FEDERATED INCOME TRUST, 485BPOS, 1997-03-26

FEDERATED INCOME TRUST
485BPOS, 1997-03-26

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1933 Act File No. 2-75366
1940 Act File No. 811-3352

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X

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

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

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X

Amendment No. 22 .............................. X

FEDERATED INCOME TRUST

(Exact Name of Registrant as Specified in Charter)

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

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

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

immediately upon filing pursuant to paragraph (b)
X on March 31, 1997 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on pursuant to paragraph (a)(ii) of Rule 485.
-----------------

If appropriate, check the following box:

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

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

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

CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of FEDERATED INCOME TRUST
consists of one portfolio which is offered in two separate classes of
shares known as (a) Institutional Shares and (b) Institutional Service
Shares. A separate prospectus is being filed herewith for each class of
shares, and one combined statement of additional information is being filed
herewith for both classes of shares and is comprised of the following:

PART A. INFORMATION REQUIRED IN A PROSPECTUS.

Prospectus Heading
(Rule 404(c) Cross Reference)

Item 1. Cover Page...............Cover Page.
Item 2. Synopsis.................Summary of Fund Expenses.
Item 3. Condensed Financial
Information..............Financial Highlights;
.........................Performance Information.
Item 4. General Description of
Registrant...............General Information; Investment
Information; Investment Objective;
Investment Policies; Investment
Limitations.
Item 5. Management of the Fund...Trust Information; Management of the
Trust; Distribution of Institutional
Shares/Institutional Service Shares; (b)
Distribution Plan; (a) Shareholder
Services; Administration of the Fund;

Item 6. Capital Stock and Other
Securities...............Dividends; Capital Gains; Shareholder
Information; Voting Rights; Tax
Information; Federal Income Tax; State
and Local Taxes.
Item 7. Purchase of Securities Being
Offered..................Investing in the Institutional
Shares/Institutional Service Shares;
Share Purchases; Minimum Investment
Required; What Shares Cost; Exchanging
Securities for Institutional
Shares/Institutional Service Shares;
Certificates and Confirmations; Net
Asset Value.
Item 8. Redemption or Repurchase.Redeeming Institutional
Shares/Institutional Service Shares;
Telephone Redemption; Written Requests;
Accounts With Low Balances.
Item 9. Pending Legal Proceedings None.

PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION

Item 10. Cover Page...............Cover Page.
Item 11. Table of Contents........Table of Contents.
Item 12. General Information and
History..................General Information About the Trust.
Item 13. Investment Objectives and
Policies.................Investment Objective and Policies;
Investment Limitations
Item 14. Management of the Fund...Federated Income Trust Management;
Trustees Compensation.
Item 15. Control Persons and Principal
Holders of Securities....Trust Ownership.
Item 16. Investment Advisory and Other
Services.................Investment Advisory Services.
Item 17. Brokerage Allocation.....Brokerage Transactions.
Item 18. Capital Stock and Other
Securities...............Not Applicable.
Item 19. Purchase, Redemption and Pricing
of Securities Being Offered Purchasing Shares; Exchanging
Securities for Trust Shares; Determining
Net Asset Value; Redeeming Shares.
Item 20. Tax Status...............Tax Status.
Item 21. Underwriters.............Not applicable.
Item 22. Calculation of Performance
Data.....................Total Return; Yield; Performance
Comparisons.
Item 23. Financial Statements.....(Filed in Part A)

FEDERATED INCOME TRUST

INSTITUTIONAL SHARES

PROSPECTUS

The Institutional Shares of Federated Income Trust (the "Trust") offered by
this prospectus represent interests in a diversified portfolio of
securities. The Trust is a no-load, open-end, diversified management
investment company (a mutual fund). The investment objective of the Trust is
to provide current income. The Trust pursues this investment objective by
investing in U.S. government securities. As of the date of this prospectus,
it is anticipated that the Trust will invest primarily in securities of U.S.
government agencies or instrumentalities, such as the Federal Home Loan
Mortgage Corporation. Institutional Shares are sold at net asset value.

THE INSTITUTIONAL 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 BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
INSTITUTIONAL SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.

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

The Trust has also filed a Statement of Additional Information dated March
31, 1997, with the Securities and Exchange Commission ("SEC"). The
information contained in the Statement of Additional Information is
incorporated by reference into this prospectus. You may request a copy of
the Statement of Additional Information, or a paper copy of this prospectus,
if you have received your prospectus electronically, free of charge by
calling 1-800-341-7400. To obtain other information, or make inquiries about
the Trust, contact the Trust at the address listed in the back of this
prospectus. This Statement of Additional Information, material incorporated
by reference into this document, and other information regarding the Trust
is maintained electronically with the SEC at Internet Website
(http://www.sec.gov).

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

Prospectus dated March 31, 1997

Table of Contents
<TABLE>
<S> <C>
SUMMARY OF TRUST EXPENSES 1
FINANCIAL HIGHLIGHTS --
INSTITUTIONAL SHARES 2
GENERAL INFORMATION 3
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
Investment Limitations 6
Portfolio Turnover 6
TRUST INFORMATION 6
Management of the Trust 6
Distribution of Institutional Shares 7
Supplemental Payments to Financial Institutions 7
Administration of the Trust 8
NET ASSET VALUE 8
INVESTING IN INSTITUTIONAL SHARES 8
Share Purchases 8
Minimum Investment Required 9
What Shares Cost 9
Exchanging Securities for Trust Shares 9
Certificates and Confirmations 9
Dividends 10
Capital Gains 10
REDEEMING INSTITUTIONAL SHARES 10
Telephone Redemption 10
Written Requests 10
Accounts with Low Balances 11
SHAREHOLDER INFORMATION 11
Voting Rights 11
TAX INFORMATION 12
Federal Income Tax 12
State and Local Taxes 12
PERFORMANCE INFORMATION 12
OTHER CLASSES OF SHARES 13
FINANCIAL HIGHLIGHTS --
INSTITUTIONAL SERVICE SHARES 14
FINANCIAL STATEMENTS 15
INDEPENDENT AUDITORS' REPORT 25
ADDRESSES 26
</TABLE>

SUMMARY OF TRUST EXPENSES

INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <S>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>
Management Fee 0.40%
12b-1 Fee None
Total Other Expenses 0.18%
Shareholder Services Fee (after waiver)(1) 0.03%
Total Operating Expenses(2) 0.58%
</TABLE>

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

(2) The total operating expenses would have been 0.80% absent the voluntary
waiver of a portion of the shareholder services fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Shares of the
Fund will bear, either directly or indirectly. For more complete
descriptions of the various costs and expenses, see "Trust Information" and
"Investing in Institutional Shares." Wire-transferred redemptions of less
than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period $6 $19 $32 $73
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

FEDERATED INCOME TRUST
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING
OF PERIOD $10.39 $ 9.70 $10.50 $10.73 $10.66 $10.42 $10.18 $10.05 $10.43 $10.74
INCOME FROM
INVESTMENT
OPERATIONS
Net investment 0.68 0.67 0.70 0.77 0.80 0.89 0.93 0.94 0.95 0.99
income
Net realized and
unrealized gain
(loss)
on investments (0.24) 0.69 (0.80) (0.23) 0.07 0.24 0.24 0.13 (0.38) (0.31)
Total from
investment
operations 0.44 1.36 (0.10) 0.54 0.87 1.13 1.17 1.07 0.57 0.68
LESS DISTRIBUTIONS
Distributions
from net
investment (0.68) (0.67) (0.70) (0.77) (0.80) (0.89) (0.93) (0.94) (0.95) (0.99)
income
Distributions in
excess of net
investment
income -- (0.00) -- -- -- -- -- -- -- --
Total (0.68) (0.67) (0.70) (0.77) (0.80) (0.89) (0.93) (0.94) (0.95) (0.99)
distributions
NET ASSET
VALUE, END
OF
PERIOD $10.15 $10.39 $ 9.70 $10.50 $10.73 $10.66 $10.42 $10.18 $10.05 $10.43
TOTAL RETURN(A) 4.44% 14.44% (0.86)% 5.22% 8.51% 11.27% 12.01% 11.04% 5.75% 6.79%
RATIOS TO AVERAGE
NET ASSETS
Expenses 0.58% 0.58% 0.56% 0.51% 0.51% 0.50% 0.50% 0.53% 0.52% 0.50%
Net investment 6.70% 6.67% 6.99% 7.28% 7.53% 8.41% 9.06% 9.23% 9.33% 9.49%
income
Expense waiver/
reimbursement(b) 0.22% 0.22% -- -- -- -- -- -- -- --
SUPPLEMENTAL DATA
Net assets, end
of
period (000 $838,542 $983,093 $1,119,976 $1,727,247 $1,548,858 $1,231,978 $892,255 $1,023,886 $1,196,585 $1,376,895
omitted)
Portfolio
turnover 212% 184% 217% 178% 52% 51% 36% 45% 77% 92%
</TABLE>

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

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

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

GENERAL INFORMATION

The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 17, 1981. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in
any one portfolio may be offered in separate classes. As of the date of this
prospectus, the Board of Trustees ("Trustees") has established two classes
of shares of the Trust, known as Institutional Shares and Institutional
Service Shares. This prospectus relates only to Institutional Shares of the
Trust.

Institutional Shares ("Shares") are sold primarily to accounts for which
financial institutions act in a fiduciary or agency capacity or other
accounts where the financial institution maintains master accounts with an
aggregate investment of at least $400 million in certain funds which are
advised or distributed by affiliates of Federated Investors. Shares are also
made available to financial intermediaries, public, and private
organizations. An investment in the Trust serves as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
of U.S. government securities. A minimum initial investment of $25,000 over
a 90-day period is required.
Shares are currently sold and redeemed at net asset value without a sales
charge imposed by the Trust.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

The investment objective of the Trust is current income. The investment
objective may not be changed without the approval of shareholders. The Trust
pursues this investment objective by investing in U.S. government securities
and certain collateralized mortgage obligations ("CMOs"). While there is no
assurance that the Trust will achieve its investment objective, it endeavors
to do so by following the investment policies described in this prospectus.

INVESTMENT POLICIES

As a matter of investment policy which may be changed without shareholder
approval, the Trust will limit its investments to those that are permitted
for purchase by federal savings associations pursuant to applicable rules,
regulations, or interpretations of the Office of Thrift Supervision. Should
additional permitted investments be allowed as a result of future changes in
applicable regulations or federal laws, the Trust reserves the right,
without shareholder approval, to make such investments consistent with the
Trust''s investment objective, policies, and limitations. Further, should
existing statutes or regulations change so as to cause any securities held
by the Trust to become ineligible for purchase by federal savings
associations, the Trust will dispose of those securities at times
advantageous to the Trust.

As operated within the above limitation, the Trust may also serve as an
appropriate vehicle for a national bank as an investment for its own
account.
Except as otherwise noted, the investment policies and limitations described
below cannot be changed without approval of shareholders.

ACCEPTABLE INVESTMENTS. The U.S. government securities in which the Trust
invests are either issued or guaranteed by the U.S. government, its
agencies, or instrumentalities. The securities in which the Trust may invest
are limited to:

* direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds; and

* notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States;

* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

* notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.

Some obligations issued or guaranteed by agencies or instrumentalities of
the U.S. government are backed by the full faith and credit of the U.S.
Treasury. No assurances can be given that the U.S. government will provide
financial support to other agencies or instrumentalities, since it is not
obligated to do so. These instruments are supported by:

* the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

* the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or
* the credit of the agency or instrumentality.

CMOS. CMOs are bonds issued by single-purpose stand-alone finance
subsidiaries or trusts of financial institutions, government agencies,
investment bankers, or companies related to the construction industry and
may meet the Internal Revenue Code requirements to be classified as real
estate mortgage investment conduits. Most of the CMOs in which the Trust
would invest use the same basic structure:

* Several classes of securities are issued against a pool of mortgage
collateral. The most common structure contains four classes of securities:
The first three (A, B, and C bonds) pay interest at their stated rates
beginning with the issue date; the final class (or Z bond) typically
receives the residual income from the underlying investments after payments
are made to the other classes.

* The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities.

* The classes of securities are retired sequentially. All principal payments
are directed first to the shortest-maturity class (or A bonds). When those
securities are completely retired, all principal payments are then directed
to the next-shortest-maturity security (or B bond.) This process continues
until all of the classes have been paid off.

The Trust will invest only in CMOs which are rated AAA by a nationally
recognized rating agency, and which may be: (a) collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of principal
and interest by an agency or instrumentality of the U.S. government; (b)
collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is collateralized by
U.S. government securities; or (c) securities in which the proceeds of the
issuance are invested in mortgage securities and payment of the principal
and interest are supported by the credit of an agency or instrumentality of
the U.S. government.

The prices of fixed income securities fluctuate inversely to the direction
of interest rates.

REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which
banks, broker/dealers, and other recognized financial institutions sell U.S.
government securities or other securities to the Trust and agree at the time
of sale to repurchase them at a mutually agreed upon time and price. To the
extent that the original seller does not repurchase the securities from the
Trust, the Trust could receive less than the repurchase price on any sale of
such securities.

As a matter of investment practice, which can be changed without shareholder
approval, the Trust will not invest more than 15% of its net assets in
repurchase agreements providing for settlement in more than seven days after
notice.

CHARACTERISTICS OF MORTGAGE-BACKED SECURITIES. Some of the U.S. government
securities in which the Trust will invest can represent an undivided
interest in a pool of residential mortgages or may be collateralized by a
pool of residential mortgages ("mortgage-backed securities").
Mortgage-backed securities have yield and maturity characteristics
corresponding to the underlying mortgages. Distributions to holders of
mortgage-backed securities include both interest and principal payments.
Principal payments represent the amortization of the principal of the
underlying mortgages and any prepayments of principal due to prepayment,
refinancing, or foreclosure of the underlying mortgages. Although maturities
of the underlying mortgage loans may range up to 30 years, amortization and
prepayments substantially shorten the effective maturities of
mortgage-backed securities. Due to these features, mortgage-backed
securities are less effective as a means of "locking in" attractive
long-term interest rates than fixed-income securities which pay only a
stated amount of interest until maturity, when the entire principal amount
is returned. This is caused by the need to reinvest at lower interest rates
both distributions of principal generally and significant prepayments which
become more likely as mortgage interest rates decline. Since comparatively
high interest rates cannot be effectively "locked in," mortgage-backed
securities may have less potential for capital appreciation during periods
of declining interest rates than other non-callable fixed-income government
securities of comparable stated maturities. However, mortgage-backed
securities may experience less pronounced declines in value during periods
of rising interest rates.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase U.S.
government obligations on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Trust purchases securities with
payment and delivery scheduled for a future time. The seller''s failure to
complete these transactions may cause the Trust to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

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

INVESTMENT LIMITATIONS

The Trust will not borrow money or pledge securities except, under certain
circumstances, the Trust may borrow up to one-third of the value of its
total assets and pledge up to 10% of the value of those assets to secure
such borrowings. These limitations may not be changed without shareholder
approval.

PORTFOLIO TURNOVER

The Trust does not attempt to set or meet any specific portfolio turnover
rate, since turnover is incidental to transactions undertaken in an attempt
to achieve the Trust's investment objective. High turnover rates may result
in higher brokerage commissions and capital gains. See "Tax Information" in
this prospectus and "Brokerage Transactions" in the Statement of Additional
Information.

TRUST INFORMATION

MANAGEMENT OF THE TRUST

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

INVESTMENT ADVISER. Pursuant to an investment advisory contract with the
Trust, investment decisions for the Trust are made by Federated Management,
the Trust's investment adviser (the "Adviser"), subject to direction by the
Trustees. The Adviser continually conducts investment research and
supervision for the Trust and is responsible for the purchase and sale of
portfolio instruments, for which it receives an annual fee from the Trust.

ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to 0.40% of the Trust's average daily net assets.

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

Federated Management and other subsidiaries of Federated Investors serve as
investment advisers to a number of investment companies and private
accounts. Certain other subsidiaries also provide administrative services to
a number of investment companies. With over $110 billion invested across
over 300 funds under management and/or administration by its subsidiaries,
as of December 31, 1996, Federated Investors is one of the largest mutual
fund investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,500
financial institutions nationwide.

Kathleen M. Foody-Malus has been the Trust's portfolio manager since April
1990. Ms. Foody-Malus joined Federated Investors in 1983 and has been a Vice
President of the Trust's investment adviser since 1993. Ms. Foody-Malus
served as an Assistant Vice President of the investment adviser from 1990
until 1992. Ms. Foody-Malus received her M.B.A. in Accounting/Finance from
the University of Pittsburgh.

Edward J. Tiedge has been the Trust's portfolio manager since October 1995.
Mr. Tiedge joined Federated Investors in 1993 and has been a Vice President
of the Trust's investment adviser since January 1996. He served as an
Assistant Vice President of the Trust's investment adviser in 1995, and an
Investment Analyst during 1993 and 1994. Mr. Tiedge served as Director of
Investments at Duquesne Light Company from 1990 to 1993. Mr. Tiedge is a
Chartered Financial Analyst and received his M.S. in Industrial
Administration from Carnegie Mellon University.

Both the Trust and the Adviser have adopted strict codes of ethics governing
the conduct of all employees who manage the Trust and its portfolio
securities. These codes recognize that such persons owe a fiduciary duty to
the Trust's shareholders and must place the interests of shareholders ahead
of the employees' own interest. Among other things, the codes: require
preclearance and periodic reporting of personal securities transactions;
prohibit personal transactions in securities being purchased or sold, or
being considered for purchase or sale, by the Fund; prohibit purchasing
securities in initial public offerings; and prohibit taking profits on
securities held for less than sixty days. Violations of the codes are
subject to review by the Trustees, and could result in severe penalties.

DISTRIBUTION OF INSTITUTIONAL SHARES

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

SHAREHOLDER SERVICES. The Trust has entered into a Shareholder Services
Agreement with Federated Shareholder Services, a subsidiary of Federated
Investors, under which the Trust may make payments up to 0.25% of the
average daily net asset value of Institutional Shares, computed at an annual
rate, to obtain certain personal services for shareholders and to maintain
shareholder accounts. From time to time and for such periods as deemed
appropriate, the amount stated above may be reduced voluntarily. Under the
Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions
to perform shareholder services. Financial institutions will receive fees
based upon shares owned by their clients or customers. The schedules of such
fees and the basis upon which such fees will be paid will be determined from
time to time by the Trust and Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

In addition to payments made pursuant to the Shareholder Services Agreement,
Federated Securities Corp. and Federated Shareholder Services, from their
own assets, may pay financial institutions supplemental fees for the
performance of substantial sales services, distribution-related support
services, or shareholder services. The support may include sponsoring sales,
educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Trust. Such assistance will be predicated upon the amount
of shares the financial institution sells or may sell, and/or upon the type
and nature of sales or marketing support furnished by the financial
institution. Any payments made by the distributor may be reimbursed by the
Trust's investment adviser or its affiliates.

ADMINISTRATION OF THE TRUST

<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE
ADMINISTRATIVE FEE DAILY NET ASSETS
<C> <S>
.15% on the first $250 million
.125% on the next $250 million
.10% on the next $250 million
.075% on assets in excess of $750 million
</TABLE>

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

NET ASSET VALUE

The Trust's net asset value per Share fluctuates. The net asset value for
Shares is determined by adding the interest of the Shares in the market
value of all securities and other assets of the Trust, subtracting the
interest of the Shares in the liabilities of the Trust and those
attributable to Shares, and dividing the remainder by the number of Shares
outstanding. The net asset value for Shares may exceed that of Institutional
Service Shares 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.

INVESTING IN INSTITUTIONAL SHARES

SHARE PURCHASES

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

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

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

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

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $25,000 plus any financial
intermediary's fee, if applicable. However, 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 will be calculated by combining
all accounts it maintains with the Trust. Accounts established through a
financial intermediary may be subject to a smaller minimum investment.

WHAT SHARES COST

Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Trust. Investors who
purchase Shares through a financial intermediary may be charged a service
fee by that financial intermediary.

The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value
of the Trust's portfolio securities that its net asset value might be
materially affected; (ii) days during which no shares are tendered for
redemption and no orders to purchase shares are received; or (iii) the
following holidays: New Year's Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.

EXCHANGING SECURITIES FOR TRUST SHARES

Investors may exchange certain U.S. government securities or a combination
of securities and cash for Shares. The securities and any cash must have a
market value of at least $25,000. The Trust reserves the right to determine
the acceptability of securities to be exchanged. Securities accepted by the
Trust are valued in the same manner as the Trust values its assets.
Investors wishing to exchange securities should first contact Federated
Securities Corp.

Shares purchased by exchange of U.S. government securities cannot be
redeemed by telephone for five business days to allow time for the transfer
to settle.

CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Trust, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested by contacting the Trust.

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

DIVIDENDS

Dividends are declared daily and paid monthly. Dividends are declared just
prior to determining net asset value. If an order for Shares is placed on
the preceding business day, Shares purchased by wire begin earning dividends
on the business day wire payment is received by State Street Bank. If the
order for Shares and payment by wire are received on the same day, shares
begin earning dividends on the next business day. Shares purchased by check
begin earning dividends on the business day after the check is converted,
upon instruction of the transfer agent, into federal funds. Dividends are
automatically reinvested in additional Shares unless cash payments are
requested by contacting the Trust.

CAPITAL GAINS

Capital gains realized by the Trust, if any, are distributed at least once
every 12 months.

REDEEMING INSTITUTIONAL SHARES

The Trust redeems Shares at the net asset value next determined after the
Trust receives the redemption request. Investors who redeem shares through a
financial intermediary may be charged a service fee by that financial
intermediary. Redemptions will be made on days on which the Trust computes
its net asset value. Redemption requests must be received in proper form and
can be made by telephone request or by written request.

TELEPHONE REDEMPTION

Shareholders may redeem their Shares by telephoning the Trust before 4:00
p.m. (Eastern time). Telephone redemption instructions may be recorded. The
proceeds will normally be wire transferred the following business day, but
in no event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. If at any
time, the Trust shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.

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

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

WRITTEN REQUESTS

Shares may also be redeemed by sending a written request to the Trust. Call
the Trust for specific instructions before redeeming by letter. The
shareholder will be asked to provide in the request his name, the Trust
name, his account number, and the share or dollar amount requested. All
owners of the account must sign the request exactly as the shares are
registered. If share certificates have been issued, they must be sent
unendorsed with the written request by registered or certified mail.

SIGNATURES. Shareholders requesting a redemption of any amount to be sent to
an address other than that on record with the Trust or a redemption payable
other than to the shareholder of record must have their signatures
guaranteed by:

* a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");

* a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

* a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or

* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Trust does not accept signatures guaranteed by a notary public.

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

RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a
proper written redemption request.

ACCOUNTS WITH LOW BALANCES

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

Before Shares are redeemed to close an account, the shareholder is notified
in writing and allowed 30 days to purchase additional Shares to meet the
minimum requirement.

SHAREHOLDER INFORMATION

VOTING RIGHTS

Each Share of the Trust gives the shareholder one vote in Trustee elections
and other matters submitted to shareholders for vote. All shares of all
classes of each portfolio in the Trust have equal voting rights except that,
in matters affecting only a particular fund or class, only shares of that
fund or class are entitled to vote.

As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's operation and for the election of Trustees under
certain circumstances.

Trustees may be removed by the Trustees or by shareholders at a special
meeting. A special meeting of the shareholders for this purpose shall be
called by the Trustees upon the written request of shareholders owning at
least 10% of the Trust's outstanding shares entitled to vote.

TAX INFORMATION

FEDERAL INCOME TAX

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

Unless otherwise exempt, shareholders are required to pay federal income tax
on any dividends and other distributions received. This applies whether
dividends and distributions are received in cash or as additional shares.

STATE AND LOCAL TAXES

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

Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

PERFORMANCE INFORMATION

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

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

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

Total return and yield will be calculated separately for Institutional
Shares and Institutional Service Shares. Because Institutional Service
Shares are subject to a 12b-1 fee and shareholder services fee, the total
return and yield for Institutional Shares, for the same period, will exceed
that of Institutional Service Shares.

Institutional Shares are sold without any sales charge or other similar
non-recurring charges.

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

OTHER CLASSES OF SHARES

Institutional Service Shares are designed primarily for retail and private
banking customers of financial institutions as a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
of U.S. government securities. A minimum initial investment of $25,000 over
a 90-day period is required.

Institutional Service Shares are distributed pursuant to a 12b-1 Plan
adopted by the Trust whereby the distributor is paid a fee of 0.25% of the
Institutional Service Shares' average daily net assets. In addition,
Institutional Service Shares pay a shareholder services fee of 0.25% of the
Institutional Service Shares' average daily net assets.

Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of
shares of the Trust is sold.

The amount of dividends payable to Institutional Shares will exceed that of
Institutional Service Shares by the difference between class expenses and
distribution and shareholder service expenses borne by shares of each
respective class. The stated advisory fee is the same for both classes of
shares.

FEDERATED INCOME TRUST
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Reference is made to the Independent Auditors' Report on page 25.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $10.39 $ 9.70 $10.50 $10.73 $10.64
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.65 0.65 0.68 0.75 0.51
Net realized and unrealized gain (loss)
on investments (0.24) 0.69 (0.80) (0.23) 0.09
Total from investment operations 0.41 1.34 (0.12) 0.52 0.60
LESS DISTRIBUTIONS
Distributions from net investment income (0.65) (0.65) (0.68) (0.75) (0.51)
NET ASSET VALUE, END OF PERIOD $10.15 $10.39 $ 9.70 $10.50 $10.73
TOTAL RETURN(B) 4.21% 14.19% (1.08)% 4.96% 4.80%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% 0.80% 0.78% 0.76% 0.76%*
Net investment income 6.49% 6.45% 6.75% 7.03% 7.16%*
Expense waiver/reimbursement(c) 0.25% 0.25% 0.22% -- --
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $43,257 $40,788 $40,428 $67,176 $53,981
Portfolio turnover 212% 184% 217% 178% 52%
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from May 31, 1992 (effective date of
Institutional Service Shares) to January 31, 1993.

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

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

FEDERATED INCOME TRUST
PORTFOLIO OF INVESTMENTS

JANUARY 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM OBLIGATIONS -- 98.3%
(A)FEDERAL HOME LOAN MORTGAGE CORP. -- 31.8%
$ 131,983 11.50%, 12/1/2014 $ 148,770
405,792 11.00%, 5/1/2000 428,683
269,365 10.50%, 7/1/2000 283,423
13,769,920 9.50%, 11/1/2009 - 12/1/2022 14,897,958
32,109,957 9.00%, 4/1/2009 - 2/1/2025 33,928,682
24,542,293 8.00%, 9/1/2026 25,056,208
126,698,603 7.50%, 7/1/2025 - 8/1/2026 127,010,909
57,593,637 7.00%, 10/1/2007 - 5/1/2011 57,716,480
21,173,385 6.00%, 5/1/2011 20,460,477
Total 279,931,590
(A)FEDERAL HOME LOAN MORTGAGE CORP. REMIC -- 3.3%
5,269,800 7.50%, Series 1928-PG, (Interest Only), 12/15/2018 999,627
14,000,247 7.00%, Series 176, (Interest Only), 6/1/2026 4,956,927
8,662,405 6.50%, Series 1808-B, 5/15/2008 8,234,742
5,326,902 5.958%, Series 1590-T, (Inverse Floater), 10/15/2023 3,159,545
40,364,829 4.00%, Series 1707-B, (Interest Only), 3/15/2024 12,037,196
Total 29,388,037
(A)FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 31.5%
17,017,107 10.50%, 12/1/2019 - 4/1/2022 18,851,722
32,793,923 10.00%, 11/1/2009 - 4/1/2025 35,857,131
34,073,753 8.50%, 7/1/2024 - 12/1/2024 35,399,501
52,050,521 8.00%, 2/1/2002 - 11/1/2026 53,159,303
23,521,767 7.50%, 3/1/2010 - 11/1/2010 23,921,032
113,129,182 7.00%, 8/1/2025 - 11/1/2026 110,774,890
Total 277,963,579
</TABLE>

FEDERATED INCOME TRUST

<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
LONG-TERM OBLIGATIONS -- CONTINUED
(A)FEDERAL NATIONAL MORTGAGE ASSOCIATION REMIC -- 3.9%
$ 8,557,426 7.00%, Series 1996-64 PM, (Interest Only), 1/18/2012 $ 2,388,035
20,850,000 6.50%, Series 1995-24 M, 5/25/2008 19,813,964
3,834,001 5.958%, Series 1993-202 SK, (Inverse Floater), 11/25/2023 2,274,061
11,139,000 2.618%, Series 96X-225C VN, (Inverse Floater), 12/25/2023 5,103,110
7,100,000 0.00%, Series 1996-24 C, (Principal Only), 2/25/2008 4,657,174
Total 34,236,344
(A)GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 13.0%
50,649,732 8.50%, 7/15/2024 52,701,046
60,190,284 8.00%, 12/15/2023 61,902,096
Total 114,603,142
(A)GOVERNMENT NATIONAL MORTGAGE ASSOCIATION REMIC -- 0.3%
11,280,560 7.50%, Series 1997-3 PG, (Interest Only), 2/28/2027 2,642,132
U.S. TREASURY NOTES -- 14.5%
48,200,000 6.875%, 5/15/2006 49,414,158
78,250,000 6.375%, 9/30/2001 78,611,515
Total 128,025,673
TOTAL LONG-TERM OBLIGATIONS (IDENTIFIED COST $860,873,070) 866,790,497
(B)REPURCHASE AGREEMENT -- 1.7%
15,335,000 BT Securities Corporation, 5.58%, dated 1/31/1997, due 2/3/1997
(AT AMORTIZED COST) 15,335,000
TOTAL INVESTMENTS (IDENTIFIED COST $876,208,070)(C) $ 882,125,497
</TABLE>

(a) Because of monthly principal payments, the average lives of the Federal
Home Loan Mortgage Corp., Federal National Mortgage Association, and
Government National Mortgage Association securities approximates
1-10 Years.

(b) The repurchase agreement is fully collateralized by U.S. government
and/or agency obligations based on market prices at the date of the
portfolio. The investment in the repurchase agreement is through
participation in a joint account with other Federated funds.

(c) The cost of investments for federal tax purposes amounts to
$876,208,070. The net unrealized appreciation of investments on a federal
tax basis amounts to $5,917,427 which is comprised of $10,635,349
appreciation and $4,717,922 depreciation at January 31, 1997.

Note: The categories of investments are shown as a percentage of net assets
($881,799,547) at January 31, 1997.

The following acronym is used throughout this portfolio:

REMIC -- Real Estate Mortgage Investment Conduit

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

FEDERATED INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 31, 1997
<TABLE>
<S> <C> <C>

ASSETS:
Total investments in securities, at value (identified and tax cost $876,208,070) $ 882,125,497
Income receivable 7,104,079
Receivable for shares sold 928,588
Total assets 890,158,164
LIABILITIES:
Payable for investments purchased $ 2,632,436
Payable for shares redeemed 1,264,195
Income distribution payable 3,759,427
Payable to Bank 583,368
Accrued expenses 119,191
Total liabilities 8,358,617
NET ASSETS for 86,885,019 shares outstanding $ 881,799,547
NET ASSETS CONSIST OF:
Paid in capital $ 998,005,101
Net unrealized appreciation of investments 5,917,427
Accumulated net realized loss on investments (122,565,968)
Undistributed net investment income 442,987
Total Net Assets $ 881,799,547
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$838,542,422 / 82,622,365 shares outstanding $10.15
INSTITUTIONAL SERVICE SHARES:
$43,257,125 / 4,262,654 shares outstanding $10.15
</TABLE>

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

FEDERATED INCOME TRUST
STATEMENT OF OPERATIONS

YEAR ENDED JANUARY 31, 1997
<TABLE>
<S> <C> <C> <C>

INVESTMENT INCOME:
Interest (net of dollar roll expense of $5,157,675) $ 68,902,516
EXPENSES:
Investment advisory fee $ 3,763,073
Administrative personnel and services fee 711,038
Custodian fees 184,349
Transfer and dividend disbursing agent fees and expenses 209,530
Directors'/Trustees' fees 20,716
Auditing fees 19,981
Legal fees 5,597
Portfolio accounting fees 144,584
Distribution services fee -- Institutional Service Shares 101,450
Shareholder services fee -- Institutional Shares 2,250,471
Shareholder services fee -- Institutional Service Shares 101,450
Share registration costs 28,533
Printing and postage 28,052
Insurance premiums 10,676
Taxes 53,011
Miscellaneous 11,597
Total expenses 7,644,108
Waivers and reimbursements --
Waiver of distribution services fee -- Institutional Service Shares $ (97,392)
Waiver of shareholder services fee -- Institutional Shares (1,980,414)
Waiver of shareholder services fee -- Institutional Service Shares (4,058)
Total waivers (2,081,864)
Net expenses 5,562,244
Net investment income 63,340,272
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (4,670,222)
Net change in unrealized appreciation of investments (19,622,703)
Net realized and unrealized loss on investments (24,292,925)
Change in net assets resulting from operations $ 39,047,347
</TABLE>

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

FEDERATED INCOME TRUST
STATEMENT OF CHANGES IN NET ASSETS

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS --
Net investment income $ 63,340,272 $ 72,946,966
Net realized gain (loss) on investments ($4,661,466 net loss and
$2,326,436 net gain, respectively, as computed for federal
tax purposes) (4,670,222) 15,870,867
Net change in unrealized appreciation (depreciation) (19,622,703) 60,251,612
Change in net assets resulting from operations 39,047,347 149,069,445
DISTRIBUTIONS TO SHAREHOLDERS --
Distributions from net investment income
Institutional Shares (60,187,940) (70,138,212)
Institutional Service Shares (2,622,790) (2,808,754)
Distributions in excess of net investment income
Institutional Shares --- (86,555)
Change in net assets resulting from distributions to shareholders (62,810,730) (73,033,521)
SHARE TRANSACTIONS --
Proceeds from sale of shares 181,714,820 149,627,416
Net asset value of shares issued to shareholders in payment of
distributions declared 16,144,090 17,688,726
Cost of shares redeemed (316,176,917) (379,876,015)
Change in net assets resulting from share transactions (118,318,007) (212,559,873)
Change in net assets (142,081,390) (136,523,949)
NET ASSETS:
Beginning of period 1,023,880,937 1,160,404,886
End of period (including undistributed net investment income
of $442,987 and $0, respectively) $ 881,799,547 $ 1,023,880,937
</TABLE>

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

FEDERATED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997

1. ORGANIZATION

Federated Income Trust (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as a diversified, open-end
management investment company. The Trust offers two classes of shares:
Institutional Shares and Institutional Service Shares. The investment
objective of the Trust is current income.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Trust in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.

INVESTMENT VALUATIONS -- U.S. government securities are generally valued at
the mean of the latest bid and asked price as furnished by an independent
pricing service. Short-term securities are valued at the prices provided by
an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be
valued at amortized cost, which approximates fair market value.

REPURCHASE AGREEMENTS -- It is the policy of the Trust to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System, or to have segregated within the custodian bank's
vault, all securities held as collateral under repurchase agreement
transactions. Additionally, procedures have been established by the Trust to
monitor, on a daily basis, the market value of each repurchase agreement's
collateral to ensure that the value of collateral at least equals the
repurchase price to be paid under the repurchase agreement transaction.

The Trust will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Trust's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Trust could receive less
than the repurchase price on the sale of collateral securities.

INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS -- Interest income and
expenses are accrued daily. Bond premium and discount, if applicable, are
amortized as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.

Income and capital gain distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
expiring capital loss carryforwards. The following reclassifications have
been made to the financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
ACCUMULATED
NET REALIZED NET REALIZED
PAID-IN CAPITAL GAIN/LOSS
<C> <C>
$(26,760,646) $26,760,646
</TABLE>

Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.

FEDERAL TAXES -- It is the Trust's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.

At January 31, 1997, the Trust, for federal tax purposes, had a capital loss
carryforward of $122,621,966, which will reduce the Trust's taxable income
arising from future net realized gain on investments, if any, to the extent
permitted by the Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Trust of
any liability for federal tax. Pursuant to the Code, such capital loss
carryforward will expire as follows:
<TABLE>
<CAPTION>
EXPIRATION YEAR EXPIRATION AMOUNT
<C> <C>
1998 $ 16,389,825
1999 $ 1,962,942
2003 $ 99,607,733
2005 $ 4,661,466
</TABLE>

Additionally, net capital losses of $8,756 attributable to security
transactions incurred after October 31, 1996 are treated as arising on the
first day of the Trust's next taxable year.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Trust may engage in
when-issued or delayed delivery transactions. The Trust records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.

DOLLAR ROLL TRANSACTIONS -- The Trust enters into dollar roll transactions,
with respect to mortgage securities issued by GNMA, FNMA and FHLMC, in which
the Trust sells mortgage securities to financial institutions and
simultaneously agrees to accept substantially similar (same type, coupon and
maturity) securities at a later date at an agreed upon price. Dollar roll
transactions are short-term financing arrangements which will not exceed
twelve months. The Trust will use the proceeds generated from the
transactions to invest in short-term investments, which may enhance the
Trust's current yield and total return.

USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.

OTHER -- Investment transactions are accounted for on the trade date.

3. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value) for
each class of shares.

Transactions in shares were as follows:

<TABLE>
<CAPTION>
YEAR ENDED JANUARY 31,
1997 1996
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 16,566,782 $ 167,676,822 13,342,322 $ 135,013,099
Shares issued to shareholders in payment of
distributions declared 1,436,529 14,505,137 1,532,878 15,528,395
Shares redeemed (30,045,652) (303,965,855) (35,659,060) (360,499,241)
Net change resulting from
Institutional Share transactions (12,042,341) $(121,783,896) (20,783,860) $(209,957,747)
<CAPTION>
YEAR ENDED JANUARY 31,
1997 1996
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 1,383,128 $ 14,037,998 1,456,002 $ 14,614,317
Shares issued to shareholders in payment of
distributions declared 162,236 1,638,953 213,112 2,160,331
Shares redeemed (1,210,371) (12,211,062) (1,908,899) (19,376,774)
Net change resulting from
Institutional Service Share transactions 334,993 $ 3,465,889 (239,785) $ (2,602,126)
Net change resulting from
share transactions (11,707,348) $(118,318,007) (21,023,645) $(212,559,873)
</TABLE>

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

INVESTMENT ADVISORY FEE -- Federated Management, the Trust's investment
adviser (the "Adviser"), receives for its services an annual investment
advisory fee equal to 0.40% of the Trust's average daily net assets.

ADMINISTRATIVE FEE -- Federated Services Company ("FServ"), under the
Administrative Services Agreement, provides the Trust with administrative
personnel and services. The fee paid to FServ is based on the level of
average aggregate daily net assets of all funds advised by subsidiaries of
Federated Investors for the period. The administrative fee received during
the period of the Administrative Services Agreement shall be at least
$125,000 per portfolio and $30,000 per each additional class of shares.

DISTRIBUTION SERVICES FEE -- The Trust has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan,
the Trust will compensate Federated Securities Corp. ("FSC"), the principal
distributor, from the net assets of the Trust to finance activities intended
to result in the sale of the Trust's Institutional Service Shares. The Plan
provides that the Trust may incur distribution expenses up to 0.25% of the
average daily net assets of the Institutional Service Shares, annually, to
compensate FSC. The distributor may voluntarily choose to waive any portion
of its fee. The distributor can modify or terminate this voluntary waiver at
any time at its sole discretion.

SHAREHOLDER SERVICES FEE -- Under the terms of a Shareholder Services
Agreement with Federated Shareholder Services ("FSS"), the Trust will pay
FSS up to 0.25% of average daily net assets of the Trust for the period. The
fee paid to FSS is used to finance certain services for shareholders and to
maintain shareholder accounts. FSS may voluntarily choose to waive any
portion of its fee. FSS can modify or terminate this voluntary waiver at any
time at its sole discretion.

TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES -- Federated
Services Company ("FServ"), through its subsidiary, Federated Shareholder
Services Company ("FSSC") serves as transfer and dividend disbursing agent
for the Trust. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.

PORTFOLIO ACCOUNTING FEES -- FServ maintains the Trust's accounting records
for which it receives a fee. The fee is based on the level of the Trust's
average daily net assets for the period, plus out-of-pocket expenses.

GENERAL -- Certain of the Officers and Trustees of the Trust are Officers
and Directors or Trustees of the above companies.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended January 31, 1997, were as follows:

<TABLE>
<S> <C>
PURCHASES $ 2,262,621,245
SALES $ 1,963,542,901
</TABLE>

INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
FEDERATED INCOME TRUST:

We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Federated Income Trust as of
January 31, 1997, and the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended January
31, 1997 and 1996, and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on
these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of the
securities owned as of January 31, 1997 by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed
other auditing procedures. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Federated Income
Trust as of January 31, 1997, the results of its operations, the changes in
its net assets and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Pittsburgh, Pennsylvania
March 12, 1997

ADDRESSES

Federated Income Trust
Institutional Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

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

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

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

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

Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

FEDERATED INCOME TRUST
INSTITUTIONAL SHARES

PROSPECTUS

An Open-End, Diversified
Management Investment Company

March 31, 1997

[Graphic]

Federated Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779

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

[Graphic]

Cusip 314199100
8030102A-IS (3/97)

FEDERATED INCOME TRUST

INSTITUTIONAL SERVICE SHARES
PROSPECTUS

The Institutional Service Shares of Federated Income Trust (the "Trust")
offered by this prospectus represent interests in a diversified portfolio of
securities. The Trust is a no-load, open-end, diversified management
investment company (a mutual fund). The investment objective of the Trust is
to provide current income. The Trust pursues this investment objective by
investing in U.S. government securities. As of the date of this prospectus,
it is anticipated that the Trust will invest primarily in securities of U.S.
government agencies or instrumentalities, such as the Federal Home Loan
Mortgage Corporation.

THE INSTITUTIONAL SERVICE 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 BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
INSTITUTIONAL SERVICE SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.

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

Prospectus dated March 31, 1997

TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF TRUST EXPENSES 1
FINANCIAL HIGHLIGHTS --
INSTITUTIONAL SERVICE SHARES 2
GENERAL INFORMATION 3
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
Investment Limitations 6
Portfolio Turnover 6
TRUST INFORMATION 6
Management of the Trust 6
Distribution of Institutional Service Shares 7
Supplemental Payments to Financial Institutions 8
Administration of the Trust 8
NET ASSET VALUE 8
INVESTING IN INSTITUTIONAL SERVICE SHARES 9
Share Purchases 9
Exchange Privilege 9
Minimum Investment Required 9
What Shares Cost 9
Exchanging Securities for Trust Shares 10
Certificates and Confirmations 10
Dividends 10
Capital Gains 10
REDEEMING INSTITUTIONAL SERVICE SHARES 11
Telephone Redemption 11
Written Requests 11
Accounts with Low Balances 12
SHAREHOLDER INFORMATION 12
Voting Rights 12
TAX INFORMATION 12
Federal Income Tax 12
State and Local Taxes 13
PERFORMANCE INFORMATION 13
OTHER CLASSES OF SHARES 13
FINANCIAL HIGHLIGHTS --
INSTITUTIONAL SHARES 14
FINANCIAL STATEMENTS 15
INDEPENDENT AUDITORS' REPORT 25
ADDRESSES 26
</TABLE>

SUMMARY OF TRUST EXPENSES

INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) None
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase
price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>

ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<TABLE>
<S> <C> <C>

Management Fee 0.40%
12b-1 Fee (after waiver)(1) 0.01%
Total Other Expenses 0.39%
Shareholder Services Fee (after waiver)(2) 0.24%
Total Operating Expenses(3) 0.80%
</TABLE>

(1) The 12b-1 fee has been reduced to reflect the voluntary waiver of a
portion of the 12b-1 fee. The distributor can terminate this voluntary
waiver at any time at its sole discretion. The maximum 12b-1 fee is 0.25%.

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

(3) The total operating expenses would have been 1.05% absent the voluntary
waivers of portions of the 12b-1 fee and shareholder services fee.

The purpose of this table is to assist an investor in understanding the
various costs and expenses that a shareholder of Institutional Service
Shares of the Fund will bear, either directly or indirectly. For more
complete descriptions of the various costs and expenses, see "Trust
Information" and "Investing in Institutional Service Shares."
Wire-transferred redemptions of less than $5,000 may be subject to
additional fees.

LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return;
(2) redemption at the end of each time period $8 $26 $44 $99
</TABLE>

THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

FEDERATED INCOME TRUST
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

* Computed on an annualized basis.

(a) Reflects operations for the period from May 31, 1992 (effective date of
Institutional Service Shares) to January 31, 1993.

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

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

GENERAL INFORMATION

The Trust was established as a Massachusetts business trust under a
Declaration of Trust dated November 17, 1981. The Declaration of Trust
permits the Trust to offer separate series of shares of beneficial interest
representing interests in separate portfolios of securities. The shares in
any one portfolio may be offered in separate classes. As of the date of this
prospectus, the Board of Trustees ("Trustees") has established two classes
of shares of the Trust, known as Institutional Service Shares and
Institutional Shares. This prospectus relates only to Institutional Service
Shares of the Trust.

Institutional Service Shares ("Shares") are designed primarily for retail
and private banking customers of financial institutions as a convenient
means of accumulating an interest in a professionally managed, diversified
portfolio of U.S. government securities. A minimum initial investment of
$25,000 over a 90-day period is required.

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

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE

INVESTMENT POLICIES

As a matter of investment policy which may be changed without shareholder
approval, the Trust will limit its investments to those that are permitted
for purchase by federal savings associations pursuant to applicable rules,
regulations, or interpretations of the Office of Thrift Supervision. Should
additional permitted investments be allowed as a result of future changes in
applicable regulations or federal laws, the Trust reserves the right,
without shareholder approval, to make such investments consistent with the
Trust's investment objective, policies, and limitations. Further, should
existing statutes or regulations change so as to cause any securities held
by the Trust to become ineligible for purchase by federal savings
associations, the Trust will dispose of those securities at times
advantageous to the Trust.

As operated within the above limitation, the Trust may also serve as an
appropriate vehicle for a national bank as an investment for its own
account.

Except as otherwise noted, the investment policies and limitations described
below cannot be changed without approval of shareholders.

* direct obligations of the U.S. Treasury such as U.S. Treasury bills,
notes, and bonds; and

* notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States;

* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and

* notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.

* the issuer's right to borrow an amount limited to a specific line of
credit from the U.S. Treasury;

* the discretionary authority of the U.S. government to purchase certain
obligations of an agency or instrumentality; or

* the credit of the agency or instrumentality.

* The cash flows from the underlying mortgages are applied first to pay
interest and then to retire securities.

Because the cash flow is distributed sequentially instead of pro rata as
with pass-through securities, the cash flows and average lives of CMOs are
more predictable, and there is a period of time during which the investors
in the longer-maturity classes receive no principal paydowns. The interest
portion of these payments is distributed by the Trust as income and the
capital portion is reinvested. One or more of the classes may be adjustable
rate. In addition, the Trust may invest in CMOs that include a class whose
yield floats inversely against a specified index rate.
The Trust will invest only in CMOs which are rated AAA by a nationally
recognized rating agency, and which may be: (a) collateralized by pools of
mortgages in which each mortgage is guaranteed as to payment of principal
and interest by an agency or instrumentality of the U.S. government; (b)
collateralized by pools of mortgages in which payment of principal and
interest is guaranteed by the issuer and such guarantee is collateralized by
U.S. government securities; or (c) securities in which the proceeds of the
issuance are invested in mortgage securities and payment of the principal
and interest are supported by the credit of an agency or instrumentality of
the U.S. government.

The prices of fixed income securities fluctuate inversely to the direction
of interest rates.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Trust may purchase U.S.
government obligations on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Trust purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Trust to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices.

INVESTMENT LIMITATIONS

PORTFOLIO TURNOVER

TRUST INFORMATION

MANAGEMENT OF THE TRUST

ADVISORY FEES. The Adviser receives an annual investment advisory fee equal
to 0.40% of the Trust's average daily net assets.

DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES

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

DISTRIBUTION PLAN AND SHAREHOLDER SERVICES. Under a distribution plan
adopted in accordance with Rule 12b-1 under the Investment Company Act of
1940 (the "Plan"), the distributor may be paid a fee by the Trust in an
amount computed at an annual rate of up to 0.25% of the average daily net
asset value of the Institutional Service Shares. The distributor may select
financial institutions such as banks, fiduciaries, custodians for public
funds, investment advisers, and broker/dealers to provide sales services or
distribution-related support services as agents for their clients or
customers.

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

In addition, the Trust has entered into a Shareholder Services Agreement
with Federated Shareholder Services, a subsidiary of Federated Investors,
under which the Trust may make payments up to 0.25% of the average daily net
asset value of the Institutional Service Shares to obtain certain personal
services for shareholders and to maintain shareholder accounts. From time to
time and for such periods as deemed appropriate, the amount stated above may
be reduced voluntarily. Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or
will select financial institutions to perform shareholder services.
Financial institutions will receive fees based upon shares owned by their
clients or customers. The schedules of such fees and the basis upon which
such fees will be paid will be determined from time to time by the Trust and
Federated Shareholder Services.

SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS

In addition to payments made pursuant to the Distribution Plan and
Shareholder Services Agreement, Federated Securities Corp. and Federated
Shareholder Services, from their own assets, may pay financial institutions
supplemental fees for the performance of substantial sales services,
distribution-related support services, or shareholder services. The support
may include sponsoring sales, educational and training seminars for their
employees, providing sales literature, and engineering computer software
programs that emphasize the attributes of the Trust. Such assistance will be
predicated upon the amount of shares the financial institution sells or may
sell, and/or upon the type and nature of sales or marketing support
furnished by the financial institution. Any payments made by the distributor
may be reimbursed by the Trust's investment adviser or its affiliates.

ADMINISTRATION OF THE TRUST

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

NET ASSET VALUE

The Trust's net asset value per Share fluctuates. The net asset value for
Shares is determined by adding the interest of the Shares in the market
value of all securities and other assets of the Trust, subtracting the
interest of Shares in the liabilities of the Trust and those attributable to
Shares, and dividing the remainder by the total number of Shares
outstanding. The net asset value for Institutional Shares may exceed that of
Shares 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.

INVESTING IN INSTITUTIONAL SERVICE SHARES

SHARE PURCHASES

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

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

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

EXCHANGE PRIVILEGE

Financial institutions that maintain master accounts with an aggregate
investment of at least $400 million in certain funds which are advised or
distributed by affiliates of Federated Investors may exchange their Shares
for Institutional Shares of the Trust.

MINIMUM INVESTMENT REQUIRED

The minimum initial investment in Shares is $25,000 plus any non-affiliated
bank or broker's fee, if applicable. However, 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 will be calculated by
combining all accounts it maintains with the Trust. Accounts established
through a non-affiliated bank or broker may be subject to a smaller minimum
investment.

WHAT SHARES COST

EXCHANGING SECURITIES FOR TRUST SHARES

Shares purchased by exchange of U.S. government securities cannot be
redeemed for five business days to allow time for the transfer to settle.
CERTIFICATES AND CONFIRMATIONS

As transfer agent for the Trust, Federated Shareholder Services Company
maintains a share account for each shareholder. Share certificates are not
issued unless requested by contacting the Trust.

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

DIVIDENDS

Dividends are declared daily and paid monthly. Dividends are declared just
prior to determining net asset value. If an order for Shares is placed on
the preceding business day, Shares purchased by wire begin earning dividends
on the business day wire payment is received by State Street Bank. If the
order for Shares and payment by wire are received on the same day, Shares
begin earning dividends on the next business day. Shares purchased by check
begin earning dividends on the business day after the check is converted,
upon instruction of the transfer agent, into federal funds. Dividends are
automatically reinvested in additional Shares unless cash payments are
requested by contacting the Trust.

CAPITAL GAINS

Capital gains realized by the Trust, if any, are distributed at least once
every 12 months.

REDEEMING INSTITUTIONAL SERVICE SHARES

The Trust redeems Shares at the net asset value next determined after the
Trust receives the redemption request. Redemptions will be made on days on
which the Trust computes its net asset value. Investors who redeem shares
through a financial intermediary may be charged a service fee by that
financial intermediary. Redemption requests must be received in proper form
and can be made by telephone request or by written request.

TELEPHONE REDEMPTION

Shareholders may redeem their Shares by telephoning the Trust before 4:00
p.m. (Eastern time). Telephone redemption instructions may be recorded. All
proceeds will normally be wire transferred the following business day, but
in no event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. If at any
time the Trust shall determine it necessary to terminate or modify this
method of redemption, shareholders would be promptly notified.

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

WRITTEN REQUESTS

* a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC")

* a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;

* a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or

* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.

The Trust does not accept signatures guaranteed by a notary public.

RECEIVING PAYMENT. Normally, a check for the proceeds is mailed within one
business day, but in no event more than seven days, after receipt of a
proper written redemption request.
ACCOUNTS WITH LOW BALANCES

Before Shares are redeemed to close an account, the shareholder is notified
in writing and allowed 30 days to purchase additional Shares to meet the
minimum requirement.

SHAREHOLDER INFORMATION

VOTING RIGHTS

FEDERAL INCOME TAX

STATE AND LOCAL TAXES

Shareholders are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.

PERFORMANCE INFORMATION

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

Total return and yield will be calculated separately for Institutional
Service Shares and Institutional Shares. Because Institutional Service
Shares are subject to a 12b-1 fee and shareholder services fee, the total
return and yield for Institutional Shares, for the same period, will exceed
that of Institutional Service Shares.

Institutional Service Shares are sold without any sales charge or other
similar non-recurring charges.

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

OTHER CLASSES OF SHARES

Institutional Shares are sold primarily to accounts for which financial
institutions act in a fiduciary or agency capacity. Institutional Shares are
sold at net asset value. Investments in Institutional Shares are subject to
a minimum initial investment of $25,000.

Institutional Shares are distributed without a 12b-1 Plan. Institutional
Shares pay a shareholder services fee of 0.25% of the Institutional Shares'
average daily net assets.
Financial institutions and brokers providing sales and administrative
services may receive different compensation depending upon which class of
shares of the Trust is sold.

The stated advisory fee is the same for both classes of shares.

FEDERATED INCOME TRUST
FINANCIAL HIGHLIGHTS -- INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

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

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

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

FEDERATED INCOME TRUST
PORTFOLIO OF INVESTMENTS

FEDERATED INCOME TRUST

Note: The categories of investments are shown as a percentage of net assets
($881,799,547) at January 31, 1997.

The following acronym is used throughout this portfolio:

REMIC -- Real Estate Mortgage Investment Conduit

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

FEDERATED INCOME TRUST
STATEMENT OF ASSETS AND LIABILITIES

JANUARY 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified and tax cost $876,208,070) $ 882,125,497
Income receivable 7,104,079
Receivable for shares sold 928,588
Total assets 890,158,164
LIABILITIES:
Payable for investments purchased $ 2,632,436
Payable for shares redeemed 1,264,195
Income distribution payable 3,759,427
Payable to Bank 583,368
Accrued expenses 119,191
Total liabilities 8,358,617
NET ASSETS for 86,885,019 shares outstanding $ 881,799,547
NET ASSETS CONSIST OF:
Paid in capital $ 998,005,101
Net unrealized appreciation of investments 5,917,427
Accumulated net realized loss on investments (122,565,968)
Undistributed net investment income 442,987
Total Net Assets $ 881,799,547
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$838,542,422 / 82,622,365 shares outstanding $10.15
INSTITUTIONAL SERVICE SHARES:
$43,257,125 / 4,262,654 shares outstanding $10.15
</TABLE>

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

FEDERATED INCOME TRUST
STATEMENT OF OPERATIONS

YEAR ENDED JANUARY 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest (net of dollar roll expense of $5,157,675) $ 68,902,516
EXPENSES:
Investment advisory fee $ 3,763,073
Administrative personnel and services fee 711,038
Custodian fees 184,349
Transfer and dividend disbursing agent fees and expenses 209,530
Directors'/Trustees' fees 20,716
Auditing fees 19,981
Legal fees 5,597
Portfolio accounting fees 144,584
Distribution services fee -- Institutional Service Shares 101,450
Shareholder services fee -- Institutional Shares 2,250,471
Shareholder services fee -- Institutional Service Shares 101,450
Share registration costs 28,533
Printing and postage 28,052
Insurance premiums 10,676
Taxes 53,011
Miscellaneous 11,597
Total expenses 7,644,108
Waivers and reimbursements --
Waiver of distribution services fee -- Institutional Service Shares $ (97,392)
Waiver of shareholder services fee -- Institutional Shares (1,980,414)
Waiver of shareholder services fee -- Institutional Service Shares (4,058)
Total waivers (2,081,864)
Net expenses 5,562,244
Net investment income 63,340,272
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments (4,670,222)
Net change in unrealized appreciation of investments (19,622,703)
Net realized and unrealized loss on investments (24,292,925)
Change in net assets resulting from operations $ 39,047,347
</TABLE>

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

FEDERATED INCOME TRUST
STATEMENT OF CHANGES IN NET ASSETS

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

FEDERATED INCOME TRUST
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1997

1. ORGANIZATION

2. SIGNIFICANT ACCOUNTING POLICIES

Net investment income, net realized gains/losses, and net assets were not
affected by this reclassification.

Additionally, net capital losses of $8,756 attributable to security
transactions incurred after October 31, 1996 are treated as arising on the
first day of the Trust's next taxable year.

OTHER -- Investment transactions are accounted for on the trade date.
3. SHARES OF BENEFICIAL INTEREST

The Declaration of Trust permits the Trustees to issue an unlimited number
of full and fractional shares of beneficial interest (without par value) for
each class of shares.

Transactions in shares were as follows:

4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES

GENERAL -- Certain of the Officers and Trustees of the Trust are Officers
and Directors or Trustees of the above companies.

5. INVESTMENT TRANSACTIONS

Purchases and sales of investments, excluding short-term securities, for the
period ended January 31, 1997, were as follows:

<TABLE>
<S> <C>
PURCHASES $ 2,262,621,245
SALES $ 1,963,542,901
</TABLE>

INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
FEDERATED INCOME TRUST:

DELOITTE & TOUCHE LLP

Pittsburgh, Pennsylvania
March 12, 1997

ADDRESSES

Federated Income Trust
Institutional Service Shares Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779

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

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

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

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

Independent Auditors
Deloitte & Touche LLP 2500 One PPG Place
Pittsburgh, Pennsylvania 15222-5401

FEDERATED INCOME TRUST
INSTITUTIONAL SERVICE SHARES
PROSPECTUS

An Open-End, Diversified
Management Investment Company

March 31, 1997

[Graphic]

Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

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

[Graphic]

Cusip 314199209
8030102A-SS(3/97)

FEDERATED INCOME TRUST
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES

STATEMENT OF ADDITIONAL INFORMATION

The Institutional Shares and Institutional Service Shares of Federated
Income Trust (the "Trust") represent interests in a diversified portfolio of
securities. This Statement of Additional Information should be read with the
prospectuses of the Trust dated March 31, 1997. This Statement is not a
prospectus. You may request a copy of a prospectus or a paper copy of this
Statement, if you have received it electronically, free of charge by calling
1-800-341-7400.

FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779

Statement dated March 31, 1997

[Graphic]
Federated Investors

Federated Investors Tower
Pittsburgh, PA 15222-3779

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

Cusip 314199100
Cusip 314199209
8030102B (3/97)

TABLE OF CONTENTS

GENERAL INFORMATION ABOUT THE TRUST 1
INVESTMENT OBJECTIVE AND POLICIES 1
Types of Investments 1
When-Issued and Delayed Delivery Transactions 1
Repurchase Agreements 1
Interest-Only and Principal-Only Investments 1
Inverse Floaters 1
Portfolio Turnover 2
INVESTMENT LIMITATIONS 2
Selling Short and Buying on Margin 2
Borrowing Money 2
Pledging Assets 2
Lending Cash or Securities 2
Issuing Senior Securities 2
Investing in Securities of Other Investment
Companies 2
FEDERATED INCOME TRUST MANAGEMENT 3
Trust Ownership 6
Trustees Compensation 7
Trustee Liability 7
INVESTMENT ADVISORY SERVICES 8
Adviser to the Trust 8
Advisory Fees 8
BROKERAGE TRANSACTIONS 8
OTHER SERVICES 8
Trust Administration 8
Custodian and Portfolio Accountant 9
Transfer Agent 9
Independent Auditors 9
PURCHASING SHARES 9
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES
9
Conversion to Federal Funds 9
DETERMINING NET ASSET VALUE 9
Determining Market Value of Securities 10
REDEEMING SHARES 10
MASSACHUSETTS PARTNERSHIP LAW 10
EXCHANGING SECURITIES FOR TRUST SHARES 10
Tax Consequences 10
TAX STATUS 11
The Trust's Tax Status 11
Shareholders' Tax Status 11
TOTAL RETURN 11
YIELD 11
PERFORMANCE COMPARISONS 12
Economic and Market Information 13
Duration 13
ABOUT FEDERATED INVESTORS 13
Mutual Fund Market 13
Institutional Clients 13
Bank Marketing 14
Broker/Dealers and Bank
Broker/Dealer Subsidiaries 14

GENERAL INFORMATION ABOUT THE TRUST

Federated Income Trust was established as a Massachusetts business trust
under a Declaration of Trust dated November 17, 1981.

Shares of the Trust are offered in two classes known as Institutional Shares
and Institutional Service Shares (individually and collectively referred to
as "Shares"). This Statement of Additional Information relates to the
above-mentioned Shares of the Trust.

INVESTMENT OBJECTIVE AND POLICIES
The Trust's investment objective is current income.

TYPES OF INVESTMENTS

The Trust invests only in U.S. government securities and certain
collateralized mortgage obligations. This investment policy and the
objective stated above cannot be changed without approval of shareholders.

WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS

These transactions are made to secure what is considered to be an
advantageous price or yield for the Trust. No fees or other expenses, other
than normal transaction costs, are incurred. However, liquid assets of the
Trust sufficient to make payment for the securities to be purchased are
segregated on the Trust's records at the trade date. These assets are marked
to market daily and are maintained until the transaction has been settled.
The Trust does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20%
of the total value of its assets.

REPURCHASE AGREEMENTS

The Trust requires its custodian to take possession of the securities
subject to repurchase agreements, and these securities are marked to market
daily. To the extent that the original seller does not repurchase the
securities from the Trust, the Trust could receive less than the repurchase
price on any sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of such
securities by the Trust might be delayed pending court action. The Trust
believes that under the regular procedures normally in effect for custody of
the Trust's portfolio securities subject to repurchase agreements, a court
of competent jurisdiction would rule in favor of the Trust and allow
retention or disposition of such securities. The Trust will only enter into
repurchase agreements with banks and other recognized financial institutions
such as broker/dealers which are deemed by the Trust's adviser to be
creditworthy pursuant to guidelines established by the Trustees.

INTEREST-ONLY AND PRINCIPAL-ONLY INVESTMENTS

Some of the securities purchased by the Fund may represent an interest
solely in the principal repayments or solely in the interest payments on
mortgage-backed securities (stripped mortgage-backed securities or "SMBSs").
SMBSs are usually structured with two classes and receive different
proportions of the interest and principal distributions on the pool of
underlying mortgage-backed securities. Due to the possibility of prepayments
on the underlying mortgages, SMBSs may be more interest-rate sensitive than
other securities purchased by the Fund. If prevailing interest rates fall
below the level at which SMBSs were issued, there may be substantial
prepayments on the underlying mortgages, leading to the relatively early
prepayments of principal-only SMBSs (the principal-only or "PO" class) and a
reduction in the amount of payments made to holders of interest-only SMBSs
(the interest-only or "IO" class). Because the yield to maturity of an IO
class is extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying mortgage-backed securities, it is
possible that the Fund might not recover its original investment on
interest-only SMBSs if there are substantial prepayments on the underlying
mortgages. The Fund's inability to fully recoup its investments in these
securities as a result of a rapid rate of principal prepayments may occur
even if the securities are rated by a nationally rated statistical rating
organization. Therefore, interest-only SMBSs generally increase in value as
interest rates rise and decrease in value as interest rates fall, counter to
changes in value experienced by most fixed income securities.

INVERSE FLOATERS

Some of the collateralized mortgage obligations ("CMOs") purchased by the
Fund may include a class whose yield floats inversely against a specified
index rate. These "inverse floaters" are more volatile than conventional
fixed or floating rate classes of a CMO and the yield thereon, as well as
the value thereof, will fluctuate in inverse proportion to changes in the
index on which interest rate adjustments are based. As a result, the yield
on an inverse floater class of a CMO will generally increase when market
yields (as reflected by the index) decrease and decrease when market yields
increase. The extent of the volatility of inverse floaters depends on the
extent of anticipated changes in market rates of interest. Generally,
inverse floaters provide for interest rate adjustments based upon a multiple
of the specified interest index, which further increases their volatility.
The degree of additional volatility will be directly proportional to the
size of the multiple used in determining interest rate adjustments.

PORTFOLIO TURNOVER

The Trust conducts portfolio transactions to accomplish its investment
objective as interest rates change, to invest new money obtained from
selling its shares, and to meet redemption requests. The Trust may dispose
of portfolio securities at any time if it appears that selling the
securities will help the Trust achieve its investment objective.

The Trust will not attempt to set or meet a portfolio turnover rate since
any turnover would be incidental to transactions undertaken in an attempt to
achieve the Trust's investment objective. During the fiscal years ended
January 31, 1997 and 1996, the portfolio turnover rates were 212% and 184%,
respectively.

INVESTMENT LIMITATIONS

The Trust will not change any of the investment limitations described below
without approval of shareholders.
SELLING SHORT AND BUYING ON MARGIN

The Trust will not sell any securities short or purchase any securities on
margin, but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of portfolio securities.

BORROWING MONEY

The Trust will not borrow money except as a temporary measure for
extraordinary or emergency purposes and then only in amounts not in excess
of 5% of the value of its total assets or in an amount 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 borrowing provision is not for investment leverage but solely to
facilitate management of the portfolio by enabling the Trust to meet
redemption requests when the liquidation of portfolio securities would be
inconvenient or disadvantageous.

Interest paid on borrowed funds will not be available for investment. The
Trust will liquidate any such borrowings as soon as possible and may not
purchase any portfolio securities while any borrowings are outstanding.

PLEDGING ASSETS

The Trust will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value of
total assets at the time of the borrowing.

LENDING CASH OR SECURITIES

The Trust will not lend any assets except portfolio securities. (This will
not prevent the purchase or holding of bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
repurchase agreements or other transactions which are permitted by the
Trust's investment objective and policies or Declaration of Trust).

ISSUING SENIOR SECURITIES

The Trust will not issue senior securities, except as permitted by its
investment objective and policies.

INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES

The Trust may not own securities of open-end investment companies. The Trust
can acquire up to 3 per centum of the total outstanding stock of closed-end
investment companies. The Trust will not be subject to any other limitations
with regard to the acquisition of securities of closed-end investment
companies so long as the public offering price of the Trust's Shares does
not include a sales load exceeding 1-1/2 per cent. The Trust will purchase
securities of closed-end investment companies only in open-market
transactions involving only customary broker's commissions. However, these
limitations are not applicable if the securities are acquired in a merger,
consolidation, or acquisition of assets.

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 restriction.

The Trust did not borrow money or pledge securities in excess of 5% of the
value of its total assets during the last fiscal year and has no present
intent to do so in the coming fiscal year.

FEDERATED INCOME TRUST MANAGEMENT

Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Income Trust, and principal occupations.

John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924

Chairman and Trustee

Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds.

Thomas G. Bigley
28th Floor, One Oxford Centre
Pittsburgh, PA
Birthdate: February 3, 1934

Trustee

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

John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937

Trustee

President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.

William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918

Trustee

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

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

Trustee

Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Trustee of the
Funds.

Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932

Trustee

Professor of Medicine, University of Pittsburgh; Medical Director,
University of Pittsburgh Medical Center - Downtown; Member, Board of
Directors, University of Pittsburgh Medical Center; formerly, Hematologist,
Oncologist, and Internist, Presbyterian and Montefiore Hospitals; Director
or Trustee of the Funds.

Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924

Trustee

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

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

President and Trustee

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

Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942

Trustee

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

Gregor F. Meyer
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: October 6, 1926

Trustee

Attorney, Member of Miller, Ament, Henny & Kochuba; Chairman, Meritcare,
Inc.; Director, Eat'N Park Restaurants, Inc.; Director or Trustee of the
Funds.

John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932

Trustee

President, Law Professor, Duquesne University; Consulting Partner, Mollica,
Murray and Hogue; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925

Trustee

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

Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935

Trustee

Public Relations/Marketing/Conference Planning, Manchester Craftsmen's
Guild; Restaurant Consultant, Frick Art & History Center; Conference
Coordinator, University of Pittsburgh Art History Department; Director or
Trustee of the Funds.

J. Christopher Donahue
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President

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

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

Executive Vice President

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

John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938

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

Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923

Vice President

Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.

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

@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.

As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Arrow Funds; Automated Government
Money Trust; Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash
Trust Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D.
Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S.
Government Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs
Fund; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated
Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated
Government Income Securities, Inc.; Federated Government Trust; Federated
High Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index Trust; Federated
Institutional Trust; Federated Insurance Series; Federated Investment
Portfolios; Federated Investment Trust; Federated Master Trust; Federated
Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund,
Inc.; Federated Municipal Trust; Federated Short-Term Municipal Trust;
Federated Short-Term U.S. Government Trust; Federated Stock and Bond Fund,
Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Investment Series Trust;
Liberty Term Trust, Inc. -- 1999; Liberty U.S. Government Money Market
Trust; Liquid Cash Trust; Managed Series Trust; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust; Municipal
Securities Income Trust; Newpoint Funds; Peachtree Funds; RIMCO Monument
Funds; Targeted Duration Trust; Tax-Free Instruments Trust; The Planters
Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds; Trust
for Financial Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury Obligations;
Wesmark Funds; and World Investment Series, Inc.

TRUST OWNERSHIP

Officers and Trustees own less than 1% of the Trust's outstanding shares.

As of March 10, 1997, the following shareholder of record owned 5% or more
of the outstanding Institutional Shares of the Trust: Sheldon & Co.,
National City Bank, Cleveland, Ohio, owned approximately 7,028,036.8110
shares (8.60%).

As of March 10, 1997, the following shareholders of record owned 5% or more
of the outstanding Institutional Service Shares of the Trust: First National
Bank & Trust of McAllister, McAllister, Oklahoma owned approximately
559,908.2780 shares (13.08%); Charles Schwab & Co., Inc., San Francisco,
California owned approximately 514,820.8740 shares (12.03%); Heritage Trust
Company, Grand Junction, Colorado owned approximately 505,816.9580 shares
(11.82%); Signet Trust Company, Baltimore, Maryland owned approximately
310,942.6120 shares (7.26%); Community First National Bank, Fargo, North
Dakota owned approximately 301,606.0920 shares (7.05%); Citizens'
Scholarship FOA, Inc., St. Peter, Minnesota owned approximately 282,809.7270
shares (6.61%); and CPB Trust Division, Honolulu, Hawaii owned approximately
278,573.3610 shares (6.51%).

TRUSTEES COMPENSATION
<TABLE>
<CAPTION>
NAME, AGGREGATE TOTAL COMPENSATION
POSITION WITH COMPENSATION FROM PAID TO TRUSTEES FROM
TRUST TRUST* TRUST AND FUND COMPLEX+
<S> <C> <S>

John F. Donahue, Chairman $-0- $-0- for the Trust and
and Trustee 56 investment companies
Glen R. Johnson, President $-0- $-0- for the Trust and
and Trustee 8 investment companies
Thomas G. Bigley, Trustee $1,967 $108,725 for the Trust and
56 investment companies
John T. Conroy, Jr., Trustee $2,164 $119,615 for the Trust and
56 investment companies
William J. Copeland, Trustee $2,164 $119,615 for the Trust and
56 investment companies
James E. Dowd, Trustee $2,164 $119,615 for the Trust and
56 investment companies
Lawrence D. Ellis, M.D., Trustee $1,967 $108,725 for the Trust and
56 investment companies
Edward L. Flaherty, Jr., Trustee $2,164 $119,615 for the Trust and
56 investment companies
Peter E. Madden, Trustee $1,967 $108,725 for the Trust and
56 investment companies
Gregor F. Meyer, Trustee $1,967 $108,725 for the Trust and
56 investment companies
John E. Murray, Jr., Trustee $1,967 $108,725 for the Trust and
56 investment companies
Wesley W. Posvar, Trustee $1,967 $108,725 for the Trust and
56 investment companies
Marjorie P. Smuts, Trustee $1,967 $108,725 for the Trust and
56 investment companies
</TABLE>

* Information is furnished for the fiscal year ended January 31, 1997

+ The information provided is for the last calendar year.

TRUSTEE LIABILITY

The Trust's Declaration of Trust provides that the Trustees are not liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.

INVESTMENT ADVISORY SERVICES

ADVISER TO THE TRUST

The Trust's investment adviser is Federated Management (the "Adviser"). It
is a subsidiary of Federated Investors. All the voting securities of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, his wife, and his son, J. Christopher Donahue.

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

Advisory Fees

For its advisory services, Federated Management receives an annual
investment advisory fee as described in the prospectuses. During the fiscal
years ended January 31, 1997, 1996, and 1995, the Trust's Adviser earned
$3,763,073, $4,380,678, and $5,793,071, respectively.

BROKERAGE TRANSACTIONS

When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the order
at a favorable price. In working with dealers, the Adviser will generally
use those who are recognized dealers in specific portfolio instruments,
except when a better price and execution of the order can be obtained
elsewhere. The Adviser makes decisions on portfolio transactions and selects
brokers and dealers subject to guidelines established by the Trustees. The
Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Trust or to the
Adviser and may include: advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services provided by brokers and dealers may be used by
the Adviser or its affiliates in advising the Fund and other accounts. To
the extent that receipt of these services may supplant services for which
the Adviser or its affiliates might otherwise have paid, it would tend to
reduce their expenses. The Adviser and its affiliates exercise reasonable
business judgment in selecting brokers who offer brokerage and research
services to execute securities transactions. They determine in good faith
that commissions charged by such persons are reasonable in relationship to
the value of the brokerage and research services provided. During the fiscal
years ended January 31, 1997, 1996, 1995, the Trust paid no brokerage
commissions.

Although investment decisions for the Trust are made independently from
those of the other accounts managed by the Adviser, investments of the type
the Trust may make may also be made by those other accounts. When the Trust
and one or more other accounts managed by the Adviser are prepared to invest
in, or desire to dispose of, the same security, available investments or
opportunities for sales will be allocated in a manner believed by the
Adviser to be equitable to each. In some cases, this procedure may adversely
affect the price paid or received by the Trust or the size of the position
obtained or disposed of by the Trust. In other cases, however, it is
believed that coordination and the ability to participate in volume
transactions will be to the benefit of the Trust.

OTHER SERVICES

Trust Administration

Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services to the Trust for a fee as described in
the prospectus. From March 1, 1994, to March 1, 1996, Federated
Administrative Services served as the Trust's Administrator. Prior to March
1, 1994, Federated Administrative Services, Inc. served as the Trust's
Administrator. Both former Administrators are subsidiaries of Federated
Investors. For purposes of this Statement of Additional Information,
Federated Services Company, Federated Administrative Services, and Federated
Administrative Services, Inc. may hereinafter collectively be referred to as
the "Administrators." For the fiscal years ended January 31, 1997, 1996, and
1995, the Administrators earned $711,038, $828,876, and $1,081,996,
respectively.

Custodian and Portfolio Accountant

State Street Bank and Trust Company, Boston, MA, is custodian for the
securities and cash of the Trust. Federated Services Company, Pittsburgh,
PA, provides certain accounting and recordkeeping services with respect to
the Trust's portfolio investments. The fee paid for this service is based
upon the level of the Trust's average net assets for the period plus
out-of-pocket expenses.

Transfer Agent

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

Independent Auditors

The independent auditors for the Trust are Deloitte & Touche LLP,
Pittsburgh, Pennsylvania.

PURCHASING SHARES

Shares are sold at their net asset value without a sales charge on days the
New York Stock Exchange is open for business. The procedure for purchasing
Shares is explained in the respective prospectus under "Investing in
Institutional Shares" or "Investing in Institutional Service Shares."

DISTRIBUTION PLAN AND SHAREHOLDER SERVICES

These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular
circumstances and goals. These activities and services may include, but are
not limited to, marketing efforts; providing office space, equipment,
telephone facilities, and various clerical, supervisory, computer, and other
personnel as necessary or beneficial to establish and maintain shareholder
accounts and records; processing purchase and redemption transactions and
automatic investments of client account cash balances; answering routine
client inquiries; and assisting clients in changing dividend options,
account designations, and addresses.

With respect to the Institutional Service Shares class of the Trust, by
adopting the Distribution Plan, the Trustees expects that the Trust will be
able to achieve a more predictable flow of cash for investment purposes and
to meet redemptions. This will facilitate more efficient portfolio
management and assist the Trust in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Trust's
objectives, and properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.

Other benefits, which may be realized under either arrangement, may include:
(1) providing personal services to shareholders; (2) investing shareholder
assets with a minimum of delay and administrative detail; (3) enhancing
shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.

For the year ended January 31, 1997, payments in the amount of $101,450 were
made pursuant to the Distribution Plan (Institutional Service Shares only),
$97,392 of which was waived. In addition, for this period, the Trust paid
shareholder service fees in the amount of $2,250,471 for Institutional
Shares and $101,450 for Institutional Service Shares, of which $1,980,414
and $4,058 was waived, respectively.

CONVERSION TO FEDERAL FUNDS

It is the Trust's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be
in federal funds or be converted into federal funds. State Street Bank acts
as the shareholder's agent in depositing checks and converting them to
federal funds.

DETERMINING NET ASSET VALUE

Net asset value generally changes each day. The days on which the net asset
value is calculated by the Trust are described in the respective
prospectuses.

DETERMINING MARKET VALUE OF SECURITIES

Market values of the Trust's portfolio securities are determined as follows:

* according to the mean between the over-the-counter bid and asked prices
provided by an independent pricing service, if available, or at fair value
as determined in good faith by the Trustees; or

* for short-term obligations with remaining maturities of less than 60 days
at the time of purchase, at amortized cost unless the Trustees determine
that particular circumstances of the security indicate otherwise.

REDEEMING SHARES

The Trust is obligated to redeem shares solely in cash up to $250,000 or 1%
of the Trust's net asset value, whichever is less, for any one shareholder
within a 90-day period. Any redemption beyond this amount will also be in
cash unless the Trustees determine that further payments should be in kind.
In such cases, the Trust will pay all or a portion of the remainder of the
redemption in portfolio instruments valued in the same way as the Trust
determines net asset value. The portfolio instruments will be selected in a
manner that the Trustees deem fair and equitable. Redemption in kind is not
as liquid as a cash redemption. If redemption is made in kind, shareholders
who sell these securities, could receive less than the redemption value and
could incur certain transaction costs.

MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect
its shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for acts or
obligations of the Trust. These documents require notice of this disclaimer
to be given in each agreement, obligation, or instrument the Trust or its
Trustees enter into or sign.

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

EXCHANGING SECURITIES FOR TRUST SHARES

Investors may exchange certain U.S. government securities they already own
for Shares of either class, or they may exchange a combination of securities
and cash for Shares of either class. An investor should forward the
securities in negotiable form with an authorized letter of transmittal to
Federated Securities Corp. specifying whether the investor will receive
Institutional Shares or Institutional Service Shares. The Trust will notify
the investor of its acceptance and valuation of the securities within five
business days of their receipt by the transfer agent.

The Trust values securities in the same manner as the Trust values its
assets. The basis of the exchange will depend upon the net asset value of
Shares on the day the securities are valued. One share of the Trust will be
issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends, subscription,
or other rights attached to the securities become the property of the Trust,
along with the securities.

TAX CONSEQUENCES

Exercise of this exchange privilege is treated as a sale for federal income
tax purposes. Depending upon the cost basis of the securities exchanged for
Shares, a gain or loss may be realized by the investor.

TAX STATUS

THE TRUST'S TAX STATUS

The Trust will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code, as amended,
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, the
Trust must, among other requirements:

* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;

* derive less than 30% of its gross income from the sale of securities held
less than three months;

* invest in securities within certain statutory limits; and

* distribute to its shareholders at least 90% of its net income earned
during the year.

SHAREHOLDERS' TAX STATUS

Shareholders are subject to federal income tax on dividends and capital
gains received as cash or additional Shares. No portion of any income
dividend paid by the Trust is eligible for the dividends received deduction
available to corporations. These dividends, and any short-term capital
gains, are taxable as ordinary income.

CAPITAL GAINS

Capital gains distributed to shareholders will be treated as long-term
capital gains regardless of how long shareholders have held Shares.

TOTAL RETURN

The average annual total return for Shares of the Trust 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 offering price per share at the end of
the period. The number of shares owned at the end of the period is based on
the number of shares purchased at the beginning of the period with $1,000,
adjusted over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions.

The Trust's average annual total return for Institutional Shares for the
one-year, five-year and ten-year periods ended January 31, 1997, were 4.44%,
6.23%, and 7.78%, respectively. The Trust's average annual total return for
Institutional Service Shares for the year ended January 31, 1997 and the
period from June 2, 1992 (date of Institutional Service Shares inception) to
January 31, 1997, was 4.21% and 5.94%, respectively.

YIELD
The yield for both classes of Shares of the Trust is determined each day by
dividing the net investment income per share (as defined by the Securities
and Exchange Commission) earned by either class of shares over a thirty-day
period by the offering price per share by either class of shares on the last
day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a twelve-month
period and is reinvested every six months. The yield does not necessarily
reflect income actually earned by the Trust because of certain adjustments
required by the Securities and Exchange Commission and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.

To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in
either class of Shares, performance will be reduced for those shareholders
paying those fees.

The Trust's yield for Institutional Shares for the thirty-day period ended
January 31, 1997, was 6.69%. The Trust's yield for Institutional Service
Shares was 6.47% for the same period.

PERFORMANCE COMPARISONS

The performance of both classes of Shares depends upon such variables as:

* portfolio quality;

* average portfolio maturity;

* type of instruments in which the portfolio is invested;

* changes in interest rates and market value of portfolio securities;
* changes in the Trust's expenses or either class of shares' expenses; and

* various other factors.

Both classes of Shares' performance fluctuates on a daily basis largely
because net earnings and net asset value per share fluctuate daily. Both net
earnings and net asset value per share are factors in the computation of
yield and total return. Investors may use financial publications and/or
indices to obtain a more complete view of the Trust's performance. When
comparing performance, investors should consider all relevant factors such
as the composition of any index used, prevailing market conditions,
portfolio compositions of other funds, and methods used to value portfolio
securities and compute offering price. The financial publications and/or
indices which the Trust uses in advertising may include:

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

* LEHMAN BROTHERS GOVERNMENT INDEX is an unmanaged index comprised of all
publicly issued, non-convertible domestic debt of the U.S. government, or
any agency thereof, or any quasi-federal corporation and of corporate debt
guaranteed by the U.S. government. Only notes and bonds with a minimum
outstanding principal of $1 million and a minimum maturity of one year are
included.

* SALOMON BROTHERS 15-YEAR MORTGAGE-BACKED SECURITIES INDEX includes the
average of all 15-year mortgage securities which include Federal Home Loan
Mortgage Corp. (Freddie Mac), Federal National Mortgage Association (Fannie
Mae), and Government National Mortgage Association (GNMA).

* LEHMAN BROTHERS FIVE-YEAR TREASURY BELLWETHER INDEX is an unmanaged index
comprised of U.S. government Treasury bonds with an average maturity of five
years.

* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.

In addition, the Trust will make comparisons to certain direct market
securities in which it is permitted to invest. The type of security that
will be used for such comparisons, and the sources of its performance are
listed below.

* 5-YEAR TREASURY NOTES -- Source: Wall Street Journal, Bloomberg Financial
Markets, and Telerate.

Advertisements and other sales literature for both classes of Shares may
quote total returns which are calculated on non-standardized base periods.
These total returns also represent the historic change in the value of an
investment in either class of Shares based on monthly reinvestment of
dividends over a specified period of time.

Advertising and other promotional literature may include charts, graphs and
other illustrations using the Trust's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Trust can
compare its performance, or performance for the types of securities in which
it invests, to a variety of other investments, such as bank savings
accounts, certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION

Advertising and sales literature for the Trust may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Trust portfolio managers and their views and analysis on how
such developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the
mutual fund industry, including the growth of the industry, from sources
such as the Investment Company Institute.

DURATION

Duration is a commonly used measure of the potential volatility in the price
of a bond, or other fixed income security, or in a portfolio of fixed income
securities, prior to maturity. Volatility is the magnitude of the change in
the price of a bond relative to a given change in the market rate of
interest. A bond's price volatility depends on three primary variables: the
bond's coupon rate; maturity date; and the level of market yields of similar
fixed-income securities. Generally, bonds with lower coupons or longer
maturities will be more volatile than bonds with higher coupons or shorter
maturities. Duration combines these variables into a single measure.

Duration is calculated by dividing the sum of the time-weighted values of
the cash flows of a bond or bonds, including interest and principal
payments, by the sum of the present values of the cash flows.

When the Trust invests in mortgage pass-through securities, its duration
will be calculated in a manner which requires assumptions to be made
regarding future principal prepayments. A more complete description of this
calculation is available upon request from the Trust.

ABOUT FEDERATED INVESTORS

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

The company's disciplined security selection process is firmly rooted in
sound methodologies backed by fundamental and technical research. Investment
decisions are made and executed by teams of portfolio managers, analysts,
and traders dedicated to specific market sectors. These traders handle
trillions of dollars in annual trading volume.

In the government sector, as of December 31, 1996, Federated Investors
managed 9 mortgage-backed, 5 government/agency and 17 government money
market mutual funds, with assets approximating $6.3 billion, $1.7 billion
and $23.6 billion, respectively. Federated trades approximately $309 million
in U.S. government and mortgage-backed securities daily and places $17
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 nearly $30 billion in
government funds within these maturity ranges.

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

MUTUAL FUND MARKET

Thirty-seven percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $3.5 trillion to the more than 6,000 funds
available.*

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

INSTITUTIONAL CLIENTS

Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for
a variety of applications, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax-exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisers. The marketing effort to these institutional clients is
headed by John B. Fisher, President, Institutional Sales Division.

BANK MARKETING

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

BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES

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

* Source: Investment Company Institute

PART C. OTHER INFORMATION

Item 24. Financial Statements and Exhibits:
(a) Financial Statements (Filed in Part A)
(b) Exhibits:
(1) Conformed copy of the Declaration of Trust of the
Registrant as amended (3);
(2) Copy of the By-Laws of the Registrant(5);
(i) Copy of Amendment No. 2 to the By-Laws of the
Registrant dated February 2, 1987 (6);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant;
(i) Institutional Shares (3);
(ii) Institutional Service Shares;+
(5) Conformed copy of the revised Investment Advisory
Contract of the Registrant dated August 1, 1989 (9);
(6) (i) Conformed copy of the Distributor's Contract;+
(ii) The Registrant hereby incorporates the conformed
copy of the secimen Mutual Funds Sales and
Service Agreement; Mutual Funds Service Agreement
and Plan Trustee/Mutual Funds Service Agreement
from Item 24(b)6 of the Cash Trust Series II
Registration Statement on Form N-1A, filed with
the Commission on July 24, 1995. (File Nos. 33-
38550 and 811-6269).
(7) Not applicable;
(8) Conformed copy of the Custodian Agreement of the
Registrant;+

+ All exhibits have been filed electronically.

3. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1 dated March 17, 1982. (File Nos. 2-75366
and 811-3352)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 6 on Form N-1A filed January 30, 1985. (File Nos. 2-
75366 and 811-3352)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N1-A filed March 23, 1987. (File Nos. 2-75366
and 811-3352)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 15 on Form N-1A filed March 13, 1990. (File Nos. 2-
75366 and 811-3352)

Item 24. Financial Statements and Exhibits: (Continued)
(9) (i) Conformed copy of the Agreement for Fund
Accounting Services, Administrative
Services, Transfer Agency Services, and
Custody Services Procurement of the
Registrant;+
(ii) The responses described in Item 24(b)(6)
are hereby incorporated by reference.
(iii) The Registrant hereby incorporates the
conformed copy of the Shareholder Services Sub-
Contract between National Pensions Alliance, Ltd.
and Federated Shareholder Services from Item
24(b)(9)(ii) of the Federated GNMA Trust
Registration Statement on Form N-1A, filed with the
Commission on March 25, 1996. (File Nos. 2-
75670 and 811-3375)
(iv) The Registrant hereby incorporates the conformed
copy of the Shareholder Services Sub-Contract between
Fidelity and Federated Shareholder Services from Item
24(b)(9)(iii) of the Federated GNMA Trust
Registration Statement on Form N-1A, filed with
the Commission on March 25, 1996. (File Nos. 2-
75670 and 811-3375)
(10) Conformed copy of the Opinion and Consent of Counsel as
to legality of shares being registered (10);
(11) Conformed copy of the Consent of Independent Public
Accountants;+
(12) Not applicable;
(13) Conformed copy of Initial Capital Understanding (2);
(14) Not applicable;
(15) Conformed copy of Rule 12B-1 Plan (13);
(16) Copy of Schedules for Computation of Trust Performance
Data (8);
(17) Copy of Financial Data Schedules;+
(18) The Registrant hereby incorporates the conformed copy
of the specimen Multiple Class Plan from Item 24(b)(18)
of the World Investment Series, Inc. Registration
Statement on Form N-1A, filed with the Commission on
January 26, 1996. (File Nos. 33-52149 and 811-07141)
(19) Conformed copy of Power of Attorney+
+ All exhibits have been filed electronically.

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1 filed February 3, 1982. (File Nos. 2-
75366 and 811-3352)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 12 on Form N-1A filed March 22, 1989. (File Nos. 2-
75366 and 811-3352)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 17 on Form N-1A filed March 22, 1991. (File Nos. 2-
75366 and 811-3352)
13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 25 on Form N-1A filed March 27, 1996. (File Nos. 2-
75366 and 811-3352)

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

None

Item 26. Number of Holders of Securities:

Number of Record Holders
Title of Class as of March 10,1997

Shares of Beneficial Interest
(no par value)

Institutional Shares 6,261
Institutional Service Shares 683
Item 27. Indemnification: (3);

Item 28. Business and Other Connections of Investment Adviser:

For a description of the other business of the investment
adviser, see the section entitled "INSERT PROSPECTUS HEADING'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 "INSERT
SAI HEADING." The remaining Trustee of the investment adviser,
his position with the investment adviser, and, in parentheses,
his principal occupation is: Mark D. Olson (Partner, Wilson,
Halbrook & Bayard), 107 W. Market Street, Georgetown, Delaware
19947.

The remaining Officers of the investment adviser are: William D.
Dawson,III, Henry A. Frantzen, J. Thomas Madden, and Mark L.
Mallon, Executive Vice Presidents; Peter R. Anderson, Drew J.
Collins, Jonathan C. Conley, Deborah A. Cunningham, Mark E.
Durbiano, J. Alan Minteer, and Mary Jo Ochson, Senior Vice
Presidents; J. Scott Albrecht, Joseph M. Balestrino, Randall S.
Bauer, David F. Belton, Christine A. Bosio, David A. Briggs,
Kenneth J. Cody, Alexandre de Bethmann, Linda A. Duessel, Michael
J. Donnelly, Michael P. Donnelly, Kathleen M. Foody-Malus, Thomas
M. Franks; Edward C. Gonzales, James E. Grefenstette, Susan R.
Hill, Stephen A. Keen, Robert M. Kowit, Mark S. Kopinski, Jeff A.
Kozemchak, Marian R. Marinack, Sandra L. McInerney, Susan M.
Nason, Robert J. Ostrowski, Charles A. Ritter, Frank Semack, Aash
M. Shah, Scott B. Schermerhorn, William F. Stotz, Tracy
P.Stouffer, Edward J. Tiedge, Paige M. Wilhelm, Jolanta M.
Wysocka, Vice Presidents; Todd A. Abraham, Stafanie L. Bachhuber,
Michael W. Casey, William R. Jamison, Constantine Kartsonsas,
Robert M. March, Joseph M. Natoli, Keith J. Sabol, and Michael W.
Sirianni, Assistant Vice Presidents; Stephen A. Keen, Secretary;
Thomas R. Donahue, Treasurer and Assistant Secretary; Richard B.
Fisher, Assistant Secretary and Assistant Treasurer; Christine I.
McGonigle, Assistant Secretary. The business address of each of
the Officers of the investment adviser is Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779. These individuals
are also officers of a majority of the investment advisers to the
Funds listed in Part B of this Registration Statement.
3. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 on Form N-1 dated March 17, 1982. (File Nos. 2-75366
and 811-3352)

Item 29. Principal Underwriters:

(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: 111 Corcoran Funds;
Arrow Funds; Automated Government Money Trust; BayFunds;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust
Series II; Cash Trust Series, Inc.; DG Investor Series; Edward D.
Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate
U.S. Government Fund, Inc.; Federated American Leaders Fund,
Inc.; Federated ARMs Fund; Federated Equity Funds; Federated
Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government
Income Securities, Inc.; Federated Government Trust; Federated
High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust;
Federated Index Trust; Federated Institutional Trust; Federated
Insurance Series; Federated Investment Portfolios; Federated
Investment Trust; Federated Master Trust; Federated Municipal
Opportunities Fund, Inc.; Federated Municipal Securities Fund,
Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated
Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-
Free Trust; Federated Total Return Series, Inc.; Federated U.S.
Government Bond Fund; Federated U.S. Government Securities Fund:
1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years;
Federated U.S. Government Securities Fund: 5-10 Years; Federated
Utility Fund, Inc.; First Priority Funds; Fixed Income
Securities, Inc.; High Yield Cash Trust; Independence One Mutual
Funds; Intermediate Municipal Trust; International Series, Inc.;
Investment Series Funds, Inc.; Investment Series Trust; Liberty
U.S. Government Money Market Trust; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Biltmore
Funds; The Biltmore Municipal Funds; The Monitor Funds; The
Planters Funds; The Starburst Funds; The Starburst Funds II; The
Virtus Funds; Tower Mutual Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves; Trust for
Short-Term U.S. Government Securities; Trust for U.S. Treasury
Obligations; Vision Group of Funds, Inc.; Wesmark Funds; and
World Investment Series, Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty Term
Trust, Inc.- 1999.

(b)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Item 30. Location of Accounts and Records:
All accounts and records required to be maintained by Section
31(a) of the Investment Company Act of 1940 and Rules 31a-1
through 31a-3 promulgated thereunder are maintained at one of the
following locations:

Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779

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

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

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

Federated Global Research 175 Water Street
Corp. New York, NY 10038-4965
Investment Adviser
State Street Bank and P.O. Box 8600
Trust Company Boston, MA 02266-8600
Custodian

Item 31. Management Services: Not applicable.

Item 32. Undertakings:

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

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

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED INCOME TRUST,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 25th day of March, 1997.

FEDERATED INCOME TRUST

BY: /s/ J. Crilley Kelly
J. Crilley Kelly, Assistant Secretary
Attorney in Fact for John F. Donahue
March 25, 1997

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/ J. Crilley Kelly
J. Crilley Kelly Attorney In Fact March 25, 1997
ASSISTANT SECRETARY For the Persons
Listed Below

NAME TITLE

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

Glen R. Johnson* President

John W. McGonigle* Treasurer, Executive Vice
President and Secretary
(Principal Financial and
Accounting Officer)

Thomas J. Bigley * Trustee

John T. Conroy, Jr.* Trustee

William J. Copeland* Trustee

James E. Dowd* Trustee

Lawrence D. Ellis, M.D.* Trustee

Edward L. Flaherty, Jr.* Trustee

Peter E. Madden* Trustee

Gregor F. Meyer* Trustee

John E. Murray, Jr.* Trustee

Wesley W. Posvar* Trustee

Marjorie P. Smuts* Trustee

* By Power of Attorney

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

INDEPENDENT AUDITORS' CONSENT

To the Board of Trustees and
Shareholders of FEDERATED INCOME TRUST:

We consent to the use in Post-Effective Amendment No. 27 to Registration
Statement (No. 2-75366) of Federated Income Trust of our report dated March 12,
1997, appearing in the Prospectus, which is a part of such Registration
Statement, and to the reference to us under the heading `Financial Highlights''
in such Prospectus.

By:/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP

Pittsburgh, Pennsylvania
March 25, 1997

Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

CUSTODIAN CONTRACT
BETWEEN
FEDERATED INVESTMENT COMPANIES
AND
STATE STREET BANK AND TRUST COMPANY
AND
FEDERATED SERVICES COMPANY

TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held by It......1
2. Duties of the Custodian With Respect to Property
of the Funds Held by the Custodian.........................2
2.1 Holding Securities....................................2
2.2 Delivery of Securities................................2
2.3 Registration of Securities............................5
2.4 Bank Accounts.........................................6
2.5 Payments for Shares...................................7
2.6 Availability of Federal Funds.........................7
2.7 Collection of Income..................................7
2.8 Payment of Fund Moneys................................8
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased..................................9
2.10 Payments for Repurchases or Redemptions of Shares of
a Fund ...............................................9
2.11 Appointment of Agents................................10
2.12 Deposit of Fund Assets in Securities System..........10
2.13 Segregated Account...................................12
2.14 Joint Repurchase Agreements..........................13
2.15 Ownership Certificates for Tax Purposes..............13
2.16 Proxies..............................................13
2.17 Communications Relating to Fund Portfolio Securities.13
2.18 Proper Instructions..................................14
2.19 Actions Permitted Without Express Authority..........14
2.20 Evidence of Authority................................15
2.21 Notice to Trust by Custodian Regarding Cash Movement.15
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.............15
4. Records ..................................................16
5. Opinion of Funds' Independent Public Accountants/Auditors.16
6. Reports to Trust by Independent Public Accountants/Auditors17
7. Compensation of Custodian.................................17
8. Responsibility of Custodian...............................17
9. Effective Period, Termination and Amendment...............19
10. Successor Custodian.......................................20
11. Interpretive and Additional Provisions....................21
12. Massachusetts Law to Apply................................22
13. Notices ..................................................22
14. Counterparts..............................................22
15. Limitations of Liability..................................22

CUSTODIAN CONTRACT

This Contract between those INVESTMENT COMPANIES listed on Exhibit 1, as it
may be amended from time to time, (the "Trust"), which may be Massachusetts
business trusts or Maryland corporations or have such other form of
organization as may be indicated, on behalf of the portfolios (hereinafter
collectively called the "Funds" and individually referred to as a "Fund")
of the Trust, having its principal place of business at Federated Investors
Tower, Pittsburgh, Pennsylvania, 15222-3779, and STATE STREET BANK AND
TRUST COMPANY, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110, hereinafter
called the "Custodian", and FEDERATED SERVICES COMPANY, a Delaware business
trust company, having its principal place of business at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, hereinafter called
("Company").

WITNESSETH: That in consideration of the mutual covenants and
agreements hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Trust hereby employs the Custodian as the custodian of the assets
of each of the Funds of the Trust. Except as otherwise expressly
provided herein, the securities and other assets of each of the Funds
shall be segregated from the assets of each of the other Funds and
from all other persons and entities. The Trust will deliver to the
Custodian all securities and cash owned by the Funds and all payments
of income, payments of principal or capital distributions received by
them with respect to all securities owned by the Funds from time to
time, and the cash consideration received by them for shares

("Shares") of beneficial interest/capital stock of the Funds as may be
issued or sold from time to time. The Custodian shall not be
responsible for any property of the Funds held or received by the
Funds and not delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.18), the Custodian shall from time to time employ one or more sub-
custodians upon the terms specified in the Proper Instructions,
provided that the Custodian shall have no more or less responsibility
or liability to the Trust or any of the Funds on account of any
actions or omissions of any sub-custodian so employed than any such
sub-custodian has to the Custodian.
2. Duties of the Custodian With Respect to Property of the Funds Held
by the Custodian
2.1Holding Securities. The Custodian shall hold and physically
segregate for the account of each Fund all non-cash property,
including all securities owned by each Fund, other than securities
which are maintained pursuant to Section 2.12 in a clearing agency
which acts as a securities depository or in a book-entry system
authorized by the U.S. Department of the Treasury, collectively
referred to herein as "Securities System", or securities which are
subject to a joint repurchase agreement with affiliated funds
pursuant to Section 2.14. The Custodian shall maintain records of
all receipts, deliveries and locations of such securities,
together with a current inventory thereof, and shall conduct
periodic physical inspections of certificates representing stocks,
bonds and other securities held by it under this Contract in such
manner as the Custodian shall determine from time to time to be
advisable in order to verify the accuracy of such inventory. With

respect to securities held by any agent appointed pursuant to
Section 2.11 hereof, and with respect to securities held by any
sub-custodian appointed pursuant to Section 1 hereof, the
Custodian may rely upon certificates from such agent as to the
holdings of such agent and from such sub-custodian as to the
holdings of such sub-custodian, it being understood that such
reliance in no way relieves the Custodian of its responsibilities
under this Contract. The Custodian will promptly report to the
Trust the results of such inspections, indicating any shortages or
discrepancies uncovered thereby, and take appropriate action to
remedy any such shortages or discrepancies.
2.2Delivery of Securities. The Custodian shall release and deliver
securities owned by a Fund held by the Custodian or in a
Securities System account of the Custodian only upon receipt of
Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
(1) Upon sale of such securities for the account of a Fund and
receipt of payment therefor;
(2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the
Trust;
(3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
(4) To the depository agent in connection with tender or other
similar offers for portfolio securities of a Fund, in
accordance with the provisions of Section 2.17 hereof;

(5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(6) To the issuer thereof, or its agent, for transfer into the
name of a Fund or into the name of any nominee or nominees of
the Custodian or into the name or nominee name of any agent
appointed pursuant to Section 2.11 or into the name or nominee
name of any sub-custodian appointed pursuant to Section 1; or
for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or
number of units; provided that, in any such case, the new
securities are to be delivered to the Custodian;
(7) Upon the sale of such securities for the account of a Fund, to
the broker or its clearing agent, against a receipt, for
examination in accordance with "street delivery custom";
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
failure to act in accordance with the standard of reasonable
care or any higher standard of care imposed upon the Custodian
by any applicable law or regulation if such above-stated
standard of reasonable care were not part of this Contract;
(8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
securities, or pursuant to provisions for conversion contained

in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian;
(9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that,
in any such case, the new securities and cash, if any, are to
be delivered to the Custodian;
(10) For delivery in connection with any loans of portfolio
securities of a Fund, but only against receipt of adequate
collateral in the form of (a) cash, in an amount specified by
the Trust, (b) certificated securities of a description
specified by the Trust, registered in the name of the Fund or
in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, or (c)
securities of a description specified by the Trust,
transferred through a Securities System in accordance with
Section 2.12 hereof;
(11) For delivery as security in connection with any borrowings
requiring a pledge of assets by a Fund, but only against
receipt of amounts borrowed, except that in cases where
additional collateral is required to secure a borrowing
already made, further securities may be released for the
purpose;
(12) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian and a
broker-dealer registered under the Securities Exchange Act of

1934, as amended, (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"),
relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities
exchange, or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions for a Fund;
(13) For delivery in accordance with the provisions of any
agreement among the Trust or a Fund, the Custodian, and a
Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any Contract
Market, or any similar organization or organizations,
regarding account deposits in connection with transaction for
a Fund;
(14) Upon receipt of instructions from the transfer agent
("Transfer Agent") for a Fund, for delivery to such Transfer
Agent or to the holders of shares in connection with
distributions in kind, in satisfaction of requests by holders
of Shares for repurchase or redemption; and
(15) For any other proper corporate purpose, but only upon
receipt of, in addition to Proper Instructions, a certified
copy of a resolution of the Executive Committee of the Trust
on behalf of a Fund signed by an officer of the Trust and
certified by its Secretary or an Assistant Secretary,
specifying the securities to be delivered, setting forth the
purpose for which such delivery is to be made, declaring such
purpose to be a proper corporate purpose, and naming the

person or persons to whom delivery of such securities shall be
made.
2.3 Registration of Securities. Securities held by the Custodian
(other than bearer securities) shall be registered in the name of
a particular Fund or in the name of any nominee of the Fund or of
any nominee of the Custodian which nominee shall be assigned
exclusively to the Fund, unless the Trust has authorized in
writing the appointment of a nominee to be used in common with
other registered investment companies affiliated with the Fund, or
in the name or nominee name of any agent appointed pursuant to
Section 2.11 or in the name or nominee name of any sub-custodian
appointed pursuant to Section 1. All securities accepted by the
Custodian on behalf of a Fund under the terms of this Contract
shall be in "street name" or other good delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate
bank account or accounts in the name of each Fund, subject only to
draft or order by the Custodian acting pursuant to the terms of
this Contract, and shall hold in such account or accounts, subject
to the provisions hereof, all cash received by it from or for the
account of each Fund, other than cash maintained in a joint
repurchase account with other affiliated funds pursuant to Section
2.14 of this Contract or by a particular Fund in a bank account
established and used in accordance with Rule 17f-3 under the
Investment Company Act of 1940, as amended, (the "1940 Act").
Funds held by the Custodian for a Fund may be deposited by it to
its credit as Custodian in the Banking Department of the Custodian
or in such other banks or trust companies as it may in its
discretion deem necessary or desirable; provided, however, that

every such bank or trust company shall be qualified to act as a
custodian under the 1940 Act and that each such bank or trust
company and the funds to be deposited with each such bank or trust
company shall be approved by vote of a majority of the Board of
Trustees/Directors ("Board") of the Trust. Such funds shall be
deposited by the Custodian in its capacity as Custodian for the
Fund and shall be withdrawable by the Custodian only in that
capacity. If requested by the Trust, the Custodian shall furnish
the Trust, not later than twenty (20) days after the last business
day of each month, an internal reconciliation of the closing
balance as of that day in all accounts described in this section
to the balance shown on the daily cash report for that day
rendered to the Trust.
2.5Payments for Shares. The Custodian shall make such arrangements
with the Transfer Agent of each Fund, as will enable the Custodian
to receive the cash consideration due to each Fund and will
deposit into each Fund's account such payments as are received
from the Transfer Agent. The Custodian will provide timely
notification to the Trust and the Transfer Agent of any receipt by
it of payments for Shares of the respective Fund.
2.6Availability of Federal Funds. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds
available to the Funds as of specified times agreed upon from time
to time by the Trust and the Custodian in the amount of checks,
clearing house funds, and other non-federal funds received in
payment for Shares of the Funds which are deposited into the
Funds' accounts.
2.7Collection of Income.

(1) The Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held
hereunder to which each Fund shall be entitled either by law
or pursuant to custom in the securities business, and shall
collect on a timely basis all income and other payments with
respect to bearer securities if, on the date of payment by the
issuer, such securities are held by the Custodian or its agent
thereof and shall credit such income, as collected, to each
Fund's custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for
payment all coupons and other income items requiring
presentation as and when they become due and shall collect
interest when due on securities held hereunder. The
collection of income due the Funds on securities loaned
pursuant to the provisions of Section 2.2 (10) shall be the
responsibility of the Trust. The Custodian will have no duty
or responsibility in connection therewith, other than to
provide the Trust with such information or data as may be
necessary to assist the Trust in arranging for the timely
delivery to the Custodian of the income to which each Fund is
properly entitled.
(2) The Custodian shall promptly notify the Trust whenever income
due on securities is not collected in due course and will
provide the Trust with monthly reports of the status of past
due income unless the parties otherwise agree.
2.8Payment of Fund Moneys. Upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by

the parties, the Custodian shall pay out moneys of each Fund in
the following cases only:
(1) Upon the purchase of securities, futures contracts or options
on futures contracts for the account of a Fund but only (a)
against the delivery of such securities, or evidence of title
to futures contracts, to the Custodian (or any bank, banking
firm or trust company doing business in the United States or
abroad which is qualified under the 1940 Act to act as a
custodian and has been designated by the Custodian as its
agent for this purpose) registered in the name of the Fund or
in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer, (b) in the
case of a purchase effected through a Securities System, in
accordance with the conditions set forth in Section 2.12
hereof or (c) in the case of repurchase agreements entered
into between the Trust and any other party, (i) against
delivery of the securities either in certificate form or
through an entry crediting the Custodian's account at the
Federal Reserve Bank with such securities or (ii) against
delivery of the receipt evidencing purchase for the account of
the Fund of securities owned by the Custodian along with
written evidence of the agreement by the Custodian to
repurchase such securities from the Fund;
(2) In connection with conversion, exchange or surrender of
securities owned by a Fund as set forth in Section 2.2 hereof;
(3) For the redemption or repurchase of Shares of a Fund issued by
the Trust as set forth in Section 2.10 hereof;

(4) For the payment of any expense or liability incurred by a
Fund, including but not limited to the following payments for
the account of the Fund: interest; taxes; management,
accounting, transfer agent and legal fees; and operating
expenses of the Fund, whether or not such expenses are to be
in whole or part capitalized or treated as deferred expenses;
(5) For the payment of any dividends on Shares of a Fund declared
pursuant to the governing documents of the Trust;
(6) For payment of the amount of dividends received in respect of
securities sold short;
(7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a
resolution of the Executive Committee of the Trust on behalf
of a Fund signed by an officer of the Trust and certified by
its Secretary or an Assistant Secretary, specifying the amount
of such payment, setting forth the purpose for which such
payment is to be made, declaring such purpose to be a proper
purpose, and naming the person or persons to whom such payment
is to be made.
2.9Liability for Payment in Advance of Receipt of Securities
Purchased. In any and every case where payment for purchase of
securities for the account of a Fund is made by the Custodian in
advance of receipt of the securities purchased, in the absence of
specific written instructions from the Trust to so pay in advance,
the Custodian shall be absolutely liable to the Fund for such
securities to the same extent as if the securities had been
received by the Custodian.

2.10 Payments for Repurchases or Redemptions of Shares of a Fund.
From such funds as may be available for the purpose of
repurchasing or redeeming Shares of a Fund, but subject to the
limitations of the Declaration of Trust/Articles of Incorporation
and any applicable votes of the Board of the Trust pursuant
thereto, the Custodian shall, upon receipt of instructions from
the Transfer Agent, make funds available for payment to holders of
shares of such Fund who have delivered to the Transfer Agent a
request for redemption or repurchase of their shares including
without limitation through bank drafts, automated clearinghouse
facilities, or by other means. In connection with the redemption
or repurchase of Shares of the Funds, the Custodian is authorized
upon receipt of instructions from the Transfer Agent to wire funds
to or through a commercial bank designated by the redeeming
shareholders.
2.11 Appointment of Agents. The Custodian may at any time or times in
its discretion appoint (and may at any time remove) any other bank
or trust company which is itself qualified under the 1940 Act and
any applicable state law or regulation, to act as a custodian, as
its agent to carry out such of the provisions of this Section 2 as
the Custodian may from time to time direct; provided, however,
that the appointment of any agent shall not relieve the Custodian
of its responsibilities or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities System. The Custodian may
deposit and/or maintain securities owned by the Funds in a
clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Exchange Act, which
acts as a securities depository, or in the book-entry system

authorized by the U.S. Department of the Treasury and certain
federal agencies, collectively referred to herein as "Securities
System" in accordance with applicable Federal Reserve Board and
SEC rules and regulations, if any, and subject to the following
provisions:
(1) The Custodian may keep securities of each Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for
customers;
(2) The records of the Custodian with respect to securities of the
Funds which are maintained in a Securities System shall
identify by book-entry those securities belonging to each
Fund;
(3) The Custodian shall pay for securities purchased for the
account of each Fund upon (i) receipt of advice from the
Securities System that such securities have been transferred
to the Account, and (ii) the making of an entry on the records
of the Custodian to reflect such payment and transfer for the
account of the Fund. The Custodian shall transfer securities
sold for the account of a Fund upon (i) receipt of advice from
the Securities System that payment for such securities has
been transferred to the Account, and (ii) the making of an
entry on the records of the Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all
advices from the Securities System of transfers of securities
for the account of a Fund shall identify the Fund, be

maintained for the Fund by the Custodian and be provided to
the Trust at its request. Upon request, the Custodian shall
furnish the Trust confirmation of each transfer to or from the
account of a Fund in the form of a written advice or notice
and shall furnish to the Trust copies of daily transaction
sheets reflecting each day's transactions in the Securities
System for the account of a Fund.
(4) The Custodian shall provide the Trust with any report obtained
by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
(5) The Custodian shall have received the initial certificate,
required by Section 9 hereof;
(6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Trust for any loss or damage
to a Fund resulting from use of the Securities System by
reason of any negligence, misfeasance or misconduct of the
Custodian or any of its agents or of any of its or their
employees or from failure of the Custodian or any such agent
to enforce effectively such rights as it may have against the
Securities System; at the election of the Trust, it shall be
entitled to be subrogated to the rights of the Custodian with
respect to any claim against the Securities System or any
other person which the Custodian may have as a consequence of
any such loss or damage if and to the extent that a Fund has
not been made whole for any such loss or damage.

(7) The authorization contained in this Section 2.12 shall not
relieve the Custodian from using reasonable care and diligence
in making use of any Securities System.
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or
accounts for and on behalf of each Fund, into which account or
accounts may be transferred cash and/or securities, including
securities maintained in an account by the Custodian pursuant to
Section 2.12 hereof, (i) in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity
Exchange Act), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange (or the Commodity Futures Trading Commission
or any registered contract market), or of any similar organization
or organizations, regarding escrow or other arrangements in
connection with transactions for a Fund, (ii) for purpose of
segregating cash or government securities in connection with
options purchased, sold or written for a Fund or commodity futures
contracts or options thereon purchased or sold for a Fund, (iii)
for the purpose of compliance by the Trust or a Fund with the
procedures required by any release or releases of the SEC relating
to the maintenance of segregated accounts by registered investment
companies and (iv) for other proper corporate purposes, but only,
in the case of clause (iv), upon receipt of, in addition to Proper
Instructions, a certified copy of a resolution of the Board or of
the Executive Committee signed by an officer of the Trust and

certified by the Secretary or an Assistant Secretary, setting
forth the purpose or purposes of such segregated account and
declaring such purposes to be proper corporate purposes.
2.14 Joint Repurchase Agreements. Upon the receipt of Proper
Instructions, the Custodian shall deposit and/or maintain any
assets of a Fund and any affiliated funds which are subject to
joint repurchase transactions in an account established solely for
such transactions for the Fund and its affiliated funds. For
purposes of this Section 2.14, "affiliated funds" shall include
all investment companies and their portfolios for which
subsidiaries or affiliates of Federated Investors serve as
investment advisers, distributors or administrators in accordance
with applicable exemptive orders from the SEC. The requirements
of segregation set forth in Section 2.1 shall be deemed to be
waived with respect to such assets.
2.15 Ownership Certificates for Tax Purposes. The Custodian shall
execute ownership and other certificates and affidavits for all
federal and state tax purposes in connection with receipt of
income or other payments with respect to securities of a Fund held
by it and in connection with transfers of securities.
2.16 Proxies. The Custodian shall, with respect to the securities
held hereunder, cause to be promptly executed by the registered
holder of such securities, if the securities are registered
otherwise than in the name of a Fund or a nominee of a Fund, all
proxies, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices relating
to such securities.

2.17 Communications Relating to Fund Portfolio Securities. The
Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and
maturities of securities and expirations of rights in connection
therewith and notices of exercise of call and put options written
by the Fund and the maturity of futures contracts purchased or
sold by the Fund) received by the Custodian from issuers of the
securities being held for the Fund. With respect to tender or
exchange offers, the Custodian shall transmit promptly to the
Trust all written information received by the Custodian from
issuers of the securities whose tender or exchange is sought and
from the party (or his agents) making the tender or exchange
offer. If the Trust desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the
Trust shall notify the Custodian in writing at least three
business days prior to the date on which the Custodian is to take
such action. However, the Custodian shall nevertheless exercise
its best efforts to take such action in the event that
notification is received three business days or less prior to the
date on which action is required.
2.18 Proper Instructions. Proper Instructions as used throughout this
Section 2 means a writing signed or initialed by one or more
person or persons as the Board shall have from time to time
authorized. Each such writing shall set forth the specific
transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Custodian
reasonably believes them to have been given by a person previously
authorized in Proper Instructions to give such instructions with

respect to the transaction involved, and (b) the Trust promptly
causes such oral instructions to be confirmed in writing. Upon
receipt of a certificate of the Secretary or an Assistant
Secretary as to the authorization by the Board of the Trust
accompanied by a detailed description of procedures approved by
the Board, Proper Instructions may include communications effected
directly between electro-mechanical or electronic devices provided
that the Board and the Custodian are satisfied that such
procedures afford adequate safeguards for a Fund's assets.
2.19 Actions Permitted Without Express Authority. The Custodian may
in its discretion, without express authority from the Trust:
(1) make payments to itself or others for minor expenses of
handling securities or other similar items relating to its
duties under this Contract, provided that all such payments
shall be accounted for to the Trust in such form that it may
be allocated to the affected Fund;
(2) surrender securities in temporary form for securities in
definitive form;
(3) endorse for collection, in the name of a Fund, checks, drafts
and other negotiable instruments; and
(4) in general, attend to all non-discretionary details in
connection with the sale, exchange, substitution, purchase,
transfer and other dealings with the securities and property
of each Fund except as otherwise directed by the Trust.
2.20 Evidence of Authority. The Custodian shall be protected in
acting upon any instructions, notice, request, consent,
certificate or other instrument or paper reasonably believed by it
to be genuine and to have been properly executed on behalf of a

Fund. The Custodian may receive and accept a certified copy of a
vote of the Board of the Trust as conclusive evidence (a) of the
authority of any person to act in accordance with such vote or (b)
of any determination of or any action by the Board pursuant to the
Declaration of Trust/Articles of Incorporation as described in
such vote, and such vote may be considered as in full force and
effect until receipt by the Custodian of written notice to the
contrary.
2.21 Notice to Trust by Custodian Regarding Cash Movement. The
Custodian will provide timely notification to the Trust of any
receipt of cash, income or payments to the Trust and the release
of cash or payment by the Trust.
3. Duties of Custodian With Respect to the Books of Account and
Calculation of Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to
the entity or entities appointed by the Board of the Trust to keep the
books of account of each Fund and/or compute the net asset value per
share of the outstanding Shares of each Fund or, if directed in
writing to do so by the Trust, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the
Custodian shall also calculate daily the net income of a Fund as
described in the Fund's currently effective prospectus and Statement
of Additional Information ("Prospectus") and shall advise the Trust
and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Trust to do so,
shall advise the Transfer Agent periodically of the division of such
net income among its various components. The calculations of the net
asset value per share and the daily income of a Fund shall be made at

the time or times described from time to time in the Fund's currently
effective Prospectus.
4. Records.
The Custodian shall create and maintain all records relating to its
activities and obligations under this Contract in such manner as will
meet the obligations of the Trust and the Funds under the 1940 Act,
with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder, and specifically including identified cost records
used for tax purposes. All such records shall be the property of the
Trust and shall at all times during the regular business hours of the
Custodian be open for inspection by duly authorized officers,
employees or agents of the Trust and employees and agents of the SEC.
In the event of termination of this Contract, the Custodian will
deliver all such records to the Trust, to a successor Custodian, or to
such other person as the Trust may direct. The Custodian shall supply
daily to the Trust a tabulation of securities owned by a Fund and held
by the Custodian and shall, when requested to do so by the Trust and
for such compensation as shall be agreed upon between the Trust and
the Custodian, include certificate numbers in such tabulations.
5. Opinion of Funds' Independent Public Accountants/Auditors.
The Custodian shall take all reasonable action, as the Trust may from
time to time request, to obtain from year to year favorable opinions
from each Fund's independent public accountants/auditors with respect
to its activities hereunder in connection with the preparation of the
Fund's registration statement, periodic reports, or any other reports
to the SEC and with respect to any other requirements of such
Commission.
6. Reports to Trust by Independent Public Accountants/Auditors.

The Custodian shall provide the Trust, at such times as the Trust may
reasonably require, with reports by independent public
accountants/auditors for each Fund on the accounting system, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the
services provided by the Custodian for the Fund under this Contract;
such reports shall be of sufficient scope and in sufficient detail, as
may reasonably be required by the Trust, to provide reasonable
assurance that any material inadequacies would be disclosed by such
examination and, if there are no such inadequacies, the reports shall
so state.
7. Compensation of Custodian.
The Custodian shall be entitled to reasonable compensation for its
services and expenses as Custodian, as agreed upon from time to time
between Company and the Custodian.
8. Responsibility of Custodian.
The Custodian shall be held to a standard of reasonable care in
carrying out the provisions of this Contract; provided, however, that
the Custodian shall be held to any higher standard of care which would
be imposed upon the Custodian by any applicable law or regulation if
such above stated standard of reasonable care was not part of this
Contract. The Custodian shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Trust) on all matters,
and shall be without liability for any action reasonably taken or
omitted pursuant to such advice, provided that such action is not in
violation of applicable federal or state laws or regulations, and is
in good faith and without negligence. Subject to the limitations set

forth in Section 15 hereof, the Custodian shall be kept indemnified by
the Trust but only from the assets of the Fund involved in the issue
at hand and be without liability for any action taken or thing done by
it in carrying out the terms and provisions of this Contract in
accordance with the above standards.
In order that the indemnification provisions contained in this
Section 8 shall apply, however, it is understood that if in any case
the Trust may be asked to indemnify or save the Custodian harmless,
the Trust shall be fully and promptly advised of all pertinent facts
concerning the situation in question, and it is further understood
that the Custodian will use all reasonable care to identify and notify
the Trust promptly concerning any situation which presents or appears
likely to present the probability of such a claim for indemnification.
The Trust shall have the option to defend the Custodian against any
claim which may be the subject of this indemnification, and in the
event that the Trust so elects it will so notify the Custodian and
thereupon the Trust shall take over complete defense of the claim, and
the Custodian shall in such situation initiate no further legal or
other expenses for which it shall seek indemnification under this
Section. The Custodian shall in no case confess any claim or make any
compromise in any case in which the Trust will be asked to indemnify
the Custodian except with the Trust's prior written consent.
Notwithstanding the foregoing, the responsibility of the Custodian
with respect to redemptions effected by check shall be in accordance
with a separate Agreement entered into between the Custodian and the
Trust.
If the Trust requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action

may, in the reasonable opinion of the Custodian, result in the
Custodian or its nominee assigned to a Fund being liable for the
payment of money or incurring liability of some other form, the
Custodian may request the Trust, as a prerequisite to requiring the
Custodian to take such action, to provide indemnity to the Custodian
in an amount and form satisfactory to the Custodian.
Subject to the limitations set forth in Section 15 hereof, the Trust
agrees to indemnify and hold harmless the Custodian and its nominee
from and against all taxes, charges, expenses, assessments, claims and
liabilities (including counsel fees) (referred to herein as authorized
charges) incurred or assessed against it or its nominee in connection
with the performance of this Contract, except such as may arise from
it or its nominee's own failure to act in accordance with the standard
of reasonable care or any higher standard of care which would be
imposed upon the Custodian by any applicable law or regulation if such
above-stated standard of reasonable care were not part of this
Contract. To secure any authorized charges and any advances of cash
or securities made by the Custodian to or for the benefit of a Fund
for any purpose which results in the Fund incurring an overdraft at
the end of any business day or for extraordinary or emergency purposes
during any business day, the Trust hereby grants to the Custodian a
security interest in and pledges to the Custodian securities held for
the Fund by the Custodian, in an amount not to exceed 10 percent of
the Fund's gross assets, the specific securities to be designated in
writing from time to time by the Trust or the Fund's investment
adviser. Should the Trust fail to make such designation, or should it
instruct the Custodian to make advances exceeding the percentage
amount set forth above and should the Custodian do so, the Trust

hereby agrees that the Custodian shall have a security interest in all
securities or other property purchased for a Fund with the advances by
the Custodian, which securities or property shall be deemed to be
pledged to the Custodian, and the written instructions of the Trust
instructing their purchase shall be considered the requisite
description and designation of the property so pledged for purposes of
the requirements of the Uniform Commercial Code. Should the Trust
fail to cause a Fund to repay promptly any authorized charges or
advances of cash or securities, subject to the provision of the second
paragraph of this Section 8 regarding indemnification, the Custodian
shall be entitled to use available cash and to dispose of pledged
securities and property as is necessary to repay any such advances.
9. Effective Period, Termination and Amendment.
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an instrument
in writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than sixty (60) days after
the date of such delivery or mailing; provided, however that the
Custodian shall not act under Section 2.12 hereof in the absence of
receipt of an initial certificate of the Secretary or an Assistant
Secretary that the Board of the Trust has approved the initial use of
a particular Securities System as required in each case by Rule 17f-4
under the 1940 Act; provided further, however, that the Trust shall
not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the
Declaration of Trust/Articles of Incorporation, and further provided,

that the Trust may at any time by action of its Board (i) substitute
another bank or trust company for the Custodian by giving notice as
described above to the Custodian, or (ii) immediately terminate this
Contract in the event of the appointment of a conservator or receiver
for the Custodian by the appropriate banking regulatory agency or upon
the happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of the Contract, the Trust shall pay to the Custodian
such compensation as may be due as of the date of such termination and
shall likewise reimburse the Custodian for its costs, expenses and
disbursements.
10. Successor Custodian.
If a successor custodian shall be appointed by the Board of the Trust,
the Custodian shall, upon termination, deliver to such successor
custodian at the office of the Custodian, duly endorsed and in the
form for transfer, all securities then held by it hereunder for each
Fund and shall transfer to separate accounts of the successor
custodian all of each Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian
shall, in like manner, upon receipt of a certified copy of a vote of
the Board of the Trust, deliver at the office of the Custodian and
transfer such securities, funds and other properties in accordance
with such vote.
In the event that no written order designating a successor custodian
or certified copy of a vote of the Board shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a
bank or trust company, which is a "bank" as defined in the 1940 Act,

(delete "doing business ... Massachusetts" unless SSBT is the
Custodian) doing business in Boston, Massachusetts, of its own
selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than
$100,000,000, all securities, funds and other properties held by the
Custodian and all instruments held by the Custodian relative thereto
and all other property held by it under this Contract for each Fund
and to transfer to separate accounts of such successor custodian all
of each Fund's securities held in any Securities System. Thereafter,
such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing
to failure of the Trust to procure the certified copy of the vote
referred to or of the Board to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services
during such period as the Custodian retains possession of such
securities, funds and other properties and the provisions of this
Contract relating to the duties and obligations of the Custodian shall
remain in full force and effect.
11. Interpretive and Additional Provisions.
In connection with the operation of this Contract, the Custodian and
the Trust may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Contract as may in their
joint opinion be consistent with the general tenor of this Contract.
Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any

applicable federal or state regulations or any provision of the
Declaration of Trust/Articles of Incorporation. No interpretive or
additional provisions made as provided in the preceding sentence shall
be deemed to be an amendment of this Contract.
12.Massachusetts Law to Apply.
This Contract shall be construed and the provisions thereof
interpreted under and in accordance with laws of The Commonwealth of
Massachusetts.
13. Notices.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Trust at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Custodian at address for SSBT only: 225 Franklin Street, Boston,
Massachusetts, 02110, or to such other address as the Trust or the
Custodian may hereafter specify, shall be deemed to have been properly
delivered or given hereunder to the respective address.
14. Counterparts.
This Contract may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
15. Limitations of Liability.
The Custodian is expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust of
those Trusts which are business trusts and agrees that the obligations
and liabilities assumed by the Trust and any Fund pursuant to this
Contract, including, without limitation, any obligation or liability
to indemnify the Custodian pursuant to Section 8 hereof, shall be
limited in any case to the relevant Fund and its assets and that the
Custodian shall not seek satisfaction of any such obligation from the

shareholders of the relevant Fund, from any other Fund or its
shareholders or from the Trustees, Officers, employees or agents of
the Trust, or any of them. In addition, in connection with the
discharge and satisfaction of any claim made by the Custodian against
the Trust, for whatever reasons, involving more than one Fund, the
Trust shall have the exclusive right to determine the appropriate
allocations of liability for any such claim between or among the
Funds.

IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed effective as of the 1st day of December,
1993.

ATTEST: INVESTMENT COMPANIES

/s/John G. McGonigle By /s/John G. Donahue
--------- ----------
John G. McGonigle John F. Donahue
Secretary Chairman

ATTEST: STATE STREET BANK AND TRUST
COMPANY

/s/ Ed McKenzie By /s/ F. J. Sidoti, Jr.
-------------- -------------
(Assistant) Secretary Typed Name: Frank J. Sidoti, Jr.
Typed Name: Ed McKenzie Title: Vice President

ATTEST: FEDERATED SERVICES COMPANY

/s/ Jeannette Fisher-Garber By /s/ James J. Dolan
------ ------------
Jeannette Fisher-Garber James J. Dolan
Secretary President

EXHIBIT 1
CONTRACT
DATE INVESTMENT COMPANY

12/1/93 Federated Income Trust
Institutional Shares
Institutional Service Shares

Exhibit 6(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K

FEDERATED INCOME TRUST

DISTRIBUTOR'S CONTRACT

This Agreement is entered into this 1st day of June, 1992, between
Federated Income Trust (the `Trust''), a Massachusetts business trust, and
FEDERATED SECURITIES CORP. (`FSC''), a Pennsylvania corporation.

In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and among the parties hereto as follows:

1. The Trust hereby appoints FSC its agent to sell and distribute
shares of the Trust which may be offered in one or more series (the
`Funds'') consisting of one or more classes (the ``Classes'') of shares
(the `Shares'') as described and set forth on one or more exhibits to this
Agreement at the current offering price thereof as described and set forth
in the current Prospectuses of the Trust. FSC hereby accepts such
appointment and agrees to provide such other services for the Trust, if
any, and accept such compensation from the Trust, if any, as set forth in
the applicable exhibit to this Agreement.

2. The sale of any Shares may be suspended with or without prior
notice whenever in the judgment of the Trust it is in its best interest to
do so.

3. Neither FSC nor any other person is authorized by the Trust to
give any information or to make any representation relative to any Shares
other than those contained in the Registration Statement, Prospectuses, or
Statements of Additional Information (`SAIs'') filed with the Securities
and Exchange Commission, as the same may be amended from time to time, or
in any supplemental information to said Prospectuses or SAIs approved by
the Trust. FSC agrees that any other information or representations other
than those specified above which it or any dealer or other person who
purchases Shares through FSC may make in connection with the offer or sale
of Shares, shall be made entirely without liability on the part of the
Trust. No person or dealer, other than FSC, is authorized to act as agent
for the Trust for any purpose. FSC agrees that in offering or selling
Shares as agent of the Trust, it will, in all respects, duly conform to all
applicable state and federal laws and the rules and regulations of the
National Association of Securities Dealers, Inc., including its Rules of
Fair Practice. FSC will submit to the Trust copies of all sales literature
before using the same and will not use such sales literature if disapproved
by the Trust.

4. This Agreement is effective with respect to each Class as of the
date of execution of the applicable exhibit and shall continue in effect
with respect to each Class presently set forth on an exhibit and any
subsequent Classes added pursuant to an exhibit during the initial term of
this Agreement for one year from the date set forth above, and thereafter
for successive periods of one year if such continuance is approved at least
annually by the Trustees of the Trust including a majority of the Trustees
of the Trust who are not interested persons of the Trust and have no direct
or indirect financial interest in the operation of any Distribution Plan
relating to the Trust or in any related document to such Plan
(`Disinterested Trustees'') cast in person at a meeting called for that
purpose. If a Class is added after the first annual approval by the
Trustees as described above, this Agreement will be effective as to that
Class upon execution of the applicable exhibit and will continue in effect
until the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as
described above.
5. This Agreement may be terminated with regard to a particular Fund
or Class at any time, without payment of any penalty, by the vote of a
majority of the Disinterested Trustees or by a majority of the outstanding
voting securities of the particular Fund or Class on not more than sixty
(60) days' written notice to any other party to this Agreement. This
Agreement may be terminated with regard to a particular Fund or Class by
FSC on sixty (60) days' written notice to the Trust.

6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment as defined in the Investment
Company Act of 1940, provided, however, that FSC may employ such other
person, persons, corporation or corporations as it shall determine in order
to assist in it carrying out its duties under this Agreement.

7. FSC shall not be liable to the Trust for anything done or omitted
by it, except acts or omissions involving willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties imposed by this
Agreement.

8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved
by the Trustees of the Trust including a majority of the Disinterested
Trustees of the Trust cast in person at a meeting called for that purpose.

9. This Agreement shall be construed in accordance with and governed
by the laws of the Commonwealth of Pennsylvania.

10. (a) Subject to the conditions set forth below, the Trust agrees
to indemnify and hold harmless FSC and each person, if any, who controls
FSC within the meaning of Section 15 of the Securities Act of 1933 and
Section 20 of the Securities Exchange Act of 1934, as amended, against any
and all loss, liability, claim, damage and expense whatsoever (including
but not limited to any and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced or
threatened, or any claim whatsoever) arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained
in the Registration Statement, any Prospectuses pr SAIs (as from time to
time amended and supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statement therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with written
information furnished to the Trust with respect to FSC by or on behalf of
FSC expressly for use in the Registration Statement or Prospectus and
Statement of Additional Information, or any amendment or supplement
thereof.

(b) If any action is brought against FSC or any controlling
person thereof with respect of which indemnity may be sought against the
Trust pursuant to the foregoing paragraph, FSC shall promptly notify the
Trust in writing of the institution of such action and the Trust shall
assume the defense of such action, including the employment of counsel
selected by the Trust and payment of expenses. FSC or any such controlling
person thereof shall have the right to employ separate counsel in any such
case, but the fees and expenses of such counsel shall be at the expense of
FSC or such controlling person unless the employment of such counsel shall
have been authorized in writing by the Trust in connection with the defense
of such action or the Trust shall not have employed counsel to have charge
of the defense of such action, in any of which events such fees and
expenses shall be borne by the Trust. Anything in this paragraph to the
contrary notwithstanding, the Trust shall not be liable for any settlement
of any such claim or action effected without its written consent. The
Trust agrees promptly to notify FSC of the commencement of any litigation
or proceedings against the Trust or any of its officers or Trustees or
controlling persons in connection with the issue and sale of Shares or in
connection with such Registration Statement, Prospectuses, or SAIs.
(c) FSC agrees to indemnify and hold harmless the Trust, each of
its Trustees, each of its officers who have signed the Registration
Statement and each other person, if any, who controls the Trust within the
meaning of Section 15 of the Securities Act of 1933, but only with respect
to statements or omissions, if any, made in the Registration Statement or
any Prospectus, or SAI, or any amendment or supplement thereof in reliance
upon, and in conformity with, information furnished to the Trust with
respect to FSC by or on behalf of FSC expressly for in the Registration
Statement or any Prospectus, SAI, or any amendment or supplement thereof.
In case any action shall be brought against the Trust or any other person
so indemnified based on the Registration Statement or any Prospectuses,
SAI, or any amendment or supplement thereof, and with respect to which
indemnity may be sought against FSC, FSC shall have the rights and duties
given to FSC by the provisions of subsection (a) above.

(d) Nothing herein contained shall be deemed to protect any
person against liability to the Trust or its shareholders to which such
person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of the duties of such person
or by reason of the reckless disregard by such person of the obligations
and duties of such person under this Agreement.

(e) Insofoar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940 for Trustees,
officers, FSC and controlling persons of the Trust by the Trust pursuant to
this Agreement, the Trust is aware of the position of the Securities and
Exchange Commission as set forth in the Investment Company Act Release No.
IC-11330. Therefore, the Trust undertakes that in addition to complying
with the applicable provisions of this Agreement, in the absence of a final
decision on the merits by a court or other body before which the proceeding
was brought, that an indemnification payment will not be made unless in the
absence of such a decision, a reasonable determination based upon factual
review has been made (i) by a majority vote of a quorum of non-party
DisinterestedTrustees, or (ii) by independent legal counsel in a written
opinion that the indemnitee was not liable for an act of willful
misfeasance, bad faith, gross negligence or reckless disregard of duties.
The Trust further undertakes that advancement of expenses incurred in the
defense of a proceeding (upon undertaking for repayment unless it is
ultimately determined that indemnification is appropriate) against an
officer, Trustee, FSC or controlling person of the Trust will not be made
absent the fulfillment of at least one of the following conditions: (i)
the indemnitee provides security for his undertaking; (ii) the Trust is
insured against losses arising by reason of any lawful advances; or (iii) a
majority of a quorum of non-party Disinterested Trustees or independent
legal counsel in a written opinion makes a factual determination that there
is reason to believe the indemnitee will be entitled to indemnification.

11. FSC is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations assumed by the Trust pursuant to this Agreement shall
be limited in any case to the Trust and its assets and FSC shall not seek
satisfaction of any such obligation from the shareholders of the Trust, the
Trustees, officers, employees or agents of the Trust, or any of them.

12. If at any time the Shares of any Fund are offered in two or more
Classes, FSC agrees to adopt compliance standards as to when a class of
shares may be sold to particular investors.

13. This Agreement shall become binding on the parties hereto upon
the execution of the attached exhibits to the Agreement

DISTRIBUTOR'S CONTRACT

Exhibit A
Fund: Federated Income Trust

Institutional Shares

In consideration of the mutual covenants set forth in the
Distributor's Contract dated June 1, 1992 between the Trust and FSC, the
Trust, with respect tothe Class of Shares of the Fund set forth above, and
FSC execute and deliver this Exhibit.

Witness the due execution hereof this 1st day of June, 1992.

ATTEST: FEDERATED INCOME TRUST.

/s/ John W. McGonigle By: /s/ Glen R. Johnson
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/s/ S. Elliott Cohan By: /s/ Richard B. Fisher
Secretary President
(SEAL)

DISTRIBUTOR'S CONTRACT

Exhibit B

Fund: Federated Income Trust

Institutional Service Shares

The following provisions are hereby incorporated and made part of the
Distributor's Contract dated the 1st day of June, 1992, between the Trust
and FSC with respect to the Class of Shares of the set forth above. (This
Fund has the same name as the Trust).

1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the Class. Pursuant to this
appointment FSC is authorized to select a group of brokers (`Brokers') to
sell shares of the above-listed Classes (`Shares''), at the current
offering price thereof as described and set forth in the respective
prospectuses of the Trust, and to render administrative support services to
the Trust and its shareholders. In addition, FSC is authorized to select a
group of Administrators (`Administrators'') to render administrative
support services to the Trust and its shareholders.

2. Administrative support services may include, but are not limited
to, the following eleven functions: (1) account openings: the Broker or
Administrator communicates account openings via computer terminals located
on the Broker or Administrator's premises; (2) account closings: the
Broker or Administrator communicates account closings via computer
terminals; (3) enter purchase transactions: purchase transactions are
entered through the Broker or Administrator's own personal computer or
through the use of a toll-free telephone number; (4) enter redemption
transactions: Broker or Administrator enters redemption transactions in
the same manner as purchases; (5) account maintenance: Broker or
Administrator provides or arranges to provide accounting support all
transactions. Broker or Administrator also wires and reconciles all
transactions, reviews the activity in the Trust's accounts, and provides
training and supervision of its personnel; (6) interest posting: Broker or
Administrator posts and reinvests dividends to the Trust's accounts; (7)
prospectus and shareholder reports: Broker or Administrator maintains and
distributes current copies of prospectuses and shareholder reports; (8)
advertisements: the Broker or Administrator continuously advertises the
availability of its services and products; (9) customer lists: The Broker
or Administrator continuously provides name of potential customers; (10)
design services: the Broker or Administrator continuously designs material
to send to customers and develops methods of making such materials
accessible to customers; and (11) consultation services: the Broker or
Administrator continuously provides information about the product needs of
customers.

3. During the term of this Agreement, the Trust will pay FSC for
services pursuant to this Agreement, a monthly fee computed at the annual
rate of .25% of the average aggregate net asset value of the Shares held
during the month. For the month in which this Agreement becomes effective
or terminates, there shall be an appropriate proration of any fee payable
on the basis of the number of days that the Agreement is in effect during
the month.

4. FSC may from time-to-time and for such periods as it deemed
appropriate reduce its compensation to the extent any Classes' expenses
exceed such lower expense limitation as FSC may, by notice to the Trust,
voluntarily declare to be effective.

5. FSC will enter into separate written agreements with various
firms to provide certain of the services set forth in Paragaph 1 herein.
FSC, in its sole discretion, may pay Brokers and Administrators a periodic
fee in respect of Shares owned from time to time by their clients or
customers. The schedules of such fees and the basis upon which such fees
will be paid shall be determined from time to time by FSC in its sole
discretion.

6. FSC will prepare reports to the Board of Trustees of the Trust on
a quarterly basis showing amounts expended hereunder including amounts paid
to Brokers and Administrators and the purpose for such payments.

In consideration of the mutual covenants set forth in the
Distributor's Contract dated June 1, 1992 between the Trust and FSC, the
Trust, with respect tothe class of Shares of the Fund set forth above, and
FSC execute and deliver this Exhibit.

Witness the due execution hereof this 1st day of June, 1992.

ATTEST: FEDERATED INCOME TRUST.

/s/ John W. McGonigle By: /s/ Glen R. Johnson
Secretary President
(SEAL)

ATTEST: FEDERATED SECURITIES CORP.

/s/ S. Elliott Cohan By: /s/ Richard B. Fisher
Secretary President

(SEAL)

Exhibit 9(i) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

AGREEMENT
FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES,
TRANSFER AGENCY SERVICES
AND
CUSTODY SERVICES PROCUREMENT

AGREEMENT made as of March 1, 1996, by and between those investment
companies listed on Exhibit 1 as may be amended from time to time, having
their principal office and place of business at Federated Investors Tower,
Pittsburgh, PA 15222-3779 (the `Investment Company''), on behalf of the
portfolios (individually referred to herein as a `Fund'' and collectively
as `Funds'') of the Investment Company, and FEDERATED SERVICES COMPANY, a
Pennsylvania corporation, having its principal office and place of business
at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779 on behalf
of itself and its subsidiaries (the `Company'').
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
(the `1940 Act''), with authorized and issued shares of capital stock or
beneficial interest (`Shares'');
WHEREAS, the Investment Company may desire to retain the Company as fund
accountant to provide fund accounting services (as herein defined)
including certain pricing, accounting and recordkeeping services for each
of the Funds, including any classes of shares issued by any Fund
(`Classes'') if so indicated on Exhibit 1, and the Company desires to
accept such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
administrator to provide it with administrative services (as herein
defined), if so indicated on Exhibit, and the Company desires to accept
such appointment;
WHEREAS, the Investment Company may desire to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer
agency services (as herein defined) if so indicated on Exhibit 1, and agent
in connection with certain other activities, and the Company desires to
accept such appointment; and
WHEREAS, the Investment Company may desire to appoint the Company as its
agent to select, negotiate and subcontract for custodian services from an
approved list of qualified banks if so indicated on Exhibit 1, and the
Company desires to accept such appointment; and
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the
period and on the terms set forth in this Agreement. The Company accepts
such appointment and agrees to furnish the services herein set forth in
return for the compensation as provided in Article 3 of this Section.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's Board
of Trustees or Directors (`Board''), the Company will assist the
Investment Company with regard to fund accounting for the Investment
Company, and/or the Funds, and/or the Classes, and in connection therewith
undertakes to perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
adviser, or sources selected by the adviser, and reviewed by the
board; secondarily, if a designated pricing service does not provide
a price for a security which the Company believes should be
available by market quotation, the Company may obtain a price by
calling brokers designated by the investment adviser of the fund
holding the security, or if the adviser does not supply the names of
such brokers, the Company will attempt on its own to find brokers to
price those securities; thirdly, for securities for which no market
price is available, the Pricing Committee of the Board will
determine a fair value in good faith. Consistent with Rule 2a-4 of
the 40 Act, estimates may be used where necessary or appropriate.
The Company's obligations with regard to the prices received from
outside pricing services and designated brokers or other outside
sources, is to exercise reasonable care in the supervision of the
pricing agent. The Company is not the guarantor of the securities
prices received from such agents and the Company is not liable to
the Fund for potential errors in valuing a Fund's assets or
calculating the net asset value per share of such Fund or Class when
the calculations are based upon such prices. All of the above
sources of prices used as described are deemed by the Company to be
authorized sources of security prices. The Company provides daily to
the adviser the securities prices used in calculating the net asset
value of the fund, for its use in preparing exception reports for
those prices on which the adviser has comment. Further, upon receipt
of the exception reports generated by the adviser, the Company
diligently pursues communication regarding exception reports with
the designated pricing agents;
B. Determine the net asset value per share of each Fund and/or Class,
at the time and in the manner from time to time determined by the
Board and as set forth in the Prospectus and Statement of Additional
Information (``Prospectus') of each Fund;
C. Calculate the net income of each of the Funds, if any;
D. Calculate realized capital gains or losses of each of the Funds
resulting from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund, and/or
Class, as required under Section 31(a) of the 1940 Act and the Rules
thereunder in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records to be maintained by Rule 31a-1 under the 1940 Act in
connection with the services provided by the Company. The Company
further agrees that all such records it maintains for the Investment
Company are the property of the Investment Company and further
agrees to surrender promptly to the Investment Company such records
upon the Investment Company's request;
G. At the request of the Investment Company, prepare various reports or
other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section
One, shall hereafter be referred to as `Fund Accounting Services.''
ARTICLE 3. COMPENSATION AND ALLOCATION OF EXPENSES.
A. The Funds will compensate the Company for Fund Accounting Services
in accordance with the fees agreed upon from time to time between
the parties hereto. Such fees do not include out-of-pocket
disbursements of the Company for which the Funds shall reimburse the
Company. Out-of-pocket disbursements shall include, but shall not be
limited to, the items agreed upon between the parties from time to
time.
B. The Fund and/or the Class, and not the Company, shall bear the cost
of: custodial expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency expenses;
investment advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; administrative
expenses; interest on borrowed money; brokerage commissions; taxes
and fees payable to federal, state and other governmental agencies;
fees of Trustees or Directors of the Investment Company; independent
auditors expenses; legal and audit department expenses billed to the
Company for work performed related to the Investment Company, the
Funds, or the Classes; law firm expenses; organizational expenses;
or other expenses not specified in this Article 3 which may be
properly payable by the Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no
less frequently than monthly, and shall be paid daily upon request
of the Company. The Company will maintain detailed information about
the compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
E. The fee for the period from the effective date of this Agreement
with respect to a Fund or a Class to the end of the initial month
shall be prorated according to the proportion that such period bears
to the full month period. Upon any termination of this Agreement
before the end of any month, the fee for such period shall be
prorated according to the proportion which such period bears to the
full month period. For purposes of determining fees payable to the
Company, the value of the Fund's net assets shall be computed at the
time and in the manner specified in the Fund's Prospectus.
F. The Company, in its sole discretion, may from time to time
subcontract to, employ or associate with itself such person or
persons as the Company may believe to be particularly suited to
assist it in performing Fund Accounting Services. Such person or
persons may be affiliates of the Company, third-party service
providers, or they may be officers and employees who are employed by
both the Company and the Investment Company; provided, however, that
the Company shall be as fully responsible to each Fund for the acts
and omissions of any such subcontractor as it is for its own acts
and omissions. The compensation of such person or persons shall be
paid by the Company and no obligation shall be incurred on behalf of
the Investment Company, the Funds, or the Classes in such respect.
SECTION TWO: ADMINISTRATIVE SERVICES.
ARTICLE 4. APPOINTMENT.
The Investment Company hereby appoints the Company as Administrator for
the period on the terms and conditions set forth in this Agreement. The
Company hereby accepts such appointment and agrees to furnish the services
set forth in Article 5 of this Agreement in return for the compensation set
forth in Article 9 of this Agreement.
ARTICLE 5. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the
Board and in accordance with Proper Instructions (as defined hereafter)
from the Investment Company, the Company will provide facilities,
equipment, and personnel to carry out the following administrative services
for operation of the business and affairs of the Investment Company and
each of its portfolios:
A. prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the Charter (which
has already been prepared and filed), the By-laws and minutes of
meetings of the Board and Shareholders;
B. prepare and file with the Securities and Exchange Commission and the
appropriate state securities authorities the registration statements
for the Investment Company and the Investment Company's shares and
all amendments thereto, reports to regulatory authorities and
shareholders, prospectuses, proxy statements, and such other
documents all as may be necessary to enable the Investment Company
to make a continuous offering of its shares;
C. prepare, negotiate, and administer contracts (if any) on behalf of
the Investment Company with, among others, the Investment Company's
investment advisers and distributors, subject to any applicable
restrictions of the Board or the 1940 Act;
D. calculate performance data of the Investment Company for
dissemination to information services covering the investment
company industry;
E. prepare and file the Investment Company's tax returns;
F. coordinate the layout and printing of publicly disseminated
prospectuses and reports;
G. perform internal audit examinations in accordance with a charter to
be adopted by the Company and the Investment Company;
H. assist with the design, development, and operation of the Investment
Company and the Funds;
I. provide individuals reasonably acceptable to the Board for
nomination, appointment, or election as officers of the Investment
Company, who will be responsible for the management of certain of
the Investment Company's affairs as determined by the Investment
Company's Board; and
J. consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section
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) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate
to the Shareholder at its address as set forth on the transfer
books of the Funds, and/or Classes, subject to any Proper
Instructions regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of the Fund and/or Class is returned unpaid for any
reason, the Company shall debit the Share account of the
Shareholder by the number of Shares that had been credited to
its account upon receipt of the check or other order, promptly
mail a debit advice to the Shareholder, and notify the Fund
and/or Class of its action. In the event that the amount paid
for such Shares exceeds proceeds of the redemption of such
Shares plus the amount of any dividends paid with respect to
such Shares, the Fund and/the Class or its distributor will
reimburse the Company on the amount of such excess.
B. Distribution
(1) Upon notification by the Funds of the declaration of any
distribution to Shareholders, the Company shall act as Dividend
Disbursing Agent for the Funds in accordance with the
provisions of its governing document and the then-current
Prospectus of the Fund. The Company shall prepare and mail or
credit income, capital gain, or any other payments to
Shareholders. As the Dividend Disbursing Agent, the Company
shall, on or before the payment date of any such distribution,
notify the Custodian of the estimated amount required to pay
any portion of said distribution which is payable in cash and
request the Custodian to make available sufficient funds for
the cash amount to be paid out. The Company shall reconcile the
amounts so requested and the amounts actually received with the
Custodian on a daily basis. If a Shareholder is entitled to
receive additional Shares by virtue of any such distribution or
dividend, appropriate credits shall be made to the
Shareholder's account, for certificated Funds and/or Classes,
delivered where requested; and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class
and its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set
forth in Proper Instructions, deliver the appropriate
instructions therefor to the Custodian. The Company shall
notify the Funds on a daily basis of the total amount of
redemption requests processed and monies paid to the Company by
the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to
procedures described in the then-current Prospectus of the
Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor,
and shall effect such redemption at the price applicable to the
date and time of receipt of documents complying with said
procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual
basis and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the
Securities and Exchange Commission (``SEC') a record of the
total number of Shares of the Fund and/or Class which are
authorized, based upon data provided to it by the Fund, and
issued and outstanding. The Company shall also provide the Fund
on a regular basis or upon reasonable request with the total
number of Shares which are authorized and issued and
outstanding, but shall have no obligation when recording the
issuance of Shares, except as otherwise set forth herein, to
monitor the issuance of such Shares or to take cognizance of
any laws relating to the issue or sale of such Shares, which
functions shall be the sole responsibility of the Funds.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed hereunder in the form and manner as agreed to by the
Investment Company or the Fund to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and whether
such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including
dividends paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any Shareholder
holding certificates;
(h) Any information required in order for the Company to
perform the calculations contemplated or required by this
Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such
record retention shall be at the expense of the Company, and
such records may be inspected by the Fund at reasonable times.
The Company may, at its option at any time, and shall forthwith
upon the Fund's demand, turn over to the Fund and cease to
retain in the Company's files, records and documents created
and maintained by the Company pursuant to this Agreement, which
are no longer needed by the Company in performance of its
services or for its protection. If not so turned over to the
Fund, such records and documents will be retained by the
Company for six years from the year of creation, during the
first two of which such documents will be in readily accessible
form. At the end of the six year period, such records and
documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for ``blue sky''purposes as determined according to
Proper Instructions delivered from time to time by the
Fund to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees,
or other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to
time.
(2) The Company shall prepare in the appropriate form, file with
the Internal Revenue Service and appropriate state agencies,
and, if required, mail to Shareholders, such notices for
reporting dividends and distributions paid as are required to
be so filed and mailed and shall withhold such sums as are
required to be withheld under applicable federal and state
income tax laws, rules and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in
connection with accumulation, open-account or similar
plans (including without limitation any periodic
investment plan or periodic withdrawal program), including
but not limited to: maintaining all Shareholder accounts,
mailing Shareholder reports and Prospectuses to current
Shareholders, withholding taxes on accounts subject to
back-up or other withholding (including non-resident alien
accounts), preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms required
with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares
and other conformable transactions in Shareholder
accounts, preparing and mailing activity statements for
Shareholders, and providing Shareholder account
information; and
(b) provide a system which will enable the Fund to monitor the
total number of Shares of each Fund (and/or Class) sold in
each state (``blue sky reporting'). The Fund shall by
Proper Instructions (i) identify to the Company those
transactions and assets to be treated as exempt from the
blue sky reporting for each state and (ii) verify the
classification of transactions for each state on the
system prior to activation and thereafter monitor the
daily activity for each state. The responsibility of the
Company for each Fund's (and/or Class's) state blue sky
registration status is limited solely to the recording of
the initial classification of transactions or accounts
with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided
above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders
relating to their Share accounts and such other correspondence
as may from time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in
connection with Shareholder meetings of each Fund; receive,
examine and tabulate returned proxies, and certify the vote of
the Shareholders;
(3) The Company shall establish and maintain facilities and
procedures for safekeeping of stock certificates, check forms
and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such
certificates, forms and devices.
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. Share Certificates
The Investment Company shall supply the Company with a sufficient
supply of blank Share certificates and from time to time shall renew
such supply upon request of the Company. Such blank Share
certificates shall be properly signed, manually or by facsimile, if
authorized by the Investment Company and shall bear the seal of the
Investment Company or facsimile thereof; and notwithstanding the
death, resignation or removal of any officer of the Investment
Company authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Investment
Company.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's shares.
ARTICLE 14. COMPENSATION AND EXPENSES.
A. Annual Fee
For performance by the Company pursuant to Section Three of this
Agreement, the Investment Company and/or the Fund agree to pay the
Company an annual maintenance fee for each Shareholder account as
agreed upon between the parties and as may be added to or amended
from time to time. Such fees may be changed from time to time
subject to written agreement between the Investment Company and the
Company. Pursuant to information in the Fund Prospectus or other
information or instructions from the Fund, the Company may sub-
divide any Fund into Classes or other sub-components for
recordkeeping purposes. The Company will charge the Fund the same
fees for each such Class or sub-component the same as if each were a
Fund.
B. Reimbursements
In addition to the fee paid under Article 7A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed
upon between the parties, as may be added to or amended from time to
time. In addition, any other expenses incurred by the Company at the
request or with the consent of the Investment Company and/or the
Fund, will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
SECTION FOUR: CUSTODY SERVICES PROCUREMENT.
ARTICLE 15. APPOINTMENT.
The Investment Company hereby appoints Company as its agent to evaluate
and obtain custody services from a financial institution that (i) meets the
criteria established in Section 17(f) of the 1940 Act and (ii) has been
approved by the Board as eligible for selection by the Company as a
custodian (the `Eligible Custodian''). The Company accepts such
appointment.
ARTICLE 16. THE COMPANY AND ITS DUTIES.
Subject to the review, supervision and control of the Board, the Company
shall:
A. evaluate and obtain custody services from a financial institution
that meets the criteria established in Section 17(f) of the 1940 Act
and has been approved by the Board as being eligible for selection by
the Company as an Eligible Custodian;
B. negotiate and enter into agreements with Eligible Custodians for the
benefit of the Investment Company, with the Investment Company as a
party to each such agreement. The Company may, as paying agent, be a
party to any agreement with any such Eligible Custodian;
C. establish procedures to monitor the nature and the quality of the
services provided by Eligible Custodians;
D. monitor and evaluate the nature and the quality of services provided
by Eligible Custodians;
E. periodically provide to the Investment Company (i) written reports
on the activities and services of Eligible Custodians; (ii) the
nature and amount of disbursements made on account of the each Fund
with respect to each custodial agreement; and (iii) such other
information as the Board shall reasonably request to enable it to
fulfill its duties and obligations under Sections 17(f) and 36(b) of
the 1940 Act and other duties and obligations thereof;
F. periodically provide recommendations to the Board to enhance
Eligible Custodian's customer services capabilities and improve upon
fees being charged to the Fund by Eligible Custodian; and
The foregoing, along with any additional services that Company shall
agree in writing to perform for the Fund under this Section Four, shall
hereafter be referred to as "Custody Services Procurement."
ARTICLE 17. FEES AND EXPENSES.
A. Annual Fee
For the performance of Custody Services Procurement by the Company
pursuant to Section Four of this Agreement, the Investment Company
and/or the Fund agree to compensate the Company in accordance with
the fees agreed upon from time to time.
B. Reimbursements
In addition to the fee paid under Section 11A above, the Investment
Company and/or Fund agree to reimburse the Company for out-of-pocket
expenses or advances incurred by the Company for the items agreed
upon between the parties, as may be added to or amended from time to
time. In addition, any other expenses incurred by the Company at the
request or with the consent of the Investment Company and/or the
Fund, will be reimbursed by the appropriate Fund.
C. Payment
The compensation and out-of-pocket expenses shall be accrued by the
Fund and shall be paid to the Company no less frequently than
monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation
and out-of-pocket expenses by Fund.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly
authorized officer of the Company.
ARTICLE 18. REPRESENTATIONS.
The Company represents and warrants that it has obtained all required
approvals from all government or regulatory authorities necessary to enter
into this arrangement and to provide the services contemplated in Section
Four of this Agreement.
SECTION FIVE: GENERAL PROVISIONS.
ARTICLE 19. PROPER INSTRUCTIONS.
As used throughout this Agreement, a ``Proper Instruction'' means a
writing signed or initialed by one or more person or persons as the Board
shall have from time to time authorized. Each such writing shall set forth
the specific transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Company reasonably
believes them to have been given by a person previously authorized in
Proper Instructions to give such instructions with respect to the
transaction involved, and (b) the Investment Company, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Investment
Company, or the Fund, and the Company are satisfied that such procedures
afford adequate safeguards for the Fund's assets. Proper Instructions may
only be amended in writing.
ARTICLE 20. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights
or obligations under this Agreement may be assigned by either party without
the written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may without
further consent on the part of the Investment Company subcontract
for the performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a
Delaware business trust, which is duly registered as a transfer
agent pursuant to Section 17A(c)(1) of the Securities Exchange
Act of 1934, as amended, or any succeeding statute (``Section
17A(c)(1)''); or
(2) such other provider of services duly registered as a transfer
agent under Section 17A(c)(1) as Company shall select.
The Company shall be as fully responsible to the Investment Company
for the acts and omissions of any subcontractor as it is for its own
acts and omissions.
C. With regard to Fund Accounting Services, Administrative Services and
Custody Procurement Services, the Company may without further
consent on the part of the Investment Company subcontract for the
performance of such services with Federated Administrative Services,
a wholly-owned subsidiary of the Company.
D. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement
with an Agent selected by the Investment Company, other than as
described in B. and C. above; provided, however, that the Company
shall in no way be responsible to the Investment Company for the
acts and omissions of the Agent.
ARTICLE 21. DOCUMENTS.
A. In connection with the appointment of the Company under this
Agreement, the Investment Company shall file with the Company the
following documents:
(1) A copy of the Charter and By-Laws of the Investment Company and
all amendments thereto;
(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Investment Company or the Funds in the forms approved by the
Board of the Investment Company with a certificate of the
Secretary of the Investment Company as to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Investment Company
authorizing the original issuance of each Fund's, and/or
Class's Shares;
(2) Each Registration Statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to
the sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the governing document
and the By-Laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers
to give Proper Instructions to the Custodian and agents for
fund accountant, custody services procurement, and shareholder
recordkeeping or transfer agency services;
(5) Specimens of all new Share certificates representing Shares of
any Fund, accompanied by Board resolutions approving such
forms;
(6) Such other certificates, documents or opinions which the
Company may, in its discretion, deem necessary or appropriate
in the proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 22. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each
jurisdiction where the nature of its business requires such
qualification, and in the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its Articles of
Incorporation and By-Laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to
authorize it to enter into and perform its obligations under
this Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement;
(6) it is in compliance with federal securities law requirements
and in good standing as an administrator and fund accountant;
and
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in
good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its Charter and
By-Laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said Charter and By-Laws
have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Investment Company is an open-end investment company
registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective,
and appropriate state securities law filings have been made and
will continue to be made, with respect to all Shares of each
Fund being offered for sale.
ARTICLE 23. STANDARD OF CARE AND INDEMNIFICATION.
A. Standard of Care
With regard to Sections One, Three and Four, the Company shall be
held to a standard of reasonable care in carrying out the provisions
of this Contract. The Company shall be entitled to rely on and may
act upon advice of counsel (who may be counsel for the Investment
Company) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice, provided
that such action is not in violation of applicable federal or state
laws or regulations, and is in good faith and without negligence.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company
or Fund shall indemnify and hold the Company, including its
officers, directors, shareholders and their agents, employees and
affiliates, harmless against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liabilities arising
out of or attributable to:
(1) The acts or omissions of any Custodian, Adviser, Sub-adviser or
other party contracted by or approved by the Investment Company
or Fund,
(2) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which
(a) are received by the Company or its agents or
subcontractors and furnished to it by or on behalf of the
Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and Shareholder
account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Funds; or
(c) are received by the Company or its agents or
subcontractors from Advisers, Sub-advisers or other third
parties contracted by or approved by the Investment
Company of Fund for use in the performance of services
under this Agreement;
(d) have been prepared and/or maintained by the Fund or its
affiliates or any other person or firm on behalf of the
Investment Company.
(3) The reliance on, or the carrying out by the Company or its
agents or subcontractors of Proper Instructions of the
Investment Company or the Fund.
(4) The offer or sale of Shares in violation of any requirement
under the federal securities laws or regulations or the
securities laws or regulations of any state that such Shares be
registered in such state or in violation of any stop order or
other determination or ruling by any federal agency or any
state with respect to the offer or sale of such Shares in such
state.
Provided, however, that the Company shall not be protected by
this Article 23.B. from liability for any act or omission
resulting from the Company's willful misfeasance, bad faith,
negligence or reckless disregard of its duties or failure to
meet the standard of care set forth in 23.A. above.
C. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services
to be performed by the Company under this Agreement, and the Company
and its agents or subcontractors shall not be liable and shall be
indemnified by the Investment Company or the appropriate Fund for
any action reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such
action is not in violation of applicable federal or state laws or
regulations. The Company, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which
are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Investment Company or the Fund,
and the proper countersignature of any former transfer agent or
registrar, or of a co-transfer agent or co-registrar.
D. Notification
In order that the indemnification provisions contained in this
Article 23 shall apply, upon the assertion of a claim for which
either party may be required to indemnify the other, the party
seeking indemnification shall promptly notify the other party of
such assertion, and shall keep the other party advised with respect
to all developments concerning such claim. The party who may be
required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The
party seeking indemnification shall in no case confess any claim or
make any compromise in any case in which the other party may be
required to indemnify it except with the other party's prior written
consent.
ARTICLE 24. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from March 1, 1996 and shall continue
until February 28, 2003 (`Term'). Thereafter, the Agreement will continue
for 18 month terms. The Agreement can be terminated by either party upon
18 months notice to be effective as of the end of such 18 month period. In
the event, however, of willful misfeasance, bad faith, negligence or
reckless disregard of its duties by the Company, the Investment Company has
the right to terminate the Agreement upon 60 days written notice, if
Company has not cured such willful misfeasance, bad faith, negligence or
reckless disregard of its duties within 60 days. The termination date for
all original or after-added Investment companies which are, or become, a
party to this Agreement. shall be coterminous. Investment Companies that
merge or dissolve during the Term, shall cease to be a party on the
effective date of such merger or dissolution.
Should the Investment Company exercise its rights to terminate, all out-
of-pocket expenses associated with the movement of records and materials
will be borne by the Investment Company or the appropriate Fund.
Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of
Articles 10 and 23 shall survive the termination of this Agreement.
ARTICLE 25. AMENDMENT.
This Agreement may be amended or modified by a written agreement
executed by both parties.
ARTICLE 26. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Agreement as may
in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that
no such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the Charter. No
interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.
ARTICLE 27. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Massachusetts
ARTICLE 28. NOTICES.
Except as otherwise specifically provided herein, Notices and other
writings delivered or mailed postage prepaid to the Investment Company at
Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779, or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779,
or to such other address as the Investment Company or the Company may
hereafter specify, shall be deemed to have been properly delivered or given
hereunder to the respective address.
ARTICLE 29. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original.
ARTICLE 30. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Company and signed by an authorized officer of the Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by
any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any
of the Trustees or Shareholders of the Company, but bind only the
appropriate property of the Fund, or Class, as provided in the Declaration
of Trust.
ARTICLE 31. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
ARTICLE 32. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by
the Investment Company, the Company shall upon termination of this
Agreement deliver to such successor agent at the office of the Company all
properties of the Investment Company held by it hereunder. If no such
successor agent shall be appointed, the Company shall at its office upon
receipt of Proper Instructions deliver such properties in accordance with
such instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or before
the date when such termination shall become effective, then the Company
shall have the right to deliver to a bank or trust company, which is a
`bank'' as defined in the 1940 Act, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $2,000,000, all properties held by the
Company under this Agreement. Thereafter, such bank or trust company shall
be the successor of the Company under this Agreement.
ARTICLE 33. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder
or any damages resulting therefrom to the Fund as a result of work
stoppage, power or other mechanical failure, natural disaster, governmental
action, communication disruption or other impossibility of performance.
ARTICLE 34. ASSIGNMENT; SUCCESSORS.
This Agreement shall not be assigned by either party without the prior
written consent of the other party, except that either party may assign all
of or a substantial portion of its business to a successor, or to a party
controlling, controlled by, or under common control with such party.
Nothing in this Article 34 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 35. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 36. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Investment Company and signed by an authorized officer of
the Investment Company, acting as such, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this Agreement
are not binding upon any of the Trustees or Shareholders of the Investment
Company, but bind only the property of the Fund, or Class, as provided in
the Declaration of Trust.

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

INVESTMENT COMPANIES
(LISTED ON EXHIBIT 1)

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

FEDERATED SERVICES COMPANY

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

EXHIBIT 1

3/1/96 Federated Income Trust
Institutional Shares
Institutional Service Shares

FEDERATED SERVICES COMPANY provides the following services:

Fund Accounting Services
Administrative Services
Transfer Agency Services
Custody Services Procurement

Exhibit 4(ii) under Form N-1A
Exhibit 3(c) under Item 601/Reg. S-K

FEDERATED INCOME TRUST
INSTITUTIONAL SERVICE SHARES
Number Shares
Account No. Alpha Code See Reverse Side For
Certain Definitions

THIS IS TO CERTIFY THAT is the owner of

CUSIP 314199 20 9

Fully Paid and Non-Assessable Shares of Beneficial Interest of FEDERATED INCOME
TRUST(INSTITUTIONAL SERVICE SHARES) hereafter called the Trust, transferable on
the books of the Trust by the owner in person or by duly authorized attorney
upon surrender of this certificate properly endorsed.

The shares represented hereby are issued and shall be held subject to the
provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.

This Certificate is not valid unless countersigned by the Transfer Agent.

IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed in
its name by its proper officers and to be sealed with its seal.

Dated: FEDERATED INCOME TRUST
Corporate Seal
1981
Massachusetts

/s/Edward C. Gonzales /s/ John F. Donahue
Treasurer Chairman

Countersigned: [State Street Bank
and Trust Company/Federated Services
Company/Other] (Boston)
Transfer Agent
By:
Authorized Signature

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN ACT-
....Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)

Additional abbreviations may also be used though not in the above list.

For value received hereby sell, assign, and transfer unto
----------

Please insert social security or other
identifying number of assignee

- -----------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)

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

shares
- ----------------------------------------------------------------------

of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
==========================================
to transfer the said shares on the books of the within named Trust with full
power of substitution in the premises.

Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must correspond
with the name as written upon the face of the
certificate in every particular, without
alteration or enlargement or any change whatever.

All persons dealing with , a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any claim
against the Trust, as the Trustees, officers, agents or shareholders of the
Trust assume no personal liability whatsoever for obligations entered into on
behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY

DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE

Page One

A. The Certificate is outlined by a green one-half inch border.

B. The number in the upper left-hand corner and the number of shares in the
upper right-hand corner are outlined by octagonal boxes.

C. The cusip number in the middle right-hand area of the page is boxed.

D. The Massachusetts corporate seal appears in the bottom middle of the
page.

Page Two

The social security or other identifying number of the assignee appears
in a box in the top-third upper-left area of the page.

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

POWER OF ATTORNEY

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

SIGNATURES TITLE DATE

/s/ John F. Donahue Chairman and Trustee March 4, 1997
John F. Donahue (Chief Executive Officer)

/s/ Glen R. Johnson President and Trustee March 4, 1997
Glen R. Johnson

/s/ John W. McGonigle Treasurer, Executive March 4, 1997
John W. McGonigle Vice President and Secretary
(Principal Financial and
Accounting Officer)

/s/ Thomas G. Bigley Trustee March 4, 1997
Thomas G. Bigley

/s/ John T. Conroy, Jr. Trustee March 4, 1997
John T. Conroy, Jr.

/s/ William J. Copeland Trustee March 4, 1997
William J. Copeland

/s/ James E. Dowd Trustee March 4, 1997
James E. Dowd

/s/ Lawrence D. Ellis, M.D. Trustee March 4, 1997
Lawrence D. Ellis, M.D.

/s/ Edward L. Flaherty, Jr. Trustee March 4, 1997
Edward L. Flaherty, Jr.

/s/ Peter E. Madden Trustee March 4, 1997
Peter E. Madden

/s/ Gregor F. Meyer Trustee March 4, 1997
Gregor F. Meyer

/s/ John E. Murray, Jr. Trustee March 4, 1997
John E. Murray, Jr.

/s/ Wesley W. Posvar Trustee March 4, 1997
Wesley W. Posvar

/s/ Marjorie P. Smuts Trustee March 4, 1997
Marjorie P. Smuts

Sworn to and subscribed before me this 4th day of March, 1997

/s/ Marie M. Hamm
Notarial Seal
Marie M. Hamm, Notary Public
Plum Boro, Allegheny County
My Commission Expires Oct. 9, 2000
Member, Pennsylvania Association of Notaries

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> Federated Income Trust
Institutional Shares

<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Jan-31-1997
<PERIOD-END> Jan-31-1997
<INVESTMENTS-AT-COST> 876,208,070
<INVESTMENTS-AT-VALUE> 882,125,497
<RECEIVABLES> 8,032,667
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 890,158,164
<PAYABLE-FOR-SECURITIES> 2,632,436
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,726,181
<TOTAL-LIABILITIES> 8,358,617
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 998,005,101
<SHARES-COMMON-STOCK> 82,622,365
<SHARES-COMMON-PRIOR> 94,664,706
<ACCUMULATED-NII-CURRENT> 442,987
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (122,565,968)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,917,427
<NET-ASSETS> 838,542,422
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 68,902,516
<OTHER-INCOME> 0
<EXPENSES-NET> 5,562,244
<NET-INVESTMENT-INCOME> 63,340,272
<REALIZED-GAINS-CURRENT> (4,670,222)
<APPREC-INCREASE-CURRENT> (19,622,703)
<NET-CHANGE-FROM-OPS> 39,047,347
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 60,187,940
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,566,782
<NUMBER-OF-SHARES-REDEEMED> 30,045,652
<SHARES-REINVESTED> 1,436,529
<NET-CHANGE-IN-ASSETS> 142,081,390
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (144,656,392)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,763,073
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,644,108
<AVERAGE-NET-ASSETS> 940,815,010
<PER-SHARE-NAV-BEGIN> 10.390
<PER-SHARE-NII> 0.680
<PER-SHARE-GAIN-APPREC> (0.240)
<PER-SHARE-DIVIDEND> 0.680
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.150
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 88,658,313
<AVG-DEBT-PER-SHARE> 0.959

</TABLE>

<S> <C>

<ARTICLE> 6
<SERIES>
<NUMBER> 002
<NAME> Federated Income Trust
Institutional Service Shares

<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Jan-31-1997
<PERIOD-END> Jan-31-1997
<INVESTMENTS-AT-COST> 876,208,070
<INVESTMENTS-AT-VALUE> 882,125,497
<RECEIVABLES> 8,032,667
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 890,158,164
<PAYABLE-FOR-SECURITIES> 2,632,436
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 5,726,181
<TOTAL-LIABILITIES> 8,358,617
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 998,005,101
<SHARES-COMMON-STOCK> 4,262,654
<SHARES-COMMON-PRIOR> 3,927,661
<ACCUMULATED-NII-CURRENT> 442,987
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (122,565,968)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5,917,427
<NET-ASSETS> 43,257,125
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 68,902,516
<OTHER-INCOME> 0
<EXPENSES-NET> 5,562,244
<NET-INVESTMENT-INCOME> 63,340,272
<REALIZED-GAINS-CURRENT> (4,670,222)
<APPREC-INCREASE-CURRENT> (19,622,703)
<NET-CHANGE-FROM-OPS> 39,047,347
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,622,790
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,383,128
<NUMBER-OF-SHARES-REDEEMED> 1,210,371
<SHARES-REINVESTED> 162,236
<NET-CHANGE-IN-ASSETS> 142,081,390
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (144,656,392)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,763,073
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 7,644,108
<AVERAGE-NET-ASSETS> 940,815,010
<PER-SHARE-NAV-BEGIN> 10.390
<PER-SHARE-NII> 0.650
<PER-SHARE-GAIN-APPREC> (0.240)
<PER-SHARE-DIVIDEND> 0.650
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.150
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 88,658,313
<AVG-DEBT-PER-SHARE> 0.959

</TABLE>