TAX FREE INSTRUMENTS TRUST, 485BPOS, 1998-05-28

TAX FREE INSTRUMENTS TRUST
485BPOS, 1998-05-28

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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. 30 ...................... X
----- ---

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 23 .................................... X
------ ---

TAX-FREE INSTRUMENTS TRUST

(Exact Name of Registrant as Specified in Charter)

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7000
(Address of Principal Executive Offices)

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

John W. McGonigle, Esquire,
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, 1998, 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.

<PAGE>

Copies To:

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

<PAGE>

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) Financial Highlights--Investment
Shares; (2) Financial Highlights--
Institutional Service Shares;
(1-2) Performance Information.
Item 4. General Description of
Registrant....................(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; (2)
----------------------
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) 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) Exchange
Privilege; (1) Making an
Exchange; (1-2) Account Activity.

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

Item 9. Pending Legal Proceedings None.

<PAGE>

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) Other Services; (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 Information.
Item 23. Financial Statements (1-2) Financial Statements. (Financial
Statements are incorporated by
reference to the Annual
Report of Registrant dated March 31,
1998). (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 management investment company
(a mutual fund). The Trust invests in short-term municipal securities to achieve
current income exempt from all federal income 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,
1998, with the Securities and Exchange Commission ("SEC"). 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 1-800-341-7400. To
obtain other information, or make inquiries about the Trust, contact the Trust
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Trust is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov). THESE SECURITIES HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated May 31, 1998

TABLE OF CONTENTS

Summary of Trust Expenses 1 Financial HighlightsInvestment Shares 2 General
Information 3 Year 2000 Statement 3 Investment Information 3 Investment
Objective 3 Investment Policies 3 Municipal Securities 5 Investment Risks 5
Investment Limitations 5 Trust Information 6 Management of the Trust 6
Distribution of Investment Shares 6 Administration of the Trust 7 Net Asset
Value 7 How to Purchase Shares 7 Purchasing Shares Through a Financial
Institution 7 Purchasing Shares by Wire 8 Purchasing Shares by Check 8 Special
Purchase Features 8 Exchange Privilege 8 Making an Exchange 8 How to Redeem
Shares 9 Redeeming Shares Through a Financial Institution 9 Redeeming Shares by
Telephone 9 Redeeming Shares by Mail 9 Special Redemption Features 10 Account
and Share Information 10 Dividends 10 Capital Gains 10 Account Activity 10
Accounts with Low Balances 10 Voting Rights 10 Tax Information 10 Federal
Income Tax 10 State and Local Taxes 11 Other Classes of Shares 11 Performance
Information 11

SUMMARY OF TRUST EXPENSES

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> 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 if applicable)
None Redemption Fee (as a percentage of amount redeemed,if applicable) None
Exchange Fee None

<CAPTION>
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.44%
12b-1 Fee None
Total Other Operating Expenses 0.29%
Shareholder Services Fee(2) 0.15%
Total Expenses(3) 0.73%

</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 shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole discretion.
The maximum shareholder services fee is 0.25%.

(3) The total operating expenses would have been 0.89% 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
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.

<S> <C>
1 Year $ 7
3 Years $23
5 Years $41
10 Years $91
</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

(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 14, 1998, on the Trust's
financial statements for the year ended March 31, 1998, 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 the notes thereto, which may be
obtained free of charge from the Trust.

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
BEGINNING OF PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
Net investment
income 0.03 0.03 0.03 0.03 0.02 0.02 0.04 0.05 0.06 0.05
LESS DISTRIBUTIONS
Distributions from
net (0.03) (0.03) (0.03) (0.03) (0.02) (0.02) (0.04) (0.05) (0.06) (0.05)
investment income
NET ASSET VALUE, END OF $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
PERIOD
TOTAL RETURN(A) 3.10% 2.92% 3.32% 2.70% 2.01% 2.42% 3.84% 5.40% 5.88% 5.28%
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.73% 0.71% 0.71% 0.70% 0.61% 0.55% 0.55% 0.55% 0.55% 0.55%
Net investment income 3.04% 2.88% 3.27% 2.66% 2.00% 2.38% 3.73% 5.25% 5.73% 5.14%
Expense 0.16% 0.18% 0.24% 0.17% 0.14% 0.10% 0.11% 0.12% 0.11% 0.08%
waiver/reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end
of period
(000 omitted) $1,646,267 $1,506,918 $1,465,333 $1,277,894 $1,327,506$1,619,531 $1,440,970 $1,214,045 $1,142,022 $1,313,391
</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, 1998, 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 1, 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
portfolio investing 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.

YEAR 2000 STATEMENT

Like other mutual funds and business organizations worldwide, the Trust's
service providers (among them, the adviser, distributor, administrator, and
transfer agent) must ensure that their computer systems are adjusted to properly
process and calculate date-related information from and after January 1, 2000.
Many software programs and, to a lesser extent, computer hardware in use today
cannot distinguish the year 2000 from the year 1900. This design flaw may have a
negative impact in the handling of securities trades, pricing, and accounting
services. The Trust and its service providers are actively working on necessary
changes to computer systems to deal with the year 2000 and reasonably believe
that systems will be year 2000 compliant when required. The Trust is continuing
to analyze the financial impact of instituting a year 2000 compliant program on
its operations. 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
diversification and other 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

CREDIT ENHANCEMENT

Certain of the Trust's acceptable investments may be credit-enhanced by a
guaranty, letter of credit, or insurance. Any bankruptcy, receivership, default,
or change in the credit quality of the party providing the credit enhancement
will adversely affect the quality and marketability of the underlying security
and could cause losses to the Trust and affect its share price. 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.

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 Standard
and Poor's, Prime-1 by Moody's Investors Service, Inc., or F-1 by Fitch IBCA,
Inc. 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. The Fund's concentration in Municipal Securities may entail
a greater level of risk than other types of money market funds.

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.

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 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, Inc. All of the Class A (voting) shares of
Federated Investors, Inc. are owned by a trust, the trustees of which are John
F. Donahue, Chairman and Trustee of Federated Investors, Inc., Mr. Donahue's
wife, and Mr. Donahue's son, J. Christopher Donahue, who is President and
Trustee of Federated Investors, Inc.

Federated Management and other subsidiaries of Federated Investors, Inc. 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 $120 billion invested across more than 300 funds
under management and/or administration by its subsidiaries, as of December 31,
1997, Federated Investors, Inc. is one of the largest mutual fund investment
managers in the United States. With more than 2,000 employees, Federated
continues to be led by the management who founded the company in 1955. Federated
funds are presently at work in and through approximately 4,000 financial
institutions nationwide.

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, Inc.

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, Inc., 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, Inc. specified below:

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

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 Investment 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, Martin Luther
King, Jr. 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 on 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
$1,500 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.

Shareholders who have purchased shares through a financial intermediary, such as
a bank or broker/dealer, should consult their financial representative for
information regarding the applicability of this section, "How to Purchase
Shares," as well as "Exchange Privilege" and "How to Redeem Shares."

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 TrustInvestment 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 $50 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, Inc. serve
as investment adviser and principal underwriter (the "Federated Funds") at net
asset value plus any sales charge of the fund into which the Investment Shares
are to be exchanged. No additional fees are imposed on exchanges. 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 modifications 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 Shareholder Services Company.
Shares may be exchanged between two funds only if they have identical
shareholder registrations. Telephone instructions may be recorded. 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
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. Under limited circumstances,
arrangements may be made with the distributor for same-day payment of proceeds,
without that day's dividend, for redemption requests received before 2:00 p.m.
(Eastern time). Proceeds from redeemed shares purchased by check or through an
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 UMB Bank, N.A., the bank responsible for administering the check
writing program, for payment. However, checks should never be made payable or
sent to 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, other than
retirement accounts subject to required minimum distributions, 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. 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

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 capital gains at least once every 12 months.

ACCOUNT ACTIVITY

Shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Trust will not issue share certificates.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, the Trust may
redeem shares in any account, except accounts maintained by retirement plans,
and pay the proceeds to the shareholder if the account balance falls below a
required minimum value of $5,000 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

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. All
shares of all classes of each portfolio in the Trust have equal voting rights,
except that in matters affecting only a particular portfolio or class, only
shareholders of that portfolio or class are entitled to 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. As
of May 5, 1998, Fiduciary Trust Co. International, organized in the the state of
New York owned 38.56% of the Institutional Service Shares 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.
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

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 Institutional Service
Shares, investors may call 1-800-341-7400.

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.

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.

[Graphic]
Federated Investors

Tax-Free Instruments Trust

Investment Shares

PROSPECTUS

MAY 31, 1998

An Open-End Management Investment Company

TAX-FREE
INSTRUMENTS TRUST
INVESTMENT SHARES

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

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

INVESTMENT ADVISER
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

TRANSFER AGENT AND
DIVIDEND DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222

Federated Securities Corp., Distributor
1-800-431-7400
www.federatedinvestors.com

Cusip 876924101
8062810A-IV (5/98)

[Graphic]

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 management
investment company (a mutual fund). The Trust invests in short-term municipal
securities to achieve current income exempt from all federal income 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.

TABLE OF CONTENTS

Summary of Trust Expenses 1
Financial HighlightsInstitutional Service Shares 2
General Information 3
Year 2000 Statement 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Municipal Securities 5
Investment Risks 5
Investment Limitations 5
Trust Information 6
Management of the Trust 6
Distribution of Institutional Service Shares 6
Administration of the Trust 7
Net Asset Value 7
How to Purchase Shares 7
Purchasing Shares by Wire 7
Purchasing Shares by Check 8
How to Redeem Shares 8
Redeeming Shares by Telephone 8
Redeeming Shares by Mail 8
Account and Share Information 8
Dividends 8
Capital Gains 8
Account Activity 9
Accounts with Low Balances 9
Voting Rights 9
Tax Information 9
Federal Income Tax 9
State and Local Taxes 9
Other Classes of Shares 10
Performance Information 10

SUMMARY OF TRUST EXPENSES

<CAPTION>
ANNUAL TRUST OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.44%
12b-1 Fee None
Total Other Operating Expenses 0.14%
Shareholder Services Fee(2) 0.00%
Total Expenses(3) 0.58%

(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of the shareholders services fee. The shareholder service provider can
terminate this voluntary waiver at any time at its sole discretion. The maximum
shareholder services fee is 0.25%.

(3) The total operating expenses would have been 0.89% absent the voluntary
waivers of a portion 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
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.

<S> <C>
1 Year $ 6
3 Years $19
5 Years $32
10 Years $73
</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

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
1998 1997 1996 1995 1994(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.03 0.03 0.03 0.03 0.01
LESS DISTRIBUTIONS
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.01)
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
TOTAL RETURN(B) 3.25% 3.08% 3.47% 2.85% 0.92%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.58% 0.56% 0.56% 0.55% 0.55%*
Net investment income 3.19% 3.02% 3.43% 2.82% 1.99%*
Expense waiver/reimbursement(c) 0.31% 0.33% 0.40% 0.17% 0.14%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $284,124 $247,946 $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.

FURTHER INFORMATION ABOUT THE TRUST'S PERFORMANCE IS CONTAINED IN THE
TRUST'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED MARCH 31, 1998, 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 portfolio investing 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.

YEAR 2000 STATEMENT

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

VARIABLE RATE DEMAND NOTES

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

REPURCHASE AGREEMENTS

CREDIT ENHANCEMENT

DEMAND FEATURES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

TEMPORARY INVESTMENTS

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.

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, Inc.

SHAREHOLDER SERVICES

The Trust has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, Inc., under which the
Trust may make payments up to 0.25% of the average daily net asset value of its
shares, computed at an annual rate, to obtain certain personal services for
shareholders and to maintain 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 investment adviser or its affiliates.
ADMINISTRATION OF THE TRUST

ADMINISTRATIVE SERVICES

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

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
Institutional Service Shares outstanding. The Trust cannot guarantee that its
net asset value will always remain at $1.00 per share.

HOW TO PURCHASE SHARES

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. However, an account may be opened with a
smaller amount as long as the minimum is reached within 90 days. 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) 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 TrustInstitutional 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 TrustInstitutional Service 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.

HOW TO REDEEM SHARES

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 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

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.

ACCOUNT AND SHARE INFORMATION

DIVIDENDS

CAPITAL GAINS

ACCOUNT ACTIVITY

Shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Trust will not issue share certificates.
ACCOUNTS WITH LOW BALANCES Due to the high cost of maintaining accounts with
low balances, the Trust may redeem shares in any account, except accounts
maintained by retirement plans, 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

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

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 Investment Shares. Investment Shares are sold at net asset value
primarily to individuals, and are subject to a minimum initial investment of
$1,500. 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 Investment
Shares, investors may call 1-800-341-7400. PERFORMANCE INFORMATION

From time to time, the Trust advertises its total return, yield, effective
yield, and its 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 Fund
may refer to ratings, rankings, and other information in certain financial
publications and/or compare the Fund's performance to certain indices.

Federated Investors
[Graphic]

Tax-Free Instruments Trust

Institutional Service Shares

PROSPECTUS

MAY 31, 1998

An Open-End Management Investment Company

TAX-FREE
INSTRUMENTS TRUST
INSTITUTIONAL
SERVICE SHARES
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

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

INVESTMENT ADVISER
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

TRANSFER AGENT
AND DIVIDEND
DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600

INDEPENDENT PUBLIC
ACCOUNTANTS
Arthur Andersen LLP
2100 One PPG Place
Pittsburgh, PA 15222

Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com

Cusip 876924200
8062810A-SS (5/98)

[Graphic]

Tax-Free Instruments Trust

Investment Shares

PROSPECTUS

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,
1998, with the Securities and Exchange Commission ("SEC"). 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 1-800-341-7400. To
obtain other information, or make inquiries about the Trust, contact your
financial institution. The Statement of Additional Information, material
incorporated by reference into this document, and other information regarding
the Trust is maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).

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

Prospectus dated May 31, 1998

TABLE OF CONTENTS

Summary of Trust Expenses 1
Financial Highlights--Investment Shares 2
General Information 3
Year 2000 Statement 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Municipal Securities 5
Investment Risks 5
Investment Limitations 5
Net Asset Value 6
Investing in the Trust 6
Share Purchases 6
Full Service Account 6
Minimum Investment Required 6
Receipt of Orders 6
Account Activity 6
Dividends 7
Capital Gains 7
Exchange Privilege 7
Requirements for Exchange 7
Tax Consequences 7
Making an Exchange 7
Telephone Instructions 7
Redeeming Shares 8
Redeeming by Check 8
Written Requests 8
Signatures 8
Receiving Payment 8
Accounts with Low Balances 8
Trust Information 9
Management of the Trust 9
Distribution of Investment Shares 9
Administration of the Trust 10
Shareholder Information 10
Voting Rights 10
Tax Information 10
Federal Income Tax 10
State and Local Taxes 10
Other Classes of Shares 11
Performance Information 11

SUMMARY OF TRUST EXPENSES

Maximum Sales Charge Imposed on Purchases (as a percentage of offering price)
(As a percentage of average net assets) Management Fee (after waiver)(1)
<TABLE>
<CAPTION>
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> 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
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.44%
12b-1 Fee None
Total Other Expenses 0.29%
Shareholder Services Fee (after waiver)(2) 0.15%
Total Operating Expenses(3) 0.73%
</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%.

(3) The total operating expenses would have been 0.89% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.

EXAMPLE
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.
1 Year $7
3 Years $23
5 Years $41
10 Years $91

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

(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 14, 1998, on the Trust's
financial statements for the year ended March 31, 1998, 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,
1998 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
BEGINNING OF
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
Net investment 0.03 0.03 0.03 0.03 0.02 0.02
income
LESS
DISTRIBUTIONS
Distributions (0.03) (0.03) (0.03) (0.03) (0.02) (0.02)
from net
investment income
NET ASSET VALUE, $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
END OF PERIOD
TOTAL RETURN(A) 3.10% 2.92% 3.32% 2.70% 2.01% 2.42%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.73% 0.71% 0.71% 0.70% 0.61% 0.55%
Net investment 3.04% 2.88% 3.27% 2.66% 2.00% 2.38%
income
Expense waiver/ 0.16% 0.18% 0.24% 0.17% 0.14% 0.10%
reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end $1,646,267 $1,506,918 $1,465,333 $1,277,894 $1,327,506 $1,619,531
of period (000
omitted)

<CAPTION>
YEAR ENDED MARCH 31,
1992 1991 1990 1989
<S> <C> <C> <C> <C>
NET ASSET VALUE, $ 1.00 $ 1.00 $ 1.00 $ 1.00
BEGINNING OF
PERIOD
INCOME FROM
INVESTMENT
OPERATIONS
Net investment 0.04 0.05 0.06 0.05
income
LESS
DISTRIBUTIONS
Distributions (0.04) (0.05) (0.06) (0.05)
from net
investment income
NET ASSET VALUE, $ 1.00 $ 1.00 $ 1.00 $1.00
END OF PERIOD
TOTAL RETURN(A) 3.84% 5.40% 5.88% 5.28%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.55% 0.55% 0.55% 0.55%
Net investment 3.73% 5.25% 5.73% 5.14%
income
Expense waiver/ 0.11% 0.12% 0.11% 0.08%
reimbursement(b)
SUPPLEMENTAL DATA
Net assets, end $1,440,970 $1,214,045 $1,142,022 $1,313,391
of period (000
omitted)
</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, 1998, 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
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 $1,000 is required.

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

YEAR 2000 STATEMENT

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

ACCEPTABLE INVESTMENTS

VARIABLE RATE DEMAND NOTES

PARTICIPATION INTERESTS

MUNICIPAL LEASES

REPURCHASE AGREEMENTS

CREDIT ENHANCEMENT

DEMAND FEATURES

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

TEMPORARY INVESTMENTS

MUNICIPAL SECURITIES

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.

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.

INVESTING IN THE TRUST

SHARE PURCHASES

To purchase shares of the Trust:

* sign the Automatic Collection and Reinvestment Service Agreement, also
available from an Edward D. Jones & Co. investment representative
(optional, but recommended);
* complete and sign a check-writing application, available from an Edward
D. Jones & Co. investment representative (optional);
* enclose a check for $1,000 or more made payable to Edward D. Jones &
Co.; and
* send the check and completed form(s) to your local Edward D. Jones &
Co. office.

FEDERAL RESERVE OR BANK WIRE

Shares may also be purchased with federal funds sent by Federal Reserve or bank
wire. This method results in a more rapid investment in Trust shares. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions should be directed to your shareholder services representative at the
telephone number listed on your account statement. An investment representative
of Edward D. Jones & Co. must be contacted before wiring any funds.

FULL SERVICE ACCOUNT

Shareholders of the Trust may subscribe to Edward D. Jones & Co.'s Full
Service Account ("FSA"). This program provides a convenient method for
investment by linking the shareholder's Trust Account and Edward D. Jones &
Co. Brokerage Account. The FSA subscriber, with a free credit balance in a
Brokerage Account, will automatically have this sum invested in the Trust
Account on a daily basis. FSA also permits daily, automatic redemption of
Trust shares to satisfy debit balances in the shareholders' Brokerage
Accounts. At present, there is no fee for this service, but Edward D. Jones
& Co. reserves the right to charge a fee in the future.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in the Trust is $1,000. Subsequent investments
must be in amounts of at least $1,000 except for the FSA in which there is no
minimum requirement. If the investor has signed an Automatic Collection and
Reinvestment Service Agreement there is no minimum. An investment can be made by
sending a check to Edward D. Jones & Co. with instructions that it be invested
in the Trust.

RECEIPT OF ORDERS

Trust shares are sold on days on which the New York Stock Exchange is open.
Orders are considered received after payment by check is converted by Edward D.
Jones & Co. or Federated Shareholder Services Company, the Trust's transfer
agent, into federal funds (normally within two business days of receiving the
check). When payment is made with federal funds, the order is considered
received immediately.

The Trust reserves the right to reject any purchase request.

ACCOUNT ACTIVITY

All purchases, redemptions, and dividends paid during the preceding month
will be confirmed on the shareholder's Edward D. Jones & Co. monthly account
statement. The Trust will not issue share certificates.

DIVIDENDS

Dividends are declared daily and paid monthly. Dividends are automatically
reinvested on payment dates in additional shares of the Trust. Shares purchased
before 3:00 p.m. (Eastern time) earn dividends that day.

CAPITAL GAINS

Since the Trust's policy is, under normal circumstances, to hold portfolio
securities to maturity and to value portfolio securities at amortized cost, it
does not expect any capital gains or losses. If the Trust does experience gains,
however, it could result in an increase in dividends. Capital losses could
result in a decrease in dividends. If for some extraordinary reason the Trust
realizes net long-term capital gains, it will distribute them at least once
every 12 months.

EXCHANGE PRIVILEGE

Trust shares may be acquired in exchange for shares of certain other funds for
which affiliates of Federated Investors, Inc. serve as investment adviser and
principal underwriter (the "Federated Funds") at net asset value. Also, Trust
shares may be exchanged for shares in other Federated Funds at net asset value
plus a sales charge, if applicable. Neither the Trust nor any of the Federated
Funds impose any additional fees on exchanges.

Please contact Edward D. Jones & Co. directly or Federated Securities Corp.
at 1-800-341-7400 for information on and prospectuses for the Federated
Funds into which your shares may be exchanged.

Shareholders of Class A Shares who have been designated Liberty Life Members are
exempt from sales charges on future purchases in and exchanges between the Class
A Shares of any funds in the Federated Funds, as long as they maintain a $500
balance in one of the Federated Funds.

REQUIREMENTS FOR EXCHANGE

Shareholders using this privilege must exchange shares having a net asset value
equal to the minimum investment requirements of the fund into which the exchange
is being made. Before the exchange, the shareholder must receive a prospectus of
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 exchange privilege may be terminated at any time. Shareholders
will be notified of the termination of the exchange privilege.

Further information on the exchange privilege and prospectuses for the Federated
Funds are available by contacting your Edward D. Jones & Co.
investment representative.

TAX CONSEQUENCES

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

MAKING AN EXCHANGE

Exchange instructions for Federated Funds may be given in writing or by
telephoning your Edward D. Jones & Co. investment representative. 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 the broker or financial institution by telephone, it
is recommended that an exchange request be made in writing and sent by overnight
mail.

TELEPHONE INSTRUCTIONS

Telephone instructions made by the investor may be carried out only if a
telephone authorization form completed by the investor is on file with Federated
Shareholder Services Company. If the instructions are given by a broker, a
telephone authorization form completed by the broker must be on file with
Federated Shareholder Services Company. Shares may be exchanged between two
funds by telephone only if the two funds have identical shareholder
registrations.

Any shares held in certificate form cannot be exchanged by telephone but must be
forwarded to Federated Shareholder Services Company and deposited to the
shareholder's account before being exchanged. Telephone exchange instructions
may be recorded and will be binding upon the shareholder. Such instructions will
be processed as of 4:00 p.m. (Eastern time) and must be received by Federated
Shareholder Services Company before that time for shares to be exchanged the
same day. Shareholders exchanging into a fund will not receive any dividend that
is payable to shareholders of record on that date. This privilege may be
modified or terminated at any time.

REDEEMING SHARES

The Trust redeems shares 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:

* by writing a check;
* by contacting your Edward D. Jones & Co. investment representative; or
* by written request.

REDEEMING BY CHECK

At the shareholder's request, Federated Shareholder Services Company will
establish a checking account for redeeming Trust shares. For further
information, contact an investment representative of Edward D. Jones & Co.

USING THE CHECKING ACCOUNT

With a Trust checking account, shares may be redeemed simply by writing a check
for $100 or more. The redemption will be made at the net asset value on the date
that the check is presented to State Street Bank and Trust Company on behalf of
the Trust. A check may not be written to close an account. In addition, if a
shareholder wishes to redeem shares and have the proceeds available, a check may
be written and negotiated through the shareholder's local bank. Checks should
never be sent to Federated Shareholder Services Company to redeem shares.
Canceled checks are currently sent to the shareholder each month. We reserve the
right to return on a less frequent basis, or to truncate or image the checks.

WRITTEN REQUESTS

Trust shares may also be redeemed by sending a written request to Edward D.
Jones & Co. Call Edward D. Jones & Co. for specific instructions before
redeeming by letter. The shareholder will be asked to provide in the request,
the shareholder's name, the Trust name, the account number, and the share or
dollar amount requested. If share certificates have been issued, they should be
sent unendorsed by registered or certified mail with the written request.

SIGNATURES

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 signatures on written redemption requests
guaranteed by:

* a trust company or commercial bank whose deposits are insured by the BIF,
which is administered by the Federal Deposit Insurance Corporation
("FDIC");
* a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
* a savings bank or savings association whose deposits are insured by the
SAIF, which is administered by the FDIC; 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.

The Trust and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Trust may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Trust and its transfer agent reserve the right
to amend these standards at any time without notice.

RECEIVING PAYMENT

Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request. In addition, proceeds from redemption requests received before 3:00
p.m. (Eastern Time) may be wired the same day to the shareholder's account, but
will not include that day's dividend. Proceeds from redemption requests after
that time include that day's dividend but will be wired the following business
day.

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. The
checkwriting and FSA privileges will be deleted from accounts with a zero
balance after 90 days.

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.

TRUST INFORMATION

MANAGEMENT OF THE TRUST

BOARD OF TRUSTEES

INVESTMENT ADVISER

ADVISORY FEES

ADVISER'S BACKGROUND

DISTRIBUTION OF INVESTMENT SHARES

SHAREHOLDER SERVICES

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

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

ADMINISTRATION OF THE TRUST

ADMINISTRATIVE SERVICES

MAXIMUM AVERAGE AGGREGATE
FEE DAILY NET ASSETS
0.150% on the first $250 million
0.125% on the next $250 million
0.100% on the next $250 million
0.075% on assets in excess of $750 million

SHAREHOLDER INFORMATION

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. All
shares of classes of each portfolio in the Trust have equal voting rights,
except that in matters affecting only a particular portfolio or class, only
shareholders of that portfolio or class are entitled to 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.

As of May 5, 1998, Fiduciary Trust Co. International, organized in the state of
New York, owned 38.56% of the Institutional Service Shares 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.

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

OTHER CLASSES OF SHARES

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 Institutional Service Shares,
investors may call 1-800-341-7400.

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.

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.

NOTES

ADDRESSES

TAX-FREE INSTRUMENTS TRUST
INVESTMENT SHARES

FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000

DISTRIBUTOR

FEDERATED SECURITIES CORP.
FEDERATED INVESTORS TOWER
1001 LIBERTY AVENUE
PITTSBURGH, PA 15222-3779

INVESTMENT ADVISER

FEDERATED MANAGEMENT
FEDERATED INVESTORS TOWER
1001 LIBERTY AVENUE
PITTSBURGH, PA 15222-3779

[Graphic]

Tax-Free Instruments Trust

Prospectus

May 31, 1998

Edward Jones
201 Progress Parkway
Maryland Heights, MO 63043
1-800-331-2451

[Graphic]

Cusip 876924101
8062810AC (5/98)

[Graphic]

TAX-FREE INSTRUMENTS TRUST

INSTITUTIONAL SERVICE SHARES
INVESTMENT 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, 1998. 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
1-800-341-7400.

TAX-FREE INSTRUMENTS TRUST
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000

Statement dated May 31, 1998

[Graphic]

Cusip 876924101
Cusip 876924200
8062810B (5/98)

[Graphic]

TABLE OF CONTENTS

INVESTMENT POLICIES 1 Acceptable Investments 1 Participation Interests 1
Municipal Leases 1 Ratings 1 When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 2 Reverse Repurchase Agreements 2 Credit Enhancement 2
INVESTMENT LIMITATIONS 2 Selling Short and Buying on Margin 2 Borrowing Money 2
Pledging Assets 2 Lending Cash or Securities 3 Investing in Commodities and
Minerals 3 Investing in Real Estate 3 Underwriting 3 Concentration of
Investments 3 Diversification of Investments 3 Investing in Illiquid Securities
3 Investing in Securities of Other Investment Companies 3 Investing in New
Issuers 3 Investing in Issuers Whose Securities are Owned by Officers and
Trustees 3 Investing in Options 4 Investing for Control 4 Regulatory Compliance
4 TAX-FREE INSTRUMENTS TRUST MANAGEMENT 4 Share Ownership 8 Trustee
Compensation 9 Trustee Liability 9 INVESTMENT ADVISORY SERVICES 9 Investment
Adviser 9 Advisory Fees 9 BROKERAGE TRANSACTIONS 10 OTHER SERVICES 10 Fund
Administration 10 Custodian and Portfolio Accountant 10 Transfer Agent 10
Independent Public Accountants 10 Shareholder Services 11 DETERMINING NET ASSET
VALUE 11 REDEMPTION IN KIND 11 MASSACHUSETTS PARTNERSHIP LAW 12 THE TRUST'S TAX
STATUS 12 PERFORMANCE INFORMATION 12 Yield 12 Effective Yield 12 Tax-Equivalent
Yield 12 Tax-Equivalency Table 13 Total Return 13 Performance Comparisons 14
Economic and Market Information 14 ABOUT FEDERATED INVESTORS, INC. 14 Mutual
Fund Market 14 Institutional Clients 15 Bank Marketing 15 Broker/Dealers and
Bank Broker/Dealer Subsidiaries 15 FINANCIAL STATEMENTS 15 APPENDIX 16

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. The 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 ("S&P"), MIG-1 or
MIG-2 by Moody's Investors Service, Inc. ("Moody's"), or F-1+, F-1, or F-2 by
Fitch IBCA, 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 exceeding 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 0.50% 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 or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President of the Company.

Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA

Birthdate: February 3, 1934

Trustee

Director, Member of Executive Committee, Children's Hospital of Pittsburgh;
formerly, Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.;
Director, Member of Executive Committee, University of Pittsburgh; Director
or Trustee of the Funds.

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; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

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.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.

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, 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.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA

Birthdate: June 18, 1924

Trustee

Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL

Birthdate: March 16, 1942

Trustee

Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; 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; Director or Trustee of the Funds.

Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA

Birthdate: September 14, 1925

Trustee

Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation;
President Emeritus, University of Pittsburgh; Founding Chairman, National
Advisory Council for Environmental Policy and Technology, Federal Emergency
Management Advisory Board and Czech Management Center, Prague; Director or
Trustee of the Funds.

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA

Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning; 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.

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 Shareholder Services Company and
Federated Shareholder Services; Director, Federated Services Company;
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 Company.

Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA

Birthdate: October 22, 1930

Executive Vice President

Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; 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, Secretary, and Treasurer

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
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some 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.

* This Trustee 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. As referred to in the list of Trustees and Officers, "Funds" includes
the following investment companies:

111 Corcoran 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 Core Trust; 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 Investment Portfolios; Federated Investment 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: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; 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 Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; 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; WesMark Funds; WCT Funds; and World Investment Series,
Inc. SHARE OWNERSHIP Officers and Trustees as a group own less than 1%
of the Trust's outstanding shares.

As of May 5, 1998, the following shareholders of record owned 5% or more of the
outstanding Investment Shares of the Trust: Stephens, Inc., Little Rock,
Arkansas, owned approximately 29,689,048 shares (15.56%); Prudential Securities,
for the account of Joseph L. Anstett, New York, New York, owned approximately
28,302,645 shares (14.84%); and BHC Securities, Inc., Philadelphia,
Pennsylvania, owned approximately 11,243,820 shares (5.89%).

As of May 5, 1998, the following shareholders of record owned 5% or more of the
outstanding Institutional Service Shares of the Trust: Fiduciary Trust Co.
International, New York, New York, owned approximately 98,718,200 shares
(38.56%); Citibank N.A., Long Island City, New York, owned approximately
27,550,977 shares (10.76%); Memphis Commerce Square, c/o National Bank of
Commerce, Memphis, Tennessee, owned approximately 20,897,725 shares (8.16%); and
HUBCO, Regions Financial Corp., Birmingham, Alabama, owned approximately
19,222,862 shares (7.51%). TRUSTEE COMPENSATION
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+

John F. Donahue $0.00 $0 for the Trust and
Chairman and Trustee 56 other investment companies in
the Fund Complex

Thomas G. Bigley $2,287.75 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

John T. Conroy, Jr. $2,516.88 $122,362 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

William J. Copeland $2,516.88 $122,362 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

James E. Dowd $2,516.88 $122,362 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

Lawrence D. Ellis, M.D. $2,287.75 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

Edward L. Flaherty, Jr. $2,516.88 $122,362 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

Peter E. Madden $2,287.75 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

John E. Murray, Jr. $2,287.75 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

Wesley W. Posvar $2,287.75 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

Marjorie P. Smuts $2,287.75 $111,222 for the Trust and
Trustee 56 other investment companies in
the Fund Complex

* Information is furnished for the fiscal year ended March 31, 1998.

# The aggregate compensation is provided for the Trust which is comprised of
one portfolio.

+ The information is provided for the last calendar year.

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, 1998, 1997, and 1996 the adviser earned $9,015,069, $8,802,596, and
$8,657,750, respectively, of which $1,109,430, $1,432,278, and $2,483,925,
respectively, were waived. 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, 1998, 1997, and 1996, 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.
OTHER SERVICES

FUND 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, a subsidiary of Federated Investors, served as the Trust's
Administrator. For purposes of this Statement of Additional Information,
Federated Services Company and Federated Administrative Services may hereinafter
collectively be referred to as the "Administrators." For the fiscal years ended
March 31, 1998, 1997, and 1996, the Administrators earned $1,361,111,
$1,330,311, and $1,310,182, respectively. 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 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. For its services, the transfer agent 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
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 ended
March 31, 1998, payment in the amount of $4,508,828 was made pursuant to the
Shareholder Services Agreement, $2,207,362 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;
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, 1998, the yield for
Institutional Service Shares was 3.12%, and the yield for Investment Shares was
2.97%. 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, 1998, the effective yield for Institutional Service Shares was 3.17%,
and the effective yield for Investment Shares was 3.01%. 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, 1998, the tax-equivalent yield for
Investment Shares was 4.13% and the tax-equivalent yield for Institutional
Service Shares was 4.33%. 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 1998
MULTISTATE MUNICIPAL FUND

FEDERAL INCOME TAX BRACKET:

15.00% 28.00% 31.00% 36.00% 39.60%

JOINT $1- $42,351- $102,301- $155,951- OVER
RETURN 42,350 102,300 155,950 278,450 $278,450

SINGLE $1- $25,351- $61,401- $128,101- OVER
RETURN 25,350 61,400 128,100 278,450 $278,450

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.

The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Trust shares.

* Some portion of the Trust's income may be subject to the federal alternative
minimum tax and state and local 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, 1998, the average annual total
returns for Investment Shares were 3.10%, 2.81%, and 3.68%, respectively. For
the one-year period ended March 31, 1998, and for the period from October 15,
1993 through March 31, 1998, the average annual total returns for Institutional
Service Shares were 3.25% and 3.04%, respectively. PERFORMANCE COMPARISONS
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
* 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.

* IBC/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.

* 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 Fund'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 Fund 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 Fund 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 portfolio managers and their views and analysis on how such
developments could affect the funds. 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, INC.

Federated Investors, Inc. 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,
Inc. 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, 1997, Federated Investors, Inc. managed
more than $63.1 billion in assets across 51 money market funds, including 18
government, 11 prime, and 22 municipal with assets approximating $35 billion,
$17.1 billion, and $10.9 billion, respectively.

J. Thomas Madden, Executive Vice President, oversees Federated Investors, Inc.'s
equity and high yield corporate bond management while William D. Dawson,
Executive Vice President, oversees Federated Investors, Inc.'s domestic fixed
income management. Henry A. Frantzen, Executive Vice President, oversees the
management of Federated Investors, Inc.'s
international and global portfolios.

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $4.4 trillion to the more than 6,700 funds available.*

* Source: Investment Company Institute.

Federated Investors, Inc., through its subsidiaries, distributes mutual funds
for a variety of investment applications. Specific markets include:

INSTITUTIONAL CLIENTS

Federated Investors, Inc. meets the needs of approximately 900 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.

BANK MARKETING

Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.

FINANCIAL STATEMENTS

The Financial Statements for the fiscal year ended March 31, 1998, are
incorporated herein by reference to the Annual Report to Shareholders of the
Trust dated March 31, 1998 (File Nos. 2-75122 and 811-3337). A copy of the
report may be obtained without charge by contacting the Trust.

APPENDIX

STANDARD & POOR'S 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.

MOODY'S 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.

FITCH IBCA, INC. SHORT-TERM DEBT RATING DEFINITIONS

F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment, only slightly less in degree than issues rated
F-1+.

F-2--Good Credit Quality. Issues carrying this rating have a satisfactory degree
of assurance for timely payment, but the margin of safety is not as great as for
issues assigned F-1+ and F-1 ratings.

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits:

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits:

(a) Financial Statements (Incorporated by reference to
the Annual Report of the Registrant dated March 31,
1998). (File Nos. 2-75122 and 811-3337).
(b) Exhibits:
(1) Conformed copy of Amended Declaration of
Trust of the Registrant; (11)
(2) (i) Copy of By-Laws of the Registrant; (5)
(ii) Copy of Amendment No. 5 to By-Laws; +
(iii) Copy of Amendment No. 6 to By-Laws; +
(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 4(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) (i) Conformed copy of Custodian Agreement of
the Registrant; (11)
(ii) Conformed copy of Domestic Custody Fee
Schedule; +

- ------------------------------------------
+ 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).

5. Response is incorporated by reference to Registrant's Post-Effective
Ammendment 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).

<PAGE>

(9) (i) Conformed copy of Agreement for Fund
Accounting Services, Administrative
Services, Transfer Agency Services, and
Custody Services Procurement; (12)
(ii) Conformed copy of Shareholder Services
Agreement; (11)
(iii) The responses described in Item 24(b)(6)
are hereby incorporated by reference;
(iv) Conformed copy of Amended and Restated
Shareholder Services Agreement; +
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered; (12)
(11) Conformed copy of Consent of Independent
Public Accountants; +
(12) Not applicable;
(13) Letter Agreement; (3)
(14) Not applicable;
(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 Schedules; + (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. (13)

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

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).

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).

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).

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 to its Registration Statement on Form N-1A filed on May
24, 1996. (File No. 2-75122 and File No. 811-3337).

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 29 to its Registration Statement on Form N-1A filed on May
22, 1997. (File No. 2-75122 and File No. 811-3337).

<PAGE>

1. Financial Statements (Incorporated by reference to the Annual
Report of the Registrant dated March 31, 1997). (File Nos.
2-75122 and 811-3337).

2. Exhibits:
Conformed copy of Amended Declaration of Trust of the Registrant; (11)
Copy of By-Laws of the Registrant; (5)
Not applicable;
Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant; (2) Copy of Investment Advisory Contract of the Registrant; (7) (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 4(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);
Not applicable; Conformed copy of Custodian Agreement of the Registrant; (11)
(i) Conformed copy of Agreement for Fund Accounting Services, Administrative
Services, Transfer Agency Services, and Custody Services Procurement; (12)
(ii) Conformed copy of Shareholder Services Agreement; (11)
(iii)The responses described in Item 24(b)(6) are hereby incorporated by
reference;
Conformed copy of Opinion and Consent of Counsel as to legality of shares being
registered; (12)
Conformed copy of Consent of Independent Public Accountants; (+)
Not applicable;
Letter Agreement; (3)
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
Ammendment 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).

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 27 to its Registration Statement on Form N-1A filed on May
24, 1996. (File No. 2-75122 and File No. 811-3337).

<PAGE>

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

2. (a) Financial Statements (Incorporated by reference to the Annual Report of
Registrant dated March 31, 1996 (File Nos. 2-75122 and 811-3337)

(a) (b) Exhibits:
(2) (1) Conformed Copy of Amended Declaration of Trust of the
Registrant (11);
(3) (2) Copy of By-Laws of Registrant (5);
(4) (3) Not applicable;
(5) (4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (2);
(6) (5) Copy of Investment Advisory Contract of the Registrant
(7);

(i) (6) (i) Conformed copy of Distributor's Contract of the Registrant (10);

(7) (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)

(i) (7) Not applicable;
(b) (8).....Conformed Copy of Custodian Agreement of the Registrant (11);
(i) (9) (i) Conformed copy of Agreement for Fund
Accounting Services, Administrative Services,Transfer Agency
Services, and Custody Services Procurement +;

(8) (ii) Conformed copy Shareholder Services (i) Agreement (11); (i) (10)
Conformed Copy of Opinion and Consent of Counsel as to legality of shares
being registered +; (ii) (11) Conformed copy of Consent of Independent
Public Accountants +; (iii) (12) Not applicable; (iv) (13) Letter Agreement
(3); (v) (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).

<PAGE>

(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 857, 199781996
-------------- --------------------------

Shares of Beneficial Interest (no par value)

Investment Shares 4,6983229,807
Institutional Service Shares 45809613

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).

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).

+ 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).

<PAGE>

Item 28. Business and Other Connections of Investment Adviser:

(a) 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 four 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, and J. Thomas Madden, and Mark L. Mallon,
Executive Vice Presidents; Peter R. Anderson, Drew J. Collins, Jonathan C.
Conley, Deborah A. Cunningham, Mark E. Durbiano, J. Alan Minteer, Susan M.
Nason, and Mary Jo Ochson, Senior Vice Presidents; J. Scott Albrecht, Joseph M.
Balestrino, Randall S. Bauer, David F. Belton, Christine A. Bosio, David A.
Briggs, Kenneth J. Cody, Alexandre de Bethmann, Linda A. Duessel, Michael J.
Donnelly, Michael P. Donnelly, Kathleen M. Foody-Malus, Thomas M. Franks; Edward
C. Gonzales, James E. Grefenstette, Susan R. Hill, Stephen A. Keen, Robert M.
Kowit, Mark S. Kopinski, Jeff A. Kozemchak, Marian R. Marinack, Sandra L.
McInerney, Susan M. Nason, Robert J. Ostrowski, Charles A. Ritter, Scott B.
Schermerhorn, Frank Semack, Aash M. Shah, Scott B. Schermerhorn, William F.
Stotz, Tracy P.Stouffer, Edward J. Tiedge, Paige M. Wilhelm, Jolanta M. Wysocka,
Vice Presidents; Todd A. Abraham, Stafanie L. Bachhuber, Arthur J. Barry,
Michael W. Casey, John T. Gentry, William R. Jamison, Constantine Kartsonsas,
Robert M. March, Joseph M. Natoli, Keith J. Sabol, and Michael W. Sirianni,
Gregg S. Tenser, Assistant Vice Presidents; Stephen A. Keen, Secretary; Thomas
R. Donahue, Treasurer and Assistant Secretary; Richard B. Fisher, Assistant
Secretary and Assistant Treasurer; Christine I. McGonigle, Assistant Secretary.
The business address of each of the Officers of the investment adviser is
Federated Investors Tower, Pittsburgh, Pennsylvania 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 28. Business and
Other Connections of Investment Adviser:

(a) 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 four 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:

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

Senior Vice Presidents: Joseph M. Balestrino
Drew J. Collins
Jonathan C. Conley
Deborah A. Cunningham
Mark E. Durbiano
Sandra L. McInerney
J. Alan Minteer
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Randall S. Bauer
David A. Briggs
Micheal W. Casey
Kenneth J. Cody
Alexandre de Bethmann
Michael P. Donnelly
Linda A. Duessel
Donald T. Ellenberger
Kathleen M. Foody-Malus
Thomas M. Franks
Edward C. Gonzales
James E. Grefenstette
Susan R. Hill
Stephen A. Keen
Robert K. Kinsey
Robert M. Kowit
Jeff A. Kozemchak
Steven Lehman
Marian R. Marinack
Charles A. Ritter
Scott B. Schermerhorn
Frank Semack
Aash M. Shah
Christopher Smith
William F. Stotz
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka

<PAGE>

Assistant Vice Presidents:
Stefanie L. Bachhuber
Arthur J. Barry
Robert E. Cauley
Lee R. Cunningham, II
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
Natalie F. Metz
Joseph M. Natoli
Keith J. Sabol
John Sheehy
Michael W. Sirianni
Gregg S. Tenser
Leonardo A. Vila
Lori A. Wolff

Secretary: Stephen A. Keen

Treasurer: Thomas R. Donahue

Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine I. McGonigle

Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment adviser
is Federated Investors Tower, Pittsburgh, Pennsylvania 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.

<PAGE>

Item 29. Principal Underwriters:

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

111 Corcoran 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 Core Trust; 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 Investment Portfolios; Federated Investment 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: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, 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 Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree Funds; Regions
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The Virtus
Funds; The Wachovia Funds; The Wachovia Municipal 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.

<PAGE>

(b)

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

Richard B. Fisher Director, Chairman, Chief
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 Vice
Federated Investors Tower President, Federated,
Pittsburgh, PA 15222-3779 Securities Corp.

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

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

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

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

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

Laura M. Deger 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

Keith Nixon 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 Distributor With Registrant

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

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

Teresa M. Antoszyk 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

David J. Callahan 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

R. Leonard Corton, 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 Securities Corp.
Pittsburgh, PA 15222-3779

Marc C. Danile 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 Distributor With Registrant

William C. Doyle 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

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

John K. Goettlicher 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

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

Brian G. Kelly Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Michael R. Manning 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 Distributor With Registrant

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

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

Thomas A. Peters III 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

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

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

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Edward L. Smith 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

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

Colin B. Starks 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 Distributor With Registrant

Jeffrey A. Stewart 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

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

John F. Wallin 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

Edward J. Wojnarowski 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

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

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

Robert M. Rossi 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

Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

(a) 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; 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
Investment Portfolios; Federated Investment 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: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, 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 Obligations Trust II; 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.; Wesmark Funds; 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.

<PAGE>

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

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

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.

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