FEDERATED INSTITUTIONAL SHORT DURATION GOVERNMENT FUND
(A Portfolio of Federated Institutional Trust)
Supplement to Prospectus dated September 30, 1997
Please insert the following after the subsection entitled "Mortgage-Backed
Securities" on page 3 of the Prospectus:
"Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage
Investment Conduits ("REMICs")
CMOs are a type of mortgage-backed security issued as multiple class
bonds and collateralized by pools of real estate mortgages. The CMOs in
which the Fund invests are issued and guaranteed as to payment of
principal and interest by the U.S. government or its agencies or
instrumentalities. A REMIC is a CMO that qualifies and elects treatment
as such under provisions of the Internal Revenue Code that provide for
favorable federal tax treatment. The Fund will only purchase investment
grade CMOs, as rated by a nationally recognized statistical rating
organization. The Fund's investment in CMOs will meet interest rate risk
testing requirements for investments by federal credit unions and other
financial institutions."
February 6, 1998
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Cusip 31420B102
G02287-02 (2/98)
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FEDERATED INSTITUTIONAL SHORT DURATION GOVERNMENT FUND
(A Portfolio of Federated Institutional Trust)
Supplement to Statement of Additional Information dated September 30, 1997
Please insert the following after the subsection entitled "Mortgage-Backed
Securities" on page 1 of the Statement of Additional Information:
"Collateralized Mortgage Obligations ("CMOs") and Real Estate Mortgage
Investment Conduits ("REMICs")
The Fund will not invest in any CMO that meets any of the following three tests:
(1) the CMO has an expected average life greater than 10 years;
(2) the average life of the CMO extends by more than four years assuming
an immediate and sustained parallel shift in the yield curve of plus 300
basis points, or shortens by more than six years assuming an immediate
and sustained parallel shift in the yield curve of minus 300 basis
points; or (3) the estimated change in the price of the CMO is more than
17%, due to an immediate and sustained parallel shift in the yield curve
of plus or minus 300 basis points.
Neither test (1) nor (2) above apply to floating or adjustable rate CMOs
with all of the following characteristics: (a) the interest rate of the
instrument is reset at least annually; (b) the interest rate is below
the contractual cap of the instrument; (c) the instrument is tied to a
widely-used market rate; and (d) the instrument varies directly (not
inversely) and is reset in proportion with the index's changes.
The Fund may not purchase a residual interest in a CMO."
February 6, 1998
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Cusip 31420B102
G02287-03 (2/98)
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