MONEY MARKET OBLIGATIONS TRUST /NEW/, 497, 1999-10-27

MONEY MARKET OBLIGATIONS TRUST /NEW/
497, 1999-10-27

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FEDERATED TAX-FREE TRUST

A Portfolio of Money Market Obligations Trust

A money market mutual fund seeking to provide for its shareholders dividend
income exempt from federal regular income taxes while seeking relative stability
of principal by investing in a portfolio of high quality tax exempt securities
maturing in 397 days or less.

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

<TABLE>
<CAPTION>
Contents
<S> <C>
Risk/Return Summary 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Investment Strategies? 4
What are the Principal Securities in Which the Fund Invests? 4
What are the Specific Risks of Investing in the Fund? 5
What Do Shares Cost? 6
How is the Fund Sold? 6
How to Purchase Shares 6
How to Redeem Shares 7
Account and Share Information 9
Who Manages the Fund? 10
Financial Information 10
</TABLE>

OCTOBER 31, 1999

Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund is a money market fund which seeks to maintain a stable net asset value
of $1.00. The Fund's investment objective is to provide for its shareholders
dividend income exempt from federal regular income taxes while seeking relative
stability of principal. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the strategies and
policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund invests in a portfolio of high quality tax exempt securities maturing
in 397 days or less. At least 80% of the Fund's annual interest income will be
exempt from federal regular income tax. Interest income from the Fund's
investments may be subject to federal alternative minimum tax for individuals
and corporations (AMT). The average maturity of the Fund's portfolio will be 90
days or less.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, even though the Fund is a
money market fund that seeks to maintain a stable net asset value, it is
possible to lose money by investing in the Fund.

The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.

Risk/Return Bar Chart and Table

The Bar Chart and Performance Table below reflect historical performance data
for Shares of Federated Tax- Free Trust (the "Former Fund") prior to its
reorganization into the Fund, which is a newly created portfolio of Money Market
Obligations Trust (the "Trust"). On the date of the reorganization, November 1,
1999, the Former Fund will be dissolved and its net assets (inclusive of
liabilities recorded on the Former Fund's records) will be transferred to the
Fund.

[GRAPH APPEARS HERE - SEE APPENDIX]

Historically, the Former Fund has maintained a constant $1.00 net asset value
per share. The bar chart shows the variability of the Former Fund's total
returns on a calendar year-end basis.

The Former Fund's Shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon the net asset value. The Former
Fund's total return for the nine-month period from January 1, 1999 to September
30, 1999 was 2.15%.

Within the period shown in the Chart, the Former Fund's highest quarterly return
was 1.54% (quarter ended June 30, 1989). Its lowest quarterly return was 0.49%
(quarter ended March 31, 1994).

Average Annual Total Return Table

The following table represents the Former Fund's Shares Average Annual Total
Returns for the calendar periods ended December 31, 1998.

<TABLE>
<CAPTION>
Calendar Period
<S> <C>
- ------------------------------------------------------------------
1 Year 3.18%
- ------------------------------------------------------------------
5 Years 3.16%
- ------------------------------------------------------------------
10 Years 3.66%
- ------------------------------------------------------------------
</TABLE>

The Former Fund's 7-Day Net Yield as of December 31, 1998 was 3.34%. Investors
may call the Fund at 1-800-341-7400 to acquire the current 7-Day Net Yield.

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

WHAT ARE THE FUND'S FEES AND EXPENSES?

FEDERATED TAX-FREE TRUST

FEES AND EXPENSES

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

<TABLE>
<S>
<C>
Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering
price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price
or redemption proceeds, as applicable) None Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other Distributions) (as a percentage of offering
price) None
Redemption Fee (as a percentage of amount redeemed, if
applicable) None
Exchange
Fee
None

Annual Fund Operating Expenses (Before Waiver)
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management
Fee/1/
0.40%
Distribution (12b-1)
Fee None
Shareholder Services
Fee 0.25%
Other
Expenses
0.12%
Total Annual Fund Operating
Expenses/2/ 0.77%
Total Waivers of Fund Expenses (contractual
waivers) 0.32%
Total Actual Annual Fund Operating Expenses (after
waivers) 0.45%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

/1/ Pursuant to the investment advisory contract, the adviser will waive a
portion of the management fee. The management fee the Fund expects to pay
(after the contractual waivers) is 0.08% for the fiscal year ending November
30, 1999.

/2/ For the fiscal year ended November 30, 1998, prior to the reorganization of
Federated Tax-Free Trust, the Former Fund, as a portfolio of Trust, the
Total Annual Fund Operating Expenses and Total Actual Annual Fund Operating
Expenses (after waivers) were 0.77% and 0.45%, respectively.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The Example assumes that you invest $10,000 in the Fund for the time periods
indicated and then redeem all of your Shares at the end of those periods. The
Example also assumes that your investment has a 5% return each year and that the
Fund's maximum allowable operating expenses as shown in the table remain the
same. Although your actual costs may be higher or lower, based on these
assumptions your costs would be:

<TABLE>
<S> <C>
- -----------------------------------------------------------------
1 Year $ 46
- -----------------------------------------------------------------
3 Years $ 144
- -----------------------------------------------------------------
5 Years $ 252
- -----------------------------------------------------------------
10 Years $ 567
- -----------------------------------------------------------------
</TABLE>

WHAT ARE THE FUND'S INVESTMENT STRATEGIES?

The Fund invests in a portfolio of high-quality tax exempt securities maturing
in 397 days or less. At least 80% of the Fund's annual interest income will be
exempt from federal regular income tax. Interest from the Fund's investments may
be subject to AMT. The Fund will have an average portfolio maturity of 90 days
or less. The Fund's investment adviser (Adviser) actively manages the Fund's
portfolio, seeking to limit the credit risk taken by the Fund and select
investments with enhanced yields.
The Adviser performs a fundamental credit analysis to develop an approved list
of issuers and securities that meet the Adviser's standard for minimal credit
risk. The Adviser monitors the credit risks of all portfolio securities on an
ongoing basis by reviewing periodic financial data and ratings of nationally
recognized statistical rating organizations (NRSROs).
The Adviser targets an average portfolio maturity based upon its interest rate
outlook and the tax exempt securities available. The Adviser formulates its
interest rate outlook by analyzing a variety of factors, such as current and
expected U.S. economic growth; current and expected interest rates and
inflation; and the Federal Reserve's monetary policy.

The Adviser structures the portfolio by investing primarily in variable rate
demand instruments and municipal notes. The Adviser generally shortens the
portfolio maturity when it expects interest rates to rise and extends the
maturity when it expects interest rates to fall. This strategy seeks to enhance
the returns from favorable interest rate changes and reduce the effect of
unfavorable changes.

TEMPORARY DEFENSIVE INVESTMENTS

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

WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE FUND INVESTS?

TAX EXEMPT SECURITIES

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

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

The following describes the types of tax exempt securities in which the Fund
invests.

Variable Rate Demand Instruments

Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a variable
rate intended to cause the securities to trade at their face value. The Fund
treats demand instruments as short-term securities, because their variable
interest rate adjusts in response to changes in market rates, even though their
stated maturity may extend beyond 397 days.

Municipal Notes

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

CREDIT ENHANCEMENT

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

INVESTMENT RATINGS

The securities in which the Fund invests must be rated in the highest short-term
rating category by one or more NRSROs or be of comparable quality to securities
having such ratings.

WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE FUND?

CREDIT RISKS

Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, the Fund
will lose money. Money market funds try to minimize this risk by purchasing
higher quality securities.
Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investors Service Inc. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not received
a rating, the Fund must rely entirely upon the Adviser's credit assessment.

INTEREST RATE RISKS

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

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

SECTOR RISKS

A substantial part of the Fund's portfolio may be comprised of securities credit
enhanced by banks or companies with similar characteristics. As a result, the
Fund will be more susceptible to any economic, business, political or other
developments which generally affect these entities. WHAT DO SHARES COST?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is
open. The Fund attempts to stabilize the net asset value (NAV) of its Shares at
$1.00 by valuing the portfolio securities using the amortized cost method. The
Fund cannot guarantee that its NAV will always remain at $1.00 per Share. The
Fund does not charge a front- end sales charge. NAV is determined at 12:00 noon
and 3:00 p.m. (Eastern time) and as of the end of regular trading (normally 4:00
p.m. Eastern time) each day the NYSE is open.

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

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

HOW IS THE FUND SOLD?

The Fund's Distributor, Federated Securities Corp., markets the Shares described
in this prospectus to institutions acting in an agency or fiduciary capacity or
to individuals, directly or through investment professionals. The Distributor
and its affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

HOW TO PURCHASE SHARES

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

THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and

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

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

DIRECTLY FROM THE FUND

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

Send your payment to the Fund by Federal Reserve wire or check. You will
become the owner of Shares after the Fund receives your wire or your check. If
your check does not clear, your purchase will be canceled and you could be
liable for any losses or fees incurred by the Fund or Federated Shareholder
Services Company, the Fund's transfer agent.

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

By Wire

Send your wire to:

State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number 011000028
Attention: EDGEWIRE
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Fund Name and Number and Account Number.

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

By Check

Make your check payable to The Federated Funds, note your account number on the
check, and mail it to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

If you send your check by a private courier or overnight delivery service that
requires a street address, mail it to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund will
not accept third- party checks (checks originally payable to someone other than
you or The Federated Funds). Orders by mail are considered received when payment
by check is converted into federal funds (normally the business day after the
check is received) and Shares begin earning dividends the next day.

BY AUTOMATIC INVESTMENTS

You may establish an account with your financial institution to automatically
purchase Shares on pre- determined dates or when your bank account reaches a
certain level. Under this program, participating financial institutions are
responsible for prompt transmission of orders and may charge you for this
service. You should read this prospectus along with your financial institution's
agreement or materials describing this service.

BY AUTOMATED CLEARING HOUSE (ACH)

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

HOW TO REDEEM SHARES

You should redeem Shares:

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

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

THROUGH AN INVESTMENT PROFESSIONAL

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

DIRECTLY FROM THE FUND

By Telephone

You may redeem Shares by calling the Fund at 1-800-341-7400 once you have
completed the appropriate authorization form for telephone transactions.

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

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

By Mail

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

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

Send requests by mail to:

Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

Federated Shareholder Services Company
1099 Hingham Street
Rockland, MA 02370-3317

All requests must include:

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

. amount to be redeemed; and

. signatures of all shareholders exactly as registered.

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

Signature Guarantees

Signatures must be guaranteed if:

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

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

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

A signature guarantee is designed to protect your account from fraud. Obtain a
signature guarantee from a bank or trust company, savings association, credit
union or broker, dealer, or securities exchange member. A notary public cannot
provide a signature guarantee.

PAYMENT METHODS FOR REDEMPTIONS

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

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

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

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

. to allow your purchase to clear;

. during periods of market volatility; or

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

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

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

ACCOUNT AND SHARE INFORMATION

ACCOUNT ACTIVITY

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

DIVIDENDS AND CAPITAL GAINS

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

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

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

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

WHO MANAGES THE FUND?

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

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

ADVISORY FEES

The Adviser receives an annual investment advisory fee of 0.40% of the Fund's
average daily net assets. Under the investment advisory contract, which is
subject to annual renewal by the Fund's Board of Trustees, the Adviser will
waive the amount, limited to the amount of the advisory fee, by which the Fund's
aggregate annual operating expenses, including the investment advisory fee but
excluding interest, taxes, brokerage commissions, expenses of registering or
qualifying the Fund and its shares under federal and state laws and regulations,
expenses of withholding taxes, and extraordinary expenses exceed 0.45% of its
average daily net assets.

YEAR 2000 READINESS

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

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

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

Year 2000 problems would also increase the risks of the Fund's investments. To
assess the potential effect of the Year 2000 problem, the Adviser is reviewing
information regarding the Year 2000 readiness of issuers of securities the Fund
may purchase.The financial impact of these issues for the Fund is still being
determined. There can be no assurance that potential Year 2000 problems would
not have a material adverse effect on the Fund. FINANCIAL INFORMATION

FINANCIAL HIGHLIGHTS

The Fund's Financial Highlights are contained in the Former Fund's Prospectus
which also serves as the Annual Report, dated January 31, 1999 and is
incorporated by reference and must precede or accompany this document.

A Statement of Additional Information (SAI) dated October 31, 1999, is
incorporated by reference into this prospectus. Additional information about the
Fund and its investments is contained in the Former Fund's SAI and Annual and
Semi-Annual Reports to shareholders and will be contained in the Fund's Annual
and Semi-Annual Reports as they become available. To obtain the SAI,Annual
Report, Semi-Annual Report and other information without charge and make
inquiries, call your investment professional or the Fund at 1-800-341-7400.

You can obtain information about the Fund (including the SAI) by writing or
visiting the Public Reference Room in Washington, D.C. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected]. or by writing to the SEC's Public
Reference Section, Washington, D.C. 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.

[FEDERATED LOGO]

Federated Tax-Free Trust
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
1-800-341-7400
www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-2891

Cusip 60934N666

8010414A (10/99)

Federated is a registered mark
of Federated Investors, Inc.
1999 (C)Federated Investors, Inc.

[RECYCLED PAPER LOGO APPEARS HERE]

[FEDERATED LOGO APPEARS HERE]

Federated
Tax-Free Trust

A Portfolio of Money Market Obligations Trust

OCTOBER 31, 1999

P R O S P E C T U S

STATEMENT OF ADDITIONAL INFORMATION

FEDERATED TAX-FREE TRUST

A Portfolio of Money Market Obligations Trust

<PAGE>

This Statement of Additional Information (SAI) is not a prospectus. Read this
SAI in conjunction with the prospectus for Federated Tax-Free Trust (Fund),
dated October 31, 1999. Obtain the prospectus without charge by calling
1-800-341-7400.

<PAGE>

October 31, 1999

<PAGE>

CUSIP 60934N666

8010414B (10/99)

<PAGE>

Contents
How is the Fund Organized? 1
Securities in Which the Fund Invests 1
What Do Shares Cost?
How is the Fund Sold?
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Investment Ratings
Addresses

<PAGE>

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Money Market Obligations Trust (Trust).
The Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on November 20, 1978. The
Trust may offer separate series of shares representing interests in separate
portfolios of securities. The Fund, which was established on March 6, 1979, will
be reorganized as a portfolio of the Trust on November 1, 1999. The Fund's
investment adviser is Federated Investment Management Company (Adviser).

SECURITIES IN WHICH THE FUND INVESTS

The Fund's principal securities are described in its prospectus. Additional
securities, and further information regarding the principal securities, are
outlined below. In pursuing its investment strategy, the Fund may invest in such
securities for any purpose that is consistent with its investment
objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.

The following describes the types of fixed income securities in which the Fund
invests.

Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.

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

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

<PAGE>

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

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

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

The Fund may invest in securities supported by individual leases or pools of
municipal leases.

Zero Coupon Securities
Zero coupon securities do not pay interest or principal until final maturity
unlike debt securities that provide periodic payments of interest (referred to
as a coupon payment). Investors buy zero coupon securities at a price below the
amount payable at maturity. The difference between the purchase price and the
amount paid at maturity represents interest on the zero coupon security.
Investors must wait until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon security.
Credit Enhancement Common types of credit enhancement include guarantees,
letters of credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure payment of
a fixed income security. If a default occurs, these assets may be sold and the
proceeds paid to the security's holders. Either form of credit enhancement
reduces credit risk by providing another source of payment for a fixed income
security.

Investing in Securities of Other Investment Companies
The Fund may invest its assets in securities of other investment companies,
including the securities of affiliated money market funds, as an efficient means
of carrying out its investment policies and managing its uninvested cash.

Special Transactions

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

Asset Coverage
In order to secure its obligations in connection with special transactions
including delayed delivery transactions, the Fund will set aside readily
marketable securities with a value that equals or exceeds the Fund's
obligations. Unless the Fund has other readily marketable assets to set aside,
it cannot trade assets used to secure such obligations without terminating the
special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on special transactions.

Temporary Defensive Investments

The Fund may make temporary defensive investments in the following taxable
securities.

Treasury Securities

Treasury securities are direct obligations of the federal government of the
United States.

<PAGE>

Agency Securities
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The United
States supports some GSEs with its full faith and credit. Other GSEs receive
support through federal subsidies, loans or other benefits. A few GSEs have no
explicit financial support, but are regarded as having implied support because
the federal government sponsors their activities.

Bank Instruments
Bank instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit and
banker's acceptances.

Corporate Debt Securities

Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities.

Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than nine
months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and use the
proceeds (or bank loans) to repay maturing paper. If the issuer cannot continue
to obtain liquidity in this fashion, its commercial paper may default.

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

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

Repurchase agreements are subject to credit risks.

Reverse Repurchase Agreements
Reverse repurchase agreements are repurchase agreements in which the Fund is the
seller (rather than the buyer) of the securities, and agrees to repurchase them
at an agreed upon time and price. A reverse repurchase agreement may be viewed
as a type of borrowing by the Fund. Reverse repurchase agreements are subject to
credit risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.

Investment Ratings
The highest rating category of a nationally recognized statistical rating
organization (NRSRO) is determined without regard for sub-categories and
gradations. For example, securities rated SP-1+ or SP-1 by Standard & Poor's
("S&P"), MIG-1 by Moody's Investors Service, Inc. ("Moody's"), or F-1+ or F-1 by
Fitch IBCA, Inc. ("Fitch") are all considered rated in the highest short-term
rating category. The Fund will follow applicable regulations in determining
whether a security rated by more than one NRSRO can be treated as being in the
highest short-term rating category. See "Regulatory Compliance."

INVESTMENT RISKS
There are many factors which may affect an investment in the Fund. The Fund's
principal risks are described in its prospectus. Additional risk factors are
outlined below.

<PAGE>

Credit Risks
Credit risk includes the possibility that a party to a transaction involving the
Fund will fail to meet its obligations. This could cause the Fund to lose the
benefit of the transaction or prevent the Fund from selling or buying other
securities to implement its investment strategy.

Leverage Risks
Leverage risk is created when an investment exposes the Fund to a level of risk
that exceeds the amount invested. Changes in the value of such an investment
magnify the Fund's risk of loss and potential for gain.

Tax Risks
In order to be tax exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest received
and distributed by the Fund to shareholders to be taxable. Changes or proposed
changes in federal tax laws may cause the prices of municipal securities to
fall.

FUNDAMENTAL INVESTMENT OBJECTIVE and policY
The Fund's investment objective is to provide for its shareholders dividend
income exempt from federal regular income taxes while seeking relative stability
of principal. Under normal market conditions, at least 80% of the Fund's annual
interest income will be exempt from Federal regular income tax except in
extraordinary circumstances when, for example, management feels that market
conditions dictate a defensive posture in temporary investments. The investment
objective and policy may not be changed by the Fund's Trustees without
shareholder approval.

INVESTMENT LIMITATIONS

Diversification of Investments
With respect to securities comprising 75% of the value of its total assets, the
Fund will not purchase securities of any one issuer (other than cash; cash
items; securities issued or guaranteed by the government of the United States or
its agencies or instrumentalities and repurchase agreements collateralized by
such U.S. government securities; and securities of other investment companies)
if, as a result, more than 5% of the value of its total assets would be invested
in securities of that issuer, or the Fund would own more than 10% of the
outstanding voting securities of that issuer.

Issuing Senior Securities and Borrowing Money
The Fund may borrow money, directly or indirectly, and issue senior securities
to the maximum extent permitted under the 1940 Act.

Concentration of Investments

The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry,
except that the Fund may concentrate its investments in short-term tax exempt
securities which are guaranteed by the U.S. government, regardless of the
location of the issuing municipality. Government securities, municipal
securities and bank instruments are not deemed to constitute an industry.

Lending Cash or Securities
The Fund may not make loans, provided that this restriction does not prevent the
Fund from purchasing debt obligations, entering into repurchase agreements,
lending its assets to broker/dealers or institutional investors and investing in
loans, including assignments and participation interests.

Underwriting
The Fund may not underwrite the securities of other issuers, except that the
Fund may engage in transactions involving the acquisition, disposition or resale
of its portfolio securities, under circumstances where it may be considered to
be an underwriter under the Securities Act of 1933.

Investing in Real Estate
The Fund may not purchase or sell real estate, provided that this restriction
does not prevent the Fund from investing in issuers which invest, deal, or
otherwise engage in transactions in real estate or interests therein, or
investing in securities that are secured by real estate or interests therein.
The Fund may exercise its rights under agreements relating to such securities,
including the right to enforce security interests and to hold real estate
acquired by reason of such enforcement until that real estate can be liquidated
in an orderly manner.

<PAGE>

Investing in Commodities
The Fund may not purchase or sell physical commodities, provided that the Fund
may purchase securities of companies that deal in commodities.

The above limitations cannot be changed unless authorized by the Board of
Trustees (Board) and by the "vote of a majority of its outstanding voting
securities," as defined by the Investment Company Act. The following
limitations, however, may be changed by the Board without shareholder approval.
Shareholders will be notified before any material change in these limitations
becomes effective.

Pledging Assets
The Fund will not mortgage, pledge or hypothecate any of its assets, provided
that this shall not apply to the transfer of securities in connection with any
permissible borrowing or to collateral arrangements in connection with
permissible activities.

Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available
market, or enter into repurchase agreements or purchase time deposits maturing
in more than seven days, if immediately after and as a result, the value of such
securities would exceed, in the aggregate, 10% of the Fund's net assets.

Investing in Restricted Securities

The Fund may invest in restricted securities subject to restrictions on resale
under the federal securities laws.

Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and sales of
securities. 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 asets will not result in a
violation of such limitation.

Regulatory Compliance

The Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Fund will comply
with the various requirements of Rule 2a-7 (the Rule), which regulates money
market mutual funds. The Fund will determine the effective maturity of its
investments, as well as its ability to consider a security as having received
the requisite short-term ratings by NRSROs, according to the Rule. The Fund may
change these operational policies to reflect changes in the laws and regulations
without the approval of its shareholders.

DETERMINING MARKET VALUE OF SECURITIES
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.
Accordingly, neither the amount of daily income nor the net asset value is
affected by any unrealized appreciation or depreciation of the portfolio. In
periods of declining interest rates, the indicated daily yield on shares of the
Fund computed by dividing the annualized daily income on the Fund's portfolio by
the net asset value computed as above may tend to be higher than a similar
computation made by using a method of valuation based upon market prices and
estimates. In periods of rising interest rates, the opposite may be true.

The Fund's use of the amortized cost method of valuing portfolio instruments
depends on its compliance with certain conditions in the Rule. Under the Rule,
the Trustees must establish procedures reasonably designed to stabilize the net
asset value per share, as computed for purposes of distribution and redemption,
at $1.00 per share, taking into account current market conditions and the Fund's
investment objective. The procedures include monitoring the relationship between
the amortized cost value per share and the net asset value per share based upon
available indications of market value. The Trustees will decide what, if any,
steps should be taken if there is a difference of more than 0.5 of 1% between
the two values. The Trustees will take any steps they consider appropriate (such
as redemption in kind or shortening the average portfolio maturity) to minimize
any material dilution or other unfair results arising from differences between
the two methods of determining net asset value.

<PAGE>

HOW IS THE FUND SOLD?

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

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

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

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

SUBACCOUNTING SERVICES

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

REDEMPTION IN KIND

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

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

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

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

<PAGE>

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.

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.

ACCOUNT AND SHARE INFORMATION

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

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

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

TAX INFORMATION

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

The Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trust's other portfolios will be separate from those realized by the Fund.

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes each
person's: name, address, birth date, present position(s) held with the Trust,
principal occupations for the past five years and positions held prior to the
past five years, total compensation received as a Trustee from the Trust for its
most recent fiscal year, and the total compensation received from the Federated
Fund Complex for the most recent calendar year. The Trust is comprised of 21
funds and the Federated Fund Complex is comprised of 54 investment companies,
whose investment advisers are affiliated with the Fund's Adviser.

As of October 27, 1999, the Fund's Board and Officers as a group owned less
than 1% of the Fund's outstanding Shares.

<PAGE>

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

Name Total
Birth Date Aggregate Compensation From
Address Principal Occupations Compensation Trust and Fund
Position With Trust for Past Five Years From Trust Complex
- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
John F. Donahue*+# Chief Executive Officer and Director or Trustee of the $0 $0 for the
Birth Date: July 28, 1924 Federated Fund Complex; Chairman and Director, Trust and
Federated Investors Tower Federated Investors, Inc.; Chairman and Trustee, 54 other investment
1001 Liberty Avenue Federated Investment Management Company; Chairman and companies
Pittsburgh, PA Director, Federated Investment Counseling and in the Fund Complex
CHAIRMAN AND TRUSTEE Federated Global Investment Management Corp.;
Chairman, Passport Research, Ltd.
- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
Thomas G. Bigley Director or Trustee of the Federated Fund Complex; $18, 351 $113,860.22 for the
Birth Date: February 3, 1934 Director, Member of Executive Committee, Children's Trust and 54 other
15 Old Timber Trail Hospital of Pittsburgh; Director, Robroy Industries, investment
Pittsburgh, PA Inc. (coated steel conduits/computer storage companies
TRUSTEE equipment); formerly: Senior Partner, Ernst & Young in the Fund Complex
LLP; Director, MED 3000 Group, Inc. (physician
practice management); Director, Member of Executive
Committee, University of Pittsburgh.

- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
John T. Conroy, Jr. Director or Trustee of the Federated Fund Complex; $20,189 $125,264.48 for the
Birth Date: June 23, 1937 President, Investment Properties Corporation; Senior Trust and 54 other
Wood/Commercial Dept. Vice President, John R. Wood and Associates, Inc., investment
John R. Wood Associates, Realtors; Partner or Trustee in private real estate companies
Inc. Realtors ventures in Southwest Florida; formerly: President, in the Fund Complex
3255 Tamiami Trail North Naples Property Management, Inc. and Northgate Village
Naples, FL Development Corporation.
TRUSTEE

Previous Positions: Chairman of the Board and Chief
Executive Officer, Computer Consoles, Inc.; President
and Chief Operating Officer, Wang Laboratories;
Director, First National Bank of Boston; Director,
Apollo Computer, Inc.

- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
Peter E. Madden Director or Trustee of the Federated Fund Complex; $18,351 $113,860.22 for the
Birth Date: March 16, 1942 formerly: Representative, Commonwealth of Trust and 54 other
One Royal Palm Way Massachusetts General Court; President, State Street investment
100 Royal Palm Way Bank and Trust Company and State Street Corporation. companies
Palm Beach, FL in the Fund Complex
TRUSTEE Previous Positions: Director, VISA USA and VISA
International; Chairman and Director,
Massachusetts Bankers Association; Director,
Depository Trust Corporation; Director, The
Boston Stock Exchange.

- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
Charles F. Mansfield, Jr.++ Director or Trustee of some of the Federated Fund $0 $0 for the Trust
Birth Date: April 10, 1945 Complex; Management Consultant. and 50 other
80 South Road investment
Westhampton Beach, NY Previous Positions: Chief Executive Officer, PBTC companies in the
TRUSTEE International Bank; Partner, Arthur Young & Company Fund Complex
(now Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector, Chase
Manhattan Bank; Senior Vice President, Marine
Midland Bank; Vice President, Citibank;
Assistant Professor of Banking and Finance,
Frank G. Zarb School of Business, Hofstra
University.

- ----------------------------- -- -------------------------------------------------------- -- ----------------- - -------------------
- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
John E. Murray, Jr., J.D., Director or Trustee of the Federated Fund Complex; $18,351 $113,860.22 for
S.J.D.# President, Law Professor, Duquesne University; the
Birth Date: December 20, 1932 Consulting Partner, Mollica & Murray; Director, Trust and 54 other
President, Duquesne Michael Baker Corp. (engineering, construction, investment
University operations and technical services). companies
Pittsburgh, PA in the Fund Complex
TRUSTEE Previous Positions: Dean and Professor of Law,
University of Pittsburgh School of Law; Dean and
Professor of Law, Villanova University School of Law.

- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
John S. Walsh++ Director or Trustee of some of the Federated Fund $0 $0 for the Trust
Birth Date: November 28, 1957 Complex; President and Director, Heat Wagon, Inc. and 48 other
2007 Sherwood Drive (manufacturer of construction temporary heaters); investment
Valparaiso, IN President and Director, Manufacturers Products, Inc. companies in the
TRUSTEE (distributor of portable construction heaters); Fund Complex
President, Portable Heater Parts, a division of
Manufacturers Products, Inc.; Director, Walsh &
Kelly, Inc. (heavy highway contractor); formerly:
Vice President, Walsh & Kelly, Inc.

- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
J. Christopher Donahue+ President or Executive Vice President of the $0 $0 for the Trust
Birth Date: April 11, 1949 Federated Fund Complex; Director or Trustee of some and 16 other
Federated Investors Tower of the Funds in the Federated Fund Complex; investment
1001 Liberty Avenue President, Chief Executive Officer and Director, companies in the
Pittsburgh, PA Federated Investors, Inc.; President and Trustee, Fund Complex
PRESIDENT Federated Investment Management Company and Federated
Investment Counseling; President and Director,
Federated Global Investment Management Corp.;
President, Passport Research, Ltd.; Trustee,
Federated Shareholder Services Company;
Director, Federated Services Company.

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

<PAGE>

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

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

- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
William D. Dawson, III Chief Investment Officer of this Fund and various $0 $0 for the Trust
Birth Date: March 3, 1949 other Funds in the Federated Fund Complex; Executive and 41 other
Federated Investors Tower Vice President, Federated Investment Counseling, investment
1001 Liberty Avenue Federated Global Investment Management Corp., companies in the
Pittsburgh, PA Federated Investment Management Company and Passport Fund Complex
CHIEF INVESTMENT OFFICER Research, Ltd.; Registered Representative, Federated
Securities Corp.; Portfolio Manager, Federated
Administrative Services; Vice President,
Federated Investors, Inc.; formerly: Executive
Vice President and Senior Vice President,
Federated Investment Counseling Institutional
Portfolio Management Services Division; Senior
Vice President, Federated Investment
Management Company and Passport Research, Ltd.

- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
- ------------------------------ -- ------------------------------------------------------- --- ---------------- -- ------------------
Mary Jo Ochson Mary Jo Ochson is Vice President of the Trust. Ms. $0 $0 for the Trust
Birth Date: September 12, Ochson joined Federated Investors in 1982 and has and 7 other
1953 been a Senior Portfolio Manager and a Senior Vice investment
Federated Investors Tower President of the Fund's investment adviser since companies in the
1001 Liberty Avenue 1996. From 1988 through 1995, Ms. Ochson served as a Fund Complex
Pittsburgh, PA Portfolio Manager and a Vice President of the Fund's
VICE PRESIDENT investment adviser. Ms. Ochson is a Chartered
Financial Analyst and received her M.B.A. in Finance
from the University of Pittsburgh.

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

</TABLE>

* An asterisk denotes a Trustee who is deemed to be an interested person as
defined in the Investment Company Act of 1940. # A pound sign denotes a Member
of the Board's Executive Committee, which handles the Board's responsibilities
between its meetings.
+ Mr. Donahue is the father of J. Christopher Donahue, President of the Trust.
++ Messrs. Cunningham, Mansfield and Walsh became members of the Board on
January 1, 1999. They did not earn any fees for serving the Fund Complex
since these fees are reported as of the end of the last calendar year.
They did not receive any fees as of the fiscal year end of the Trust.

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

The Adviser is a wholly owned subsidiary of Federated.

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

The Adviser must waive the portion of its advisory fee that increases the
Fund's aggregate annual operating expenses above 0.45% of its average daily net
assets. The Fund's operating expenses include the advisory fee but exclude
interest, taxes, brokerage commissions, expenses of registering the Fund and its
shares under federal and state laws, expenses of withholding taxes, and
extraordinary expenses.

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

BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. The Adviser will generally use those who are recognized dealers in
specific portfolio instruments, except when a better price and execution of the
order can be obtained elsewhere. In selecting among firms believed to meet these
criteria, the Adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Adviser makes decisions on portfolio transactions and
selects brokers and dealers subject to review by the Fund's Board.
Investment decisions for the Fund are made independently from those of other
accounts managed by the Adviser. When the Fund and one or more of those accounts
invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Fund, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Fund.

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

Maximum Administrative Fee Average Aggregate Daily Net
Assets of the Federated Funds
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750
million

The administrative fee received during any fiscal year shall be at least
$125,000 per portfolio and $30,000 per each additional class of Shares.
Federated Services Company may voluntarily waive a portion of its fee and may
reimburse the Fund for expenses.

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

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

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

iNDEPENDENT auditors
The independent auditor for the Fund, Deloitte & Touche LLP, plans and performs
its audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES
For the Year Ended November 30 1998 1997 1996
Advisory Fee Earned $2,267,974 $2,902,993 $3,255,470
Advisory Fee Reduction 700,126 960,485
823,445
Brokerage Commissions 0 0 0
Administrative Fee 427,513 547,940 615,257
Shareholder Services Fee 283,496 - -
If the Fund's are capped at a particular level, the cap does not include
reimbursement to the Fund of any expenses incurred by shareholders who use the
transfer agent's subaccounting facilities. For the fiscal years ended November
30, 1998, 1997 and 1996, fees paid by the Fund for services are prior to the
Fund's reorganization as a portfolio of the Trust on November 1, 1999.

HOW DOES THE FUND MEASURE PERFORMANCE?

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

The performance of Shares depends upon such variables as: portfolio quality;
average portfolio maturity; type and value of portfolio securities; changes in
interest rates; changes or differences in the Fund's or any class of Shares'
expenses; and various other factors.

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

Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and ten year periods ended
November 30, 1998.

Yield, Effective Yield and Tax-Equivalent Yield are given for the 7-day period
ended November 30, 1998.

Performance of the Fund shown is prior to its reorganization as a portfolio of
the Trust on November 1, 1999.

7-Day Period 1 Year 5 Years 10 Years
Total Return N/A 3.21% 3.14% 3.69%
Yield 3.03% N/A N/A N/A
Effective Yield 3.08% N/A N/A N/A
Tax-Equivalent Yield 5.02% N/A N/A N/A

TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.
The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

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

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

TAX EQUIVALENCY TABLE
Taxable Yield Equivalent for 1999 MultiState Municipal Fund

Federal Income Tax Bracket: 15.00% 28.00% 31.00% 36.00% 39.60%
Joint Return $1-43,050 $43,051-104,050 $104,051-158,550 $158,551-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
</TABLE>

Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent.

PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs, and illustrations using the Fund's returns; or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.

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

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

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

Lipper Analytical Services, Inc.

Lipper Analytical Services, Inc. ranks funds in various fund categories based on
total return, which assumes the reinvestment of all income dividends and capital
gains distributions, if any.

IBC/Donoghue's Money Fund Report
IBC/Donoghue's Money Fund Report publishes annualized yields of money market
funds weekly. Donoghue's Money Market Insight publication reports monthly and
12-month-to-date investment results for the same money funds.

Money
Money, a monthly magazine, regularly ranks money market funds in various
categories based on the latest available seven-day effective yield.

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.
Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a single
portfolio manager. It is a fusion of individual talents and state-of-the-art
industry tools and resources. Federated's investment process involves teams of
portfolio managers and analysts, and investment decisions are executed by
traders who are dedicated to specific market sectors and who handle trillions of
dollars in annual trading volume.

Federated Funds overview

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

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

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

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

Money Market Funds
In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by
money managers today to value money market fund shares. Other innovations
include the first institutional tax-free money market fund. As of December 31,
1998, Federated managed more than $76.7 billion in assets across 52 money market
funds, including 19 government, 9 prime, and 23 municipal with assets
approximating $41.6 billion, $22.8 billion, and $12.5 billion, respectively.

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

Mutual Fund Market
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $5 trillion to the more than 7,300 funds available,
according to the Investment Company Institute.

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

Institutional Clients
Federated meets the needs of approximately 900 institutional clients nationwide
by managing and servicing separate accounts and mutual funds for a variety of
purposes, including defined benefit and defined contribution programs, cash
management, and asset/liability management. Institutional clients include
corporations, pension funds, tax exempt entities, foundations/ endowments,
insurance companies, and investment and financial advisers. The marketing effort
to these institutional clients is headed by John B. Fisher, President,
Institutional Sales Division, Federated Securities Corp.

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

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

FINANCIAL INFORMATION

The Financial Statements for the Former Fund for the fiscal year ended November
30, 1998, are for prior to the Fund's reorganization as a portfolio of the Trust
on November 1, 1999.

<PAGE>

INVESTMENT RATINGS

Standard & Poor's Short-Term Municipal Obligation Ratings
A Standard & Poor's (S&P) note rating reflects the liquidity concerns and market
access risks unique to notes. SP-1--Very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics will be given a plus sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.

Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
S&P assigns dual ratings to all long-term debt issues that have as part of their
provisions a variable rate demand feature. The first rating (long-term rating)
addresses the likelihood of repayment of principal and interest when due, and
the second rating (short-term rating) describes the demand characteristics.
Several examples are AAA/A-1+, AA/A-1+, A/A-1. (The definitions for the
long-term and the short-term ratings are provided below.)

Commercial Paper (CP) Ratings
An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation. A-2--Capacity for
timely payment on issues with this designation is satisfactory. However, the
relative degree of safety is not as high as for issues designated A-1.

Long-Term Debt Ratings
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong. AA--Debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the
highest-rated issues only in small degree. A--Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher-rated categories.

Moody's Investors Service, Inc., Short-Term Municipal Obligation Ratings
Moody's Investor Service, Inc. (Moody's) short-term ratings are designated
Moody's Investment Grade (MIG or VMIG). (See below.) The purpose of the MIG or
VMIG ratings is to provide investors with a simple system by which the relative
investment qualities of short-term obligations may be evaluated. MIG1--This
designation denotes best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated broad based
access to the market for refinancing. MIG2--This designation denotes high
quality. Margins of protection are ample although not so large as in the
preceding group.

Variable Rate Demand Notes (VRDNs) And Tender Option Bonds (TOBs) Ratings
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity. In this case, two ratings are usually assigned, (for example,
Aaa/VMIG-1); the first representing an evaluation of the degree of risk
associated with scheduled principal and interest payments, and the second
representing an evaluation of the degree of risk associated with the demand
feature. The VMIG rating can be assigned a 1 or 2 designation using the same
definitions described above for the MIG rating.

Commercial Paper (CP) Ratings
P-1--Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations. Prime-1 repayment
capacity will normally be evidenced by the following characteristics: leading
market positions in well established industries, high rates of return on funds
employed, conservative capitalization structure with moderate reliance on debt
and ample asset protection, broad margins in earning coverage of fixed financial
charges and high internal cash generation, well-established access to a range of
financial markets and assured sources of alternate liquidity. P-2--Issuers rated
Prime-2 (or related supporting institutions) have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics cited above, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

Long-Term Debt Ratings
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues. Aa--Bonds which are rated Aa are
judged to be of high quality by all standards. Together with the Aaa group, they
comprise what are generally known as high-grade bonds. They are rated lower than
the best bonds because margins of protection may not be as large as in Aaa
securities or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks appear
somewhat larger than in Aaa securities. A--Bonds which are rated A possess many
favorable investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate but elements may be present which suggest a susceptibility to
impairment sometime in the future. NR--Indicates that both the bonds and the
obligor or credit enhancer are not currently rated by S&P or Moody's with
respect to short-term indebtedness. However, management considers them to be of
comparable quality to securities rated A-1 or P-1. NR(1)--The underlying
issuer/obligor/guarantor has other outstanding debt rated AAA by S&P or Aaa by
Moody's. NR(2)--The underlying issuer/obligor/guarantor has other outstanding
debt rated AA by S&P or Aa by Moody's. NR(3)--The underlying
issuer/obligor/guarantor has other outstanding debt rated A by S&P or Moody's.

Fitch IBCA, INC. Short-Term Debt Rating Definitions
F-1+--Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.
F-1--Very Strong Credit Quality. Issues assigned this rating reflect an
assurance for timely payment, only slightly less in degree than issues rated
F-1+. F-2--Good Credit Quality. Issues carrying this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues assigned F-1+ and F-1 ratings.

<PAGE>

ADDRESSES

FEDERATED TAX-FREE TRUST
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

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

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

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

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

Independent Auditors
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116

APPENDIX

FEDERATED TAX FREE TRUST

Risk/Return Bar Chart and Table
Thegraphic presentation displayed here consists of a bar chart representing the
annual total returns of Federated Tax-Free Trust as of the calendar year-end
for each of 10 years.
The`y' axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 1.00% up to 7.00%.
The`x' axis represents calculation periods from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features ten distinct vertical bars, each
shaded in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The calculated
total return percentage for the Shares for each calendar year is stated
directly at the bottom of each respective bar, for the calendar years 1989
through1998. The percentages noted are 6.03%, 5.69%, 4.32%, 2.75%, 2.14%,
2.57%, 3.57%, 3.14%, 3.33% and 3.18%, respectively.