TAX FREE INSTRUMENTS TRUST, 485BPOS, 1996-05-24

TAX FREE INSTRUMENTS TRUST
485BPOS, 1996-05-24

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1933 Act File No. 2-75122
1940 Act File No. 811-3337

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

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

Post-Effective Amendment No. 27 ........... X

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 21 .......................... X

TAX-FREE INSTRUMENTS 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, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
- -
X on May 31, 1996, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------

If appropriate, check the following box:

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

Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of 1940,
and:

X filed the Notice required by that Rule on May 15, 1996 ; or
-- ---------
intends to file the Notice required by that Rule on or about
; or
------------
during the most recent fiscal year did not sell any securities pursuant
to Rule 24f-2 under the Investment Company Act of 1940, and, pursuant to
Rule 24f-2(b)(2), need not file the Notice.

Copies To:

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

CROSS-REFERENCE SHEET

This Amendment to the Registration Statement of TAX-FREE INSTRUMENTS TRUST
which is comprised of two classes of shares: (1) Investment Shares and (2)
Institutional Service Shares, relates to both classes of shares and is
comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page...............(1-2) Cover Page.
Item 2. Synopsis.................(1-2) Summary of Trust Expenses.
Item 3. Condensed Financial
Information..............(1-2) Financial Highlights.
Item 4. General Description of
Registrant...............(1-2) Performance Information; (1-2)
General Information; (1-2) Investment
Information; (1-2) Investment Objective;
(1-2) Investment Policies; (1-2) Municipal
Securities; (1-2) Investment Risks; (1-2)
Investment Limitations; (1-2) Other
Classes of Shares.
Item 5. Management of the Fund...(1-2) Trust Information; (1-2) Management
of the Trust; (1) Distribution of
Investment Shares; Distribution of
Institutional Service Shares; (1-2)
Administration of the Trust.
Item 6. Capital Stock and Other
Securities...............(1-2) Dividends; (1-2) Capital Gains; (1-
2) Shareholder Information; (1-2) Voting
Rights; (1-2) Tax Information; (1-2)
Federal Income Tax; (1-2) State and Local
Taxes.
Item 7. Purchase of Securities Being
Offered..................(1-2) Net Asset Value; (1-2) How to
Purchase Shares; (1-2) Certificates and
Confirmations; (1) Exchange Privilege; (1)
Making an Exchange.

Item 8. Redemption or Repurchase.(1-2) How to Redeem Shares; (1) Special
Redemption Features; (1) Contingent
Deferred Sales Charge; (1-2) Accounts With
Low Balances.

Item 9. Pending Legal Proceedings None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.

Item 10. Cover Page...............(1-2) Cover Page.
Item 11. Table of Contents........(1-2) Table of Contents.
Item 12. General Information and
History..................Not applicable.
Item 13. Investment Objectives and
Policies.................(1-2) Investment Policies; (1-2)
Investment Limitations.
Item 14. Management of the Fund...(1-2) Tax-Free Instruments Trust
Management.
Item 15. Control Persons and Principal
Holders of Securities....(1-2) Share Ownership.
Item 16. Investment Advisory and Other
Services.................(1-2) Investment Advisory Services; (1-2)
Trust Administration; (1-2) Shareholder
Services.
Item 17. Brokerage Allocation.....(1-2) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered (1-2) Determining Net Asset Value;
(1-2) Redemption in Kind.
Item 20. Tax Status...............(1-2) The Trust's Tax Status.
Item 21. Underwriters.............Not applicable
Item 22. Calculations of Yield Quotations
of Money Market Funds....(1-2) Performance Informantion; (1-2)
Yield; (1-2) Tax-Equivalent Yield; (1-2)
Effective Yield; (1-2) Performance
Comparisons.
Item 23. Financial Statements.....(1-2) Incorporated by reference to the
Annual Report of Registrant dated March
31, 1996 (File No. 2-75122 and File No.
811-3337).

TAX-FREE INSTRUMENTS TRUST
INVESTMENT SHARES
PROSPECTUS

The Investment Shares of Tax-Free Instruments Trust (the "Trust") offered by
this prospectus represent interests in an open-end, diversified management
investment company (a mutual fund). The Trust invests in short-term municipal
securities to achieve current income exempt from all federal income tax
including the alternative minimum tax consistent with stability of principal.

THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK AND ARE NOT INSURED OR
GUARANTEED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL. THE
TRUST ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE; THERE
CAN BE NO ASSURANCE THAT THE TRUST WILL BE ABLE TO DO SO.

This prospectus contains the information you should read and know before you
invest in the Trust. Keep this prospectus for future reference.

The Trust has also filed a Statement of Additional Information dated May 31,
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 1-800-245-5051. To obtain other
information, or make inquiries about the Trust, contact your financial
institution.

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 May 31, 1996

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

Summary of Fund Expenses.......................................................1

Financial Highlights--Investment Shares........................................2

General Information............................................................3

Investment Information.........................................................3
Investment Objective.........................................................3
Investment Policies..........................................................3
Municipal Securities.........................................................6
Investment Risks.............................................................6
Investment Limitations.......................................................6

Trust Information..............................................................7
Management of the Trust......................................................7
Distribution of Investment Shares............................................8
Supplemental Payments to Financial
Institutions..............................................................8
Administration of the Trust..................................................9

Net Asset Value................................................................9

How to Purchase Shares........................................................10
Special Purchase Features...................................................10
Exchange Privilege............................................................11
Making an Exchange..........................................................11

How To Redeem Shares..........................................................12
Special Redemption Features.................................................13

Account and Share Information.................................................14

Tax Information...............................................................15
Federal Income Tax..........................................................15
State and Local Taxes.......................................................16

Other Classes of Shares.......................................................16

Performance Information.......................................................17

Addresses.....................................................................18

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SUMMARY OF FUND EXPENSES
TAX-FREE INSTRUMENTS TRUST
<TABLE>
<S> <C> <C> <C>
INVESTMENT 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) (1)..................................................................... 0.00%
Redemption Fee (as a percentage of amount redeemed, if applicable)............................................ None
Exchange Fee.................................................................................................. None
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (2)............................................................................. 0.36%
12b-1 Fee..................................................................................................... None
Total Other Expenses.......................................................................................... 0.35%
Shareholder Services Fee (after waiver) (3).................................................... 0.15%
Total Operating Expenses (4)......................................................................... 0.71%
</TABLE>

(1) Shareholders who purchased shares of the Trust through an exchange of shares
of another Federated Fund, may be charged a contingent deferred sales charge
by the Trust's distributor of 0.50% based upon the terms and conditions
applicable to redemptions of the Class A Shares of the Federated Fund
originally purchased. See "Contingent Deferred Sales Charge".

(2) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.

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

(4) The total operating expenses would have been 0.95% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Investment Shares of the Trust
will bear, either directly or indirectly. For more complete descriptions of the
various costs and expenses, see "Trust Information." Wire-transferred
redemptions of less than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <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.............. $12 $23 $40 $88
You would pay the following expenses on the same investment, assuming no
redemption................................................................... $ 7 $23 $40 $88
</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.

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

FINANCIAL HIGHLIGHTS--INVESTMENT SHARES
TAX-FREE INSTRUMENTS TRUST
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Trust's
independent public accountants. Their report, dated May 10, 1996, on the Trust's
financial statements for the year ended March 31, 1996, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated herein by reference. This table should be read in conjunction
with the Trust's financial statements and notes thereto, which may be obtained
free of charge from the Trust.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
NET ASSET VALUE,
BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------
INCOME FROM
INVESTMENT
OPERATIONS
- --------------------
Net investment
income 0.03 0.03 0.02 0.02 0.04 0.05 0.06 0.05 0.04 0.04
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
LESS DISTRIBUTIONS
- --------------------
Distributions from
net investment
income (0.03) (0.03) (0.02) (0.02) (0.04) (0.05) (0.06) (0.05) (0.04) (0.04)
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
NET ASSET VALUE,
END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------- --------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
TOTAL RETURN (A) 3.32% 2.70% 2.01% 2.42% 3.84% 5.40% 5.88% 5.28% 4.29% 3.84%
- --------------------
RATIOS TO AVERAGE
NET ASSETS
- --------------------
Expenses 0.71% 0.70% 0.61% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55% 0.55%
- --------------------
Net investment
income 3.27% 2.66% 2.00% 2.38% 3.73% 5.25% 5.73% 5.14% 4.19% 3.74%
- --------------------
Expense waiver/
reimbursement (b) 0.24% 0.17% 0.14% 0.10% 0.11% 0.12% 0.11% 0.08% 0.06% 0.06%
- --------------------
SUPPLEMENTAL DATA
- --------------------
Net assets,
end of period
(000 omitted) $1,465,333 $1,277,894 $1,327,506 $1,619,531 $1,440,970 $1,214,045 $1,142,022 $1,313,391 $1,552,460 $1,661,086
- --------------------
</TABLE>

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

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

Further information about the Trust's performance is contained in the Trust's
annual report for the fiscal year ended March 31, 1996, which can be obtained
free of charge.

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

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 17, 1981. The shares in any one portfolio may be offered
in separate classes. With respect to this Trust, as of the date of this
prospectus, the Board of Trustees has established two classes of shares known as
Investment Shares and Institutional Service Shares. This prospectus relates only
to Investment Shares of the Trust, which are designed primarily for individuals
as a convenient means of accumulating an interest in a professionally managed,
diversified portfolio investing primarily in short-term municipal securities.
The Trust may not be a suitable investment for retirement plans because it
invests in municipal securities. A minimum initial investment of $500 is
required.

The Trust attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price. However, a contingent deferred sales
charge may be imposed under certain circumstances.
- -------------------------------------------------------
INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Trust is current income exempt from federal
income tax consistent with stability of principal. Federal income tax includes
the alternative minimum tax. While there is no assurance that the Trust will
achieve its investment objective, it endeavors to do so by complying with the
various requirements of Rule 2a-7 under the Investment Company Act of 1940 which
regulates money market mutual funds and by following the investment policies
described in this prospectus. The investment objective and the policies and
limitations described below cannot be changed without approval of shareholders,
unless indicated otherwise.

INVESTMENT POLICIES

The Trust pursues its investment objective by investing in a portfolio of
municipal securities maturing in thirteen months or less. At least 80% of the
Trust's annual interest income will be exempt from federal income tax. However,
the interest from certain municipal securities is subject to the federal
alternative minimum tax, and up to 20% of the Trust's income may be derived from
such securities. As a matter of operating policy, the Trust will limit the
average maturity of its portfolio to 90 days or less, in order to meet
regulatory requirements.

ACCEPTABLE INVESTMENTS

The Trust invests primarily in debt obligations issued by or on behalf of
states, territories, and possessions of the United States, including the
District of Columbia, and any political subdivision or financing authority of
any of these, the income from which is, in the opinion of qualified legal
counsel, exempt from all federal income tax including the alternative minimum
tax ("Municipal Securities"). Examples of Municipal Securities include, but are
not limited to:

tax and revenue anticipation notes ("TRANs") issued to finance working capital
needs in anticipation of receiving taxes or other revenues;

bond anticipation notes ("BANs") that are intended to be refinanced through a
later issuance of longer-term bonds;

municipal commercial paper and other short-term notes;

variable rate demand notes;

municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and

participation, trust, and partnership interests in any of the foregoing
obligations.

VARIABLE RATE DEMAND NOTES

Variable rate demand notes are long-term debt instruments that have variable or
floating interest rates and provide the Trust with the right to tender the
security for repurchase at its stated principal amount plus accrued interest.
Such securities typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is normally based on a
published interest rate or interest rate index. Most variable rate demand notes
allow the Trust to demand the repurchase of the security on not more than seven
days prior notice. Other notes only permit the Trust to tender the security at
the time of each interest rate adjustment or at other fixed intervals. See
"Demand Features." The Trust treats variable rate demand notes as maturing on
the later of the date of the next interest rate adjustment or the date on which
the Trust may next tender the security for repurchase.

PARTICIPATION INTERESTS

The Trust may purchase interests in Municipal Securities from financial
institutions such as commercial and investment banks, savings associations, and
insurance companies. These interests may take the form of participations,
beneficial interests in a trust, partnership interests or any other form of
indirect ownership that allows the Trust to treat the income from the investment
as exempt from federal income tax. The Trust invests in these participation
interests in order to obtain credit enhancement or demand features that would
not be available through direct ownership of the underlying Municipal
Securities.

MUNICIPAL LEASES

Municipal leases are obligations issued by state and local governments or
authorities to finance the acquisition of equipment and facilities. They may
take the form of a lease, an installment purchase contract, a conditional sales
contract, or a participation interest in any of the above. Lease obligations may
be subject to periodic appropriation. Municipal leases are subject to certain
specific risks in the event of default or failure of appropriation.

REPURCHASE AGREEMENTS

Certain securities in which the Trust invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities to
the Trust and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the seller does not repurchase the
securities from the Trust, the Trust could receive less than the repurchase
price on any sale of such securities.

CREDIT ENHANCEMENT

Certain of the Trust's acceptable investments may be credit-enhanced by a
guaranty, letter of credit, or insurance. Any bankruptcy, receivership, or
default of the party providing the credit enhancement will adversely affect the
quality and marketability of the underlying security. The Trust may have more
than 25% of its total assets invested in securities credit-enhanced by banks.

DEMAND FEATURES

The Trust may acquire securities that are subject to puts and standby
commitments ("demand features") to purchase the securities at their principal
amount (usually with accrued interest) within a fixed period (usually seven
days) following a demand by the Trust. The demand feature may be issued by the
issuer of the underlying securities, a dealer in the securities, or by another
third party, and may not be transferred separately from the underlying security.
The Trust uses these arrangements to provide the Trust with liquidity and not to
protect against changes in the market value of the underlying securities. The
bankruptcy, receivership, or default by the issuer of the demand feature, or a
default on the underlying security or other event that terminates the demand
feature before its exercise, will adversely affect the liquidity of the
underlying security. Demand features that are exercisable even after a payment
default on the underlying security may be treated as a form of credit
enhancement.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

The Trust may purchase securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Trust purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Trust to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Trust may pay more
or less than the market value of the securities on the settlement date.

The Trust may dispose of a commitment prior to settlement if the adviser deems
it appropriate to do so. In addition, the Trust may enter into transactions to
sell its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Trust may realize short-term profits or losses upon the sale of such
commitments.

TEMPORARY INVESTMENTS

From time to time, when the investment adviser determines that market conditions
call for a temporary defensive posture, the Trust may invest in tax-exempt or
taxable securities, all of comparable quality to other securities in which the
Trust invests, such as: obligations issued by or on behalf of municipal or
corporate issuers; obligations issued or guaranteed by the U.S. government, its
agencies, or instrumentalities; instruments issued by a U.S. branch of a
domestic bank or other deposit institutions having capital, surplus, and
undivided profits in excess of $100,000,000 at the time of investment;
repurchase agreements (arrangements in which the organization selling the Trust
a temporary investment agrees at the time of sale to repurchase it at a mutually
agreed upon time and price); and prime commercial paper rated A-1 by S&P,
Prime-1 by Moody's, or F-1 by Fitch. Although the Trust is permitted to make
taxable, temporary investments, there is no current intention to do so.

MUNICIPAL SECURITIES

Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.

Municipal Securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.

The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.

INVESTMENT RISKS

Yields on Municipal Securities depend on a variety of factors, including: the
general conditions of the short-term municipal note market and of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Trust to achieve
its investment objective also depends on the continuing ability of the issuers
of Municipal Securities and participation interests, or the credit enhancers of
either, to meet their obligations for the payment of interest and principal when
due. In addition, from time to time, the supply of Municipal Securities
acceptable for purchase by the Trust could become limited.

The Trust may invest in Municipal Securities which are repayable out of revenue
streams generated from economically related projects or facilities and/or whose
issuers are located in the same state. Sizable investments in these Municipal
Securities could involve an increased risk to the Trust should any of these
related projects or facilities experience financial difficulties.

Obligations of issuers of Municipal Securities are subject to the provisions of
bankruptcy, insolvency, and other laws affecting the rights and remedies of
creditors. In addition, the obligations of such issuers may become subject to
laws enacted in the future by Congress, state legislators, or referenda
extending the time for payment of principal and/or interest, or imposing other
constraints upon enforcement of such obligations or upon the ability of states
or municipalities to levy taxes. There is also the possibility that, as a result
of litigation or other conditions, the power or ability of any issuer to pay,
when due, the principal of and interest on its municipal securities may be
materially affected.

INVESTMENT LIMITATIONS

The Trust will not borrow money directly or through reverse repurchase
agreements (arrangements in which the Trust sells a money market instrument for
a percentage of its cash value with an agreement to buy it back on a set date)
or pledge securities except, under certain circumstances, the Trust may borrow
up to one-third of the value of its total assets and pledge up to 10% of the
value of total assets to secure such borrowings.

The Trust will not invest more than 10% of the value of its total assets in
illiquid securities, including repurchase agreements maturing in more than seven
days.

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TRUST INFORMATION
MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all the Trust's powers
except those reserved for the shareholders. An Executive Committee of the Board
of Trustees handles the Board's responsibilities between meetings of the Board.

INVESTMENT ADVISER

Investment decisions for the Trust are made by Federated Management, the Trust's
investment adviser, subject to direction by the Trustees. The adviser
continually conducts investment research and supervision for the Trust and is
responsible for the purchase and sale of portfolio instruments.

ADVISORY FEES

The adviser receives an annual investment advisory fee equal to 0.50% of the
Trust's average daily net assets. The adviser has undertaken to reimburse the
Trust up to the amount of the advisory fee for operating expenses in excess of
limitations established by certain states. Also, the adviser may voluntarily
choose to waive a portion of its fee or reimburse other expenses of the Trust,
but reserves the right to terminate such waiver or reimbursement at any time at
its sole discretion.

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.

Both the Trust and the adviser have adopted strict codes of ethics governing the
conduct of all employees who manage the Trust and its portfolio securities.
These codes recognize that such persons owe a fiduciary duty to the Trust's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. 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 Trust; 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.

DISTRIBUTION OF INVESTMENT SHARES

Federated Securities Corp. is the principal distributor for Investment Shares of
the Trust. 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.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

SHAREHOLDER SERVICES

The Trust has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Trust
may make payments up to 0.25% of the average daily net assets of the Investment
Shares, computed at an annual rate, to obtain certain personal services for
shareholders and to provide 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 such fees will be paid will be
determined from time to time by the Trust and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS
TO FINANCIAL INSTITUTIONS

In addition to payments made pursuant to the 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, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Trust. 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 Trust's investment adviser or its affiliates.

ADMINISTRATION OF THE TRUST

ADMINISTRATIVE SERVICES

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Trust at an annual rate which
relates to the average aggregate daily net assets of all funds advised by
affiliates of Federated Investors as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE
MAXIMUM FEE DAILY NET ASSETS
<C> <S>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of
$750 million
</TABLE>

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.
Federated Services Company may choose voluntarily to waive a portion of its fee.

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

The Trust attempts to stabilize the net asset value of shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting liabilities attributable to
Investment Shares from the value of Trust assets attributable to Investment
Shares, and dividing the remainder by the number of shares outstanding. The
Trust cannot guarantee that its net asset value will always remain at $1.00 per
share.

The net asset value is determined at 12:00 noon, 3:00 p.m. (Eastern time), and
as of the close of trading (normally 4:00 p.m., Eastern time) on the New York
Stock Exchange, Monday through Friday, except on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.

- -------------------------------------------------------
HOW TO PURCHASE SHARES

Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days which the New York Stock Exchange
is open for business. Shares may be purchased as described below, either through
a financial institution (such as a bank or broker/dealer) or by wire or by check
directly from the Trust, with a minimum initial investment of $500 or more or
additional investments of as little as $100. Financial institutions may impose
different minimum investment requirements on their customers.

In connection with any sale, Federated Securities Corp. may from time to time
offer certain items of nominal value to any shareholder or investor. The Trust
reserves the right to reject any purchase request. An account must be
established at a financial institution or by completing, signing, and returning
the new account form available from the Trust before shares can be purchased.

PURCHASING SHARES THROUGH A FINANCIAL INSTITUTION

Investors may purchase shares through a financial institution which has a sales
agreement with the distributor. Orders are considered received when the Trust
receives payment by wire or converts payment by check from the financial
institution into federal funds. It is the financial institution's responsibility
to transmit orders promptly. Financial institutions may charge additional fees
for their services.

PURCHASING SHARES BY WIRE

Shares may be purchased by wire by calling the Trust before 3:00 p.m. (Eastern
time) to place an order. The order is considered received immediately. Payment
by federal funds must be received before 3:00 p.m. (Eastern time) in order to
begin earning dividends that same day. Federal funds should be wired as follows:
Federated Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, MA; Attention: EDGEWIRE; For Credit to: Tax-Free Instruments Trust,
Investment Shares; Fund Number (this number can be found on the account
statement or by contacting the Trust); Group Number or 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.

PURCHASING SHARES BY CHECK

Shares may be purchased by sending a check to Federated Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600. The check should be made payable
to Tax-Free Instruments Trust-Investment Shares. Please include an account
number on the check. Orders by mail are considered received when payment by
check is converted into federal funds (normally the business day after the check
is received), and shares begin earning dividends the next day.

SPECIAL PURCHASE FEATURES

SYSTEMATIC INVESTMENT PROGRAM

A minimum of $100 can be automatically withdrawn periodically from the
shareholder's checking account at an Automated Clearing House ("ACH") member and
invested in Trust shares. Shareholders should contact their financial
institution or the Trust to participate in this program. Customers of certain
financial institutions may not be eligible to participate in this program.

- -------------------------------------------------------
EXCHANGE PRIVILEGE

Investment Shares may be acquired in exchange for shares of certain other funds
for which affiliates of Federated Investors serve as investment adviser or
principal underwriter (the "Federated Funds") at net asset value plus the
difference between the Trust's sales charge already paid and any sales charge of
the fund into which the Investment Shares are to be exchanged, if higher.
Investment shares also may be exchanged for shares of other Federated mutual
funds at net asset value plus a sales charge, if applicable and not previously
paid. No additional fees are imposed on exchanges This privilege is available to
shareholders resident in any state in which the fund shares being acquired may
be sold.
Exchanges must be in amounts of at least the value of the minimum investment
required of the fund into which the Investment Shares are to be exchanged.
Before the exchange, the shareholder must receive a prospectus for the fund for
which the exchange is being made. Upon receipt of proper instructions and
required supporting documents, shares submitted for exchange are redeemed, and
the proceeds invested in shares of the other fund. The Trust reserves the right
to reject any exchange. The exchange privilege may be terminated or modified at
any time. Shareholders will be notified of the termination or modification of
the exchange privilege.

An exercise of the exchange privilege is treated as a sale for federal income
tax purposes. Depending on the circumstances, a short-term or long-term capital
gain or loss may be
realized.

For further information on the exchange privilege and to obtain prospectuses for
Federated Funds, contact the Trust.

MAKING AN EXCHANGE

Instructions for exchanges for the Federated Funds may be given in writing or by
telephone. Written instructions may require a signature guarantee. Shareholders
of the Trust may have difficulty in making exchanges by telephone through
brokers and other financial institutions during times of drastic economic or
market changes. If a shareholder cannot contact his broker or financial
institution by telephone, it is recommended that an exchange request be made in
writing and sent by overnight mail to Federated Shareholder Services Company,
1099 Hingham Street, Rockland, MA 02370-3317.

TELEPHONE INSTRUCTIONS

Before an exchange can be made by telephone, a properly executed authorization
form must be completed and on file with Federated Services Company. Shares may
be exchanged between two funds only if they have identical shareholder
registrations. If reasonable procedures are not followed by the Trust, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.

Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600 and deposited to the shareholder's account before being
exchanged. Telephone instructions will be processed as of 4:00 p.m. (Eastern
time) and must be received by the Trust before that time for shares to be
exchanged the same day. Shareholders exchanging into a fund will begin receiving
dividends the following business day. This privilege may be modified or
terminated at any time.

- -------------------------------------------------------
HOW TO REDEEM SHARES

Shares are redeemed at their net asset value next determined after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Trust computes its net asset value. Redemption
requests must be received in proper form and can be made as described below.

REDEEMING SHARES THROUGH
A FINANCIAL INSTITUTION

Shares may be redeemed by contacting the shareholder's financial institution.
Shares will be redeemed at the net asset value next determined after Federated
Shareholder Services Company receives the redemption request. According to the
shareholder's instructions, redemption proceeds can be sent to the financial
institution or to the shareholder by check or by wire. The financial institution
is responsible for promptly submitting redemption requests and providing proper
written redemption instructions. Customary fees and commissions may be charged
by the financial institution for this
service.

REDEEMING SHARES BY TELEPHONE

Redemptions in minimum amounts of $1,000 may be made by calling the Trust
provided the Trust has a properly completed authorization form. These forms can
be obtained from Federated Securities Corp. Proceeds from redemption requests
received before 12:00 noon (Eastern time) will be wired the same day to the
shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Proceeds from redeemed shares
purchased by check or through ACH will not be wired until that method of payment
has cleared. Proceeds from redemption requests 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.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Trust, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If this occurs, "Redeeming Shares By Mail"
should be considered. If at any time the Trust shall determine it necessary to
terminate or modify the telephone redemption privilege, shareholders would be
promptly notified.

REDEEMING SHARES BY MAIL

Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 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 Trust name and the class designation; the
account name as registered with the Trust; 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 Trust 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
Trust does not accept signatures guaranteed by a notary public.

SPECIAL REDEMPTION FEATURES

CHECK WRITING

Upon request, a checking account will be established to allow shareholders to
redeem their Trust shares. Shareholder accounts will continue to receive the
daily dividend declared on the shares to be redeemed until the check is
presented to State Street Bank and Trust Company or UMB Bank, N.A., the banks
responsible for administering the check writing program, for payment. However,
checks should never be made payable or sent to State Street Bank and Trust
Company, UMB Bank, N.A. or the Trust to redeem shares, and a check may not be
written to close an account.

SYSTEMATIC WITHDRAWAL PROGRAM

If a shareholder's account has a value of at least $10,000, a systematic
withdrawal program may be established whereby automatic redemptions are made
from the account and transferred electronically to any commercial bank, savings
bank, or credit union that is an ACH member. Shareholders may apply for
participation in this program through their financial institutions or the Trust.
Customers of certain financial institutions may not be eligible to participate
in this program.

- -------------------------------------------------------
ACCOUNT AND SHARE
INFORMATION

DIVIDENDS

Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Trust unless cash
payments are requested by writing to the Trust.

CAPITAL GAINS

The Trust does not expect to realize any capital gains or losses. If capital
gains or losses were to occur, they could result in an increase or decrease in
dividends. The Trust will distribute in cash or additional shares any realized
net long-term capital gains at least once every 12 months.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Trust, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested by contacting the Trust or Federated Shareholder
Services Company in writing. Monthly confirmations are sent to report all
transactions as well as dividends paid during the month.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, there is an
average monthly (calculated on a 30-day basis) account balance policy.
Shareholders must maintain a $5,000 average monthly account balance.
Shareholders who do not maintain an average monthly account balance of $5,000,
in any given 30-day period, will be charged a $3.00 fee for that period. A
shareholder's checkwriting privilege may be discontinued at any time. This
policy does not currently apply to IRAs, Keoghs, other retirement accounts or
accounts owned by associates of Edward D. Jones & Co., L.P. These types of
accounts may be subject to the policy in the future.

CONTINGENT DEFERRED SALES CHARGE

Shareholders who purchase shares of the Trust through an exchange from a
Federated Fund which was purchased with proceeds of a redemption of shares of a
mutual fund sold with a sales charge and not distributed by Federated Securities
Corp., and subsequently exchange into the Trust, will be charged a contingent
deferred sales charge by the Trust's distributor of .50% for redemptions made
within one year of purchase based upon the terms and conditions applicable to
the redemption.

The contingent deferred sales charge will not be imposed in connection with
redemptions by the Trust of accounts with low balances or when a redemption
results from a return under the following circumstances: (i) a total or partial
distribution from a qualified plan, other than an IRA, Keogh Plan, or a
custodial account, following retirement; (ii) a total or partial distribution
from an IRA, Keogh Plan, or a custodial account, after the beneficial owner
attains age 70-1/2; or (iii) from the death or disability of the beneficial
owner. The exemption from the contingent deferred sales charge for qualified
plans, an IRA, Keogh Plan or custodial account does
not extend to account transfers, rollovers, and other redemptions made for
purposes of reinvestment.

VOTING RIGHTS

Each share of the Trust owned by a shareholder gives that shareholder one vote
in Trustee elections and other matters submitted to shareholders for vote. The
Trust is not required to hold annual shareholder meetings. Shareholder approval
will be sought only for certain changes in the Trust's operation and for
election of Trustees under certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of the Trust.

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

FEDERAL INCOME TAX

The Trust will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.

Shareholders are not required to pay the federal regular income tax on any
dividends received from the Trust that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest earned on certain "private activity" bonds issued
after August 7, 1986, may be included in calculating the federal individual
alternative minimum tax or the federal alternative minimum tax for corporations.
The Trust may purchase, within the limits of its investment policies, all types
of municipal bonds, including private activity bonds.

The alternative minimum tax applies when it exceeds the regular tax for the
taxable year. Alternative minimum taxable income is equal to the regular taxable
income of the taxpayer increased by certain "tax preference" items not included
in regular taxable income and reduced by only a portion of the deductions
allowed in the calculation of the regular tax.

Dividends of the Trust representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares.

STATE AND LOCAL TAXES

In the opinion of Houston, Houston, & Donnelley, counsel to the Trust, Trust
shares may be subject to personal property taxes imposed by counties,
municipalities, and school districts in Pennsylvania to the extent that the
portfolio securities in the Trust would be subject to such taxes if owned
directly by residents of those jurisdictions.

Because interest received by the Trust may not be exempt from all state and
local income taxes, shareholders may be required to pay state and local taxes on
dividends received from the Trust. Shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.

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

The Trust also offers another class of shares called Institutional Service
Shares. Institutional Service Shares are sold at net asset value primarily to
individuals, institutions, and fiduciaries and are subject to a minimum initial
investment of $25,000.

All classes are subject to certain of the same expenses. Institutional Service
Shares are distributed with no 12b-1 Plan but are subject to shareholder
services fees. Expense differences between classes may affect the performance of
each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-245-4270.

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

From time to time, the Trust advertises its total return, yield, effective
yield, and tax-equivalent yield. The performance figures will be calculated
separately for each class of shares.

Yield represents the annualized rate of income earned on an investment over a
seven-day period. It is the annualized dividends earned during the period on an
investment shown as a percentage of the investment. The effective yield is
calculated similarly to the yield, but when annualized, the income earned by an
investment is assumed to be reinvested daily. The effective yield will be
slightly higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that would have to be earned to equal
the Trust's tax-exempt yield, assuming a specific tax rate.
Total return represents the change, over a specified period of time, in the
value of an investment in the shares after reinvesting all income distributions.
It is calculated by dividing that change by the initial investment and is
expressed as a percentage.

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

ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Tax-Free Instruments Trust
Investment Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------------

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

Investment Adviser
Federated Management Federated Investors Tower
Pittsburgh, PA 15222-3779
- ---------------------------------------------------------------------------------------------------------------------------

Custodian
State Street Bank and c/o Federated Shareholder Services Company,
Trust Company P.O. Box 8600
Boston, MA 02266-8600
- ---------------------------------------------------------------------------------------------------------------------------

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

Independent Public Accountants
Arthur Andersen LLP 2100 One PPG Place
Pittsburgh, PA 15222
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

TAX-FREE INSTRUMENTS TRUST
INVESTMENT SHARES
PROSPECTUS

An Open-End, Diversified,
Management Investment Company

Prospectus dated May 31, 1996

[LOGO] FEDERATED INVESTORS
Since 1955

Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors

Cusip 876924101 [LOGO]
8062810A-IV (5/96) RECYCLED
PAPER

TAX-FREE INSTRUMENTS TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS

The Institutional Service Shares of Tax-Free Instruments Trust (the "Trust")
offered by this prospectus represent interests in an open-end, diversified
management investment company (a mutual fund). The Trust invests in short-term
municipal securities to achieve current income exempt from all federal income
tax including the alternative minimum tax consistent with stability of
principal.

This prospectus contains the information you should read and know before you
invest in the Trust. Keep this prospectus for future reference.

The Trust has also filed a Statement of Additional Information dated May 31,
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 Trust, contact the Trust at the address
listed in the back of this prospectus.

Prospectus dated May 31, 1996

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

Summary of Fund Expenses.......................................................1

Financial Highlights--Institutional Service
Shares.......................................................................2

General Information............................................................3

Trust Information..............................................................7
Management of the Trust......................................................7
Distribution of Institutional
Service Shares............................................................8
Supplemental Payments to
Financial Institutions....................................................8
Administration of the Trust..................................................9

Net Asset Value................................................................9
How To Purchase Shares........................................................10

How to Redeem Shares..........................................................11

Account and Share Information.................................................12

Tax Information...............................................................13
Federal Income Tax..........................................................13
State and Local Taxes.......................................................13

Other Classes of Shares.......................................................14

Performance Information.......................................................14

Addresses.....................................................................15

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

SUMMARY OF FUND EXPENSES
TAX-FREE INSTRUMENTS TRUST
<TABLE>
<S> <C> <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 OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)............................................................................ 0.36%
12b-1 Fee.................................................................................................... None
Total Other Expenses......................................................................................... 0.20%
Shareholder Services Fee (after waiver) (2).................................................. 0.00%
Total Operating Expenses (3)....................................................................... 0.56%
</TABLE>

(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.

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

(3) The total operating expenses would have been 0.95% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.

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 "Trust Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <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 $18 $31 $70
</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.

- -------------------------------------------------------
-------------------------------------------------------
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
TAX-FREE INSTRUMENTS TRUST
- --------------------------------------------------------------------------------

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Arthur Andersen LLP, the Trust's
independent public accountants. Their report, dated May 10, 1996, on the Trust's
financial statements for the year ended March 31, 1996, and on the following
table for each of the periods presented, is included in the Annual Report, which
is incorporated herein by reference. This table should be read in conjunction
with the Trust's financial statements and notes thereto, which may be obtained
free of charge from the Trust.
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
<S> <C> <C> <C>
1996 1995 1994(A)
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------
Net investment income 0.03 0.03 0.01
- -------------------------------------------------------------------------------- --------- --------- -----------
LESS DISTRIBUTIONS
- --------------------------------------------------------------------------------
Distributions from net investment income (0.03) (0.03) (0.01)
- -------------------------------------------------------------------------------- --------- --------- -----------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00
- -------------------------------------------------------------------------------- --------- --------- -----------
TOTAL RETURN (B) 3.47% 2.85% 0.92%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- --------------------------------------------------------------------------------
Expenses 0.56% 0.55% 0.55%*
- --------------------------------------------------------------------------------
Net investment income 3.43% 2.82% 1.99%*
- --------------------------------------------------------------------------------
Expense waiver/reimbursement (c) 0.40% 0.17% 0.14%*
- --------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- --------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $304,516 $358,826 $390,453
- --------------------------------------------------------------------------------
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from October 15, 1993 (date of initial
public investment) to March 31, 1994.

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

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

Further information about the Trust's performance is contained in the Trust's
annual report for the fiscal year ended March 31, 1996, which can be obtained
free of charge.

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

The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated November 17, 1981. The shares in any one portfolio may be offered
in separate classes. With respect to this Trust, as of the date of this
prospectus, the Board of Trustees has established two classes of shares known as
Institutional Service Shares and Investment Shares. This prospectus relates only
to Institutional Service Shares of the Trust, which are designed primarily for
individuals, institutions, and fiduciaries as a convenient means of accumulating
an interest in a professionally managed, diversified portfolio investing
primarily in short-term municipal securities. The Trust may not be a suitable
investment for retirement plans because it invests in municipal securities. A
minimum initial investment of $25,000 is required.

The Trust attempts to stabilize the value of a share at $1.00. Shares are
currently sold and redeemed at that price.

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

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

The Trust invests primarily in debt obligations issued by or on behalf of
states, territories, and possessions of the United States, including the
District of Columbia, and any political subdivision or financing authority of
any of these, the income from which is, in the opinion of qualified legal
counsel, exempt from all federal income tax ("Municipal Securities"). Examples
of Municipal Securities include, but are not limited to:

tax and revenue anticipation notes ("TRANs") issued to finance working capital
needs in anticipation of receiving taxes or other revenues;

bond anticipation notes ("BANs") that are intended to be refinanced through a
later issuance of longer-term bonds;

municipal commercial paper and other short-term notes;

variable rate demand notes;

municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and

participation, trust, and partnership interests in any of the foregoing
obligations.

VARIABLE RATE DEMAND NOTES

PARTICIPATION INTERESTS

MUNICIPAL LEASES

REPURCHASE AGREEMENTS

CREDIT ENHANCEMENT

DEMAND FEATURES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

TEMPORARY INVESTMENTS

MUNICIPAL SECURITIES
Municipal Securities are generally issued to finance public works, such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.

INVESTMENT RISKS

INVESTMENT LIMITATIONS

The Trust will not invest more than 10% of the value of its total assets in
illiquid securities, including repurchase agreements maturing in more than seven
days.

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TRUST INFORMATION

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

INVESTMENT ADVISER

ADVISORY FEES

ADVISER'S BACKGROUND

DISTRIBUTION OF INSTITUTIONAL
SERVICE SHARES
Federated Securities Corp. is the principal distributor for Institutional
Service Shares of the Trust. 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.

State securities laws may require certain financial institutions such as
depository institutions to register as dealers.

SHAREHOLDER SERVICES

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

SUPPLEMENTAL PAYMENTS
TO FINANCIAL INSTITUTIONS

In addition to payments made pursuant to the Shareholder Services Agreement,
Federated

ADMINISTRATION OF THE TRUST

ADMINISTRATIVE SERVICES

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NET ASSET VALUE

The Trust attempts to stabilize the net asset value of shares at $1.00 by
valuing the portfolio securities using the amortized cost method. The net asset
value per share is determined by subtracting liabilities attributable to
Institutional Service Shares from the value of Trust assets attributable to
Institutional Service Shares, and dividing the remainder by the number of shares
outstanding. The Trust cannot guarantee that its net asset value will always
remain at $1.00 per share.

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HOW TO PURCHASE SHARES

Shares are sold at their net asset value, without a sales charge, next
determined after an order is received, on days on which the New York Stock
Exchange is open for business. Shares may be purchased either by wire or by
check. The Trust reserves the right to reject any purchase request.

To make a purchase, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken by telephone. The
minimum initial investment is $25,000. Minimum investments will be calculated by
combining all accounts maintained with the Trust. Financial institutions may
impose different minimum investment requirements on their customers.

PURCHASING SHARES BY WIRE

Shares may be purchased by Federal Reserve wire by calling the Trust before 3:00
p.m. (Eastern time) to place an order. The order is considered received
immediately. Payment by federal funds must be received before 3:00 p.m. (Eastern
time) that day. Federal funds should be wired as follows: Federated Shareholder
Services Company, c/o State Street Bank and Trust Company, Boston, MA;
Attention: EDGEWIRE; For Credit to: Tax-Free Instruments Trust--Institutional
Service Shares; Fund Number (this number can be found on the account statement
or by contacting the Trust); Group Number or 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.

PURCHASING SHARES BY CHECK

Shares may be purchased by sending a check to Federated Shareholder Services
Company, P.O. Box 8600, Boston, MA 02266-8600. The check should be made payable
to Tax-Free Instruments Trust--Institutional Service Shares. Orders by mail are
considered received when payment by check is converted into federal funds
(normally the business day after the check is received), and shares begin
earning dividends the next day.

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HOW TO REDEEM SHARES
Shares are redeemed at their net asset value next determined after Federated
Shareholder Services Company receives the redemption request. Redemptions will
be made on days on which the Trust computes its net asset value. Redemption
requests must be received in proper form and can be made as described below.

REDEEMING SHARES BY TELEPHONE

Redemptions in minimum amounts of $1,000 may be made by calling the Trust
provided the Trust has a properly completed authorization form. These forms can
be obtained from Federated Securities Corp. Proceeds from redemption requests
received before 12:00 p.m. (Eastern time) will be wired the same day to the
shareholder's account at a domestic commercial bank which is a member of the
Federal Reserve System, but will not include that day's dividend. Proceeds from
redemption requests received after that time include that day's dividend but
will be wired the following business day. Proceeds from redemption requests 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.

Telephone instructions may be recorded and if reasonable procedures are not
followed by the Trust, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

REDEEMING SHARES BY MAIL
Shares may be redeemed in any amount by mailing a written request to: Federated
Shareholder Services Company, P.O. Box 8600, Boston, MA 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 Trust name and the class designation; the
account name as registered with the Trust; 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.

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ACCOUNT AND SHARE
INFORMATION

DIVIDENDS

Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Trust unless cash
payments are requested by writing to the Trust. Shares purchased by wire before
3:00 p.m. (Eastern time) begin earning dividends that day. Shares purchased by
check begin earning dividends the day after the check is converted into federal
funds.

CAPITAL GAINS

CERTIFICATES AND CONFIRMATIONS

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Trust 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 due to
shareholder redemptions. 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.

VOTING RIGHTS

As of May 7, 1996, Fiduciary Tr. Co. International, (as owner of record holding
shares for its clients), New York, New York, owned 35.25% of the voting
securities of the Trust, and, therefore, may, for certain purposes, be deemed to
control the Trust and be able to affect the outcome of certain matters presented
for a vote of shareholders.

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TAX INFORMATION

FEDERAL INCOME TAX

Dividends of the Trust representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.

These tax consequences apply whether dividends are received in cash or as
additional shares.

STATE AND LOCAL TAXES

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OTHER CLASSES OF SHARES

The Trust also offers another class of shares called Investment Shares.
Investment Shares are sold at net asset value primarily to individuals, and are
subject to a minimum initial investment of $500.

All classes are subject to certain of the same expenses. Investment Shares are
distributed with no 12b-1 Plan but are subject to shareholder services fees.
Expense differences between classes may affect the performance of each class.

To obtain more information and a prospectus for any other class, investors may
call 1-800-245-5051.

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PERFORMANCE INFORMATION

From time to time, the Trust advertises its total return, yield, effective
yield, and tax-equivalent yield. The performance figures will be calculated
separately for each class of shares.

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

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

ADDRESSES
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<TABLE>
<S> <C> <C>
Tax-Free Instruments Trust
Institutional Service Shares Federated Investors Tower
Pittsburgh, PA 15222-3779
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TAX-FREE INSTRUMENTS TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS

An Open-End, Diversified,
Management Investment Company

Prospectus dated May 31, 1996

[LOGO] FEDERATED INVESTORS
Since 1955
Federated Investors Tower
Pittsburgh, PA 15222-3779

Federated Securities Corp. is the distributor of the fund
and is a subsidiary of Federated Investors

[LOGO]
Cusip 876924200 RECYCLED
8062810A-SS (5/96) PAPER

TAX-FREE INSTRUMENTS TRUST
INVESTMENT SHARES
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectuses of Tax-Free Instruments Trust (the "Trust"), dated May 31,
1996. This Statement is not a prospectus. You may request a copy of a
prospectus or a paper copy of this Statement, if you have received it
electronically, free of charge by calling 1-800-235-4669.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated May 31, 1996

Federated Securities Corp is the distributor of the Trust and is a
subsidiary of Federated Investors
CUSIP 876924101
CUSIP 876924200
8062810B (5/96)

INVESTMENT POLICIES 3

ACCEPTABLE INVESTMENTS 3
PARTICIPATION INTERESTS 3
MUNICIPAL LEASES 3
RATINGS 4
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS 5
REPURCHASE AGREEMENTS 5
REVERSE REPURCHASE AGREEMENTS 6
CREDIT ENHANCEMENT 6
INVESTMENT LIMITATIONS 7

TAX-FREE INSTRUMENTS TRUST MANAGEMENT 11

THE FUNDS 18
SHARE OWNERSHIP 19
TRUSTEE COMPENSATION 20
TRUSTEE LIABILITY 21
INVESTMENT ADVISORY SERVICES 22

INVESTMENT ADVISER 22
ADVISORY FEES 22
BROKERAGE TRANSACTIONS 23

ACCOUNTS WITH LOW BALANCES (INVESTMENT SHARES) 12
OTHER SERVICES 24

TRUST ADMINISTRATION 24
CUSTODIAN AND PORTFOLIO ACCOUNTANT 25
TRANSFER AGENT 25
INDEPENDENT PUBLIC ACCOUNTANTS 25

SHAREHOLDER SERVICES 26

DETERMINING NET ASSET VALUE 26

REDEMPTION IN KIND 27

MASSACHUSETTS PARTNERSHIP LAW 28

THE TRUST'S TAX STATUS 28

PERFORMANCE INFORMATION 29

YIELD 29
EFFECTIVE YIELD 29
TAX-EQUIVALENT YIELD 30
TAX-EQUIVALENCY TABLE 30
TOTAL RETURN 32
PERFORMANCE COMPARISONS 32
ECONOMIC AND MARKET INFORMATION 16
ABOUT FEDERATED INVESTORS 33

MUTUAL FUND MARKET 34
INSTITUTIONAL CLIENTS 35
TRUST ORGANIZATIONS 35
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES 35
FINANCIAL STATEMENTS 17

APPENDIX 18

INVESTMENT POLICIES

Unless indicated otherwise, the policies described below may not be changed
by the Board of Trustees without shareholder approval.
ACCEPTABLE INVESTMENTS
When determining whether a security presents minimal credit risks, the
investment adviser will consider the creditworthiness of: the issuer of the
security; the issuer of any demand feature applicable to the security; or any
guarantor of either the security or any demand feature.
PARTICIPATION INTERESTS
The financial institutions from which the Trust purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Trust the right to
demand payment of the principal amounts of the participation interests plus
accrued interest on short notice (usually within seven days). The municipal
securities subject to the participation interests are not limited to the
Trust's maximum maturity requirements so long as the participation interests
include the right to demand payment from the issuers of those interests. By
purchasing these participation interests, the Trust is buying a security
meeting the maturity and quality requirements of the Trust and also is
receiving the tax-free benefits of the underlying securities.
MUNICIPAL LEASES
The Trust may purchase municipal securities in the form of participation
interests that represent an undivided proportional interest in lease payments
by a governmental or nonprofit entity. The lease payments and other rights
under the lease provide for and secure payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of the
appropriation for the lease. Furthermore, a lease may provide that the
participants cannot accelerate lease obligations upon default. The

participants would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, unless the
participation interests are credit enhanced, it is unlikely that the
participants would be able to obtain an acceptable substitute source of
payment.
In determining the liquidity of municipal lease securities, the investment
adviser, under the authority delegated by the Trustees, will base its
determination on the following factors: whether the lease can be terminated
by the lessee; the potential recovery, if any, from a sale of the leased
property upon termination of the lease; the lessee's general credit strength
(e.g., its debt, administrative, economic and financial characteristics and
prospects); the likelihood that the lessee will discontinue appropriating
funding for the leased property because the property is no longer deemed
essential to its operations (e.g., the potential for an "event of non-
appropriation"); and any credit enhancement or legal recourse provided upon
an event of non-appropriation or other termination of the lease.
RATINGS
The securities in which the Trust invests must be rated in one of the two
highest short-term rating categories by one or more nationally recognized
statistical rating organizations ("NRSROs") or be of comparable quality to
securities having such ratings. An NRSRO's two highest rating categories are
determined without regard for sub-categories and gradations. For example,
securities rated SP-1+, SP-1, or SP-2 by Standard & Poor's Ratings Group
("S&P"), MIG-1 or MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or
FIN-1+, FIN-1, or FIN-2 by Fitch Investors Service, Inc. ("Fitch") are all
considered rated in one of the two highest short-term rating categories. The
Trust will follow applicable regulations in determining whether a security
rated by more than one NRSRO can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be

rated by two NRSROs in one of their two highest rating categories. See
"Regulatory Compliance."
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an
advantageous price or yield for the Trust. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Trust in a dollar amount sufficient to make payment for the securities to be
purchased are: segregated on the Trust`s records at the trade date; marked to
market daily, and maintained until the transaction is settled. The Trust does
not intend to engage in when-issued and delayed delivery transactions to an
extent that would cause the segregation of more than 20% of the total value
of its assets.
REPURCHASE AGREEMENTS
Certain securities in which the Trust invests may be purchased pursuant to
repurchase agreements. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell securities
to the Trust and agree at the time of sale to repurchase them at a mutually
agreed upon time and price. To the extent that the seller does not repurchase
the securities from the Trust, the Trust could receive less than the
repurchase price on any sale of such securities. The Trust or its custodian
will take possession of the securities subject to repurchase agreements, and
these securities will be marked to market daily. In the event that a
defaulting seller filed for bankruptcy or became insolvent, disposition of
such securities by the Trust might be delayed pending court action. The Trust
believes that under the regular procedures normally in effect for custody of
the Trust's portfolio securities subject to repurchase agreements, a court of
competent jurisdiction would rule in favor of the Trust and allow retention
or disposition of such securities. The Trust will only enter into repurchase
agreements with banks and other recognized financial institutions, such as

broker/dealers, which are deemed by the Trust's adviser to be creditworthy
pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Trust may also enter into reverse repurchase agreements. These
transactions are similar to borrowing cash. In a reverse repurchase
agreement, the Trust transfers possession of a portfolio instrument in return
for a percentage of the instrument's market value in cash and agrees that on
a stipulated date in the future the Trust will repurchase the portfolio
instrument by remitting the original consideration plus interest at an agreed
upon rate. The use of reverse repurchase agreements may enable the Trust to
avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous, but does not ensure this result. However, liquid assets of
the Trust, in a dollar amount sufficient to make payment for the securities
to be purchased, are: segregated on the Trust's records at the trade date;
marked to market daily; and maintained until the transaction is settled.
CREDIT ENHANCEMENT
The Trust typically evaluates the credit quality and ratings of credit-
enhanced securities based upon the financial condition and ratings of the
party providing the credit enhancement (the "credit enhancer"), rather than
the issuer. However, credit-enhanced securities will not be treated as having
been issued by the credit enhancer for diversification purposes, unless the
Trust has invested more than 10% of its assets in securities issued,
guaranteed or otherwise credit enhanced by the credit enhancer, in which case
the securities will be treated as having been issued by both the issuer and
the credit enhancer.
The Trust may have more than 25% of its total assets invested in securities
credit enhanced by banks.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN
The Trust will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as are necessary for clearance
of purchases and sales of securities.
BORROWING MONEY
The Trust will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess of
5% of the value of its total assets. In addition, the Trust may enter into
reverse repurchase agreements and otherwise borrow up to one-third of the
value of its total assets, including the amount borrowed, in order to meet
redemption requests without immediately selling portfolio securities. This
latter practice is not for investment leverage but solely to facilitate
management of the portfolio by enabling the Trust to meet redemption requests
when the liquidation of portfolio securities would be inconvenient or
disadvantageous.
Interest paid on borrowed funds will serve to reduce the Trust's income. The
Trust will liquidate any borrowings as soon as possible and may not purchase
any portfolio instruments while any borrowings are outstanding.
PLEDGING ASSETS
The Trust will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings. In those cases, it may pledge assets having a
market value not exceding 10% of the value of total assets at the time of the
pledge.
LENDING CASH OR SECURITIES
The Trust will not lend any of its assets, except that it may acquire
publicly or non-publicly issued municipal securities or temporary investments

or enter into repurchase agreements, as permitted by its investment objective
and policies.
INVESTING IN COMMODITIES AND MINERALS
The Trust will not purchase or sell commodities, commodity contracts, or oil,
gas, or other mineral exploration or development programs.
INVESTING IN REAL ESTATE
The Trust will not purchase or sell real estate, although it may invest in
municipal securities secured by real estate or interests in real estate.
UNDERWRITING
The Trust will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities in accordance with its investment objective,
policies, and limitations.
CONCENTRATION OF INVESTMENTS
The Trust will not purchase securities (other than securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities) if, as
a result of such purchase, more than 25% of the value of its assets would be
invested in any one industry.
This policy applies to securities which are related in such a way that an
economic, business, or political development affecting one security would
also affect the other securities (such as securities paid from revenues from
selected projects in transportation, public works, education, or housing).
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of its assets, the Trust will not
invest more than 5% of its total assets in the securities of any one issuer.
Under this limitation, each governmental subdivision, including states and
the District of Columbia, territories, possessions of the United States, or
their political subdivisions, agencies, authorities, instrumentalities, or
similar entities, will be considered a separate issuer if its assets and

revenues are separate from those of the governmental body creating it and the
security is backed only by its own assets and revenues. Industrial
development bonds backed only by the assets and revenues of a nongovernmental
user are considered to be issued solely by that user.
INVESTING IN ILLIQUID SECURITIES
The Trust will not invest more than 10% of the value of its total assets in
illiquid securities, including repurchase agreements maturing in more than
seven days.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Trust will not acquire the voting securities of any issuer, except as
part of a merger, consolidation, or other acquisition of other assets. It
may not invest in securities issued by any other investment company or
investment trust.
INVESTING IN NEW ISSUERS
The Trust will not invest more than 5% of the value of its total assets in
securities of issuers (or in the alternative, guarantors, where applicable)
which have records of less than three years of continuous operations,
including the operation of any predecessor.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES
The Trust will not purchase or retain the securities of any issuer other than
the Trust if the Officers and Trustees of the Trust or its investment
adviser, owning individually more than .50% of the issuer's securities,
together beneficially own more than 5% of the issuer's securities.

INVESTING IN OPTIONS
The Trust will not purchase or sell puts, calls, straddles, spreads, or any
combination of them except that the Trust may purchase municipal securities

from a bank, broker, dealer, or other person accompanied by the agreement of
the seller to purchase them, at the Trust's option, prior to maturity.
The above limitations cannot be changed without shareholder approval. The
following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
INVESTING FOR CONTROL
The Trust will not invest in securities of a company for the purpose of
exercising control or management.
For purposes of the above limitations, the Trust considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic
bank or savings association having capital, surplus, and undivided profits in
excess of $100,000,000 at the time of investment to be "cash items." Except
with respect to borrowing money, if a percentage limitation is adhered to at
the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
limitation.
The Trust did not borrow money or pledge securities in excess of 5% of the
value of its net assets during the last fiscal year and has no present
intent to do so during the coming fiscal year.
REGULATORY COMPLIANCE
The Trust may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply
with applicable laws and regulations, including the provisions of and
regulations under the Investment Company Act of 1940. In particular, the
Trust will comply with the various requirements of Rule 2a-7, which regulates
money market mutual funds. The Trust will determine the effective maturity of
its investments, as well as its ability to consider a security as having

received the requisite short-term ratings by NRSROs, according to Rule 2a-7.
The Trust may change these operational policies to reflect changes in the
laws and regulations without the approval of its shareholders.

TAX-FREE INSTRUMENTS TRUST MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Tax-Free Instruments Trust, and principal occupations.

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 orTrustee of the Funds. Mr. Donahue is
the father of J. Christopher Donahue, Executive Vice President 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 or Trustee 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 or Trustee 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
or Trustee of the Funds; formerly, Vice Chairman and Director, PNC Bank,
N.A., and PNC Bank Corp. and Director, Ryan Homes, Inc.

James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922

Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee 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 or Trustee 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
or Trustee of the Funds; formerly, Counsel, Horizon Financial, F.A., Western
Region.

Peter E. Madden

Seacliff
562 Bellevue Avenue
Newport, RI
Birthdate: March 16, 1942
Trustee
Consultant; State Representative, Commonwealth of Massachusetts; Director or
Trustee 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 or Trustee
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 or 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 or Trustee 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 or Trustee of the Funds.

Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President

Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp. and Federated Administrative
Services.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President
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 Services Company, and Federated
Shareholder Services; President or Executive Vice President of the Funds;
Director or Trustee of some of the Funds. Mr. Donahue is the son of John F.
Donahue, Chairman and Trustee of the Trust.

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

* ThisTrustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

THE FUNDS
As referred to in the list of Trustees and Officers, "Funds" includes the
following investment companies:
111 Corcoran Funds; Annuity Management Series; Arrow Funds; Automated
Government Money Trust; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; Cash Trust Series II; Cash Trust Series, Inc. ; 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 Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated Government Trust;
Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated
Income Securities Trust; Federated Income Trust; Federated Index Trust;
Federated Institutional Trust; Federated 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 Term Trust, Inc. -
1999; Liberty U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Money Market Management, Inc.; Money Market Obligations Trust;
Money Market Trust; Municipal Securities Income Trust; Newpoint Funds;
Peachtree Funds; RIMCO Monument Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; The Planters Funds; The Starburst Funds; The Starburst
Funds II; The Virtus Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; and World Investment Series, Inc.
SHARE OWNERSHIP
Officers and Trustees as a group own less than 1% of the Trust`s outstanding
Investment Shares.
As of May 7, 1996, the following shareholders of record owned 5% or more of
the outstanding Investment Shares of the Trust: Stephens, Inc., Little Rock,
Arkansas, owned approximately 21,447,647 shares (5.41%); Speedway
Motorsports Inc., Charlotte, North Carolina, owned 21,313,450 shares (5.37%).
As of May 7, 1996, the following shareholders of record owned 5% or more of
the outstanding Institutional Service Shares of the Trust: Fiduciary Tr. Co.
International, New York, New York, owned approximately 98,681,800 shares
(35.25%); EGAP &CO, Chittenden Trust Company, Burlington, Vermont, owned

approximately 19,919,213 shares (7.11%); Memphis Commerce Square, c/o
National Bank of Commerce, Memphis, Tennessee, owned approximately 16,574,582
shares (5.92%); Rhode Island Hosp. Tr. National Bank, East Providence, Rhode
Island, owned approximately 15,498,532 shares (5.53%); and Citibank NA, Long
Island City, New York, owned approximately 15,304,370 shares (5.46%).

TRUSTEE COMPENSATION

AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +

John F. Donahue $ -0- $-0- for the Company and
Chairman andTrustee 54 other investment companies in the Fund
Complex
Thomas G. Bigley++ $2,596.14 $86,331 for the Company and
Trustee 54 other investment companies in the Fund Complex
John T. Conroy, Jr. $2,767.03 $115,760 for the Company and
Trustee 54 other investment companies in the Fund Complex
William J. Copeland $2,767.03 $115,760 for the Company and
Trustee 54 other investment companies in the Fund Complex
James E. Dowd $2,767.03 $115,760 for the Company and
Trustee 54 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $2,596.14 $104,898 for the Company and
Trustee 54 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $2,767.03 $115,760 for the Company and

Trustee 54 other investment companies in the Fund Complex
Peter E. Madden $2,596.14 $104,898 for the Company and
Trustee 54 other investment companies in the Fund Complex
Gregor F. Meyer $2,596.14 $104,898 for the Company and
Trustee 54 other investment companies in the Fund Complex
John E. Murray, Jr. $2,596.14 $104,898 for the Company and
Trustee 54 other investment companies in the Fund Complex
Wesley W. Posvar $2,596.14 $104,898 for the Company and
Trustee 54 other investment companies in the Fund Complex
Marjorie P. Smuts$2,596.14 $104,898 for the Company and
Trustee 54 other investment companies in the Fund Complex

*Information is furnished for the fiscal year ended March 31, 1996.
#The aggregate compensation is provided for the Trust which is comprised of
one portfolio.
+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.
TRUSTEE LIABILITY
The 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.

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISER
The Trust's investment adviser is Federated Management. It is a subsidiary of
Federated Investors. All 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.
The adviser shall not be liable to the Trust or any shareholder for any
losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
ADVISORY FEES
For its advisory services, Federated Management receives an annual investment
advisory fee as described in the prospectus. For the fiscal years ended March
31, 1996, 1995, and 1994, the adviser earned $8,657,750, $8,274,688 and
$8,264,650, respectively, of which $2,483,925, $2,852,758 and $2,322,865,
respectively, were waived.
STATE EXPENSE LIMITATIONS
The adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Trust's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets,
2% per year of the next $70 million of average net assets, and 1-1/2%
per year of the remaining average net assets, the adviser will reimburse
the Trust for its expenses over the limitation.

If the Trust's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fees.
This arrangement is not part of the advisory contract and may be amended
or rescinded in the future.
BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the adviser looks for prompt execution of the order at
a favorable price. In working with dealers, the adviser will generally use
those who are recognized dealers in specific portfolio instruments, except
when a better price and execution of the order can be obtained elsewhere. The
adviser makes decisions on portfolio transactions and selects brokers and
dealers subject to guidelines established by the Trustees. The adviser may
select brokers and dealers who offer brokerage and research services. These
services may be furnished directly to the Trust or to the adviser and may
include: advice as to the advisability of investing in securities; security
analysis and reports; economic studies; industry studies; receipt of
quotations for portfolio evaluations; and similar services. Research services
provided by brokers and dealers may be used by the adviser or its affiliates
in advising the Trust and other accounts. To the extent that receipt of these
services may supplant services for which the adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses. The adviser and
its affiliates exercise reasonable business judgment in selecting brokers who
offer brokerage and research services to execute securities transactions.
They determine in good faith that commissions charged by such persons are

reasonable in relationship to the value of the brokerage and research
services provided. During the fiscal years ended March 31, 1996, 1995 and
1994, the Trust paid no brokerage commissions.
Although investment decisions for the Trust are made independently from those
of the other accounts managed by the adviser, investments of the type the
Trust may make may also be made by those other accounts. When the Trust and
one or more other accounts managed by the adviser are prepared to invest in,
or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the adviser
to be equitable to each. In some cases, this procedure may adversely affect
the price paid or received by the Trust or the size of the position obtained
or disposed of by the Trust. In other cases, however, it is believed that
coordination and the ability to participate in volume transactions will be to
the benefit of the Trust.

ACCOUNTS WITH LOW BALANCES (INVESTMENT SHARES)
The average monthly account balance policy, whereby shareholders maintain a
$5,000 average monthly account balance in order to avoid the $3.00 monthly
fee, is not applicable to Liberty Life Members; shareholders who have
purchased shares through Aetna Insurance Company of America and its
affiliates or the Lutheran Brotherhood; associates of E.D. Jones & Co., L.P.,
and employees of Federated Investors.
OTHER SERVICES

TRUST ADMINISTRATION
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Trust for a fee as described in
the prospectus. From March 1, 1994 to March 1, 1996, Federated Administrative

Services served as the Trust's Administrator. Prior to March 1, 1994,
Federated Aministrative Services, Inc. served as the Trust's Administrator.
Both former Administrators are subsidiaries of Federated Investors. (For
purposes of this Statement of Additional Information, Federated Services
Company, Federated Administrative Services and Federated Administrative
Services, Inc. may hereinafter collectively be referred to as the
"Administrators.") For the fiscal years ended March 31, 1996, 1995, and 1994,
the Administrators earned $1,310,182, $1,252,788, and $954,364, respectively.
Dr. Henry J. Gailliot, an officer of Federated Management, the adviser to the
Trust, 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 Federated Services Company.
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Trust. Federated Services Company, Pittsburgh, PA,
provides certain accounting and recordkeeping services with respect to the
Trust's portfolio investments. The fee paid for this service is based upon
the level of the Trust's average daily net assets for the period plus out-of-
pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent, Federated
Shareholder Services Company, maintains all necessary shareholder records and
receives a fee based on the size, type and number of accounts and
transactions made by shareholders.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants for the Trust are Arthur Andersen LLP,
Pittsburgh, PA.

SHAREHOLDER SERVICES

This arrangement permits the payment of fees to Federated Shareholder
Services and financial institutions to cause services to be provided which
are necessary for the maintenance of shareholder accounts and to encourage
personal services 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: 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. By adopting the
Shareholder Services Agreement, the Trustees expect that the Trust will
benefit by: (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. For the
fiscal year ending March 31, 1996, payment in the amount of $2,077,170 was
made pursuant to the Shareholder Services Agreement, all of which was paid to
financial institutions.
DETERMINING NET ASSET VALUE

The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization
of premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In

periods of declining interest rates, the indicated daily yield on shares of
the Trust computed by dividing the annualized daily income on the Trust's
portfolio by the net asset value computed as above may tend to be higher than
a similar computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the opposite may
be true.
The Trust's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in Rule 2a-7 (the "Rule")
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940. Under the Rule, the Trustees must establish procedures
reasonably designed to stabilize the net asset value per share, as computed
for purposes of distribution and redemption, at $1.00 per share, taking into
account current market conditions and the Trust's investment objective. The
procedures include monitoring the relationship between the amortized cost
value per share and the net asset value per share based upon available
indications of market value. The Trustees will decide what, if any, steps
should be taken if there is a difference of more than 0.5 of 1% between the
two values. The Trustees will take any steps they consider appropriate (such
as redemption in kind or shortening the average portfolio maturity) to
minimize any material dilution or other unfair results arising from
differences between the two methods of determining net asset value.
REDEMPTION IN KIND

The Trust is obligated to redeem shares solely in cash up to $250,000 or 1%
of the Trust's 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 determine that further payments should be in kind.
In such cases, the Trust will pay all or a portion of the remainder of the
redemption in portfolio instruments valued in the same way as the Trust

determines net asset value. The portfolio instruments will be selected in a
manner that the Trustees deem fair and equitable. Redemption in kind is not
as liquid as a cash redemption. If redemption is made in kind, shareholders
who sell these securities could receive less than the redemption value and
could incur certain transaction costs.
MASSACHUSETTS PARTNERSHIP LAW

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

To qualify for the special tax treatment afforded to regulated investment
companies, the Trust must, among other requirements: derive at least 90% of
its gross income from dividends, interest, and gains from the sale of
securities; derive less than 30% of its gross income from the sale of
securities held less than three months; invest in securities within certain
statutory limits; and distribute to its shareholders at least 90% of its net
income earned during the year.

PERFORMANCE INFORMATION

Performance depends upon such variables as: portfolio quality; average
portfolio maturity; type of instruments in which the portfolio is invested;
changes in interest rates; changes in expenses; and the relative amount of
cash flow. To the extent that financial institutions and broker/dealers
charge fees in connection with services provided in conjunction with an
investment in shares of the Trust, the performance will be reduced for those
shareholders paying those fees.
YIELD
The yield is calculated based upon the seven days ending on the day of the
calculation, called the "base period." This yield is computed by: determining
the net change in the value of a hypothetical account with a balance of one
share at the beginning of the base period, with the net change excluding
capital changes but including the value of any additional shares purchased
with dividends earned from the original one share and all dividends declared
on the original and any purchased shares; dividing the net change in the
account's value by the value of the account at the beginning of the base
period to determine the base period return; and multiplying the base period
return by 365/7.
For the seven-day period ended March 31, 1996, the yield for Investment
Shares was 2.88%, Institutional Service was 3.03%.
EFFECTIVE YIELD
The effective yield is calculated by compounding the unannualized base period
return by: adding 1 to the base period return; raising the sum to the 365/7th
power; and subtracting 1 from the result.
For the seven-day period ended March 31, 1996, the effective yield for
Investment Shares was 2.92%, Institutional Service Shares was 3.08%.

TAX-EQUIVALENT YIELD
The tax-equivalent yield of the Trust is calculated similarly to the yield
but is adjusted to reflect the taxable yield that the Trust would have had to
earn to equal its actual yield, assuming 28% tax rate (the maximum effective
federal rate for individuals) and assuming that the income is 100% tax
exempt.
For the seven-day period ended March 31, 1996, the tax-equivalent yield for
Investment Shares was 4.05%, Institutional Service Shares was 4.27%.

TAX-EQUIVALENCY TABLE
A tax-equivalency table may be used in advertising and sales literature. The
interest earned by the municipal securities in the Trust's portfolio
generally remains free from federal regular income tax,* and is often free
from state and local taxes as well. As the table below indicates, a "tax-
free" investment can be an attractive choice for investors, particularly in
times of narrow spreads between tax-free and taxable yields.

TAXABLE YIELD EQUIVALENT FOR 1996
MULTISTATE MUNICIPAL FUNDS

FEDERAL INCOME TAX BRACKET:
15.00% 28.00% 31.00% 36.00% 39.60%

JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750

SINGLE $1- $24,001- $58,151- $121,301- OVER

RETURN 24,000 58,150 121,300 263,750 $263,750

TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT

1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%

Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state
and local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of Trust shares.

*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local income taxes.

TOTAL RETURN
Average annual total return 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 net
asset value 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, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends and
distributions.
For the one, five and ten year periods ended March 31, 1996, the average
annual total returns for Investment Shares were 3.32%, 2.85% and 3.89%,
respectively. For the one year period ended March 31, 1996, and for the
period from October 15, 1993, through March 31, 1996, the average annual
total returns for Institutional Service Shares were 3.47% and 2.94%,
respectively.
PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Trust'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 Trust uses in
advertising may include:

O LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories
based on total return, which assumes the reinvestment of all income
dividends and capital gains distributions, if any.
o DONOGHUE'S MONEY FUND REPORT publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports
monthly and 12 month-to-date investment results for the same money
funds.
o MONEY, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Trust's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Trust can
compare its performance, or performance for the types of securities in which
it invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Trust may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Trust portfolio managers and their views and analysis on how
such developments could affect the Trust. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
ABOUT FEDERATED INVESTORS

Federated Investors is 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. These traders handle trillions
of dollars in annual trading volume.
In the money market sector, Federated Investors gained prominence in the
mutual fund industry in 1974 with the creation of the first institutional
money market fund. Simultaneously, the company pioneered the use of the
amortized cost method of accounting for valuing shares of money market funds,
a principal means used by money managers today to value money market fund
shares. Other innovations include the first institutional tax-free money
market fund. As of December 31, 1995, Federated Investors managed more than
$40.2 billion in assets across approximately 47 money market funds, including
17 government, 10 prime and 20 municipal with assets approximating $20.9
billion, $11.5 billion and $7.8 billion, respectively.
J. Thomas Madden, Executive Vice President, oversees Federated Investors'
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors' domestic fixed income
management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors' 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 CLIENTS
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. Federated's service to
financial professionals and institutions has earned it high rankings in
several DALBAR Surveys. The marketing effort to these firms is headed by
James F. Getz, President, Broker/Dealer Division.
FINANCIAL STATEMENTS

The financial statements for the Trust for the fiscal year ended March 31,
1996, are incorporated herein by reference to the Annual Report to
Shareholders of the Trust dated March 31, 1996.

*Source: Investment Company Institute

STANDARD & POOR'S RATINGS GROUP
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
A Standard & Poor's Ratings Group (S&P) note rating reflects the liquidity
concerns and market access risks unique to notes.
SP-1 Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be
given a plus sign (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
S&P assigns dual ratings to all long-term debt issues that have as part of
their provisions a variable rate demand feature. The first rating (long-term
rating) addresses the likelihood of repayment of principal and interest when
due, and the second rating (short-term rating) describes the demand
characteristics. Several examples are AAA/A-L+, AA/A-I+, A/A-1. (The
definitions for the long-term and the short-term ratings are provided below.)
COMMERCIAL PAPER (CP) RATINGS
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
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.
A-2 Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as
for issues designated A-1.

LONG-TERM DEBT 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 rate "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest 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.
MOODYS INVESTORS SERVICE, INC.,
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG) (see below). The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the
relative investment qualities of short-term obligations may be evaluated.
MIG1 This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG2 This designation denotes high quality. Margins of protection are ample
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS) AND TENDER OPTION BONDS (TOBS) RATINGS
Short-term ratings on issues with demand features are differentiated by the
use of the VMIG symbol to reflect such characteristics as payment upon
periodic demand rather than fixed maturity dates and payment relying on
external liquidity. In this case, two ratings are usually assigned, (for
example, AAA/VMIG-1); the first representing an evaluation of the degree of
risk associated with scheduled principal and interest payments, and the
second representing an evaluation of the degree of risk associated with the

demand feature. The VMIG rating can be assigned a 1 or 2 designation using
the same definitions described above for the MIG rating.

COMMERCIAL PAPER (CP) RATINGS
P-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: leading market positions in well established
industries, high rates of return on funds employed, conservative
capitalization structure with moderate reliance on debt and ample asset
protection, broad margins in earning coverage of fixed financial charges
and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity.
P-2 Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to
a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
LONG-TERM DEBT 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.
NR Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term
indebtedness. However, management considers them to be of comparable
quality to securities rated A-1 or P-1.
NR(1) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AAA" by S&P or "AAA" by Moody's.
NR(2) The underlying issuer/obligor/guarantor has other outstanding debt
rated "AA" by S&P or "AA" by Moody's.
NR(3) The underlying issuer/obligor/guarantor has other outstanding debt
rated "A" by S&P or Moody's.

CUSIP 876924101
CUSIP 876924200
8062810B (5/96)

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits:

(a) Financial Statements (Incorporated by reference to the Annual
Report of Registrant dated March 31, 1996 (File Nos. 2-75122
and 811-3337)
(b) Exhibits:
(1) Conformed Copy of Amended Declaration of Trust of the
Registrant (11);
(2) Copy of By-Laws of Registrant (5);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (2);
(5) Copy of Investment Advisory Contract of the Registrant
(7);
(6) (i) Conformed copy of Distributor's Contract of the
Registrant (10);
(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 of
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 Custodian Agreement of the
Registrant (11);
(9) (i) Conformed copy of Agreement for Fund Accounting
Services, Administrative Services,Transfer Agency
Services, and Custody Services Procurement +;
(ii) Conformed copy Shareholder Services
Agreement (11);
(10) Conformed Copy of Opinion and Consent of Counsel as to
legality of shares being registered +;
(11) Conformed copy of Consent of Independent Public
Accountants +;
(12) Not applicable;
(13) Letter Agreement (3);
(14) Not applicable;

+ All exhibits have been filed electronically.

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 to its Registration Statement on Form N-1 filed on
August 13, 1982. (File No. 2-75122 and File No. 811-3337)
3. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 to its Registration Statement on Form N-1 filed on
November 4, 1982. (File No. 2-75122 and File No. 811-3337)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 to its Registration Statement on Form N-1A filed on
July 14, 1987. (File No. 2-75122 and File No. 811-3337)

7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 to its Registration Statement on Form N-1A filed on
July 28, 1989. (File No. 2-75122 and File No. 811-3337).
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 23 to its Registration Statement on Form N-1A filed on May
26, 1994. (File No. 2-75122 and File No. 811-3337).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 to its Registration Statement on Form N-1A filed on May
24, 1995. (File No. 2-75122 and File No. 811-3337).

(15) (i) Copy of Distribution Plan of the Registrant (4);
(ii) The responses described in Item 24(b)6 are hereby
incorporated by reference.
(16) Copy of Schedule of Computation of Yield Calculation
(11);
(17) Copy of Financial Data Schedule; +
(18) The Registrant hereby incorporates the conformed copy of
the specimen Multiple Class Plan from Item 24(b)(18) of
the World Investment Series, Inc. Registration Statement
on Form N-1A, filed with the Commission on January 26,
1996. (File Nos. 33-52149 and 811-07141);
(19) Conformed copy of Power of Attorney; +

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

None

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of May 7, 1996

Shares of Beneficial Interest (no par value)

Investment Shares 9,807
Institutional Service Shares 613

Item 27. Indemnification: (7)

+ All exhibits have been filed electronically.

4. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 to its Registration Statement on Form N-1 filed on
January 30, 1984. (File No. 2-75122 and File No. 811-3337)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 to its Registration Statement on Form N-1A filed on
July 14, 1987. (File No. 2-75122 and File No. 811-3337)
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 to its Registration Statement on Form N-1A filed on
July 28, 1989. (File No. 2-75122 and File No. 811-3337).
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 to its Registration Statement on Form N-1A filed on May
24, 1995. (File No. 2-75122 and File No. 811-3337).

Item 28. Business and Other Connections of Investment Adviser

For a description of the other business of the investment adviser,
see the section entitled "Trust Information - Management of the
Trust" in Part A. The affiliations with the Registrant of three of
the Trustees and one of the Officers of the investment adviser are
included in Part B of this Registration Statement under "Tax-Free
Instruments Trust Management." The remaining Trustee of the
investment adviser, his position with the investment adviser, and,
in parentheses, his principal occupation is: Mark D. Olson,
Partner, Wilson, Halbrook & Bayard, 107 W. Market Street,
Georgetown, Delaware 19947.

The remaining Officers of the investment adviser are: William D.
Dawson, III, Henry A. Frantzen, J. Thomas Madden and Mark L.
Mallon, Executive Vice Presidents; Henry J. Gailliot, Senior Vice
President-Economist; Peter R. Anderson, Drew J. Collins, Jonathan
C. Conley, Mark E. Durbiano, J. Alan Minteer and Mary Jo Ochson,
Senior Vice Presidents; J. Scott Albrecht, Joseph M. Balestrino,
Randall S. Bauer, David F. Belton, David A. Briggs, Kenneth J.
Cody, Deborah A. Cunningham, Michael P. Donnelly, Linda A. Duessel,
Kathleen M. Foody-Malus, Thomas M. Franks, Edward C. Gonzales,
Timothy E. Keefe, Stephen A. Keen, Mark S. Kopinski, Jeff A.
Kozemchek, Marian R. Marinack, Susan M. Nason, Robert J. Ostrowski,
Frederick L. Plautz, Jr., Charles A. Ritter, James D. Roberge,
Frank Semack, William F. Stotz, Edward J. Tiedge, Sandra L. Weber
and Christopher Wiles, Vice Presidents, Thomas R. Donahue,
Treasurer, and Stephen A. Keen, Secretary. The business address of
each of the Officers of the Federated Research Division of the
investment adviser is Federated Investors Tower, Pittsburgh, PA

15222-3779. These individuals are also officers of a majority of
the investment advisers to the Funds listed in Part B of this
Registration Statement.

Item 29. Principal Underwriters:

Federated Securities Corp., the Distributor for shares of the Registrant,
also acts as principal underwriter for the following open-end
investment companies: 111 Corcoran Funds; Annuity Management
Series; Arrow Funds; Automated Government Money Trust;
BayFunds; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; Cash Trust Series II; Cash Trust Series, Inc.; 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 Fund for U.S. Government Securities, Inc.; Federated
GNMA Trust; Federated Government Income Securities, Inc.;
Federated Government Trust; Federated High Income Bond Fund,
Inc.; Federated High Yield Trust; Federated Income Securities
Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal
Trust; Federated Short-Term Municipal Trust; Federated Short-
Term U.S. Government Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated Tax-Free Trust;

Federated Total Return Series, Inc.; Federated U.S. Government
Bond Fund; Federated U.S. Government Securities Fund: 1-3
Years; Federated U.S. Government Securities Fund: 2-5 Years;
Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; Fortress Utility Fund, Inc.; High
Yield Cash Trust; Independence One Mutual Funds; 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; Municipal
Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO
Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; The Biltmore Funds; The Biltmore Municipal
Funds; The Monitor Funds; The Planters Funds; The Starburst
Funds; The Starburst Funds II; The Virtus Funds; 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; 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

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

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

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

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

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

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

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

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

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

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
(c) Not applicable

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-b
promulgated thereunder are maintained at one of the following
locations:

Registrant Federated Investors Tower
Tax-Free Instruments Trust Pittsburgh, PA 15222-3779

Federated Services Company P.O. Box 8600
Transfer Agent, Dividend Boston, MA 02266-8600
Disbursing Agent and Portfolio
Recordkeeper

Federated Administrative Services Federated Investors Tower
Administrator Pittsburgh, PA 15222-3779

Federated Management Federated Investors Tower
Adviser Pittsburgh, PA 15222-3779

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

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 special shareholder meetings by
shareholders.

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, TAX-FREE INSTRUMENTS TRUST,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on
the 23rd day of May, 1996.

TAX-FREE INSTRUMENTS TRUST

BY: /s/Charles H. Field
Charles H. Field, Assistant Secretary
Attorney in Fact for John F. Donahue
May 23, 1996

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

NAME TITLE DATE

By:/s/Charles H. Field
Charles H. Field Attorney In Fact May 23, 1996
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

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

Glen R. Johnson* President

Edward C. Gonzales* Vice President and 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

Exhibit 11 under Form N-1A
Exhibit 8 under Item 601/Reg. S-K

ARTHUR ANDERSEN LLP

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent tothe use in post-
Effective Amendment No. 27 to Form N-1A Registration Statement of Tax-Free
Instruments Trust of our report dated May 10, 1996, on the financial
statements as of March 31, 1996, included in or made a part of this
registration statement.

/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP

Pittsburgh, Pennsylvania,

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 March 1, 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 Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the
Funds, including any classes of shares issued by any Fund ("Classes") if so
indicated on Exhibit 1, and the Company desires to accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein
defined), if so indicated on Exhibit, and the Company desires to accept such
appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer
agency services (as herein defined) if so indicated on Exhibit 1, and agent
in connection with certain other activities, and the Company desires to
accept such appointment; and
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the
Company desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the
period and on the terms set forth in this Agreement. The Company accepts
such appointment and agrees to furnish the services herein set forth in
return for the compensation as provided in Article 3 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's Board
of Trustees or Directors ("Board"), the Company will assist the Investment
Company with regard to fund accounting for the Investment Company, and/or
the Funds, and/or the Classes, and in connection therewith undertakes to
perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide a
price for a security which the Company believes should be available by
market quotation, the Company may obtain a price by calling brokers
designated by the investment adviser of the fund holding the security,
or if the adviser does not supply the names of such brokers, the
Company will attempt on its own to find brokers to price those
securities; thirdly, for securities for which no market price is
available, the Pricing Committee of the Board will determine a fair
value in good faith. Consistent with Rule 2a-4 of the 40 Act,
estimates may be used where necessary or appropriate. The Company's
obligations with regard to the prices received from outside pricing
services and designated brokers or other outside sources, is to
exercise reasonable care in the supervision of the pricing agent. The
Company is not the guarantor of the securities prices received from
such agents and the Company is not liable to the Fund for potential
errors in valuing a Fund's assets or calculating the net asset value
per share of such Fund or Class when the calculations are based upon
such prices. All of the above sources of prices used as described are
deemed by the Company to be authorized sources of security prices. The
Company provides daily to the adviser the securities prices used in
calculating the net asset value of the fund, for its use in preparing
exception reports for those prices on which the adviser has comment.
Further, upon receipt of the exception reports generated by the
adviser, the Company diligently pursues communication regarding
exception reports with the designated pricing agents;
B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board
and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate realized capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Investment
Company are the property of the Investment Company and further agrees
to surrender promptly to the Investment Company such records upon the
Investment Company's request;
G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section
One, shall hereafter be referred to as "Fund Accounting Services."
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for Fund Accounting Services in
accordance with the fees agreed upon from time to time between the
parties hereto. Such fees do not include out-of-pocket disbursements
of the Company for which the Funds shall reimburse the Company. Out-
of-pocket disbursements shall include, but shall not be limited to,
the items agreed upon between the parties from time to time.
B. The Fund and/or the Class, and not the Company, shall bear the cost
of: custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; 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 on the terms and conditions set forth in this Agreement. The
Company hereby accepts such appointment and agrees to furnish the services
set forth in Article 5 of this Agreement in return for the compensation set
forth in Article 9 of this Agreement.
ARTICLE 5. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the Board
and in accordance with Proper Instructions (as defined hereafter) from the
Investment Company the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation
of the business and affairs of the Investment Company and each of its
portfolios:
A. prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the Charter (which
has already been prepared and filed), the By-laws and minutes of
meetings of the Board and Shareholders;
B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements
for the Investment Company and the Investment Company's shares and all
amendments thereto, reports to regulatory authorities and
shareholders, prospectuses, proxy statements, and such other documents
all as may be necessary to enable the Investment Company to make a
continuous offering of its shares;
C. prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Investment Company's
investment advisers and distributors, subject to any applicable
restrictions of the Board or the 1940 Act;
D. calculate performance data of the Investment Company for dissemination
to information services covering the investment company industry;
E. prepare and file the Investment Company's tax returns;
F. coordinate the layout and printing of publicly disseminated
prospectuses and reports;
G. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;
H. assist with the design, development, and operation of the Investment
Company and the Funds;
I. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who
will be responsible for the management of certain of the Investment
Company's affairs as determined by the Investment Company's Board; and
J. consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section 4,
shall hereafter be referred to as "Administrative Services."
ARTICLE 6. RECORDS.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but
not limited to records required by Section 31(a) of the Investment Company
act of 1940 and the rules thereunder, as the same may be amended from time
to time, pertaining to the Administrative Services performed by it and not
otherwise created and maintained by another party pursuant to contract with
the Investment Company. Where applicable, such records shall be maintained
by the Company for the periods and in the places required by Rule 31a-2
under the 1940 Act. The books and records pertaining to the Investment
Company which are in the possession of the Company shall be the property of
the Investment Company. The Investment Company, or the Investment Company's
authorized representatives, shall have access to such books and records at
all times during the Company's normal business hours. Upon the reasonable
request of the Investment Company, copies of any such books and records
shall be provided promptly by the Company to the Investment Company or the
Investment Company's authorized representatives.
ARTICLE 7. DUTIES OF THE FUND.
The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all
applicable requirements the 1940 Act, the Internal Revenue Code, and any
other laws, rules and regulations of government authorities having
jurisdiction.
ARTICLE 8. EXPENSES.
The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide
the Administrative Services to the Investment Company, including the
compensation of the Company employees who serve as trustees or directors or
officers of the Investment Company. The Investment Company shall be
responsible for all other expenses incurred by the Company on behalf of the
Investment Company, including without limitation postage and courier
expenses, printing expenses, travel expenses, registration fees, filing
fees, fees of outside counsel and independent auditors, or other
professional services, organizational expenses, insurance premiums, fees
payable to persons who are not the Company's employees, trade association
dues, and other expenses properly payable by the Funds and/or the Classes.
ARTICLE 9. COMPENSATION.
For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation
for its services rendered hereunder an administrative fee at an annual rate
per Fund, as specified below.
The compensation and out of pocket expenses attributable to the Fund shall
be accrued by the Fund and paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The Company
will maintain detailed information about the compensation and out of pocket
expenses by the Fund.
MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUNDS
.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
(Average Daily Net Asset break-points are on a complex-wide basis)

However, in no event shall the administrative fee received during any year
of the Agreement be less than, or be paid at a rate less than would
aggregate $125,000 per Fund and $30,000 per Class. The minimum fee set forth
above in this Article 9 may increase annually upon each March 1 anniversary
of this Agreement over the minimum fee during the prior 12 months, as
calculated under this agreement, in an amount equal to the increase in
Pennsylvania Consumer Price Index (not to exceed 6% annually) as last
reported by the U.S. Bureau of Labor Statistics for the twelve months
immediately preceding such anniversary.
ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.
A. The Company shall not be liable for any error of judgment or mistake
of law or for any loss suffered by the Investment Company in
connection with the matters to which this Agreement relates, except a
loss resulting from willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
The Company shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Investment Company) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Any person, even though
also an officer, director, trustee, partner, employee or agent of the
Company, who may be or become an officer, director, trustee, partner,
employee or agent of the Investment Company, shall be deemed, when
rendering services to the Investment Company or acting on any business
of the Investment Company (other than services or business in
connection with the duties of the Company hereunder) to be rendering
such services to or acting solely for the Investment Company and not
as an officer, director, trustee, partner, employee or agent or one
under the control or direction of the Company even though paid by the
Company.
B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in
performing the Administrative Services in accordance with the above
standards. In order that the indemnification provisions contained in
this Article 10 shall apply, however, it is understood that if in any
case the Investment Company may be asked to indemnify or hold the
Company harmless, the Investment Company shall be fully and promptly
advised of all pertinent facts concerning the situation in question,
and it is further understood that the Company will use all reasonable
care to identify and notify the Investment Company promptly concerning
any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Investment
Company. The Investment Company shall have the option to defend the
Company against any claim which may be the subject of this
indemnification. In the event that the Investment Company so elects,
it will so notify the Company and thereupon the Investment Company
shall take over complete defense of the claim, and the Company shall
in such situation initiate no further legal or other expenses for
which it shall seek indemnification under this Article. the Company
shall in no case confess any claim or make any compromise in any case
in which the Investment Company will be asked to indemnify the Company
except with the Investment Company's written consent.
SECTION THREE: TRANSFER AGENCY SERVICES.
ARTICLE 11. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company
agrees to act as, transfer agent and dividend disbursing agent for each
Fund's Shares, and agent in connection with any accumulation, open-account
or similar plans provided to the shareholders of any Fund
("Shareholder(s)"), including without limitation any periodic investment
plan or periodic withdrawal program.
ARTICLE 12. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Investment Company
as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
shares and promptly deliver payment and appropriate documentation
therefore to the custodian of the relevant Fund, (the
"Custodian"). The Company shall notify the Fund and the Custodian
on a daily basis of the total amount of orders and payments so
delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) 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 of
the estimated amount required to pay any portion of said
distribution which is payable in cash and request the Custodian
to make available sufficient funds for the cash amount to be paid
out. The Company shall reconcile the amounts so requested and the
amounts actually received with the Custodian on a daily basis. If
a Shareholder is entitled to receive additional Shares by virtue
of any such distribution or dividend, appropriate credits shall
be made to the Shareholder's account, 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 Funds on a daily basis of the total amount of redemption
requests processed and monies paid to the Company by the
Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the total
number of Shares of the Fund and/or Class which are authorized,
based upon data provided to it by the Fund, and issued and
outstanding. The Company shall also provide the Fund on a regular
basis or upon reasonable request with the total number of Shares
which are authorized and issued and outstanding, but shall have
no obligation when recording the issuance of Shares, except as
otherwise set forth herein, to monitor the issuance of such
Shares or to take cognizance of any laws relating to the issue or
sale of such Shares, which functions shall be the sole
responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(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;
(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such
records may be inspected by the Fund at reasonable times. The
Company may, at its option at any time, and shall forthwith upon
the Fund's demand, turn over to the Fund and cease to retain in
the Company's files, records and documents created and maintained
by the Company pursuant to this Agreement, which are no longer
needed by the Company in performance of its services or for its
protection. If not so turned over to the Fund, such records and
documents will be retained by the Company for six years from the
year of creation, during the first two of which such documents
will be in readily accessible form. At the end of the six year
period, such records and documents will either be turned over to
the Fund or destroyed in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the Fund
to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees, or
other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws,
rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited
to: maintaining all Shareholder accounts, mailing
Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to back-
up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other
conformable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and
providing Shareholder account information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund (and/or Class) sold in
each state ("blue sky reporting"). The Fund shall by Proper
Instructions (i) identify to the Company those transactions
and assets to be treated as exempt from the blue sky
reporting for each state and (ii) verify the classification
of transactions for each state on the system prior to
activation and thereafter monitor the daily activity for
each state. The responsibility of the Company for each
Fund's (and/or Class's) state blue sky registration status
is limited solely to the recording of the initial
classification of transactions or accounts with regard to
blue sky compliance and the reporting of such transactions
and accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence as
may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders;
(3) The Company shall establish and maintain 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.
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
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
For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company and/or the Fund agree to pay the
Company an annual maintenance fee for each Shareholder account as
agreed upon between the parties and as may be added to or amended from
time to time. Such fees may be changed from time to time subject to
written agreement between the Investment Company and the Company.
Pursuant to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund into
Classes or other sub-components for recordkeeping purposes. The
Company will charge the Fund the same fees for each such Class or sub-
component the same as if each were a Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time.
In addition, any other expenses incurred by the Company at the request
or with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
SECTION FOUR: CUSTODY SERVICES PROCUREMENT.
ARTICLE 15. APPOINTMENT.
The Investment Company hereby appoints Company as its agent to evaluate
and obtain custody services from a financial institution that (i) meets the
criteria established in Section 17(f) of the 1940 Act and (ii) has been
approved by the Board as eligible for selection by the Company as a
custodian (the "Eligible Custodian"). The Company accepts such appointment.
ARTICLE 16. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and has
been approved by the Board as being eligible for selection by the
Company as an Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a
party to each such agreement. The Company may, as paying agent, be a
party to any agreement with any such Eligible Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services provided
by Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports on
the activities and services of Eligible Custodians; (ii) the nature
and amount of disbursements made on account of the each Fund with
respect to each custodial agreement; and (iii) such other information
as the Board shall reasonably request to enable it to fulfill its
duties and obligations under Sections 17(f) and 36(b) of the 1940 Act
and other duties and obligations thereof;
F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being
charged to the Fund by Eligible Custodian; and
The foregoing, along with any additional services that Company shall agree
in writing to perform for the Fund under this Section Four, shall hereafter
be referred to as "Custody Services Procurement."
ARTICLE 17. FEES AND EXPENSES.
A. Annual Fee
For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with the
fees agreed upon from time to time.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time.
In addition, any other expenses incurred by the Company at the request
or with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.
C. Payment
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 the Board of the Investment Company
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 Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Investment Company
authorizing the original issuance of each Fund's, and/or Class's
Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document and
the By-Laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for fund
accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) 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 Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each
jurisdiction where the nature of its business requires such
qualification, and in the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this
Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(6) it is in compliance with federal securities law requirements and
in good standing as an administrator and fund accountant; and
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and By-
Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Investment Company is an open-end investment company
registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each Fund
being offered for sale.
ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be held
to a standard of reasonable care in carrying out the provisions of
this Contract. The Company shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Investment Company)
on all matters, and shall be without liability for any action
reasonably taken or omitted pursuant to such advice, provided that
such action is not in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents, employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or
attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Investment Company
or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Fund, its
Shareholders or investors regarding the purchase, redemption
or transfer of Shares and Shareholder account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Funds; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-advisers or other third parties
contracted by or approved by the Investment Company of Fund
for use in the performance of services under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Investment Company.
(3) The reliance on, or the carrying out by the Company or its agents
or subcontractors of Proper Instructions of the Investment
Company or the Fund.
(4) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in
such state or in violation of any stop order or other
determination or ruling by any federal agency or any state with
respect to the offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by
this Article 23.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties or failure to meet
the standard of care set forth in 23.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services to
be performed by the Company under this Agreement, and the Company and
its agents or subcontractors shall not be liable and shall be
indemnified by the Investment Company or the appropriate Fund for any
action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such action
is not in violation of applicable federal or state laws or
regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which are
reasonably believed to bear the proper manual or facsimile signatures
of the officers of the Investment Company or the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 23 shall apply, upon the assertion of a claim for which either
party may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.
ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from 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 rights to terminate, all out-
of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Articles 10 and 23 shall survive the termination of this Agreement.
ARTICLE 25. AMENDMENT.
This Agreement may be amended or modified by a written agreement executed
by both parties.
ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Agreement as may in
their joint opinion be consistent with the general tenor of this Agreement.
Any such interpretive or additional provisions shall be in a writing signed
by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of the Charter. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
ARTICLE 27. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
ARTICLE 28. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Investment Company at
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
appropriate property of the Fund, or Class, as provided in the Declaration
of Trust.
ARTICLE 31. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof
whether oral or written.
ARTICLE 32. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement
deliver to such successor agent at the office of the Company all properties
of the Investment Company held by it hereunder. If no such successor agent
shall be appointed, the Company shall at its office upon receipt of Proper
Instructions deliver such properties in accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date
when such termination shall become effective, then the Company shall have
the right to deliver to a bank or trust company, which is a "bank" as
defined in the 1940 Act, of its own selection, having an aggregate capital,
surplus, and undivided profits, as shown by its last published report, of
not less than $2,000,000, all properties held by the Company under this
Agreement. Thereafter, such bank or trust company shall be the successor of
the Company under this Agreement.
ARTICLE 33. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage,
power or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
ARTICLE 34. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all
of or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing
in this Article 34 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 35. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of
the Investment Company, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this Agreement
are not binding upon any of the Trustees or Shareholders of the Investment
Company, but bind only the property of the Fund, or Class, as provided in
the Declaration of Trust.

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

INVESTMENT COMPANIES
(LISTED ON EXHIBIT 1)

By: /s/ S. Elliott Cohan
S. Elliott Cohan
Assistant Secretary

FEDERATED SERVICES COMPANY

By: /s/ Thomas J. Ward
Thomas J. Ward
Secretary

EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY
Portfolios
Classes

March 1, 1996 TAX-FREE INSTRUMENTS TRUST
INVESTMENT SHARES
INSTITUTIONAL SERVICE SHARES

FEDERATED SERVICES COMPANY provides the following services:

Administrative Services
Fund Accounting Services
Shareholder Recordkeeping Services

Exhibit 10 under Form N-1A
Exhibit 5 under Item 601/Reg. S-K

HOUSTON, HOUSTON & DONNELLY
ATTORNEYS AT LAW
Centre City Tower
Pittsburgh, PA 15222

October 18, 1982

The Trustees of
Tax-Free Instruments Trust
421 Seventh Avenue
Pittsburgh, PA 15219

Gentlemen:

Tax-Free Instruments Trust ("Trust") proposes to offer and sell Shares
of Beneficial Interest ("Shares") in the manner and on the terms set forth in
its Registration Statement filed with the Securities and Exchange Commission
under the Securities Act of 1933, as amended.

As counsel we have participated in the organization of the Trust, its
registration under the Investment Company Act of 1940 and the preparation and
filing of its Registration Statement under the Securities Act of 1933. We
have examined and are familiar with the provisions of the written Declaration
of Trust dated November 17, 1981, as amended, ("Declaration of Trust"), the
Bylaws of the Trust and such other documents and records deemed relevant. We
have also reviewed questions of law and consulted with counsel there on as
deemed necessary or appropriate by us for the purposes of this opinion.

Based upon the foregoing, it is our opinion that:
1. The Trust is duly organized and validly existing pursuant to the
Declaration of Trust.
2. The Shares which are currently being registered by the amended
Registration Statement referred to above may be legally and validly issued
from time to time in accordance with the Declaration of Trust upon receipt of
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, and applicable state laws regulating the
sale of securities. Such Shares, when so issued, will be fully paid and non-
assessable.

We consent to your filing this opinion as an exhibit to the amended
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. We further consent to the reference to our firm under
the caption "Legal Counsel and Accountants" in the prospectus filed as a part
of such amended Registration Statement, applications and registrations
statements.

Very truly yours,

HOUSTON, HOUSTON & DONNELLY

Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

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

SIGNATURES TITLE DATE

/s/ John F. Donahue Chairman May 3, 1996
John F. Donahue (Chief Executive Officer)

/s/ Glen R. Johnson President May 3, 1996
Glen R. Johnson

/s/ David M. Taylor Treasurer May 3, 1996
David M. Taylor (Principal Financial and
Accounting Officer)

/s/ Thomas G. Bigley Trustee May 3, 1996
Thomas G. Bigley

/s/ John T. Conroy, Jr. Trustee May 3, 1996
John T. Conroy, Jr.

SIGNATURES TITLE DATE

/s/ William J. Copeland Trustee May 3, 1996
William J. Copeland

/s/ James E. Dowd Trustee May 3, 1996
James E. Dowd

/s/ Lawrence D. Ellis, M.D. Trustee May 3, 1996
Lawrence D. Ellis, M.D.

/s/ Edward L. Flaherty, Jr. Trustee May 3, 1996
Edward L. Flaherty, Jr.

/s/ Peter E. Madden Trustee May 3, 1996
Peter E. Madden

/s/ Gregor F. Meyer Trustee May 3, 1996
Gregor F. Meyer

/s/ John E. Murray, Jr. Trustee May 3, 1996
John E. Murray, Jr.

/s/ Wesley W. Posvar Trustee May 3, 1996
Wesley W. Posvar

/s/ Marjorie P. Smuts Trustee May 3, 1996
Marjorie P. Smuts

Sworn to and subscribed before me this 3rd day of May, 1996

/s/ Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Sept. 16, 1996

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Investment Shares

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Institutional Service Shares

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