TAX FREE INSTRUMENTS TRUST, 485APOS, 1999-03-25

TAX FREE INSTRUMENTS TRUST
485APOS, 1999-03-25

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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. 31 ............................ X
----- -----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 24 ........................................... 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).
on _______________, pursuant to paragraph (b).
60 days after filing pursuant to paragraph (a)(i).

X on May 31, 1999 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

PROSPECTUS

TAX-FREE INSTRUMENTS TRUST

INVESTMENT SHARES

A money market mutual fund seeking current income exempt from federal income tax
consistent with stability of principal by investing in a portfolio of tax-exempt
securities maturing in thirteen months or less.

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

CONTENTS

Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem and Exchange Shares
Account and Share Information
Who Manages the Fund?
Financial Information

may 31, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is current income exempt from federal income tax
consistent with stability of principal. While there is no assurance that the
Fund will achieve its investment objective, it endeavors to do so by following
the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests in tax exempt securities so that the Fund's annual interest
income is exempt from federal income tax. At least 80% of the Fund's interest
income from investments will also be exempt from the alternative minimum tax for
individuals and corporations.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

Although the Fund seeks to maintain a stable net asset value, it is possible to
lose money by investing in the Fund. The Shares offered by this prospectus are
not deposits or obligations of any bank, are not endorsed or guaranteed by any
bank and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency.

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Fund's Investment Shares as of the calendar year-end
for each of ten years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 7%.

The `x' axis represents calculation periods for the last ten calendar years of
the Fund, beginning with the earliest year. The light gray shaded chart features
ten distinct vertical bars, each shaded in charcoal, and each visually
representing by height the total return percentages for the calendar year stated
directly at its base. The calculated total return percentage for the Fund's
Investment Shares for each calendar year is stated directly at the top of each
respective bar, for the calendar years 1989 through 1998. The percentages noted
are: 6.01%, 5.62%, 4.26%, 2.63%, 2.07%, 2.34%, 3.39%, 2.95%, 3.08% and 2.94%.

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Investment Shares total
returns on a yearly basis.

The Fund's Investment Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's total return from January 1, 1999 to March 31, 1999 was ____%.

Within the period shown in the Chart, the Fund's Investment Shares highest
quarterly return was 1.54% (quarter ended June 30, 1989). Its lowest quarterly
return was 0.50% (quarter ended March 31, 1993).

The Fund's Investment Shares 7-Day Net Yield as of December 31, 1998 was 2.39%.

The following table represents the Fund's Investment Shares Average Annual Total
Returns through March 31, 1999.

AVERAGE ANNUAL TOTAL RETURN

1 YEAR 5 YEARS 10 YEARS
INVESTMENT SHARES __% __% __%

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

Investors may call the Fund at 1-800-341-7400 to acquire the current 7-Day Net
Yield.

Past performance does not necessarily predict future performance. This
information provides you with historical performance so that you can analyze
whether the Fund's investment risks are balanced by its potential rewards.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

TAX-FREE INSTRUMENTS TRUST

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's Investment Shares.

SHAREHOLDER FEES

FEES PAID DIRECTLY FROM YOUR INVESTMENT
Maximum Sales Charge (Load) Imposed on Purchases (as a None
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of None
original purchase price or redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and None
other Distributions) (as a percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, if None
applicable)
Exchange Fee None

ANNUAL FUND OPERATING EXPENSES (Before Waivers)(1) EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fee(2) 0.50%
Distribution (12b-1) Fee None Shareholder Services Fee(3) 0.25% Other Expenses
0.16% Total Annual Fund Operating Expenses 0.91% 1 Although not contractually
obligated to do so, the adviser and

shareholder services provider waived certain amounts. These are shown

below along with the net expenses the Fund's Investment Shares ACTUALLY PAID
for the fiscal year ended March 31, 1999.

- ------------------------------------------------------------------------------
Waiver of Fund Expenses 0.16%
Total Actual Annual Fund Operating Expenses (after waivers) 0.75%

2 The adviser voluntarily waived a portion of the management fee. The adviser
can terminate this voluntary waiver at any time. The management fee paid by
the Fund (after the voluntary waiver) was 0.44% for the year ended March 31,
1999.

3 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid by
the Fund's Investment Shares (after the voluntary reduction) was 0.15% for
the year ended March 31, 1999.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's
Investment Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the Fund's Investment Shares for
the time periods indicated and then redeem all of your Shares at the end of
those

periods. The Example also assumes that your investment has a 5% return each year
and that the Fund's Investment Shares operating expenses are BEFORE WAIVERS as
shown in the table and remain the same. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
$93 $290 $504 $1,120
- -----------------------------

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund invests in a portfolio of high-quality tax exempt securities maturing
in 13 months or less. The average maturity of the Fund's portfolio is 90 days or
less. The Fund's investment adviser (Adviser) actively manages the Fund's
portfolio, seeking to limit the credit risk taken by the Fund and select
investments with enhanced yields.

The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standards for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized ratings services.

The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve's monetary policy. The Adviser structures the
portfolio by investing primarily in variable rate demand instruments and
municipal notes. The Adviser generally shortens the portfolio's maturity when it
expects interest rates to rise and extends the maturity when it expects interest
rates to fall. This strategy seeks to enhance the yields from favorable interest
rate changes and reduce the effect of unfavorable changes.

In an attempt to further enhance yields and provide diversification, the Adviser
may invest a portion of the portfolio in tax exempt securities subject to the
alternative minimum tax. Up to 20% of the Fund's income may be derived from such
securities.

TEMPORARY DEFENSIVE INVESTMENTS

The Fund may temporarily depart from its principal investment strategies by
investing in securities subject to federal income tax. It may do this to
minimize potential losses and maintain liquidity to meet shareholder redemptions
during adverse market conditions. This also may cause the Fund to receive and
distribute taxable income to investors. Temporary investments will be of
comparable quality to other securities in which the Fund invests.

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

TAX EXEMPT SECURITIES

Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Fixed income securities pay interest,
dividends and distributions at a specified rate. The rate may be fixed or
adjusted periodically. The issuer must also repay the principal amount of the
security, normally within a specified time.

Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.

VARIABLE RATE DEMAND INSTRUMENTS

Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though
their stated maturity may extend beyond thirteen months.

MUNICIPAL NOTES

Municipal notes are short-term tax exempt securities. Many municipalities
issue such notes to fund their current operations before collecting taxes or
other municipal revenues. Municipalities may also issue notes to fund capital
projects prior to issuing long-term bonds. The issuers typically repay the
notes at the end of their fiscal year, either with taxes, other revenues or
proceeds from newly issued notes or bonds.

CREDIT ENHANCEMENT

Credit enhancement consists of an arrangement in which a company agrees to pay
amounts due on a fixed income security if the issuer defaults. In some cases the
company providing credit enhancement makes all payments directly to the security
holders and receives reimbursement from the issuer. Normally, the credit
enhancer has greater financial resources and liquidity than the issuer. For this
reason, the Adviser usually evaluates the credit risk of a fixed income security
based solely upon its credit enhancement.

DELAYED DELIVERY TRANSACTIONS

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

INVESTMENT RATINGS

The securities in which the Fund invests must be rated in one of the two highest
short-term rating categories by one or more nationally recognized rating
services or be of comparable quality to securities having such ratings.

<PAGE>

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.

Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investor Services, Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not received
a rating, the Fund must rely entirely upon the Adviser's credit assessment.

INTEREST RATE RISKS

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

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

SECTOR RISKS

A substantial part of the Fund's portfolio may be comprised of securities issued
or credit enhanced by companies in similar businesses or with other similar
characteristics. As a result, the Fund will be more susceptible to any economic,
business, political, or other developments which generally affect these issuers.

WHAT DO SHARES COST?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. When the Fund receives your transaction request in proper form,
it is processed at the next calculated net asset value (NAV). The Fund does not
charge a front-end sales charge. NAV is determined at 12:00 noon and 3:00 p.m.
(Eastern time), and as of the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open.

The required minimum initial investment for Fund Shares is $500 and the required
minimum subsequent investment amount is $100.

An institutional investor's minimum investment is calculated by combining all
accounts it maintains with the Fund. Accounts established through investment
professionals may be subject to a smaller minimum investment amount. Keep in
mind that investment professionals may charge you fees for their services in
connection with your Share transactions.

<PAGE>

HOW IS THE FUND SOLD?

The Fund offers two share classes: Investment Shares and Institutional Service
Shares, each representing interests in a single portfolio of securities. This
prospectus relates only to Investment Shares. Each share class has different
expenses, which affect their performance. Contact your investment professional
or call 1-800-341-7400 for more information concerning the other class.

The Fund's Distributor markets the Shares described in this prospectus to
individuals as a convenient means of accumulating an interest in a
professionally managed portfolio investing in short-term municipal securities,
directly or through investment professionals. The Fund may not be a suitable
investment for retirement plans

The Distributor and its affiliates may pay out of their assets other
amounts (including items of material value) to investment professionals for
marketing and servicing Shares. The Distributor is a subsidiary of Federated
Investors, Inc. (Federated).

HOW TO PURCHASE SHARES

You may purchase Shares through an investment professional, directly from the
Fund, or through an exchange from another Federated Fund. The Fund reserves the
right to reject any request to purchase or exchange Shares.

THROUGH AN INVESTMENT PROFESSIONAL

o Establish an account with the investment professional; and

o Submit your purchase order to the investment professional before 3:00 p.m.
(Eastern time). You will receive that day's dividend if the investment
professional forwards the order to the Fund and the Fund receives payment by
3:00 p.m. (Eastern time). You will become the owner of Shares and receive
dividends when the Fund receives your payment.

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

o Establish your account with the Fund by submitting a completed New
Account Form; and

o Send your payment to the Fund by Federal Reserve wire or check.

You will become the owner of Shares after the Fund receives your wire or your
check. If your check does not clear, your purchase will be canceled and you
could be liable for any losses or fees the Fund or its transfer agent incurs.

An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.

BY WIRE Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third-party checks (checks originally payable to someone other than
you or The Federated Funds). 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.

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same Share class of another
Federated Fund. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM

Once you have opened an account, you may automatically purchase additional
Shares on a regular basis by completing the Systematic Investment Program (SIP)
section of the New Account Form or by contacting the Fund or your investment
professional. The minimum investment amount for SIPs is $50.

BY AUTOMATED CLEARING HOUSE (ACH)

Once you have opened an account, you may purchase additional Shares through a
depository institution that is an ACH member. This purchase option can be
established by completing the appropriate sections of the New Account Form.

HOW TO REDEEM AND EXCHANGE SHARES

You should redeem or exchange Shares:

o through an investment professional if you purchased Shares through an
investment professional; or

o directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional by
the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time).
Investment professionals are responsible for promptly submitting redemption
requests and providing proper written redemption instructions as outlined below.

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem or exchange Shares by calling the Fund once you have completed
the appropriate authorization form for telephone transactions.

If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.

If you call after 12:00 noon (Eastern time) your redemption will be wired to you
the following business day. You will receive that day's dividend. Under limited
circumstances, arrangements may be made with the Distributor for same-day
payment of redemption proceeds, without that day's dividend, for redemption
requests received before 2:00 p.m. (Eastern time).

BY MAIL

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

Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317 All requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed or exchanged;

o signatures of all shareholders exactly as registered; and

o IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

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

SIGNATURE GUARANTEES Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last 30 days;

o a redemption is payable to someone other than the shareholder(s) of
record; or

IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A NOTARY PUBLIC CANNOT
PROVIDE A SIGNATURE GUARANTEE.

PAYMENT METHODS FOR REDEMPTIONS

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

o an electronic transfer to your account at a financial institution that
is an ACH member; or

o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.

REDEMPTION IN KIND

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

EXCHANGE PRIVILEGES

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

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

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

The Fund may modify or terminate the exchange privilege at any time. The Fund's
management or investment adviser may determine from the amount, frequency and
pattern of exchanges that a shareholder is engaged in excessive trading that is
detrimental to the Fund and other shareholders. If this occurs, the Fund may
terminate the availability of exchanges to that shareholder and may bar that
shareholder from purchasing other Federated Funds.

SYSTEMATIC WITHDRAWAL PROGRAM

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

CHECKWRITING

You may request checks to redeem your Fund Shares. Your account will continue to
receive the daily dividend declared on the Shares being redeemed until the check
is presented for payment.

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

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

SHARE CERTIFICATES

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

ACCOUNT AND SHARE INFORMATION

ACCOUNT ACTIVITY

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

DIVIDENDS AND CAPITAL GAINS

The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.

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

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of the Fund's dividends may not be exempt.
Dividends may be subject to state and local taxes. Capital gains and non-exempt
dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.

WHO MANAGES THE FUND?

The Board of Trustees governs the Fund. The Board selects and oversees the
Adviser, Federated Investment Management Company. The Adviser manages the Fund's
assets, including buying and selling portfolio securities. The Adviser's address
is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Adviser and other subsidiaries of Federated advise approximately 175 mutual
funds and separate accounts, which total approximately $111 billion in assets as
of December 31, 1998. Federated was established in 1955 and is one of the
largest mutual fund investment managers in the United States with approximately
1,900 employees. More than 4,000 investment professionals make Federated Funds
available to their customers.

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.50% of the Fund's
average daily net assets. The Adviser may voluntarily waive a portion of its fee
or reimburse the Fund for certain operating expenses.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999 or experience other date-related problems. The Year 2000 problem may cause
systems to process information incorrectly and could disrupt businesses, such as
the Fund, that rely on computers.

While it is impossible to determine in advance all of the risks to the Fund, the
Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

The Fund's service providers are making changes to their computer systems to fix
any Year 2000 problems. In addition, they are working to gather information from
third-party providers to determine their Year 2000 readiness.

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Financial Highlights will help you understand the Fund's financial
performance for its past five fiscal years, or since inception, if the life of
the Fund is shorter. Some of the information is presented on a per share basis.
Total returns represent the rate an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of any dividends and capital
gains.

This information has been audited by Arthur Andersen LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(To be filed by amendment.)

<PAGE>

TAX-FREE INSTRUMENTS TRUST

INVESTMENT SHARES

A Statement of Additional Information (SAI) dated May 31, 1999, is incorporated
by reference into this prospectus. Additional information about the Fund's
investments is contained in the Fund's annual and semi-annual reports to
shareholders as they become available. The annual report discusses market
conditions and investment strategies that significantly affected the Fund's
performance during its last fiscal year. To obtain the SAI, the annual report,
semi-annual report and other information without charge, call your investment
professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by visiting or
writing the Public Reference Room of the Securities and Exchange Commission in
Washington, DC 20549-6009 or from the Commission's Internet site at
http://www.sec.gov. You can call 1-800-SEC-0330 for information on the Public
Reference Room's operations and copying charges.

INVESTMENT COMPANY ACT FILE NO. 811-3337
CUSIP 876924101

8062810A-IV (3/99)

PROSPECTUS

TAX-FREE INSTRUMENTS TRUST

INVESTMENT SHARES

CONTENTS

may 31, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Fund's Investment Shares as of the calendar year-end
for each of ten years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 1% up to 7%.

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Investment Shares total
returns on a yearly basis.

The Fund's Investment Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

The Fund's total return from January 1, 1999 to March 31, 1999 was ____%.

The Fund's Investment Shares 7-Day Net Yield as of December 31, 1998 was 2.39%.

The following table represents the Fund's Investment Shares Average Annual Total
Returns through March 31, 1999.

AVERAGE ANNUAL TOTAL RETURN

1 YEAR 5 YEARS 10 YEARS
INVESTMENT SHARES __% __% __%

Investors may call the Fund at 1-800-341-7400 to acquire the current 7-Day Net
Yield.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

TAX-FREE INSTRUMENTS TRUST

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's Investment Shares.

SHAREHOLDER FEES

shareholder services provider waived certain amounts. These are shown

below along with the net expenses the Fund's Investment Shares ACTUALLY PAID
for the fiscal year ended March 31, 1999.

- ------------------------------------------------------------------------------
Waiver of Fund Expenses 0.16%
Total Actual Annual Fund Operating Expenses (after waivers) 0.75%

EXAMPLE

1 YEAR 3 YEARS 5 YEARS 10 YEARS
$93 $290 $504 $1,120
- -----------------------------

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

TEMPORARY DEFENSIVE INVESTMENTS

<PAGE>

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

TAX EXEMPT SECURITIES

Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.

VARIABLE RATE DEMAND INSTRUMENTS

MUNICIPAL NOTES

CREDIT ENHANCEMENT

DELAYED DELIVERY TRANSACTIONS

INVESTMENT RATINGS

<PAGE>

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

CREDIT RISKS

INTEREST RATE RISKS

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

SECTOR RISKS

WHAT DO SHARES COST?

You can purchase, redeem, or exchange Shares any day the New York Stock Exchange
(NYSE) is open. Shares are sold at the net asset value (NAV) next calculated
after your order is received. The Fund does not charge a front-end sales charge.
NAV is determined at 12:00 noon and 3:00 p.m. (Eastern time), and as of the end
of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The required minimum initial investment for Fund Shares is $1,000. Subsequent
investments must be in amounts of at least $1,000, except that there are no
minimum requirements for those shareholders in Edward D. Jones & Co.'s Full
Service Account (FSA) or who have signed an Automatic Collection and
Reinvestment Service Agreement.

FULL SERVICE ACCOUNT

As a shareholder, you may subscribe to FSA. This program provides a convenient
method for investment by linking your Fund account and the Edward D. Jones & Co.
Brokerage Account. As an FSA subscriber, you will have a free credit balance in
the Brokerage Account and will automatically have this sum invested in your Fund
account on a daily basis. FSA also permits daily, automatic redemption of Fund
Shares to satisfy debit balances in the your 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.

<PAGE>

HOW IS THE FUND SOLD?

The Fund offers two share classes: Investment Shares and Institutional
Service Shares. This prospectus relates only to Investment Shares. Each class
has different expenses, which affect their performance. Contact your Edward D.
Jones & Co. investment professional for more information concerning the other
class.

The Fund's Distributor markets the Shares described in this prospectus to
individual accounts. The Fund may not be a suitable investment for retirement
plans because it invests in municipal securities.

The Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc.

HOW TO PURCHASE SHARES

You may purchase Shares by check or wire. Fund Shares purchased before 3:00
p.m. (Eastern time) earn dividends that day. Payment should be made in U.S.
dollars and drawn on a U.S. bank.

When payment is made by check, the order is considered received after the check
is converted into federal funds by Edward D. Jones & Co. This is normally within
two business days of receiving the check. If your check does not clear, your
purchase will be canceled and you could be liable for any losses or fees the
Fund incurs. Checks originally payable to someone other than you or Edward D.
Jones & Co. (third-party checks) are not accepted.

When payment is made by wire with federal funds, the order is considered
received immediately. The Fund reserves the right to reject any request to
purchase Shares.

BY CHECK
To purchase Shares by check:

o sign the Automatic Collection and Reinvestment Service Agreement* ;

o complete and sign a checkwriting application*;

o enclose a check for $1,000 or more made payable to Edward D. Jones &
Co.; and

o send the check and any completed forms to your local Edward D. Jones &
Co. office with instructions that it be invested in the Fund.

* These forms are available from your Edward D. Jones & Co. investment
professional. They are optional but recommended.

BY WIRE

Shares may be purchased with federal funds sent by Federal Reserve or bank wire.
This method results in a more rapid investment in Fund Shares. Contact your
Edward D. Jones & Co. investment professional before wiring any funds. You
cannot purchase Shares by wire on holidays when wire transfers are restricted.

THROUGH AN EXCHANGE

You may purchase Shares through an exchange of shares you own in certain
funds advised and distributed by affiliates of Federated Investors, Inc.
(Federated Funds). Or, you may purchase shares of certain Federated Funds by
exchanging your Fund Shares. Sales charges may apply in purchasing some
Federated Funds. You must meet the minimum initial investment requirement for
purchasing Shares and both accounts must have identical registrations. 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.

HOW TO REDEEM AND EXCHANGE SHARES

You may redeem or exchange Shares by submitting a request by telephone or
by mail to your Edward D. Jones & Co. investment professional.

BY TELEPHONE

You may redeem or exchange Shares by calling your Edward D. Jones & Co.
investment professional.

If you call before 3:00 p.m. (Eastern time) your redemption will be mailed to
you the same day. You will not receive that day's dividend.

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

BY MAIL

You may redeem or exchange Shares by mailing a written request to Edward D.
Jones & Co. Call your Edward D. Jones & Co. investment professional for specific
instructions before redeeming by letter.

Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.

All written requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed or exchanged;

o signatures of all shareholders exactly as registered; and

o IF EXCHANGING, the Fund Name and Share Class, account number and account
registration into which you are exchanging.

SIGNATURE GUARANTEES Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last thirty days;

o a redemption is payable to someone other than the shareholder(s) of
record; or

o IF EXCHANGING (TRANSFERRING) into another fund with a different shareholder
registration.

PAYMENT METHODS FOR REDEMPTIONS

Your redemption proceeds will be mailed by check to your address of record. The
following payment options are available. These payment options require a
signature guarantee if they were not established when the account was opened:

o an electronic transfer to your account at a financial institution that
is an ACH member; or

o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.

LIMITATIONS ON REDEMPTION PROCEEDS

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

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

EXCHANGE PRIVILEGES

You may exchange Shares of the Fund into Shares of certain Federated Funds. To
do this, you must:

o ensure that the account registrations are identical;

o meet any minimum initial investment requirements; and

o receive a prospectus for the fund into which you wish to exchange.

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

CHECKWRITING

You may request checks to redeem your Fund Shares in amounts of $100 or more.
Your account will continue to receive the daily dividend declared on the Shares
being redeemed until the check is presented for payment. You may not write
checks to redeem Shares directly from Federated Shareholder Services Company or
to close an account. The checkwriting privilege may be discontinued at any time.
For further information, contact your Edward D. Jones & Co. investment
professional.

ADDITIONAL CONDITIONS

SHARE CERTIFICATES

ACCOUNT AND SHARE INFORMATION

ACCOUNT ACTIVITY

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

DIVIDENDS AND CAPITAL GAINS

The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase Shares by wire, you begin earning dividends on the day your wire is
received. If you purchase Shares by check, you begin earning dividends on the
third business day after the Fund receives your check. In either case, you earn
dividends through the day your redemption request is received.

ACCOUNTS WITH LOW BALANCES

Due to the high cost of maintaining accounts with low balances, you must
maintain a $5,000 average monthly account balance in any month. Otherwise, you
will be charged a $3.00 fee for that month. 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.

TAX INFORMATION

Edward D. Jones & Co. sends an annual statement of your account activity to
assist you in completing your federal, state and local tax returns. It is
anticipated that Fund distributions will be primarily dividends that are exempt
from federal income tax, although a portion of the Fund's dividends may not be
exempt. Dividends may be subject to state and local taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in the Fund.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.

WHO MANAGES THE FUND?

ADVISORY FEES

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

This information has been audited by Arthur Andersen LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(To be filed by amendment.)

<PAGE>

TAX-FREE INSTRUMENTS TRUST

INVESTMENT SHARES

INVESTMENT COMPANY ACT FILE NO. 811-3337
CUSIP 876924101

8062810A-IV (3/99)

PROSPECTUS

TAX-FREE INSTRUMENTS TRUST

INSTITUTIONAL SERVICE SHARES

CONTENTS

Risk/Return Summary
What are the Fund's Fees and Expenses?
What are the Fund's Investment Strategies?
What are the Principal Securities in Which the Fund Invests?
What are the Specific Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase Shares
How to Redeem Shares
Account and Share Information
Who Manages the Fund?
Financial Information

may 31, 1999

<PAGE>

RISK/RETURN SUMMARY

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

<PAGE>

RISK/RETURN BAR CHART AND TABLE

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Fund's Institutional Service Shares as of the
calendar year-end for each of five years.

The `y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 0.50% up to 4%.

The `x' axis represents calculation periods from the earliest calendar year end
of the Fund's Institutional Service Shares through the calendar year ended 1998.
The light gray shaded chart features five distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return percentages
for the calendar year stated directly at its base. The calculated total return
percentage for the Fund's Institutional Service Shares for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1994
through 1998. The percentages noted are: 2.49%, 3.55%, 3.11%, 3.23% and 3.10%.

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Institutional Service
Shares total returns on a yearly basis.

The Fund's Institutional Service Shares are not sold subject to a sales charge
(load). The total returns displayed above are based upon net asset value.

The Fund's total return from January 1, 1999 to March 31, 1999 was ____%.

Within the period shown in the Chart, the Fund's Institutional Service Shares
highest quarterly return was 0.93% (quarter ended June 30, 1995). Its lowest
quarterly return was 0.48% (quarter ended March 31, 1994).

The Fund's Institutional Service Shares 7-Day Net Yield as of December 31, 1998
was 2.54%.

The following table represents the Fund's Institutional Service Shares Average
Annual Total Returns through March 31, 1999.

AVERAGE ANNUAL TOTAL RETURN

LIFE OF THE FUND 1 YEAR 5 YEARS
(1)

INSTITUTIONAL __% __% __%

SERVICE SHARES

(1) The Fund's Institutional Service Shares start of performance date was
October 15, 1993.

Investors may call the Fund at 1-800-341-7400 to acquire the current 7-Day Net
Yield.

<PAGE>

WHAT ARE THE FUND'S FEES AND EXPENSES?

TAX-FREE INSTRUMENTS TRUST

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund's Institutional Service Shares.

SHAREHOLDER FEES

ANNUAL FUND OPERATING EXPENSES (Before Waivers)(1) EXPENSES THAT ARE DEDUCTED
FROM FUND ASSETS (AS A PERCENTAGE OF AVERAGE NET ASSETS) Management Fee(2) 0.50%
Distribution (12b-1) Fee None Shareholder Services Fee(3) 0.25% Other Expenses
0.07% Total Annual Fund Operating Expenses 0.82% 1 Although not contractually
obligated to do so, the adviser and

shareholder services provider waived certain amounts. These are shown below
along with the net expenses the Fund's Institutional Service Shares ACTUALLY
PAID for the fiscal year ended March 31, 1999.

- ------------------------------------------------------------------------------
Waiver of Fund Expenses 0.28%
Total Actual Annual Fund Operating Expenses (after waivers) 0.54%

3 The shareholder services fee has been voluntarily reduced. This voluntary
reduction can be terminated at any time. The shareholder services fee paid by
the Fund's Institutional Service Shares (after the voluntary reduction) was
0.02% for the year ended March 31, 1999.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's
Institutional Service Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Institutional
Service Shares for the time periods indicated and then redeem all of your
Shares at the end

of those periods. The Example also assumes that your investment has a 5% return
each year and that the Fund's Institutional Service Shares operating expenses
are BEFORE WAIVERS as shown in the table and remain the same. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:

1 YEAR 3 YEARS 5 YEARS 10 YEARS
$84 $262 $455 $1,014
- -----------------------------

<PAGE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

TEMPORARY DEFENSIVE INVESTMENTS

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

TAX EXEMPT SECURITIES

Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.

VARIABLE RATE DEMAND INSTRUMENTS

MUNICIPAL NOTES

CREDIT ENHANCEMENT

DELAYED DELIVERY TRANSACTIONS

INVESTMENT RATINGS

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

CREDIT RISKS

INTEREST RATE RISKS

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

SECTOR RISKS

WHAT DO SHARES COST?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. When the Fund receives your transaction request in proper form, it is
processed at the next calculated net asset value (NAV). The Fund does not charge
a front-end sales charge. NAV is determined at 12:00 noon and 3:00 p.m. (Eastern
time), and as of the end of regular trading (normally 4:00 p.m. Eastern time)
each day the NYSE is open.

The required minimum initial investment for Fund Shares is $25,000. There is no
required minimum subsequent investment amount.

An account may be opened with a smaller amount as long as the $25,000 minimum is
reached within 90 days. An institutional investor's minimum investment is
calculated by combining all accounts it maintains with the Fund. Accounts
established through investment professionals may be subject to a smaller minimum
investment amount. Keep in mind that investment professionals may charge you
fees for their services in connection with your Share transactions.

HOW IS THE FUND SOLD?

The Fund offers two share classes: Investment Shares and Institutional Service
Shares, each representing interests in a single portfolio of securities. This
prospectus relates only to Institutional Service Shares. Each share class has
different expenses, which affect their performance. Contact your investment
professional or call 1-800-341-7400 for more information concerning the other
class.

The Fund's Distributor markets the Shares described in this prospectus to
individuals, institutions, and fiduciaries as a convenient means of accumulating
an interest in a professionally managed portfolio investing in short-term
municipal securities, directly or through investment professionals. The Fund may
not be a suitable investment for retirement plans.

HOW TO PURCHASE SHARES

You may purchase Shares through an investment professional or directly from the
Fund. The Fund reserves the right to reject any request to purchase Shares.

THROUGH AN INVESTMENT PROFESSIONAL

o Establish an account with the investment professional; and

Investment professionals should send payments according to the instructions in
the sections "By Wire" or "By Check."

DIRECTLY FROM THE FUND

o Establish your account with the Fund by submitting a completed New
Account Form; and

o Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund
and will become a shareholder after the Fund receives the order.

BY WIRE Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire

ABA Number 011000028
Attention: EDGEWIRE

Wire Order Number, Dealer Number, or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number

You cannot purchase Shares by wire on holidays when wire transfers are
restricted.

BY CHECK

Make your check payable to THE FEDERATED FUNDS, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

If you send your check by a PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund
will not accept third-party checks (checks originally payable to someone other
than you or The Federated Funds).

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.

BY AUTOMATED CLEARING HOUSE (ACH)

HOW TO REDEEM SHARES

You should redeem Shares:

o through an investment professional if you purchased Shares through an
investment professional; or

o directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption request to your investment professional by the end of
regular trading on the NYSE (normally 4:00 p.m. Eastern time). Investment
professionals are responsible for promptly submitting redemption requests and
providing proper written redemption instructions as outlined below.

DIRECTLY FROM THE FUND

BY TELEPHONE

You may redeem Shares by calling the Fund once you have completed the
appropriate authorization form for telephone transactions.

If you call before 12:00 noon (Eastern time) your redemption will be wired to
you the same day. You will not receive that day's dividend.

If you call after 12:00 noon (Eastern time) your redemption will be wired to you
the following business day. You will receive that day's dividend.

BY MAIL

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

Your redemption request will be processed on the day the Fund receives your
written request in proper form. Dividends are paid up to and including the day
that a redemption request is processed.

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600

Boston, MA 02266-8600

Send requests by PRIVATE COURIER OR OVERNIGHT DELIVERY SERVICE to:

Federated Shareholder Services Company
1099 Hingham Street

Rockland, MA 02370-3317 All requests must include:

o Fund Name and Share Class, account number and account registration;

o amount to be redeemed;

o signatures of all shareholders exactly as registered.

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

SIGNATURE GUARANTEES Signatures must be guaranteed if:

o your redemption will be sent to an address other than the address of
record;

o your redemption will be sent to an address of record that was changed
within the last 30 days; or

o a redemption is payable to someone other than the shareholder(s) of
record.

PAYMENT METHODS FOR REDEMPTIONS

o an electronic transfer to your account at a financial institution that
is an ACH member; or

o wire payment to your account at a domestic commercial bank that is a
Federal Reserve System member.

REDEMPTION IN KIND

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

o to allow your purchase to clear;

o during periods of market volatility; or

o when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

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

ADDITIONAL CONDITIONS

TELEPHONE TRANSACTIONS

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

SHARE CERTIFICATES

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

ACCOUNT AND SHARE INFORMATION

ACCOUNT ACTIVITY

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

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

Please consult your tax adviser regarding your federal, state and local tax
liability.

WHO MANAGES THE FUND?

ADVISORY FEES

YEAR 2000 READINESS

The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

<PAGE>

FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

This information has been audited by Arthur Andersen LLP, whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

(To be filed by amendment.)

<PAGE>

TAX-FREE INSTRUMENTS TRUST

INSTITUTIONAL SERVICE SHARES

INVESTMENT COMPANY ACT FILE NO. 811-3337
CUSIP 876924200

8062810A-SS (3/99)

STATEMENT OF ADDITIONAL INFORMATION

TAX-FREE INSTRUMENTS TRUST

INSTITUTIONAL SERVICE SHARES

INVESTMENT SHARES

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectuses for Tax-Free Instruments Trust (Fund),
dated May 31, 1999. This SAI incorporates by reference the Fund's Annual Report.
Obtain the prospectuses or the Annual Report without charge by calling
1-800-341-7400.

may 31, 1999

CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What Do Shares Cost?
How is the Fund Sold?
Exchanging Securities for Shares
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses

CUSIP 876924101

CUSIP 876924200

8062810B (3/99)

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified open-end, management investment company that was
established under the laws of the Commonwealth of Massachusetts on November 17,
1981. The Fund's investment adviser is Federated Investment Management Company
(Adviser). Effective March 31, 1999, Federated Management, Adviser to the Fund,
merged into Federated Investment Management Company (formerly Federated
Advisers).

SECURITIES IN WHICH THE FUND INVESTS

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

SECURITIES DESCRIPTIONS AND TECHNIQUES

GENERAL OBLIGATION BONDS

General obligation bonds are supported by the issuer's power to exact property
or other taxes. The issuer must impose and collect taxes sufficient to pay
principal and interest on the bonds. However, the issuer's authority to impose
additional taxes may be limited by its charter or state law.

SPECIAL REVENUE BONDS

Special revenue bonds are payable solely from specific revenues received by the
issuer such as specific taxes, assessments, tolls, or fees. Bondholders may not
collect from the municipality's general taxes or revenues. For example, a
municipality may issue bonds to build a toll road, and pledge the tolls to repay
the bonds. Therefore, a shortfall in the tolls could result in a default on the
bonds.

PRIVATE ACTIVITY BONDS

Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new factory
to improve its local economy. The municipality would lend the proceeds from its
bonds to the company using the factory, and the company would agree to make loan
payments sufficient to repay the bonds. The bonds would be payable solely from
the company's loan payments, not from any other revenues of the municipality.
Therefore, any default on the loan normally would result in a default on the
bonds. The Adviser generally invests in private activity bonds that are credit
enhanced by financial institutions.

The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT). The Fund may invest in bonds subject to
AMT.

MUNICIPAL LEASES

Municipalities may enter into leases for equipment or facilities. In order to
comply with state public financing laws, these leases are typically subject to
annual appropriation. In other words, a municipality may end a lease, without
penalty, by not providing for the lease payments in its annual budget. After the
lease ends, the lessor can resell the equipment or facility but may lose money
on the sale.

The Fund may invest in securities supported by pools of municipal leases. The
most common type of lease backed securities are certificates of participation
(COPs). However, the Fund may also invest directly in individual leases.

CREDIT ENHANCEMENT

Common types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements where
securities or other liquid assets secure payment of a fixed income security. If
a default occurs, these assets may be sold and the proceeds paid to security's
holders. Either form of credit enhancement reduces credit risks by providing
another source of payment for a fixed income security.

REPURCHASE AGREEMENTS

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

The Fund's custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The Adviser or subcustodian will monitor the
value of the underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price.

Repurchase agreements are subject to CREDIT RISKS.

REVERSE REPURCHASE AGREEMENTS

Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
CREDIT RISKS.

INVESTMENT RATINGS

A nationally recognized rating service'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, MIG-1 or MIG-2 by
Moody's Investors Service, Inc., or F-1+, F-1, or F-2 by Fitch IBCA, Inc. are
all considered rated in one of the two highest short-term rating categories. The
Fund will follow applicable regulations in determining whether a security rated
by more than one rating service can be treated as being in one of the two
highest short-term rating categories; currently, such securities must be rated
by two rating services in one of their two highest rating categories. See
"Regulatory Compliance."

INVESTMENT RISKS

There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. An additional risk factor is
outlined below.

TAX RISKS

In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable.

Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.

INVESTMENT POLICY

As a matter of fundamental investment policy, the Fund invests its assets so
that at least 80% of its annual interest income is exempt from federal income
tax.

INVESTMENT LIMITATIONS

SELLING SHORT AND BUYING ON MARGIN

The Fund 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 Fund 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 Fund 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 Fund 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 Fund's income. The Fund
will liquidate any borrowings as soon as possible and may not purchase any
portfolio instruments while any borrowings are outstanding.

PLEDGING ASSETS

The Fund 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 Fund 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 Fund will not purchase or sell commodities, commodity contracts, or oil, gas
or other mineral exploration or development programs.

INVESTING IN REAL ESTATE

The Fund 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 Fund 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 Fund 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 Fund 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. If in the
case of an industrial development bond or governmental issued security, a
governmental or some other entity guarantees the security, such guarantee would
be considered a separate security issued by the guarantor, as well as the other
issuer, subject to limited exclusions allowed by the 1940 Act.

INVESTING IN ILLIQUID SECURITIES

The Fund 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 Fund 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 Fund 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 Fund will not purchase or retain the securities of any issuer other than the
Fund if the Officers and Trustees of the Fund or its investment adviser, owning
individually more than .50% of the issuer's securities, together beneficially
own more than 5% of the issuer's securities.

INVESTING IN OPTIONS

The Fund will not purchase or sell puts, calls, straddles, spreads, or any
combination of them except that the Fund may purchase municipal securities from
a bank, broker, dealer, or other person accompanied by the agreement of the
seller to purchase them, at the Fund's option, prior to maturity.

THE ABOVE LIMITATIONS CANNOT BE CHANGED UNLESS AUTHORIZED BY THE "VOTE OF A
MAJORITY OF ITS OUTSTANDING VOTING SECURITIES," AS DEFINED BY THE INVESTMENT
COMPANY ACT. THE FOLLOWING LIMITATION, HOWEVER, MAY BE CHANGED BY THE BOARD
WITHOUT SHAREHOLDER APPROVAL. SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL
CHANGE IN THESE LIMITATIONS BECOMES EFFECTIVE.

INVESTING FOR CONTROL

The Fund will not invest in securities of a company for the purpose of
exercising control or management.

For purposes of the above limitations, the Fund considers certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of investment to be "cash items." Except with
respect to borrowing money, if a percentage limitation is adhered to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value or net assets will not result in a violation of such limitation.

The Fund 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 Fund 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 (the "Act"). In particular, the Fund
will comply with the various requirements of Rule 2a-7 (the "Rule") promulgated
by the Securities and Exchange Commission under the Act, which regulates money
market mutual funds. The Fund 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 nationally recognized rating services,
according to the Rule. The Fund may change these operational policies to reflect
changes in the laws and regulations without the approval of its shareholders.

DETERMINING MARKET VALUE OF SECURITIES

The 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
Fund computed by dividing the annualized daily income on the Fund'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 Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in the Rule. Under the Rule,
the 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 Fund'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.

WHAT DO SHARES COST?

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

HOW IS THE FUND SOLD?

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

SHAREHOLDER SERVICES

The Fund may pay Federated Shareholder Services Company, a subsidiary of
Federated Investors, Inc. (Federated), for providing shareholder services and
maintaining shareholder accounts. Federated Shareholder Services Company may
select others to perform these services for their customers and may pay them
fees.

SUPPLEMENTAL PAYMENTS

Investment professionals may be paid fees out of the assets of the Distributor
and/or Federated Shareholder Services Company (but not out of Fund assets). The
Distributor and/or Federated Shareholder Services Company may be reimbursed by
the Adviser or its affiliates.

Investment professionals receive such fees for providing distribution-related or
shareholder services such as sponsoring sales, providing sales literature,
conducting training seminars for employees, and engineering sales-related
computer software programs and systems. Also, investment professionals may be
paid cash or promotional incentives, such as reimbursement of certain expenses
relating to attendance at informational meetings about the Fund or other special
events at recreational-type facilities, or items of material value. These
payments will be based upon the amount of Shares the investment professional
sells or may sell and/or upon the type and nature of sales or marketing support
furnished by the investment professional.

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Investment Shares in
exchange for securities you own. The Fund reserves the right to determine
whether to accept your securities and the minimum market value to accept. The
Fund will value your securities in the same manner as it values its assets. This
exchange is treated as a sale of your securities for federal tax purposes.

SUBACCOUNTING SERVICES

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

REDEMPTION IN KIND

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

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

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

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

MASSACHUSETTS PARTNERSHIP LAW

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

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

ACCOUNT AND SHARE INFORMATION

VOTING RIGHTS

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

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

Trustees may be removed by the Board or by shareholders at a special meeting. A
special meeting of shareholders will be called by the Board upon the written
request of shareholders who own at least 10% of the Fund's outstanding shares.

As of May __, 1999, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Institutional Service Shares: _____.

As of May __, 1999, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Investment Shares: _____.

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

FEDERAL INCOME TAX

The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, it will not receive special tax treatment and will pay federal income tax.

<PAGE>

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

The Board is responsible for managing the Fund's business affairs and for
exercising all the Fund's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Fund,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Fund for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Federated Fund Complex is
comprised of 54 investment companies, whose investment advisers are affiliated
with the Fund's Adviser.

As of May __, 1999, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Shares.

An asterisk (*) denotes a Trustee who is deemed to be an interested person as
defined in the Act. The following symbol (#) denotes a Member of the Board's
Executive Committee, which handles the Board's responsibilities between its
meetings.

<PAGE>

NAME

BIRTH DATE AGGREGATE TOTAL
ADDRESS COMPENSATION COMPENSATION
POSITION WITH FUND PRINCIPAL OCCUPATIONS FROM FUND FROM
- ------------------------ FOR PAST 5 YEARS ----------- ----------------
FUND AND FUND
COMPLEX
<S> <C> <C> <C>
JOHN F. DONAHUE*+ Chief Executive Officer and Director or $0 $0 for the
Birth Date: July 28, Trustee of the Federated Fund Complex; Fund and
1924 Chairman and Director, Federated Investors, 54 other
Federated Investors Inc.; Chairman and Trustee, Federated investment
Tower Investment Management Company; Chairman and companies
1001 Liberty Avenue Director, Federated Investment Counseling, in the Fund
Pittsburgh, PA and Federated Global Investment Management Complex
CHAIRMAN AND TRUSTEE Corp.; Chairman, Passport Research, Ltd.

- -------------------------
THOMAS G. BIGLEY Director or Trustee of the Federated Fund $___ $113,860.22 for
Birth Date: February 3, Complex; Director, Member of Executive the
1934 Committee, Children's Hospital of Fund and
15 Old Timber Trail Pittsburgh; formerly: Senior Partner, Ernst 54 other
Pittsburgh, PA & Young LLP; Director, MED 3000 Group, investment
TRUSTEE Inc.; Director, Member of Executive companies
Committee, University of Pittsburgh. in the Fund
Complex

- -------------------------
JOHN T. CONROY, JR. Director or Trustee of the Federated Fund $___ $125,264.48 for
Birth Date: June 23, Complex; President, Investment Properties the
1937 Corporation; Senior Vice President, Fund and
Wood/IPC Commercial John R. Wood and Associates, Inc., 54 other
Dept. Realtors; Partner or Trustee in private investment
John R. Wood real estate ventures in Southwest Florida; companies
Associates, Inc. formerly: President, Naples Property in the Fund
Realtors Management, Inc. and Northgate Village Complex
3255 Tamiami Trial Development Corporation.
North Naples, FL

TRUSTEE

- -------------------------
WILLIAM J. COPELAND Director or Trustee of the Federated Fund $___ $125,264.48 for
Birth Date: July 4, 1918 Complex; Director and Member of the the
One PNC Plaza-23rd Floor Executive Committee, Michael Baker, Inc.; Fund and
Pittsburgh, PA formerly: Vice Chairman and Director, PNC 54 other
TRUSTEE Bank, N.A., and PNC Bank Corp.; Director, investment
Ryan Homes, Inc. companies
in the Fund

Previous Positions: Director, United Complex
Refinery; Director, Forbes Fund; Chairman,
Pittsburgh Foundation; Chairman, Pittsburgh

Civic Light Opera.

- -------------------------
LAWRENCE D. ELLIS, M.D.* Director or Trustee of the Federated Fund $___ $113,860.22 for
Birth Date: October 11, Complex; Professor of Medicine, University the
1932 of Pittsburgh; Medical Director, University Fund and
3471 Fifth Avenue of Pittsburgh Medical Center - Downtown; 54 other
Suite 1111 Hematologist, Oncologist, and Internist, investment
Pittsburgh, PA University of Pittsburgh Medical Center; companies
TRUSTEE Member, National Board of Trustees, in the Fund
Leukemia Society of America. Complex

- -------------------------
PETER E. MADDEN Director or Trustee of the Federated Fund $___ $113,860.22 for
Birth Date: March 16, Complex; formerly: Representative, the
1942 Commonwealth of Massachusetts General Fund and
One Royal Palm Way Court; President, State Street Bank and 54 other
100 Royal Palm Way Trust Company and State Street Corporation. investment
Palm Beach, FL companies
TRUSTEE Previous Positions: Director, VISA USA and in the Fund
VISA International; Chairman and Director, Complex
Massachusetts Bankers Association;

Director, Depository Trust Corporation.

- -------------------------
CHARLES F. MANSFIELD, Director or Trustee of some of the $___ $0 for the
JR.++ Federated Funds; Management Consultant. Fund and
Birth Date: April 10, 26 other
1945 Previous Positions: Chief Executive investment
80 South Road Officer, PBTC International Bank; Chief companies
Westhampton Beach, NY Financial Officer of Retail Banking Sector, in the Fund
TRUSTEE Chase Manhattan Bank; Senior Vice Complex
President, Marine Midland Bank; Vice
President, Citibank; Assistant Professor of
Banking and Finance, Frank G. Zarb School
of Business, Hofstra University.

- -------------------------
JOHN E. MURRAY, JR., Director or Trustee of the Federated Fund $___ $113,860.22 for
J.D., S.J.D. Complex; President, Law Professor, Duquesne the
Birth Date: December University; Consulting Partner, Mollica & Fund and
20, 1932 Murray. 54 other
President, Duquesne investment
University Previous Positions: Dean and Professor of companies
Pittsburgh, PA Law, University of Pittsburgh School of in the Fund
TRUSTEE Law; Dean and Professor of Law, Villanova Complex
University School of Law.

- -------------------------
MARJORIE P. SMUTS Director or Trustee of the Federated Fund $___ $113,860.22 for
Birth Date: June 21, Complex; Public the
1935 Relations/Marketing/Conference Planning. Fund and
4905 Bayard Street 54 other
Pittsburgh, PA Previous Positions: National Spokesperson, investment
TRUSTEE Aluminum Company of America; business owner. companies
in the Fund
Complex

- -------------------------
JOHN S. WALSH++ Director or Trustee of some of the $___ $0 for the
Birth Date: November Federated Funds; President and Director, Fund and
28, 1957 Heat Wagon, Inc.; President and Director, 23 other
2007 Sherwood Drive Manufacturers Products, Inc.; President, investment
Valparaiso, IN Portable Heater Parts, a division of companies
TRUSTEE Manufacturers Products, Inc.; Director, in the Fund
Walsh & Kelly, Inc.; formerly: Vice Complex
President, Walsh & Kelly, Inc.

- -------------------------
GLEN R. JOHNSON Trustee, Federated Investors, Inc.; staff $0 $0 for the
Birth Date: May 2, 1929 member, Federated Securities Corp. Fund and
Federated Investors 8 other
Tower investment
1001 Liberty Avenue companies
Pittsburgh, PA in the Fund
PRESIDENT Complex
- -------------------------
J. CHRISTOPHER DONAHUE+ President or Executive Vice President of $0 $0 for the
Birth Date: April 11, the Federated Fund Complex; Director or Fund and
1949 Trustee of some of the Funds in the 16 other
Federated Investors Federated Fund Complex; President and investment
Tower Director, Federated Investors, Inc.; companies
1001 Liberty Avenue President and Trustee, Federated Investment in the Fund
Pittsburgh, PA Management Company; President and Director, Complex
EXECUTIVE VICE PRESIDENT Federated Investment Counseling and
Federated Global Investment Management
Corp.; President, Passport Research, Ltd.;
Trustee, Federated Shareholder Services
Company; Director, Federated Services

Company.

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

<PAGE>

EDWARD C. GONZALES Trustee or Director of some of the Funds in $0 $0 for the
Birth Date: October 22, the Federated Fund Complex; President, Fund and
1930 Executive Vice President and Treasurer of 1 other
Federated Investors some of the Funds in the Federated Fund investment
Tower Complex; Vice Chairman, Federated company
1001 Liberty Avenue Investors, Inc.; Vice President, Federated in the Fund
Pittsburgh, PA Investment Management Company and Federated Complex
EXECUTIVE VICE PRESIDENT Investment Counseling, Federated Global
Investment Management Corp. and Passport
Research, Ltd.; Executive Vice President
and Director, Federated Securities Corp.;
Trustee, Federated Shareholder Services

Company.

- -------------------------
JOHN W. MCGONIGLE Executive Vice President and Secretary of $0 $0 for the
Birth Date: October 26, the Federated Fund Complex; Executive Vice Fund and
1938 President, Secretary, and Director, 54 other
Federated Investors Federated Investors, Inc.; Trustee, investment
Tower Federated Investment Management Company; companies
1001 Liberty Avenue Director, Federated Investment Counseling in the Fund
Pittsburgh, PA and Federated Global Investment Management Complex
EXECUTIVE VICE Corp.; Director, Federated Services
PRESIDENT AND SECRETARY Company; Director, Federated Securities
Corp.

- -------------------------
RICHARD J. THOMAS Treasurer of the Federated Fund Complex; $0 $0 for the
Birth Date: June 17, Vice President - Funds Financial Services Fund and
1954 Division, Federated Investors, Inc.; 54 other
Federated Investors Formerly: various management positions investment
Tower within Funds Financial Services Division of companies
1001 Liberty Avenue Federated Investors, Inc. in the Fund
Pittsburgh, PA Complex
TREASURER

- -------------------------
RICHARD B. FISHER President or Vice President of some of the $0 $0 for the
Birth Date: May 17, 1923 Funds in the Federated Fund Complex; Fund and
Federated Investors Director or Trustee of some of the Funds in 6 other
Tower the Federated Fund Complex; Executive Vice investment
1001 Liberty Avenue President, Federated Investors, Inc.; companies
Pittsburgh, PA Chairman and Director, Federated Securities in the Fund
VICE PRESIDENT Corp. Complex
- -------------------------
WILLIAM D. DAWSON, III Chief Investment Officer of this Fund and $0 $0 for the
Birth Date: March 3, various other Funds in the Federated Fund Fund and
1949 Complex; Executive Vice President, 41 other
Federated Investors Federated Investment Counseling, Federated investment
Tower Global Investment Management Corp., companies
1001 Liberty Avenue Federated Investment Management Company, in the Fund
Pittsburgh, PA and Passport Research, Ltd.; Registered Complex
CHIEF INVESTMENT OFFICER Representative, Federated Securities Corp.;
Portfolio Manager, Federated Administrative
Services; Vice President, Federated
Investors, Inc.; Formerly: Executive Vice
President and Senior Vice President,
Federated Investment Counseling
Institutional Portfolio Management Services
Division; Senior Vice President, Federated
Investment Management Company, and Passport
Research, Ltd.

- -------------------------
JEFF A. KOZEMCHAK Jeff A. Kozemchak is Vice President of the $0 $0 for the
Birth Date: January 15, Fund. Mr. Kozemchak joined Federated in Fund and
1960 1987 and has been a Senior Portfolio 3 other
Federated Investors Manager since 1996 and a Senior Vice investment
Tower President of the Fund's Adviser since 1999. companies
1001 Liberty Avenue He was a Portfolio Manager and a Vice in the Fund
Pittsburgh, PA President of the Fund's Adviser from 1993 Complex
VICE PRESIDENT to 1998. Mr. Kozemchak is a Chartered
Financial Analyst and received his M.S. in

Industrial Administration from Carnegie
Mellon University in 1987.
</TABLE>

+ MR. DONAHUE IS THE FATHER OF J. CHRISTOPHER DONAHUE, EXECUTIVE VICE
PRESIDENT OF THE FUND.

++ MESSRS. MANSFIELD AND WALSH BECAME MEMBERS OF THE BOARD OF TRUSTEES ON
JANUARY 1, 1999. THEY DID NOT EARN ANY FEES FOR SERVING THE FUND COMPLEX SINCE
THESE FEES ARE REPORTED AS OF THE END OF THE LAST CALENDAR YEAR.

INVESTMENT ADVISER

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

The Adviser is a wholly owned subsidiary of Federated.

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

OTHER RELATED SERVICES

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

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. The Adviser may select brokers and dealers
based on whether they also offer research services (as described below). In
selecting among firms believed to meet these criteria, the Adviser may give
consideration to those firms which have sold or are selling Shares of the Fund
and other funds distributed by the Distributor and its affiliates. The Adviser
makes decisions on portfolio transactions and selects brokers and dealers
subject to review by the Fund's Board.

RESEARCH SERVICES

Research services 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 may be used by the Adviser or by affiliates of Federated in advising
other accounts. To the extent that receipt of these services may replace
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 those 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.

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

ADMINISTRATOR

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

MAXIMUM ADMINISTRATIVE AVERAGE AGGREGATE DAILY NET ASSETS OF THE FEDERATED
FEE FUNDS
0.150 of 1% on the first $250 million

- -------------------------
0.125 of 1% on the next $250 million
- -------------------------
0.100 of 1% on the next $250 million
- -------------------------
0.075 of 1% 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 voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

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

CUSTODIAN

State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Foreign instruments purchased by the Fund are
held by foreign banks participating in a network coordinated by State Street
Bank.

TRANSFER AGENT AND DIVIDEND DISBURSING AGENT

Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, maintains all necessary shareholder
records. The Fund pays the transfer agent a fee based on the size, type, and
number of accounts and transactions made by shareholders.

INDEPENDENT PUBLIC ACCOUNTANTS

Arthur Andersen LLP is the independent public accountant for the Fund.

FEES PAID BY THE FUND FOR SERVICES
<TABLE>
<CAPTION>

FOR THE YEAR ENDED MARCH 31,
<S> <C> <C> <C>
- -------------------------------- 1999 1998 1997

Advisory Fee Earned $__ $__ $__
- ---------------------------------
Advisory Fee Reduction $__ $__ $__
- ---------------------------------
Brokerage Commissions $__ $__ $__
- ---------------------------------
Administrative Fee $__ $__ $__
- ---------------------------------
12B-1 FEE None

- ---------------------------------
SHAREHOLDER SERVICES FEE

- ---------------------------------
Institutional Service Shares $__ ---- ----
- ---------------------------------
Investment Shares $__ ---- ----
- ---------------------------------
</TABLE>
Fees are allocated among classes based on their pro rata share of Fund assets,
except for shareholder services fees, which are borne only by the applicable
class of Shares.

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

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

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

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

Total returns given for the one-year, five-year, ten-year or since inception
periods ended March 31, 1999.

Yield, Effective Yield and Tax-Equivalent Yield given for the 7-day period ended
March 31, 1999.

7 DAY PERIOD 1 Year 5 Years 10 Years
INVESTMENT SHARES

- ---------------------
Total Return NA __% __% __%

- ---------------------
Yield __% NA NA NA

- ---------------------
Effective Yield __% NA NA NA

- ---------------------
Tax-Equivalent Yield __% NA NA NA

7 DAY PERIOD 1 Year 5 Years Since inception on
October 15, 1993
INSTITUTIONAL

SERVICE SHARES ----------------------------------------------

- ---------------------
Total Return NA __% __% __%

- ---------------------
Yield __% NA NA NA

- ---------------------
Effective Yield __% NA NA NA

- ---------------------
Tax-Equivalent Yield __% NA NA NA

TOTAL RETURN

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

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $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 NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

<PAGE>

YIELD

The yield of Shares is based upon the seven days ending on the day of the
calculation, called the "base period." This yield is calculated by: determining
the net change in the value of a hypothetical account with a balance of one
Share at the beginning of the base period, with the net change excluding capital
changes but including the value of any additional Shares purchased with
dividends earned from the original one Share and all dividends declared on the
original and any purchased Shares; dividing the net change in the account's
value by the value of the account at the beginning of the base period to
determine the base period return; and multiplying the base period return by
365/7. The effective yield is calculated by compounding the unannualized
base-period return by: adding one to the base-period return, raising the sum to
the 365/7th power; and subtracting one from the result. The tax- equivalent
yield of Shares is calculated similarly to the yield, but is adjusted to reflect
the taxable yield that Shares would have had to earn to equal the actual yield,
assuming a specific tax rate.

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

TAX EQUIVALENCY TABLE

Set forth below is a sample of a tax-equivalency table that may be used in
advertising and sales literature. This table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the Fund generally remains
free from federal regular income tax and is often free from state and local
taxes as well. However, some of the Fund's income may be subject to the federal
alternative minimum tax and state and/or local taxes.

TAXABLE YIELD EQUIVALENT FOR 1999 MULTISTATE MUNICIPAL FUND

FEDERAL INCOME TAX BRACKET: 15.00% 28.00% 31.00% 36.00% 39.60%
Joint Return $1-43,050 $43,051-104,05$104,051-158,550$158,551-283,150 Over
283,150
Single Return $1-25,750 $25,751-62,450$62,451-130,250 $130,251-283,150 Over
283,150
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
<S> <C> <C> <C> <C> <C>
- --------------------------------
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%
- --------------------------------
</TABLE>

NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT.

PERFORMANCE COMPARISONS

Advertising and sales literature may include:

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

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

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

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

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

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

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

LIPPER 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.

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

FEDERATED FUNDS OVERVIEW

MUNICIPAL FUNDS

In the municipal sector, as of December 31, 1998, Federated managed 10 bond
funds with approximately $2.2 billion in assets and 23 money market funds with
approximately $12.5 billion in total assets. In 1976, Federated introduced one
of the first municipal bond mutual funds in the industry and is now one of the
largest institutional buyers of municipal securities. The Funds may quote
statistics from organizations including The Tax Foundation and the National
Taxpayers Union regarding the tax obligations of Americans.

EQUITY FUNDS

In the equity sector, Federated has more than 28 years' experience. As of
December 31, 1998, Federated managed 27 equity funds totaling approximately
$14.9 billion in assets across growth, value, equity income, international,
index and sector (i.e. utility) styles. Federated's value-oriented management
style combines quantitative and qualitative analysis and features a structured,
computer-assisted composite modeling system that was developed in the 1970s.

CORPORATE BOND FUNDS

In the corporate bond sector, as of December 31, 1998, Federated managed 9 money
market funds and 15 bond funds with assets approximating $22.8 billion and $7.1
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 26 years of experience in
the corporate bond sector. In 1972, Federated introduced one of the first
high-yield bond funds in the industry. In 1983, Federated was one of the first
fund managers to participate in the asset-backed securities market, a market
totaling more than $209 billion.

GOVERNMENT FUNDS

In the government sector, as of December 31, 1998, Federated manages 9
mortgage-backed, 5 government/ agency and 19 government money market mutual
funds, with assets approximating $5.3 billion, $1.8 billion and $41.6 billion,
respectively. Federated trades approximately $425 million in U.S. government and
mortgage-backed securities daily and places approximately $25 billion in
repurchase agreements each day. Federated introduced the first U.S. government
fund to invest in U.S. government bond securities in 1969. Federated has been a
major force in the short- and intermediate-term government markets since 1982
and currently manages approximately $43.2 billion in government funds within
these maturity ranges.

MONEY MARKET FUNDS

In the money market sector, Federated 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,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime and 23 municipal with assets
approximating $41.6 billion, $22.8 billion and $12.5 billion, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: U.S. equity and high yield - J. Thomas
Madden; U.S. fixed income -William D. Dawson, III; and global equities and fixed
income - Henry A. Frantzen. The Chief Investment Officers are Executive Vice
Presidents of the

Federated advisory companies.

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 $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

FEDERATED CLIENTS OVERVIEW

Federated distributes mutual funds through its subsidiaries for a variety of
investment purposes. Specific markets include:

INSTITUTIONAL CLIENTS

Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, 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 advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

BANK MARKETING

Other institutional clients include 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, Broker/Dealer Sales Division, Federated Securities Corp.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended March 31, 1999
are incorporated herein by reference to the Annual Report to Shareholders of
Tax-Free Instruments Trust dated March 31, 1999.

(To be filed by amendment.)

<PAGE>

INVESTMENT RATINGS

STANDARD & POOR'S SHORT-TERM MUNICIPAL OBLIGATION RATINGS

A Standard & Poor's (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 rated 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 in the defined rating categories.

FITCH INVESTORS SERVICE, L.P. 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.

<PAGE>

ADDRESSES

TAX-FREE INSTRUMENTS TRUST

Institutional Service Shares

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 Investment Management Company
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
225 Franklin Street
Boston, MA 02110-2812

PART C. OTHER INFORMATION

Item 23. Exhibits:

(a) Conformed copy of Amended Declaration of
Trust of the Registrant; (11)

(b) (i) Copy of By-Laws of the Registrant; (2)
(ii) Copy of Amendment No. 1 to By-Laws; +

(iii) Copy of Amendment No. 2 to By-Laws; (5)
(iv) Copy of Amendment No. 3 to By-Laws; (5)
(v) Copy of Amendment No. 4 to By-Laws; (5)
(vi) Copy of Amendment No. 5 to By-Laws; (14)
(vii) Copy of Amendment No. 6 to By-Laws; (14)

(viii) Copy of Amendment No. 7 to By-Laws; +
(ix) Copy of Amendment No. 8 to By-Laws; +

(d) Copy of Investment Advisory Contract of the
Registrant; (7)

(e) (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);
(f) Not applicable;

(g) (i) Conformed copy of Custodian Agreement of
the Registrant; (11)

(ii) Conformed copy of Domestic Custody Fee
Schedule; (14)

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

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 to its Registration Statement on Form N-1A filed on May
28, 1998. (File No. 2-75122 and File No. 811-3337).

<PAGE>

(h) (i) Conformed copy of Agreement for Fund

Accounting Services, Administrative
Services, Transfer Agency Services, and
Custody Services Procurement; +

(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; (14)

(i) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered; (12)

(j) Not applicable;
(k) Not applicable;
(l) Letter Agreement; (3)

(m) (i) Copy of Distribution Plan of the
Registrant; (4)

(ii) The responses described in Item 24(b)(6)
are hereby incorporated by reference;

(n) Not applicable;

(o) 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);

(p) Conformed copy of Power of Attorney. (13)
(i) Conformed copy of Power of Attorney of the

Chief Investment Officer of the Registrant; +
(ii)Conformed copy of Power of Attorney of the

Treasurer of the Registrant; +
(iii)Conformed copy of Power of Attorney of
Trustee Charles F. Mansfield, Jr.; +

(iv) Conformed copy of Power of Attorney of
Trustee John S. Walsh. +

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

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 30 to its Registration Statement on Form N-1A filed on May
28, 1998. (File No. 2-75122 and File No. 811-3337).

<PAGE>

Item 24. Persons Controlled by or Under Common Control with Registrant:

None

Item 25. Indemnification: (7)

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

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).

<PAGE>

Item 26. Business and Other Connections of Investment Adviser:

(a) For a description of the other business of the investment adviser,
see the section entitled "WHO MANAGES THE FUND?"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 "WHO MANAGES AND PROVIDES SERVICES TO
THE FUND?" 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
Susan M. Nason
Mary Jo Ochson
Robert J. Ostrowski

Vice Presidents: Todd A. Abraham
J. Scott Albrecht
Arthur J. Barry
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
Richard J. Lazarchic
Steven Lehman
Marian R. Marinack
Keith J. Sabol
Frank Semack
Aash M. Shah
Christopher Smith
Tracy P. Stouffer
Edward J. Tiedge
Paige M. Wilhelm
Jolanta M. Wysocka
Marc Halperin

Assistant Vice Presidents: Nancy J. Belz
Robert E. Cauley
Lee R. Cunningham, II
B. Anthony Delserone, Jr.
Paul S. Drotch
Salvatore A. Esposito
Donna M. Fabiano
John T. Gentry
William R. Jamison
Constantine Kartsonsas
John C. Kerber
Grant K. McKay
Natalie F. Metz
Joseph M. Natoli
John Sheehy
Michael W. Sirianni
Leonardo A. Vila
Lori A. Wolff
Gary Farwell

Secretary: Stephen A. Keen

Treasurer: Thomas R. Donahue

Assistant Secretaries: Thomas R. Donahue
Richard B. Fisher
Christine M. Newcamp

Assistant Treasurer: Richard B. Fisher

The business address of each of the Officers of the investment
adviser is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779. These individuals are also
officers of a majority of the investment advisers to the investment
companies in the Federated Fund Complex described in Part B of this
Registration Statement.

<PAGE>

ITEM 27. 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: Automated Government Money Trust; Cash
Trust Series II; Cash Trust Series, Inc.; CCB Funds; 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
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.; ; Hibernia Funds; Independence One Mutual Funds;
Intermediate Municipal Trust; International Series, Inc.; Investment Series
Funds, Inc.; 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; Regions
Funds; RIGGS Funds; SouthTrust Funds; Tax-Free Instruments Trust; The
Planters Funds; The Wachovia Funds; The Wachovia Municipal FundsTrust for
Government Cash Reserves; Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; Vision Group of Funds, Inc.; World
Investment Series, Inc.; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; DG Investor Series; High Yield Cash Trust; Investment Series Trust;
Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for Financial
Institutions;

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

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT

Richard B. Fisher Director, Chairman, Chief Vice President
Federated Investors Tower Executive Officer, Chief
1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.

Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice Executive Vice
Federated Investors Tower President, President

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

Thomas R. Donahue Director, Assistant Secretary --
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David M. Taylor Executive Vice President --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Raymond Hanley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth A. Hetzel Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

John F. Wallin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Terri E. Bush Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

</TABLE>

Item 28. Location of Accounts and Records:

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

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

Federated Shareholder Federated Investors Tower
Services Company 1001 Liberty Avenue
(Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and

Portfolio Recordkeeper)

Federated Services Company Federated Investors Tower
(Administrator) 1001 Liberty Avenue
Pittsburgh, PA 15222-3779

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

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

(Custodian)

Item 29. Management Services: Not applicable.

Item 30. Undertakings:

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

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, TAX-FREE INSTRUMENTS TRUST,
certifies that it has duly caused this Amendment to its Registration Statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Pittsburgh and Commonwealth of Pennsylvania, on the 25th day of March,
1999.

TAX-FREE INSTRUMENTS TRUST

BY: /s/ Karen M. Brownlee
Karen M. Brownlee, Assistant Secretary
Attorney in Fact for John F. Donahue

March 25, 1999

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

NAME TITLE DATE

By: /s/ Karen M. Brownlee

Karen M. Brownlee Attorney In Fact March 25, 1999
ASSISTANT SECRETARY For the Persons

Listed Below

NAME TITLE

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

Glen R. Johnson* President

Richard J. Thomas* Treasurer
(Principal Financial and

Accounting Officer)

William D. Dawson, III* Chief Investment Officer

Thomas G. Bigley* Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

Lawrence D. Ellis, M.D.* Trustee

Peter E. Madden* Trustee

Charles F. Mansfield, Jr.* Trustee

John E. Murray, Jr.* Trustee

Marjorie P. Smuts* Trustee

John S. Walsh* Trustee

* By Power of Attorney

Exhibit (b)(ii) under Form N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

TAX-FREE INSTRUMENTS TRUST

Amendment No. 1 to By-Laws

December 10, 1982

ARTICLE II

Powers and Duties of Trustees and Officers

SECTION 2. Chairman of the Trustees ("Chairman"). The Chairman shall be
the chief executive officer of the Trust. He shall have general supervision over
the business of the Trust and policies of the Trust. He shall employ and define
the duties of all employees of the Trust, shall have power to discharge any such
employees, shall exercise general supervision over the affairs of the Trust and
shall perform such other duties as may be assigned to him from time to time by
the Trustees. He shall preside at the meetings of shareholders and of the
Trustees. The Chairman shall appoint a Trustee to preside at such meetings in
his absence, with the approval of the Trustees.

SECTION 3. President. The President, in the absence of the Chairman,
shall perform all duties and may exercise any of the powers of the Chairman
subject to the control of the other Trustees. He shall counsel and advise the
Chairman on matters of major importance and shall perform such other duties as
may be assigned to him from time to time by the Trustees, the Chairman or the
Executive Committee.

ARTICLE IX

Seal

The seal of the Trust should be circular in form bearing the
inscription:

TAX-FREE INSTRUMENTS TRUST - 1981 - Massachusetts

ARTICLE X

Fiscal Year

The fiscal year of the Trust shall be the period of twelve months ending
on the last day of November in each calendar year.

Exhibit (b)(viii) under Form N-1A
Exhibit 3(ii) under Item 601/Reg. S-K

TAX-FREE INSTRUMENTS TRUST

AMENDMENT #7

TO THE BY-LAWS

(EFFECTIVE FEBRUARY 27, 1998)

Delete Section 5 PROXIES of Article IV SHAREHOLDERS' MEETINGS, and replace with
the following:

Section 5. PROXIES. Any shareholder entitled to vote at any meeting of
shareholders may vote either in person, by telephone, by electronic
means including facsimile, or by proxy, but no proxy which is dated more
than six months before the meeting named therein shall be accepted
unless otherwise provided in the proxy. Every proxy shall be in writing,
subscribed by the shareholder or his duly authorized agent or be in such
other form as may be permitted by law, including documents conveyed by
electronic transmission. Every proxy shall be dated, but need not be
sealed, witnessed or acknowledged. The placing of a shareholder's name
on a proxy or authorizing another to act as the shareholder's agent,
pursuant to telephone or electronically transmitted instructions
obtained in accordance with procedures reasonably designed to verify
that such instructions have been authorized by such shareholder, shall
constitute execution of a proxy by or on behalf of such shareholder.
Where Shares are held of record by more than one person, any co-owner or
co-fiduciary may execute the proxy or give authority to an agent, unless
the Secretary of the Trust is notified in writing by any co-owner or
co-fiduciary that the joinder of more than one is to be required. All
proxies shall be filed with and verified by the Secretary or an
Assistant Secretary of the Trust, or the person acting as Secretary of
the Meeting. Unless otherwise specifically limited by their term, all
proxies shall entitle the holders thereof to vote at any adjournment of
such meeting but shall not be valid after the final adjournment of such
meeting.

Exhibit (b)(ix) under Form N-1A

Exhibit 3(ii) under Item 601/Reg. S-K

TAX-FREE INSTRUMENTS TRUST

AMENDMENT #8

TO THE BY-LAWS

(EFFECTIVE MAY 12, 1998)

Strike Section 3 - Place of Meeting of Article IV - Shareholders' Meetings and
replace it with the following:

Section 3. PLACE OF MEETING. Meetings of the shareholders of the Trust
or a particular Series or Class shall be held at such place within or
without The Commonwealth of Massachusetts as may be fixed from time to
time by resolution of the Trustees.

Strike Section 6 - Place of Meeting of Article V - Trustees' Meetings and
replace it with the following:

Section 6. PLACE OF MEETING. Meetings of the Trustees shall be held at
such place within or without The Commonwealth of Massachusetts as fixed
from time to time by resolution of the Trustees, or as the person or
persons requesting said meeting to be called may designate, but any
meeting may adjourn to any other place.

Exhibit (h)(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

AMENDED & RESTATED

AGREEMENT

FOR

FUND ACCOUNTING SERVICES,

ADMINISTRATIVE SERVICES,

TRANSFER AGENCY SERVICES

AND

CUSTODY SERVICES PROCUREMENT

AGREEMENT made as of March 1, 1996, and amended and restated as of September
1, 1997, by and between those investment companies listed on Exhibit 1 as may be
amended from time to time, having their principal office and place of business
at 5800 Corporate Drive, Pittsburgh, PA 15237-7000 (the "Investment Company"),
on behalf of the portfolios (individually referred to herein as a "Fund" and
collectively as "Funds") of the Investment Company, and FEDERATED SERVICES
COMPANY, a Pennsylvania corporation, having its principal office and place of
business at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 on
behalf of itself and its subsidiaries (the "Company").

WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of capital stock or beneficial
interest ("Shares");

WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes") if so indicated
on Exhibit 1, and the Company desires to accept such appointment;

WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein defined), if
so indicated on Exhibit, and the Company desires to accept such appointment;

WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer agency
services (as herein defined) if so indicated on Exhibit 1, and agent in
connection with certain other activities, and the Company desires to accept such
appointment; and

WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the Company
desires to accept such appointment; and

NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:

SECTION ONE: FUND ACCOUNTING.

ARTICLE 1. APPOINTMENT.

The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the period
and on the terms set forth in this Agreement. The Company accepts such
appointment and agrees to furnish the services herein set forth in return for
the compensation as provided in Article 3 of this Section.

ARTICLE 2. THE COMPANY'S DUTIES.

Subject to the supervision and control of the Investment Company's Board of
Trustees or Directors ("Board"), the Company will assist the Investment Company
with regard to fund accounting for the Investment Company, and/or the Funds,
and/or the Classes, and in connection therewith undertakes to perform the
following specific services;

A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent pricing
services selected by the Company in consultation with the adviser, or
sources selected by the adviser, and reviewed by the board; secondarily, if
a designated pricing service does not provide a price for a security which
the Company believes should be available by market quotation, the Company
may obtain a price by calling brokers designated by the investment adviser
of the fund holding the security, or if the adviser does not supply the
names of such brokers, the Company will attempt on its own to find brokers
to price those securities; thirdly, for securities for which no market
price is available, the Pricing Committee of the Board will determine a
fair value in good faith. Consistent with Rule 2a-4 of the 40 Act,
estimates may be used where necessary or appropriate. The Company's
obligations with regard to the prices received from outside pricing
services and designated brokers or other outside sources, is to exercise
reasonable care in the supervision of the pricing agent. The Company is not
the guarantor of the securities prices received from such agents and the
Company is not liable to the Fund for potential errors in valuing a Fund's
assets or calculating the net asset value per share of such Fund or Class
when the calculations are based upon such prices. All of the above sources
of prices used as described are deemed by the Company to be authorized
sources of security prices. The Company provides daily to the adviser the
securities prices used in calculating the net asset value of the fund, for
its use in preparing exception reports for those prices on which the
adviser has comment. Further, upon receipt of the exception reports
generated by the adviser, the Company diligently pursues communication
regarding exception reports with the designated pricing agents;

B. Determine the net asset value per share of each Fund and/or Class, at
the time and in the manner from time to time determined by the Board
and as set forth in the Prospectus and Statement of Additional
Information ("Prospectus") of each Fund;

C. Calculate the net income of each of the Funds, if any;

D. Calculate realized capital gains or losses of each of the Funds resulting
from sale or disposition of assets, if any;

E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;

F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Investment
Company are the property of the Investment Company and further agrees
to surrender promptly to the Investment Company such records upon the
Investment Company's request;

G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and

H. Such other similar services as may be reasonably requested by the
Investment Company.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."

ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.

A. The Funds will compensate the Company for Fund Accounting Services in
accordance with the fees agreed upon from time to time between the
parties hereto. Such fees do not include out-of-pocket disbursements of
the Company for which the Funds shall reimburse the Company.
Out-of-pocket disbursements shall include, but shall not be limited to,
the items agreed upon between the parties from time to time.

B. The Fund and/or the Class, and not the Company, shall bear the cost of:
custodial expenses; membership dues in the Investment Company Institute
or any similar organization; transfer agency expenses; investment
advisory expenses; Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes and
fees payable to federal, state and other governmental agencies; fees of
Trustees or Directors of the Investment Company; independent auditors
expenses; legal and audit department expenses billed to the Company for
work performed related to the Investment Company, the Funds, or the
Classes; law firm expenses; organizational expenses; or other expenses
not specified in this Article 3 which may be properly payable by the
Funds and/or Classes.

C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request of the
Company. The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.

D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.

E. The fee for the period from the effective date of this Agreement with
respect to a Fund or a Class to the end of the initial month shall be
prorated according to the proportion that such period bears to the full
month period. Upon any termination of this Agreement before the end of
any month, the fee for such period shall be prorated according to the
proportion which such period bears to the full month period. For
purposes of determining fees payable to the Company, the value of the
Fund's net assets shall be computed at the time and in the manner
specified in the Fund's Prospectus.

F. The Company, in its sole discretion, may from time to time subcontract
to, employ or associate with itself such person or persons as the
Company may believe to be particularly suited to assist it in
performing Fund Accounting Services. Such person or persons may be
affiliates of the Company, third-party service providers, or they may
be officers and employees who are employed by both the Company and the
Investment Company; provided, however, that the Company shall be as
fully responsible to each Fund for the acts and omissions of any such
subcontractor as it is for its own acts and omissions. The compensation
of such person or persons shall be paid by the Company and no
obligation shall be incurred on behalf of the Investment Company, the
Funds, or the Classes in such respect.

SECTION TWO: ADMINISTRATIVE SERVICES.

ARTICLE 4. APPOINTMENT.

The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services set forth in
Article 5 of this Agreement in return for the compensation set forth in Article
9 of this Agreement.

ARTICLE 5. THE COMPANY'S DUTIES.

As Administrator, and subject to the supervision and control of the Board
and in accordance with Proper Instructions (as defined hereafter) from the
Investment Company, the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its portfolios:

A. prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the Charter (which has
already been prepared and filed), the By-laws and minutes of meetings
of the Board and Shareholders;

B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements
for the Investment Company and the Investment Company's shares and all
amendments thereto, reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents all as may be
necessary to enable the Investment Company to make a continuous
offering of its shares;

C. prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Investment Company's
investment advisers and distributors, subject to any applicable
restrictions of the Board or the 1940 Act;

D. calculate performance data of the Investment Company for dissemination to
information services covering the investment company industry;

E. prepare and file the Investment Company's tax returns;

F. coordinate the layout and printing of publicly disseminated prospectuses
and reports;

G. perform internal audit examinations in accordance with a charter to be
adopted by the Company and the Investment Company;

H. assist with the design, development, and operation of the Investment
Company and the Funds;

I. provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who will be
responsible for the management of certain of the Investment Company's
affairs as determined by the Investment Company's Board; and

J. consult with the Investment Company and its Board on matters concerning the
Investment Company and its affairs.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Two,
shall hereafter be referred to as "Administrative Services."

ARTICLE 6. RECORDS.

The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the Investment Company act of
1940 and the rules thereunder, as the same may be amended from time to time,
pertaining to the Administrative Services performed by it and not otherwise
created and maintained by another party pursuant to contract with the Investment
Company. Where applicable, such records shall be maintained by the Company for
the periods and in the places required by Rule 31a-2 under the 1940 Act. The
books and records pertaining to the Investment Company which are in the
possession of the Company shall be the property of the Investment Company. The
Investment Company, or the Investment Company's authorized representatives,
shall have access to such books and records at all times during the Company's
normal business hours. Upon the reasonable request of the Investment Company,
copies of any such books and records shall be provided promptly by the Company
to the Investment Company or the Investment Company's authorized
representatives.

ARTICLE 7. DUTIES OF THE FUND.

The Fund assumes full responsibility for the preparation, contents and
distribution of its own offering document and for complying with all applicable
requirements the 1940 Act, the Internal Revenue Code, and any other laws, rules
and regulations of government authorities having jurisdiction.

ARTICLE 8. EXPENSES.

The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to provide the
Administrative Services to the Investment Company, including the compensation of
the Company employees who serve as trustees or directors or officers of the
Investment Company. The Investment Company shall be responsible for all other
expenses incurred by the Company on behalf of the Investment Company, including
without limitation postage and courier expenses, printing expenses, travel
expenses, registration fees, filing fees, fees of outside counsel and
independent auditors, or other professional services, organizational expenses,
insurance premiums, fees payable to persons who are not the Company's employees,
trade association dues, and other expenses properly payable by the Funds and/or
the Classes.

ARTICLE 9. COMPENSATION.

For the Administrative Services provided, the Investment Company hereby
agrees to pay and the Company hereby agrees to accept as full compensation for
its services rendered hereunder an administrative fee at an annual rate per
Fund, as specified below.

The compensation and out of pocket expenses attributable to the Fund shall
be accrued by the Fund and paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will maintain
detailed information about the compensation and out of pocket expenses by the
Fund.

MAX. ADMIN. AVERAGE DAILY NET ASSETS
FEE OF THE FUNDS

.150% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of $750 million
(Average Daily Net Asset break-points are on a complex-wide basis)

However, in no event shall the administrative fee received during any year
of the Agreement be less than, or be paid at a rate less than would aggregate
$125,000 per Fund and $30,000 per Class. The minimum fee set forth above in this
Article 9 may increase annually upon each March 1 anniversary of this Agreement
over the minimum fee during the prior 12 months, as calculated under this
agreement, in an amount equal to the increase in Pennsylvania Consumer Price
Index (not to exceed 6% annually) as last reported by the U.S. Bureau of Labor
Statistics for the twelve months immediately preceding such anniversary.

ARTICLE 10. RESPONSIBILITY OF ADMINISTRATOR.

A. The Company shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Investment Company in connection with the
matters to which this Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. The Company shall be entitled
to rely on and may act upon advice of counsel (who may be counsel for the
Investment Company) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Any person,
even though also an officer, director, trustee, partner, employee or agent
of the Company, who may be or become an officer, director, trustee,
partner, employee or agent of the Investment Company, shall be deemed, when
rendering services to the Investment Company or acting on any business of
the Investment Company (other than services or business in connection with
the duties of the Company hereunder) to be rendering such services to or
acting solely for the Investment Company and not as an officer, director,
trustee, partner, employee or agent or one under the control or direction
of the Company even though paid by the Company.

B. The Company shall be kept indemnified by the Investment Company and be
without liability for any action taken or thing done by it in performing
the Administrative Services in accordance with the above standards. In
order that the indemnification provisions contained in this Article 10
shall apply, however, it is understood that if in any case the Investment
Company may be asked to indemnify or hold the Company harmless, the
Investment Company shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood
that the Company will use all reasonable care to identify and notify the
Investment Company promptly concerning any situation which presents or
appears likely to present the probability of such a claim for
indemnification against the Investment Company. The Investment Company
shall have the option to defend the Company against any claim which may be
the subject of this indemnification. In the event that the Investment
Company so elects, it will so notify the Company and thereupon the
Investment Company shall take over complete defense of the claim, and the
Company shall in such situation initiate no further legal or other expenses
for which it shall seek indemnification under this Article. The Company
shall in no case confess any claim or make any compromise in any case in
which the Investment Company will be asked to indemnify the Company except
with the Investment Company's written consent.

SECTION THREE: TRANSFER AGENCY SERVICES.

ARTICLE 11. TERMS OF APPOINTMENT.

Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as, and the Company agrees
to act as, transfer agent and dividend disbursing agent for each Fund's Shares,
and agent in connection with any accumulation, open-account or similar plans
provided to the shareholders of any Fund ("Shareholder(s)"), including without
limitation any periodic investment plan or periodic withdrawal program.

ARTICLE 12. DUTIES OF THE COMPANY.

The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Investment Company as
to any Fund:

A. Purchases

(1) The Company shall receive orders and payment for the purchase
of shares and promptly deliver payment and appropriate
documentation therefore to the custodian of the relevant Fund,
(the "Custodian"). The Company shall notify the Fund and the
Custodian on a daily basis of the total amount of orders and
payments so delivered.

(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.

(3) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.

B. Distribution

(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the
provisions of its governing document and the then-current
Prospectus of the Fund. The Company shall prepare and mail or
credit income, capital gain, or any other payments to
Shareholders. As the Dividend Disbursing Agent, the Company
shall, on or before the payment date of any such distribution,
notify the Custodian of the estimated amount required to pay
any portion of said distribution which is payable in cash and
request the Custodian to make available sufficient funds for
the cash amount to be paid out. The Company shall reconcile the
amounts so requested and the amounts actually received with the
Custodian on a daily basis. If a Shareholder is entitled to
receive additional Shares by virtue of any such distribution or
dividend, appropriate credits shall be made to the
Shareholder's account; and

(2) The Company shall maintain records of account for each Fund and Class
and advise the Investment Company, each Fund and Class and its
Shareholders as to the foregoing.

C. Redemptions and Transfers

(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by
the Custodian for redemptions.

(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to
procedures described in the then-current Prospectus of the
Fund.

(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor,
and shall effect such redemption at the price applicable to the
date and time of receipt of documents complying with said
procedures.

(4) The Company shall effect transfers of Shares by the registered owners
thereof.

(5) The Company shall identify and process abandoned accounts and uncashed
checks for state escheat requirements on an annual basis and report
such actions to the Fund.

D. Recordkeeping

(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission ("SEC") a record of the
total number of Shares of the Fund and/or Class which are
authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Company shall also provide the Fund
on a regular basis or upon reasonable request with the total
number of Shares which are authorized and issued and
outstanding, but shall have no obligation when recording the
issuance of Shares, except as otherwise set forth herein, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.

(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:

(a) Name, address and tax identification number (and whether
such number has been certified);

(b) Number of Shares held;

(d) Any stop or restraining order placed against the account;

(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;

(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current maintenance of the account;

(g) Certificate numbers and denominations for any Shareholder
holding certificates;

(h) Any information required in order for the Company to
perform the calculations contemplated or required by this Agreement.

(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall forthwith
upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created
and maintained by the Company pursuant to this Agreement, which
are no longer needed by the Company in performance of its
services or for its protection. If not so turned over to the
Fund, such records and documents will be retained by the
Company for six years from the year of creation, during the
first two of which such documents will be in readily accessible
form. At the end of the six year period, such records and
documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.

E. Confirmations/Reports

(1) The Company shall furnish to the Fund periodically the following
information:

(a) A copy of the transaction register;

(b) Dividend and reinvestment blotters;

(c) The total number of Shares issued and outstanding in
each state for "blue sky" purposes as determined
according to Proper Instructions delivered from time to
time by the Fund to the Company;

(d) Shareholder lists and statistical information;

(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;

(f) Such other information as may be agreed upon from time to
time.

(2) The Company shall prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies,
and, if required, mail to Shareholders, such notices for
reporting dividends and distributions paid as are required to
be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state
income tax laws, rules and regulations.

(3) In addition to and not in lieu of the services set forth above,
the Company shall:

(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar plans
(including without limitation any periodic investment plan
or periodic withdrawal program), including but not limited
to: maintaining all Shareholder accounts, mailing
Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders
for all purchases and redemptions of Shares and other
conformable transactions in Shareholder accounts, preparing
and mailing activity statements for Shareholders, and
providing Shareholder account information; and

(b) provide a system which will enable the Fund to monitor
the total number of Shares of each Fund (and/or Class)
sold in each state ("blue sky reporting"). The Fund
shall by Proper Instructions (i) identify to the Company
those transactions and assets to be treated as exempt
from the blue sky reporting for each state and (ii)
verify the classification of transactions for each state
on the system prior to activation and thereafter monitor
the daily activity for each state. The responsibility of
the Company for each Fund's (and/or Class's) state blue
sky registration status is limited solely to the
recording of the initial classification of transactions
or accounts with regard to blue sky compliance and the
reporting of such transactions and accounts to the Fund
as provided above.

F. Other Duties

(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;

(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in
connection with Shareholder meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;

(3) The Company shall establish and maintain faclities and
procedures for safekeeping of check forms and facsimile
signature imprinting devices, if any; and for the preparation
or use, and for keeping account of, such forms and devices.

The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Three,
shall hereafter be referred to as "Transfer Agency Services."

ARTICLE 13. DUTIES OF THE INVESTMENT COMPANY.

A. Compliance

The Investment Company or Fund assume full responsibility for the
preparation, contents and distribution of their own and/or their
classes' Prospectus and for complying with all applicable requirements
of the Securities Act of 1933, as amended (the "1933 Act"), the 1940
Act and any laws, rules and regulations of government authorities
having jurisdiction.

B. Distributions

The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.

ARTICLE 14. COMPENSATION AND EXPENSES.

A. Annual Fee

For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company and/or the Fund agree to pay the
Company an annual maintenance fee for each Shareholder account as
agreed upon between the parties and as may be added to or amended from
time to time. Such fees may be changed from time to time subject to
written agreement between the Investment Company and the Company.
Pursuant to information in the Fund Prospectus or other information or
instructions from the Fund, the Company may sub-divide any Fund into
Classes or other sub-components for recordkeeping purposes. The Company
will charge the Fund the same fees for each such Class or sub-component
the same as if each were a Fund.

B. Reimbursements

In addition to the fee paid under Article 7A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time.
In addition, any other expenses incurred by the Company at the request
or with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.

C. Payment

The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than monthly,
and shall be paid daily upon request of the Company. The Company will
maintain detailed information about the compensation and out-of-pocket
expenses by Fund and Class.

SECTION FOUR: CUSTODY SERVICES PROCUREMENT.

ARTICLE 15. APPOINTMENT.

The Investment Company hereby appoints Company as its agent to evaluate and
obtain custody services from a financial institution that (i) meets the criteria
established in Section 17(f) of the 1940 Act and (ii) has been approved by the
Board as eligible for selection by the Company as a custodian (the "Eligible
Custodian"). The Company accepts such appointment.

ARTICLE 16. THE COMPANY AND ITS DUTIES.

Subject to the review, supervision and control of the Board, the Company
shall:

A. evaluate and obtain custody services from a financial institution that
meets the criteria established in Section 17(f) of the 1940 Act and
has been approved by the Board as being eligible for selection by the
Company as an Eligible Custodian;

B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a
party to each such agreement. The Company may, as paying agent, be a
party to any agreement with any such Eligible Custodian;

C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;

D. monitor and evaluate the nature and the quality of services provided
by Eligible Custodians;

E. periodically provide to the Investment Company (i) written reports on
the activities and services of Eligible Custodians; (ii) the nature
and amount of disbursements made on account of the each Fund with
respect to each custodial agreement; and (iii) such other information
as the Board shall reasonably request to enable it to fulfill its
duties and obligations under Sections 17(f) and 36(b) of the 1940 Act
and other duties and obligations thereof;

F. periodically provide recommendations to the Board to enhance Eligible
Custodian's customer services capabilities and improve upon fees being
charged to the Fund by Eligible Custodian; and

The foregoing, along with any additional services that Company shall agree
in writing to perform for the Fund under this Section Four, shall hereafter be
referred to as "Custody Services Procurement."

ARTICLE 17. FEES AND EXPENSES.

A. Annual Fee

For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with the
fees agreed upon from time to time.

B. Reimbursements

In addition to the fee paid under Section 11A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed upon
between the parties, as may be added to or amended from time to time.
In addition, any other expenses incurred by the Company at the request
or with the consent of the Investment Company and/or the Fund, will be
reimbursed by the appropriate Fund.

C. Payment

ARTICLE 18. REPRESENTATIONS.

The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter into
this arrangement and to provide the services contemplated in Section Four of
this Agreement.

SECTION FIVE: GENERAL PROVISIONS.

ARTICLE 19. PROPER INSTRUCTIONS.

As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more person or persons as the Board shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions will be deemed to
be Proper Instructions if (a) the Company reasonably believes them to have been
given by a person previously authorized in Proper Instructions to give such
instructions with respect to the transaction involved, and (b) the Investment
Company, or the Fund, and the Company promptly cause such oral instructions to
be confirmed in writing. Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided that the
Investment Company, or the Fund, and the Company are satisfied that such
procedures afford adequate safeguards for the Fund's assets. Proper Instructions
may only be amended in writing.

ARTICLE 20. ASSIGNMENT.

Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.

A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.

B. With regard to Transfer Agency Services, the Company may without
further consent on the part of the Investment Company subcontract for
the performance of Transfer Agency Services with

(1) its subsidiary, Federated Shareholder Service Company, a
Delaware business trust, which is duly registered as a transfer
agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934, as amended, or any succeeding statute ("Section
17A(c)(1)"); or

(2) such other provider of services duly registered as a transfer agent
under Section 17A(c)(1) as Company shall select.

The Company shall be as fully responsible to the Investment Company for
the acts and omissions of any subcontractor as it is for its own acts and
omissions.

C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further consent
on the part of the Investment Company subcontract for the performance
of such services with Federated Administrative Services, a wholly-owned
subsidiary of the Company.

D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement with
an Agent selected by the Investment Company, other than as described in
B. and C. above; provided, however, that the Company shall in no way be
responsible to the Investment Company for the acts and omissions of the
Agent.

ARTICLE 21. DOCUMENTS.

A. In connection with the appointment of the Company under this Agreement,
the Investment Company shall file with the Company the following documents:

(1) A copy of the Charter and By-Laws of the Investment Company and all
amendments thereto;

(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;

(3) Printed documentation from the recordkeeping system representing
outstanding Share certificates of the Investment Company or the Funds;

(4) All account application forms and other documents relating to
Shareholders accounts; and

(5) A copy of the current Prospectus for each Fund.

B. The Fund will also furnish from time to time the following documents:

(1) Each resolution of the Board of the Investment Company authorizing the
original issuance of each Fund's, and/or Class's Shares;

(2) Each Registration Statement filed with the SEC and amendments thereof
and orders relating thereto in effect with respect to the sale of
Shares of any Fund, and/or Class;

(3) A certified copy of each amendment to the governing document and the
By-Laws of the Investment Company;

(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for
fund accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;

(5) Such other certifications, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the proper
performance of its duties; and

(6) Revisions to the Prospectus of each Fund.

ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company

The Company represents and warrants to the Fund that:

(1) it is a corporation duly organized and existing and in good standing
under the laws of the Commonwealth of Pennsylvania;

(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and in
the Commonwealth of Pennsylvania;

(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this Agreement;

(4) all requisite corporate proceedings have been taken to authorize it to
enter into and perform its obligations under this Agreement;

(5) it has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement;

(6) it is in compliance with federal securities law requirements and in
good standing as an administrator and fund accountant; and

B. Representations and Warranties of the Investment Company

The Investment Company represents and warrants to the Company that:

(1) It is an investment company duly organized and existing and in good
standing under the laws of its state of organization;

(2) It is empowered under applicable laws and by its Charter and By-Laws
to enter into and perform its obligations under this Agreement;

(3) All corporate proceedings required by said Charter and By-Laws have
been taken to authorize it to enter into and perform its obligations
under this Agreement;

(4) The Investment Company is an open-end investment company registered
under the 1940 Act; and

(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.

ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.

A. Standard of Care

With regard to Sections One, Three and Four, the Company shall be held
to a standard of reasonable care in carrying out the provisions of this
Contract. The Company shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Investment Company) on
all matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice, provided that such action is
not in violation of applicable federal or state laws or regulations,
and is in good faith and without negligence.

B. Indemnification by Investment Company

The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents, employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable
to:

(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or other
party contracted by or approved by the Investment Company or Fund,

(2) The reliance on or use by the Company or its agents or subcontractors
of information, records and documents in proper form which

(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of
the Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and
Shareholder account information;

(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the Funds; or

(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other
third parties contracted by or approved by the
Investment Company of Fund for use in the performance of
services under this Agreement;

(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the Investment Company.

(3) The reliance on, or the carrying out by the Company or its agents or
subcontractors of Proper Instructions of the Investment Company or the
Fund.

(4) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares be
registered in such state or in violation of any stop order or
other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
state.

Provided, however, that the Company shall not be protected by
this Article 23.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties or failure to
meet the standard of care set forth in 23.A.

above.

C. Reliance

At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services to
be performed by the Company under this Agreement, and the Company and
its agents or subcontractors shall not be liable and shall be
indemnified by the Investment Company or the appropriate Fund for any
action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such action
is not in violation of applicable federal or state laws or regulations.
The Company, its agents and subcontractors shall be protected and
indemnified in recognizing stock certificates which are reasonably
believed to bear the proper manual or facsimile signatures of the
officers of the Investment Company or the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a
co-transfer agent or co-registrar.

D. Notification

In order that the indemnification provisions contained in this Article
23 shall apply, upon the assertion of a claim for which either party
may be required to indemnify the other, the party seeking
indemnification shall promptly notify the other party of such
assertion, and shall keep the other party advised with respect to all
developments concerning such claim. The party who may be required to
indemnify shall have the option to participate with the party seeking
indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any
compromise in any case in which the other party may be required to
indemnify it except with the other party's prior written consent.

ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.

This Agreement shall be effective from September 1, 1997, and shall continue
until February 28, 2003 (`Term"). Thereafter, the Agreement will continue for 18
month terms. The Agreement can be terminated by either party upon 18 months
notice to be effective as of the end of such 18 month period. In the event,
however, of willful misfeasance, bad faith, negligence or reckless disregard of
its duties by the Company, the Investment Company has the right to terminate the
Agreement upon 60 days written notice, if Company has not cured such willful
misfeasance, bad faith, negligence or reckless disregard of its duties within 60
days. The termination date for all original or after-added Investment companies
which are, or become, a party to this Agreement. shall be coterminous.
Investment Companies that merge or dissolve during the Term, shall cease to be a
party on the effective date of such merger or dissolution.

Should the Investment Company exercise its rights to terminate, all
out-of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund. Additionally,
the Company reserves the right to charge for any other reasonable expenses
associated with such termination. The provisions of Articles 10 and 23 shall
survive the termination of this Agreement.

ARTICLE 25. AMENDMENT.

This Agreement may be amended or modified by a written agreement executed by
both parties.

ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.

In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, PROVIDED that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Charter. No interpretive or additional
provisions made as provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.

ARTICLE 27. GOVERNING LAW.

This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts

ARTICLE 28. NOTICES.

Except as otherwise specifically provided herein, Notices and other writings
delivered or mailed postage prepaid to the Investment Company at , , or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or
to such other address as the Investment Company or the Company may hereafter
specify, shall be deemed to have been properly delivered or given hereunder to
the respective address.

ARTICLE 29. COUNTERPARTS.

This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original. ARTICLE 30.
LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE COMPANY.

The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, and
the obligations of this Agreement are not binding upon any of the Trustees or
Shareholders of the Company, but bind only the appropriate property of the Fund,
or Class, as provided in the Declaration of Trust.

ARTICLE 31. MERGER OF AGREEMENT.

This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.

ARTICLE 32. SUCCESSOR AGENT.

If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement deliver
to such successor agent at the office of the Company all properties of the
Investment Company held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper Instructions
deliver such properties in accordance with such instructions.

In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Company under this Agreement.

ARTICLE 33. FORCE MAJEURE.

The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.

ARTICLE 34. ASSIGNMENT; SUCCESSORS.

This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all of
or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party. Nothing in
this Article 34 shall prevent the Company from delegating its responsibilities
to another entity to the extent provided herein.

ARTICLE 35. SEVERABILITY.

In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.

ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
INVESTMENT COMPANY.

The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any of
the Trustees or Shareholders of the Investment Company, but bind only the
property of the Fund, or Class, as provided in the Declaration of Trust.

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

INVESTMENT COMPANIES

(LISTED ON EXHIBIT 1)

By: /S/ S. ELLIOTT COHAN

Name: S. Elliott Cohan
Title: Assistant Secretary

FEDERATED SERVICES COMPANY

By: /S/ THOMAS J. WARD

Name: Thomas J. Ward
Title: Secretary

<PAGE>

EXHIBIT 1

Tax-Free Instruments Trust

Investment Shares

Institutional Shares

Exhibit (p)(i) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

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

SIGNATURES TITLE DATE

/S/ WILLIAM D. DAWSON, III Chief Investment Officer March 3, 1999
- -----------------------------
William D. Dawson, III

Sworn to and subscribed before me this 3rd day of March, 1999

/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit (p)(ii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/S/ RICHARD J. THOMAS Treasurer December 11, 1998
- ----------------------------
Richard J. Thomas (Principal Financial and
Accounting Officer)

Sworn to and subscribed before me this 11th day of December, 1998

/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit (p)(iii) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/S/ CHARLES F. MANSFIELD, JR. Trustee March 3, 1999
- ----------------------------------------
Charles F. Mansfield, Jr.

Sworn to and subscribed before me this 3rd day of March, 1999

/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries

Exhibit (p)(iv) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K

POWER OF ATTORNEY

SIGNATURES TITLE DATE

/S/ JOHN S. WALSH Trustee March 3, 1999
- ----------------------------------------
John S. Walsh

Sworn to and subscribed before me this 3rd day of March, 1999

/S/ CHERI S. GOOD
Notarial Seal
Cheri S. Good, Notary Public
Pittsburgh, Allegheny County
My Commission Expires Nov. 19, 2001
Member, Pennsylvania Association of Notaries