FEDERATED INVESTMENT TRUST, N-1A EL/A, 1996-03-05

FEDERATED INVESTMENT TRUST
N-1A EL/A, 1996-03-05

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1933 Act File No. 33-00053
1940 Act File No. 811-07477

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

Pre-Effective Amendment No. 1 .................. X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 1 ............................... X

FEDERATED INVESTMENT TRUST

(Exact name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

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

John W. McGonigle, Esq., Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering As soon as possible after
the effectiveness of the Registration
Statement

Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of
1940, Registrant hereby elects to register an indefinite number of shares.

Amendment Pursuant to Rule 473

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission acting
pursuant to said Section 8(a), may determine.

Copies To:

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

Federated Investment Portfolios has also executed this Registration
Statement.

CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of Federated Investment
Trust, which consists of one portfolio, Federated Bond Index Fund which
consists of (a) Institutional Shares and (b) Institutional Service Shares),
is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page...............(a,b) Cover Page.
Item 2. Synopsis.................(a) Summary of Fund Expenses -
Institutional Shares; (b) Summary of
Fund Expenses - Institutional Service
Shares.
Item 3. Condensed Financial
Information..............(a,b) Performance Information.
Item 4. General Description of
Registrant...............(a,b) General Information; Investment
Information; Investment Objective;
Investment Policies; Investment
Limitations; Additional Investment
Strategies and Techniques: Risk
Factors; Special Information Concerning
Hub and Spoke; Other Classes of Shares;
Miscellaneous; Addresses.

Item 5. Management of the Fund...Information About the Trust and
Federated Portfolios; Management of the
Trust and Federated Portfolios;
Expenses; (a) Distribution of
Institutional Shares; Shareholder
Services; Supplemental Payments to
Financial Institutions; (b) Distribution
of Institutional Service Shares;
Distribution Plan and Shareholder
Services; Supplemental Payments to
Financial Institutions; (a, b)
Administration of the Trust; Service
Providers of the Portfolio; Effect of
Banking Laws.
Item 6. Capital Stock and Other
Securities...............(a,b) Dividends; Capital Gains;
Shareholder Information; Voting Rights;
Massachusetts Partnership Law; Tax
Information.
Item 7. Purchase of Securities Being
Offered..................(a,b) Net Asset Value; Determination of
the Fund's Net Asset Value; (a)
Investing in Institutional Shares; (b)
Investing in Institutional Service
Shares; (a,b) Share Purchases; Minimum
Investment Required; What Shares Cost;
Certificates and Confirmations;
Retirement Plans.

Item 8. Redemption or Repurchase.(a) Redeeming Institutional Shares; (b)
Redeeming Institutional Service Shares;
(a,b) Telephone Redemption; Written
Requests; Accounts With Low Balances.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page...............(a, b) Cover Page.
Item 11. Table of Contents........(a, b) Table of Contents.
Item 12. General Information and
History..................(a, b) Description of Federated
Portfolios; About Federated Investors.
Item 13. Investment Objectives and
Policies.................(a, b) Investment Objective and
Policies.

Item 14. Management of the Trust..(a, b) Management of the Trust and
Federated Portfolios; Trustees'
Compensation.
Item 15. Control Persons and Principal
Holders of Securities....(a, b) Fund Ownership.
Item 16. Investment Advisory and Other
Services.................(a, b) Investment Advisory and Sub-
Advisory Services; Other Services.

Item 17. Brokerage Allocation.....Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............(a,b) Massachusetts Partnership Law.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered..................(a, b) Purchasing Shares; Determining
Net Asset Value; Redeeming Shares;
Redemption in Kind.

Item 20. Tax Status...............(a, b) Tax Status.

Item 21. Underwriters.............Not applicable.
Item 22. Calculations of Performance
Data.....................(a, b) Total Return; Yield; Performance
Comparisons.

Item 23. Financial Statements.....Filed in Part B.

FEDERATED BOND INDEX FUND
(A PORTFOLIO OF FEDERATED INVESTMENT TRUST)
INSTITUTIONAL SERVICE SHARES
PROSPECTUS

The Institutional Service Shares of Federated Bond Index Fund (the "Fund")
offered by this prospectus represent interests in a diversified portfolio of
securities which is an investment portfolio of Federated Investment Trust (the
"Trust"), an open-end management investment company (a mutual fund).
Institutional Service Shares are sold at net asset value.

The investment objective of the Fund is to provide investment results that
correspond to the investment performance of the Lehman Brothers Aggregate Bond
Index, a broad market-weighted index which encompasses U.S. Treasury and agency
securities, corporate investment grade bonds, and mortgage-backed securities.

UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING ALL
OF ITS INVESTABLE ASSETS ("ASSETS") IN BOND INDEX PORTFOLIO (THE "PORTFOLIO"), A
DIVERSIFIED SERIES OF FEDERATED INVESTMENT PORTFOLIOS (THE "FEDERATED
PORTFOLIOS"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY. THE PORTFOLIO HAS THE
SAME INVESTMENT OBJECTIVE AND POLICIES AS THE FUND. THEREFORE, THE FUND'S
INVESTMENT EXPERIENCE WILL CORRESPOND DIRECTLY WITH THAT OF THE PORTFOLIO. THE
FUND INVESTS IN THE PORTFOLIO THROUGH A TWO-TIER MASTER/FEEDER FUND STRUCTURE.
SEE "SPECIAL INFORMATION CONCERNING HUB AND SPOKE."

Federated Management is the Portfolio's investment adviser. Federated Management
has delegated the daily management of the security holdings of the Portfolio to
United States Trust Company of New York ("U.S. Trust Company"), acting as
sub-adviser. U.S. Trust Company and Federated Management may hereinafter be
referred to collectively as the "Investment Managers." For more information on
the Investment Managers of the Fund, please refer to the prospectus section
herein entitled "Management of the Trust and Federated Portfolios."

THE INSTITUTIONAL SERVICE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK (INCLUDING U.S. TRUST COMPANY), ARE NOT ENDORSED OR
GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in Institutional Service Shares of the Fund. Keep this prospectus for
future reference.

The Fund has also filed a Statement of Additional Information for Institutional
Service Shares and Institutional Shares dated March 5, 1996, with the Securities
and Exchange Commission. The information contained in the Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Statement of Additional Information or a paper copy of
this prospectus, if you have received your prospectus electronically, free of
charge by calling 1-800-245-4270. To obtain other information or make inquiries
about the Fund, contact the Fund at the address listed in the back of this
prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

Prospectus dated March 5, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES--
INSTITUTIONAL SERVICE SHARES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 2
Investment Policies 3

Additional Investment Strategies
and Techniques; Risk Factors 6

Investment Limitations 11
Special Information Concerning Hub
and Spoke 12

INFORMATION ABOUT THE TRUST AND
FEDERATED PORTFOLIOS 13
- ------------------------------------------------------

Management of the Trust and Federated
Portfolios 13
Expenses 16
Distribution of Institutional Service
Shares 17
Administration of the Trust 19
Service Providers of the Portfolio 19

NET ASSET VALUE 20
- ------------------------------------------------------

INVESTING IN INSTITUTIONAL SERVICE SHARES 20
- ------------------------------------------------------

Share Purchases 20
Minimum Investment Required 20
What Shares Cost 21
Subaccounting Services 21
Certificates and Confirmations 21
Dividends 22
Capital Gains 22
Retirement Plans 22
REDEEMING INSTITUTIONAL SERVICE SHARES 22
- ------------------------------------------------------

Telephone Redemption 22
Written Requests 23
Accounts With Low Balances 23

SHAREHOLDER INFORMATION 24
- ------------------------------------------------------

Voting Rights 24

EFFECT OF BANKING LAWS 24
- ------------------------------------------------------

TAX INFORMATION 25
- ------------------------------------------------------

PERFORMANCE INFORMATION 26
- ------------------------------------------------------

OTHER CLASSES OF SHARES 27
- ------------------------------------------------------

MISCELLANEOUS 27
- ------------------------------------------------------

ADDRESSES 29
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES--INSTITUTIONAL SERVICE
SHARES
- --------------------------------------------------------------------------------

The following table provides (i) a summary of estimated expenses related to
purchases and sales of Fund Shares and the aggregate annual operating expenses
of Fund Shares and the Portfolio as a percentage of their projected average
daily net assets, and (ii) an example illustrating the dollar cost of such
expenses on a $1,000 investment in Fund Shares.
<TABLE>
<S> <C> <C>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES

Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................................ None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price).....................
None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds,
as applicable)............................................................................................. None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................... None
Exchange Fee................................................................................................. None
ANNUAL INSTITUTIONAL SERVICE SHARES OPERATING EXPENSES
(As a percentage of projected average net assets)*

Management Fee (after waiver) (1)............................................................................ 0.00%
12b-1 Fee (after waiver) (2)................................................................................. 0.00%
Total Other Expenses (after expense reimbursement by the Investment Managers and administrator)......................... 0.54%
Shareholder Services Fee...................................................................... 0.25%
Total Institutional Service Shares Operating Expenses (after waivers and reimbursements)
(3)............................................ 0.54%

</TABLE>

(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver of the management fee. While the Fund does not pay any fee
directly to an investment adviser, it bears indirectly, as an investor in
the Portfolio, any fees paid by the Portfolio to its investment adviser. The
Portfolio has entered into an investment advisory agreement with Federated
Management and agrees to pay an annual fee of up to 0.25% of the Portfolio's
average net assets. Federated Management can terminate this voluntary waiver
at any time at its sole discretion.

(2) The maximum 12b-1 fee is 0.25%.

(3) The Total Institutional Service Shares Operating Expenses are estimated to
be 3.67% absent the anticipated voluntary waivers of the management fee and
the 12b-1 fee and the anticipated voluntary reimbursement of certain other
operating expenses by the Investment Managers and administrator.

Total Institutional Service Shares Operating Expenses include the Fund's pro
rata share of the aggregate annual operating expenses of the Portfolio, in
which all of the investable assets of the Fund are invested. The Trustees of
the Trust considered the aggregate per share expenses of the fund, the Fund's
pro rata share of the expenses for the Portfolio and the potential economies of
scale the Fund could achieve by investing its assets in the Portfolio. As a
result, the Trustees believe that the aggregate per share expenses of the Fund
and the Fund's pro rata share of the expenses for the Portfolio will be less
than or approximately equal to the expenses which the Fund would incur if it
retained the services of an investment adviser and the Assets of the Fund were
invested directly in the type of securities held by the Portfolio. Federated
Investors has agreed to maintain total operating expenses (after waivers and
reimbursements) of the Portfolio at no greater than 0.20% of average net assets
of the Portfolio for the twelve month period following January 2, 1996.

* Total Institutional Service Shares Operating Expenses in the table above are
estimated based on expenses expected to be incurred during the fiscal year
ending May 31, 1996. During the course of this period, expenses may be more
or less than the amount shown.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SERVICE SHARES OF THE
FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF
THE VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN INSTITUTIONAL SERVICE SHARES"
AND "INFORMATION ABOUT THE TRUST AND FEDERATED PORTFOLIOS." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.

Long-term shareholders may pay more than the economic equivalent of the maximum
front-end sales charges permitted under the rules of the National Association of
Securities Dealers, Inc.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
<S> <C> <C>

You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period................................................... $6 $17

</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING MAY 31, 1996.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated October 3, 1995. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees of the Trust (the "Trustees") has established two classes of shares of
the Fund, known as Institutional Shares and Institutional Service Shares.
This prospectus relates only to Institutional Service Shares.

Institutional Service Shares ("Shares") are designed primarily for retail and
private banking customers of financial institutions as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio of
U.S. investment grade fixed income securities that attempt to provide investment
results that correspond to the Lehman Brothers Aggregate Bond Index, a broad
market-weighted index which encompasses U.S. Treasury and agency securities,
corporate investment grade bonds and mortgage-backed securities, each with
maturities greater than one year. A minimum initial investment of $5,000 is
required, unless the investment is in a retirement program, in which case the
minimum initial investment is $50. Subsequent investments must be in amounts of
at least $100, and $50 for retirement programs.
Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.

The Fund invests through the Portfolio, a series of Federated Portfolios, which
is a business trust organized under the laws of the Commonwealth of
Massachusetts. Federated Portfolios was established as a Massachusetts business
trust under a Declaration of Trust dated as of September 29, 1995.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

Unless otherwise stated, all of the investment objectives, policies and
strategies discussed herein and in the Statement of Additional Information are
deemed "non-fundamental," i.e., the approval of the Fund's shareholders is not
required to change its investment objective or any of its investment policies
and strategies. Likewise, the approval of the Fund and other investors in the
Portfolio is not required to change the Portfolio's investment objective or any
of the Portfolio's investment policies and strategies. Any changes in the Fund's
or the Portfolio's investment objective, policies or strategies could result in
the Fund having investment objectives, policies and strategies different from
those applicable at the time of a shareholder's investment in the Fund.

INVESTMENT OBJECTIVE

The investment objective of the Fund is to provide investment results that
correspond to the investment performance of the Lehman Brothers Aggregate Bond
Index (the "Aggregate Bond Index"), a broad market-weighted index which
encompasses U.S. Treasury and agency securities, corporate investment grade
bonds, and mortgage-backed securities, each with maturities greater than one
year.

The Fund seeks to achieve its investment objective by investing all of its
Assets in the Portfolio, which is a diversified open-end management investment
company that has the same investment objective, policies and limitations as the
Fund. The Portfolio seeks to achieve its investment objective by replicating the
yield and total return of the Aggregate Bond Index through a statistically
selected sample of debt instruments. The Aggregate Bond Index is a broad
market-weighted index of U.S. investment grade fixed income securities.

While there is no assurance that the Fund (or the Portfolio) will achieve its
investment objective, the Fund (and the Portfolio) endeavor to do so by
following the investment policies described in this prospectus. Shareholder
approval is not required to change the Fund's investment objective. Likewise,
the approval of the investors in the Portfolio is not required to change the
Portfolio's investment objective. Shareholders will be given 30 days' prior
notice before any material change becomes effective. If there is a change in the
Fund's (or the Portfolio's) investment objective, such change could result in
the Fund (or the Portfolio) having an investment objective that is different
than the objective a shareholder considered applicable at the time of
investment. If the Fund's (or the Portfolio's) investment objective is changed,
shareholders should consider whether the Fund remains an appropriate investment
in light of their then-current financial position and needs.

Since the investment policies and limitations of the Fund will correspond
directly to those of the Portfolio, the following is a discussion of the various
investment policies and limitations of the Portfolio. Further information about
the investment policies and limitations of the Portfolio, including a list of
those investment limitations that are fundamental (i.e., that cannot be changed
without shareholder approval) appears in the Statement of Additional
Information.

INVESTMENT POLICIES
Unless indicated otherwise, the investment policies discussed below may be
changed without the approval of the Fund's shareholders (or the investors of the
Portfolio). Shareholders will be given 30 days' prior notice before any material
change becomes effective.

INVESTMENT PHILOSOPHY AND STRATEGIES. U.S. Trust Company, the sub-adviser for
the Portfolio, is a state-chartered bank and trust company which offers a
variety of specialized fiduciary and financial services to high net worth
individuals, institutions and corporations. As one of the largest institutions
of its type, U.S. Trust Company prides itself in offering an attentive and high
level of service to each of its clients.

INVESTMENT PHILOSOPHY. The Portfolio is not managed pursuant to
traditional methods of active investment management, which involve the
buying and selling of securities based upon economic, financial and market
analyses and investment judgment. Instead, the Portfolio, utilizing a
passive or indexing investment approach, will attempt to duplicate the
investment performance of the Aggregate Bond Index.

The Portfolio seeks to duplicate the investment performance of the
Aggregate Bond Index through statistical sampling procedures, that is, the
Portfolio will invest in a selected group-- not the entire universe--of
securities in the Aggregate Bond Index. This group of securities, when
taken together, is expected to perform similarly to the Aggregate Bond
Index as a whole. The sampling technique is expected to enable the
Portfolio to track the price movements and
performance of the Aggregate Bond Index, while minimizing brokerage,
custodial and accounting costs.

The Trust expects that there will be a close correlation between the
Portfolio's performance and that of the Aggregate Bond Index in both rising
and falling markets. The Portfolio will attempt to maximize the correlation
between its performance and that of the Aggregate Bond Index.
The Investment Managers seek a correlation of 0.95 or better. In the
event that a correlation of 0.95 or better is not achieved, the Trustees of
Federated Portfolios will review methods for increasing such correlation
with the Investment Managers, such as through adjustments in securities
holdings of the Portfolio. A correlation of 1.0 would indicate a perfect
correlation, which would be achieved when the Portfolio's net asset value,
including the value of its dividend and capital gains distributions,
increases or decreases in exact proportion to changes in the Aggregate Bond
Index. The Portfolio's Investment Managers monitor the correlation between
the performance of the Portfolio and the Aggregate Bond Index on a regular
basis. Factors such as the size of the Portfolio's securities holdings,
transaction costs, management fees and expenses, brokerage commissions and
fees, the extent and timing of cash flows into and out of the Portfolio,
and changes in the securities markets and the index itself, are expected to
account for any differences between the Portfolio's performance and that of
the Aggregate Bond Index.

The Portfolio invests at least 80% of its assets in a portfolio of
securities consisting of a representative selection of debt instruments
included in the Aggregate Bond Index. The Portfolio intends to remain fully
invested, to the extent practicable, in a pool of securities that match the
yield and total return of the Aggregate Bond Index.

LEHMAN BROTHERS AGGREGATE BOND INDEX. The Aggregate Bond Index is a broad
market-weighted index which encompasses three major classes of United States
investment grade fixed income securities with maturities greater than one year:
U.S. Treasury and agency securities, corporate bonds, and mortgage-backed
securities. The Index measures the total investment return (capital change plus
income) provided by a universe of fixed income securities, weighted by the
market value outstanding of each security. The securities included in the Index
generally meet the following criteria, as defined by Lehman Brothers: an
outstanding market value of at least $100 million and investment grade quality
(rated a minimum of Baa by Moody's Investors Service, Inc. ("Moody's") or BBB by
Standard & Poor's Ratings Group ("S&P")).

The Aggregate Bond Index is composed of the following kinds of securities:
public obligations of the U.S. Government; publicly issued debt of U.S.
Government agencies and quasi-federal corporations; corporate debt guaranteed by
the U.S. Government; fixed rate nonconvertible dollar-denominated corporate
debt; 15- and 30-year fixed rate securities backed by mortgage pools of the
Government National Mortgage Association (GNMA), the Federal Home Loan Mortgage
Corporation (FHLMC), and the Federal National Mortgage Association (FNMA); and
asset-backed pass-through securities representing pools of credit card
receivables and auto or home equity loans.

As of December 31, 1995, the following classes of fixed incoem securities
represented the stated proportions of the total market value of the
Aggregate Bond Index:
<TABLE>
<S> <C>
U.S. Treasury and government agency securities 53%
Corporate Bonds 18%
Mortgage- and asset-backed securities 29%
</TABLE>

The Portfolio has a policy of weighing its holdings so as to approximate the
relative composition of the securities contained in the Aggregate Bond Index,
under normal circumstances. Therefore, for each of the three classes of fixed
income securities listed above, the variation in weighting between the assets
held by the Portfolio and the assets in the Aggregate Bond Index is not
expected to be greater than plus or minus 5%. These weightings will be monitored
at the time securities are purchased by the Portfolio.

U.S. GOVERNMENT AND AGENCY SECURITIES. The Portfolio may invest in U.S.
Government securities and securities issued or guaranteed by agencies or
instrumentalities of the U.S. Government. Securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities include U.S. Treasury
securities, which differ only in their interest rates, maturities and times of
issuance: Treasury Bills have initial maturities of one year or less; Treasury
Notes have initial maturities of one to ten years; and Treasury Bonds generally
have initial maturities of greater than ten years. Some obligations issued or
guaranteed by U.S. Government agencies and instrumentalities, such as Government
National Mortgage Association pass-through certificates, are supported by the
full faith and credit of the U.S. Treasury; other securities, such as those of
the Federal Home Loan Banks, are supported by the right of the issuer to borrow
from the Treasury. Securities issued by the Federal National Mortgage
Association are supported by discretionary authority of the U.S. Government to
purchase certain obligations of the agency or instrumentality; other securities,
such as those issued by the Student Loan Marketing Association, are supported
only by the credit of the agency or instrumentality. While the U.S. Government
provides financial support to such U.S. Government-sponsored agencies or
instrumentalities, no assurance can be given that it will always do so, since it
is not so obligated by law. The Portfolio and the Fund and their respective net
asset values and yields are not guaranteed by the U.S. Government or any federal
agency or instrumentality.

CORPORATE BONDS. The Portfolio may purchase debt securities of United States
corporations only if they are deemed investment grade, that is, they carry a
rating of at least Baa from Moody's or BBB from S&P or, if not rated by these
rating agencies, are judged by the Investment Managers to be of comparable
quality. With respect to securities rated Baa by Moody's and BBB by S&P,
interest and principal payments are regarded as adequate for the present;
however, securities with these ratings may have speculative characteristics, and
changes in economic conditions or other circumstances are more likely to lead to
a weakened capacity to make interest and principal payments than is the case
with higher grade bonds. The Portfolio intends to dispose of, in an orderly
manner, any security which is downgraded below investment grade subsequent to
its purchase. See the Appendix to the Statement of Additional Information for a
more detailed explanation of these ratings.

Corporate bonds are subject to call risk during periods of falling interest
rates. Securities with high stated interest rates may be prepaid (or called)
prior to maturity, requiring the Portfolio to invest the proceeds at generally
lower interest rates. Call provisions, common in many corporate bonds, allow
bond issuers to redeem bonds prior to maturity (at a specific price). When
interest rates are falling, bond issuers often exercise these call provisions,
paying off bonds that carry high stated interest rates and often issuing new
bonds at lower rates. For the Portfolio, the result would be that bonds with
high interest rates are called and must be replaced with lower-yielding
instruments. In these circumstances, the income of the Portfolio would decline.

MORTGAGE PASS-THROUGHS AND COLLATERALIZED MORTGAGE OBLIGATIONS. The Portfolio
may purchase mortgage and mortgage-related securities such as pass-throughs and
collateralized mortgage obligations that meet the Portfolio's selection criteria
and are investment grade or of comparable quality (collectively, "Mortgage
Securities"). Mortgage pass-throughs are securities that pass through to
investors an undivided interest in a pool of underlying mortgages. These are
issued or guaranteed by U.S. government agencies such as GNMA, FNMA, and FHLMC.
Other mortgage pass-throughs consist of whole loans originated and issued by
private limited purpose corporations or conduits. Collateralized mortgage
obligation bonds are obligations of special purpose corporations that are
collateralized or supported by mortgages or mortgage securities such as
pass-throughs.

As a result of its investments in Mortgage Securities, the mortgage-backed
securities in the Portfolio may be subject to a greater degree of market
volatility as a result of unanticipated prepayments of principal. During periods
of declining interest rates, the principal invested in mortgage-backed
securities with high interest rates may be repaid earlier than scheduled, and
the Portfolio will be forced to reinvest the unanticipated payments at generally
lower interest rates. When interest rates fall and principal prepayments are
reinvested at lower interest rates, the income that the Portfolio derives from
mortgage-backed securities is reduced. In addition, like other fixed income
securities, Mortgage Securities generally decline in price when interest rates
rise.

Because the Portfolio will seek to represent all major sectors of the investment
grade fixed income securities market, the Fund may be a suitable vehicle for
those investors seeking ownership in the "bond market" as a whole, without
regard to particular sectors. The Fund is intended to be a long-term investment
vehicle and is not designed to provide investors with a means of speculating on
short-term bond market movements. Because of potential share price fluctuations,
the Fund may be inappropriate for investors who have short-term objectives or
who require stability of principal. Investors should not consider the Fund a
complete investment program.

ADDITIONAL INVESTMENT STRATEGIES AND TECHNIQUES; RISK FACTORS

The Portfolio may utilize the investment strategies and techniques described
below.

SAMPLING AND TRADING IN THE PORTFOLIO. The Portfolio does not expect to hold
all of the individual issues which comprise the Aggregate Bond Index because of
the large number of securities involved. Instead, the Portfolio will hold a
representative sample of securities, selecting one or two issues to represent
entire classes or types of securities in the Index. This sampling technique is
expected to be an effective means of substantially duplicating the income and
capital returns provided by the Index.

To reduce transaction costs, the Portfolio's securities holdings will not be
automatically traded or re-balanced to reflect changes in the Aggregate Bond
Index. The Portfolio will seek to buy round lots of securities and may trade
large blocks of securities. These policies may cause a particular security to
be over- or under-represented in the Portfolio relative to its Index weighting
or result in its continued ownership by the Portfolio after its deletion from
the Index, thereby reducing the correlation between the Portfolio and the
Index. The Portfolio is not required to buy or sell securities solely because
the percentage of its assets invested in Index securities changes when their
market values increase or decrease. In addition, in order to more closely
correlate to the return of the Index, the Portfolio may omit or remove Index
securities from its portfolio and substitute other Index securities if the
Investment Managers believe the removed security to be insufficiently liquid or
believe the merit of the investment has been substantially impaired by
extraordinary events or financial conditions. The Investment Managers seek a
correlation of 0.95 or better between the performance of the Portfolio and that
of the Aggregate Bond Index. See "Investment Philosophy and Strategies" above.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis in order to hedge against anticipated changes in
interest rates and prices. These transactions involve a commitment by the
Portfolio to purchase or sell particular securities with payment and delivery
taking place in the future, beyond the normal settlement date, at a stated price
and yield. Securities purchased on a forward commitment or when-issued basis are
recorded as an asset and are subject to changes in value based upon changes in
the general level of interest rates. When such transactions are negotiated, the
price, which is generally expressed in yield terms, is fixed at the time the
commitment is made, but delivery and payment for the securities take place at a
later date. When-issued securities and forward commitments may be sold prior to
the settlement date, but the Portfolio will enter into when-issued and forward
commitments only with the intention of actually receiving or delivering the
securities, as the case may be. At the time the Portfolio enters into a
transaction on a when-issued or forward commitment basis, a segregated account
consisting of cash or high grade liquid debt securities equal to the value of
the when-issued or forward commitment securities will be established and
maintained. There is a risk that the securities may not be delivered and that
the Portfolio may incur a loss.

REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Trustees of Federated Portfolios. In a repurchase agreement,
the Portfolio buys a security from a seller that has agreed to repurchase it at
a mutually agreed upon date and price, reflecting the interest rate effective
for the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest, and this value is maintained during
the term of the agreement. If the seller defaults and the collateral value
declines, the Portfolio might incur a loss. If bankruptcy proceedings are
commenced with respect to the seller, the Portfolio's realization upon the
disposition of collateral may be delayed or limited. Investments in certain
repurchase agreements and certain other investments which may be considered
illiquid are limited. See "Illiquid Investments; Privately Placed and other
Unregistered Securities" below.

REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow funds, in an amount up
to one-third of the value of its total assets, for temporary or emergency
purposes, such as meeting larger than anticipated redemption requests, and not
for leverage. The Portfolio may also agree to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase them
at a mutually agreed date and price (a "reverse repurchase agreement"). The
Securities and Exchange Commission ("SEC") views reverse repurchase agreements
as a form of borrowing. At the time the Portfolio enters into a reverse
repurchase agreement, it will place in a segregated custodial account cash,
U.S. Government securities or high-grade debt obligations having a value equal
to the repurchase price, including accrued interest. Reverse repurchase
agreements involve the risk that the market value of the securities sold by the
Portfolio may decline below the repurchase price of those securities.

INVESTMENT COMPANY SECURITIES. In connection with the management of its daily
cash position, the Portfolio may invest in securities issued by other investment
companies which invest in high quality, short-term debt securities and which
determine their net asset value per share based on the amortized cost or
penny-rounding method. In addition to the advisory and sub-advisory fees and
other expenses the Portfolio bears directly in connection with its own
operations, as a shareholder of another investment company the Portfolio would
bear its pro rata portion of the other investment company's advisory fees and
other expenses. As such, the Fund's shareholders would indirectly bear the
expenses of the other investment company, some or all of which would be
duplicated. Securities of other investment companies may be acquired by the
Portfolio to the extent permitted under the 1940 Act, that is, the Portfolio may
invest a maximum of up to 10% of its total assets in securities of other
investment companies so long as not more than 3% of the total outstanding voting
stock of any one investment company is held by the Portfolio. In addition, not
more than 5% of the Portfolio's total assets may be invested in the securities
of any one investment company.

FUTURES CONTRACTS AND OPTIONS. The Portfolio may purchase put and call options
on securities, indices of securities and futures contracts. The Portfolio may
also purchase and sell futures contracts. Futures contracts on securities and
securities indices will be used primarily to accommodate cash flows or in
anticipation of taking a market position when, in the opinion of the Investment
Managers, available cash balances do not permit economically efficient purchases
of securities. Moreover, the Portfolio may sell futures and options to "close
out" futures and options it may have purchased or to protect against a decrease
in the price of securities it owns but intends to sell. The Portfolio will not
invest in futures or options as part of a defensive strategy to protect against
potential market declines. See "Futures Contracts and Options on Futures
Contracts" in the Statement of Additional Information.

The Portfolio may (a) purchase exchange-traded and over the counter (OTC) put
and call options on securities and indices of securities, (b) purchase and sell
futures contracts on securities and indices of securities and (c) purchase put
and call options on futures contracts on securities and indices of securities.
In addition, the Portfolio may sell (write) exchange-traded and OTC put and call
options on securities and indices of securities and on futures contracts on
securities and indices of securities. The staff of the SEC has taken the
position that OTC options are illiquid and, therefore, together with other
illiquid securities held by the Portfolio, cannot exceed 15% of the Portfolio's
net assets. The Portfolio intends to comply with this limitation.

The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these techniques by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these investments entail certain other risks. If the Investment
Managers apply a strategy at an inappropriate time or judge market conditions
or trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's potential to realize gains as
well as limit its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly
correlated with its other investments, or if it could not close out its
positions because of an illiquid secondary market. In addition, the Portfolio
will incur transaction costs, including trading commissions and option
premiums, in connection with its futures and options transactions and these
transactions could significantly increase the Portfolio's turnover rate. For
more information on these investment techniques, see the Statement of
Additional Information.

The Portfolio may purchase and sell put and call options on securities, indices
of securities and futures contracts, or purchase and sell futures contracts,
only if such options are written by other persons and if (i) the aggregate
premiums paid on all such options which are held at any time do not exceed 20%
of the Portfolio's total net assets, and (ii) the aggregate margin deposits
required on all such futures and premium on options thereon held at any time do
not exceed 5% of the Portfolio's total assets. The Portfolio may also be subject
to certain limitations pursuant to the regulations of the Commodity Futures
Trading Commission. The Portfolio does not have any current intention of
purchasing futures contracts or investing in put and call options on securities,
indices of securities, or futures contracts if more than 5% of its net assets
would be at risk from such transactions.

ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may acquire investments that are illiquid or have limited liquidity,
such as private placements or investments that are not registered under the
Securities Act of 1933 (the "1933 Act") and cannot be offered for public sale in
the United States without first being registered under the 1933 Act. An illiquid
investment is any investment that cannot be disposed of within seven days in the
normal course of business at approximately the amount at which it is valued by
the Portfolio. The price the Portfolio pays for illiquid securities or receives
upon resale may be lower than the price paid or received for similar securities
with a more liquid market. Accordingly the valuation of these securities will
reflect any limitations on their liquidity.

Acquisitions of illiquid investments by the Portfolio are subject to the
following non-fundamental policies. The Portfolio may not invest in additional
illiquid securities if, as a result, more than 15% of the market value of its
net assets would be invested in illiquid securities. The Portfolio may also
purchase Rule 144A securities sold to institutional investors without
registration under the 1933 Act. These securities may be determined to be liquid
in accordance with guidelines established by the Investment Managers and
approved by the Trustees of Federated Portfolios. The Trustees of Federated
Portfolios will monitor the implementation of these guidelines on a periodic
basis. Because Rule 144A is relatively new, it is not possible to predict how
markets in Rule 144A securities will develop. If trading in Rule 144A securities
were to decline, these securities could become illiquid after being purchased,
increasing the level of illiquidity of the Portfolio. As a result, the Portfolio
might not be able to sell these securities when the Investment Managers wish to
do so, or might have to sell them at less than fair value.

SHORT-TERM INSTRUMENTS. The Portfolio may invest in short-term income
securities in accordance with its investment objective and policies as described
above. The Portfolio may also make money market investments pending other
investments or settlement, or to maintain liquidity to meet shareholder
redemptions. Although the Portfolio normally seeks to remain substantially fully
invested in securities selected to match the Aggregate Bond Index consistent
with seeking a correlation of 0.95 or better between the Portfolio's performance
and that of the Aggregate Bond Index, the Portfolio may invest temporarily up to
20% of its assets in certain short-term fixed income securities. The Portfolio
will not invest in short-term instruments as part of a defensive strategy to
protect against potential market declines.

Short-term investments include: obligations of the U.S. Government and its
agencies or instrumentalities; commercial paper and other debt securities;
variable and floating rate securities; bank obligations; repurchase agreements
collateralized by these securities; and shares of other investment companies
that primarily invest in any of the above referenced securities. Commercial
paper consists of short-term, unsecured promissory notes issued to finance
short-term credit needs. Other corporate obligations in which the Portfolio may
invest consist of high quality, U.S. dollar-
denominated short-term bonds and notes (including variable amount master demand
notes) issued by domestic and foreign corporations. The Portfolio may invest in
commercial paper issued by major corporations in reliance on the exemption from
registration afforded by Section 3(a)(3) of the 1933 Act. Such commercial paper
may be issued only to finance current transactions and must mature in nine
months or less. Trading of such commercial paper is conducted primarily by
institutional investors through investment dealers, and individual investor
participation in the commercial paper market is very limited.

The Portfolio may invest in U.S. dollar-denominated certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued by
domestic banks and domestic or foreign branches or subsidiaries of foreign
banks. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specified period of time. Such
instruments include Yankee Certificates of Deposit ("Yankee CDs"), which are
certificates of deposit denominated in U.S. dollars and issued in the United
States by the domestic branch of a foreign bank. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Time deposits which may be held by the
Portfolio are not insured by the Federal Deposit Insurance Corporation or any
other agency of the U.S. Government. The Portfolio will not invest more than 15%
of the value of its net assets in time deposits maturing in longer than seven
days and other instruments which are deemed illiquid or not readily marketable.
Bankers' acceptances are credit instruments evidencing the obligation of a bank
to pay a draft drawn on it by a customer. These instruments reflect the
obligation both of the bank and of the drawer to pay the face amount of the
instrument upon maturity. The other short-term obligations in which the
Portfolio may invest include uninsured, direct obligations which have either
fixed, floating or variable interest rates.

The Portfolio will limit its short-term investments to those U.S.
dollar-denominated instruments which are determined by or on behalf of the
Trustees of Federated Portfolios to present minimal credit risks and which are
of "high quality" as determined by a major rating service (i.e., rated P-1 by
Moody's or A-1 by S&P) or, in the case of instruments which are not rated, are
deemed to be of comparable quality pursuant to procedures established by the
Trustees of Federated Portfolios. The Portfolio may invest in obligations of
banks which at the date of investment have capital, surplus and undivided
profits (as of the date of their most recently published financial statements)
in excess of $100 million. Investments in high quality short-term instruments
may, in many circumstances, result in a lower yield than would be available
from investments in instruments with a lower quality or longer term.

SECURITIES LENDING. The Portfolio may seek to increase its income by lending
securities to banks, brokers or dealers and other recognized institutional
investors. Such loans may not exceed 30% of the value of the Portfolio's total
assets. In connection with such loans, the Portfolio will receive collateral
consisting of cash, U.S. Government or other high quality securities,
irrevocable letters of credit issued by a bank, or any combination thereof. Such
collateral will be maintained at all times in an amount equal to at least 100%
of the current market value of the loaned securities. The Portfolio can increase
its income through the investment of any such collateral consisting of cash. The
Portfolio continues to be entitled to payments in amounts equal to the interest
payable on the loaned security and in addition, if the collateral received is
other than cash, receives a fee based on the amount of the loan. Such loans will
be terminable at any time upon specified notice. The Portfolio might experience
risk of loss if the institution with which it has engaged in a portfolio loan
transaction breaches its agreement with the Portfolio.

SHORT SALES "AGAINST THE BOX." In a short sale, the Portfolio sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. The Portfolio may engage in short sales only if at the time
of the short sale it owns or has the right to obtain, at no additional cost, an
equal amount of the security being sold short. This investment technique is
known as a short sale "against the box." The Portfolio may make a short sale as
a hedge, when it believes that the value of a security owned by it (or a
security convertible or exchangeable for such security) may decline, or when the
Portfolio wants to sell the security at an attractive current price but wishes
to defer recognition of gain or loss for tax purposes. Not more than 40% of the
Portfolio's total assets would be involved in short sales "against the box."

CERTAIN OTHER OBLIGATIONS. Consistent with its investment objectives, policies
and restrictions, the Portfolio may also invest in participation interests,
guaranteed investment contracts and zero coupon obligations. See the Statement
of Additional Information. In order to allow for investments in new instruments
that may be created in the future, upon supplementing this prospectus, the
Portfolio may invest in obligations other than those listed previously, provided
such investments are consistent with the Portfolio's and Fund's investment
objective, policies and restrictions.

INVESTMENT LIMITATIONS

As a diversified investment company, 75% of the assets of the Portfolio are
represented by cash and cash items (including receivables), government
securities, securities of other investment companies, and other securities
which for purposes of this calculation are subject to the following fundamental
limitations: (a) the Portfolio may not invest more than 5% of its total assets
in the securities of any one issuer, and (b) the Portfolio may not own more
than 10% of the outstanding voting securities of any one issuer. In addition,
the Portfolio may not invest 25% or more of its assets in the securities of
issuers in any one industry, unless the securities in a single industry were to
comprise 25% or more of the Aggregate Bond Index in which case the Portfolio
will invest 25% or more of its assets in that industry. These are fundamental
investment policies which may not be changed without investor approval.

The Statement of Additional Information includes a further discussion of
investment strategies and techniques, and a listing of other fundamental
investment restrictions and non-fundamental investment policies which govern the
investment policies of the Fund and the Portfolio. Fundamental investment
restrictions may not be changed, in the case of the Fund, without the approval
of the shareholders of the Fund or, in the case of the Portfolio, without the
approval of the investors (including the Fund) in the Portfolio. If a percentage
restriction (other than a restriction as to borrowing) or a rating restriction
on investment or utilization of assets is adhered to at the time an investment
is made or assets are so utilized, a later change in percentage resulting from
changes in the value of the securities held by the Portfolio or a later change
in the rating of a security held by the Portfolio is not considered a violation
of the policy.

SPECIAL INFORMATION CONCERNING HUB AND SPOKE

Unlike other mutual funds that directly acquire and manage their own portfolios
of securities, the Fund seeks to achieve its investment objective by investing
all of its Assets in the Portfolio. The Fund invests in the Portfolio through
Signature Financial Group, Inc.'s two-tier structure known as the Hub and Spoke
financial services method. Hub and Spoke employs a two-tier master/feeder fund
structure and is a registered service mark of Signature Financial Group, Inc.
The Fund has the same investment objective and policies as the Portfolio. In
addition to selling a beneficial interest to the Fund, the Portfolio may sell
beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
pay a proportionate share of the Portfolio's expenses. However, the other
investors investing in the Portfolio are not required to issue their shares at
the same public offering price as the Fund due to variations in sales
commissions and other operating expenses. Investors in the Fund should be aware
that these differences may result in differences in returns experienced by
investors in the different funds that invest in the Portfolio. Such differences
in returns are also present in other mutual fund structures. Information
concerning other holders of interests (e.g., other spokesSM or feeder funds) in
the Portfolio is available from Federated Services Company at 1-800-245-4270.

The investment objective of the Fund may be changed without the approval of the
Fund's shareholders but not without written notice thereof to the Fund's
shareholders thirty days prior to implementing the change. If there were a
change in the Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then-current
financial position and needs. The investment objective of the Portfolio may be
changed without the approval of the investors in the Portfolio, but not without
written notice thereof to the Portfolio's investors (and notice by the Fund to
its shareholders) thirty days prior to implementing the change. There can, of
course, be no assurance that the investment objective of the Fund or the
Portfolio will be achieved. See "Investment Limitations" in the Statement of
Additional Information for a description of the fundamental investment policies
and restrictions of the Portfolio and the Fund that cannot be changed without
approval by the holders of a "majority of the outstanding voting securities"
(as defined in the Investment Company Act of 1940 ("1940 Act")) of the
Portfolio or Fund. Except as stated otherwise, the investment objective,
policies, strategies and restrictions described herein and in the Statement of
Additional Information are non-fundamental.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. Also, funds with
a greater pro rata ownership in the Portfolio could have effective voting
control over the operations of the Portfolio. (However, these situations also
exist for traditionally structured funds which have large or institutional
investors). Whenever the Fund is requested to vote on a matter pertaining to
the Portfolio, the Fund will vote its shares without a meeting of Fund
shareholders if the proposal is one, if which made with respect to the Fund,
would not require the vote of Fund shareholders, as long as such action
is permissible under applicable statutory and regulatory requirements.
Conversely, except as permitted by the SEC, whenever the Fund is requested
to vote as an investor in the Portfolio on matters pertaining to the Portfolio
because the 1940 Act requires approval of the matter by an investment
company's shareholders, the Fund will hold a meeting of its shareholders and
will cast all of its votes as an investor in the Portfolio in the same
proportion as directed by the votes of the Fund's shareholders. Fund
shareholders who do not vote will not affect the votes cast by the Fund at the
meeting of the Portfolio investors. The percentage of votes representing the
Fund's shareholders will be voted by the Fund in the same proportion as the
Fund's shareholders who do, in fact, vote. Certain changes in the Portfolio's
investment objective, policies or limitations may require the Fund to withdraw
its investment in the Portfolio. Any such withdrawal could result in a
distribution in kind of portfolio securities (as opposed to a cash
distribution from the Portfolio). If securities are distributed, the Fund
could incur brokerage, tax or other charges in converting the securities to
cash. In addition, the distribution in kind may result in a less diversified
portfolio of investments or adversely affect the liquidity of the Fund.
Notwithstanding the above, there are other means for meeting shareholder
redemption requests, such as borrowing.

The Fund may withdraw its investment in the Portfolio at any time, if the
Trustees of the Trust determine that it is in the best interests of the Fund to
do so. Upon any such withdrawal, the Trustees of the Trust would consider what
action might be taken, including investing the Fund's Assets in another pooled
investment entity having the same investment objective and policies as the Fund
or retaining an investment adviser to manage the Fund's assets in accordance
with the investment policies described above with respect to the Portfolio.

For descriptions of the investment objective, policies and limitations of the
Portfolio, see "Investment Objective," "Investment Policies," and "Investment
Limitations" herein and in the Statement of Additional Information. For
descriptions of the management of the Portfolio, see "Management of the Trust
and Federated Portfolios" herein and in the Statement of Additional Information.
For descriptions of the expenses of the Portfolio, see "Management of the Trust
and Federated Portfolios" and "Expenses" below.

INFORMATION ABOUT THE TRUST AND FEDERATED PORTFOLIOS
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST AND FEDERATED PORTFOLIOS

BOARD OF TRUSTEES. Each of the Trust and Federated Portfolios is managed by
its Board of Trustees. The respective Trustees are responsible for managing the
business affairs of the Trust and Federated Portfolios and for exercising all
the powers of the Trust and Federated Portfolios except those reserved for the
shareholders and investors, respectively. The Executive Committee of each Board
of Trustees handles the Board's responsibilities between meetings of the Board.

A majority of the disinterested Trustees have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust and of the
Federated Portfolios, up to and including creating a separate board of trustees.
See "Management of the Trust and of Federated Portfolios" in the Statement of
Additional Information for more information about the Trustees and officers of
the Trust and of Federated Portfolios.

INVESTMENT ADVISER. The Fund seeks to achieve its investment objective by
investing all of its Assets in the Portfolio, which has the same investment
objective, policies, and limitations as the Fund. Federated Management (the
"Adviser") is responsible for the management of the assets of the Portfolio,
pursuant to an investment advisory agreement (the "Advisory Agreement") with
Federated Portfolios on behalf of the Portfolio. Federated Management has
delegated the daily management of the security holdings of the Portfolio to U.S.
Trust Company, acting as sub-adviser.

Subject to the general guidance and policies set by the Trustees of Federated
Portfolios, the Adviser provides general supervision over the investment
management functions performed by U.S. Trust Company. The Adviser closely
monitors U.S. Trust Company's application of the Portfolio's investment policies
and strategies, and regularly evaluates U.S. Trust Company's investment results
and trading practices.

ADVISORY FEES. For its services under the Advisory Agreement, the Adviser is
entitled to receive from the Portfolio a fee accrued daily and paid monthly at
an annual rate equal to .25 of 1% of the Portfolio's average daily net assets.
The Adviser has agreed to currently waive all investment advisory fees with
respect to the Portfolio. This waiver may be terminated at any time. The Adviser
has also undertaken to reimburse the Portfolio for operating expenses in excess
of limitations established by certain states. This does not include
reimbursement to the Fund of any expenses incurred by its shareholders who use
the transfer agent's subaccounting facilities.

ADVISER'S BACKGROUND. Federated Management, a Delaware business trust
organized on April 11, 1989, is a registered investment adviser under the
Investment Advisers Act of 1940. It is a subsidiary of Federated Investors. All
of the Class A (voting) shares of Federated Investors are owned by a trust, the
trustees of which are John F. Donahue, Chairman and Trustee of Federated
Investors, Mr. Donahue's wife, and Mr. Donahue's son, J. Christopher Donahue,
who is President and Trustee of Federated Investors.

Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $80 billion invested across more than 250 funds
under management and/or administration by its subsidiaries, as of
December 31, 1995, Federated Investors is one of the largest mutual fund
investment managers in the United States. With more than 1,800 employees,
Federated continues to be led by the management who founded the company in 1955.
Federated funds are presently at work in and through 4,000 financial
institutions nationwide. More than 100,000 investment professionals have
selected Federated funds for their clients.

Susan M. Nason has been the Portfolio's portfolio manager since its inception.
Ms. Nason joined Federated Investors in 1987 and has been a Vice President of
the Adviser since 1993. Ms. Nason served as an Assistant Vice President of the
Adviser from 1990 until 1992, and from 1987 until 1990 she acted as an
investment analyst. Ms. Nason is a Chartered Financial Analyst and received her
M.B.A. in Finance from Carnegie Mellon University.

SUB-ADVISER. Federated Management has delegated the daily management of the
Portfolio's security holdings to U.S. Trust Company. U.S. Trust Company is
located at 770 Broadway, New York, New York. Subject to the general guidance and
policies set by the Trustees of Federated Portfolios, Federated Management
closely monitors U.S. Trust Company's application of the Portfolio's investment
policies and strategies, and regularly evaluates U.S. Trust Company's investment
results and trading practices.

SUB-ADVISORY FEES. Pursuant to a Sub-Advisory Agreement (the "Sub-Advisory
Agreement") between the Adviser and U.S. Trust Company, U.S. Trust Company makes
the day-to-day investment decisions and portfolio selections for the Portfolio,
consistent with the general guidelines and policies established by the Adviser
and the Trustees of Federated Portfolios. For the investment management services
it provides to the Portfolio, U.S. Trust Company is compensated only by the
Adviser, and receives no fees directly from the Fund or the Portfolio. For its
services under the Sub-Advisory Agreement, U.S. Trust Company is entitled to
receive from the Adviser a fee accrued daily and paid monthly at an annual rate
equal to .12 of 1% of the Portfolio's average daily net assets. U.S. Trust
Company has agreed to currently waive all sub-advisory fees with respect to the
Portfolio, although this waiver may be terminated at any time. U.S. Trust
Company furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Portfolio's investments and effecting
securities transactions for the Portfolio.

SUB-ADVISER'S BACKGROUND. U.S. Trust Company is a state-chartered bank and
trust company which provides trust and banking services to individuals,
corporations and institutions, both nationally and internationally, including
investment management, estate and trust administration, financial planning,
corporate trust and agency services, and personal and corporate banking. U.S.
Trust Company is a member bank of the Federal Reserve System and the Federal
Deposit Insurance Corporation and is one of the twelve members of the New York
Clearing House Association. On June 30, 1995, U.S. Trust Company's Asset
Management Group had approximately $41.2 billion in assets under management.
U.S. Trust Company, which has its principal offices at 114 West 47th Street,
New York, New York, is a subsidiary of U.S. Trust Corporation, a registered
bank holding company. U.S. Trust Company also serves as investment adviser to
Excelsior Funds, Inc. (formerly known as UST Master Funds, Inc.), Excelsior
Tax-Exempt Funds, Inc. (formerly known as UST Master Tax-Exempt Funds, Inc.),
and Excelsior Institutional Trust, all of which are registered investment
companies. U.S. Trust Company also serves as investment adviser to the UST
Variable Series, Inc.

It is the responsibility of U.S. Trust Company in its capacity as sub-adviser to
make the day-to-day investment decisions for the Portfolio and to place the
purchase and sales orders for securities transactions of the Portfolio, subject
to the general supervision of Federated Management. U.S. Trust Company furnishes
at its own expense all services, facilities and personnel necessary in
connection with managing the Portfolio's investments and effecting securities
transactions for the Portfolio.

Bruce Tavel, Senior Vice President, and Cyril M. Theccanat, Vice President, of
U.S. Trust Company, Structured Investment Management Department, have been
portfolio managers of the Portfolio since its inception and are responsible for
the day-to-day management of the Portfolio.

Mr. Theccanat has been managing structured investment portfolios at U.S. Trust
Company since January, 1990. Prior to this, Mr. Theccanat was a Vice President
of Drexel Burnham & Lambert, and was responsible for interest rate and foreign
exchange risk management. Mr. Tavel designs, develops and implements analytic
procedures and services utilizing quantitative and financial information. He has
over 17 years of experience in the execution of decision support systems at U.S.
Trust Company and previously at Lehman Asset Management, where he was Director
of Institutional Computer Services.

CERTAIN RELATIONSHIPS AND ACTIVITIES. U.S. Trust Company and its affiliates may
have deposit, loan and other commercial banking relationships with the issuers
of securities which may be purchased on behalf of the Portfolio, including
outstanding loans to such issuers which could be repaid in whole or in part with
the proceeds of securities so purchased. U.S. Trust Company has informed the
Portfolio that, in making investment decisions, it does not obtain or use
material inside information in its possession or in the possession of any of its
affiliates. In making investment recommendations for the Portfolio, U.S. Trust
Company will not inquire or take into consideration whether an issuer of
securities proposed for purchase or sale by the Portfolio is a customer of U.S.
Trust Company, its parents or its subsidiaries or affiliates. When dealing with
its customers, U.S. Trust Company, its parents, subsidiaries, and affiliates
will not inquire or take into consideration whether securities of such customers
are held by any fund managed by U.S. Trust Company or any such affiliate.

EXPENSES

The Fund invests through the Portfolio, which is a series of Federated
Portfolios. Expenses of Federated Portfolios (of which the Portfolio bears its
pro rata share) include the compensation of its Trustees who are not affiliated
with the Investment Managers; governmental fees, interest charges; taxes; fees
and expenses of independent auditors, of legal counsel and of any transfer
agent, administrator, registrar or dividend disbursing agent of Federated
Portfolios; insurance premiums; and expenses of calculating the net asset value
of, and the net income or interests in the Portfolio.

Expenses of Federated Portfolios also include expenses connected with the
execution, recording and settlement of security transactions; fees and expenses
of Federated Portfolio's custodian for all services to the Portfolio, including
safekeeping of funds and securities and maintaining required books and accounts;
expenses of preparing and mailing reports to investors and to governmental
offices and commissions; expenses of meetings of investors and Trustees; and the
advisory fees, if any, payable to the Adviser under the Advisory Agreement.

Holders of Fund Shares pay their allocable portion of Trust expenses. The Trust
expenses for which holders of Shares pay their allocable portion include, but
are not limited to: the cost of organizing the Trust and continuing its
existence; registering the Trust with federal and state securities authorities;
Trustees' fees; auditors' fees; the cost of meetings of Trustees; legal fees of
the Trust; association membership dues; and such non-recurring and extraordinary
items as may arise from time to time.

The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the Fund and Shares of the Fund;
investment advisory services; taxes and commissions; custodian fees; insurance
premiums; auditors' fees; and such non-recurring and extraordinary items as may
arise from time to time.

At present, the only expenses allocated to Shares as a class are expenses under
the Fund's Shareholder Services Agreement and the Fund's Distribution Plan which
relate to Shares.

However, the Trustees reserve the right to allocate certain other expenses to
holders of Shares as it deems appropriate ("Class Expenses"). In any case, Class
Expenses would be limited to: transfer agent fees as identified by the transfer
agent as attributable to holders of Shares; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and registration fees paid to state
securities commissions; expenses related to administrative personnel and
services as required to support holders of Shares; legal fees relating solely to
Shares; and Trustees' fees incurred as a result of issues relating solely to
Shares.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

Federated Securities Corp. is the principal distributor for Shares. It is a
Pennsylvania corporation organized on November 14, 1969, and is the principal
distributor for a number of investment companies. Federated Securities Corp. is
a subsidiary of Federated Investors.

DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan adopted
in accordance with Investment Company Act Rule 12b-1 (the "Distribution Plan"),
the Fund may pay to the distributor an amount, computed at an annual rate of
0.25% of the average daily net asset value of Shares, to finance any activity
which is principally intended to result in the sale of Shares subject to the
Distribution Plan. The distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers, and
broker/dealers to provide sales services or distribution-related support
services as agents for their clients or customers.

The Distribution Plan is a compensation-type plan. As such, the Fund makes no
payments to the distributor except as described above. Therefore, the Fund does
not pay for unreimbursed expenses of the distributor, including amounts expended
by the distributor in excess of amounts received by it from the Fund, interest,
carrying, or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Distribution Plan.

In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25% of the average daily net asset value of
Shares, computed at an annual rate, to obtain certain personal services for
shareholders and for the maintenance of shareholder accounts. From time to time
and for such periods as deemed appropriate, the amount stated above may be
reduced voluntarily.

Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform shareholder services directly or will select financial
institutions to perform shareholder services. Financial institutions will
receive fees based upon Shares owned by their clients or customers. The
schedules of such fees and the basis upon which fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments made
pursuant to the Distribution Plan and Shareholder Services Agreement, Federated
Securities Corp. and Federated Shareholder Services, from their own assets, may
pay financial institutions supplemental fees for the performance of substantial
sales services, distribution-related support services, or shareholder services.
The support may include sponsoring sales, educational and training seminars for
their employees at recreational-type facilities, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the financial
institution sells or may sell and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Adviser or its affiliates, and not the
Fund.

The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or savings association) from being an underwriter or distributor of most
securities. In the event the Glass-Steagall Act is deemed to prohibit depository
institutions from acting in the capacities described above or should Congress
relax current restrictions on depository institutions, the Trustees will
consider appropriate changes in the services.

State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.

The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the plans.

ADMINISTRATION OF THE TRUST

ADMINISTRATIVE SERVICES. Federated Services Company, through its subsidiary
Federated Administrative Services, provides administrative personnel and
services (including certain legal and financial reporting services) necessary to
operate the Fund. Federated Services Company, a Pennsylvania corporation, is a
subsidiary of Federated Investors and is located in Pittsburgh, Pennsylvania.
Federated Services Company provides these services at an annual rate, accrued
daily and paid monthly, which relates to the average aggregate daily net assets
of the Fund as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS OF THE FUND
<S> <C>
0.1000 of 1% on the first $250 million
0.0875 of 1% on the next $250 million
0.0750 of 1% on the next $250 million
0.0700 of 1% on assets in excess of $750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least $60,000
per fund and $30,000 per each additional class of shares. Federated Services
Company may choose voluntarily to waive a portion of its fee.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT. Federated Shareholder Services
Company, Boston, Massachusetts, a subsidiary of Federated Services Company, is
transfer agent for Shares of the Fund and dividend disbursing agent for the
Fund.

SERVICE PROVIDERS OF THE PORTFOLIO

Federated Shareholder Services Company serves as transfer agent and dividend
disbursing agent for Federated Portfolios.

Federated Securities Corp. is the placement agent for investments in
the Portfolio but receives no fee for such services.

Federated Services Company, through its subsidiary Federated Administrative
Services, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Portfolio.
Federated Services Company is entitled to receive a fee from the
Portfolio accrued daily and paid monthly at an annual rate of up to 0.05% of the
average daily net assets of the Portfolio, subject to a minimum of $60,000 for
the Portfolio (unless waived). From time to time, Federated Services Company
may waive all or a portion of the administrative fee. Federated Services Company
also maintains the Portfolio's accounting records.

Federated Investors and its subsidiaries have agreed to waive fees and reimburse
expenses in order to maintain total operating expenses (after waivers and
reimbursements) of the Portfolio at no greater than 0.20% of average net assets
for the twelve month period following January 2, 1996.

NET ASSET VALUE
- --------------------------------------------------------------------------------

The Fund's net asset value per share fluctuates. The net asset value per share
for Shares is determined by adding the interest of the Shares in the market
value of all securities and other assets of the Fund, subtracting the interest
of the Shares in the liabilities of the Fund and those attributable to Shares,
and dividing the remainder by the total number of Shares outstanding. Since the
Fund will invest all of its Assets in the Portfolio, the value of the Fund's
Assets will be equal to the value of its beneficial interest in the Portfolio.

INVESTING IN INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.

To purchase Shares, open an account by calling Federated Securities Corp.
Information needed to establish an account will be taken over the telephone. The
Fund reserves the right to reject any purchase request.

BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal wire funds must be received before 3:00 p.m.
(Eastern time) on the next business day following the order. Federal funds
should be wired as follows: Federated Shareholder Services Company, c/o State
Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For
Credit to: Federated Bond Index Fund--Institutional Service Shares; Fund Number
(this number can be found on the account statement or by contacting the Fund);
Group Number or Wire Order Number; Nominee or Institution Name; and ABA Number
011000028. Shares cannot be purchased by wire on holidays when wire transfers
are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.

BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Bond Index Fund --Institutional Service Shares to Federated Shareholder Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by mail are
considered received after payment by check is converted by the transfer agent's
bank, State Street Bank, into federal funds. This is generally the next business
day after State Street Bank receives the check.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $5,000. Subsequent investments must
be in amounts of at least $50. The minimum initial investment in Shares is $50
if the investment is in a retirement program, for which subsequent investments
must also be in amounts of at least $50. An institutional investor's minimum
investment will be calculated by combining all accounts it maintains with the
Trust. Accounts established through a non-affiliated bank or broker may be
subject to a smaller minimum investment.
WHAT SHARES COST

Shares are sold at their net asset value per Share next determined after an
order is received. There is no sales charge imposed by the Fund. Investors who
purchase Shares through a non-affiliated bank or broker may be charged an
additional service fee by that bank or broker.

The net asset value of the Fund is determined as of the close of trading
(normally 4:00 p.m., Eastern time) (the "Valuation Time") on the New York Stock
Exchange, Monday through Friday, except on (i) days on which there are not
sufficient changes in the value of the Portfolio's portfolio securities such
that its net asset value might be materially affected; (ii) days during which no
Shares are tendered for redemption and no orders to purchase Shares are
received; and (iii) the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Any day on which the Fund may determine its net asset value, as
described above, may be referred to herein as a "Business Day."

Assets in the Portfolio which are traded on a recognized domestic exchange or
are quoted on a national securities market are valued at the last sale price on
the securities exchange on which such securities are primarily traded or at the
last sale price on such national securities market. Securities traded only on
over-the-counter markets are valued on the basis of closing over-the-counter bid
prices. Restricted securities, securities for which market quotations are not
readily available, and other assets are valued at fair value, pursuant to
guidelines adopted by the Trustees of Federated Portfolios. Absent unusual
circumstances, debt securities maturing in 60 days or less are valued at
amortized cost. Some of the securities acquired by the Portfolio may be traded
on over-the-counter markets on days which are not Business Days. In such cases,
the net asset value per share of Fund Shares may be significantly affected on
days when shareholders neither purchase nor redeem their shares of beneficial
interest in the Fund. The Portfolio may use one or more independent pricing
services in connection with the pricing of its portfolio securities.

SUBACCOUNTING SERVICES

Institutions 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 provided which may be related to the ownership of Shares. This
prospectus should, therefore, be read together with any agreement between the
customer and the institution with regard to the services provided, the fees
charged for those services, and any restrictions and limitations imposed.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Fund, Federated Shareholder Services Company
maintains a share account for each shareholder. Certificates for
Shares of the Fund are not issued unless requested by contacting the Fund or
Federated Shareholder Services Company in writing.

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during the
month.

DIVIDENDS

Dividends equal to all or substantially all of the Fund's net investment income
allocable to Shares are declared daily and paid monthly. The Fund's net income
for dividend purposes consists of (i) all accrued income, whether taxable or
tax-exempt, plus discount earned on the Fund's assets, less (ii) amortization of
premium on such assets, accrued expenses directly attributable to the Fund and
the general expenses of the Trust (e.g., legal, administrative, accounting, and
Trustees' fees). Dividends and distributions will reduce the net asset value of
the Fund by the amount of the dividend or distribution. Dividends are declared
just prior to determining net asset value. If an order for Shares is placed on
the preceding Business Day, Shares purchased by wire begin earning dividends on
the Business Day wire payment is received by State Street Bank. If the order for
Shares and payment by wire are received on the same day, Shares begin earning
dividends on the next Business Day. Shares purchased by check begin earning
dividends on the Business Day after the check is converted by the transfer agent
into federal funds. Dividends are automatically reinvested on payment dates in
additional Shares unless cash payments are requested by contacting the Fund.

CAPITAL GAINS

Long-term capital gains realized by the Fund, if any, will be distributed once a
year, usually in December, if the Fund's profits during that year from the sale
of securities held for longer than the applicable period exceed losses during
such year from the sale of securities together with any net capital losses
carried forward from prior years (to the extent not used to offset short-term
capital gains). Net short-term capital gains realized during the Fund's fiscal
year will also be distributed during such year.

RETIREMENT PLANS

Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, contact Federated Securities Corp. and
consult a tax adviser.

REDEEMING INSTITUTIONAL SERVICE SHARES
- --------------------------------------------------------------------------------

The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or by written request.

TELEPHONE REDEMPTION

Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern time). Telephone redemption instructions may be recorded. All proceeds
will normally be wire transferred the following business day, but in no event
more than seven days, to the shareholder's account at a domestic commercial
bank that is a member of the Federal Reserve System. Proceeds from redemption
requests received on holidays when wire transfers are restricted will be wired
the following Business Day. Questions about telephone redemptions on days when
wire transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.

An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as written requests, should be considered. If
reasonable procedures are not followed by the Fund, it may be liable for losses
due to unauthorized or fraudulent telephone instructions.

WRITTEN REQUESTS

Shares may also be redeemed in any amount by mailing a written request to:
Federated Shareholder Services Company, P.O. Box 8600, Boston, Massachusetts
02266-8600. If Share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail to the
address noted above.

The written request should state: the Fund name and class of shares name; the
account number; and the number of shares to be redeemed or the dollar amount
requested. All owners of the account must sign the request exactly as the Shares
are registered. Normally, a check for the proceeds is mailed within one business
day, but in no event more than seven days, after the receipt of a proper written
redemption request. Dividends are paid up to and including the day that a
redemption request is processed.

Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by a commercial
or savings bank, trust company or savings association whose deposits are insured
by an organization which is administered by the Federal Deposit Insurance
Corporation; a member firm of a domestic stock exchange; or any other "eligible
guarantor institution," as defined in the Securities Exchange Act of 1934. The
Fund does not accept signatures guaranteed by a notary public.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $5,000. This requirement
does not apply, however, if the balance falls below $5,000 because of changes in
the Fund's net asset value.

Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER 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 all classes of
each series in the Trust have equal voting rights except that in matters
affecting only a particular series or class, only shares of that series or class
are entitled to vote. As a Massachusetts business trust, the Trust is not
required to hold annual shareholder meetings. Shareholder approval will be
sought only for certain changes in the Fund's operation (e.g., to approve a
change in the Fund's fundamental investment policies or limitations) and for the
election of Trustees under certain circumstances. For additional information on
voting by the Fund and its shareholders on matters relating to the Portfolio,
see "Special Information Concerning Hub and Spoke."

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders for this purpose shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of the Trust entitled to vote. Shareholders of all series of
the Trust will vote together to elect Trustees of the Trust and for certain
other matters. Under certain circumstances, the shareholders of one or more
series of the Trust could control the outcome of these votes.

The Fund invests in the Portfolio, a series of Federated Portfolios, which is a
business trust organized under the laws of the Commonwealth of Massachusetts.
The interests in Federated Portfolios are divided into separate series or
portfolios. Investors in each series of Federated Portfolios will vote
separately or together in the same manner as shareholders of the Trust's series.
Federated Portfolios' Declaration of Trust provides that the Fund and other
entities investing in the Portfolio and the other series of Federated Portfolios
(e.g., other investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the series in which they invest (and of no other series) and of the overall
obligations of Federated Portfolios. However, the Trustees of the Trust believe
that the risk of the Fund incurring financial loss on account of such liability
is limited to circumstances in which neither the Portfolio nor Federated
Portfolios are able to meet their obligations, and that neither the Fund nor its
shareholders will be exposed to a material risk of liability by reason of the
Fund's investment in the Portfolio.

For more information regarding the Trustees of the Trust and of Federated
Portfolios, see "Management of Trust and Federated Portfolios" in the Statement
of Additional Information.

EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------

The Glass-Steagall Act and other banking laws and regulations presently
prohibit a bank holding company registered under the Banking Holding Company
Act of 1956 such as U.S. Trust Company, or any affiliate thereof, from
sponsoring, organizing or controlling a registered, open-end investment company
that is continuously engaged in the issuance of its shares,
and from issuing, underwriting, selling or distributing securities in general.
Such laws and regulations do not prohibit such a holding company or affiliate
from acting as investment adviser, transfer agent, or custodian to such
investment company or from purchasing shares of such a company as agent for and
upon the order of their customers. Based on advice of its counsel, it is the
position of U.S. Trust Company that the investment sub-advisory services it
performs under the Sub-Advisory Agreement with the Adviser on behalf of the
Portfolio do not constitute underwriting activities and are consistent with the
requirements of the Glass-Steagall Act. Future changes in either federal or
state statutes and regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, as well as future judicial or
administrative decisions or interpretations of present or future statutes and
regulations, could prevent a bank from continuing to perform all or part of
the above services. If a bank were prohibited from so acting, alternative means
for continuing the management of the Portfolio and the Fund would be sought. In
such event, changes in the operation of the Portfolio and the Fund might occur.
The Trustees of Federated Portfolios and of the Trust do not expect that
investors in the Portfolio or shareholders of the Fund would suffer any adverse
financial consequences as a result of these occurrences.

TAX INFORMATION
- --------------------------------------------------------------------------------

Each year the Trust intents to qualify the Fund and elect that the Fund be
treated as a separate "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). Provided the Fund meets all income,
distribution and diversification requirements of the Code, and distributes
substantially all of its net investment income and realized capital gains to
shareholders in accordance with the timing requirements imposed by the Code, no
federal income or excise taxes will be required to be paid from the Fund. If the
Fund fails to qualify as a "regulated investment company" in any year, the Fund
would incur a regular corporate federal income tax upon its taxable income.
Whether or not the Fund qualifies as a RIC, the Fund's distributions would
generally be taxable as ordinary dividend income to shareholders. With respect
to the Fund, the Portfolio in which it invests is also not expected to be
required to pay any federal income or excise taxes.

Shareholders of the Fund normally will have to pay federal income taxes and any
state or local taxes on the dividends and net capital gain distributions, if
any, they receive from the Fund. Dividends from ordinary income and any
distributions from net short-term capital gains are taxable to Fund shareholders
as ordinary income for federal income tax purposes. Distributions of net capital
gains are taxable to Fund shareholders as long-term capital gains without regard
to the length of time the Fund shareholders have held their Shares. Dividends
and distributions, if any, paid to shareholders will be treated in the same
manner for federal income tax purposes whether received in cash or reinvested in
additional Shares of the Fund.

Dividends declared in October, November or December of any year payable to Fund
shareholders of record on a specified date in such months will be deemed to have
been received by Fund shareholders and paid by the Fund on December 31 of such
year in the event such dividends are actually paid during January of the
following year.

At the end of each calendar year, each Fund shareholder receives information
for tax purposes on the dividends and other distributions received during that
calendar year, including the portion thereof taxable as ordinary income, the
portion taxable as long-term capital gains, the portion (if any) which
constitutes a return of capital (which is generally free of tax but results in
a basis reduction), and the amount of dividends (if any) which may qualify for
the dividends-received deduction for corporations.

In general, any gain or loss realized upon a taxable disposition of Shares of
the Fund by a shareholder that holds such Shares as a capital asset will be
treated as a long-term capital gain or loss if the Shares have been held for
more than 12 months and otherwise as a short-term capital gain or loss. However,
any loss realized upon a redemption of Shares in the Fund held for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those Shares. Any loss
realized upon a disposition of Shares may also be disallowed under rules
relating to wash sales.

The Fund may be required to withhold federal income tax at the rate of 31% from
all taxable distributions and redemption proceeds payable to shareholders who do
not provide the Fund with their correct taxpayer identification number or make
required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Such withholding is not an
additional tax. Any amounts withheld may be credited against the Fund
shareholder's federal income tax liability.

Under current law, neither the Trust, as a business trust, nor the Fund is
liable for any income or franchise tax in the Commonwealth of Massachusetts as
long as the Fund continues to qualify as a "regulated investment company" under
the Code.

The foregoing discussion is intended for general information only. An investor
should consult with his or her own tax adviser as to the tax consequences of an
investment in the Fund, including the status of distributions from the Fund
under applicable state and local laws.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund advertises its total return and yield for Shares.

Total return represents the change, over a specified period of time, in the
value of an investment in Shares of the Fund after reinvesting all income and
capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.

The yield of Shares is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by Shares
over a thirty-day period by the maximum offering price per share of Shares on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
Shares and, therefore, may not correlate to the dividends or other distributions
paid to shareholders.

The Fund is sold without any sales charge or other similar non-recurring
charges.

Total return and yield will be calculated separately for Institutional Shares
and Institutional Service Shares.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund also offers another class of shares called Institutional Shares.
Institutional Shares are sold at net asset value primarily to accounts for which
financial institutions act in a fiduciary or agency capacity, or other accounts
where the financial institution maintains master accounts with an aggregate
investment of at least $400 million in certain funds which are advised or
distributed by affiliates of Federated Investors. Institutional Shares are also
made available to financial intermediaries, as well as private and public
organizations and are subject to a minimum initial investment of $25,000.

Institutional Shares and Institutional Service Shares are subject to certain of
the same expenses; however, Institutional Service Shares are distributed under a
12b-1 Plan adopted by the Fund. This, plus other expense differences between
Institutional Shares and Institutional Service Shares, may affect the
performance of each class.
To obtain more information and a prospectus for Institutional Shares, investors
may call 1-800-245-4270.

MISCELLANEOUS
- --------------------------------------------------------------------------------

The Fund's Statement of Additional Information bears the same date as this
prospectus and contains more detailed information about the Fund and the
Portfolio, including information related to (i) investment policies and
restrictions of the Fund and the Portfolio, (ii) Trustees and officers of the
Trust and of Federated Portfolios, (iii) portfolio transactions and any
brokerage commissions, (iv) rights and liabilities of shareholders of the Trust
and investors in Federated Portfolios, (v) additional performance information,
including a description of the Fund's calculation of yield and total return, and
(vi) determination of the net asset value of Shares of the Fund.

In addition, the Fund's Statement of Additional Information contains financial
statements of Excelsior Institutional Bond Index Fund, a series of Excelsior
Institutional Trust, and Bond Market Portfolio, a series of St. James Portfolios
for their fiscal year ended May 31, 1995 (audited) and the six months ended
November 30, 1995 (unaudited). Excelsior Institutional Bond Index Fund invested
all of its investable assets in Bond Market Portfolio until December 29, 1995,
at which point it withdrew its assets and invested them in the Portfolio. Like
the Fund and the Portfolio, Excelsior Institutional Bond Index Fund and Bond
Market Portfolio operated in a Hub and Spoke structure. Their financial
information is included since they have the same investment objective and
policies as the Fund and Portfolio, the Portfolio succeeded to the financial
history and performance of Bond Market Portfolio, and the Fund and Excelsior
Institutional Bond Index Fund both are SpokeSM funds of the Portfolio. In this
regard, the performance of Excelsior Institutional Bond Index Fund is as
follows: cumulative total return for the period from inception (July 11, 1994)
to May 31, 1995 was 11.03%; the average annual total return for the twelve
months ended November 30, 1995 was 16.76%, and for the period from the date of
inception to November 30, 1995 was 12%. The 30-day yields for the periods ended
May 31, 1995 and November 30, 1995 were 6.74%, and 6.45%, respectively. Of
course, past performance is not indicative of future performance.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Bond Index Fund
Institutional Service Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Distributor for Federated Bond Index Fund and Placement Agent
for Bond Index Portfolio
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Investment Adviser for Bond Index Portfolio
Federated Management Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Sub-Adviser for Bond Index Portfolio
United States Trust Company of New York
114 West 47th Street
New York, New York 10036
- -----------------------------------------------------------------------------------------------------------------------

Custodian for Federated Bond Index Fund
State Street Bank and Trust Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- -----------------------------------------------------------------------------------------------------------------------

Custodian for Bond Index Portfolio
Investors Bank and Trust Company 79 Milk Street
7th Floor
Boston, Massachusetts 02205
- -----------------------------------------------------------------------------------------------------------------------

Administrator
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600
- -----------------------------------------------------------------------------------------------------------------------

Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania 15219
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

FEDERATED BOND
INDEX FUND
INSTITUTIONAL SERVICE SHARES
PROSPECTUS
An Open-End, Diversified Management
Investment Company

Prospectus dated March 5, 1996

[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

G01556-01-SS (3/96)

Cusip 313909202

FEDERATED BOND INDEX FUND
(A PORTFOLIO OF FEDERATED INVESTMENT TRUST)
INSTITUTIONAL SHARES
PROSPECTUS

The Institutional Shares of Federated Bond Index Fund (the "Fund") offered by
this prospectus represent interests in a diversified portfolio of securities
which is an investment portfolio of Federated Investment Trust (the "Trust"), an
open-end management investment company (a mutual fund). Institutional Shares are
sold at net asset value.

THE INSTITUTIONAL SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR
OBLIGATIONS OF ANY BANK (INCLUDING U.S. TRUST COMPANY), ARE NOT ENDORSED OR
GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.

This prospectus contains the information you should read and know before you
invest in Institutional Shares of the Fund. Keep this prospectus for future
reference.

The Fund has also filed a Statement of Additional Information for Institutional
Shares and Institutional Service Shares dated March 5, 1996, with the Securities
and Exchange Commission. The information contained in the Statement of
Additional Information is incorporated by reference into this prospectus. You
may request a copy of the Statement of Additional Information or a paper copy of
this prospectus, if you have received your prospectus electronically, free of
charge by calling 1-800-245-4270. To obtain other information or make inquiries
about the Fund, contact the Fund at the address listed in the back of this
prospectus.

Prospectus dated March 5, 1996

TABLE OF CONTENTS
- --------------------------------------------------------------------------------

SUMMARY OF FUND EXPENSES--
INSTITUTIONAL SHARES 1
- ------------------------------------------------------

GENERAL INFORMATION 2
- ------------------------------------------------------

INVESTMENT INFORMATION 2
- ------------------------------------------------------

Investment Objective 3
Investment Policies 3

Additional Investment Strategies
and Techniques; Risk Factors 6

Investment Limitations 12
Special Information Concerning Hub
and Spoke 12

INFORMATION ABOUT THE TRUST AND
FEDERATED PORTFOLIOS 14
- ------------------------------------------------------

Management of the Trust and Federated
Portfolios 14
Expenses 17
Distribution of Institutional Shares 18
Administration of the Trust 18
Service Providers of the Portfolio 19
NET ASSET VALUE 19
- ------------------------------------------------------

INVESTING IN INSTITUTIONAL SHARES 20
- ------------------------------------------------------

Share Purchases 20
Minimum Investment Required 20

What Shares Cost 20
Subaccounting Services 21
Certificates and Confirmations 21
Dividends 21
Capital Gains 22
Retirement Plans 22

REDEEMING INSTITUTIONAL SHARES 22
- ------------------------------------------------------

Telephone Redemption 22
Written Requests 23
Accounts With Low Balances 23

SHAREHOLDER INFORMATION 23
- ------------------------------------------------------

Voting Rights 23

EFFECT OF BANKING LAWS 24
- ------------------------------------------------------

TAX INFORMATION 25
- ------------------------------------------------------

PERFORMANCE INFORMATION 26
- ------------------------------------------------------

OTHER CLASSES OF SHARES 26
- ------------------------------------------------------

MISCELLANEOUS 27
- ------------------------------------------------------

ADDRESSES 28
- ------------------------------------------------------

SUMMARY OF FUND EXPENSES--INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------

Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)................................ None
Maximum Sales Charge Imposed on Reinvested Dividends (as a percentage of offering price).....................
None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds,
as applicable)............................................................................................. None
Redemption Fee (as a percentage of amount redeemed, if applicable)........................................... None
Exchange Fee................................................................................................. None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES
(As a percentage of projected average net assets)*

Management Fee (after waiver) (1)............................................................................ 0.00%
12b-1 Fee.................................................................................................... None
Total Other Expenses (after expense reimbursement by the Investment Managers and administrator).............. 0.29%
Shareholder Services Fee (after waiver) (2)................................................... 0.00%
Total Institutional Shares Operating Expenses (after waivers and reimbursements) (3)................. 0.29%

</TABLE>

(2) The maximum shareholder services fee is 0.25%.

(3) The Total Institutional Shares Operating Expenses are estimated to be 3.42%
absent the anticipated voluntary waivers of the management fee and the
shareholder services fee and the anticipated voluntary reimbursement of
certain other operating expenses by the Investment Managers and administrator.

Total Institutional Shares Operating Expenses include the Fund's pro rata
share of the aggregate annual operating expenses of the Portfolio, in which
all of the investable assets of the Fund are invested. The Trustees of the
Trust considered the aggregate per share expenses of the Fund, the Fund's pro
rata share of the expenses for the Portfolio and the potential economies of
scale the Fund could achieve by investing its assets in the Portfolio. As a
result, the Trustees believe that the aggregate per share expenses of the Fund
and the Fund's pro rata share of the expenses for the Portfolio will be less
than or approximately equal to the expenses which the Fund would incur if it
retained the services of an investment adviser and the Assets of the Fund were
invested directly in the type of securities held by the Portfolio. Federated
Investors has agreed to maintain total operating expenses (after waivers and
reimbursements) of the Portfolio at no greater than 0.20% of average net assets
of the Portfolio for the twelve month period following January 2, 1996.

* Total Institutional Shares Operating Expenses in the table above are
estimated based on expenses expected to be incurred during the fiscal year
ending May 31, 1996. During the course of this period, expenses may be more
or less than the amount shown.

THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE VARIOUS
COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL SHARES OF THE FUND WILL
BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE
VARIOUS COSTS AND EXPENSES, SEE "INVESTING IN INSTITUTIONAL SHARES" AND
"INFORMATION ABOUT THE TRUST AND FEDERATED PORTFOLIOS." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS
<S> <C> <C>
You would pay the following expenses on a $1,000 investment assuming (1) 5% annual return and
(2) redemption at the end of each time period................................................... $ 3 $ 9

</TABLE>

GENERAL INFORMATION
- --------------------------------------------------------------------------------

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated October 3, 1995. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees of the Trust (the "Trustees") has established two classes of shares of
the Fund, known as Institutional Shares and Institutional Service Shares. This
prospectus relates only to Institutional Shares.

Institutional Shares ("Shares") are sold primarily to accounts for which
financial institutions act in a fiduciary or agency capacity, or other accounts
where the financial institution maintains master accounts with an aggregate
investment of at least $400 million in certain funds which are advised or
distributed by affiliates of Federated Investors. Shares are also made available
to financial intermediaries, as well as public and private organizations. An
investment in the Fund serves as a convenient means of accumulating an interest
in a professionally managed, diversified portfolio of U.S. investment grade
fixed income securities that attempt to provide investment results that
correspond to the Lehman Brothers Aggregate Bond Index, a broad market-weighted
index which encompasses U.S. Treasury and agency securities, corporate
investment grade bonds and mortgage-backed securities, each with maturities
greater than one year. A minimum initial investment of $25,000 over a 90-day
period is required, unless the investment is in a retirement program, in which
case the minimum initial investment is $50. Subsequent investments must be in
amounts of at least $100, or $50 for retirement programs.

Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

Unless indicated otherwise, the investment policies discussed below may be
changed without the approval of the Fund's shareholders (or the investors of the
Portfolio). Shareholders will be given 30 days' prior notice before any material
change becomes effective.

INVESTMENT PHILOSOPHY. The Portfolio is not managed pursuant to
traditional methods of active investment management, which involve the
buying and selling of securities based upon economic, financial and market
analyses and investment judgment. Instead, the Portfolio,
utilizing a passive or indexing investment approach, will attempt to
duplicate the investment performance of the Aggregate Bond Index.

The Portfolio seeks to duplicate the investment performance of the
Aggregate Bond Index through statistical sampling procedures, that is, the
Portfolio will invest in a selected group-- not the entire universe--of
securities in the Aggregate Bond Index. This group of securities, when
taken together, is expected to perform similarly to the Aggregate Bond
Index as a whole. The sampling technique is expected to enable the
Portfolio to track the price movements and performance of the Aggregate
Bond Index, while minimizing brokerage, custodial and accounting costs.

The Trust expects that there will be a close correlation between the
Portfolio's performance and that of the Aggregate Bond Index in both rising
and falling markets. The Portfolio will attempt to maximize the correlation
between its performance and that of the Aggregate Bond Index. The Investment
Managers seek a correlation of 0.95 or better. In the event that a
correlation of 0.95 or better is not achieved, the Trustees of
Federated Portfolios will review methods for increasing such correlation
with the Investment Managers, such as through adjustments in securities
holdings of the Portfolio. A correlation of 1.0 would indicate a perfect
correlation, which would be achieved when the Portfolio's net asset value,
including the value of its dividend and capital gains distributions,
increases or decreases in exact proportion to changes in the Aggregate Bond
Index. The Portfolio's Investment Managers monitor the correlation between
the performance of the Portfolio and the Aggregate Bond Index on a regular
basis. Factors such as the size of the Portfolio's securities holdings,
transaction costs, management fees and expenses, brokerage commissions and
fees, the extent and timing of cash flows into and out of the Portfolio,
and changes in the securities markets and the index itself, are expected to
account for any differences between the Portfolio's performance and that of
the Aggregate Bond Index.

As of December 31, 1995, the following classes of fixed income securities
represented the stated proportions of the total market value of the Aggregate
Bond Index:
<TABLE>
<S> <C>
U.S. Treasury and government agency securities 53%
Corporate Bonds 18%
Mortgage- and asset-backed securities 29%
</TABLE>

The Portfolio has a policy of weighing its holdings so as to approximate the
relative composition of the securities contained in the Aggregate Bond Index,
under normal circumstances. Therefore, for each of the three classes of fixed
income securities listed above, the variation in weighting between the assets
held by the Portfolio and the assets in the Aggregate Bond Index is not
expected to be greater than plus or minus 5%. These weightings will be
monitored at the time securities are purchased by the Portfolio.

CORPORATE BONDS. The Portfolio may purchase debt securities of United States
corporations only if they are deemed investment grade, that is, they carry a
rating of at least Baa from Moody's or BBB from S&P or, if not rated by these
rating agencies, are judged by the Investment Managers to be of comparable
quality. With respect to securities rated Baa by Moody's and BBB by S&P,
interest and principal payments are regarded as adequate for the present;
however, securities with these ratings may have speculative characteristics,
and changes in economic conditions or other circumstances are more likely to
lead to a weakened capacity to make interest and principal payments than is the
case with higher grade bonds. The Portfolio intends to dispose of, in an
orderly manner, any security which is downgraded below investment grade
subsequent to its purchase. See the Appendix to the Statement of Additional
Information for a more detailed explanation of these ratings.

ADDITIONAL INVESTMENT STRATEGIES AND TECHNIQUES; RISK FACTORS
The Portfolio may utilize the investment strategies and techniques described
below.

To reduce transaction costs, the Portfolio's securities holdings will not be
automatically traded or re-balanced to reflect changes in the Aggregate Bond
Index. The Portfolio will seek to buy round lots of securities and may trade
large blocks of securities. These policies may cause a particular security to be
over- or under-represented in the Portfolio relative to its Index weighting or
result in its continued ownership by the Portfolio after its deletion from the
Index, thereby reducing the correlation between the Portfolio and the Index. The
Portfolio is not required to buy or sell securities solely because the
percentage of its assets invested in Index securities changes when their market
values increase or decrease. In addition, in order to more closely correlate to
the return of the Index, the Portfolio may omit or remove Index securities
from its portfolio and substitute other Index securities if the Investment
Managers believe the removed security to be insufficiently liquid or believe
the merit of the investment has been substantially impaired by extraordinary
events or financial conditions. The Investment Managers seek a correlation of
0.95 or better between the performance of the Portfolio and that of the
Aggregate Bond Index. See "Investment Philosophy and Strategies" above.

REVERSE REPURCHASE AGREEMENTS. The Portfolio may borrow funds, in an amount up
to one-third of the value of its total assets, for temporary or emergency
purposes, such as meeting larger than anticipated redemption requests, and not
for leverage. The Portfolio may also agree to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase them
at a mutually agreed date and price (a "reverse repurchase agreement"). The
Securities and Exchange Commission ("SEC") views reverse repurchase agreements
as a form of borrowing. At the time the Portfolio enters into a reverse
repurchase agreement, it will place in a segregated custodial account cash, U.S.
Government securities or high-grade debt obligations having a value equal to the
repurchase price, including accrued interest. Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Portfolio
may decline below the repurchase price of those securities.

The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these techniques by the
Portfolio may reduce certain risks associated with owning its portfolio
securities, these investments entail certain other risks. If the Investment
Managers apply a strategy at an inappropriate time or judge market conditions or
trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's potential to realize gains as
well as limit its exposure to losses. The Portfolio could also experience losses
if the prices of its options and futures positions were poorly correlated with
its other investments, or if it could not close out its positions because of an
illiquid secondary market. In addition, the Portfolio will incur transaction
costs, including trading commissions and option premiums, in connection with its
futures and options transactions and these transactions could significantly
increase the Portfolio's turnover rate. For more information on these investment
techniques, see the Statement of Additional Information.

Short-term investments include: obligations of the U.S. Government and its
agencies or instrumentalities; commercial paper and other debt securities;
variable and floating rate securities; bank obligations; repurchase agreements
collateralized by these securities; and shares of other investment companies
that primarily invest in any of the above referenced securities. Commercial
paper consists of short-term, unsecured promissory notes issued to finance
short-term credit needs. Other corporate obligations in which the Portfolio may
invest consist of high quality, U.S. dollar-denominated short-term bonds and
notes (including variable amount master demand notes) issued by domestic and
foreign corporations. The Portfolio may invest in commercial paper issued by
major corporations in reliance on the exemption from registration afforded by
Section 3(a)(3) of the 1933 Act. Such commercial paper may be issued only to
finance current transactions and must mature in nine months or less. Trading of
such commercial paper is conducted primarily by institutional investors through
investment dealers, and individual investor participation in the commercial
paper market is very limited.

The Portfolio may invest in U.S. dollar-denominated certificates of deposit,
time deposits, bankers' acceptances and other short-term obligations issued by
domestic banks and domestic or foreign branches or subsidiaries of foreign
banks. Certificates of deposit are certificates evidencing the obligation of a
bank to repay funds deposited with it for a specified period of time. Such
instruments include Yankee Certificates of Deposit ("Yankee CDs"), which are
certificates of deposit denominated in U.S. dollars and issued in the United
States by the domestic branch of a foreign bank. Time deposits are
non-negotiable deposits maintained in a banking institution for a specified
period of time at a stated interest rate. Time deposits which may be held by
the Portfolio are not insured by the Federal Deposit Insurance Corporation or
any other agency of the U.S. Government. The Portfolio will not invest more
than 15% of the value of its net assets in time deposits maturing in longer
than seven days and other instruments which are deemed illiquid or not readily
marketable. Bankers' acceptances are credit instruments evidencing the
obligation of a bank to pay a draft drawn on it by a customer. These
instruments reflect the obligation both of the bank and of the drawer to pay
the face amount of the instrument upon maturity. The other short-term
obligations in which the Portfolio may invest include uninsured, direct
obligations which have either fixed, floating or variable interest rates.

The Portfolio will limit its short-term investments to those U.S.
dollar-denominated instruments which are determined by or on behalf of the
Trustees of Federated Portfolios to present minimal credit risks and which are
of "high quality" as determined by a major rating service (i.e., rated P-1 by
Moody's or A-1 by S&P) or, in the case of instruments which are not rated, are
deemed to be of comparable quality pursuant to procedures established by the
Trustees of Federated Portfolios. The Portfolio may invest in obligations of
banks which at the date of investment have capital, surplus and undivided
profits (as of the date of their most recently published financial statements)
in excess of $100 million. Investments in high quality short-term instruments
may, in many circumstances, result in a lower yield than would be available from
investments in instruments with a lower quality or longer term.

CERTAIN OTHER OBLIGATIONS. Consistent with its investment objectives, policies
and restrictions, the Portfolio may also invest in participation interests,
guaranteed investment contracts and zero coupon obligations. See the Statement
of Additional Information. In order to allow for investments in new instruments
that may be created in the future, upon supplementing this prospectus, the
Portfolio may invest in obligations other than those listed previously,
provided such investments are consistent with the Portfolio's and Fund's
investment objective, policies and restrictions.

INVESTMENT LIMITATIONS

As a diversified investment company, 75% of the assets of the Portfolio are
represented by cash and cash items (including receivables), government
securities, securities of other investment companies, and other securities which
for purposes of this calculation are subject to the following fundamental
limitations: (a) the Portfolio may not invest more than 5% of its total assets
in the securities of any one issuer, and (b) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer. In addition, the
Portfolio may not invest 25% or more of its assets in the securities of issuers
in any one industry, unless the securities in a single industry were to comprise
25% or more of the Aggregate Bond Index in which case the Portfolio will invest
25% or more of its assets in that industry. These are fundamental investment
policies which may not be changed without investor approval.

SPECIAL INFORMATION CONCERNING HUB AND SPOKE

The investment objective of the Fund may be changed without the approval of the
Fund's shareholders but not without written notice thereof to the Fund's
shareholders thirty days prior to implementing the change. If there were a
change in the Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then-current
financial position and needs. The investment objective of the Portfolio may be
changed without the approval of the investors in the Portfolio, but not without
written notice thereof to the Portfolio's investors (and notice by the Fund to
its shareholders) thirty days prior to implementing the change. There can, of
course, be no assurance that the investment objective of the Fund or the
Portfolio will be achieved. See "Investment Limitations" in the Statement of
Additional Information for a description of the fundamental investment policies
and restrictions of the Portfolio and the Fund that cannot be changed without
approval by the holders of a "majority of the outstanding voting securities" (as
defined in the Investment Company Act of 1940 ("1940 Act")) of the Portfolio or
Fund. Except as stated otherwise, the investment objective, policies, strategies
and restrictions described herein and in the Statement of Additional Information
are non-fundamental.

Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may experience higher pro rata
operating expenses, thereby producing lower returns. Additionally, the Portfolio
may become less diverse, resulting in increased portfolio risk. Also, funds with
a greater pro rata ownership in the Portfolio could have effective voting
control over the operations of the Portfolio. (However, these situations also
exist for traditionally structured funds which have large or institutional
investors). Whenever the Fund is requested to vote on a matter pertaining to
the Portfolio, the Fund will vote its shares without a meeting of Fund
shareholders if the proposal is one, if which made with respect to the Fund,
would not require the vote of Fund shareholders, as long as such action
is permissible under applicable statutory and regulatory requirements.
Conversely, except as permitted by the Securities and Exchange Commission,
whenever the Fund is requested to vote as an investor in the Portfolio on
matters pertaining to the Portfolio because the 1940 Act requires approval of
the matter by an investment company's shareholders, the Fund will hold a
meeting of its shareholders and will cast all of its votes as an investor in
the Portfolio in the same proportion as directed by the votes of the Fund's
shareholders. Fund shareholders who do not vote will not affect the votes cast
by the Fund at the meeting of the Portfolio investors. The percentage of
votes representing the Fund's shareholders will be voted
by the Fund in the same proportion as the Fund's shareholders who do,
in fact, vote. Certain changes in the Portfolio's investment objective,
policies or limitations may require the Fund to withdraw its investment in the
Portfolio. Any such withdrawal could result in a distribution in kind of
portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or
adversely affect the liquidity of the Fund. Notwithstanding the above,
there are other means for meeting shareholder redemption requests, such as
borrowing.

INFORMATION ABOUT THE TRUST AND FEDERATED PORTFOLIOS
- --------------------------------------------------------------------------------

MANAGEMENT OF THE TRUST AND FEDERATED PORTFOLIOS

BOARD OF TRUSTEES. Each of the Trust and Federated Portfolios is managed by its
Board of Trustees. The respective Trustees are responsible for managing the
business affairs of the Trust and Federated Portfolios and for exercising all
the powers of the Trust and Federated Portfolios except those reserved for the
shareholders and investors, respectively. The Executive Committee of each Board
of Trustees handles the Board's responsibilities between meetings of the Board.

The Trust, Federated Portfolios, and the Adviser each has adopted strict codes
of ethics governing the conduct of all employees who manage the Fund, the
Portfolio and their portfolio securities. These codes recognize that such
persons owe a fiduciary duty to the Fund's shareholders and the Portfolio's
investors and must place their interests ahead of the employees' own interest.
Among other things, the codes: require preclearance and periodic reporting of
personal securities transactions; prohibit personal transactions in securities
being purchased or sold, or being considered for purchase or sale, by the Fund
and Portfolio; prohibit purchasing securities in initial public offerings; and
prohibit taking profits on securities held for less than sixty days. Violations
of the codes are subject to review by the Trustees, and could result in severe
penalties.
ADVISORY FEES. For its services under the Advisory Agreement, the Adviser is
entitled to receive from the Portfolio a fee accrued daily and paid monthly at
an annual rate equal to .25 of 1% of the Portfolio's average daily net assets.
The Adviser has agreed to currently waive all investment advisory fees with
respect to the Portfolio. This waiver may be terminated at any time. The Adviser
has also undertaken to reimburse the Portfolio for operating expenses in excess
of limitations established by certain states. This does not include
reimbursement to the Fund of any expenses incurred by its shareholders who use
the transfer agent's subaccounting facilities.

Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private accounts.
Certain other subsidiaries also provide administrative services to a number of
investment companies. With over $80 billion invested across more than 250 funds
under management and/or administration by its subsidiaries, as of December 31,
1995, Federated Investors is one of the largest mutual fund investment managers
in the United States. With more than 1,800 employees, Federated continues to be
led by the management who founded the company in 1955. Federated funds are
presently at work in and through 4,000 financial institutions nationwide. More
than 100,000 investment professionals have selected Federated funds for their
clients.

SUB-ADVISORY FEES. Pursuant to a Sub-Advisory Agreement (the "Sub-Advisory
Agreement") between the Adviser and U.S. Trust Company, U.S. Trust Company
makes the day-to-day investment decisions and portfolio selections for the
Portfolio, consistent with the general guidelines and policies established by
the Adviser and the Trustees of Federated Portfolios. For the investment
management services it provides to the Portfolio, U.S. Trust Company is
compensated only by the Adviser, and receives no fees directly from the Fund or
the Portfolio. For its services under the Sub-Advisory Agreement, U.S. Trust
Company is entitled to receive from the Adviser a fee accrued daily and paid
monthly at an annual rate equal to .12 of 1% of the Portfolio's average daily
net assets. U.S. Trust Company has agreed to currently waive all sub-advisory
fees with respect to the Portfolio, although this waiver may be terminated at
any time. U.S. Trust Company furnishes at its own expense all services,
facilities and personnel necessary in connection with managing the Portfolio's
investments and effecting securities transactions for the Portfolio.

SUB-ADVISER'S BACKGROUND. U.S. Trust Company is a state-chartered bank and
trust company which provides trust and banking services to individuals,
corporations and institutions, both nationally and internationally, including
investment management, estate and trust administration, financial planning,
corporate trust and agency services, and personal and corporate banking. U.S.
Trust Company is a member bank of the Federal Reserve System and the Federal
Deposit Insurance Corporation and is one of the twelve members of the New York
Clearing House Association. On June 30, 1995, U.S. Trust Company's Asset
Management Group had approximately $41.2 billion in assets under management.
U.S. Trust Company, which has its principal offices at 114 West 47th Street, New
York, New York, is a subsidiary of U.S. Trust Corporation, a registered bank
holding company. U.S. Trust Company also serves as investment adviser to
Excelsior Funds, Inc. (formerly known as UST Master Funds, Inc.), Excelsior
Tax-Exempt Funds, Inc. (formerly known as UST Master Tax-Exempt Funds, Inc.),
and Excelsior Institutional Trust, all of which are registered investment
companies. U.S. Trust Company also serves as investment adviser to the UST
Variable Series, Inc.

CERTAIN RELATIONSHIPS AND ACTIVITIES. U.S. Trust Company and its affiliates
may have deposit, loan and other commercial banking relationships with the
issuers of securities which may be purchased on behalf of the Portfolio,
including outstanding loans to such issuers which could be repaid in whole or
in part with the proceeds of securities so purchased. U.S. Trust Company has
informed the Portfolio that, in making investment decisions, it does not obtain
or use material inside information in its possession or in the possession of
any of its affiliates. In making investment recommendations for the Portfolio,
U.S. Trust Company will not inquire or take into consideration whether an
issuer of securities proposed for purchase or sale by the Portfolio is a
customer of U.S. Trust Company, its parents or its subsidiaries or affiliates.
When dealing with its customers, U.S. Trust Company, its parents, subsidiaries,
and affiliates will not inquire or take into consideration whether securities
of such customers are held by any fund managed by U.S. Trust Company or any
such affiliate.

EXPENSES

At present, the only expenses allocated to Shares as a class are expenses under
the Fund's Shareholder Services Agreement which relate to Shares.

DISTRIBUTION OF INSTITUTIONAL SHARES

SHAREHOLDER SERVICES. The Fund has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Fund may make payments up to 0.25% of the average
daily net asset value of Shares of the Fund to obtain certain personal services
for shareholders and to maintain shareholder accounts ("Shareholder Services").
Under the Shareholder Services Agreement, Federated Shareholder Services will
either perform Shareholder Services directly or will select financial
institutions to perform Shareholder Services. Financial institutions will
receive fees based upon Shares owned by their clients or customers. The
schedules of such fees and the basis upon which fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS. In addition to payments to
financial institutions under the Shareholder Services Agreement, the distributor
and Federated Shareholder Services, from their own assets, may also pay
financial institutions supplemental fees for the performance of substantial
sales services, distribution-related support services or shareholder services.
The support may include participating in sales, educational and training
seminars for employees of the financial institution at recreational-type
facilities, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Fund. Such financial assistance
will be predicated upon the amount of Shares the financial institution sells or
may sell and/or upon the type and nature of sales or marketing support furnished
by the financial institution. Any payments made by the distributor may be
reimbursed by the Adviser or its affiliates, and not the Fund.

The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings association) from being an underwriter or distributor of most
securities. In the event the Glass-Steagall Act is deemed to prohibit depository
institutions from acting in the capacities described above or should Congress
relax current restrictions on depository institutions, the Trustees will
consider appropriate changes in the services.

ADMINISTRATION OF THE TRUST

<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FUND
<S> <C>
0.1000 of 1% on the first $250 million
0.0875 of 1% on the next $250 million
0.0750 of 1% on the next $250 million
0.0700 of 1% on assets in excess of $750 million
</TABLE>

SERVICE PROVIDERS OF THE PORTFOLIO

Federated Shareholder Services Company serves as transfer agent and dividend
disbursing agent for Federated Portfolios.

Federated Securities Corp. is the placement agent for investments in the
Portfolio but receives no fee for such services.

Federated Services Company, through its subsidiary Federated Administrative
Services, provides administrative personnel and services (including certain
legal and financial reporting services) necessary to operate the Portfolio.
Federated Services Company is entitled to receive a fee from the Portfolio
accrued daily and paid monthly at an annual rate of up to 0.05% of the
average daily net assets of the Portfolio, subject to a minimum of $60,000
for the Portfolio (unless waived). From time to time, Federated
Services Company may waive all or a portion of the administrative fee. Federated
Services Company also maintains the Portfolio's accounting records.

NET ASSET VALUE
- --------------------------------------------------------------------------------

INVESTING IN INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------

SHARE PURCHASES

Shares are sold on days on which the New York Stock Exchange is open for
business. Shares may be purchased either by wire or mail.

BY WIRE. To purchase Shares by Federal Reserve wire, call the Fund before 4:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal wire funds must be received before 3:00 p.m.
(Eastern time) on the next business day following the order. Federal funds
should be wired as follows: Federated Shareholder Services Company, c/o State
Street Bank and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For
Credit to: Federated Bond Index Fund--Institutional Shares; Fund Number (this
number can be found on the account statement or by contacting the Fund); Group
Number or Wire Order Number; Nominee or Institution Name; and ABA Number
011000028. Shares cannot be purchased by wire on holidays when wire transfers
are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.

BY MAIL. To purchase Shares by mail, send a check made payable to Federated
Bond Index Fund-- Institutional Shares to Federated Shareholder Services
Company, P.O. Box 8600, Boston, Massachusetts 02266-8600. Orders by mail are
considered received after payment by check is converted by the transfer agent's
bank, State Street Bank, into federal funds. This is generally the next business
day after State Street Bank receives the check.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $25,000. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached within 90
days. Subsequent investments must be in amounts of at least $100. The minimum
initial investment in Shares is $50 if the investment is in a retirement
program, for which subsequent investments must be in amounts of at least $50. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Trust. Accounts established through a
non-affiliated bank or broker may be subject to a smaller minimum investment.

WHAT SHARES COST
Shares are sold at their net asset value per Share next determined after an
order is received. There is no sales charge imposed by the Fund. Investors who
purchase Shares through a non-affiliated bank or broker may be charged an
additional service fee by that bank or broker.

The net asset value of the Fund is determined as of the close of trading
(normally 4:00 p.m., Eastern time) (the "Valuation Time") on the New York Stock
Exchange, Monday through Friday, except on (i) days on which there are not
sufficient changes in the value of the Portfolio's portfolio securities such
that its net asset value might be materially affected; (ii) days during which
no Shares are tendered for redemption and no orders to purchase Shares are
received; and (iii) the following holidays: New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. Any day on which the Fund may determine its net asset value, as
described above, may be referred to herein as a "Business Day."

SUBACCOUNTING SERVICES

CERTIFICATES AND CONFIRMATIONS

Detailed confirmations of each purchase or redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during the
month.

DIVIDENDS

Dividends equal to all or substantially all of the Fund's net investment income
allocable to Shares are declared daily and paid monthly. The Fund's net income
for dividend purposes consists of (i) all accrued income, whether taxable or
tax-exempt, plus discount earned on the Fund's assets, less (ii) amortization
of premium on such assets, accrued expenses directly attributable to the Fund
and the general expenses of the Trust (e.g., legal, administrative, accounting,
and Trustees' fees). Dividends and distributions will reduce the net asset
value of the Fund by the amount of the dividend or distribution. Dividends are
declared just prior to determining net asset value. If an order for Shares is
placed on the preceding Business Day, Shares purchased by wire begin earning
dividends on the Business Day wire payment is received by State Street Bank. If
the order for Shares and payment by wire are received on the same day, Shares
begin earning dividends on the next Business Day. Shares purchased by check
begin earning dividends on the Business Day after the check is converted by the
transfer agent into federal funds. Dividends are automatically reinvested on
payment dates in additional Shares unless cash payments are requested by
contacting the Fund.

CAPITAL GAINS

RETIREMENT PLANS

Shares of the Fund can be purchased as an investment for retirement plans or for
IRA accounts. For further details, contact Federated Securities Corp. and
consult a tax adviser.

REDEEMING INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------

Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern time). Telephone redemption instructions may be recorded. All proceeds
will normally be wire transferred the following business day, but in no event
more than seven days, to the shareholder's account at a domestic commercial bank
that is a member of the Federal Reserve System. Proceeds from redemption
requests received on holidays when wire transfers are restricted will be wired
the following Business Day. Questions about telephone redemptions on days when
wire transfers are restricted should be directed to your shareholder services
representative at the telephone number listed on your account statement. If at
any time the Fund shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.

An authorization form permitting the Fund to accept telephone requests must
first be completed. Authorization forms and information on this service are
available from Federated Securities Corp.

WRITTEN REQUESTS

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value.

VOTING RIGHTS

For more information regarding the Trustees of the Trust and of Federated
Portfolios, see "Management of Trust and Federated Portfolios" in the Statement
of Additional Information.

EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------

The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956,
such as U.S. Trust Company. or any affiliate thereof, from sponsoring,
organizing or controlling a registered, open-end investment company that is
continuously engaged in the issuance of its shares, and from issuing,
underwriting, selling or distributing securities in general. Such laws and
regulations do not prohibit such a holding company or affiliate from acting as
investment adviser, transfer agent, or custodian to such an investment company
or from purchasing shares of such a company as agent for and upon the order
of their customers. Based on advice of its
counsel, it is the position of U.S. Trust Company that the investment
sub-advisory services it performs under the Sub-Advisory Agreement with the
Adviser on behalf of the Portfolio do not constitute underwriting activities
and are consistent with the requirements of the Glass-Steagall Act. Future
changes in either federal or state tatutes and regulations relating to the
permissible activities of banks and their
ubsidiaries or affiliates, as well as future judicial or administrative
decisions or interpretations of present or future statutes and regulations,
could prevent a bank from continuing to perform all or part of the above
services. If a bank were prohibited from so acting, alternative means for
continuing the management of the Portfolio and the Fund would be sought. In such
event, changes in the operation of the Portfolio and the Fund might occur. The
Trustees of Federated Portfolios and of the Trust do not expect that investors
in the Portfolio or shareholders of the Fund would suffer any adverse financial
consequences as a result of these occurrences.

TAX INFORMATION
- --------------------------------------------------------------------------------

Each year the Trust intends to qualify the Fund and elect that the Fund be
treated as a separate "regulated investment company" under Subchapter M of the
Internal Revenue Code of 1986 (the "Code"). Provided the Fund meets all income,
distribution and diversification requirements of the Code, and distributes
substantially all of its net investment income and realized capital gains to
shareholders in accordance with the timing requirements imposed by the Code, no
federal income or excise taxes will be required to be paid from the Fund. If the
Fund fails to qualify as a "regulated investment company" in any year, the Fund
would incur a regular corporate federal income tax upon its taxable income.
Whether or not the Fund qualifies as a RIC, the Fund's distributions would
generally be taxable as ordinary dividend income to shareholders. With respect
to the Fund, the Portfolio in which it invests is also not expected to be
required to pay any federal income or excise taxes.

At the end of each calendar year, each Fund shareholder receives information for
tax purposes on the dividends and other distributions received during that
calendar year, including the portion thereof taxable as ordinary income, the
portion taxable as long-term capital gains, the portion (if any) which
constitutes a return of capital (which is generally free of tax but results in a
basis reduction), and the amount of dividends (if any) which may qualify for the
dividends-received deduction for corporations.

The Fund may be required to withhold federal income tax at the rate of 31% from
all taxable distributions and redemption proceeds payable to shareholders who
do not provide the Fund with their correct taxpayer identification number or
make required certifications, or who have been notified by the Internal Revenue
Service that they are subject to backup withholding. Such withholding is not an
additional tax. Any amounts withheld may be credited against the Fund
shareholder's federal income tax liability.

PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------

From time to time, the Fund advertises its total return and yield for Shares.

The Fund is sold without any sales charge or other similar non-recurring
charges.

Total return and yield will be calculated separately for Institutional Shares
and Institutional Service Shares.

From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.

OTHER CLASSES OF SHARES
- --------------------------------------------------------------------------------

The Fund also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold at net asset value primarily to
retail and private banking customers of financial institutions and are subject
to a minimum initial investment of $5,000.

To obtain more information and a prospectus for Institutional Service Shares,
investors may call 1-800-245-4270.

MISCELLANEOUS
- --------------------------------------------------------------------------------

In addition, the Fund's Statement of Additional Information contains financial
statements of Excelsior Institutional Bond Index Fund, a series of Excelsior
Institutional Trust, and Bond Market Portfolio, a series of St. James Portfolios
for their fiscal year ended May 31, 1995 (audited) and the six months ended
November 30, 1995 (unaudited). Excelsior Institutional Bond Index Fund invested
all of its investable assets in Bond Market Portfolio until December 29, 1995,
at which point it withdrew its assets and invested them in the Portfolio. Like
the Fund and the Portfolio, Excelsior Institutional Bond Index Fund and Bond
Market Portfolio operated in a Hub and Spoke structure. Their financial
information is included since they have the same investment objective and
policies as the Fund and Portfolio, the Portfolio succeeded to the financial
history and performance of Bond Market Portfolio, and the Fund and Excelsior
Institutional Bond Index Fund both are SpokeSM funds of the Portfolio. In this
regard, the performance of Excelsior Institutional Bond Index Fund is as
follows: cumulative total return for the period from inception (July 11, 1994)
to May 31, 1995 was 11.03%; the average annual total return for the twelve
months ended November 30, 1995 was 16.76%, and for the period from the date of
inception to November 30, 1995 was 12%. The 30-day yields for the periods
ended May 31, 1995 and November 30, 1995 were 6.74%, and 6.45%, respectively.
Of course, past performance is not indicative of future performance.

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Federated Bond Index Fund
Institutional Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Distributor for Federated Bond Index Fund
and Placement Agent for
Bond Index Portfolio
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- -----------------------------------------------------------------------------------------------------------------------

Sub-Adviser for Bond Index Portfolio
United States Trust Company of New York 114 West 47th Street
New York, New York 10036

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

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company P.O. Box 8600
Boston, Massachusetts 02266-8600

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

FEDERATED BOND
INDEX FUND
INSTITUTIONAL SHARES
PROSPECTUS
An Open-End, Diversified Management
Investment Company

Prospectus dated March 5, 1996

[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

G01556-02-IS (3/96)
Cusip 313909103

FEDERATED BOND INDEX FUND
(A PORTFOLIO OF FEDERATED INVESTMENT TRUST)
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information relates to the Institutional
Shares and Institutional Service Shares (individually and collectively
referred to as "Shares," as the context may require). The Shares
represent interests in a diversified portfolio of securities of
Federated Bond Index Fund (the "Fund"), a portfolio of Federated
Investment Trust (the "Trust"). This Statement of Additional
Information should be read with the respective prospectuses for
Institutional Shares and Institutional Service Shares dated March 5,
1996. This Statement is not a prospectus itself. You may request a copy
of either prospectus or a paper copy of this Statement of Additional
Information, if you have received it electronically, free of charge by
calling 1-800-245-4270. Terms used but not defined herein, which are
defined in the prospectus, are used herein as defined in the
prospectus.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement date March 5, 1996

FEDERATED SECURITIES CORP.

Distributor
A subsidiary of FEDERATED INVESTORS

INVESTMENT OBJECTIVE AND POLICIES1

Asset-Backed Securities 1

Bank Obligations 1
Commercial Paper 2
Lending of Portfolio Securities 2
Variable Rate and Floating
Securities 3
Participation Interests 3
Illiquid Securities 3
Unsecured Promissory Notes 4
Repurchase Agreements and Reverse
Repurchase Agreements 4
Guaranteed Investment Contracts 4
When-Issued Securities 5
Zero Coupon Obligations 5
Futures Contracts and Options on
Futures Contracts 5
Options on Securities 7
Options on Securities Indicies 9
Short Sales "Against the Box" 9
Certain Other Obligations 9
Rating Services 10
Portfolio Turnover 10
Investment Limitations 10
MANAGEMENT OF THE TRUST AND
FEDERATED PORTFOLIOS 12

The Funds 16
Fund Ownership 17
Trustee Liability 17
Trustees' Compensation 17
INVESTMENT ADVISORY AND SUB-ADVISORY
SERVICES 18

Adviser and Sub-Adviser to the
Portfolio 18

BROKERAGE TRANSACTIONS 18

OTHER SERVICES 19

Trust Administration 19
Custodian and Portfolio
Recordkeeper 19
Transfer Agent And Dividend
Disbursing Agent 20
Independent Auditors 20
PURCHASING SHARES 20

Distribution Plan (Institutional
Service Shares only) and
Shareholder Services Agreement20
Conversion To Federal Funds 20
DETERMINING NET ASSET VALUE 20

Determining Market Value of
Securities 20
REDEEMING SHARES 21

Redemption in Kind 21
MASSACHUSETTS PARTNERSHIP LAW 22

TAX STATUS 22

The Fund's Tax Status 22
Taxation of the Portfolio 22
Taxation of Fund Distributions 23
Other Taxation 23
TOTAL RETURN 23

YIELD 23

PERFORMANCE COMPARISONS 24

DESCRIPTION OF FEDERATED PORTFOLIOS
24

Beneficial Interests 24
Service Providers 25
ABOUT FEDERATED INVESTORS 26

Mutual Fund Market 26

FINANCIAL STATEMENTS 28

Federated Bond Index Fund 29
Report of Ernst & Young LLP 30
Excelsior Institutional Bond Index
Fund 31
Report of Ernst & Young LLP 39
Bond Market Portfolio 40

REPORT OF PRICE WATERHOUSE LLP 53

APPENDIX 54

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund and Portfolio is described in the
prospectus. There can, of course, be no assurance that the Fund or the
Portfolio will achieve its investment objective.
The Fund seeks to achieve its investment objective by investing all of its
Assets in the Portfolio. The Fund may withdrawal its investment from the
Portfolio at any time if the Board of Trustees of the Trust ("Trustees")
determines that it is in the best interests of the Fund to do so.
Since the investment characteristics of the Fund correspond directly to
those of the Portfolio, the following supplements the discussions of the
various investments of and techniques employed by the Portfolio set forth
in the prospectus of the Fund.
Unless indicated otherwise, the investment objectives and policies of the
Fund may be changed by the Boards of Trustees of the Trust and of Federated
Portfolios without the approval of the Fund's shareholders. Likewise, the
investment objective and policies of the Portfolio may be changed by the
Board of Trustees of Federated Portfolios without the approval of the
Portfolio's investors, such as the Fund. Fund shareholders will be
notified before any material change becomes effective.

ASSET-BACKED SECURITIES
Asset-backed securities have structural characteristics similar to
mortgage-backed securities but have underlying assets that generally are
not mortgage loans or interests in mortgage loans.
The Portfolio may invest in asset-backed securities including, but not
limited to, interests in pools of receivables, such as motor vehicle
installment purchase obligations and credit card receivables, equipment
leases, manufactured housing (mobile home) leases, or home equity loans.

These securities may be in the form of pass-through instruments or asset-
backed bonds. The securities are issued by non-governmental entities and
carry no direct or indirect government guarantee.
The credit characteristics of asset-backed securities differ in a number of
respects from those of traditional debt securities. The credit quality of
most asset-backed securities depends primarily upon the credit quality of
the assets underlying such securities, how well the entity issuing the
securities is insulated from the credit risk of the originator or any other
affiliated entities, and the amount and quality of any credit enhancement
to such securities.
Credit card receivables are generally unsecured and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts
owed on the credit cards, thereby reducing the balance due. Most issuers
of asset-backed securities backed by motor vehicle installment purchase
obligations permit the servicer of such receivable to retain possession of
the underlying obligations. If the servicer sells these obligations to
another party, there is a risk that the purchaser would acquire an interest
superior to that of the holders of the related asset-backed securities.
Further, if a vehicle is registered in one state and is then re-registered
because the owner and obligor moves to another state, such re-registration
could defeat the original security interest in the vehicle in certain
cases. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee
for the holders of asset-backed securities backed by automobile receivables
may not have a proper security interest in all of the obligations backing
such receivables. Therefore, there is the possibility that recoveries on
repossessed collateral may not, in some cases, be available to support
payments on these securities.

BANK OBLIGATIONS
Domestic commercial banks organized under federal law are supervised and
examined by the Comptroller of the Currency and are required to be members
of the Federal Reserve System. Domestic banks organized under state law are
supervised and examined by state banking authorities but are members of the
Federal Reserve System only if they elect to join. In addition, state banks
are subject to federal examination and to a substantial body of federal law
and regulation. As a result of federal or state laws and regulations,
domestic banks, among other things, generally are required to maintain
specified levels of reserves, are limited in the amounts which they can
loan to a single borrower, and are subject to other regulations designed to
promote financial soundness. However, not all of such laws and regulations
apply to the foreign branches of domestic banks.
Obligations of foreign branches and subsidiaries of domestic banks and
domestic and foreign branches of foreign banks, such as certificates of
deposit ("CDs") and time deposits ("TDs"), may be general obligations of
the parent banks in addition to the issuing branch, or may be limited by
the terms of a specific obligation and governmental regulation. Such
obligations are subject to different risks than are those of domestic
banks. These risks include foreign economic and political developments,
foreign governmental restrictions that may adversely affect payment of
principal and interest on the obligations, foreign exchange controls and
foreign withholding and other taxes on interest income. Foreign branches
and subsidiaries are not necessarily subject to the same or similar
regulatory requirements that apply to domestic banks, such as mandatory
reserve requirements, loan limitations, and accounting, auditing and
financial record keeping requirements. In addition, less information may be

publicly available about a foreign branch of a domestic bank or about a
foreign bank than about a domestic bank.
Obligations of United States branches of foreign banks may be general
obligations of the parent bank in addition to the issuing branch, or may be
limited by the terms of a specific obligation and by federal or state
regulation as well as governmental action in the country in which the
foreign bank has its head office. A domestic branch of a foreign bank with
assets in excess of $1 billion may be subject to reserve requirements
imposed by the Federal Reserve System or by the state in which the branch
is located if the branch is licensed in that state.
In addition, branches licensed by the Comptroller of the Currency and
branches licensed by certain states may be required to: (1) pledge to the
regulator, by depositing assets with a designated bank within the state, a
certain percentage of their assets as fixed from time to time by the
appropriate regulatory authority; and (2) maintain assets within the state
in an amount equal to a specified percentage of the aggregate amount of
liabilities of the foreign bank payable at or through all of its agencies
or branches within the state.
COMMERCIAL PAPER
Commercial paper consists of short-term (usually from 1 to 270 days)
unsecured promissory notes issued by corporations in order to finance their
current operations. A variable amount master demand note (which is a type
of commercial paper) represents a direct borrowing arrangement involving
periodically fluctuating rates of interest under an agreement between a
commercial paper issuer and an institutional lender pursuant to which the
lender may determine to invest varying amounts.
The Portfolio may purchase three types of commercial paper, as classified
by exemption from registration under the 1933 Act. The three types include
open market, privately placed, and letter of credit commercial paper.

Trading of such commercial paper is conducted primarily by institutional
investors through investment dealers or directly through the issuers.
Individual investor participation in the commercial paper market is very
limited.
OPEN MARKET. "Open market" commercial paper refers to the commercial paper
of any industrial, commercial, or financial institution which is openly
traded, including directly issued paper. "Open market" paper's 1933 Act
exemption is under Section 3(a)(3) which limits the use of proceeds to
current transactions, limits maturities to 270 days and requires that the
paper contain no provisions for automatic rollovers. PRIVATELY PLACED.
"Privately placed" commercial paper relies on the exemption from
registration provided by Section 4(2) of the 1933 Act, which exempts
transactions by an issuer not involving any public offering. The commercial
paper may only be offered to a limited number of accredited investors.
"Privately placed" commercial paper has no maturity restriction and may be
considered illiquid. See "Illiquid Securities" below. LETTER OF CREDIT.
"Letter of credit" commercial paper is exempt from registration under
Section 3(a)(2) of the 1933 Act. It is backed by an irrevocable or
unconditional commitment by a bank to provide funds for repayment of the
notes. Unlike "open market" and "privately placed" commercial paper,
"letter of credit" paper has no limitations on purchasers.
LENDING OF PORTFOLIO SECURITIES
The Portfolio has the authority to lend portfolio securities to brokers,
dealers and other financial organizations. By lending its securities, the
Portfolio can increase its income by continuing to receive income on the
loaned securities as well as by either investing the cash collateral in
short-term securities subject to payment of a rebate fee to the borrower or
obtaining a fee from the borrower when U.S. Government obligations are used
as collateral. There may be risks of delay in receiving additional

collateral or risks of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the securities fail
financially. The Portfolio will adhere to the following conditions whenever
its securities are loaned: (i) the Portfolio must receive at least 100%
cash collateral or equivalent securities from the borrower; (ii) the
borrower must increase this collateral whenever the market value of the
loaned securities including accrued interest exceeds the level of the
collateral; (iii) the Portfolio must be able to terminate the loan at any
time subject to prior notice; (iv) the Portfolio must receive a reasonable
return on the loan, as well as any dividends, interest or other
distributions on the loaned securities, and any increase in market value;
(v) the Portfolio may pay only reasonable custodian fees in connection with
the loan; and (vi) voting rights on the loaned securities may pass to the
borrower. However, if a material event adversely affecting the loaned
securities were to occur, the Portfolio would terminate the loan and regain
the right to vote the securities.
VARIABLE RATE AND FLOATING SECURITIES

The Portfolio may purchase floating and variable rate demand notes and
bonds, which are obligations ordinarily having stated maturities in excess
of 397 days, but which permit the holder to demand payment of principal at
any time, or at specified intervals not exceeding 397 days, in each case
upon not more than 30 days' notice. Variable rate demand notes include
master demand notes which are obligations that permit the Portfolio to
invest fluctuating amounts, which may change daily without penalty,
pursuant to direct arrangements between the Portfolio, as lender, and the
borrower. The interest rates on these notes fluctuate from time to time.
The issuer of such obligations normally has a corresponding right, after a
given period, to prepay in its discretion the outstanding principal amount

of the obligations plus accrued interest upon a specified number of days'
notice to the holders of such obligations. The interest rate on a floating
rate demand obligation is based on a known lending rate, such as a bank's
prime rate, and is adjusted automatically each time such rate is adjusted.
The interest rate on a variable rate demand obligation is adjusted
automatically at specified intervals. Frequently, such obligations are
collateralized by letters of credit or other credit support arrangements
provided by banks. Because these obligations are direct lending
arrangements between the lender and borrower, it is not contemplated that
such instruments generally will be traded, and there generally is no
established secondary market for these obligations, although they are
redeemable at face value. Accordingly, where these obligations are not
secured by letters of credit or other credit support arrangements, the
Portfolio's right to redeem is dependent on the ability of the borrower to
pay principal and interest on demand. Such obligations frequently are not
rated by credit rating agencies and the Portfolio may invest in obligations
which are not so rated only if its Investment Managers determine that at
the time of investment the obligations are of comparable quality to the
other obligations in which the Portfolio may invest. The Investment
Managers will consider on an ongoing basis the creditworthiness of the
issuers of the floating and variable rate demand obligations held by the
Portfolio. The Portfolio will not invest more than 15% of the value of its
net assets in floating or variable rate demand obligations as to which it
cannot exercise the demand feature on not more than seven days' notice if
there is no secondary market available for these obligations, and in other
securities that are not readily marketable. See "Investment Limitations"
below.

PARTICIPATION INTERESTS

The Portfolio may purchase from financial institutions participation
interests in securities in which the Portfolio may invest. A participation
interest gives the Portfolio an undivided interest in the security in the
proportion that the Portfolio's participation interest bears to the total
principal amount of the security. These instruments may have fixed,
floating or variable rates of interest, with remaining maturities of 13
months or less. If the participation interest is unrated, or has been given
a rating below that which is permissible for purchase by the Portfolio, the
participation interest will be backed by an irrevocable letter of credit or
guarantee of a bank, or the payment obligation otherwise will be
collateralized by U.S. Government securities, or, in the case of unrated
participation interests, the Investment Managers of the Portfolio must have
determined that the instrument is of comparable quality to those
instruments in which the Portfolio may invest. For certain participation
interests, the Portfolio will have the right to demand payment, on not more
than seven days' notice, for all or any part of the Portfolio's
participation interest in the security, plus accrued interest. As to these
instruments, the Portfolio intends to exercise its right to demand payment
only upon a default under the terms of the security, as needed to provide
liquidity to meet redemptions or to maintain or improve the quality of its
investment portfolio. The Portfolio will not invest more than 15% of its
net assets in participation interests that do not have this demand feature,
and in other securities that are not readily marketable. Currently, the
Portfolio does not intend to invest more than 5% of its net assets in
participation interests during the current year. See "Investment
Limitations" below.

ILLIQUID SECURITIES
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the 1933 Act, securities which are otherwise not readily
marketable and repurchase agreements having a maturity of longer than seven
days. Securities which have not been registered under the 1933 Act are
referred to as private placements or restricted securities and are
purchased directly from the issuer or in the secondary market. Mutual funds
do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect
on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register
such restricted securities in order to dispose of them which, if possible
at all, would result in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the 1933 Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on
an efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale of such
investments to the general public or to certain institutions may not be
indicative of their liquidity.
The Securities and Exchange Commission (the "SEC") has adopted Rule 144A,
which allows a broader institutional trading market for securities

otherwise subject to restriction on their resale to the general public.
Rule 144A establishes a "safe harbor" from the registration requirements of
the 1933 Act for resales of certain securities to qualified institutional
buyers.
The Investment Managers will monitor the liquidity of Rule 144A securities
for the Portfolio under the supervision of the Trustees of Federated
Portfolios. In reaching liquidity decisions, the Investment Managers will
consider, among other things, the following factors: (1) the frequency of
trades and quotes for the security, (2) the number of dealers and other
potential purchasers wishing to purchase or sell the security, (3) dealer
undertakings to make a market in the security and (4) the nature of the
security and of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers and the mechanics of the
transfer).
UNSECURED PROMISSORY NOTES

The Portfolio also may purchase unsecured promissory notes ("Notes") which
are not readily marketable and have not been registered under the 1933 Act,
provided such investments are consistent with the Portfolio's investment
objective and policies. The Portfolio will invest no more than 15% of its
net assets in such Notes and in other securities that are not readily
marketable (which securities would include floating and variable rate
demand obligations as to which the Portfolio cannot exercise the demand
feature described above and as to which there is no secondary market).
Currently, the Portfolio does not intend to invest any of its assets in
unsecured promissory notes during the coming year. See "Investment
Limitations" below.

REPURCHASE AGREEMENTS AND REVERSE REPURCHASE AGREEMENTS
Repurchase agreements are agreements by which a person purchases a security
and simultaneously commits to resell that security to the seller (which is
usually a member bank of the Federal Reserve System or a member firm of the
New York Stock Exchange or a subsidiary thereof) at an agreed-upon date
within a number of days (usually not more than seven) from the date of
purchase. The resale price reflects the purchase price plus an agreed-upon
market rate of interest which is unrelated to the coupon rate or maturity
of the purchased security. A repurchase agreement involves the obligation
of the seller to pay the agreed-upon price, which obligation is in effect
secured by the value of the underlying security, usually U.S. Government or
government agency issues. Under the Investment Company Act of 1940 (the
"1940 Act"), repurchase agreements may be considered to be loans by the
buyer. The Portfolio's risk is limited to the ability of the seller to pay
the agreed upon amount on the delivery date. If the seller defaults, the
underlying security constitutes collateral for the seller's obligation to
pay although the Portfolio may incur certain costs in liquidating this
collateral and in certain cases may not be permitted to liquidate this
collateral. All repurchase agreements entered into by the Portfolio are
fully collateralized, with such collateral being marked to market daily.
The Portfolio may borrow funds for temporary or emergency purposes, such as
meeting larger than anticipated redemption requests, and not for leverage.
One means of borrowing is by agreeing to sell portfolio securities to
financial institutions such as banks and broker-dealers and to repurchase
them at a mutually agreed date and price (a "reverse repurchase
agreement"). At the time the Portfolio enters into a reverse repurchase
agreement it will place in a segregated custodial account cash, U.S.
Government securities or high-grade debt obligations having a value equal
to the repurchase price, including accrued interest. Reverse repurchase

agreements involve the risk that the market value of the securities sold by
the Portfolio may decline below the repurchase price of those securities.
GUARANTEED INVESTMENT CONTRACTS
The Portfolio may invest in guaranteed investment contracts ("GICs") issued
by insurance companies. Pursuant to such contracts, the Portfolio makes
cash contributions to a deposit fund of the insurance company's general
account. The insurance company then credits guaranteed interest to the
Portfolio. The GICs provide that this guaranteed interest will not be less
than a certain minimum rate. The insurance company may assess periodic
charges against a GIC for expenses and service costs allocable to it, and
the charges will be deducted from the value of the deposit fund. Because
the Portfolio may not receive the principal amount of a GIC from the
insurance company on seven days' notice or less, the GIC is considered an
illiquid investment and, together with other instruments in the Portfolio
which are not readily marketable, will not exceed 15% of the Portfolio's
net assets. The term of a GIC will be 13 months or less. In determining
average weighted portfolio maturity, a GIC will be deemed to have a
maturity equal to the longer of the period of time remaining until the next
readjustment of the guaranteed interest rate or the period of time
remaining until the principal amount can be recovered from the issuer
through demand. Currently, the Portfolio intends to invest 5% or less of
its net assets in GICs during the current year.
WHEN-ISSUED SECURITIES
The Portfolio may purchase securities on a "when-issued" or on a "forward
delivery" basis. It is expected that under normal circumstances, the
Portfolio would take delivery of such securities. Prior to committing to
the purchase of a security on a when-issued or on a forward delivery basis,
the Portfolio will establish procedures consistent with the relevant
policies of the SEC. Those policies currently recommend that an amount of

the Portfolio's assets equal to the amount of the purchase commitment be
held aside or segregated to be used to pay for the commitment. Therefore,
the Portfolio expects always to have cash, cash equivalents, or high
quality debt securities sufficient to cover any purchase commitments or to
limit any potential risk. Although the Portfolio does not intend to make
such purchases for speculative purposes and intends to adhere to SEC
policies, purchases of securities on a when-issued or forward delivery
basis may involve additional risks than other types of securities
purchases. For example, the Portfolio may have to sell assets which have
been set aside in order to meet redemptions. Also, if the Portfolio
determines it is advisable as a matter of investment strategy to sell the
when-issued or forward delivery securities, the Portfolio would be required
to meet its obligations from its then available cash flow or the sale of
securities, or, although it would not normally expect to do so, from the
sale of the when-issued or forward delivery securities themselves (which
may have a value greater or less than the Portfolio's payment obligation).
When the Portfolio engages in when-issued or forward delivery transactions,
it relies on the other party to consummate the trade. Failure of such other
party to do so may result in the Portfolio's incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a when-issued purchase or a
forward commitment to purchase securities and any subsequent fluctuations
in their market value are taken into account when determining the market
value of the Portfolio starting on the day the Portfolio agrees to purchase
the securities. The Portfolio does not earn interest on the securities it
has committed to purchase until they are paid for and delivered on the
settlement date.
ZERO COUPON OBLIGATIONS

The Portfolio may acquire zero coupon obligations when consistent with its
investment objectives and policies. Such obligations have greater price
volatility than coupon obligations and will not result in payment of
interest until maturity. Since interest income is accrued throughout the
term of the zero coupon obligation but is not actually received until
maturity, the Portfolio, which is required for tax purposes to distribute
to its investors a certain percentage of its income, may have to sell other
securities to distribute the income prior to maturity of the zero coupon
obligation.

FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The successful use of such instruments by the Portfolio may depend
in part upon the Investment Managers' skill and experience with respect to
such instruments. Should interest rates move in an unexpected manner, the
Portfolio may not achieve the anticipated benefits of futures contracts or
options on futures contracts or may realize losses and thus will be in a
worse position than if such strategies had not been used. In addition, the
correlation between movements in the price of futures contracts or options
on futures contracts and movements in the price of the securities will not
be perfect and could produce unanticipated losses.
FUTURES CONTRACTS. The Portfolio may enter into contracts for the purchase
or sale for future delivery of securities, or contracts based on financial
indices. U.S. futures contracts have been designed by exchanges which have
been designated "contracts markets" by the CFTC, and must be executed
through a futures commission merchant, or brokerage firm, which is a member
of the relevant contract market. Futures contracts trade on a number of
exchange markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing members of
the exchange. The Portfolio may enter into futures contracts which are

based on debt securities that are backed by the full faith and credit of
the U.S. Government, such as long-term U.S. Treasury Bonds, Treasury Notes,
Government National Mortgage Association modified pass-through mortgage-
backed securities and three-month U.S. Treasury Bills. The Portfolio may
also enter into futures contracts which are based on fixed income
securities issued by entities other than the U.S. Government, including
corporate debt securities, or contracts based on financial indices
including any index of U.S. Government securities, or corporate debt
securities.
At the same time a futures contract is purchased or sold, the Portfolio
must allocate cash or securities as a deposit payment ("initial deposit").
It is expected that the initial deposit would be approximately 1/2% to 5%
of a contract's face value. Daily thereafter, the futures contract is
valued and the payment of "variation margin" may be required, since each
day the Portfolio would provide or receive cash that reflects any decline
or increase in the contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the
delivery of securities with a different interest rate from that specified
in the contract. In some (but not many) cases, securities called for by a
futures contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is
fulfilled before the date of the contract without having to make or take
delivery of the securities. The offsetting of a contractual obligation is
accomplished by buying (or selling, as the case may be) on a commodities
exchange an identical futures contract calling for delivery in the same
month. Such a transaction, which is effected through a member of an
exchange, cancels the obligation to make or take delivery of the

securities. Since all transactions in the futures market are made, offset
or fulfilled through a clearinghouse associated with the exchange on which
the contracts are traded, the Portfolio will incur brokerage fees when it
purchases or sells futures contracts.
The purpose of the acquisition or sale of a futures contract, in the case
where the Portfolio holds or intends to acquire fixed-income securities, is
to attempt to protect the Portfolio from fluctuations in interest rates
without actually buying or selling fixed-income securities. For example, if
interest rates were expected to increase, the Portfolio might enter into
futures contracts for the sale of debt securities. Such a sale would have
much the same effect as selling an equivalent value of the debt securities
owned by the Portfolio. If interest rates did increase, the value of the
debt security in the Portfolio would decline, but the value of the futures
contracts to the Portfolio would increase at approximately the same rate,
thereby keeping the net asset value of the Portfolio from declining as much
as it otherwise would have. The Portfolio could accomplish similar results
by selling debt securities and investing in bonds with short maturities
when interest rates are expected to increase. However, since the futures
market is more liquid than the cash market, the use of futures contracts as
an investment technique allows the Portfolio to maintain a defensive
position without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated
purchases of debt securities at higher prices. Since the fluctuations in
the value of futures contracts should be similar to those of debt
securities, the Portfolio could take advantage of the anticipated rise in
the value of debt securities without actually buying them until the market
had stabilized. At that time, the futures contracts could be liquidated and
the Portfolio could then buy debt securities on the cash market. To the

extent the Portfolio enters into futures contracts for this purpose, the
assets in the segregated asset account maintained to cover the Portfolio's
obligations with respect to such futures contracts will consist of cash,
cash equivalents or high quality liquid debt securities from its portfolio
in an amount equal to the difference between the fluctuating market value
of such futures contracts and the aggregate value of the initial and
variation margin payments made by the Portfolio with respect to such
futures contracts.
The ordinary spreads between prices in the cash and futures market, due to
differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial
deposit and variation margin requirements. Rather than meeting additional
variation margin requirements, investors may close futures contracts
through offsetting transactions which could distort the normal relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather
than making or taking delivery. To the extent participants decide to make
or take delivery, liquidity in the futures market could be reduced, thus
producing distortion. Third, from the point of view of speculators, the
margin deposit requirements in the futures market are less onerous than
margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary
price distortions. Due to the possibility of distortion, a correct forecast
of general interest rate trends by the Investment Managers may still not
result in a successful transaction.
In addition, futures contracts entail risks. Although the Investment
Managers believe that use of such contracts will benefit the Portfolio, if
the judgment of the Investment Managers about the general direction of
interest rates is incorrect, the Portfolio's overall performance would be

poorer than if it had not entered into any such contract. For example, if
the Portfolio has hedged against the possibility of an increase in interest
rates which would adversely affect the price of debt securities held by it
and interest rates decrease instead, the Portfolio will lose part or all of
the benefit of the increased value of its debt securities which it has
hedged because it will have offsetting losses in its futures positions. In
addition, in such situations, if the Portfolio has insufficient cash, it
may have to sell debt securities to meet daily variation margin
requirements. Such sales of bonds may be, but will not necessarily be, at
increased prices which reflect the rising market. The Portfolio may have to
sell securities at a time when it may be disadvantageous to do so.
Options on Futures Contracts. The Portfolio may purchase and write options
on futures contracts for hedging purposes. The purchase of a call option on
a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based
or the price of the underlying debt securities, it may or may not be less
risky than ownership of the futures contract or underlying debt securities.
As with the purchase of futures contracts, when the Portfolio is not fully
invested it may purchase a call option on a futures contract to hedge
against a market advance due to declining interest rates.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is below the exercise price, the Portfolio will retain the full
amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Portfolio's portfolio holdings. The
writing of a put option on a futures contract constitutes a partial hedge
against increasing prices of the security which is deliverable upon

exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Portfolio will retain the
full amount of the option premium which provides a partial hedge against
any increase in the price of securities which the Portfolio intends to
purchase. If a put or call option the Portfolio has written is exercised,
the Portfolio will incur a loss which will be reduced by the amount of the
premium it receives. Depending on the degree of correlation between changes
in the value of its portfolio securities and changes in the value of its
futures positions, the Portfolio's losses from existing options on futures
may to some extent be reduced or increased by changes in the value of
portfolio securities.
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities.
For example, the Portfolio may purchase a put option on a futures contract
to hedge its portfolio against the risk of rising interest rates.
The amount of risk the Portfolio assumes when it purchases an option on a
futures contract is the premium paid for the option plus related
transaction costs. In addition to the correlation risks discussed above,
the purchase of an option also entails the risk that changes in the value
of the underlying futures contract will not be fully reflected in the value
of the option purchased.
The Trustees of Federated Portfolios have adopted the requirement that
futures contracts and options on futures contracts be used either (i) as a
hedge without regard to any quantitative limitation, or (ii) for other
purposes to the extent that immediately thereafter the aggregate amount of
initial margin deposits on all (non-hedge) futures contracts of the
Portfolio and premiums paid on outstanding (non-hedge) options on futures
contracts owned by the Portfolio do not exceed 5% of the market value of
the net assets of the Portfolio. In addition, the aggregate market value of

the outstanding futures contracts purchased by the Portfolio may not exceed
50% of the market value of the total assets of the Portfolio. Neither of
these restrictions will be changed by the Trustees without considering the
policies and concerns of the various applicable federal and state
regulatory agencies.
OPTIONS ON SECURITIES
The Portfolio may write (sell) covered call and put options to a limited
extent on its portfolio securities ("covered options"). However, the
Portfolio may forgo the benefits of appreciation on securities sold or may
pay more than the market price on securities acquired pursuant to call and
put options written by the Portfolio.
When the Portfolio writes a covered call option, it gives the purchaser of
the option the right to buy the underlying security at the price specified
in the option (the "exercise price") by exercising the option at any time
during the option period. If the option expires unexercised, the Portfolio
will realize income in an amount equal to the premium received for writing
the option. If the option is exercised, a decision over which the Portfolio
has no control, the Portfolio must sell the underlying security to the
option holder at the exercise price. By writing a covered call option, the
Portfolio forgoes, in exchange for the premium less the commission ("net
premium"), the opportunity to profit during the option period from an
increase in the market value of the underlying security above the exercise
price.
When the Portfolio writes a covered put option, it gives the purchaser of
the option the right to sell the underlying security to the Portfolio at
the specified exercise price at any time during the option period. If the
option expires unexercised, the Portfolio will realize income in the amount
of the premium received for writing the option. If the put option is
exercised, a decision over which the Portfolio has no control, the

Portfolio must purchase the underlying security from the option holder at
the exercise price. By writing a covered put option, the Portfolio, in
exchange for the net premium received, accepts the risk of a decline in the
market value of the underlying security below the exercise price. The
Portfolio will only write put options involving securities for which a
determination is made at the time the option is written that the Portfolio
wishes to acquire the securities at the exercise price.
The Portfolio may terminate its obligation as the writer of a call or put
option by purchasing an option with the same exercise price and expiration
date as the option previously written. This transaction is called a
"closing purchase transaction." Where the Portfolio cannot effect a
closing purchase transaction, it may be forced to incur brokerage
commissions or dealer spreads in selling securities it receives or it may
be forced to hold underlying securities until an option is exercised or
expires.
When the Portfolio writes an option, an amount equal to the net premium
received by the Portfolio is included in the liability section of the
Portfolio's Statement of Assets and Liabilities as a deferred credit. The
amount of the deferred credit will be subsequently marked to market to
reflect the current market value of the option written. The current market
value of a traded option is the last sale price or, in the absence of a
sale, the closing bid price. If an option expires on its stipulated
expiration date or if the Portfolio enters into a closing purchase
transaction, the Portfolio will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the premium received when the option
was sold), and the deferred credit related to such option will be
eliminated. If a call option is exercised, the Portfolio will realize a
gain or loss from the sale of the underlying security and the proceeds of
the sale will be increased by the premium originally received. The writing

of covered call options may be deemed to involve the pledge of the
securities against which the option is being written. Securities against
which call options are written will be segregated on the books of the
custodian for the Portfolio.
The Portfolio may purchase call and put options on any securities in which
it may invest. The Portfolio would normally purchase a call option in
anticipation of an increase in the market value of such securities. The
purchase of a call option would entitle the Portfolio, in exchange for the
premium paid, to purchase a security at a specified price during the option
period. The Portfolio would ordinarily have a gain if the value of the
securities increased above the exercise price sufficiently to cover the
premium and would have a loss if the value of the securities remained at or
below the exercise price during the option period.
The Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective
puts") or securities of the type in which it is permitted to invest. The
purchase of a put option would entitle the Portfolio, in exchange for the
premium paid, to sell a security, which may or may not be held in the
Portfolio's portfolio, at a specified price during the option period. The
purchase of protective puts is designed merely to offset or hedge against a
decline in the market value of the Portfolio's portfolio securities. Put
options also may be purchased by the Portfolio for the purpose of
affirmatively benefiting from a decline in the price of securities which
the Portfolio does not own. The Portfolio would ordinarily recognize a gain
if the value of the securities decreased below the exercise price
sufficiently to cover the premium and would recognize a loss if the value
of the securities remained at or above the exercise price. Gains and losses
on the purchase of protective put options would tend to be offset by
countervailing changes in the value of underlying portfolio securities.

The Portfolio has adopted certain other non-fundamental policies concerning
option transactions which are discussed below. The Portfolio's activities
in options may also be restricted by the requirements of the Internal
Revenue Code of 1986 (the "Code") for the Fund's qualification as a
regulated investment company.
The hours of trading for options on securities may not conform to the hours
during which the underlying securities are traded. To the extent that the
option markets close before the markets for the underlying securities,
significant price and rate movements can take place in the underlying
securities markets that cannot be reflected in the option markets. It is
impossible to predict the volume of trading that may exist in such options,
and there can be no assurance that viable exchange markets will develop or
continue.
The Portfolio may engage in over-the-counter options transactions with
broker-dealers who make markets in these options. The ability to terminate
over-the-counter option positions is more limited than with exchange-traded
option positions because the predominant market is the issuing broker
rather than an exchange, and may involve the risk that broker-dealers
participating in such transactions will not fulfill their obligations. To
reduce this risk, the Portfolio will purchase such options only from
broker-dealers who are primary government securities dealers recognized by
the Federal Reserve Bank of New York and who agree to (and are expected to
be capable of) entering into closing transactions, although there can be no
guarantee that any such option will be liquidated at a favorable price
prior to expiration. The Investment Managers will monitor the
creditworthiness of dealers with whom the Portfolio enters into such option
transactions, under the general supervision of the Trustees of Federated
Portfolios.

OPTIONS ON SECURITIES INDICES
In addition to options on securities, the Portfolio may also purchase and
write (sell) call and put options on securities indices. Such options give
the holder the right to receive a cash settlement during the term of the
option based upon the difference between the exercise price and the value
of the index. Such options will be used for the purposes described under
"Options on Securities."
Options on securities indices entail risks in addition to the risks of
options on securities. The absence of a liquid secondary market to close
out options positions on securities indices is more likely to occur,
although the Portfolio generally will only purchase or write such an option
if its Investment Managers believe the option can be closed out.
Use of options on securities indices also entails the risk that trading in
such options may be interrupted if trading in certain securities included
in the index is interrupted. The Portfolio will not purchase such options
unless its Investment Managers believe the market is sufficiently developed
such that the risk of trading in such options is no greater than the risk
of trading in options on securities.
Price movements in the Portfolio's securities may not correlate precisely
with movements in the level of an index and, therefore, the use of options
on indices cannot serve as a complete hedge. Because options on securities
indices require settlement in cash, the Investment Managers may be forced
to liquidate portfolio securities to meet the Portfolio's settlement
obligations.
SHORT SALES "AGAINST THE BOX"
In a short sale, the Portfolio sells a borrowed security and has a
corresponding obligation to the lender to return the identical security.
The Portfolio may engage in short sales only if at the time of the short
sale it owns or has the right to obtain, at no additional cost, an equal

amount of the security being sold short. This investment technique is known
as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until
delivery occurs. If the Portfolio engages in a short sale, the collateral
for the short position will be maintained by its custodian or qualified
sub-custodian. While the short sale is open, the Portfolio maintains in a
segregated account an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for
such equivalent securities. These securities constitute the Portfolio's
long position.
The Portfolio will not engage in short sales against the box for investment
purposes. The Portfolio may, however, make a short sale as a hedge, when it
believes that the price of a security may decline, causing a decline in the
value of a security (or a security convertible or exchangeable for such
security), or when the Portfolio wants to sell the security at an
attractive current price, but also wishes to defer recognition of gain or
loss for federal income tax purposes or for purposes of satisfying certain
tests applicable to regulated investment companies under the Code. In such
case, any future losses in the Portfolio's long position should be reduced
by a gain in the short position. Conversely, any gain in the long position
should be reduced by a loss in the short position. The extent to which such
gains or losses are reduced depends upon the amount of the security sold
short relative to the amount the Portfolio owns. There are certain
additional transaction costs associated with short sales against the box,
but the Portfolio will endeavor to offset these costs with the income from
the investment of the cash proceeds of short sales.
As a non-fundamental operating policy, not more than 40% of the Portfolio's
total assets would be involved in short sales against the box.

CERTAIN OTHER OBLIGATIONS

In order to allow for the investments in new instruments that may be
created in the future, upon supplementing this registration statement, the
Portfolio may invest in obligations other than those listed previously,
provided such investments are consistent with the investment objectives,
policies and limitations of the Portfolio and the Fund.

RATING SERVICES
Ratings represent the opinions of rating services as to the quality of the
securities that they undertake to rate. It should be emphasized, however,
that the ratings are relative and subjective and are not absolute standards
of quality. Although these ratings are an initial criterion for selection
of portfolio investments, the Investment Managers also make their own
evaluations of these securities, subject to review by the Trustees of
Federated Portfolios. After purchase by the Portfolio, an obligation may
cease to be rated or its rating may be reduced below the minimum required
for purchase by the Portfolio. Neither event would require the Portfolio to
dispose of the obligation, but its Investment Managers will consider such
an event in their determination of whether the Portfolio should continue to
hold the obligation. A description of the ratings used herein and in
prospectus is set forth in the Appendix to this Statement of Additional
Information.
PORTFOLIO TURNOVER
Although the Portfolio is managed to reflect the composition of the
Aggregate Bond Index, the Portfolio may sell securities irrespective of how
long such securities have been held. Ordinarily, securities will be sold
from the Portfolio only to reflect certain administrative changes in the
Lehman Brothers Aggregate Bond Index (including mergers or changes in its

composition) or to accommodate cash flows into and out of the Portfolio
while maintaining the similarity of its portfolio to its benchmark index.
The Portfolio may sell a portfolio investment immediately after its
acquisition if the Investment Managers believe that such a disposition is
consistent with the investment objective of the Portfolio. Portfolio
investments may be sold for a variety of reasons, such as a more favorable
investment opportunity or other circumstances bearing on the desirability
of continuing to hold such investments.
The annual portfolio turnover rate for the Portfolio is not expected to
exceed 100%. A rate of 100% indicates that the equivalent of all of the
Portfolio's assets have been sold and reinvested in a calendar year. A high
rate of portfolio turnover may involve correspondingly greater brokerage
commission expenses and other transaction costs, which must be borne
directly by the Portfolio and ultimately by the investors in the Portfolio.
High portfolio turnover may result in the realization of substantial net
capital gains. To the extent net short-term capital gains are realized, any
distributions resulting from such gains are considered ordinary income for
Federal income tax purposes.
Except as may be required to ensure satisfaction of certain tests
applicable to regulated investment companies under the Code, portfolio
changes are made without regard to the length of time a security has been
held, or whether a sale would result in the recognition of a profit or
loss. The Portfolio may engage in short-term trading to achieve its
investment objective. Portfolio turnover may vary greatly from year to year
as well as within a particular year. The Portfolio's portfolio turnover
rate may also be affected by cash requirements for redemptions of shares
and by regulatory provisions which enable the Portfolio to receive certain
favorable tax treatment. Portfolio turnover will not be a limiting factor
in making portfolio decisions. Portfolio trading is engaged in for the

Portfolio if its Investment Managers believe that a transaction net of
costs (including custodian charges) will help achieve the Portfolio's
investment objective.

Except as stated otherwise, all investment policies and limitations
described herein are non-fundamental, and may be changed without prior
shareholder approval.

INVESTMENT LIMITATIONS

The following investment limitations are "fundamental policies" of the Fund
and the Portfolio and may not be changed with respect to the Fund or the
Portfolio without the approval of a "majority of the outstanding voting
securities" of the Fund or the Portfolio, as the case may be. "Majority of
the outstanding voting securities" under the 1940 Act and as used in this
Statement of Additional Information and in the prospectus means, with
respect to the Fund (or the Portfolio), the lesser of (i) 67% or more of
the outstanding voting securities of the Fund (or of the total beneficial
interests of the Portfolio) present at a meeting, if the holders of more
than 50% of the outstanding voting securities of the Fund (or of the total
beneficial interests of the Portfolio) are present or represented by proxy,
or
(ii) more than 50% of the outstanding voting securities of the Fund (or of
the total beneficial interests of the Portfolio).

Because the Fund invests through the Portfolio, shareholders should be
aware that fundamental policies of the Portfolio may not be changed without
the approval of a "majority of the outstanding voting securities" of the
Portfolio, i.e., the holders of the beneficial interests of the Portfolio.

Whenever the Fund is requested to vote on a fundamental policy of the
Portfolio, the Trust will hold a meeting of the Fund's shareholders and
will cast its vote as instructed by the Fund's shareholders.
With respect to each fundamental investment restriction and each non-
fundamental investment policy listed below, if a percentage restriction
(other than a restriction as to borrowing) or a rating restriction on
investment or utilization of assets is adhered to at the time an investment
is made or assets are so utilized, a later change in such percentage
resulting from changes in the Portfolio's total assets or the value of the
Portfolio's securities, or a later change in the rating of a portfolio
security, will not be considered a violation of the relevant restriction or
policy.
As a matter of fundamental policy , the Portfolio (or the Fund) may not
(except that no investment restriction of the Fund shall prevent the Fund
from investing all of its investable assets in an open-end management
investment company with substantially the same investment objective and
policies as the Fund):
(1) borrow money or mortgage or hypothecate assets of the Portfolio (or
the Fund), except that in an amount not to exceed 1/3 of the current value
of the Portfolio's (or Fund's) assets (including such borrowing) less
liabilities (not including such borrowing), it may borrow money, enter into
reverse repurchase agreements, and purchase when-issued securities, and
except that it may pledge, mortgage or hypothecate its assets to secure
such borrowings, reverse repurchase agreements, or when-issued securities,
provided that collateral arrangements with respect to options and futures,
including deposits of initial deposit and variation margin, are not
considered a pledge of assets for purposes of this restriction, and except
that assets may be pledged to secure letters of credit solely for the

purpose of participating in a captive insurance company sponsored by the
Investment Company Institute.
The Fund will not purchase securities while borrowings exceed 5% of the
Portfolio's (or Fund's) total assets;
(2) underwrite securities issued by other persons except insofar as
Federated Portfolios or the Portfolio (or the Trust or the Fund) may
technically be deemed an underwriter under the 1933 Act in selling a
portfolio security;
(3) make loans to other persons except (a) through the lending of the
Portfolio's (or Fund's) portfolio securities and provided that any such
loans not exceed 30% of the Portfolio's (or Fund's) total assets (taken at
market value), (b) through the use of repurchase agreements or the purchase
of short-term obligations, or (c) by purchasing debt securities of types
distributed publicly or privately;
(4) purchase or sell real estate (including limited partnership interests
in partnerships substantially all of whose assets consist of real estate
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts
(except futures and option contracts) in the ordinary course of business
(Federated Portfolios (or the Trust) may hold and sell, for the Portfolio's
(or Fund's) portfolio, real estate acquired as a result of the Portfolio's
(or Fund's) ownership of securities);
(5) invest 25% or more of its assets in any one industry (excluding U.S.
Government securities), unless the bonds issued by companies in a single
industry were to comprise 25% or more of Lehman Brothers Aggregate Bond
Index, in which case the Portfolio (or Fund) will invest 25% or more of its
assets in that industry; or
(6) issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and

regulations promulgated thereunder, provided that collateral arrangements
with respect to options and futures, including deposits of initial deposit
and variation margin, are not considered to be the issuance of a senior
security for purposes of this restriction.
State and Federal Restrictions. In order to comply with certain state and
federal statutes and policies, the Portfolio (or Fund) will not as a
matter of operating policy (except that no operating policy shall prevent
the Fund from investing all of its investable assets in an open-end
management investment company with substantially the same investment
objective and policies as the Fund): (i) purchase any security or
evidence of interest therein on margin, except that such short-term credit
as may be necessary for the clearance of purchases and sales of securities
may be obtained and except that deposits of initial deposit and variation
margin may be made in connection with the purchase, ownership, holding or
sale of futures;
(ii) invest for the purpose of exercising control or management;
(iii) purchase securities issued by any other investment company except by
purchase in the open market where no commission or profit to a sponsor or
dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open
market, is part of a plan of merger or consolidation; provided, however,
that securities of any investment company will not be purchased for the
Portfolio (or Fund) if such purchase at the time thereof would cause (a)
more than 10% of the Portfolio's (or Fund's) total assets (taken at the
greater of cost or market value) to be invested in the securities of such
issuers; (b) more than 5% of the Portfolio's (or Fund's) total assets
(taken at the greater of cost or market value) to be invested in any one
investment company; or (c) more than 3% of the outstanding voting
securities of any such issuer to be held for the Portfolio (or Fund);

(iv) purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio (or Fund) to hold more than 10% of any
class of securities of such issuer, for which purposes all indebtedness of
an issuer shall be deemed a single class and all preferred stock of an
issuer shall be deemed a single class, except that futures or option
contracts shall not be subject to this restriction; (v) purchase or
retain in the Portfolio's (or Fund's) portfolio any securities issued by an
issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of Federated Portfolios (or the Trust), or is an officer
or partner of the Adviser or U.S. Trust Company, if after the purchase of
the securities of such issuer for the Portfolio (or Fund) one or more of
such persons owns beneficially more than 1/2 of 1% of the shares or
securities, or both, all taken at market value, of such issuer, and such
persons owning more than 1/2 of 1% of such shares or securities together
own beneficially more than 5% of such shares or securities, or both, all
taken at market value; (vi) invest more than 5% of the Portfolio's (or
Fund's) net assets in warrants (valued at the lower of cost or market), but
not more than 2% of the Portfolio's (or Fund's) net assets may be invested
in warrants not listed on the New York Stock Exchange or the American Stock
Exchange; (vii) make short sales of securities or maintain a short
position (excluding short sales if the Portfolio (or Fund) owns an equal
amount of such securities or securities convertible into or exchangeable
for, without payment of any further consideration, securities of equivalent
kind and amount) if such short sales represent more than 25% of the
Portfolio's (or Fund's) net assets (taken at market value); provided,
however, that the value of the Portfolio's (or Fund's) short sales of
securities (excluding U.S. Government securities) of any one issuer may not
be greater than 2% of the value (taken at market value) of the Portfolio's

(or Fund's) net assets or more than 2% of the securities of any class of
any issuer;
(viii) enter into repurchase agreements providing for settlement in more
than seven days after notice, or purchase securities which are not readily
marketable, if, in the aggregate, more than 15% of its net assets would be
so invested;
(ix) purchase puts, calls, straddles, spreads or any combination thereof,
if by reason of such purchase the value of its aggregate investment in such
securities would exceed 5% of the Portfolio's (or Fund's) total assets;
(x) invest more than 10% of Portfolio's (or Fund's) total assets in
securities subject to restrictions on resale under the Securities Act of
1933, except for commercial paper issued under Section 4(2) of the
Securities Act of 1933 and certain other restricted securities which meet
the criteria for liquidity as established by the Trustees of Federated
Portfolios or the Trust; or
(xi) invest more than 5% of the value of Portfolio's (or Fund's) total
assets in securities of issuers which have records of less than three years
of continuous operations, including the operation of any predecessor.
Policies (i) through (xi) above may be changed by the Board of Trustees of
Federated Portfolios or the Trust without investor or shareholder approval.

MANAGEMENT OF THE TRUST AND FEDERATED PORTFOLIOS

Officers and Trustees of the Trust are listed with their addresses,
birthdates, principal occupations during the past five years, and present
positions, including any affiliation with Federated Management, Federated
Investors, Federated Securities Corp., Federated Administrative Services,
Federated Shareholder Services, Federated Shareholder Services Company,

Federated Services Company, and the Funds, as defined below. The officers
and Trustees of the Trust also serve in the same capacities as officers and
Trustees of Federated Portfolios.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director, Trustee, or Managing
General Partner of the Funds. Mr. Donahue is the father of J. Christopher
Donahue, President and Trustee of the Trust.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Director, Oberg Manufacturing Co.; Chairman of the Board, Children's
Hospital of Pittsburgh; Director, Trustee, or Managing General Partner of
the Funds; formerly, Senior Partner, Ernst & Young LLP.

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John
R. Wood and Associates, Inc., Realtors; President, Northgate Village
Development Corporation; Partner or Trustee in private real estate ventures
in Southwest Florida; Director, Trustee, or Managing General Partner of the
Funds; formerly, President, Naples Property Management, Inc.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly, Vice
Chairman and Director, PNC Bank, N.A., and PNC Bank Corp. and Director,
Ryan Homes, Inc.

J. Christopher Donahue *
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
President and Trustee

President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Administrative Services, Federated
Shareholder Services Company, and Federated Shareholder Services; Director,
Federated Services Company; President or Executive Vice President of the
Funds; Director, Trustee, or Managing General Partner of some of the Funds.
Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of the
Trust.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director,
Trustee, or Managing General Partner of the Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine and Member, Board of Trustees, University of
Pittsburgh; Medical Director, University of Pittsburgh Medical Center -
Downtown; Member, Board of Directors, University of Pittsburgh Medical
Center; formerly, Hematologist, Oncologist, and Internist, Presbyterian and
Montefiore Hospitals; Director, Trustee, or Managing General Partner of the
Funds.

Edward L. Flaherty, Jr.@
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Director,
Eat'N Park Restaurants, Inc., and Statewide Settlement Agency, Inc.;
Director, Trustee, or Managing General Partner of the Funds; formerly,
Counsel, Horizon Financial, F.A., Western Region.

Peter E. Madden
70 Westcliff Road
Weston, MA
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director,
Trustee, or Managing General Partner of the Funds; formerly, President,
State Street Bank and Trust Company and State Street Boston Corporation.

Gregor F. Meyer
Henny, Kochuba, Meyer and Flaherty
Two Gateway Center - Suite 674
Pittsburgh, PA
Birthdate: October 6, 1926
Trustee
Attorney-at-law; Shareholder, Henny, Kochuba, Meyer and Flaherty; Chairman,
Meritcare, Inc.; Director, Eat'N Park Restaurants, Inc.; Director, Trustee,
or Managing General Partner of the Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director, Trustee or Managing General Partner of the
Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics and Management Consultant; Trustee,
Carnegie Endowment for International Peace, RAND Corporation, Online
Computer Library Center, Inc., and U.S. Space Foundation; Chairman, Czecho
Management Center; Director, Trustee, or Managing General Partner of the
Funds; President Emeritus, University of Pittsburgh; founding Chairman,
National Advisory Council for Environmental Policy and Technology and
Federal Emergency Management Advisory Board.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public relations/marketing consultant; Conference Coordinator, Non-profit
entities; Director, Trustee, or Managing General Partner of the Funds.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated
Research Corp., Federated Global Research Corp. and Passport Research,
Ltd.; Executive Vice President and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services Company; Chairman, Treasurer, and
Trustee, Federated Administrative Services; Trustee or Director of some of
the Funds; Executive Vice President and Treasurer of the Funds.

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some
of the Funds; Director or Trustee of some of the Funds.

David M. Taylor
Federated Investors Tower
Pittsburgh, PA
Birthdate: January 13, 1947
Treasurer

Senior Vice President and Trustee, Federated Investors; Vice President,
Federated Shareholder Services; Executive Vice President, Federated
Securities Corp.; Treasurer of some of the Funds.

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President and Secretary
Executive Vice President, Secretary, General Counsel, and Trustee,
Federated Investors; Trustee, Federated Advisers, Federated Management, and
Federated Research; Director, Federated Research Corp. and Federated Global
Research Corp.; Trustee, Federated Shareholder Services Company; Director,
Federated Services Company; President and Trustee, Federated Shareholder
Services; Director, Federated Securities Corp.; Executive Vice President
and Secretary of the Funds.

* This Trustee is deemed to be an "interested person" as defined in the
1940 Act.

@ Member of both the Trust's and Federated Portfolio's Executive Committee.
The Executive Committee of a Board of Trustees handles the responsibilities
of the Trustees between meetings of the Board.

THE FUNDS

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: Annuity Management Series; Arrow Funds;
Automated Government Money Trust; Blanchard Funds; Blanchard Precious
Metals, Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash Trust; FTI

Funds; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated
American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Exchange Fund,
Ltd.; Federated Fund for U.S. Government Securities Inc.; Federated
GNMA Trust; Federated Government Trust; Federated High Income
Securities Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities
Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust;
Federated Total Return Series, Inc.; Federated U.S. Government Bond
Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated
U.S. Government Securities Fund: 3-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Utility Fund,
Inc.; High Yield Cash Trust; Insurance Management Series; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds,
Inc.; Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal Securities
Fund, Inc.; Liberty U.S. Government Money Market Trust; Liberty Term
Trust, Inc. - 1999; Liberty Utility Fund, Inc.; Liquid Cash Trust;
Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; Municipal Securities Income
Trust; Newpoint Funds; 111 Corcoran Funds; Peachtree Funds; The
Planters Funds; RIMCO Monument Funds; Star Funds; The Starburst Funds;
The Starburst Funds II; Targeted Duration Trust; Tax-Free Instruments
Trust; Trust for Financial Institutions; Trust For Government Cash

Reserves; Trust for Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; The Virtus Funds; World Investment Series,
Inc.

FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, they are
not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
See "Description of Federated Portfolios" below for a description of
Trustee liability.
TRUSTEES' COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST/FEDERATED TRUST/ FROM FUND COMPLEX +
PORTFOLIOS FEDERATED
PORTFOLIOS*

John F. Donahue, $ 0 $0 for the Trust, Federated
Portfolios, and
Chairman and Trustee 54 other investment companies in the
Fund Complex

J. Christopher Donahue, $0 $0 for the Trust, Federated
Portfolios, and
President and Trustee 16 other investment companies in the
Fund Complex
Thomas G. Bigley,++ $ 0 $86,331 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
John T. Conroy, Jr., $ 0 $115,760 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
William J. Copeland, $ 0 $115,760 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
James E. Dowd, $ 0 $115,760 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
Lawrence D. Ellis, M.D., $ 0 $104,898 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
Edward L. Flaherty, Jr., $ 0 $115,760 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex

Peter E. Madden, $ 0 $104,898 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
Gregor F. Meyer, $ 0 $104,898 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
John E. Murray, Jr., $ 0 $104,898 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
Wesley W. Posvar, $ 0 $104,898 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex
Marjorie P. Smuts, $ 0 $104,898 for the Trust, Federated
Portfolios, and
Trustee 54 other investment companies in the
Fund Complex

*As of the date of this Statement of Additional Information, neither the
Trust nor Federated Portfolios (each of which consists of one portfolio)
has paid any fees to the Trustees.
+The information is provided for the last calendar year.
++Mr. Bigley served on 39 investment companies in the Federated Funds
complex from January 1 through

September 30, 1995. On October 1, 1995, he was appointed a Trustee on 15
additional Federated Funds.

INVESTMENT ADVISORY AND SUB-ADVISORY SERVICES

ADVISER AND SUB-ADVISER TO THE PORTFOLIO
The Portfolio's investment adviser is Federated Management (the "Adviser"),
a subsidiary of Federated Investors. All of the voting securities of
Federated Investors are owned by a trust, the trustees of which are John
F. Donahue, his wife, and his son, J. Christopher Donahue. For its advisory
services, the Adviser receives an annual investment advisory fee as
described in the prospectus.
The Adviser has contracted to U.S. Trust Company the responsibility to make
the day-to-day investment decisions for the Portfolio and to place the
purchase and sales orders for securities transactions of the Portfolio,
subject in all cases to the general supervision of the Adviser. U.S. Trust
Company furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Portfolio's investments and
effecting securities transactions for the Portfolio.
The Advisory Agreement and the Sub-Advisory Agreement will continue in
effect with respect to the Portfolio as long as such continuance is
specifically approved at least annually by the Trustees of Federated
Portfolios or by a majority vote of the investors in the Portfolio (with
the vote of each being in proportion to the respective values of their
investments) and, in either case, by a majority of the Trustees of
Federated Portfolios who are not parties to the Advisory Agreement, the
Sub-Advisory Agreement, as the case may be, or interested persons of any
such party, at a meeting called for the purpose of voting on the Advisory
Agreement or Sub-Advisory Agreement. The Advisory Agreement and the Sub-

Advisory Agreement were both approved by the Trustees of Federated
Portfolios on
October 3, 1995. The Adviser, U.S. Trust Company, and administrator have
agreed to waive certain fees.

The Advisory Agreement and Sub-Advisory Agreement provide that the Adviser
and U.S. Trust Company may render services to others, and each agreement is
terminable by the Portfolio without penalty on not more than 60 days' nor
less than 30 days' written notice when authorized either by majority vote
of the Fund and the other investors in the Portfolio (with the vote of each
being in proportion to the amount of its investment), or by a vote of a
majority of the Trustees of Federated Portfolios, or by the Adviser or U.S.
Trust Company on not more than 60 days' nor less than 30 days' written
notice. The Advisory Agreement and Sub-Advisory Agreement each will
automatically terminate in the event of its assignment. The Advisory
Agreement and the Sub-Advisory Agreement provide that neither the Adviser,
U.S. Trust Company, nor its personnel shall be liable for any error of
judgment or mistake of law or for any loss arising out of any investment,
or for any act or omission in the execution of security transactions for
the Portfolio, except for willful misfeasance, bad faith, gross negligence
or reckless disregard of its or their obligations and duties under the
Advisory and Sub-Advisory Agreements.

STATE EXPENSE LIMITATIONS
The Adviser, if required by applicable state law, shall reimburse the Fund
or waive all or part of its fees up to, but not exceeding, its investment
advisory fees from the Portfolio. Such reimbursement, if required, will be
equal to the combined aggregate annual expenses of the Fund and the
Portfolio which exceed that expense limitation with the lowest threshold

prescribed by any state in which the Fund is qualified for offer or sale.
Management of each of the Trust and Federated Portfolios has been advised
that the lowest such threshold currently in effect is 2 1/2% of net assets
up to $30,000,000, 2% of the next $70,000,000 of net assets and 1 1/2% of
net assets in excess of that amount.
This arrangement is not part of the Advisory Agreement and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS

The Portfolio's purchase and sales of securities may be principal
transactions, that is, securities may be purchased directly from the issuer
or from an underwriter or market maker for the securities. There usually
are no brokerage commissions paid for such purchases and, therefore, the
Portfolio does not anticipate paying brokerage commissions in such
transactions. Purchases and sales of the Portfolio's portfolio securities
will usually be principal transactions without brokerage commissions. Any
transactions for which the Portfolio pays a brokerage commission will be
effected at the best price and execution available. Purchases from
underwriters of securities include a commission or concession paid by the
issuer to the underwriter, and purchases from dealers serving as market
makers include the spread between the bid and the asked price.
Allocations of transactions, including their frequency, to various
dealers is determined by the Investment Managers in their best judgment and
in a manner deemed to be in the best interest of the investors in the
Portfolio rather than by any formula. The primary consideration is prompt
execution of orders in an effective manner at the most favorable price.
The Advisory and Sub-Advisory Agreements provide that, in executing
portfolio transactions and selecting brokers or dealers, the Investment
Managers will seek to obtain the best net price and the most favorable

execution. The Investment Managers shall consider factors they deem
relevant, including the breadth of the market in the security, the price of
the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, for the
specific transaction and on a continuing basis.
In addition, the Advisory and Sub-Advisory Agreements authorize the
Investment Managers, to the extent permitted by law and subject to the
review of Federated Portfolio's Trustees, to cause the Portfolio to pay a
broker which furnishes brokerage and research services a higher commission
than that which might be charged by another broker for effecting the same
transaction, provided that the Investment Managers determine in good faith
that such commission is reasonable in relation to the value of the
brokerage and research services provided by such broker, viewed in terms of
either that particular transaction or the overall responsibilities of the
Investment Managers to the accounts as to which they exercise investment
discretion. Such brokerage and research services might consist of reports
and statistics on specific companies or industries, general summaries, of
groups of regional stocks and their comparative earnings, or broad
overviews of the stock market and the economy. Such services might also
include reports on global, regional, and country-by-country prospects for
economic growth, anticipated levels of inflation, prevailing and expected
interest rates, and the outlook for currency relationships.
Supplementary research information so received is in addition to and not in
lieu of services required to be performed by the Investment Managers and
does not reduce the investment advisory fees (if any) payable by the
Portfolio. Such information may be useful to the Investment Managers in
serving the Portfolio and other clients and, conversely, supplemental
information obtained by the placement of business of other clients may be
useful to the Investment Managers in carrying out their obligations to the

Portfolio. Investment decisions for the Portfolio will be made
independently from those for any other account or investment company that
is or may in the future become managed by its Investment Managers or any of
their affiliates. If, however, the Portfolio and other investment companies
or accounts managed by the same investment manager are contemporaneously
engaged in the purchase or sales of the same security, the transactions may
be averaged as to price and allocated equitably to each account. In some
cases, this policy might adversely affect the price paid or received by the
Portfolio or the size of the position obtainable for the Portfolio. In
addition, when purchases or sales of the same security for the Portfolio
and for other investment companies managed by the same Investment Managers
occur contemporaneously, the purchase or sale orders may be aggregated in
order to obtain any price advantages available to large denomination
purchases or sales. Furthermore, in certain circumstances affiliates of the
Investment Managers whose investment portfolios are managed internally,
rather than by the Investment Managers, might seek to purchase or sell the
same type of investments at the same time as the Portfolio. Such an event
might also adversely affect the Portfolio.
OTHER SERVICES

For information regarding the service providers of Federated Portfolios,
see "Description of Federated Portfolios-Service Providers" in this
Statement of Additional Information.
TRUST ADMINISTRATION

Federated Services Company, through its subsidiary Federated Administrative
Services ("FAS"), provides administrative personnel and services to the
Fund for a fee as described in the prospectus.

CUSTODIAN AND PORTFOLIO RECORDKEEPER
State Street Bank and Trust Company, Boston, Massachusetts, is custodian
for the cash and securities of the Fund.
Federated Services Company has contracted on behalf of its subsidiaries
(including FAS) to maintain the Fund's accounting records. The fee paid for
this service is based upon the level of the Fund's average net assets for
the period plus out-of-pocket expenses.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Shareholder Services Company, a subsidiary of Federated Services
Company, serves as transfer agent and dividend disbursing agent for the
Fund. For its services, the transfer agent receives a fee based upon the
size, type and number of accounts and transactions made by shareholders.

INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
PURCHASING SHARES

Shares are sold at their net asset value without a sales charge on days the
New York Stock Exchange is open for business. The procedure for purchasing
Shares is explained in the respective prospectus under "Investing in
Institutional Shares" or "Investing in Institutional Service Shares."
DISTRIBUTION PLAN (INSTITUTIONAL SERVICE SHARES ONLY) AND SHAREHOLDER
SERVICES AGREEMENT
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services to stimulate
distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's

particular circumstances and goals. These activities and services may
include, but are not limited to, marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
With respect to the Institutional Service Shares class of the Fund, by
adopting the Distribution Plan, the Trustees of the Trust expect that the
Fund will be able to achieve a more predictable flow of cash for investment
purposes and to meet redemptions. This will facilitate more efficient
portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by
the Fund's objectives, and properly servicing these accounts, it may be
possible to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; (3)
enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds. Federated Services
Company acts as the shareholder's agent in depositing checks and converting
them to federal funds.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the respective
prospectuses.
DETERMINING MARKET VALUE OF SECURITIES
Portfolio securities are valued on the basis of market quotations when they
are readily available. The Portfolio values mortgage-backed and other debt
securities for which market quotations are not readily available at their
fair value as determined in good faith, utilizing procedures approved by
the Board of Trustees of Federated Portfolios, on the basis of valuations
provided either by dealers or a pricing service. Absent unusual
circumstances, debt securities having a remaining maturity of sixty days or
less when purchased, and debt securities originally purchased with
maturities in excess of sixty days but which currently have maturities of
sixty days or less, are valued at cost adjusted for amortization of premium
and accretion of discounts.
Interest rate futures contracts held by the Portfolio are valued on the
basis of closing market quotations, which are normally available daily.
When market quotations are not readily available, the fair value of these
contracts will be determined in good faith utilizing procedures approved by
the Trustees of Federated Portfolios.

A determination of value used in calculating net asset value must be a fair
value determination made in good faith utilizing procedures approved by the
Board of Trustees of Federated Portfolios. While no single standard for
determining fair value exists, as a general rule, the current fair value of
a security would appear to be the amount which the Portfolio could expect
to receive upon its current sale. Some, but not necessarily all, of the

general factors which may be considered in determining fair value include:
(i) the fundamental analytical data relating to the investment; (ii) the
nature and duration of restrictions on disposition of the securities; and
(iii) an evaluation of the forces which influence the market in which these
securities are purchased and sold. Without limiting or including all of the
specific factors which may be considered in determining fair value, some of
the specific factors include: type of security, financial statements of
the issuer, cost at date of purchase, size of holding, discount from market
value, value of unrestricted securities of the same class at the time of
purchase, special reports prepared by analysts, information as to any
transactions or offers with respect to the security, existence of merger
proposals or tender offers affecting the securities, price and extent of
public trading in similar securities of the issuer or comparable companies,
and other relevant matters.
Each investor in the Portfolio, including the Fund, may add to or reduce
its investment in the Portfolio on each Business Day. As of the Valuation
Time on each such day, the value of each investor's beneficial interest in
the Portfolio will be determined by multiplying the net asset value of the
Portfolio by the percentage representing that investor's share of the
aggregate beneficial interests in the Portfolio. Any additions or
reductions which are to be effected on that day will then be effected. The
investor's percentage of the aggregate beneficial interests in the
Portfolio will then be recomputed as the percentage equal to the fraction
(i) the numerator of which is the value of such investor's investment in
the Portfolio as of the Valuation Time on such day plus or minus, as the
case may be, the amount of net additions to or reductions in the investor's
investment in the Portfolio effected on such day, and
(ii) the denominator of which is the aggregate net asset value of the
Portfolio as of the Valuation Time on such day plus or minus, as the case

may be, the amount of the net additions to or reductions in the aggregate
investments in the Portfolio by all investors in the Portfolio. The
percentage so determined will then be applied to determine the value of the
investor's interest in the Portfolio as of the Valuation Time on the
following Business Day adjusted for any additions or reductions which are
to be effected on that following day.
REDEEMING SHARES

The Fund redeems Shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
respective prospectuses under "Redeeming Institutional Shares" and
"Redeeming Institutional Service Shares." Although State Street Bank does
not charge for telephone redemptions, it reserves the right to charge a fee
for the cost of wire-transferred redemptions of less than $5,000.
REDEMPTION IN KIND
The Fund is obligated to redeem Shares solely in cash up to $250,000 or 1%
of the respective class net asset value, whichever is less, for any one
shareholder within a 90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
of the Trust and of Federated Portfolios determine that further cash
payments will have a material adverse effect on the remaining Fund
shareholders and Portfolio investors. In such a case, the Fund will pay all
or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way as the Fund determines net asset value. The
portfolio instruments will be selected in a manner that the Trustees of the
Trust and of Federated Portfolios deem fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is
made in kind, shareholders receiving their securities and selling them

before their maturity could receive less than the redemption value of their
securities and could incur certain transaction costs.
Although the Fund intends to redeem shares in cash, the Fund and the
Portfolio reserve the right under certain circumstances to pay the
redemption price in whole or in part by a distribution of securities. To
the extent available, such securities will be readily marketable.
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. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign.
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.
See "Description of Federated Portfolios" below for a description of
Massachusetts partnership law and investor liability with respect to an
investment in Federated Portfolios.

TAX STATUS

THE FUND'S TAX STATUS
Each series of the Trust is treated as a separate entity for federal income
tax purposes under the Code. The Fund has elected to be treated and intends
to qualify each year as a "regulated investment company" under Subchapter M
of the Code (a "RIC") by meeting all applicable requirement of Subchapter
M, including requirements as to the nature of the Fund's gross income, the
amount of the Fund's distributions, and the composition and holding period
of the Fund's portfolio assets. Because the Fund intends to distribute
substantially all of its net investment income and net realized capital
gains to its shareholders in accordance with the timing requirements
imposed by the Code, it is not expected that the Fund will be required to
pay any federal income or excise taxes. If the Fund fails to qualify as a
RIC in any year, the Fund would incur a regular corporate federal income
tax upon its taxable income. Whether or not the Fund qualifies as a RIC,
the Fund's distributions would generally be taxable as ordinary dividend
income to shareholders.

The Trust anticipates that under interpretations of the Internal Revenue
Service, (1) the Portfolio will be treated for federal income tax purposes
as a partnership and (2) for purposes of determining whether the Fund
satisfies the income and diversification requirements to maintain its
status as a RIC, the Fund, as an investor in the Portfolio, will be deemed
to own a proportionate share of the Portfolio's assets and will be deemed
to be entitled to the Portfolio's income or loss attributable to that
share. The Portfolio has advised the Fund that it intends to conduct its
operations so as to enable its investors, including the Fund, to satisfy
those requirements.

Any Fund distribution or any distribution of net capital gains or net
short-term capital gains will have the effect of reducing the per share net
asset value of Shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the Shares and then
effectively receive a portion of the purchase price back as a taxable
distribution.
Any investment by the Portfolio in zero coupon bonds, certain securities
purchased at a market discount, and similar instruments will cause the
Portfolio to recognize income prior to the receipt of cash payments with
respect to those securities. In order to distribute this income and avoid a
tax on the Fund, the Portfolio may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially
resulting in additional taxable gain or loss to the Fund.
The Portfolio's transactions in options and futures contracts will be
subject to special tax rules that may affect the amount, timing, and
character of Fund income and distributions to investors.
TAXATION OF THE PORTFOLIO
The Trust anticipates that the Portfolio will be treated as a partnership
for federal income tax purposes. As such, the Portfolio is not subject to
federal income taxation. Instead, the Fund must take into account, in
computing its federal income tax liability, its share of the Portfolio's
income, gains, losses, deductions, credits and tax preference items,
without regard to whether it has received any cash distributions from the
Portfolio.
TAXATION OF FUND DISTRIBUTIONS
Dividends from ordinary income and any distributions from net short-term
capital gains are taxable to Fund shareholders as ordinary income for

federal income tax purposes and will not be eligible for the dividends
received deduction available to corporations. Distributions of net capital
gains (the excess of net long-term capital gains over net short-term
capital losses), if any, are taxable to Fund shareholders as long-term
capital gains without regard to the length of time the shareholders have
held their Shares. Distributions are taxable as described above whether
paid in cash or reinvested in additional Shares. Fund shareholders will be
notified annually as to the federal tax status of distributions.
Amounts not distributed on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax.
To prevent imposition of the excise tax, the Fund must, and intends to,
distribute during each calendar year substantially all of its ordinary
income for that year and substantially all of its capital gain in excess of
its capital losses for that year, plus any undistributed ordinary income
and capital gains from previous years. For this and other purposes, the
Fund dividend will be treated as paid on December 31 if it is declared by
the Fund in October, November or December with a record date in such a
month and paid by the Fund during January of the following calendar year.
Accordingly, those distributions will be taxable to shareholders for the
taxable year in which that December 31 falls.

Withdrawals by the Fund from the Portfolio generally will not result in the
Fund recognizing any gain or loss for federal income tax purposes, except
that (1) gain will be recognized to the extent that any cash distributed
exceeds the basis of the Fund's interest in the Portfolio prior to the
distribution, (2) income or gain will be realized if the withdrawal is in
liquidation of the Portfolio's entire interest in the Portfolio and
includes a disproportionate share of any unrealized receivables held by the
Portfolio, and (3) loss will be recognized if the distribution is in

liquidation of that entire interest and consists solely of cash and/or
unrealized receivables. The basis of the Fund's interest in the Portfolio
generally equals the amount of cash and the basis of any property that the
Fund invests in the Portfolio, increased by the Fund's share of income from
the Portfolio and the amount of any cash distributions and the basis of any
property distributed from the Portfolio.

OTHER TAXATION
The Trust is organized as a Massachusetts business trust and, under current
law, neither the Trust nor the Fund is liable for any income or franchise
tax in the Commonwealth of Massachusetts, provided that the Fund continues
to qualify as a RIC for federal income tax purposes.
The Portfolio is organized as a series of Federated Portfolios, a business
trust organized under the laws of the Commonwealth of Massachusetts. The
Portfolio is not subject to any income or franchise tax in the Commonwealth
of Massachusetts. The investment by the Fund in the Portfolio does not
cause the Fund to be liable for any income or franchise tax in the
Commonwealth of Massachusetts.
Fund shareholders may be subject to state and local taxes on Fund
distributions to them by the Fund. Shareholders are advised to consult
their own tax advisers with respect to the particular tax consequences to
them of an investment in the Fund.
TOTAL RETURN

The average annual total return all classes of Shares of the Fund is the
average compounded rate of return for a given period that would equate a
$1,000 initial investment to the ending redeemable value of that
investment. The ending redeemable value is computed by multiplying the
number of Shares owned at the end of the period by the maximum offering

price per share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the
beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional Shares, assuming the
reinvestment of all dividends and distributions.
YIELD

The yield for all classes of shares of the Fund is determined by dividing
the net investment income per Share (as defined by the Securities and
Exchange Commission) earned by any class of Shares over a thirty-day period
by the maximum offering price per share of any class of Shares on the last
day of the period. This value is annualized using semi-annual compounding.
This means that the amount of income generated during the thirty-day period
is assumed to be generated each month over a twelve month period and is
reinvested every six months. The yield does not necessarily reflect income
actually earned by any class of Shares because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in a
class of Shares, performance will be reduced for those shareholders paying
those fees.
PERFORMANCE COMPARISONS

The performance of each class of Shares depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the Portfolio is invested;
o changes in interest rates and market value of portfolio securities;

o changes in the expenses of the Portfolio, the Fund, or either class of
Shares; and
o various other factors.
A class of Shares' performance fluctuates on a daily basis largely because
net earnings and offering price per Share fluctuate daily. Both net
earnings and net asset value per Share are factors in the computation of
yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors such as the composition of
any 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:

o LIPPER ANALYTICAL SERVICES, INC. ranks funds in various categories by
making competitive calculations using total return. Total return
assumes the reinvestment of all capital gains distributions and income
dividends and takes into account any change in net asset value over a
specific period of time. From time to time, the Fund will quote its
Lipper ranking in the "general bond funds" category in advertising and
sales literature.

o LEHMAN BROTHERS AGGREGATE BOND INDEX which is composed of securities
from Lehman Brothers Government/Corporate Bond Index, Mortgage-Backed
Securities Index, and the Asset-Backed Securities Index. Total return
comprises price appreciation/depreciation and income as a percentage
of the original investment. Indices are rebalanced monthly by market
capitalization.

Advertisements and other sales literature for any class of Shares may quote
total returns which are calculated on nonstandardized base periods. These
total returns also represent the historic change in the value of an
investment in any class of Shares based on monthly reinvestment of
dividends over a specified period of time.
DESCRIPTION OF FEDERATED PORTFOLIOS

BENEFICIAL INTERESTS
The Bond Index Portfolio is a series of Federated Portfolios, which is
organized as a trust having separate series under the laws of the
Commonwealth of Massachusetts. Under the Declaration of Trust, the Trustees
are authorized to issue beneficial interests in one or more series.
Currently, there is one portfolio of Federated Portfolios, the Bond Index
Portfolio. Investors in a portfolio will be held personally liable for the
obligations and liabilities of that portfolio (and of no other portfolio)
and Federated Portfolios, subject, however, to indemnification by Federated
Portfolios in the event that there is imposed upon an investor any
liability or obligation of the Portfolio or Federated Portfolios. The
Declaration of Trust also provides that Federated Portfolios may maintain
appropriate insurance for the protection of Federated Portfolios, its
Trustees, officers, employees and agents, and covering possible tort and
other liabilities. The risk of an investor incurring financial loss on
account of investor liability is limited to circumstances in which the
Portfolio or Federated Portfolios are unable to meet their obligations.
Investors in a portfolio are entitled to participate pro rata in
distributions of taxable income, loss, gain and credit of their respective
portfolio only. Upon liquidation or dissolution of a portfolio, investors
are entitled to share pro rata in the portfolio's (and no other
portfolio's) net assets available for distribution to its investors.

Federated Portfolios reserves the right to create and issue additional
portfolios of beneficial interests, in which case the beneficial interests
in each new portfolio would participate equally in the earnings, dividends
and assets of that portfolio (and of no other portfolio). Investments in a
portfolio have no preference, preemptive, conversion or similar rights and
are fully paid and nonassesable, except as set forth below. Investments in
a portfolio may not be transferred.
Each investor of Federated Portfolios is entitled to a vote in proportion
to the amount of its investment in each portfolio. Investors in a portfolio
do not have cumulative voting rights, and a plurality of the aggregate
beneficial interests in all outstanding series of Federated Portfolios may
elect all of the Trustees if they choose to do so and in such event other
investors would not be able to elect any Trustees. Investors in each
portfolio will vote as a separate class except as to voting for the
election or removal of Trustees, the termination of Federated Portfolios,
as otherwise required by the 1940 Act, or if the matter is determined by
the Trustees to be a matter which affects all portfolios. Federated
Portfolio's Declaration of Trust may be amended without the vote of
investors, except that investors have the right to approve by affirmative
majority vote any amendment which would adversely affect their voting
rights, alter the procedures to amend the Declaration of Trust of Federated
Portfolios, as required by Federated Portfolio's registration statement, or
as submitted to them by the Trustees.

Federated Portfolios or any portfolio may enter into a merger or
consolidation, or sell all or substantially all of its assets, if approved
(a) at a meeting of investors by investors representing the lesser or (i)
67% or more of the beneficial interests in the affected portfolio present
or represented at such meeting, if investors in more than 50% of all such

beneficial interests are present or represented by proxy, or (ii) more than
50% of all such beneficial interests (hereinafter referred to as a
"Majority Shareholder Vote") are present or represented by proxy, or (b) by
an instrument in writing without a meeting, consented to by a Majority
Shareholder Vote of the investors holding a majority of the beneficial
interests in the affected portfolio.

Federated Portfolios' Declaration of Trust provides that obligations of
Federated Portfolios are not binding upon the Trustees individually but
only upon the property of Federated Portfolios and that the Trustees will
not be liable for any action or failure to act, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of his office.
Federated Portfolio's Declaration of Trust further provides that it will
indemnify its Trustees, officers, employees and agents against liabilities
and expenses incurred in connection with litigation in which they may be
involved because of their offices with Federated Portfolios, unless, as to
liability to the Federated Portfolios or its investors, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices.
In the case of settlement, the By-Laws of Federated Portfolios provide that
such indemnification will not be provided unless it has been determined by
a court or other body approving the settlement or other disposition, or by
a reasonable determination, based upon a review of readily available facts,
by a vote of a majority of disinterested Trustees or by a written opinion
of independent counsel, that such officers or Trustees have not engaged in

willful misfeasance, bad fait, gross negligence or reckless disregard of
their duties.
SERVICE PROVIDERS
ADMINISTRATION

Federated Services Company, through its subsidiary FAS, provides
administrative personnel and services to Federated Portfolios at an annual
rate which relates to the average aggregate daily net assets of each series
as specified below:

Average Aggregate Daily
Maximum Administrative Fee Net Assets of the Portfolio
.050 of 1% on the first $1 billion
.045 of 1% on the next $1 billion
.040 of 1% on the next $1 billion
.025 of 1% on the next $1 billion
.010 of 1% on the next $1 billion
.005 of 1% on assets in excess of $5 billion
The minimum administrative fee shall be $60,000 annually for each series
(unless waived).
Dr. Henry J. Gailliot, an officer of Federated Management, the Adviser to
the Portfolio, holds approximately 20% of the outstanding common stock and
serves as a director of Commercial Data Services, Inc., a company which
provides computer processing services to FAS.
CUSTODIAN AND PORTFOLIO RECORDKEEPER
Investors Bank and Trust Company, 79 Milk Street, 7th Floor, Boston,
Massachusetts, 02205, is custodian for the cash and securities of the
Portfolio.

Federated Services Company has contracted on behalf of its subsidiaries
(including FAS) to maintain Federated Portfolio's accounting records. The
fee paid by Federated Portfolios for this service (for which the Portfolio
bears its pro rata share) is based upon the level of Federated Portfolio's
average net assets for the period plus out-of-pocket expenses.

TRANSFER AGENT

As transfer agent, Federated Shareholder Services Company, a subsidiary of
Federated Services Company, Pittsburgh, Pennsylvania, maintains all
necessary investor records for Federated Portfolios. The fee paid by
Federated Portfolios to Federated Shareholder Services Company is based
upon the size, type and number of accounts and transactions made by
investors.

INDEPENDENT AUDITORS
The Independent Auditors for the Portfolio are Ernst & Young LLP, One
Oxford Centre, Pittsburgh, Pennsylvania, 15219.
ABOUT FEDERATED INVESTORS

Federated Investors in dedicated to meeting investor needs which is
reflected in its investment decision making - structured, straightforward,
and consistent. This has resulted in a history of competitive performance
with a range of competitive investment products that have gained the
confidence of thousands of clients and their customers.

The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research.

Investment decisions are made and executed by teams of portfolio managers,
analysts, and traders dedicated to specific market sectors.

J. Thomas Madden, Executive Vice President, oversees Federated Investor's
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investor's domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees
the management of Federated Investor's international portfolios.
MUTUAL FUND MARKET
Twenty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $2 trillion to the more than 5,500 funds
available.*
Federated Investors, through its subsidiaries, distributes mutual funds for
a variety of investment applications. Specific markets include:
INSTITUTIONAL
Federated Investors meets the needs of more than 4,000 institutional
clients nationwide by managing and servicing separate accounts and
mutual funds for a variety of applications, including defined benefit
and defined contribution programs, cash management, and
asset/liability management. Institutional clients include
corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and
financial advisors. The marketing effort to these institutional
clients is headed by John B. Fisher, President, Institutional Sales
Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than
1,500 banks and trust organizations. Virtually all of the trust

divisions of the top 100 bank holding companies use Federated funds in
their clients' portfolios. The marketing effort to trust clients is
headed by Mark R. Gensheimer, Executive Vice President, Bank Marketing
& Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage
firms nationwide including 200 New York Stock Exchange firms
supported by more wholesalers than any other mutual fund distributor.
The marketing effort to these firms is headed by James F. Getz,
President, Broker/Dealer Division.

*Source: Investment Company Institute

APPENDIX

STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes
in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
NR--"NR" indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy. S&P may apply a
plus (+) or minus (-) to the above rating classifications to show relative
standing within the classifications.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
AAA--Bonds which are rated "AAA" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to
as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized

are most unlikely to impair the fundamentally strong position of such
issues.
AA--Bonds which are rated "AA" are judged to be of high quality by all
standards. Together with the "AAA" group, they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "AAA" securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risks appear somewhat
larger than in "AAA" securities.
A--Bonds which are rated "A" possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
BAA--Bonds which are rated "BAA" are considered as medium grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and, in fact, have speculative characteristics
as well.
NR--Not rated by Moody's. Moody's applies numerical modifiers, 1, 2 and 3
in each generic rating classification from "AA" through "B" in its
corporate bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue
ranks in the lower end of its generic rating category.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS

AAA--Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA--Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA." Because bonds
rated in the "AAA" and "AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these issuers is
generally rated "F-1+."
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic
conditions and circumstances than bonds with higher ratings.
BBB--Bonds considered to be investment grade and of satisfactory credit
quality. the obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds and, therefore, impair timely payment.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated "PRIME-1" (or related supporting institutions) have
a superior capacity for repayment of short-term promissory obligations.
"PRIME-1" repayment capacity will normally be evidenced by the following
characteristics:
o leading market positions in well-established industries;

o high rates of return on funds employed;
o conservative capitalization structure with moderate reliance on debt and
ample asset protection;
o broad margins in earnings coverage of fixed financial charges and high
internal cash generation; or
o well-established access to a range of financial markets and assured
sources of alternate liquidity.
FITCH INVESTORS SERVICE, INC. SHORT-TERM DEBT RATINGS
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+."

Cusips 313909 20 2 - SS
313909 10 3 -IS

G01556-03 (3/96)

Subsequent to the approval by its Board of Trustees, the shareholders of
Excelsior Institutional Bond Index Fund, a portfolio of Excelsior
Institutional Trust ("Trust"), ratified a restructuring whereby the Trust
withdrew, on December 29, 1995, the investment of all of the assets of the
Excelsior Institutional Bond Index Fund from Bond Market Portfolio (a
portfolio of St. James Portfolios) and thereafter invested all of the
investable assets of Excelsior Institutional Bond Index Fund into Bond
Index Portfolio (a series of Federated Investment Portfolios).
The investment objective and policies of Federated Bond Index Fund are
identical to those of Excelsior Institutional Bond Index Fund, Bond Index
Portfolio and Bond Market Portfolio. Since the Federated Bond Index Fund
will invest all of its investable assets in Bond Index Portfolio, the
historical financial statements of Excelsior Institutional Bond Index Fund
and Bond Market Portfolio have been included herein to provide the reader
of this prospectus with past performance and financial history of these
funds.
Past performance is not predictive of future performance. Investment
returns and principal values will vary and shares may be worth more or less
at redemption than their original cost.

FEDERATED BOND INDEX FUND
(A PORTFOLIO OF FEDERATED INVESTMENT TRUST)
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 22, 1996

ASSETS:

Cash $ 100,000

LIABILITIES: ----

Net Assets for 13,793 shares outstanding of $ 100,000
beneficial interest

NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PROCEEDS PER SHARE:

INSTITUTIONAL SHARES:

($100,000 13,793 shares of beneficial interest $ 7.25
outstanding)

NOTES:
(1) The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated October 3, 1995, and has had no operations since
that date other than those relating to organizational matters, including
the issuance on February 22, 1996, of 13,793 shares of beneficial interest
at $7.25 per share to Federated Administrative Services, the Administrator
of the Trust. Organizational expenses estimated at $ 42,000,
were borne initially by the Administrator. The Fund has agreed to
reimburse the Administrator for the organizational expenses during the five
year period following the date the Trust became effective.

(2) Reference is made to "Management of the Trust and Federated
Portfolios," "Administration of the Trust" and "Tax Information" in this

Prospectus for a description of the investment advisory fee, administration
and other services and other federal tax aspects of the Trust.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
FEDERATED BOND INDEX FUND

We have audited the accompanying statement of assets and liabilities of
Federated Bond Index Fund, a portfolio of Federated Investment Trust as of
February 22, 1996. This statement of assets and liabilities is the
responsibility of the Fund's management. Our responsibility is to express
an opinion on this statement of assets and liabilities based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the statement of assets and
liabilities is free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
statement of assets and liabilities. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall statement of assets and liabilities
presentation. We believe that our audit provides a reasonable basis for
our opinion.

In our opinion, the statement of assets and liabilities presents fairly, in
all material respects, the net assets of the Federated Bond Index Fund as
of February 22, 1996, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Pittsburgh, Pennsylvania
February 22, 1996

EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR INSTITUTIONAL BOND INDEX FUND
FINANCIAL HIGHLIGHTS

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

SIX MONTHS ENDED PERIOD ENDED
NOVEMBER 30, MAY 31,
1995
(UNAUDITED) 1995(A)

NET ASSET VALUE, BEGINNING OF
PERIOD 7.26 $ 7.00

INCOME FROM INVESTMENT OPERATIONS

Net investment income 0.26 0.46

Net realized and unrealized gain
from St. James Bond Market
Portfolio 0.13 0.28

Total from investment operations
0.39 0.74

LESS DISTRIBUTIONS

Distributions from net
investment income (0.26 (0.46)

Distributions from net realized
gains ---- (0.02)

Total distributions (0.26 (0.48)

NET ASSET VALUE, END OF PERIOD 7.39 $ 7.26

TOTAL RETURN (B) 5.43% 11.03%

RATIOS TO AVERAGE NET ASSETS

Expenses (c) 0.12%(e) 0.12%(e)

Net investment income 7.06%(e) 7.33%(e)

Expense waiver/reimbursement(d)
1.35%(e) 1.11%(e)
SUPPLEMENTAL DATA

Net assets, end of period (000
omitted) 16,271 $ 15,565

(a) Reflects operations for the period from July 11, 1994 (commencement
of operations) to May 31, 1995.
(b) The investment advisor has agreed to waive all investment advisory
fees. While St. James Bond Market Portfolio does not pay any fee to its
advisor, each institutional investor enters into an asset management
services agreement with U.S. Trust or U.S. Trust Pacific and agrees to pay
annual fees calculated as a specific percentage of average net assets.
(c) Reflects the Fund's proportionate share of St. James Bond Market
Portfolio's expenses as well as voluntary fee waivers and reimbursements by
agents of St. James Bond Market Portfolio and a voluntary fee waiver and an
expense reimbursement by agents of the Trust.
(d) This voluntary expense decrease is reflected in both the expense and
net investment income ratios shown above.
(e) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)

EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR INSTITUTIONAL BOND INDEX FUND
STATEMENTS OF ASSETS AND LIABILITIES

NOVEMBER 30, 1995
(UNAUDITED) MAY 31, 1995

ASSETS:

Investment in St. James Bond Market
Portfolio, at value (Note 1a) $ 16,356,743 $ 16,280,745

Receivable for Fund shares sold ---- 184,705

Receivable from affiliate (Note 2d) 7,855 5,516

Deferred organization expense (Note 7,655 8,718
1d)

Total assets 16,372,253 16,479,684

LIABILITIES:

Dividends payable 92,401 102,656

Organization expenses payable (Note 1,155 1,239
1d)

Servicing and Fund accounting agent 1,219 2,001
fees payable (Note 2a)

Trustees' fees and expenses payable 177 ------
(Note 2e)

Payable for Fund shares redeemed ---- 797,440

Accrued expenses 6,629 11,809

Total liabilities 101,581 915,145

NET ASSETS $6,270,672 $ 15,564,539

NET ASSETS CONSIST OF:

Paid in capital 15,290,991 $ 14,877,781

Accumulated distributions in excess ---- (498)

of net investment income

Accumulated net realized gain from
St. James Bond Market Portfolio 228,447 75,708

Net unrealized appreciation from St.
James Bond Market Portfolio 751,234 611,548

Total Net Assets $6,270,672 $ 15,564,539

NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PROCEEDS PER SHARE (Net $ 7.390$ 7.260
assets shares outstanding):

SHARES OUTSTANDING (Unlimited number
of $0.00001 par value shares 2,202,207 2,145,324
authorized for the Fund)

(See Notes which are an integral part of the Financial Statements)

EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR INSTITUTIONAL BOND INDEX FUND
STATEMENTS OF OPERATIONS
SIX MONTHS
ENDED
NOVEMBER
30, 1995 PERIOD ENDED
MAY 31,

(UNAUDITED) 1995*

INVESTMENT INCOME ALLOCATED FROM ST.
JAMES BOND MARKET PORTFOLIO (NOTE 1):

Interest income $58,262 $ 1,428,523

Portfolio expenses (Net of waivers and
reimbursements of $68,482 and $131,409, ---- ----
respectively) (a)

Net investment income from St. James 558,262 1,428,523
Bond Market Portfolio

EXPENSES (NOTE 1F):

Servicing and fund accounting agent fee 7,706 14,704
(Note 2a)

Shareholder servicing fee (Note 2c) 19,427 47,933

Transfer agent fee (Note 2b) 9,000 16,500

Auditing fees 5,111 5,000

Legal fees 508 4,127

Prospectus and shareholder reports 459 3,736

Registration fees 149 5,163

Trustees' fees and expenses (Note 2e) 558 1,873

Amortization of organization expenses 1,063 1,889
(Note 1d)

Insurance expense 1,572 2,514

Miscellaneous 79 496

Total expenses 45,632 103,935

Less: Waiver of fees (Note 2b and 2c) (28,427) (64,433)

Reimbursement of expenses (Note (7,855) (16,494)
2d)

Net expenses 9,350 23,008

Net investment income 548,912 1,405,515

REALIZED AND UNREALIZED GAIN FROM ST.
JAMES BOND MARKET PORTFOLIO:

Net realized gain 152,739 136,598

Change in unrealized appreciation 139,686 611,548

Net realized and unrealized gain 292,425 748,146

Change in net assets
resulting from operations $41,337 $ 2,153,661

* For the period from July 11, 1994 (commencement of operations) to May
31, 1995.
(a) Portfolio expenses are discussed in Note 2 of the Portfolio's Notes to
Financial Statements which are included elsewhere in this report.
(See Notes which are an integral part of the Financial Statements)

EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR INSTITUTIONAL BOND INDEX FUND
STATEMENTS OF CHANGES IN NET ASSETS

SIX MONTHS
ENDED
NOVEMBER PERIOD
30, 1995 ENDED
(UNAUDITED) MAY 31,
1995*

INCREASE (DECREASE) IN NET ASSETS:

OPERATIONS-

Net investment income $ 548,912 $ 1,405,515

Net realized gain from St. James Bond
Market Portfolio 152,739 136,598

Net change in unrealized appreciation
from St. James Bond Market Portfolio 139,686 611,548

Change in net assets resulting from
operations 841,337 2,153,661

DISTRIBUTIONS TO SHAREHOLDERS-

Distributions from net investment (548,414) (1,405,515)
income

Distributions in excess of net

investment income ---- (498)

Distributions from net realized gains ---- (60,890)

Change in net assets resulting from
distributions to shareholders (548,414) (1,466,903)

SHARE TRANSACTIONS-

Proceeds from sale of shares 3,802,836 33,020,207

Net asset value of shares issued to
shareholders in payment of 553 1,162
distributions declared

Cost of shares redeemed (3,390,179) (18,160,255)

Change in net assets resulting from
share transactions 413,210 14,861,114

Change in net assets 706,133 15,547,872

NET ASSETS:

Beginning of period (Note 1) 15,564,539 16,667

End of period $ 16,270,672 $ 15,564,539

CAPITAL SHARE TRANSACTIONS:

Shares sold 522,974 4,741,011

Shares issued for dividend reinvestment 76 167

Shares redeemed (466,167) (2,598,235)

NET INCREASE IN SHARES OUTSTANDING 56,883 2,142,943

* For the period from July 11, 1994 (commencement of operations) to May
31, 1995.
(See Notes which are an integral part of the Financial Statements)

EXCELSIOR INSTITUTIONAL TRUST
EXCELSIOR INSTITUTIONAL BOND INDEX FUND
NOTES TO FINANCIAL STATEMENTS

The amounts and disclosures contained herein pertaining to November 30,
1995 and the six months then ended are unaudited. The amounts and
disclosures contained herein pertaining to
May 31, 1995 and the period from July 11, 1994 (commencement of operations)
to May 31, 1995 have been audited by Ernst & Young LLP.

1. SIGNIFICANT ACCOUNTING POLICIES:

The Trust is registered under the Investment Company Act of 1940 ("Act")
and the Securities Act of 1933, as an open-end diversified management
company and is comprised of twelve funds (the "Funds"). The financial
statements included herein are only those of Excelsior Institutional Bond

Index Fund (the "Fund"). The financial statements of the other funds are
presented separately.

Effective August 1, 1995, Edgewood Services, Inc. (the " Distributor"), a
wholly-owned subsidiary of Federated Investors, replaced UST Distributors,
Inc. as the distributor of the Trust.

The Trust seeks to achieve the Fund's investment objective by investing all
of the Fund's investable assets in Bond Market Portfolio, the corresponding
portfolio (the "Portfolio") of St. James Portfolios, an open-end
diversified management investment company. The Fund has the same
investment objective and policies as the Portfolio. The value of the
Fund's investment reflects its proportionate beneficial interest in the net
assets of the Portfolio. At November 30, 1995, and May 31, 1995, the
Fund's beneficial interest in the Portfolio was 99.99%.

United States Trust Company of the Pacific Northwest ("U.S. Trust Pacific")
is the investment advisor for the Portfolio. U.S. Trust Pacific has
delegated the daily management of the security holdings of the Portfolio to
the investment manager, United States Trust Company of New York ("U.S.
Trust"), acting as subadvisor.

U.S. Trust Pacific is a subsidiary of U.S. Trust. The performance of the
Fund is directly affected by the performance of the Portfolio. The
financial statements of the Portfolio, including the schedule of
investments, are included elsewhere in this report and should be read in
conjunction with the Trust's financial statements. An advisory fee is
charged to the Portfolio.

a) Valuation of Investments -- Valuation of securities by the
Portfolio is discussed in Note 1 of the Portfolio's Notes to Financial
Statements which are included elsewhere in this report.

b) Investment Income -- The Fund records its share of net investment
income, realized and unrealized gain and loss and adjusts its investment in
the Portfolio each day. All the net investment income and realized and
unrealized gain and loss of the Portfolio is allocated to the Fund and
other investors in the Portfolio at the time of such determination.

c) Dividends to Shareholders -- Dividends equal to all or
substantially all of the Fund's net investment income will be declared
daily and paid at least once a month. Distributions to shareholders of net
realized capital gains, if any, are normally declared and paid annually.

d) Deferred Organization Expense -- Expenses incurred by the Fund in
connection with its organization are being amortized on a straight-line
basis over a five-year period.

e) Federal Income Taxes -- It is the policy of the Fund to continue
to qualify as a regulated investment company, if such qualification is in
the best interest of the shareholders, by complying with the requirements
of the Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies, and by distributing substantially all of its taxable
earnings to its shareholders. For Federal income tax purposes, the Fund
is treated as a single entity for the purpose of determining such
qualification.

f) Expense Allocation -- Expenses incurred by the Trust with respect
to any two or more funds in the Trust are allocated in proportion to the
average net assets of each fund, except where allocations of direct
expenses to each fund can otherwise be fairly made. Expenses directly
attributable to a fund are charged to that fund.

g) Other -- All the net income of the Portfolio is allocated pro rata
to the Fund and the other investors in the Portfolio at the time of such
determination.

2. TRANSACTIONS WITH AFFILIATES

a) Pursuant to a Servicing and Fund Accounting Agreement
("Agreement") between the Trust and Signature Financial Services, Inc.
("SFSI"), SFSI serves as a servicing and fund accounting agent to the
Trust, providing fund accounting and other services necessary for the
operation of the Trust and furnishing office facilities required for
conducting the business of the Trust. Certain officers of SFSI serve as
officers of the Trust and are compensated by SFSI. For its fund accounting
services under the Agreement, SFSI receives a fee, payable monthly, of
$12,000 per year per Fund plus out of pocket expenses. For the six months
ended November 30, 1995, and the period from July 11, 1994 (commencement of
operations) to May 31, 1995, fund accounting fees for the Fund amounted to
$6,000 and $10,677, respectively.

b) Effective September 1, 1995 Chase Global Funds Services Company
("CGFSC"), a subsidiary of the Chase Manhattan Bank, N.A., (formerly Mutual
Funds Service Company ("MFSC"), which was a subsidiary of U.S. Trust),
serves as the Trust's transfer agent. For its transfer agent services,

CGFSC receives a fee payable monthly, of $18,000 per year per Fund. For
the six months ended November 30, 1995 and the period from July 11, 1994
(commencement of operations) to May 31, 1995, CGFSC voluntarily agreed to
waive transfer agency fees in the amount of $9,000 and $16,500,
respectively, for the Fund.

c) The Trust, on behalf of the Funds, has a shareholder servicing
agreement with U.S. Trust and expects to enter into shareholder servicing
agreements ("Shareholder Service Agreements") with one or more shareholder
servicing agents ("Shareholder Service Agents"). Pursuant to the
Shareholder Service Agreements, Shareholder Service Agents are entitled to
receive a shareholder servicing fee payable monthly, computed at an annual
rate of up to 0.25% of the average daily net assets of the Fund
represented by shares owned by customers of the Shareholder Service Agents.
The services provided may include personal services relating to shareholder
accounts, such as answering shareholder inquiries regarding the Fund and
providing reports and other information. In addition, certain Shareholder
Service Agents may perform record keeping and administrative functions for
which they are entitled to receive a fee payable monthly, computed at an
annual rate of up to 0.15% of the average daily net assets of the Fund
represented by shares owned by customers of the Shareholder Service Agents.
Fees paid to Shareholder Service Agents may not exceed, on an annualized
basis, 0.40% of the average daily net assets of the Fund represented by
shares owned by customers of the Shareholder Service Agents. For the six
month ended November 30, 1995 and for the period from July 11, 1994
(commencement of operations) to May 31, 1995, U.S. Trust voluntarily agreed
to waive shareholder servicing fees in the amount of $19,427 and $47,933,
respectively, for the Fund.

d) U.S. Trust and U.S. Trust Pacific have voluntarily agreed to waive
certain of their fees, and U.S. Trust has voluntarily agreed to reimburse
the Trust and the Portfolio Series for certain administrative fees and
other expenses. After giving effect to such waivers and reimbursements,
the combined annual operating expenses (including amortization of
organizational expenses but exclusive of taxes, interest, brokerage
commissions and extraordinary expenses) of the Fund and its Portfolio will
be 0.12% of average daily net assets. For the six months ended November
30, 1995 and for the period from July 11, 1994 (commencement of operations)
to May 31, 1995, U.S. Trust voluntarily reimbursed the Fund in the amount
of $7,855 and $16,494, respectively.

e) Independent Trustees receive an annual retainer of $4,000 and an
additional $250 for each meeting of the Board of Trustees attended. In
addition, the Trust reimbursed independent Trustees for reasonable expenses
incurred when acting in their capacity as Trustees. Officers and Trustees
of the Trust or Portfolio Series, deemed to be affiliated or "interested
parties" under the Act, receive no compensation from the Trust or Portfolio
Series for their services.

3. INVESTMENT TRANSACTIONS

Additions and reductions in the Fund's investment in the Portfolio for the
six months ended November 30, 1995, and for the period ended May 31, 1995
were as follows:

SIX MONTHS PERIOD ENDED
ENDED MAY 31,

NOVEMBER 1995*
30, 1995
ADDITIONS $3,987,542 $32,835,502
REDUCTIONS $4,762,230 $18,748,092

*For the period from July 11, 1994 (commencement of operations) to May 31,
1995.

4. RESTRUCTURING

At meetings of the Board of Trustees of the Trust held on August 29,
September 13, and October 6, 1995, the Trustees of the Trust approved a
restructuring of the Trust (the "Restructuring"). The Restructuring was
ratified by the shareholders of the Trust at a special meeting of
shareholders held on November 15, 1995. Pursuant to the Restructuring, on
December 29, 1995, the Trust withdrew the investment of all of the assets
of the Bond Index Fund from Bond Market Portfolio of St. James Portfolios
and thereafter invested all of the investable assets of the Bond Index Fund
in the Bond Index Portfolio, a series of Federated Investment Portfolios,
an open-end management investment company; and, effective January 1, 1996,
(a) U.S. Trust, CGFSC and Federated Administrative Services ("FAS"), a
wholly-owned subsidiary of Federated Investors, replaced SFSI as
administrator of the Trust, and (b) FAS replaced SFSI as fund accounting
agent of the Trust.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF
EXCELSIOR INSTITUTIONAL TRUST

We have audited the accompanying statement of assets and liabilities of the
Excelsior Institutional Bond Index Fund as of May 31, 1995, and the related
statement of operations, the statement of changes in net assets, and the
financial highlights for the period then ended. These financial statements
and financial highlights are the responsibility of the Trust's management.
Our responsibility is to express an opinion on these financial statements
and financial highlights based on our audits.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for
our opinion.

In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of Excelsior Institutional Bond Index Fund at May 31, 1995, the results of
its operations, the changes in its net assets and financial highlights for
the period then ended, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP

Boston, Massachusetts
July 25, 1995

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1995 (UNAUDITED)

Principal
Amount Value

ASSET-BACKED SECURITIES --
$300,000 1.85%
Premier Auto Trust, 6.35%,
due 5/2/00 $ 302,061
(Cost
$297,876)................

CORPORATE OBLIGATIONS -- 14.08%
BEVERAGES -- 2.71%
275,000 Anheuser-Busch, 7.00%,
due 284,793
9/1/05........................
150,000 Pepsico, 7.625%, due
12/18/98.................. 157,876

..........

442,669

COMMUNICATIONS -- 3.35%
250,000 Motorola, 7.50%, due
5/15/25................... 273,863
...........
250,000 Sprint, 8.125%, due
7/15/02................... 274,330
...........

548,193

DRUGS -- 1.30%
200,000 American Home Products,
7.70%, due 212,828
2/15/00...............

FINANCE -- 4.00%
110,000 Bank of Boston, 6.625%,
due 110,119
12/1/05........................
....
500,000 Lehman Brothers
Holdings, 8.50%, due
8/1/15.................... 544,810
.................

654,929

RETAIL -- 0.98%

150,000 Penney (J.C.), 7.375%, due
6/15/04................... 160,408
.................

UTILITIES -- 1.74%
275,000 Duke Power, 7.50%, due
8/1/25.................... 283,673
..................

TOTAL CORPORATE
OBLIGATIONS
(Cost 2,302,700
$2,211,191)....................

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1995 (UNAUDITED)

Principal
Amount Value

FOREIGN GOVERNMENT
OBLIGATION -- 1.91%
$ Province of Ontario,
300,000 7.00%, due 8/4/05
(Cost $ 312,945
$304,390)........................

U.S. GOVERNMENT & AGENCY
MORTGAGE-BACKED
SECURITIES -- 26.45%
Federal Home Loan
Mortgage Association
311,394 9.00%, due 4/1/22................... 328,670
357,028 7.00%, due 5/1/24................... 358,239
342,167 7.00%, due 6/1/24................... 342,389
Federal National Mortgage Association
344,663 7.00%, due 6/1/09................... 348,789
508,243 8.50%, due 8/1/23................... 530,133
440,011 7.00%, due 5/1/24................... 439,848
417,180 7.00%, due 6/1/24................... 417,026
Government National Mortgage
Association
212,198 9.50%, due 228,603
235,777 1/15/19................... 253,611
481,131 9.50%, due 10/15/20................. 491,442
574,954 7.00%, due 587,275
6/15/24...................
7.50%, due
6/15/24...................

TOTAL U.S. GOVERNMENT & AGENCY
MORTGAGE-BACKED SECURITIES
(Cost 4,326,025
$4,146,224).....................

U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 7.16%

200,000 Federal Home Loan
Mortgage Association,
7.23%, due 12/17/02................ 205,190
900,000 Private Export Funding,
7.30%, due 1/31/02.................. 965,826

TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(Cost 1,171,016
$1,128,601).....................

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
NOVEMBER 30, 1995 (UNAUDITED)

Principal
Amount Value

UNITED STATES TREASURY
OBLIGATIONS -- 44.18%
United States Treasury Notes
$ 1,220,000 6.50%, due $ 1,238,495
825,000 5/15/97................... 839,825
1,225,000 6.50%, due 1,279,745
500,000 8/15/97................... 7.125%, 523,045
650,000 due 10/15/98............... 7.00%, 735,007
505,000 due 4/15/99................... 521,650
8.875%, due
5/15/00................. 6.25%,
due 2/15/03...................
United States Treasury Bonds
500,000 7.25%, due 548,830
245,000 5/15/04...........9.375%, due 311,341
1,100,000 2/15/06...........7.25%, due 1,228,910
5/15/16..................

TOTAL UNITED STATES
TREASURY OBLIGATIONS (Cost $6,802,075) 7,226,848

TOTAL INVESTMENTS -- 95.63%
(Cost $14,890,357).................................... $15,641,595
OTHER ASSETS AND LIABILITIES
(NET) --4.37%.......................................... 715,264

TOTAL NET ASSETS -- $16,356,859
100.00%.........................................

(See Notes which are an integral part of the Financial Statements)

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1995

Principal
Amount Value

CORPORATE OBLIGATIONS -- 12.91%
ASSET-BACKED SECURITIES -- 1.85%
$ Premier Auto Trust, 6.35%, due $ 300,654
300,000 5/02/00........................

BANKING -- 0.65%
110,000 Bank of Boston, 6.625%, due 105,238
12/01/05..........................

COMMUNICATION -- 3.12%
500,000 MCI Communications Sr.
Nts., 7.625%, due 508,335
11/07/96.......................................

CONSUMER SERVICES -- 3.16%
500,000 Hertz, 9.125%, due 514,760
8/01/96............................................
.

FINANCIAL SERVICES -- 3.18%
500,000 General Electric Capital, 8.75%, due 517,490
11/26/96...............

RETAIL -- 0.95%
150,000 Penney (J.C.), 7.375%, due 155,822
6/15/04..................................

TOTAL CORPORATE OBLIGATIONS
(Cost 2,102,299

$2,077,387)........................................
..............

U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS -- 28.03%
Federal Home Loan Mortgage
Corporation
379,254 9.00%, due 395,505
359,360 4/01/22............................................ 353,826
354,429 ........ 348,971
7.00%, due
5/01/24............................................
........
7.00%, due
6/01/24............................................
........
Federal National Mortgage
Association
353,093 7.00%, due 355,412
546,337 6/01/09............................................ 565,000
461,342 ........ 453,952
419,458 8.50%, due 412,738
8/01/23............................................
........
7.00%, due
5/01/24............................................
........
7.00%, due

6/01/24............................................
........
Government National Mortgage
Association
286,756 9.50%, due 303,884
267,859 1/15/19............................................ 282,853
1,084,327 ........ 1,091,604
9.50%, due
10/15/20...........................................
.......
7.50%, due
6/15/24............................................
........

TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS
(Cost
$4,427,700)........................................ 4,563,745
......

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 1995

Principal
Amount Value

U.S. GOVERNMENT AGENCY
OBLIGATIONS -- 1.24%
Federal Home Loan
Mortgage Association
$ 7.23%, due 12/17/02
200,000 (Cost $189,153)..... 201,192

UNITED STATES TREASURY
OBLIGATIONS -- 52.33%
United States Treasury Notes
1,270,000 6.500%, due 5/15/97............ 1,284,681
825,000 6.500%, due 8/15/97............ 835,312
500,000 7.125%, due 10/15/98.......... 517,890
500,000 7.000%, due 4/15/99............ 516,955
650,000 8.875%, due 5/15/00............ 728,306
1,230,000 6.250%, due 2/15/03............ 1,228,266
500,000 7.250%, due 5/15/04............ 531,015
1,000,000 7.500%, due 2/15/05............ 1,084,060
United States Treasury Bonds
245,000 9.375%, due 2/15/06 301,695
1,000,000 7.250%, due 5/15/16 1,052,030
400,000 7.500%, due 11/15/24 439,936

TOTAL UNITED STATES
TREASURY OBLIGATIONS
(Cost $8,081,590)................ 8,520,146

SHORT-TERM OBLIGATION -- 2.56%
TIME DEPOSIT
416,748 National Westminster Bank
(Nassau), 5.46%, due
6/01/95
(Cost $416,748) 416,748
..................

TOTAL INVESTMENTS -- 97.07%
(Cost 15,804,130
$15,192,578)..........................
.......
OTHER ASSETS AND LIABILITIES
(NET) -- 476,725
2.93%...............................

TOTAL NET ASSETS -- $16,280,855
100.00%..............................

(See Notes which are an integral part of the Financial Statements)

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
STATEMENTS OF ASSETS AND LIABILITIES

NOVEMBER
30, 1995 MAY 31, 1995
(UNAUDITED)

ASSETS:

Investments in securities, at value (Note $ 15,641,595 $ 15,804,130
3c)(a)

Cash and cash equivalents 503,917 ----

Dividends and interest receivable 177,088 160,006

Receivable for investment securities sold ---- 278,876

Receivable from affiliate (Note 2a) 48,999 47,110

Prepaid expenses ---- 2,797

Deferred organization expense (Note 1d) 33,545 38,556

Total assets 16,405,144 16,331,475

LIABILITIES:

Due to servicing agent (Note 2b) 4,830 5,112

Organization expenses payable (Note 1d) 35,100 36,058

Accrued expenses and other liabilities 8,355 9,450

Total liabilities 48,285 50,620

NET ASSETS $ 16,356,859 $ 16,280,855

REPRESENTED BY:

Paid in capital for beneficial interests $ 16,356,859 $ 16,280,855

(a) Cost of investments $ 14,890,357 $ 15,192,578

(See Notes which are an integral part of the Financial Statements)

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
STATEMENTS OF OPERATIONS

SIX MONTHS
ENDED
NOVEMBER 30, PERIOD ENDED
1995 MAY 31, 1995*
(UNAUDITED)

INVESTMENT INCOME (NOTE 1):

Interest $558,266 $ 1,428,528

EXPENSES (NOTE 1E):

Investment advisory fees (Note 19,483 47,955
2a)

Servicing and fund accounting 28,759 54,279
agent fees (Note 2b)

Custodian fees (Note 2c) 3,400 6,749

Amortization of organization 4,053 8,354
expenses (Note 1d)

Trustees' fees and expenses 1,618 3,999
(Note 2d)

Auditing fees 5,500 5,000

Legal fees 2,502 4,594

Insurance expense 2,796 ----

Miscellaneous 371 479

Total expenses 68,482 131,409

Less: Waiver of fees (Note (19,483) (47,955)
2a)

Reimbursement of expenses (48,999) (83,454)
(Note 2a)

Net expenses 0 0

Net investment income 558,266 1,428,528

REALIZED AND UNREALIZED GAIN
(NOTE 3):

Net realized gain on 152,740 136,599
investments

Net change in unrealized 139,686 611,552
appreciation on investments

Net realized and unrealized 292,426 748,151
gain

Change in net assets
resulting from operations $850,692 $ 2,176,679

* For the period from July 11, 1994 (commencement of operations) to May
31, 1995.

(See Notes which are an integral part of the Financial Statements)

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS

SIX MONTHS
ENDED PERIOD
NOVEMBER ENDED
30, 1995 MAY 31,
(UNAUDITED) 1995*

INCREASE (DECREASE) IN NET
ASSETS:

OPERATIONS-

Net investment income $ 558,266 $ 1,428,528

Net realized gain on 152,740 136,599
investments

Net change in unrealized
appreciation on investments 139,686 611,552
for the period

Net increase in net
assets resulting from 850,692 2,176,679
operations

TRANSACTIONS IN INVESTORS'
BENEFICIAL INTEREST:

Additions 3,987,542 32,835,501

Reductions (4,762,230 (18,748,092)
)

Net increase (decrease)
from transactions in (774,688) 14,087,409
investors' beneficial
interest

Total increase in Net 76,004 16,264,088
Assets

NET ASSETS:

Beginning of period (Note 16,280,855 16,767
1)

End of period $ 16,356,859 $ 16,280,855

SUPPLEMENTARY DATA

RATIOS:

Expenses to Average Net 0.00% (c) 0.00% (c)
Assets

Net Investment Income
to Average Net Assets 7.16% (c) 7.45% (c)

Expense waiver / 0.88% (c) 0.69% (c)

reimbursement (a) (c)

Portfolio Turnover (b) 37% 67%

* For the period from July 11, 1994 (commencement of operations) to May
31, 1995.
(a) This voluntary expense decrease is reflected in both the expense and
net investment income ratios shown above.
(b) Portfolio Turnover calculation excludes in-kind transfers of
securities (See Notes 3a and 3b).
(c) Computed on an annualized basis.

(See Notes which are an integral part of the Financial Statements)

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS

The amounts and disclosures contained herein pertaining to November 30,
1995 and the six months then ended are unaudited. The amounts and
disclosures contained herein pertaining to May 31, 1995 and the period from
July 11, 1994 (commencement of operations) to May 31, 1995 have been
audited by Price Waterhouse LLP.

1. SIGNIFICANT ACCOUNTING POLICIES:

St. James Portfolios (the "Portfolio Series") was organized as a New
York trust on May 11, 1994, with the Portfolios established as a separate
series of the Portfolio Series on the same date. The Portfolio Series is
comprised of twelve portfolios (the "Portfolios"), ten of which were active
at November 30, 1995 and May 31, 1995. The financial statements included

herein are only those of Bond Market Portfolio (the "Portfolio"). The
financial statements of the other Portfolios are presented separately. The
Portfolio had no operations until July 11, 1994 (when operations commenced)
other than matters relating to its organization and registration as an
open-end diversified management investment company under the Investment
Company Act of 1940 (the "Act"), the sale of an initial beneficial interest
(the "Initial Interest") of the Portfolio at the purchase price of $16,667
to Excelsior Institutional Bond Index Fund (the "Fund") and the sale of an
Initial Interest of the Portfolio at the purchase price of $100 to UST
Distributors, Inc. The Declaration of Trust permits the Portfolio Series
to issue an unlimited number of beneficial interests in each Portfolio.

United States Trust Company of The Pacific Northwest ("U.S. Trust
Pacific") is the investment advisor for the Portfolio. U.S. Trust Pacific
has delegated the daily management of the security holdings of the
Portfolio to United States Trust Company of New York ("U.S. Trust"), acting
as subadvisor.

Signature Financial Services, Inc. ("SFSI") serves as the Portfolio's
servicing and fund accounting agent. U.S. Trust serves as the Portfolio's
custodian. U.S. Trust Pacific is a subsidiary of U.S. Trust.

The following is a summary of the significant accounting policies of
the Portfolio:

a) Valuation of Investments -- Investments in securities (including
financial futures) that are traded on a domestic exchange are valued at the
last sale price on the exchange on which such securities are primarily
traded or at the last sale price on a national securities market.

Securities traded over-the-counter are valued each business day on the
basis of closing over-the-counter bid prices. Securities for which there
were no transactions are valued at the average of the most recent bid and
asked prices (as calculated by an independent pricing service (the
"Service") based upon its evaluation of the market for such securities)
when, in the judgment of the Service, quoted bid and asked prices for
securities are readily available and are representative of the market. Bid
price is used when no asked price is available. Investments in securities
that are primarily traded on foreign security exchanges are generally
valued at the preceding closing values of such securities on their
respective exchanges, except that when an occurrence subsequent to the time
a value was so established is likely to have changed such value, then a
fair value of those securities will be determined by consideration of other
factors under the direction of the Portfolio Series' Trustees. A security
which is traded on more than one exchange is valued at the quotation on the
exchange determined to be the primary market on which the security is
traded.

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS

All other foreign securities are valued at the last current bid
quotation if market quotations are available, or at fair value as
determined in accordance with policies established by the Board of
Trustees.

Securities for which market quotations are not readily available are
valued at fair value pursuant to guidelines adopted by the Portfolio
Series' Trustees. Short-term debt instruments with remaining maturities of
60 days or less are valued at amortized cost, which approximates market
value.

b) Security Transactions and Investment Income -- Security
transactions are recorded on a trade date basis. Realized gains and losses
on investments sold are recorded on the basis of identified cost. Interest
income, including where applicable amortization of discounts and premiums
on investments, is recorded on the accrual basis.

c) Repurchase Agreements -- The Portfolio may purchase portfolio
securities from financial institutions deemed to be creditworthy by the
investment advisor subject to the seller's agreement to repurchase and the
Portfolio's agreement to resell such securities at mutually agreed upon
prices. Securities purchased subject to such repurchase agreements are
deposited with the Portfolio's subcustodian or are maintained in the
Federal Reserve/Treasury book-entry system and must have, at all times, an
aggregate market value of not less than 102% of the repurchase price
(including accrued interest).

If the value of the underlying security, including accrued interest,
falls below 102% of the repurchase price plus accrued interest, the
Portfolio will require the seller to deposit additional collateral by the
next business day. Default or bankruptcy of the seller may, however,
expose the Portfolio to a risk of loss in the event that the Portfolio is
delayed or prevented from exercising its right to dispose of the underlying
collateral securities or to the extent that proceeds from a sale of the

underlying securities were less than the repurchase price under the
agreement.

d) Deferred Organization Expense -- Organization expenses of the
Portfolio in the amount of $46,910 have been deferred and are being
amortized on a straight-line basis over a period not to exceed five years
beginning with the commencement of operations of the Portfolio.

Any amount received by the Portfolio from the Fund as a result of a
redemption of the Fund's Initial Interest will be applied so as to reduce
the amount of unamortized organization expenses of the Portfolio. The
amount paid by the Portfolio Series on behalf of the Portfolio on any
withdrawal from the Portfolio of the Initial Interest of UST Distributors,
Inc. will be reduced by a pro rata portion of any unamortized organization
expenses of the Portfolio. With regard to each Portfolio, this reduction
will be determined with respect to each withdrawal of an Initial Interest
by calculating the proportion of the amount of the Initial Interest
withdrawn to the aggregate amount of the Initial Interests then
outstanding. The service providers to the Portfolio have agreed to
contribute to the Portfolio at the time of the termination, liquidation, or
dissolution of the Portfolio, an amount equal to the unamortized
organizational expense at such time.

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO

NOTES TO FINANCIAL STATEMENTS

e) Expense Allocation -- Expenses incurred by the Portfolio Series
with respect to any two or more Portfolios are allocated in proportion to
the average net assets of each Portfolio, except where allocation of direct
expenses to each Portfolio can otherwise be fairly made. Expenses directly
attributable to a Portfolio are charged to that Portfolio.

f) Federal Income Taxes -- The Portfolio will be treated as a
partnership for federal income tax purposes. As such, each investor in the
Portfolio will be subject to taxation on its share of that Portfolio's
ordinary income and capital gains. It is intended that the Portfolio's
assets will be managed in such a way that an investor in the Portfolio will
be able to satisfy the requirements of Subchapter M of the Internal Revenue
Code.

2. INVESTMENT ADVISORY FEE, SUBADVISORY FEES AND OTHER TRANSACTIONS WITH
AFFILIATES

a) Fees payable by the Portfolio pursuant to the provisions of an
Investment Advisory Agreement with U.S. Trust Pacific are payable monthly,
computed on the average daily values of the Portfolio's net assets at the
annual rate of 0.25%. For the six months ended November 30, 1995 and the
period from July 11, 1994 (commencement of operations) to May 31, 1995,
U.S. Trust Pacific voluntarily agreed to waive all of its investment
advisory fees amounting to $19,483 and $47,955, respectively.

In addition, U.S. Trust voluntarily agreed to reimburse the Portfolio
for all expenses exclusive of the investment advisory fee, taxes, interest,
brokerage commissions and extraordinary expenses. For the six months ended
November 30, 1995 and the period from July 11, 1994 (commencement of
operations) to May 31, 1995, U.S. Trust voluntarily reimbursed the
Portfolio in the amounts of $48,999 and $83,454, respectively.

Pursuant to separate subadvisory agreements between U.S. Trust Pacific
and the subadvisor, subadvisory fees are payable monthly by U.S. Trust
Pacific, computed on the average daily value of the Portfolio's net assets
at the maximum annual rate of 0.25%. The subavisor is compensated only by
U.S. Trust Pacific, and receives no fee directly from the Portfolio. For
the six months ended November 30, 1995, and the period from July 11, 1994
(commencement of operations) to May 31, 1995, subadvisory fees amounted to
$19,483 and $47,955, respectively, all of which were waived.

b) Pursuant to a Servicing and Fund Accounting Agreement
("Agreement") with SFSI, SFSI serves as the servicing and fund accounting
agent to the Portfolio, providing fund accounting and other services
necessary for the operations of the Portfolio and furnishing office
facilities required for conducting the business of the Portfolio. Certain
officers of SFSI serve as officers of the Portfolio Series and are
compensated by SFSI. Fees payable to SFSI pursuant to the Agreement for
its servicing functions are payable monthly and computed on the average
daily value of the Portfolio's net assets at the following annual rates:
0.05% of the first $2 billion in assets; 0.08% of the next $500 million;
0.07% of the next $500 million; 0.06% of the next $1 billion; and 0.05%
thereafter. In addition, for its fund accounting services under the
Agreement, SFSI receives a fee payable monthly of $50,000 per year per

Portfolio plus out of pocket expenses. For the six months ended November
30, 1995 and the period from July 11, 1994 (commencement of operations) to
May 31, 1995, fees charged under the Agreement for the Portfolio amounted
to $28,759 and $54,279, respectively.

c) U.S. Trust serves as custodian of the Portfolio's assets pursuant
to a Custody Agreement between U.S. Trust and the Portfolio. Pursuant to
delegation authority provided under the Custody Agreement, U.S. Trust has
entered into a subcustody agreement with Investors Bank & Trust Company
("IBT") with respect to the Portfolio. For services provided thereunder by
IBT, U.S. Trust has agreed to pay IBT a fee as agreed upon from time to
time. IBT receives no fee directly from the Portfolio for its subcustody
services.

Fees received by U.S. Trust under the Custody Agreement for the six
months ended November 30, 1995 and the period from July 11, 1994
(commencement of operations) to May 31, 1995 amounted to $3,400 and $6,749,
respectively.

d) Independent Trustees of the Portfolio Series receive an annual
retainer of $8,000 and an additional $500 for each meeting of the Board of
Trustees attended. In addition, the Portfolio Series reimburses the
Independent Trustees for reasonable expenses incurred when acting in their
capacity as Trustees. Officers and Trustees deemed to be affiliated or
"interested persons" under the Act received no compensation from the
Portfolio Series or the Trust for their services.

3. PURCHASES AND SALES OF INVESTMENT SECURITIES

a) Investment transactions (excluding short-term investments) for the
six months ended November 30, 1995 and the period ended May 31, 1995 were
as follows:

SIX MONTHS PERIOD ENDED
ENDED MAY 31,
NOVEMBER 1995*
30, 1995
COST OF PURCHASES $5,852,016 $12,633,873
CONTRIBUTION IN-KIND ---- $18,368,738
PROCEEDS FROM SALES $5,890,229 $16,140,644

*For the period from July 11, 1994 (commencement of operations) to May 31,
1995.

b) Investment transactions in U.S. Government and Agency Obligations
(excluding short-term investments) for the six months ended November 30,
1995 and the period ended May 31, 1995 were as follows:

SIX MONTHS PERIOD ENDED
ENDED MAY 31,
NOVEMBER 1995*
30, 1995
COST OF PURCHASES $2,632,664 $10,606,404
CONTRIBUTION IN-KIND ---- $18,320,517
PROCEEDS FROM SALES $4,357,254 $16,140,644

*For the period from July 11, 1994 (commencement of operations) to May 31,
1995.

ST. JAMES PORTFOLIOS
BOND MARKET PORTFOLIO
NOTES TO FINANCIAL STATEMENTS

c) At November 30, 1995 and May 31, 1995, the cost and gross
unrealized appreciation and depreciation in the value of investments owned
by the Portfolio, as computed on a federal tax basis, were as follows:

NOVEMBER MAY 31, 1995
30, 1995
AGGREGATE COST $14,890,357 $15,192,578

GROSS UNREALIZED APPRECIATION $751,238 $612,042
GROSS UNREALIZED DEPRECIATION ---- (490)

NET UNREALIZED APPRECIATION $751,238 $611,552

4. SUBSEQUENT EVENTS (UNAUDITED)

On December 15, 1995, the Trustees of the Portfolio Series voted to
terminate the Portfolio Series as an investment company under the
Investment Company Act of 1940. U.S. Trust reimbursed the balance of
unamortized organizational expenses at November 15, 1995 of $33,545 in
anticipation of a decision to terminate the Portfolio Series.

REPORT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS

TO THE TRUSTEES AND INVESTORS OF THE
ST. JAMES PORTFOLIOS

In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and changes in net assets and the supplementary data present
fairly, in all material respects, the financial position of the Bond Market
Portfolio (one of the portfolios constituting the St. James Portfolios) at
May 31, 1995, and the results of its operations, the changes in its net
assets, and its supplementary data for the period from July 11, 1994
(commencement of operations) to May 31, 1995, in conformity with generally
accepted accounting principles. These financial statements and
supplementary data (hereafter referred to as "financial statements") are
the responsibility of the Portfolio's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with
generally accepted auditing standards which require that we plan and

perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit, which
included confirmation of securities at May 31, 1995 by correspondence with
the custodian and brokers, and the application of alternative auditing
procedures where confirmations from brokers were not received, provides a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Boston, Massachusetts
July 25, 1995

PART C. OTHER INFORMATION.

Item 24. Financial Statements and Exhibits:

(a) The Financial Statements filed in Part B are as follows:

FEDERATED BOND INDEX FUND
Statement of Assets and Liabilities
Report of Ernst & Young LLP

EXCELSIOR INSTITUTIONAL BOND INDEX FUND
(for the six month period ended November 30, 1995 (unaudited)
and for the period from
July 11, 1994 to May 31, 1995 (audited))
Financial Highlights
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Report of Ernst & Young LLP

BOND MARKET PORTFOLIO
Schedule of Investments (as of November 30, 1995 (unaudited))
Schedule of Investments (as of May 31, 1995)(audited)
Statements of Assets and Liabilities (for the six month period
ended November 30, 1995 (unaudited) and for the fiscal year
ended May 31, 1995)(audited)
Statements of Operations (for the six month period ended
November 30, 1995 (unaudited) and for the fiscal year ended
May 31, 1995(unaudited))
Statements of Changes in Net Assets (for the six month period
ended November 30, 1995 (unaudited) and for the fiscal year
ended May 31, 1995(audited))
Notes to Financial Statements
Report of Price Waterhouse LLP

(b) Exhibits filed herewith:

(1) Conformed copy of Declaration of Trust of the
Registrant;(1)
(2) Copy of By-Laws of the Registrant;(1)
(3) Not applicable;
(4) (i) Specimen Certificate for Institutional Shares of
Federated Bond Index Fund; +
(ii) Specimen Certificate for Institutional Service
Shares of Federated Bond Index Fund; +
(5) Not applicable;
(6) (i) Form of the Distributor's Contract of the
Registrant; +
(ii) The Registrant hereby incorporates the conformed
copy of the specimen Mutual Funds Sales and Service
Agreement; Mutual Funds Service Agreement and
Plan/Trustee/Mutual Funds Service Agreement from Item
24(b)6 of the Cash Trust Series II Registration
Statement on Form N-1A, filed with the Commission on
July 24, 1995. (File Nos. 33-38550 and 811-6269);
(7) Not applicable;
(8) Conformed copy of the Custodian Agreement of the
Registrant; +
(9) (i) Form of Agreement for Fund Accounting, Transfer
Agent, Administrative Services and Custody Services
Procurement; +
(ii) Form of Shareholder Services Agreement; +
(iii) The responses described in Item 24(b)6(ii) are
hereby incorporated by reference.

+ All exhibits have been filed electronically.
1. Response is incoporated by Reference to Registrant's Initial
Registration Statement on Form N-1A filed January 4, 1996. (Files Nos.
033-00053 and 811-07477).

(10) Opinion and Consent of Counsel as to Legality of
Shares being registered; +
(11) (i) Consent of Ernst & Young LLP, Independent Auditors
(Federated Bond Index Fund); +
(ii) Consent of Ernst & Young LLP, Independent
Auditors (Excelsior Institutional Bond Index Fund);+
(iii) Consent of Price Waterhouse LLP, Independent
Accountants (Bond Market Portfolio); +
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding; +
(14) Not applicable;
(15) (i) Form of Registrant's Distribution Plan pursuant to
Rule 12b-1; +
(ii) The responses described in Item 24(b)6(ii) are
hereby incorporated by reference.
(16) Not applicable;
(17) Not Applicable;
(18) The Registrant hereby incorporates by reference the
conformed copy of the specimen Multiple Class Plan
from Item 24(b)(18) of the World Investment Series,
Inc. Registration Statement on Form N-1A, filed with

the Commission on January 26, 1996. (File Nos. 33-
52149 and 811-07141)
(19) (i) Conformed copy of Power of Attorney of Registrant;
(1)
(ii) Conformed copy of Power of Attorney of Federated
Investment Portfolios; (1)

Item 25. Persons Controlled by or Under Common Control with Registrant:

None.

Item 26. Number of Holders of Securities of Bond Index Fund as of February
22, 1996:

Institutional Shares - one
Institutional Service Shares - none

Item 27. Indemnification: (1)

+ All exhibits have been filed electronically.
1. Response is incoportated by Reference to Registrant's Initial
Registration Statement on Form N-1A filed January 4, 1996. (Files Nos.
033-00053 and 811-07477).

Item 28. Business and Other Connections of Investment Adviser:

Not applicable.

Item 29. Principal Underwriters:

(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following
open-end investment companies: Annuity Management Series; Arrow
Funds; Automated Government Money Trust; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; Blanchard Funds; Blanchard
Precious Metals Fund, Inc.; Cash Trust Series, Inc.; Cash Trust
Series II; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government
Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs
Fund; Federated Equity Funds; Federated Equity Income Fund, Inc.;
Federated Exchange Fund, Ltd.; Federated Fund for U.S. Government
Securities Inc.; Federated GNMA Trust; Federated Government
Income Securities, Inc.; Federated Government Trust; Federated
High Income Securities Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Institutional Trust; Federated
Master Trust; Federated Municipal Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund,
Inc.; Federated Short-Term Municipal Trust; Federated Short-Term
U.S. Government Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated Utility Fund, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund:
1-3 Years; Federated U.S. Government Securities Fund: 3-5 Years;

Federated U.S. Government Securities Fund: 5-10 Years; First
Priority Funds; Fixed Income Securities, Inc.; Fortress Utility
Fund, Inc.; High Yield Cash Trust; Independence One Mutual Funds;
Insurance Management Series; Intermediate Municipal Trust;
International Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty U.S. Government Money Market
Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds,
Inc.; Money Market Management, Inc.; Money Market Obligations
Trust; Money Market Trust; The Monitor Funds; Municipal
Securities Income Trust; Newpoint Funds; 111 Corcoran Funds;
Peachtree Funds; The Planters Funds; RIMCO Monument Funds;
SouthTrust Vulcan Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Targeted Duration Trust; Tax-Free Instruments
Trust; Tower Mutual Funds; Trust for Financial Institutions;
Trust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; The
Virtus Funds; Vision Group of Funds, Inc.; and World Investment
Series, Inc.

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

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive ViceExecutive Vice
Federated Investors Tower President, Federated, President
Pittsburgh, PA 15222-3779 Securities Corp.

John W. McGonigle Director, Federated Executive Vice
Federated Investors Tower Securities Corp. President and
Pittsburgh, PA 15222-3779 Secretary

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.

Mark W. Bloss Senior Vice President, --

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

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

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

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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

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

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

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

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

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

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

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

Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Jane E. Broeren-Lambesis Vice President, --

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

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

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

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779

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

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

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

Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Scott A. Hutton Vice President, --

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

H. Joeseph Kenedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

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

John C. Shelar, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --

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

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

Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant

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

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

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

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

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

J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Asstistant Secretary, --
Federated Investors Tower Assistant Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.

Joseph M. Huber Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

David M. Taylor Assistant Secretary, Treasurer
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Item 30. Location of Accounts and Records:

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

Registrant Federated Investors Tower Pittsburgh,
Pennsylvania
15222-3779

Federated Administrative Federated Investors Tower
Federated Services (AdministratorPittsburgh, Pennsylvania
and Portfolio Accountant) 15222-3779

Federated Shareholder Services P.O. Box 8600
Dividend Disbursing Company (Transfer Agent and
Agnet) Boston, Massachusetts
02266-8600

State Street Bank and Trust P.O. Box 8600
Company (Custodian) Boston,Massachusetts
02266-8600

Item 31. Management Services:

Not applicable.

Item 32. Undertakings:

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

Registrant hereby undertakes to furnish each shareholder to whom a
prospectus is delivered, a copy of the Registrant's latest annual report,
upon request and without charge.

Registrant hereby undertakes to file a post-effective amendment on behalf
of Federated Bond Index Fund, using financial statements for Federated Bond
Index Fund, which need not be certified, within four to six months from the
effective date of this Registration Statement.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED INVESTMENT TRUST,
has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 5th day of March, 1996.

FEDERATED INVESTMENT TRUST

BY: /s/ J Crilley Kelly

J Crilley Kelly, Assistant Secretary
Attorney in Fact for John F. Donahue
March 5, 1996

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

NAME TITLE DATE
By:/s/ J Crilly Kelly
J Crilly Kelly Attorney In Fact March 5, 1996
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

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

J. Christopher Donahue* President and Trustee

David M. Taylor* Treasurer
(Principal Financial and
Accounting Officer)

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

James E. Dowd* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr.* Trustee

Peter E. Madden* Trustee

Gregor F. Meyer* Trustee

John E. Murray, Jr* Trustee

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

* By Power of Attorney

SIGNATURES

Federated Investment Portfolios ("Federated Portfolios") has duly caused
the Registraton Statement on Form N-1A ("Registration Statement") of
Federated Investment Trust (the "Trust") to be signed on its behalf by the
undersigned, therto duly authorized in the City of Pittsburgh and the
Commonwealth of Pennsylvania on the 5th day of March, 1996.

FEDERATED INVESTMENT PORTFOLIOS

BY: /s/ S. Elliott Cohan
S. Elliott Cohan, Assistant Secretary
Attorney in Fact for John F. Donahue
March 5, 1996

Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in
the capacity and on the date indicated:

NAME TITLE DATE
By:/s/ S. Elliott Cohan
S. Elliott Cohan Attorney In Fact March 5, 1996
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

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

J. Christopher Donahue* President and Trustee

David M. Taylor* Treasurer
(Principal Financial and
Accounting Officer)

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

James E. Dowd* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr.* Trustee

Peter E. Madden* Trustee

Gregor F. Meyer* Trustee

John E. Murray, Jr* Trustee

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

</TABLE>

Exhibit (11)(i) under N-1A
Exhibit 23 under Item 601/Reg SK

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated February 22, 1996 on the statement of assets
and liabilities of Federated Bond Index Fund (a portfolio of Federated
Investment Trust) in Pre-Effective Amendment Number 1 to the Registration
Statement (Form N-1A No. 33-00053) and the related Prospectuses of Federated
Bond Index Fund.

By:ERNST & YOUNG
Ernst & Young
Pittsburgh, Pennsylvania

Exhibit (11)(iii) under N-1A
Exhibit 23 under Item 601/Reg SK

CONSENT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this Pre-Effective Amendment No. 1 under the Securities Act
of 1933 to the registration statement on Form N-1A of Federated Investment Trust
(the "Registration Statement") (File Nos. 33-00053, 811-07477) of our report
dated July 25, 1995, relating to the financial statements of the Bond Market
Portfolio (one of the portfolios constituting the St. James Portfolios), which
appears in such Statement of Additional Information, and to the incorporation by
reference of our report into the Prospectuses which constitute part of this
Registration Statement.

By:/s/ PRICE WATERHOUSE LLP
Price Waterhouse LLP
Boston, Massachusetts

Exhibit (11)(ii) under N-1A
Exhibit 23 under Item 601/Reg SK

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Independent Auditors"
and to the use of our report dated July 25, 1995 on the financial statements and
financial highlights of Excelsior Institutional Bond Index Fund (a portfolio of
Excelsior Institutional Trust) in Pre-Effective Amendment Number 1 to the
Registration Statement (Form N-1A No. 33-00053) and the related Prospectuses of
Federated Bond Index Fund.

By:ERNST & YOUNG
Ernst & Young
Pittsburgh, Pennsylvania

Form N-1A Exhibit No. 13
Exhibit No. 99 under Item 601/Reg SK

FEDERATED ADMINISTRATIVE SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(412) 288-1900

February 22, 1996

Federated Investment Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Gentlemen:

Federated Administrative Services agrees to purchase 13,793.103 shares of
beneficial interest of Institutional Shares of Federated Bond Index Fund, a
portfolio of Federated Investment Trust, at the cost of $7.25 each. These
shares of beneficial interest are purchased for investment purposes and
Federated Administrative Services has no present intent of redeeming these
shares.

Very truly yours,

/s/ James J. Dolan
James J. Dolan

Exhibit No. 10 on Form N-1A
Exhibit No. 5 under Item 601/Reg SK

FEDERATED ADMINISTRATIVE SERVICES
Federated Investors Tower
Pittsburgh, PA 15222-3779

March 5, 1996

The Board of Trustees
Federated Investment Trust
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

Gentlemen:

Federated Bond Index Fund, a portfolio of Federated Investment Trust (the
"Trust"), proposes to offer and sell one series of shares of beneficial interest
(comprised of two classes of shares, Institutional Shares and Institutional
Service Shares) representing interests in a portfolio of securities known as
Federated Bond Index Fund (all such shares of beneficial interest being herein
referred to as "Shares"), in the manner and on the terms set forth in its
Registration Statement filed with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended. (File No. 33-00053)

As counsel, I have participated in the organization of the Trust, its
registration under the Investment Company Act of 1940, as amended, and the
preparation and filing of its Registration Statement under the Securities Act of
1933. I have examined and am familiar with the provisions of the written
Declaration of Trust dated October 3, 1995 (the "Declaration of Trust"), the
Bylaws of the Trust, and such other documents and records deemed relevant. I
have also reviewed questions of law and consulted with counsel thereon as deemed
necessary or appropriate by us for the purposes of this opinion.

Based upon the foregoing, it is my opinion that:

1. The Trust is duly organized and validly existing pursuant to the
Declaration of Trust; and

2. The Shares which are currently being registered by the Registration
Statement referred to above may be legally and validly issued from time to
time in consideration sufficient to comply with the provisions of Article
III, Section 3, of the Declaration of Trust and subject to compliance with
the Securities Act of 1933, as amended, the Investment Company Act of 1940,
as amended, and applicable state laws regulating the sale of securities.
Such Shares, when so issued, will be fully paid and non-assessable.

I consent to the filing of this opinion as an exhibit to the Registration
Statement referred to above and to any application or registration statement
filed under the securities laws of any of the States of the United States.

Very truly yours,

By: /s/ J Crilley Kelly

Exhibit 9(ii) on Form N-1A
Exhibit 10 under Item 601/Reg. SK

AMENDED AND RESTATED
SHAREHOLDER SERVICES AGREEMENT

THIS AGREEMENT, amended and restated as of the first day of September,
1995, (originally made and enterered into as of the first day of March, 1994),
by and between those investment companies listed on Exhibit 1, as may be
amended from time to time, having their principal office and place of business
at Federated Investors Tower, Pittsburgh, PA 15222-3779 and who have approved
this form of Agreement (individually referred to herein as a "Fund" and
collectively as "Funds") and Federated Shareholder Services, a Delaware
business trust, having its principal office and place of business at Federated
Investors Tower, Pittsburgh, Pennsylvania 15222-3779 ("FSS").
1. The Funds hereby appoint FSS to render or cause to be rendered personal
services to shareholders of the Funds and/or the maintenance of accounts of
shareholders of the Funds ("Services"). In addition to providing Services
directly to shareholders of the Funds, FSS is hereby appointed the Funds'
agent to select, negotiate and subcontract for the performance of Services.
FSS hereby accepts such appointments. FSS agrees to provide or cause to be
provided Services which, in its best judgment (subject to supervision and
control of the Funds' Boards of Trustees or Directors, as applicable), are
necessary or desirable for shareholders of the Funds. FSS further agrees to
provide the Funds, upon request, a written description of the Services which
FSS is providing hereunder.
2. During the term of this Agreement, each Fund will pay FSS and FSS agrees to
accept as full compensation for its services rendered hereunder a fee at an
annual rate, calculated daily and payable monthly, up to 0.25% of 1% of
average net assets of each Fund.
For the payment period in which this Agreement becomes effective or terminates
with respect to any Fund, there shall be an appropriate proration of the

Amended and Restated
Shareholder Services Agreement Page 2
monthly fee on the basis of the number of days that this Agreement is in
effect with respect to such Fund during the month.
3. This Agreement shall continue in effect for one year from the date of its
execution, and thereafter for successive periods of one year only if the form
of this Agreement is approved at least annually by the Board of each Fund,
including a majority of the members of the Board of the Fund who are not
interested persons of the Fund ("Independent Board Members") cast in person at
a meeting called for that purpose.
4. Notwithstanding paragraph 3, this Agreement may be terminated as follows:
(a) at any time, without the payment of any penalty, by the vote of
a majority of the Independent Board Members of any Fund or by a
vote of a majority of the outstanding voting securities of any Fund
as defined in the Investment Company Act of 1940 on sixty (60)
days' written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as
defined in the Investment Company Act of 1940; and
(c) by any party to the Agreement without cause by giving the other
party at least sixty (60) days' written notice of its intention to
terminate.
5. FSS agrees to obtain any taxpayer identification number certification from
each shareholder of the Funds to which it provides Services that is required
under Section 3406 of the Internal Revenue Code, and any applicable Treasury
regulations, and to provide each Fund or its designee with timely written
notice of any failure to obtain such taxpayer identification number
certification in order to enable the implementation of any required backup
withholding.
6. FSS shall not be liable for any error of judgment or mistake of law or for
any loss suffered by any Fund in connection with the matters to which this
Agreement relates, except a loss resulting from willful misfeasance, bad faith

Amended and Restated
Shareholder Services Agreement Page 3
or gross negligence on its part in the performance of its duties or from
reckless disregard by it of its obligations and duties under this Agreement.
FSS shall be entitled to rely on and may act upon advice of counsel (who may
be counsel for such Fund) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice. Any person,
even though also an officer, trustee, partner, employee or agent of FSS, who
may be or become a member of such Fund's Board, officer, employee or agent of
any Fund, shall be deemed, when rendering services to such Fund or acting on
any business of such Fund (other than services or business in connection with
the duties of FSS hereunder) to be rendering such services to or acting solely
for such Fund and not as an officer, trustee, partner, employee or agent or
one under the control or direction of FSS even though paid by FSS.
This Section 6 shall survive termination of this Agreement.
7. No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which an enforcement of the change, waiver, discharge or termination
is sought.
8. FSS is expressly put on notice of the limitation of liability as set forth
in the Declaration of Trust of each Fund that is a Massachusetts business
trust and agrees that the obligations assumed by each such Fund pursuant to
this Agreement shall be limited in any case to such Fund and its assets and
that FSS shall not seek satisfaction of any such obligations from the
shareholders of such Fund, the Trustees, Officers, Employees or Agents of such
Fund, or any of them.
9. The execution and delivery of this Agreement have been authorized by the
Trustees of FSS and signed by an authorized officer of FSS, acting as such,
and neither such authorization by such Trustees nor such execution and
delivery by such officer shall be deemed to have been made by any of them
individually or to impose any liability on any of them personally, and the

Amended and Restated
Shareholder Services Agreement Page 4
obligations of this Agreement are not binding upon any of the Trustees or
shareholders of FSS, but bind only the trust property of FSS as provided in
the Declaration of Trust of FSS.
10.Notices of any kind to be given hereunder shall be in writing (including
facsimile communication) and shall be duly given if delivered to any Fund and
to such Fund at the following address: Federated Investors Tower, Pittsburgh,
PA 15222-3779, Attention: President and if delivered to FSS at Federated
Investors Tower, Pittsburgh, PA 15222-3779, Attention: President.
11.This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written. If any provision of this Agreement shall be held or made
invalid by a court or regulatory agency decision, statute, rule or otherwise,
the remainder of this Agreement shall not be affected thereby. Subject to the
provisions of Sections 3 and 4, hereof, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and shall be governed by Pennsylvania law; provided, however, that
nothing herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940 or any rule or regulation promulgated by the Securities
and Exchange Commission thereunder.
12.This Agreement may be executed by different parties on separate
counterparts, each of which, when so executed and delivered, shall be an
original, and all such counterparts shall together constitute one and the same
instrument.
13.This Agreement shall not be assigned by any party without the prior written
consent of FSS in the case of assignment by any Fund, or of the Funds in the
case of assignment by FSS, except that any party may assign to a successor all
of or a substantial portion of its business to a party controlling, controlled
by, or under common control with such party. Nothing in this Section 14 shall

Amended and Restated
Shareholder Services Agreement Page 5
prevent FSS from delegating its responsibilities to another entity to the
extent provided herein.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.

Investment Companies (listedon Exhibit 1)

By:
John F. Donahue
Chairman

Attest:
John W. McGonigle
Secretary

Federated Shareholder Services

By:

President

Attest:
Secretary

Amended and Restated

Form N-1A Exhibit No. 4(ii)
Exhibit No. 3(c) under Item 601/Reg. SK

FEDERATED BOND INDEX FUND
Institutional Service Shares

Number Shares
Account No. Alpha Code Organized Under the See Reverse
Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313909202

Fully Paid and Non-Assessable Shares of Beneficial Interest of Federated Bond
Index Fund, a portfolio of Federated Investment Trust (hereafter called the
"Trust"), transferable on the books of the Trust by the owner in person or by
duly authorized attorney upon surrender of this Certificate properly endorsed.

The Institutional Service Shares represented hereby are issued and shall be
held subject to the provisions of the Declaration of Trust and By-Laws of the
Trust and all amendments thereto, all of which the holder by acceptance hereof
assents.

This Certificate is not valid unless countersigned by the Transfer Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its Seal.

FEDERATED BOND INDEX FUND
Institutional Service Shares

Dated: 1996
Massachusetts

/s/David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder
Services Company
Transfer Agent
By:

Authorized Signature
The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)

Additional abbreviations may also be used though not in the above list.

For value received hereby sell, assign, and transfer unto
----------

Please insert social security or other
identifying number of assignee

- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)

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

shares
- ----------------------------------------------------------------------
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
------------------------------------------
Attorney
- ------------------------------------------------------------ -----
to transfer the said shares on the books of the within named Fund with full
power of substitution in the premises.

Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must correspond
with the name as written upon the face of the
certificate in every particular, without
alteration or enlargement or any change whatever.

All persons dealing with INSTITUTIONAL SERVICE SHARES of FEDERATED BOND INDEX
FUND, a portfolio of Federated Investment Trust, a Massachusetts business trust,
must look solely to the Trust property for the enforcement of any claim against
the Trust, as the Trustees, officers, agents and shareholders of of the Trust
assume no personal liability whatsoever for obligations entered into on behalf
of the Trust.

THIS SPACE MUST NOT BE COVERED IN ANY WAY

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears

Form N-1A Exhibit No. 4(i)
Exhibit No. 3(c) under Item 601/Reg. SK

FEDERATED BOND INDEX FUND
Institutional Shares

Number Shares
Account No. Alpha Code Organized Under the See Reverse
Side For
Laws of the Commonwealth Certain Definitions
of Massachusetts

THIS IS TO CERTIFY THAT is the owner of

CUSIP 313909103

The Institutional Shares represented hereby are issued and shall be held
subject to the provisions of the Declaration of Trust and By-Laws of the Trust
and all amendments thereto, all of which the holder by acceptance hereof
assents.

This Certificate is not valid unless countersigned by the Transfer Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its Seal.

FEDERATED BOND INDEX FUND
Institutional Shares

Dated: 1996
Massachusetts

/s/David M. Taylor /s/ John F. Donahue
Treasurer Chairman

Countersigned: Federated Shareholder
Services Company
Transfer Agent
By:

Additional abbreviations may also be used though not in the above list.

For value received hereby sell, assign, and transfer unto
----------

Please insert social security or other
identifying number of assignee

- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)

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

All persons dealing with INSTITUTIONAL SHARES of FEDERATED BOND INDEX FUND, a
portfolio of Federated Investment Trust, a Massachusetts business trust, must
look solely to the Trust property for the enforcement of any claim against the
Trust, as the Trustees, officers, agents and shareholders of the Trust assume no
personal liability whatsoever for obligations entered into on behalf of the
Trust.

THIS SPACE MUST NOT BE COVERED IN ANY WAY

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by an (color) one-half inch border.
B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears

Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg SK
CUSTODIAN CONTRACT
BETWEEN
FEDERATED INVESTMENT COMPANIES
AND
STATE STREET BANK AND TRUST COMPANY
AND
FEDERATED SERVICES COMPANY

TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It......1
2. Duties of the Custodian With Respect to Property of
the Funds Held by the Custodian............................2
2.1 Holding Securities....................................2
2.2 Delivery of Securities................................2
2.3 Registration of Securities............................5
2.4 Bank Accounts.........................................6
2.5 Payments for Shares...................................7
2.6 Availability of Federal Funds.........................7
2.7 Collection of Income..................................7
2.8 Payment of Fund Moneys................................8
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased.......................................9
2.10 Payments for Repurchases or Redemptions of
Shares of a Fund...........................................9
2.11 Appointment of Agents................................10
2.12 Deposit of Fund Assets in Securities System..........10
2.13 Segregated Account...................................12
2.14 Joint Repurchase Agreements..........................13
2.15 Ownership Certificates for Tax Purposes..............13
2.16 Proxies..............................................13
2.17 Communications Relating to Fund Portfolio Securities.13
2.18 Proper Instructions..................................14
2.19 Actions Permitted Without Express Authority..........14
2.20 Evidence of Authority................................15
2.21 Notice to Trust by Custodian Regarding Cash

Movement..................................................15
3. Duties of Custodian With Respect to the Books of
Account and Calculation of Net Asset Value
and Net Income............................................15
4. Records ..................................................16
5. Opinion of Funds' Independent Public
Accountants/Auditors......................................16
6. Reports to Trust by Independent Public
Accountants/Auditors......................................17
7. Compensation of Custodian.................................17
8. Responsibility of Custodian...............................17
9. Effective Period, Termination and Amendment...............19
10. Successor Custodian.......................................20
11. Interpretive and Additional Provisions....................21
12. Massachusetts Law to Apply................................22
13. Notices ..................................................22
14. Counterparts..............................................22
15. Limitations of Liability..................................22

CUSTODIAN CONTRACT

This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as it
may be amended from time to time, (the "Trust"), which may be Massachusetts
business trusts or Maryland corporations or have such other form of
organization as may be indicated, on behalf of the portfolios (hereinafter
collectively called the "Funds" and individually referred to as a "Fund") of
the Trust, having its principal place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, and STATE STREET BANK AND TRUST
COMPANY, a Massachusetts trust company, having its principal place of business
at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
"Custodian", and FEDERATED SERVICES COMPANY, a Delaware business trust
company, having its principal place of business at Federated Investors Tower,
Pittsburgh, Pennsylvania, 15222-3779, hereinafter called ("Company").

WITNESSETH: That in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets of
each of the Funds of the Trust. Except as otherwise expressly provided
herein, the securities and other assets of each of the Funds shall be
segregated from the assets of each of the other Funds and from all other
persons and entities. The Trust will deliver to the Custodian all
securities and cash owned by the Funds and all payments of income,
payments of principal or capital distributions received by them with
respect to all securities owned by the Funds from time to time, and the
cash consideration received by them for shares ("Shares") of beneficial
interest/capital stock of the Funds as may be issued or sold from time to

time. The Custodian shall not be responsible for any property of the
Funds held or received by the Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions, provided
that the Custodian shall have no more or less responsibility or liability
to the Trust or any of the Funds on account of any actions or omissions
of any sub-custodian so employed than any such sub-custodian has to the
Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held by the
Custodian
2.1Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than securities
which are maintained pursuant to Section 2.12 in a clearing agency
which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System", or securities which are
subject to a joint repurchase agreement with affiliated funds
pursuant to Section 2.14. The Custodian shall maintain records of
all receipts, deliveries and locations of such securities, together
with a current inventory thereof, and shall conduct periodic physical
inspections of certificates representing stocks, bonds and other
securities held by it under this Contract in such manner as the
Custodian shall determine from time to time to be advisable in order
to verify the accuracy of such inventory. With respect to securities
held by any agent appointed pursuant to Section 2.11 hereof, and with
respect to securities held by any sub-custodian appointed pursuant to

Section 1 hereof, the Custodian may rely upon certificates from such
agent as to the holdings of such agent and from such sub-custodian as
to the holdings of such sub-custodian, it being understood that such
reliance in no way relieves the Custodian of its responsibilities
under this Contract. The Custodian will promptly report to the Trust
the results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a Securities
System account of the Custodian only upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, and only in the following cases:
(1) Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Trust;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in accordance
with the provisions of Section 2.17 hereof;
(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the name
of a Fund or into the name of any nominee or nominees of the

Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or nominee name of any
sub-custodian appointed pursuant to Section 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
(7) Upon the sale of such securities for the account of a Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom"; provided
that in any such case, the Custodian shall have no responsibility
or liability for any loss arising from the delivery of such
securities prior to receiving payment for such securities except
as may arise from the Custodian's own failure to act in
accordance with the standard of reasonable care or any higher
standard of care imposed upon the Custodian by any applicable law
or regulation if such above-stated standard of reasonable care
were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or

temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
(10) For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified by the
Trust, (b) certificated securities of a description specified by
the Trust, registered in the name of the Fund or in the name of a
nominee of the Custodian referred to in Section 2.3 hereof or in
proper form for transfer, or (c) securities of a description
specified by the Trust, transferred through a Securities System
in accordance with Section 2.12 hereof;
(11) For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against receipt
of amounts borrowed, except that in cases where additional
collateral is required to secure a borrowing already made,
further securities may be released for the purpose;
(12) For delivery in accordance with the provisions of any agreement
among the Trust or a Fund, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934, as amended,
(the "Exchange Act") and a member of The National Association of
Securities Dealers, Inc. ("NASD"), relating to compliance with
the rules of The Options Clearing Corporation and of any
registered national securities exchange, or of any similar
organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund;
(13) For delivery in accordance with the provisions of any agreement
among the Trust or a Fund, the Custodian, and a Futures

Commission Merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures
Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transaction for a Fund;
(14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for a Fund, for delivery to such Transfer Agent or to the
holders of shares in connection with distributions in kind, in
satisfaction of requests by holders of Shares for repurchase or
redemption; and
(15) For any other proper corporate purpose, but only upon receipt
of, in addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on behalf of a
Fund signed by an officer of the Trust and certified by its
Secretary or an Assistant Secretary, specifying the securities to
be delivered, setting forth the purpose for which such delivery
is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of
such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of a
particular Fund or in the name of any nominee of the Fund or of any
nominee of the Custodian which nominee shall be assigned exclusively
to the Fund, unless the Trust has authorized in writing the
appointment of a nominee to be used in common with other registered
investment companies affiliated with the Fund, or in the name or
nominee name of any agent appointed pursuant to Section 2.11 or in
the name or nominee name of any sub-custodian appointed pursuant to

Section 1. All securities accepted by the Custodian on behalf of a
Fund under the terms of this Contract shall be in "street name" or
other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only to
draft or order by the Custodian acting pursuant to the terms of this
Contract, and shall hold in such account or accounts, subject to the
provisions hereof, all cash received by it from or for the account of
each Fund, other than cash maintained in a joint repurchase account
with other affiliated funds pursuant to Section 2.14 of this Contract
or by a particular Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of 1940,
as amended, (the "1940 Act"). Funds held by the Custodian for a Fund
may be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or
trust company shall be approved by vote of a majority of the Board of
Trustees/Directors ("Board") of the Trust. Such funds shall be
deposited by the Custodian in its capacity as Custodian for the Fund
and shall be withdrawable by the Custodian only in that capacity. If
requested by the Trust, the Custodian shall furnish the Trust, not
later than twenty (20) days after the last business day of each
month, an internal reconciliation of the closing balance as of that
day in all accounts described in this section to the balance shown on
the daily cash report for that day rendered to the Trust.

2.5Payments for Shares. The Custodian shall make such arrangements with
the Transfer Agent of each Fund, as will enable the Custodian to
receive the cash consideration due to each Fund and will deposit into
each Fund's account such payments as are received from the Transfer
Agent. The Custodian will provide timely notification to the Trust
and the Transfer Agent of any receipt by it of payments for Shares of
the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from time to
time by the Trust and the Custodian in the amount of checks, clearing
house funds, and other non-federal funds received in payment for
Shares of the Funds which are deposited into the Funds' accounts.
2.7Collection of Income.
(1) The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall collect
on a timely basis all income and other payments with respect to
bearer securities if, on the date of payment by the issuer, such
securities are held by the Custodian or its agent thereof and
shall credit such income, as collected, to each Fund's custodian
account. Without limiting the generality of the foregoing, the
Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become
due and shall collect interest when due on securities held
hereunder. The collection of income due the Funds on securities
loaned pursuant to the provisions of Section 2.2 (10) shall be

the responsibility of the Trust. The Custodian will have no duty
or responsibility in connection therewith, other than to provide
the Trust with such information or data as may be necessary to
assist the Trust in arranging for the timely delivery to the
Custodian of the income to which each Fund is properly entitled.
(2) The Custodian shall promptly notify the Trust whenever income due
on securities is not collected in due course and will provide the
Trust with monthly reports of the status of past due income
unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the
parties, the Custodian shall pay out moneys of each Fund in the
following cases only:
(1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of a Fund but only (a) against
the delivery of such securities, or evidence of title to futures
contracts, to the Custodian (or any bank, banking firm or trust
company doing business in the United States or abroad which is
qualified under the 1940 Act to act as a custodian and has been
designated by the Custodian as its agent for this purpose)
registered in the name of the Fund or in the name of a nominee of
the Custodian referred to in Section 2.3 hereof or in proper form
for transfer, (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth in
Section 2.12 hereof or (c) in the case of repurchase agreements
entered into between the Trust and any other party, (i) against
delivery of the securities either in certificate form or through
an entry crediting the Custodian's account at the Federal Reserve

Bank with such securities or (ii) against delivery of the receipt
evidencing purchase for the account of the Fund of securities
owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the
Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares of a Fund issued by
the Trust as set forth in Section 2.10 hereof;
(4) For the payment of any expense or liability incurred by a Fund,
including but not limited to the following payments for the
account of the Fund: interest; taxes; management, accounting,
transfer agent and legal fees; and operating expenses of the
Fund, whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Executive Committee of the Trust on behalf of a Fund
signed by an officer of the Trust and certified by its Secretary
or an Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.

2.9Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for
the account of a Fund is made by the Custodian in advance of receipt
of the securities purchased, in the absence of specific written
instructions from the Trust to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
2.10 Payments for Repurchases or Redemptions of Shares of a Fund. From
such funds as may be available for the purpose of repurchasing or
redeeming Shares of a Fund, but subject to the limitations of the
Declaration of Trust/Articles of Incorporation and any applicable
votes of the Board of the Trust pursuant thereto, the Custodian
shall, upon receipt of instructions from the Transfer Agent, make
funds available for payment to holders of shares of such Fund who
have delivered to the Transfer Agent a request for redemption or
repurchase of their shares including without limitation through bank
drafts, automated clearinghouse facilities, or by other means. In
connection with the redemption or repurchase of Shares of the Funds,
the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the 1940 Act and any
applicable state law or regulation, to act as a custodian, as its
agent to carry out such of the provisions of this Section 2 as the
Custodian may from time to time direct; provided, however, that the

appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a clearing
agency registered with the Securities and Exchange Commission ("SEC")
under Section 17A of the Exchange Act, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies, collectively
referred to herein as "Securities System" in accordance with
applicable Federal Reserve Board and SEC rules and regulations, if
any, and subject to the following provisions:
(1) The Custodian may keep securities of each Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
(2) The records of the Custodian with respect to securities of the
Funds which are maintained in a Securities System shall identify
by book-entry those securities belonging to each Fund;
(3) The Custodian shall pay for securities purchased for the account
of each Fund upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian
to reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the account of a
Fund upon (i) receipt of advice from the Securities System that
payment for such securities has been transferred to the Account,
and (ii) the making of an entry on the records of the Custodian

to reflect such transfer and payment for the account of the Fund.
Copies of all advices from the Securities System of transfers of
securities for the account of a Fund shall identify the Fund, be
maintained for the Fund by the Custodian and be provided to the
Trust at its request. Upon request, the Custodian shall furnish
the Trust confirmation of each transfer to or from the account of
a Fund in the form of a written advice or notice and shall
furnish to the Trust copies of daily transaction sheets
reflecting each day's transactions in the Securities System for
the account of a Fund.
(4) The Custodian shall provide the Trust with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage to
a Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from failure
of the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Trust, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the

extent that a Fund has not been made whole for any such loss or
damage.
(7) The authorization contained in this Section 2.12 shall not
relieve the Custodian from using reasonable care and diligence in
making use of any Securities System.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of each Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained
in an account by the Custodian pursuant to Section 2.12 hereof, (i)
in accordance with the provisions of any agreement among the Trust,
the Custodian and a broker-dealer registered under the Exchange Act
and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance
with the rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions for a Fund, (ii) for
purpose of segregating cash or government securities in connection
with options purchased, sold or written for a Fund or commodity
futures contracts or options thereon purchased or sold for a Fund,
(iii) for the purpose of compliance by the Trust or a Fund with the
procedures required by any release or releases of the SEC relating to
the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only, in
the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board or of the

Executive Committee signed by an officer of the Trust and certified
by the Secretary or an Assistant Secretary, setting forth the purpose
or purposes of such segregated account and declaring such purposes to
be proper corporate purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any assets
of a Fund and any affiliated funds which are subject to joint
repurchase transactions in an account established solely for such
transactions for the Fund and its affiliated funds. For purposes of
this Section 2.14, "affiliated funds" shall include all investment
companies and their portfolios for which subsidiaries or affiliates
of Federated Investors serve as investment advisers, distributors or
administrators in accordance with applicable exemptive orders from
the SEC. The requirements of segregation set forth in Section 2.1
shall be deemed to be waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of income
or other payments with respect to securities of a Fund held by it and
in connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of a Fund or a nominee of a Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Trust such proxies, all proxy
soliciting materials and all notices relating to such securities.

2.17 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Trust all written information
(including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and
notices of exercise of call and put options written by the Fund and
the maturity of futures contracts purchased or sold by the Fund)
received by the Custodian from issuers of the securities being held
for the Fund. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Trust all written
information received by the Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Trust desires to take
action with respect to any tender offer, exchange offer or any other
similar transaction, the Trust shall notify the Custodian in writing
at least three business days prior to the date on which the Custodian
is to take such action. However, the Custodian shall nevertheless
exercise its best efforts to take such action in the event that
notification is received three business days or less prior to the
date on which action is required.
2.18 Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more person
or persons as the Board shall have from time to time authorized.
Each such writing shall set forth the specific transaction or type of
transaction involved. Oral instructions will be deemed to be Proper
Instructions if (a) the Custodian reasonably believes them to have
been given by a person previously authorized in Proper Instructions
to give such instructions with respect to the transaction involved,
and (b) the Trust promptly causes such oral instructions to be

confirmed in writing. Upon receipt of a certificate of the Secretary
or an Assistant Secretary as to the authorization by the Board of the
Trust accompanied by a detailed description of procedures approved by
the Board, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided
that the Board and the Custodian are satisfied that such procedures
afford adequate safeguards for a Fund's assets.
2.19 Actions Permitted Without Express Authority. The Custodian may in
its discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted
for to the Trust in such form that it may be allocated to the
affected Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of a Fund, checks, drafts and
other negotiable instruments; and
(4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of each Fund
except as otherwise directed by the Trust.
2.20 Evidence of Authority. The Custodian shall be protected in acting
upon any instructions, notice, request, consent, certificate or other
instrument or paper reasonably believed by it to be genuine and to
have been properly executed on behalf of a Fund. The Custodian may
receive and accept a certified copy of a vote of the Board of the
Trust as conclusive evidence (a) of the authority of any person to

act in accordance with such vote or (b) of any determination of or
any action by the Board pursuant to the Declaration of Trust/Articles
of Incorporation as described in such vote, and such vote may be
considered as in full force and effect until receipt by the Custodian
of written notice to the contrary.
2.21 Notice to Trust by Custodian Regarding Cash Movement. The Custodian
will provide timely notification to the Trust of any receipt of cash,
income or payments to the Trust and the release of cash or payment by
the Trust.
3. Duties of Custodian With Respect to the Books of Account and Calculation
of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep the
books of account of each Fund and/or compute the net asset value per
share of the outstanding Shares of each Fund or, if directed in writing
to do so by the Trust, shall itself keep such books of account and/or
compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of a Fund as described in the
Fund's currently effective prospectus and Statement of Additional
Information ("Prospectus") and shall advise the Trust and the Transfer
Agent daily of the total amounts of such net income and, if instructed in
writing by an officer of the Trust to do so, shall advise the Transfer
Agent periodically of the division of such net income among its various
components. The calculations of the net asset value per share and the
daily income of a Fund shall be made at the time or times described from
time to time in the Fund's currently effective Prospectus.
4. Records.

The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Trust and the Funds under the 1940 Act, with
particular attention to Section 31 thereof and Rules 31a-1 and 31a-2
thereunder, and specifically including identified cost records used for
tax purposes. All such records shall be the property of the Trust and
shall at all times during the regular business hours of the Custodian be
open for inspection by duly authorized officers, employees or agents of
the Trust and employees and agents of the SEC. In the event of
termination of this Contract, the Custodian will deliver all such records
to the Trust, to a successor Custodian, or to such other person as the
Trust may direct. The Custodian shall supply daily to the Trust a
tabulation of securities owned by a Fund and held by the Custodian and
shall, when requested to do so by the Trust and for such compensation as
shall be agreed upon between the Trust and the Custodian, include
certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions from
each Fund's independent public accountants/auditors with respect to its
activities hereunder in connection with the preparation of the Fund's
registration statement, periodic reports, or any other reports to the SEC
and with respect to any other requirements of such Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.
The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system, internal
accounting control and procedures for safeguarding securities, futures

contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian for the Fund under this Contract; such
reports shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Trust, to provide reasonable assurance that
any material inadequacies would be disclosed by such examination and, if
there are no such inadequacies, the reports shall so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in carrying
out the provisions of this Contract; provided, however, that the
Custodian shall be held to any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation if such
above stated standard of reasonable care was not part of this Contract.
The Custodian shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Trust) on all matters, and shall be
without liability for any action reasonably taken or omitted pursuant to
such advice, provided that such action is not in violation of applicable
federal or state laws or regulations, and is in good faith and without
negligence. Subject to the limitations set forth in Section 15 hereof,
the Custodian shall be kept indemnified by the Trust but only from the
assets of the Fund involved in the issue at hand and be without liability
for any action taken or thing done by it in carrying out the terms and
provisions of this Contract in accordance with the above standards.

In order that the indemnification provisions contained in this Section 8
shall apply, however, it is understood that if in any case the Trust may
be asked to indemnify or save the Custodian harmless, the Trust shall be
fully and promptly advised of all pertinent facts concerning the
situation in question, and it is further understood that the Custodian
will use all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification. The Trust shall have
the option to defend the Custodian against any claim which may be the
subject of this indemnification, and in the event that the Trust so
elects it will so notify the Custodian and thereupon the Trust shall take
over complete defense of the claim, and the Custodian shall in such
situation initiate no further legal or other expenses for which it shall
seek indemnification under this Section. The Custodian shall in no case
confess any claim or make any compromise in any case in which the Trust
will be asked to indemnify the Custodian except with the Trust's prior
written consent.
Notwithstanding the foregoing, the responsibility of the Custodian with
respect to redemptions effected by check shall be in accordance with a
separate Agreement entered into between the Custodian and the Trust.
If the Trust requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action
may, in the reasonable opinion of the Custodian, result in the Custodian
or its nominee assigned to a Fund being liable for the payment of money
or incurring liability of some other form, the Custodian may request the
Trust, as a prerequisite to requiring the Custodian to take such action,
to provide indemnity to the Custodian in an amount and form satisfactory
to the Custodian.

Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee from
and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) (referred to herein as authorized
charges) incurred or assessed against it or its nominee in connection
with the performance of this Contract, except such as may arise from it
or its nominee's own failure to act in accordance with the standard of
reasonable care or any higher standard of care which would be imposed
upon the Custodian by any applicable law or regulation if such above-
stated standard of reasonable care were not part of this Contract. To
secure any authorized charges and any advances of cash or securities made
by the Custodian to or for the benefit of a Fund for any purpose which
results in the Fund incurring an overdraft at the end of any business day
or for extraordinary or emergency purposes during any business day, the
Trust hereby grants to the Custodian a security interest in and pledges
to the Custodian securities held for the Fund by the Custodian, in an
amount not to exceed 10 percent of the Fund's gross assets, the specific
securities to be designated in writing from time to time by the Trust or
the Fund's investment adviser. Should the Trust fail to make such
designation, or should it instruct the Custodian to make advances
exceeding the percentage amount set forth above and should the Custodian
do so, the Trust hereby agrees that the Custodian shall have a security
interest in all securities or other property purchased for a Fund with
the advances by the Custodian, which securities or property shall be
deemed to be pledged to the Custodian, and the written instructions of
the Trust instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes of
the requirements of the Uniform Commercial Code. Should the Trust fail

to cause a Fund to repay promptly any authorized charges or advances of
cash or securities, subject to the provision of the second paragraph of
this Section 8 regarding indemnification, the Custodian shall be entitled
to use available cash and to dispose of pledged securities and property
as is necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall continue
in full force and effect until terminated as hereinafter provided, may be
amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take
effect not sooner than sixty (60) days after the date of such delivery or
mailing; provided, however that the Custodian shall not act under Section
2.12 hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Board of the Trust has
approved the initial use of a particular Securities System as required in
each case by Rule 17f-4 under the 1940 Act; provided further, however,
that the Trust shall not amend or terminate this Contract in
contravention of any applicable federal or state regulations, or any
provision of the Declaration of Trust/Articles of Incorporation, and
further provided, that the Trust may at any time by action of its Board
(i) substitute another bank or trust company for the Custodian by giving
notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or
receiver for the Custodian by the appropriate banking regulatory agency
or upon the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.

Upon termination of the Contract, the Trust shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the Trust,
the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the form
for transfer, all securities then held by it hereunder for each Fund and
shall transfer to separate accounts of the successor custodian all of
each Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall,
in like manner, upon receipt of a certified copy of a vote of the Board
of the Trust, deliver at the office of the Custodian and transfer such
securities, funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board shall have been delivered to the
Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank
or trust company, which is a "bank" as defined in the 1940 Act, (delete
"doing business ... Massachusetts" unless SSBT is the Custodian) doing
business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $100,000,000, all securities, funds
and other properties held by the Custodian and all instruments held by
the Custodian relative thereto and all other property held by it under
this Contract for each Fund and to transfer to separate accounts of such
successor custodian all of each Fund's securities held in any Securities

System. Thereafter, such bank or trust company shall be the successor of
the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Trust to procure the certified copy of the vote referred
to or of the Board to appoint a successor custodian, the Custodian shall
be entitled to fair compensation for its services during such period as
the Custodian retains possession of such securities, funds and other
properties and the provisions of this Contract relating to the duties and
obligations of the Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and the
Trust may from time to time agree on such provisions interpretive of or
in addition to the provisions of this Contract as may in their joint
opinion be consistent with the general tenor of this Contract. Any such
interpretive or additional provisions shall be in a writing signed by
both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Declaration of
Trust/Articles of Incorporation. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to
be an amendment of this Contract.
12.Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof interpreted
under and in accordance with laws of The Commonwealth of Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated

Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Custodian at address for SSBT only: 225 Franklin Street, Boston,
Massachusetts, 02110, or to such other address as the Trust or the
Custodian may hereafter specify, shall be deemed to have been properly
delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of liability
as set forth in Article XI of the Declaration of Trust of those Trusts
which are business trusts and agrees that the obligations and liabilities
assumed by the Trust and any Fund pursuant to this Contract, including,
without limitation, any obligation or liability to indemnify the
Custodian pursuant to Section 8 hereof, shall be limited in any case to
the relevant Fund and its assets and that the Custodian shall not seek
satisfaction of any such obligation from the shareholders of the relevant
Fund, from any other Fund or its shareholders or from the Trustees,
Officers, employees or agents of the Trust, or any of them. In addition,
in connection with the discharge and satisfaction of any claim made by
the Custodian against the Trust, for whatever reasons, involving more
than one Fund, the Trust shall have the exclusive right to determine the
appropriate allocations of liability for any such claim between or among
the Funds.

IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed effective as of the 1st day of December, 1993.

ATTEST: INVESTMENT COMPANIES

/s/John G. McGonigle By /s/John G. Donahue
--------- ----------
John G. McGonigle John F. Donahue
Secretary Chairman

ATTEST: STATE STREET BANK AND TRUST
COMPANY

/s/ Ed McKenzie By /s/ F. J. Sidoti, Jr.
-------------- -------------
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President

ATTEST: FEDERATED SERVICES COMPANY

/s/ Jeannette Fisher-Garber By /s/ James J. Dolan
------ ------------
Jeannette Fisher-Garber James J. Dolan
Secretary President

EXHIBIT 1

<TABLE>
<S> <C>
CONTRACT
DATE INVESTMENT COMPANY
3/1/96
FEDERATED INVESTMENT TRUST
Federated Bond Index Fund
</TABLE>

Exhibit 9(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

AGREEMENT
FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES
AND
CUSTODY SERVICES PROCUREMENT

AGREEMENT made as of , 1996, by and between those investment
-------------
companies listed on Exhibit 1 as may be amended from time to time, having their
principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the "Investment Company"), on behalf of the
portfolios (individually referred to herein as a "Fund" and collectively as
"Funds") of the Investment Company, and FEDERATED SERVICES COMPANY, a
Pennsylvania corporation, having its principal office and place of business at
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, on behalf of
itself and its subsidiaries (the "Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares");
WHEREAS, the Fund is a Spoke in a Hub and Spoke investment structure;
WHEREAS, the Investment Company may desire to appoint the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain accounting and recordkeeping services for each of the Funds, including
any classes of shares issued by any Fund ("Classes") if so indicated on Exhibit
1, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as
administrator to provide it with administrative services (as herein defined),
if so indicated on Exhibit 1, and the Company desires to accept such
appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer
agency services (as herein defined) and agent in connection with certain other
activities, if so indicated on Exhibit 1, and the Company desires to accept
such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services, and the
Company desires to accept such appointment; and
WHEREAS, from time to time the Investment Company may desire and may
instruct the Company to subcontract for the performance of certain of its
duties and responsibilities hereunder to another agent (the "Agent").
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree
as follows:
SECTION ONE: FUND ACCOUNTING SERVICES.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company as its fund accountant to
provide certain fund accounting services to the Funds, and/or the Classes, for
the period and on the terms set forth in this Agreement. The Company accepts
such appointment and agrees to furnish the services set forth in Article 2 of
this Agreement in return for the compensation set forth in Article 3 of this
Agreement.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's Board of
Trustees or Directors ("Board"), the Company will assist the Investment Company
with regard to fund accounting for the Investment Company, and/or the Funds,
and/or the Classes, and in connection therewith undertakes to perform the
following specific services:
A. determine the net asset value per share of each Fund and/or Class, at the
time and in the manner from time to time determined by the Board and as
set forth in the Prospectus and Statement of Additional Information
("Prospectus") of each Fund;
B. calculate the net income of each Fund, if any;
C. maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or Class,
as required under Section 31(a) of the 1940 Act and the Rules thereunder
in connection with the services provided by the Company;
D. preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records to be maintained under Rule 31a-1 of the 1940 Act in connection
with the services provided by the Company. The Company further agrees
that all such records it maintains for the Investment Company are the
property of the Investment Company and further agrees to surrender
promptly to the Investment Company such records upon the Investment
Company's request;
E. calculate dividend and capital gains distributions for each Fund as set
forth in the Prospectus, if any;
F. at the request of the Investment Company, prepare various reports or
other financial documents, in accordance with generally accepted
accounting principles, as required by federal, state and other applicable
laws and regulations; and
G. such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for Fund Accounting Services in
accordance with the fees agreed upon from time to time between the
parties hereto. Such fees do not include out-of-pocket disbursements of
the Company for which the Funds shall reimburse the Company upon receipt
of a separate invoice. Out-of-pocket disbursements shall include, but
shall not be limited to, the items agreed upon between the parties from
time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company Institute
or any similar organization; transfer agency expenses; investment
advisory expenses; costs of printing and mailing stock certificates,
Prospectuses, reports and notices; administrative expenses; interest on
borrowed money; brokerage commissions; taxes and fees payable to federal,
state and other governmental agencies; fees of Trustees or Directors of
the Investment Company; independent auditors expenses; legal and audit
department expenses billed to the Company for work performed related to
the Investment Company, the Funds, or the Classes; law firm expenses;
organizational expenses; or other expenses not specified in this Article
3 which may be properly payable by the Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request of the
Company. The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted from
time to time, shall be dated and signed by a duly authorized officer of
the Investment Company and/or the Funds and a duly authorized officer of
the Company.
E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the full
month period. Upon any termination of this Agreement before the end of
any month, the fee for such period shall be prorated according to the
proportion which such period bears to the full month period. For purposes
of determining fees payable to the Company, the value of the Fund's net
assets shall be computed at the time and in the manner specified in the
Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the Company
may believe to be particularly suited to assist it in performing Fund
Accounting Services. Such person or persons may be affiliates of the
Company, third-party service providers, or they may be officers and
employees who are employed by both the Company and the Investment
Company; provided, however, that the Company shall be as fully
responsible to each Fund for the acts and omissions of any such
subcontractor as it is for its own acts and omissions. The compensation
of such person or persons shall be paid by the Company and no obligation
shall be incurred on behalf of the Investment Company, the Funds, or the
Classes in such respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
ARTICLE 4. APPOINTMENT.
The Investment Company hereby appoints the Company as Administrator for the
period and on the terms and conditions set forth in this Agreement. The
Company accepts such appointment and agrees to furnish the services set forth
in Article 5 of this Agreement in return for the compensation set forth in
Article 9 of this Agreement.

ARTICLE 5. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the Board,
the Company will provide facilities, equipment, and personnel to carry out the
following administrative services for operation of the business and affairs of
the Investment Company and the Funds and/or Classes:
A. prepare, file, and maintain the Investment Company's governing documents
and any amendments thereto, including the Articles of Incorporation or
Declaration of Trust (which has already been prepared and filed), the By-
laws and minutes of meetings of the Board and Shareholders;
B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements for
the Investment Company and the Investment Company's shares and all
amendments thereto, reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents all as may be
necessary to enable the Investment Company to make a continuous offering
of its shares;
C. prepare, negotiate, and administer contracts on behalf of the Investment
Company with, among others, the Investment Company's investment advisers
(if any), distributors, and transfer agents, subject to any applicable
restrictions of the Board or the 1940 Act;
D. calculate performance data of Funds for dissemination to information
services covering the investment company industry;
E. prepare and file Funds' tax returns;
F. examine and review the operations of the Investment Company's transfer
agents;
G. coordinate the layout and printing of publicly disseminated prospectuses
and reports;
H. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;
I. assist with the design, development, and operation of the Investment
Company and the Funds;
J. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company and the
Funds, who will be responsible for the management of certain of the
Investment Company's and the Funds' affairs as determined by the Board;
K. direct the Investment Company's custodian banks to daily transfer the
proceeds from payment for the purchase of Shares by Shareholders to the
custodian bank for the registered investment company in which the Fund
owns an interest ("Hub Fund") and at the same time notify the Hub Fund's
administrator of such transfers;
L. request the administrator for the Hub Fund to direct the custodian bank
for the Hub Fund to timely deposit cash in the custodian account of the
Fund's custodian bank as needed to meet redemptions of Shares by
Shareholders, dividend or distribution payments to Shareholders or
payment of Fund expenses;
M. reconcile the amounts so requested and transferred, as described in L.
and M. above, with the Fund's custodian, transfer agent and the Hub
Fund's administrator; and
N. consult with the Fund and its Board on matters concerning the Fund and
its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Fund under this Section Two, shall
hereafter be referred to as "Administrative Services."
ARTICLE 6. RECORDS.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company Act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the
Investment Company. Where applicable, such records shall be maintained by the
Company for the periods and in the places required by Rule 31a-2 under the 1940
Act. The books and records pertaining to the Investment Company which are in
the possession of the Company shall be the property of the Fund. The
Investment Company, or the Investment Company's authorized representatives,
shall have access to such books and records at all times during the Company `s
normal business hours. Upon the reasonable request of the Investment Company,
copies of any such books and records shall be provided promptly by the Company
to the Investment Company or the Investment Company's authorized
representatives.
ARTICLE 7. DUTIES OF THE FUND.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all applicable
requirements the 1940 Act, the Internal Revenue Code, and any other laws, rules
and regulations of government authorities having jurisdiction.
ARTICLE 8. EXPENSES.
The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide
the Administrative Services to the Fund, including the compensation of the
Company employees who serve as or officers of the Fund. The Fund shall be
responsible for all other expenses incurred by the Company on behalf of the
Fund, including without limitation postage and courier expenses, printing
expenses, travel expenses, registration fees, filing fees, fees of outside
counsel and independent auditors and other professional services,
organizational expenses, insurance premiums, fees payable to persons who are
not the Company employees, trade association dues, and other expenses properly
payable by the Funds and/or Classes.
ARTICLE 9. COMPENSATION.
For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee at an annual rate per
portfolio of the Investment Company's shares, as specified below.
The compensation and out-of-pocket expenses attributable to the Fund shall
be accrued by the Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket expenses
by the Fund.
MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUND
.100% $0-250 Million
.0875% $250-500 Million
.075% $500-750 Million
.070% $750+ Million
(Average Daily Net Asset break-points are on a per Spoke Fund basis.)
However, in no event shall the administrative fee received during any year
of the Agreement be less than, or be paid at a rate less than would aggregate
$60,000 per Fund and $30,000 per Class. A one-time, non-recurring origination
fee of $75,000 may be charged to the Fund. The minimum fee set forth above in
this Article 9 may increase annually upon each March 1 anniversary of this
Agreement over the minimum fee during the prior 12 months, as calculated under
this agreement, in an amount equal to the increase in Pennsylvania Consumer
Price Index (not to exceed 6% annually) as last reported by the U.S. Bureau of
Labor Statistics for the twelve months immediately preceding such anniversary.
ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.
A. The Company shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Investment Company in connection with
the matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. The Company shall be
entitled to rely on and may act upon advice of counsel (who may be
counsel for the Fund) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice. Any
person, even though also an officer, director, trustee, partner, employee
or agent of the Company, who may be or become an officer, director,
trustee, partner, employee or agent of the Investment Company, shall be
deemed, when rendering services to the Investment Company or acting on
any business of the Investment Company (other than services or business
in connection with the duties of the Company hereunder) to be rendering
such services to or acting solely for the Investment Company and not as
an officer, director, trustee, partner, employee or agent or one under
the control or direction of the Company even though paid by the Company.
B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in performing
the Administrative Services in accordance with the above standards. In
order that the indemnification provisions contained in this Article 10
shall apply, however, it is understood that if in any case the Investment
Company may be asked to indemnify or save the Company harmless, the
Investment Company shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood
that the Company will use all reasonable care to identify and notify the
Investment Company promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification against the Investment Company. The Investment Company
shall have the option to defend the Company against any claim which may
be the subject of this indemnification. In the event that the Investment
Company so elects, it will so notify the Company and thereupon the
Investment Company shall take over complete defense of the claim, and the
Company shall in such situation initiate no further legal or other
expenses for which it shall seek indemnification under this Article. The
Company shall in no case confess any claim or make any compromise in any
case in which the Investment Company will be asked to indemnify the
Company except with the Investment Company's written consent.
SECTION THREE: TRANSFER AGENCY SERVICES.
ARTICLE 11. TERMS OF APPOINTMENT.
The Investment Company hereby appoints the Company to act as transfer agent
and dividend disbursing agent for each Fund's Shares, and agent in connection
with any accumulation, open-account or similar plans provided to the
shareholders of any Fund ("Shareholder(s)"), including without limitation any
periodic investment plan or periodic withdrawal program.
ARTICLE 12. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with Proper
Instructions (as defined in Article 19) as may be provided from time to time by
the Investment Company as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefor to the custodian of the relevant Fund (the "Custodian").
The Company shall notify the Fund, the Administrator for the Fund
and the Custodian on a daily basis of the total amount of orders and
payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold such
Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its agent
requests a certificate, the Company, as Transfer Agent, shall
countersign and mail by first class mail, a certificate to the
Shareholder at its address as set forth on the transfer books of the
Funds, and/or Classes, subject to any Proper Instructions regarding
the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any reason,
the Company shall debit the Share account of the Shareholder by the
number of Shares that had been credited to its account upon receipt
of the check or other order, promptly mail a debit advice to the
Shareholder, and notify the Fund and/or Class of its action. In the
event that the amount paid for such Shares exceeds proceeds of the
redemption of such Shares plus the amount of any dividends paid with
respect to such Shares, the Fund and/the Class or its distributor
will reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the provisions of
its governing document and the then-current Prospectus of the Fund.
The Company shall prepare and mail or credit income, capital gain,
or any other payments to Shareholders. As the Dividend Disbursing
Agent, the Company shall, on or before the payment date of any such
distribution, notify the Custodian and the Fund's Administrator of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian to
make available sufficient funds for the cash amount to be paid out.
The Company shall reconcile the amounts so requested and the amounts
actually received with the Custodian and the Fund's Administrator on
a daily basis. If a Shareholder is entitled to receive additional
Shares by virtue of any such distribution or dividend, appropriate
credits shall be made to the Shareholder's account, for certificated
Funds and/or Classes, delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class and its
Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set forth
in Proper Instructions, deliver the appropriate instructions
therefor to the Custodian. The Company shall notify the Fund and the
Fund's Administrator on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by the
Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from the
Custodian with respect to any redemption, the Company shall pay or
cause to be paid the redemption proceeds in the manner instructed by
the redeeming Shareholders, pursuant to procedures described in the
then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date and
time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund, and/or
Class, and maintain pursuant to applicable rules of the Securities
and Exchange Commission ("SEC") a record of the total number of
Shares of the Fund and/or Class which are authorized, based upon
data provided to it by the Fund, and issued and outstanding. The
Company shall also provide the Fund on a regular basis or upon
reasonable request with the total number of Shares which are
authorized and issued and outstanding, but shall have no obligation
when recording the issuance of Shares, except as otherwise set forth
herein, to monitor the issuance of such Shares or to take cognizance
of any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be performed
hereunder in the form and manner as agreed to by the Investment
Company or the Fund to include a record for each Shareholder's
account of the following:
(a) name, address and tax identification number (and whether such
number has been certified);
(b) number of Shares held;
(c) historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) any stop or restraining order placed against the account;
(e) information with respect to withholding in the case of a
foreign account or an account for which withholding is required
by the Internal Revenue Code;
(f) any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current maintenance
of the account;
(g) certificate numbers and denominations for any Shareholder
holding certificates; and
(h) any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such records
may be inspected by the Fund at reasonable times. The Company may,
at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Company's
files, records and documents created and maintained by the Company
pursuant to this Agreement, which are no longer needed by the
Company in performance of its services or for its protection. If not
so turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of creation,
during the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records and
documents will either be turned over to the Fund or destroyed in
accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) a copy of the transaction register;
(b) dividend and reinvestment blotters;
(c) the total number of Shares issued and outstanding in each state
for "blue sky" purposes as determined according to Proper
Instructions delivered from time to time by the Fund to the
Company;
(d) Shareholder lists and statistical information;
(e) payments to third parties relating to distribution agreements,
allocations of sales loads, redemption fees, or other
transaction- or sales-related payments; and
(f) such other information as may be agreed upon from time to time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting dividends
and distributions paid as are required to be so filed and mailed and
shall withhold such sums as are required to be withheld under
applicable federal and state income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth above, the
Company shall:
(a) perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in connection
with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder reports and
Prospectuses to current Shareholders, withholding taxes on
accounts subject to back-up or other withholding (including
non-resident alien accounts), preparing and filing reports on
U.S. Treasury Department Form 1099 and other appropriate forms
required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other
conformable transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and providing
Shareholder account information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund and/or Class sold in each
state ("blue sky reporting"). The Fund shall by Proper
Instructions (i) identify to the Company those transactions and
assets to be treated as exempt from the blue sky reporting for
each state and (ii) verify the classification of transactions
for each state on the system prior to activation and thereafter
monitor the daily activity for each state. The responsibility
of the Company for each Fund's and/or Class's state blue sky
registration status is limited solely to the recording of the
initial classification of transactions or accounts with regard
to blue sky compliance and the reporting of such transactions
and accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating
to their Share accounts and such other correspondence as may from
time to time be addressed to the Company.
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder Meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the Shareholders.
(3) The Company shall establish and maintain facilities and procedures
for safekeeping of stock certificates, check forms and facsimile
signature imprinting devices, if any; and for the preparation or
use, and for keeping account of, such certificates, forms and
devices.
All of the foregoing as described in this Article 12, along with any
additional services that the Company shall agree in writing to perform for the
Investment Company under this Section Three, shall hereafter be referred to as
"Transfer Agency Services."
ARTICLE 13. DUTIES OF THE INVESTMENT COMPANY.
A. Compliance
The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their classes'
Prospectus and for complying with all applicable requirements of the
Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act and any
laws, rules and regulations of government authorities having
jurisdiction.
B. Share Certificates
If the Investment Company has authorized the issuance of share
certificates, the Investment Company shall supply the Company with a
sufficient supply of blank Share certificates and from time to time shall
renew such supply upon request of the Company. Such blank Share
certificates shall be properly signed, manually or by facsimile, if
authorized by the Investment Company and shall bear the seal of the
Investment Company or facsimile thereof; and notwithstanding the death,
resignation or removal of any officer of the Investment Company
authorized to sign certificates, the Company may continue to countersign
certificates which bear the manual or facsimile signature of such officer
until otherwise directed by the Investment Company
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
ARTICLE 14. COMPENSATION AND EXPENSES.
A. Annual Fee
The Funds will compensate the Company for Transfer Agency Services in
accordance with an annual maintenance fee schedule for Shareholder
accounts as agreed upon from time to time between the parties hereto.
Pursuant to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund into
Classes or other sub-components for recordkeeping purposes. The Company
will charge the Fund the same fees for each such Class or sub-component
the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 14A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time. In
addition, any other expenses incurred by the Company at the request or
with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted from
time to time, shall be dated and signed by a duly authorized officer of
the Investment Company and/or the Funds and a duly authorized officer of
the Company.
SECTION FOUR: CUSTODY SERVICES PROCUREMENT.
ARTICLE 15. APPOINTMENT.
The Investment Company hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets the
criteria established in Section 17(f) of the 1940 Act and (ii) has been
approved by the Board as eligible for selection by the Company as a custodian
(the "Eligible Custodian"). The Company accepts such appointment.
ARTICLE 16. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and has
been approved by the Board as being eligible for selection by the Company
as an Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a party
to each such agreement. The Company may, as paying agent, be a party to
any agreement with any such Eligible Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services provided by
Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports on the
activities and services of Eligible Custodians; (ii) the nature and
amount of disbursements made on account of the each Fund with respect to
each custodial agreement; and (iii) such other information as the Board
shall reasonably request to enable it to fulfill its duties and
obligations under Sections 17(f) and 36(b) of the 1940 Act and other
duties and obligations thereof; and
F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being
charged to the Fund by Eligible Custodian.
The foregoing, along with any additional services that Company shall agree
in writing to perform for the Fund under this Section Four, shall hereafter
be referred to as "Custody Services Procurement."
ARTICLE 17. FEES AND EXPENSES.
A. Annual Fee
For the performance Custody Services Procurement by the Company pursuant
to Section Four of this Agreement, the Investment Company and/or the Fund
agree to compensate the Company in accordance with the fees agreed upon
from time to time.
B. Reimbursements
In addition to the fee paid under Article 17A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time. In
addition, any other expenses incurred by the Company at the request or
with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the Fund
and shall be paid to the Company no less frequently than monthly, and
shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted from
time to time, shall be dated and signed by a duly authorized officer of
the Investment Company and/or the Funds and a duly authorized officer of
the Company.
ARTICLE 18. REPRESENTATIONS.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter into
this arrangement and to provide the services contemplated in Section Four of
this Agreement.
SECTION FIVE: GENERAL PROVISIONS.
ARTICLE 19. PROPER INSTRUCTIONS.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed
to be Proper Instructions if (a) the Company reasonably believes them to have
been given by a person previously authorized in Proper Instructions to give
such instructions with respect to the transaction involved, and (b) the
Investment Company, or the Fund, and the Company promptly cause such oral
instructions to be confirmed in writing. Proper Instructions may include
communications effected directly between electro-mechanical or electronic
devices provided that the Investment Company, or the Fund, and the Company are
satisfied that such procedures afford adequate safeguards for the Fund's
assets. Proper Instructions may only be amended in writing.
ARTICLE 20. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may without further
consent on the part of the Investment Company subcontract for the
performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended, or any succeeding statute ("Section 17A(c)(1)");
or
(2) such other provider of services duly registered as a transfer agent
under Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Investment Company for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.
C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further consent on
the part of the Investment Company subcontract for the performance of
such services with Federated Administrative Services, a wholly-owned
subsidiary of the Company.
D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with an
Agent selected by the Investment Company, other than as described in B.
and C. above; provided, however, that the Company shall in no way be
responsible to the Investment Company for the acts and omissions of the
Agent.
ARTICLE 21. DOCUMENTS.
A. In connection with the appointment of the Company under this Agreement,
the Investment Company shall file with the Company the following
documents:
(1) a copy of the Charter and By-Laws of the Investment Company and all
amendments thereto;
(2) a copy of the resolution of its Board authorizing this Agreement;
(3) specimens of all forms of outstanding Share certificates of the
Investment Company or the Funds in the forms approved by the Board
of the Investment Company with a certificate of the Secretary of the
Investment Company as to such approval;
(4) all account application forms and other documents relating to
Shareholders' accounts; and
(5) a copy of the current Prospectus for each Fund.
B. The Investment Company will also furnish from time to time the following
documents:
(1) each resolution of the Board authorizing the original issuance of
each Fund's, and/or Class's Shares;
(2) each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) a certified copy of each amendment to the governing document and the
By-Laws of the Investment Company;
(4) certified copies of each vote of the Board authorizing persons to
give Proper Instructions;
(5) specimens of all new Share certificates representing Shares of any
Fund, accompanied by Board resolutions approving such forms;
(6) such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the proper
performance of its duties; and
(7) revisions to the Prospectus of each Fund.
ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Investment Company that:
(1) it is a corporation duly organized and existing and in good standing
under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and in
the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its charter and by-laws
to enter into and perform this Agreement;
(4) all requisite corporate proceedings have been taken to authorize it
to enter into and perform its obligations under this Agreement;
(5) it has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement; and
(6) it is in compliance with federal securities law requirements and in
good standing as a transfer agent.
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) it is an investment company duly organized and existing and in good
standing under the laws of its state of organization;
(2) it is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform its obligations under this Agreement;
(3) all corporate proceedings required by said Charter and By-Laws have
been taken to authorize it to enter into and perform its obligations
under this Agreement;
(4) the Investment Company is an open-end investment company registered
under the 1940 Act; and
(5) a registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.
ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be held to
a standard of reasonable care in carrying out the provisions of this
Contract. The Company shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Investment Company) on all
matters, and shall be without liability for any action reasonably taken
or omitted pursuant to such advice, provided that such action is not in
violation of applicable federal or state laws or regulations, and is in
good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable
to:
(1) the acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Investment Company or
Fund;
(2) the reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper form
which
(a) are received by the Company or its agents or subcontractors and
furnished to it by or on behalf of the Fund, its Shareholders
or investors regarding the purchase, redemption or transfer of
Shares and Shareholder account information;
(b) are received by the Company from independent pricing services
or sources for use in valuing the assets of the Funds;
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties contracted
by or approved by the Investment Company of Fund for use in the
performance of services under this Agreement; or
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Investment Company;
(3) the reliance on, or the carrying out by the Company or its agents or
subcontractors of Proper Instructions of the Investment Company or
the Fund; or
(4) the offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the offer
or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this
Article 23.B from liability for any act or omission resulting from
the Company's willful misfeasance, bad faith, negligence or reckless
disregard of its duties of failure to meet the standard of care set
forth in 23.A above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel with
respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and its
agents or subcontractors shall not be liable and shall be indemnified by
the Investment Company or the appropriate Fund for any action reasonably
taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel provided such action is not in violation of
applicable federal or state laws or regulations. The Company, its agents
and subcontractors shall be protected and indemnified in recognizing
stock certificates which are reasonably believed to bear the proper
manual or facsimile signatures of the officers of the Investment Company
or the Fund, and the proper countersignature of any former transfer agent
or registrar, or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this Article 23
shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the
other party advised with respect to all developments concerning such
claim. The party who may be required to indemnify shall have the option
to participate with the party seeking indemnification in the defense of
such claim. The party seeking indemnification shall in no case confess
any claim or make any compromise in any case in which the other party may
be required to indemnify it except with the other party's prior written
consent.
ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from March 1, 1996 and shall continue
until February 28, 2003 (`Term"). Thereafter, the Agreement will continue for
18 month terms. The Agreement can be terminated by either party upon 18 months
notice to be effective as of the end of such 18 month period. In the event,
however, of willful misfeasance, bad faith, negligence or reckless disregard of
its duties by the Company, the Investment Company has the right to terminate
the Agreement upon 60 days written notice, if Company has not cured such
willful misfeasance, bad faith, negligence or reckless disregard of its duties
within 60 days. The termination date for all original or after-added
Investment companies which are, or become, a party to this Agreement. shall be
coterminous. Investment Companies that merge or dissolve during the Term,
shall cease to be a party on the effective date of such merger or dissolution.
Should the Investment Company exercise its right to terminate, all out-of-
pocket expenses associated with the movement of records and materials will be
borne by the Investment Company or the appropriate Fund. Additionally, the
Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Articles 10 and 23 shall
survive the termination of this Agreement.
ARTICLE 25. AMENDMENT.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by a written agreement executed by both parties.
ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the organizational documents. No interpretive
or additional provisions made as provided in the preceding sentence shall be
deemed to be an amendment of this Agreement.
ARTICLE 27. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
ARTICLE 28. NOTICES.
Except as otherwise specifically provided herein, Notices and other writings
delivered or mailed postage prepaid to the Investment Company at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to such
other address as the Investment Company or the Company may hereafter specify,
shall be deemed to have been properly delivered or given hereunder to the
respective address.
ARTICLE 29. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
ARTICLE 30. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, and
the obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the property of the Company as
provided in the Declaration of Trust.
ARTICLE 31. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
ARTICLE 32. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement
deliver to such successor agent at the office of the Company all properties of
the Investment Company held by it hereunder. If no such successor agent shall
be appointed, the Company shall at its office upon receipt of Proper
Instructions deliver such properties in accordance with such instructions.
With regard to Section One and Two, in the event that no written order
designating a successor agent or Proper Instructions shall have been delivered
to the Company on or before the date when such termination shall become
effective, then the Company shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, of its own selection,
having an aggregate capital, surplus, and undivided profits, as shown by its
last published report, of not less than $2,000,000, all properties held by the
Company under this Agreement. Thereafter, such bank or trust company shall be
the successor of the Company under this Agreement.
ARTICLE 33. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
ARTICLE 34. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all of
or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing in
this Article 34 shall prevent the Company from delegating its responsibilities
to another entity to the extent provided herein.
ARTICLE 35. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, and the obligations of this Agreement are not binding upon any
of the Trustees or Shareholders of the Investment Company, but bind only the
appropriate property of the Fund, or Class, as provided in the Declaration of
Trust.

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

ATTEST: INVESTMENT COMPANIES
(LISTED ON EXHIBIT 1)

By:
John W. McGonigle John F. Donahue
Secretary Chairman

ATTEST: FEDERATED SERVICES COMPANY

By:
Thomas J. Ward James J. Dolan
Secretary President

EXHIBIT 1

<TABLE>
<S> <C>
CONTRACT
DATE INVESTMENT COMPANY SERVICES
Portfolios Sections:
Classes

Federated Investment Trust
Federated Bond Index Fund 1,2,3,4,5

</TABLE>

Exhibit 6(i) on Form N-1A
Exhibit 1 under Item 601/Reg. SK

FEDERATED INVESTMENT TRUST
DISTRIBUTOR'S CONTRACT

AGREEMENT made this day of , 199 by and between Federated
-- ------ -
Investment Trust (the "Trust"), a Massachusetts business trust, and
FEDERATED SECURITIES CORP. ("FSC"), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints FSC as its agent to sell and distribute shares
of the Trust which may be offered in one or more series (the "Funds")
consisting of one or more classes (the "Classes") of shares (the
"Shares"), as described and set forth on one or more exhibits to this
Agreement, at the current offering price thereof as described and set
forth in the current Prospectuses of the Trust. FSC hereby accepts such
appointment and agrees to provide such other services for the Trust, if
any, and accept such compensation from the Trust, if any, as set forth in
the applicable exhibits to this Agreement.
2. The sale of any Shares may be suspended without prior notice whenever in
the judgment of the Trust it is in its best interest to do so.
3. Neither FSC nor any other person is authorized by the Trust to give any
information or to make any representation relative to any Shares other
than those contained in the Registration Statement, Prospectuses, or
Statements of Additional Information ("SAIs") filed with the Securities
and Exchange Commission, as the same may be amended from time to time, or
in any supplemental information to said Prospectuses or SAIs approved by
the Trust. FSC agrees that any other information or representations
other than those specified above which it or any dealer or other person
who purchases Shares through FSC may make in connection with the offer or
sale of Shares, shall be made entirely without liability on the part of
the Trust. No person or dealer, other than FSC, is authorized to act as
agent for the Trust for any purpose. FSC agrees that in offering or
selling Shares as agent of the Trust, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and
regulations of the National Association of Securities Dealers, Inc.,
including its Rules of Fair Practice. FSC will submit to the Trust
copies of all sales literature before using the same and will not use
such sales literature if disapproved by the Trust.
4. This Agreement is effective with respect to each Class as of the date of
execution of the applicable exhibit and shall continue in effect with
respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term
of this Agreement for one year from the date set forth above, and
thereafter for successive periods of one year if such continuance is
approved at least annually by the Trustees of the Trust including a
majority of the members of the Board of Trustees of the Trust who are not
interested persons of the Trust and have no direct or indirect financial
interest in the operation of any Distribution Plan relating to the Trust
or in any related documents to such Plan ("Disinterested Trustees") cast
in person at a meeting called for that purpose. If a Class is added
after the first annual approval by the Trustees as described above, this
Agreement will be effective as to that Class upon execution of the
applicable exhibit and will continue in effect until the next annual
approval of this Agreement by the Trustees and thereafter for successive
periods of one year, subject to approval as described above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a
majority of the Disinterested Trustees or by a majority of the
outstanding voting securities of the particular Fund or Class on not more
than sixty (60) days' written notice to any other party to this
Agreement. This Agreement may be terminated with regard to a particular
Fund or Class by FSC on sixty (60) days' written notice to the Trust.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the
Investment Company Act of 1940, as amended, provided, however, that FSC
may employ such other person, persons, corporation or corporations as it
shall determine in order to assist it in carrying out its duties under
this Agreement.
7. FSC shall not be liable to the Trust 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 by this
Agreement.
8. This Agreement may be amended at any time by mutual agreement in writing
of all the parties hereto, provided that such amendment is approved by
the Trustees of the Trust including a majority of the Disinterested
Trustees of the Trust cast in person at a meeting called for that
purpose.
9. This Agreement shall be construed in accordance with and governed by the
laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless FSC and each person, if any, who
controls FSC within the meaning of Section 15 of the Securities Act
of 1933 and Section 20 of the Securities Act of 1934, as amended,
against any and all loss, liability, claim, damage and expense
whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened, or any
claim whatsoever) arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement, any Prospectuses or SAIs (as from time to
time amended and supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such
statement or omission was made in reliance upon and in conformity
with written information furnished to the Trust about FSC by or on
behalf of FSC expressly for use in the Registration Statement, any
Prospectuses and SAIs or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person
thereof with respect to which indemnity may be sought against the
Trust pursuant to the foregoing paragraph, FSC shall promptly notify
the Trust in writing of the institution of such action and the Trust
shall assume the defense of such action, including the employment of
counsel selected by the Trust and payment of expenses. FSC or any
such controlling person thereof shall have the right to employ
separate counsel in any such case, but the fees and expenses of such
counsel shall be at the expense of FSC or such controlling person
unless the employment of such counsel shall have been authorized in
writing by the Trust in connection with the defense of such action
or the Trust shall not have employed counsel to have charge of the
defense of such action, in any of which events such fees and
expenses shall be borne by the Trust. Anything in this paragraph to
the contrary notwithstanding, the Trust shall not be liable for any
settlement of any such claim of action effected without its written
consent. The Trust agrees promptly to notify FSC of the
commencement of any litigation or proceedings against the Trust or
any of its officers or Trustees or controlling persons in connection
with the issue and sale of Shares or in connection with the
Registration Statement, Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Trust
within the meaning of Section 15 of the Securities Act of 1933, but
only with respect to statements or omissions, if any, made in the
Registration Statement or any Prospectus, SAI, or any amendment or
supplement thereof in reliance upon, and in conformity with,
information furnished to the Trust about FSC by or on behalf of FSC
expressly for use in the Registration Statement or any Prospectus,
SAI, or any amendment or supplement thereof. In case any action
shall be brought against the Trust or any other person so
indemnified based on the Registration Statement or any Prospectus,
SAI, or any amendment or supplement thereof, and with respect to
which indemnity may be sought against FSC, FSC shall have the rights
and duties given to the Trust, and the Trust and each other person
so indemnified shall have the rights and duties given to FSC by the
provisions of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance,
bad faith or gross negligence in the performance of the duties of
such person or by reason of the reckless disregard by such person of
the obligations and duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940, as amended, for
Trustees, officers, FSC and controlling persons of the Trust by the
Trust pursuant to this Agreement, the Trust is aware of the position
of the Securities and Exchange Commission as set forth in the
Investment Company Act Release No. IC-11330. Therefore, the Trust
undertakes that in addition to complying with the applicable
provisions of this Agreement, in the absence of a final decision on
the merits by a court or other body before which the proceeding was
brought, that an indemnification payment will not be made unless in
the absence of such a decision, a reasonable determination based
upon factual review has been made (i) by a majority vote of a quorum
of non-party Disinterested Trustees, or (ii) by independent legal
counsel in a written opinion that the indemnitee was not liable for
an act of willful misfeasance, bad faith, gross negligence or
reckless disregard of duties. The Trust further undertakes that
advancement of expenses incurred in the defense of a proceeding
(upon undertaking for repayment unless it is ultimately determined
that indemnification is appropriate) against an officer, Trustee,
FSC or controlling person of the Trust will not be made absent the
fulfillment of at least one of the following conditions: (i) the
indemnitee provides security for his undertaking; (ii) the Trust is
insured against losses arising by reason of any lawful advances; or
(iii) a majority of a quorum of non-party Disinterested Trustees or
independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be
entitled to indemnification.
11. FSC is hereby expressly put on notice of the limitation of liability as
set forth in the Declaration of Trust and agrees that the obligations
assumed by the Trust pursuant to this Agreement shall be limited in any
case to the Trust and its assets and FSC shall not seek satisfaction of
any such obligation from the shareholders of the Trust, the Trustees,
officers, employees or agents of the Trust, or any of them.
12. If at any time the Shares of any Fund are offered in two or more Classes,
FSC agrees to adopt compliance standards as to when a class of shares may
be sold to particular investors.
13. This Agreement will become binding on the parties hereto upon the
execution of the attached exhibits to the Agreement.

Exhibit A
to the
Distributor's Contract

Federated Investment Trust
Federated Bond Index Fund
Institutional Shares

In consideration of the mutual covenants set forth in the Distributor's
Contract dated , between Federated Investment Trust and
------- ----
Federated Securities Corp., Federated Investment Trust executes and
delivers this Exhibit on behalf of Federated Bond Index Fund, and with
respect to the Institutional Shares thereof, first set forth in this
Exhibit.
Witness the due execution hereof this day of , .
--- ---- ----

ATTEST: FEDERATED INVESTMENT TRUST

By:
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

By:
Secretary Executive Vice President
(SEAL)

Exhibit B
to the
Distributor's Contract

FEDERATED INVESTMENT TRUST
Federated Bond Index Fund
Institutional Service Shares

The following provisions are hereby incorporated and made part of the
Distributor's Contract dated , , between Federated Investment
----- ----
Trust and Federated Securities Corp. with respect to the Class of shares
set forth above.
1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Class
("Shares"). Pursuant to this appointment, FSC is authorized to select a
group of financial institutions ("Financial Institutions") to sell Shares
at the current offering price thereof as described and set forth in the
respective prospectuses of the Trust.
2. During the term of this Agreement, the Trust will pay FSC for services
pursuant to this Agreement, a monthly fee computed at the annual rate of
0.25 of 1% of the average aggregate net asset value of the Shares held
during the month. For the month in which this Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable
on the basis of the number of days that the Agreement is in effect during
the month.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Class' expenses exceed such
lower expense limitation as FSC may, by notice to the Trust, voluntarily
declare to be effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in
its sole discretion, may pay Financial Institutions a periodic fee in
respect of Shares owned from time to time by their clients or customers.
The schedules of such fees and the basis upon which such fees will be
paid shall be determined from time to time by FSC in its sole discretion.
5. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts paid
to Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated , between Federated Investment Trust and
----- ----
Federated Securities Corp., Federated Investment Trust executes and
delivers this Exhibit on behalf of the Federated Bond Index Fund, and with
respect to the Institutional Service Shares thereof, first set forth in
this Exhibit.
Witness the due execution hereof this day of , .
--- ---- ----

ATTEST: FEDERATED INVESTMENT TRUST

By:
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

By:
Secretary Executive Vice President

Exhibit 15(i) on Form N-1A
Exhibit 1 under Item 601/Reg. SK

FEDERATED INVESTMENT TRUST
DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted as of , , by the
----- ----
Board of Trustees of Federated Investment Trust (the "Trust"), a business
trust with respect to certain classes of shares ("Classes") of the
portfolios of the Trust (the "Funds") set forth in exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended ("Act"), so as to allow the Trust to make
payments as contemplated herein, in conjunction with the distribution of
Classes of the Funds ("Shares").
2. This Plan is designed to finance activities of Federated Securities
Corp. ("FSC") principally intended to result in the sale of Shares to
include: (a) providing incentives to financial institutions ("Financial
Institutions") to sell Shares; (b) advertising and marketing of Shares
to include preparing, printing and distributing prospectuses and sales
literature to prospective shareholders and with Financial Institutions;
and (c) implementing and operating the Plan. In compensation for
services provided pursuant to this Plan, FSC will be paid a fee in
respect of the following Classes set forth on the applicable exhibit.
3. Any payment to FSC in accordance with this Plan will be made pursuant to
the "Distributor's Contract" entered into by the Trust and FSC. Any
payments made by FSC to Financial Institutions with funds received as
compensation under this Plan will be made pursuant to the "Financial
Institution Agreement" entered into by FSC and the Institution.
4. FSC has the right (i) to select, in its sole discretion, the Financial
Institutions to participate in the Plan and (ii) to terminate without
cause and in its sole discretion any Financial Institution Agreement.
5. Quarterly in each year that this Plan remains in effect, FSC shall
prepare and furnish to the Board of Trustees of the Trust, and the Board
of Trustees shall review, a written report of the amounts expended under
the Plan and the purpose for which such expenditures were made.
6. This Plan shall become effective with respect to each Class (i) after
approval by majority votes of: (a) the Trust's Board of Trustees;
(b) the members of the Board of the Trust who are not interested persons
of the Trust and have no direct or indirect financial interest in the
operation of the Trust's Plan or in any related documents to the Plan
("Disinterested Trustees"), cast in person at a meeting called for the
purpose of voting on the Plan; and (c) the outstanding voting securities
of the particular Class , as defined in Section 2(a)(42) of the Act and
(ii) upon execution of an exhibit adopting this Plan with respect to
such Class.
7. This Plan shall remain in effect with respect to each Class presently
set forth on an exhibit and any subsequent Classes added pursuant to an
exhibit during the initial year of this Plan for the period of one year
from the date set forth above and may be continued thereafter if this
Plan is approved with respect to each Class at least annually by a
majority of the Trust's Board of Trustees and a majority of the
Disinterested Trustees, cast in person at a meeting called for the
purpose of voting on such Plan. If this Plan is adopted with respect to
a Class after the first annual approval by the Trust as described above,
this Plan will be effective as to that Class upon execution of the
applicable exhibit pursuant to the provisions of paragraph 6(ii) above
and will continue in effect until the next annual approval of this Plan
by the Trustees and thereafter for successive periods of one year
subject to approval as described above.
8. All material amendments to this Plan must be approved by a vote of the
Board of Trustees of the Trust and of the Disinterested Trustees, cast
in person at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase materially the costs
which the Classes may bear for distribution pursuant to the Plan without
being approved by a majority vote of the outstanding voting securities
of the Classes as defined in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Class at any
time by: (a) a majority vote of the Disinterested Trustees; or (b) a
vote of a majority of the outstanding voting securities of the
particular Class as defined in Section 2(a)(42) of the Act; or (c) by
FSC on 60 days' notice to the Trust.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Trustees of the Trust shall be committed to the discretion
of the Disinterested Trustees then in office.
12. All agreements with any person relating to the implementation of this
Plan shall be in writing and any agreement related to this Plan shall be
subject to termination, without penalty, pursuant to the provisions of
Paragraph 10 herein.
13. This Plan shall be construed in accordance with and governed by the laws
of the Commonwealth of Pennsylvania.

EXHIBIT A
to the
Distribution Plan
Federated Investment Trust
Federated Bond Index Fund
Institutional Service Shares

This Distribution Plan is adopted by Federated Investment Trust with
respect to the Class of Shares of the portfolio of the Trust set forth
above.
In compensation for the services provided pursuant to this Plan, FSC
will be paid a monthly fee computed at the annual rate of 0.25 of 1% of
the average aggregate net asset value of the Institutional Service Shares
of Federated Bond Index Fund held during the month.
Witness the due execution hereof this day of , .
--- ----- -----

Federated Investment Trust

By: