the name of the
Fund, clicking on "Prospectuses and Regulatory Reports" and selecting
the link to the appropriate PDF. Complete listings of the Fund's
portfolio holdings as of the end of the Fund's first and third fiscal
quarters may be accessed by selecting "Portfolio Holdings" from the
"Products" section and then selecting the appropriate link opposite the
name of the Fund. Fiscal quarter information is made available on the
website within 70 days after the end of the fiscal quarter. This
information is also available in reports filed with the SEC at the
SEC's website at www.sec.gov.

The disclosure policy of the Fund and the Adviser prohibits the
disclosure of portfolio holdings information to any investor or
intermediary before the same information is made available to other
investors. Employees of the Adviser or its affiliates who have access
to nonpublic information concerning the Fund's portfolio holdings are
prohibited from trading securities on the basis of this information.
Such persons must report all personal securities trades and obtain
pre-clearance for all personal securities trades other than mutual fund
shares.

Firms that provide administrative, custody, financial, accounting,
legal or other services to the Fund may receive nonpublic information
about Fund portfolio holdings for purposes relating to their services.
The Fund may also provide portfolio holdings information to
publications that rate, rank or otherwise categorize investment
companies. Traders or portfolio managers may provide "interest" lists
to facilitate portfolio trading if the list reflects only that subset
of the portfolio for which the trader or portfolio manager is seeking
market interest. A list of service providers, publications and other
third parties who may receive nonpublic portfolio holdings information
appears in the Appendix to this SAI.

The furnishing of nonpublic portfolio holdings information to any third
party (other than authorized governmental or regulatory personnel)
requires the prior approval of the President of the Adviser and of the
Chief Compliance Officer of the Fund. The President of the Adviser and
the Chief Compliance Officer will approve the furnishing of nonpublic
portfolio holdings information to a third party only if they consider
the furnishing of such information to be in the best interests of the
Fund and its shareholders. In that regard, and to address possible
conflicts between the interests of Fund shareholders and those of the
Adviser and its affiliates, the following procedures apply. No
consideration may be received by the Fund, the Adviser, any affiliate
of the Adviser or any of their employees in connection with the
disclosure of portfolio holdings information. Before information is
furnished, the third party must sign a written agreement that it will
safeguard the confidentiality of the information, will use it only for
the purposes for which it is furnished and will not use it in
connection with the trading of any security. Persons approved to
receive nonpublic portfolio holdings information will receive it as
often as necessary for the purpose for which it is provided. Such
information may be furnished as frequently as daily and often with no
time lag between the date of the information and the date it is
furnished. The Board receives and reviews annually a list of the
persons who receive nonpublic portfolio holdings information and the
purposes for which it is furnished.

BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the
order at a favorable price. The Adviser will generally use those who
are recognized dealers in specific portfolio instruments, except when a
better price and execution of the order can be obtained elsewhere. The
Adviser makes decisions on portfolio transactions and selects brokers
and dealers subject to review by the Fund's Board.

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

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

Average Aggregate Daily
Maximum Administrative Fee Net Assets of the Federated Funds
0.150 of 1% on the first $5 billion
0.125 of 1% on the next $5 billion
0.100 of 1% on the next $10 billion
0.075 of 1% on assets over $20 billion

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

The administrative fee received during any fiscal year shall be at
least $150,000 per portfolio and $40,000 per each additional class of
Shares. FAS may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

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

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

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company, the Fund's registered transfer
agent, maintains all necessary shareholder records.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm for the Fund, Ernst &amp;amp;amp;
Young LLP, conducts its audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States), which
require it to plan and perform its audits to provide reasonable
assurance about whether the Fund's financial statements and financial
highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES

-------------------------- ------------ ------------- ---------------------
For the Year Ended July 2004 2003 2002
31,
Advisory Fee Earned $2,355,559 $3,184,856 $3,188,643
Advisory Fee Reduction $573,497 $253,152 $485,183
Advisory Fee Reimbursement -- $ $
12b-1 Fee:
Class B Shares $303,424 -- --
Shareholder Services Fee:
Class A Shares $363,246 -- --
Class B Shares -- -- --
Fees are allocated among classes based on their pro rata share of Fund
assets, except for marketing (Rule 12b-1) fees and shareholder services
fees, which are borne only by the applicable class of Shares.
------------------------------------------------------------------------

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the SEC's standard
methods for calculating performance applicable to all mutual funds. The
SEC also permits this standard performance information to be
accompanied by non-standard performance information.

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

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

AVERAGE ANNUAL TOTAL RETURNS AND YIELD
Total returns are given for the one-year, five-year and ten-year or
Start of Performance periods ended July 31, 2004.

Yield and Effective Yield are given for the 7-day period ended July 31,
2004.

7-Day Period 1 Year 5 Years 10 Years
Class A Shares
Total Return N/A 0.19% 2.40% 3.46%
Yield 0.43% N/A N/A N/A
Effective Yield 0.43% N/A N/A N/A

--------------------------------------------------------------------------------------
Start of
Performance on
7-Day Period 1 Year 5 Years 12/17/1994
Class B Shares
Total Return N/A (5.49)% 1.33% 2.64%
Yield 0.01% N/A N/A N/A
Effective Yield 0.01% N/A N/A N/A

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

The average annual total return for Shares is the average compounded
rate of return for a given period that would equate a $10,000 initial
investment to the ending redeemable value of that investment. The
ending redeemable value is computed by multiplying the number of Shares
owned at the end of the period by the NAV per Share at the end of the
period. The number of Shares owned at the end of the period is based on
the number of Shares purchased at the beginning of the period with
$10,000, less any applicable sales charge, adjusted over the period by
any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

YIELD AND EFFECTIVE YIELD
The yield of Shares is based upon the seven days ending on the day of
the calculation, called the "base period." This yield is calculated by:
determining the net change in the value of a hypothetical account with
a balance of one Share at the beginning of the base period, with the
net change excluding capital changes but including the value of any
additional Shares purchased with dividends earned from the original one
Share and all dividends declared on the original and any purchased
Shares; dividing the net change in the account's value by the value of
the account at the beginning of the base period to determine the base
period return; and multiplying the base period return by 365/7. The
effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising
the sum to the 365/7th power; and subtracting one from the result.

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

PERFORMANCE COMPARISONS
Advertising and sales literature may include:

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

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

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

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

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

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

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

Lipper, Inc.
Lipper, Inc. ranks funds in various fund categories based on total
return, which assumes the reinvestment of all income dividends and
capital gains distributions, if any.

iMoneyNet, Inc.
iMoneyNet, Inc.'s Money Fund Report publishes annualized yields of
money market funds weekly. iMoneyNet, Inc.'s Money Market Insight
publication reports monthly and 12-month-to-date investment results for
the same money funds.

Money
Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day effective
yield.

Salomon 30-Day Treasury Bill Index
Salomon 30-Day Treasury Bill Index is a weekly quote of the most
representative yields for selected securities, issued by the
U.S. Treasury, maturing in 30 days.

WHO IS FEDERATED INVESTORS, INC.?

Federated and its subsidiaries are dedicated to providing you with
world-class investment management. With offices in Pittsburgh, New
York City and Frankfurt, Federated is a firm with independent research,
product breadth and industry standing.

Federated seeks to achieve superior and sustainable investment
performance for a broad array of global clients through a disciplined
investment process and an information advantage created by proprietary
fundamental research. Federated is distinctive in our disciplined
process that integrates proprietary research with trading and portfolio
management.

FEDERATED FUNDS OVERVIEW

Equities
As of December 31, 2004, Federated managed 34 equity funds totaling
approximately $26.0 billion in assets across growth, value, equity
income, international, index and sector allocation styles.

Taxable Fixed Income
As of December 31, 2004, Federated managed 31 taxable bond funds
including: high-yield, multi-sector, mortgage-backed, U.S. government,
U.S. corporate and international, with assets approximating $17.7
billion.

Tax Free Fixed Income
As of December 31, 2004, Federated managed 15 municipal bond funds with
approximately $3.4 billion in assets and 22 municipal money market
funds with approximately $24.4 billion in total assets.

Money Market Funds
As of December 31, 2004, Federated managed $110.6 billion in assets
across 53 money market funds, including 19 government, 11 prime, 22
municipal and 1 euro-denominated with assets approximating $43.9
billion, $42.1 billion, $24.4 billion and $58.9 million.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: Stephen F. Auth, CFA for
Global Equity; Robert J. Ostrowski, CFA for Taxable Fixed Income; Mary
Jo Ochson, CFA for Tax Free Fixed Income; and Deborah A. Cunningham,
CFA for Money Market Funds.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended July
31, 2004 are incorporated herein by reference to the Annual Report to
Shareholders of Liberty U.S. Government Money Market Trust dated July
31, 2004.

ADDRESSES

LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST

Class A Shares
Class B Shares
Class C Shares
Class F Shares

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

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

Investment Adviser
Federated Investment Management Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Custodian, Transfer Agent and Dividend Disbursing Agent
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600

Independent Registered Public Accounting Firm
Ernst &amp;amp;amp; Young LLP
200 Clarendon Street
Boston, MA 02116-5072

APPENDIX

The following is a list of persons other than the Adviser and its affiliates that may
receive nonpublic portfolio holdings information concerning the Fund:

CUSTODIANS
State Street Bank and Trust Company

SECURITIES LENDING AGENT
None

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst &amp;amp;amp; Young LLP

LEGAL COUNSEL
Reed Smith LLP; Dickstein, Shapiro Morin &amp;amp;amp; Oshinsky LLP

SERVICE PROVIDERS
Bloomberg; Factset; Institutional Shareholder Services, Inc.

SECURITY PRICING SERVICES
None

RATINGS AGENCIES
Standard & Poor's

PERFORMANCE REPORTING/PUBLICATIONS
iMoneyNet, Inc. Lipper; Morgan Stanley Capital; International, Inc.; Morningstar;
NASDAQ; Value Line; Weisenberger/Thompson Financial

OTHER
Investment Company Institute

Federated World-Class Investment Manager

Liberty U.S. Government Money Market Trust

PROSPECTUS

CLASS C SHARESCLASS F SHARES

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

Risk/Return Bar Chart and Table

Average Annual Total Return Table

What are the Fund's Fees and Expenses?

LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST

FEES AND EXPENSES

EXAMPLE

What are the Fund's Investment Strategies?

What are the Principal Securities in Which the Fund Invests?

FIXED-INCOME SECURITIES

U.S. Treasury Securities

Agency Securities

REPURCHASE AGREEMENTS

What are the Specific Risks of Investing in the Fund?

INTEREST RATE RISKS

CREDIT RISKS

What Do Shares Cost?

SALES CHARGE WHEN YOU REDEEM

Class F Shares only

How is the Fund Sold?

RULE 12B-1 PLAN

SERVICE FEES

ADDITIONAL PAYMENTS TO FINANCIAL INSTITUTIONS

How to Purchase Shares

How to Redeem and Exchange Shares

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

By Mail

Signature Guarantees

PAYMENT METHODS FOR REDEMPTIONS

Redemption in Kind

LIMITATIONS ON REDEMPTION PROCEEDS

REDEMPTIONS FROM RETIREMENT ACCOUNTS

EXCHANGE PRIVILEGE

SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

ADDITIONAL CONDITIONS

Telephone Transactions

Share Certificates

Account and Share Information

ACCOUNT ACTIVITY

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

FREQUENT TRADING POLICIES

PORTFOLIO HOLDINGS INFORMATION

Who Manages the Fund?

ADVISORY FEES

Legal Proceedings

Financial Information

FINANCIAL HIGHLIGHTS

Federated World-Class Investment Manager

Federated
World-Class Investment Manager

CLASS C SHARES
CLASS F SHARES

Federated
World-Class Investment Manager