-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U4j4wgvW5RV3r/kDxLzjGF2Hn/HPVCq/w0WlvqSkTO1NRp70ukNCTewDH7V5qbvh T3Q7cAqH48oAD7X1V0zvtg== 0000356678-00-000003.txt : 20000524 0000356678-00-000003.hdr.sgml : 20000524 ACCESSION NUMBER: 0000356678-00-000003 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000523 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TAX FREE INSTRUMENTS TRUST CENTRAL INDEX KEY: 0000356678 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 251408835 STATE OF INCORPORATION: MA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 811-03337 FILM NUMBER: 641839 BUSINESS ADDRESS: STREET 1: FEDERATED INVESTORS TWR CITY: PITTSBURGH STATE: PA ZIP: 15222-3779 BUSINESS PHONE: 8003417400 MAIL ADDRESS: STREET 1: FEDERATED INVESTORS TOWERS CITY: PITPITTSBURGH STATE: PA ZIP: 15222-3779 FORMER COMPANY: FORMER CONFORMED NAME: MONEY MARKET SECURITIES TRUST DATE OF NAME CHANGE: 19820816 DEF 14A 1 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 Filed by the Registrant [ X ] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12 TAX-FREE INSTRUMENTS TRUST (Name of Registrant as Specified In Its Charter) FEDERATED INVESTORS (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [ X ] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. 1. Title of each class of securities to which transaction applies: 2. Aggregate number of securities to which transaction applies: 3. Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): 4. Proposed maximum aggregate value of transaction: 5. Total fee paid: [ ] Fee paid previously with preliminary proxy materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: ------------------------------------------------------------ 2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------ 3) Filing Party: ------------------------------------------------------------ 4) Date Filed: ------------------------------------------------------------ ii TAX-FREE INSTRUMENTS TRUST PROXY STATEMENT - PLEASE VOTE! TIME IS OF THE ESSENCE... VOTING ONLY TAKES A FEW MINUTES AND YOUR PARTICIPATION IS IMPORTANT! ACT NOW TO HELP THE TRUST AVOID ADDITIONAL EXPENSE. Tax-Free Instruments Trust (the "Trust") will hold a special meeting of shareholders on June 30, 2000. IT IS IMPORTANT FOR YOU TO VOTE ON THE ISSUES DESCRIBED IN THIS PROXY STATEMENT. We recommend that you read the Proxy Statement in its entirety; the explanations will help you to decide on the issues. Following is an introduction to the process and the proposals. WHY AM I BEING ASKED TO VOTE? Mutual funds are required to obtain shareholders' votes for certain types of changes, like those included in this Proxy Statement. You have a right to vote on these changes. HOW DO I VOTE MY SHARES? You may vote by telephone at 1-800-690-6903, or through the Internet at WWW.PROXYVOTE.COM. You may also vote in person at the meeting or complete and return the enclosed Proxy Card. If you: 1. choose to help save the Trust time and postage costs by voting through the Internet or by telephone, please don't return your Proxy Card. 2. do not respond at all, we may contact you by telephone to request that you cast your vote. 3. sign and return the Proxy Card without indicating a preference, your vote will be cast "for" all the proposals. WHAT ARE THE ISSUES? The proposals include: o the election of Trustees; o an amendment to and a restatement of the Declaration of Trust; and o a proposed reorganization of the Trust into a newly created portfolio of Money Market Obligations Trust ("MMOT"). WHY ARE INDIVIDUALS RECOMMENDED FOR ELECTION TO THE BOARD OF TRUSTEES? The Trust is devoted to serving the needs of its shareholders, and the Board is responsible for managing the Trust's business affairs to meet those needs. The Board represents the shareholders and can exercise all of the Trust's powers, except those reserved only for shareholders. Trustees are selected on the basis of their education and professional experience. Candidates are chosen based on their distinct interest in, and capacity for understanding the complexities of, the operation of a mutual fund. These individuals bring considerable experience to the impartial oversight of a fund's operation. The Proxy Statement includes a brief description of each nominee's history and current position with the Trust, if applicable. WHY IS THE REORGANIZATION BEING PROPOSED? The Board of Trustees and investment adviser believe that the Trust's management structure can be simplified by reorganizing as a portfolio of MMOT, another money market mutual fund. After the Reorganization, the original Trust will be dissolved. MMOT offers a variety of portfolios investing in money market securities, each with its own investment objective. HOW WILL THE REORGANIZATION AFFECT MY INVESTMENT? o The shares you own and the value of your investment will not change. o The Reorganization will be a tax-free event. o There will be no sales loads, commissions, or transaction fees in connection with the Reorganization. o The investment objective will remain the same. o There will be no increases in the fees payable to the Trust's investment adviser because of the Reorganization. WHY ARE THE TRUSTEES RECOMMENDING AN AMENDMENT TO THE DECLARATION OF TRUST? The Declaration organizing the Trust was prepared many years ago. Since then, developments in the investment company industry and changes in the law have resulted in many improvements. The Board is recommending changes to the Declaration of Trust that permit the Trust to benefit from these developments. WHO DO I CALL IF I HAVE QUESTIONS ABOUT THE PROXY STATEMENT? Call your Investment Professional or a Federated Client Service Representative. Federated's toll-free number is 1-800-341-7400. After careful consideration, the Board of Trustees has unanimously approved these proposals. The Board recommends that you read the enclosed materials carefully and vote FOR all proposals. 1 DEFINITIVE TAX-FREE INSTRUMENTS TRUST NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD JUNE 30, 2000 A Special Meeting of the shareholders of Tax-Free Instruments Trust (the "Trust") will be held at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (Eastern time), on June 30, 2000, to consider proposals: (1)To elect seven Trustees. (2) To approve an amendment to, and a restatement of, the Trust's Declaration of Trust to permit the Board of Trustees to liquidate the assets of the Trust, or of any series or class of the Trust, without seeking shareholder approval. (3)To approve a proposed Agreement and Plan of Reorganization between the Trust and Money Market Obligations Trust, on behalf of its series, Tax-Free Instruments Trust (the "New Fund"), whereby the New Fund would acquire all of the assets of the Trust in exchange for shares of the New Fund to be distributed PRO RATA by the Trust to its shareholders in complete liquidation and termination of the Trust. To transact such other business as may properly come before the meeting or any adjournment thereof. The Board of Trustees has fixed May 11, 2000 as the record date for determination of shareholders entitled to vote at the meeting. By Order of the Board of Trustees, John W. McGonigle Secretary May 24, 2000 YOU CAN HELP THE TRUST AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO ENSURE A QUORUM BY PROMPTLY SIGNING AND RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE TO ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. 2 TABLE OF CONTENTS ABOUT THE PROXY SOLICITATION AND THE MEETING..................3 ELECTION OF SEVEN TRUSTEES.......................................3 ABOUT THE ELECTION OF TRUSTEES...................................4 TRUSTEES STANDING FOR ELECTION...................................4 NOMINEES NOT PRESENTLY SERVING AS TRUSTEES.......................5 APPROVAL OF AN AMENDMENT TO AND A RESTATEMENT OF THE TRUST'S DECLARATION OF TRUST ............................. 6 APPROVAL OF THE PROPOSED AGREEMENT AND PLAN OF REORGANIZATION....7 INFORMATION ABOUT THE TRUST.....................................11 PROXIES, QUORUM AND VOTING AT THE MEETING.......................11 SHARE OWNERSHIP OF THE TRUSTEES.................................12 TRUSTEE COMPENSATION............................................12 OFFICERS AND INCUMBENT TRUSTEES OF THE TRUST....................13 OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY17 APPENDIX I: AGREEMENT AND PLAN OF REORGANIZATION..............I-1 APPENDIX II: COMPARISON OF INVESTMENT POLICIES AND LIMITATIONSII-1 21 3 DEFINITIVE PROXY STATEMENT TAX-FREE INSTRUMENTS TRUST Federated Investors Funds 5800 Corporate Drive Pittsburgh, PA 15237-7000 ABOUT THE PROXY SOLICITATION AND THE MEETING The enclosed proxy is solicited on behalf of the Board of Trustees of the Trust (the "Board" or "Trustees"). The proxies will be voted at the special meeting of shareholders of the Trust to be held on June 30, 2000, at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, at 2:00 p.m. (such special meeting and any adjournment or postponement thereof are referred to as the "Meeting"). The cost of the solicitation, including the printing and mailing of proxy materials, will be borne by the Trust. In addition to solicitations through the mails, proxies may be solicited by officers, employees, and agents of the Trust or, if necessary, a communications firm retained for this purpose. Such solicitations may be by telephone, telegraph, through the Internet or otherwise. Any telephonic solicitations will follow procedures designed to ensure accuracy and prevent fraud, including requiring identifying shareholder information, recording the shareholder's instructions, and confirming to the shareholder after the fact. Shareholders who communicate proxies by telephone or by other electronic means have the same power and authority to issue, revoke, or otherwise change their voting instruction as shareholders submitting proxies in written form. The Trust may reimburse custodians, nominees, and fiduciaries for the reasonable costs incurred by them in connection with forwarding solicitation materials to the beneficial owners of shares held of record by such persons. The Board has reviewed the proposed reorganization (the "Reorganization") of the Trust, and approved it, subject to shareholder approval. The purposes of the Meeting are set forth in the accompanying Notice. The Trustees know of no business other than that mentioned in the Notice that will be presented for consideration at the Meeting. Should other business properly be brought before the Meeting, proxies will be voted in accordance with the best judgment of the persons named as proxies. This Proxy Statement and the enclosed proxy card are expected to be mailed on or about May 24, 2000, to shareholders of record at the close of business on May 11, 2000 (the "Record Date"). On the Record Date, the Trust had outstanding 462,072,662.671 shares of beneficial interest. The Trust's annual report, which includes audited financial statements for the fiscal year ended March 31, 1999, was previously mailed to shareholders. The Trust's semi-annual report, which contains unaudited financial statements for the period ended September 30, 1999, was also previously mailed to shareholders. The Trust will promptly provide, without charge and upon request, to each person to whom this Proxy Statement is addressed, a copy of the Trust's annual report and/or semi-annual report. Requests for the annual report or the semi-annual report of the Trust may be made by writing to the Trust's principal executive offices or calling the Trust's toll-free telephone number. The Trust's principal executive offices are located at Federated Investors Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000. The Trust's toll-free telephone number is 1-800-341-7400. PROPOSAL #1: ELECTION OF SEVEN TRUSTEES The persons named as proxies intend to vote in favor of the election of Thomas G. Bigley, Nicholas P. Constantakis, John F. Cunningham, J. Christopher Donahue, Charles F. Mansfield, Jr., John E. Murray, Jr. and John S. Walsh (collectively, the "Nominees") as Trustees of the Trust. Messrs. Bigley, Mansfield, Murray and Walsh are presently serving as Trustees. If elected by shareholders, Messrs. Constantakis, Cunningham and Donahue are expected to assume their responsibilities as Trustees effective August 1, 2000. Please see "ABOUT THE ELECTION OF TRUSTEES" below for current information about the Nominees, and "OFFICERS AND INCUMBENT TRUSTEES OF THE TRUST" in this Proxy Statement for current information about the incumbent Trustees who have previously been elected by shareholders. Messrs. Bigley and Murray were appointed Trustees of the Trust on November 15, 1994 and February 14, 1995, respectively, to fill vacancies created by the decision to expand the Board. Messrs. Mansfield and Walsh were appointed Trustees on January 1, 1999, to fill vacancies stemming from the retirement of certain trustees. Messrs. Constantakis, Cunningham and Donahue are being proposed for election as Trustees to fill vacancies resulting from the decision to expand the size of the Board. All Nominees have consented to serve if elected. If elected, the Trustees will hold office without limit in time until death, resignation, retirement, or removal or until the next meeting of shareholders to elect Trustees and the election and qualification of their successors. Election of a Trustee is by a plurality vote, which means that the seven individuals receiving the greatest number of votes at the Meeting will be deemed to be elected. If any Nominee for election as a Trustee named above shall by reason of death or for any other reason become unavailable as a candidate at the Meeting, votes pursuant to the enclosed proxy will be cast for a substitute candidate by the proxies named on the proxy card, or their substitutes, present and acting at the Meeting. Any such substitute candidate for election as a Trustee who is an "interested person" (as defined in the Investment Company Act of 1940, as amended (the "1940 Act")) of the Trust shall be nominated by the Executive Committee. The selection of any substitute candidate for election as a Trustee who is not an "interested person" shall be made by a majority of the Trustees who are not "interested persons" of the Trust. The Board has no reason to believe that any Nominee will become unavailable for election as a Trustee. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE TO ELECT AS TRUSTEES THE NOMINEES FOR ELECTION TO THE BOARD OF TRUSTEES OF THE TRUST ABOUT THE ELECTION OF TRUSTEES The Declaration of Trust provides that Trustees will continue in office until their respective successors are elected, and therefore, when elected, the Trustees will hold office during the lifetime of the Trust except that: (a) any Trustee may resign; (b) any Trustee may be removed by written instrument signed by at least two-thirds of the number of Trustees prior to such removal; (c) any Trustee who requests to be retired or who has become mentally or physically incapacitated may be retired by written instrument signed by a majority of the other Trustees; and (d) a Trustee may be removed at any special meeting of the shareholders by a vote of two-thirds of the outstanding shares of the Trust. In case a vacancy shall exist for any reason, the remaining Trustees will fill such vacancy by appointment of another Trustee. The Trustees will not fill any vacancy by appointment if, immediately after filling such vacancy, less than two-thirds of the Trustees then holding office would have been elected by the shareholders. If, at any time, less than a majority of the Trustees holding office have been elected by the shareholders, the Trustees then in office will call a shareholders' meeting for the purpose of electing Trustees to fill vacancies. Otherwise, there will normally be no meeting of shareholders called for the purpose of electing Trustees. Set forth below is a listing of: (i) Trustees standing for election, and (ii) the Nominees standing for election who are not presently serving as Trustees, along with their addresses, birthdates, present positions with the Trust, if applicable, and principal occupations during the past five years: TRUSTEES STANDING FOR ELECTION THOMAS G. BIGLEY 15 Old Timber Trail Pittsburgh, PA Birthdate: February 3, 1934 Trustee Director or Trustee of the Federated Fund Complex; Director and Member of Executive Committee, Children's Hospital of Pittsburgh; Director, Robroy Industries, Inc. (coated steel conduits/computer storage equipment); formerly, Senior Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc. (physician practice management); Director and Member of Executive Committee, University of Pittsburgh. CHARLES F. MANSFIELD, JR. 80 South Road Westhampton Beach, NY Birthdate: April 10, 1945 Trustee Director or Trustee of the Federated Fund Complex; Executive Vice President, Legal and External Affairs, Dugan Valva Contess, Inc. (marketing, communications, technology and consulting); formerly: Management Consultant. Previous Positions: Chief Executive Officer, PBTC International Bank; Partner, Arthur Young & Company (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., S.J.D. President, Duquesne University Pittsburgh, PA Birthdate: December 20, 1932 Trustee Director or Trustee of the Federated Fund Complex; President, Law Professor, Duquesne University; Consulting Partner, Mollica & Murray; Director, Michael Baker Corp. (engineering, construction, operations and technical services). 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 2007 Sherwood Drive Valparaiso, IN Birthdate: November 28, 1957 Trustee Director or Trustee of the Federated Fund Complex; President and Director, Heat Wagon, Inc. (manufacturer of construction temporary heaters); President and Director, Manufacturers Products, Inc. (distributor of portable construction heaters); President, Portable Heater Parts, a division of Manufacturers Products, Inc.; Director, Walsh & Kelly, Inc. (heavy highway contractor); formerly, Vice President, Walsh & Kelly, Inc. NOMINEES NOT PRESENTLY SERVING AS TRUSTEES NICHOLAS P. CONSTANTAKIS 175 Woodshire Drive Pittsburgh, PA Birthdate: September 3, 1939 Trustee Director or Trustee of the Federated Fund Complex; Director, Michael Baker Corporation (engingeering, construction, operations and technical services); formerly, Partner, Andersen Worldwide SC. JOHN F. CUNNINGHAM 353 El Brillo Way Palm Beach, FL Birthdate: March 5, 1943 Trustee Director or Trustee of the Federated Fund Complex; Chairman, President and Chief Executive Officer, Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston College; Director, Iperia Corp. (communications/software); formerly: Director, Redgate Communications and EMC Corporation (computer storage systems). 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. J. CHRISTOPHER DONAHUE Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: April 11, 1949 Executive Vice President President or Executive Vice President of the Federated Fund Complex; Director or Trustee of some of the Funds in the Federated Fund Complex; President, Chief Executive Officer and Director, Federated Investors, Inc.; President, Chief Executive Officer and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; President, Chief Executive Officer and Director, Federated Global Investment Management Corp.; President and Chief Executive Officer, Passport Research, Ltd.; Trustee, Federated Shareholder Services Company; Director, Federated Services Company; formerly: President, Federated Investment Counseling. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of the Trust. PROPOSAL #2: TO AMEND AND RESTATE THE TRUST'S DECLARATION OF TRUST TO PERMIT THE BOARD OF TRUSTEES TO LIQUIDATE THE ASSETS OF THE TRUST WITHOUT SEEKING SHAREHOLDER APPROVAL Mutual funds, such as the Trust, are required to organize under the laws of a state and to create and be bound by organizational documents outlining how they will operate. In the case of the Trust, these organizational documents are the Declaration of Trust and the By-Laws. Since the adoption of the Trust's current Declaration of Trust, the market for mutual funds has evolved, requiring mutual funds to be more flexible in their operations to respond quickly to changes in the market. An item in the current Declaration of Trust, described below, prohibits the Trust from responding quickly and favorably to changing markets without going to the expense and delay of holding a shareholder meeting. Shareholders are being asked to approve an amendment to the Trust's Declaration of Trust to permit the Trustees to sell and convert into money (i.e., liquidate) all the assets of the Trust, or of any series or class of the Trust, and then redeem all outstanding shares of the Trust, or of any such series or class of the Trust. Currently, a majority vote of shareholders is required to liquidate the Trust, or any series or class of the Trust. The Trustees have determined that the current restriction presents a cumbersome structure under which the best interests of all of the Trust's shareholders may not be served. By requiring the Trustees to solicit a shareholder vote, by means of a proxy solicitation and special meeting of shareholders, the Declaration of Trust greatly hinders the Trustees' ability to effectively act on decisions about the continued viability of the Trust. If it is determined that it is no longer advisable to continue the Trust, or any series or class of the Trust, it may not be in the best interests of shareholders to incur the substantial additional expense of a shareholder meeting when it is more important to preserve those assets that remain. If this proposal is approved by shareholders, the Trustees will be authorized to liquidate the Trust, or any series or class of the Trust, by Board action without a further shareholder vote. If approved by shareholders, Article XII, Section 4(c) of the Declaration of Trust will be amended to read as follows: "The Trustees may at any time sell and convert into money all the assets of the Trust, or of any Series or Class of the Trust, without shareholder approval, unless otherwise required by applicable law. Upon making provision for the payment of all outstanding obligations, taxes and other liabilities, accrued or contingent, belonging to each Series or Class, the Trustees shall distribute the remaining assets belonging to each Series or Class ratably among the holders of the outstanding Shares of that Series or Class." The Trustees believe that the interests of Trust shareholders are adequately protected by this provision, as the liquidation would require the conversion of the assets of the Trust, or of any series or class of the Trust, to cash, which will thereafter be distributed to shareholders pro rata. It is believed that this will result in the return to shareholders of substantially the same value as would be provided to the shareholders by a redemption resulting in the payment to the shareholders of the then current net asset value of the shares owned by the shareholders. Accordingly, the Trustees have approved, and have authorized the submission to the Trust's shareholders for their approval, an amendment to the Trust's Declaration of Trust. In the event that the amendment to the Declaration of Trust to allow the Trustees to liquidate assets of the Trust, or of any series or class of the Trust, is not approved by the shareholders, the Declaration of Trust will remain as it currently exists, and the Trustees will consider what action, if any, should be taken. THE BOARD OF TRUSTEES RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL PROPOSAL #3: TO APPROVE THE PROPOSED AGREEMENT AND PLAN OF REORGANIZATION The Board of Trustees of the Trust has voted to recommend to shareholders of the Trust the approval of an Agreement and Plan of Reorganization (the "Reorganization Agreement") whereby Money Market Obligations Trust, a Massachusetts business trust ("MMOT"), on behalf of its portfolio, Tax-Free Instruments Trust (the "New Fund"), would acquire all of the assets (subject to the liabilities) of the Trust in exchange for shares of beneficial interest of the New Fund to be distributed pro rata by the Trust to its shareholders in complete liquidation and dissolution of the Trust (the "Reorganization"). As a result of the Reorganization, each shareholder of the Trust will become the owner of New Fund shares having a total net asset value equal to the total net asset value of his or her holdings in the Trust on the date of the Reorganization. MMOT is an open-end management investment company that consists of a number of portfolios, each of which has its own investment objective. The New Fund is a newly-organized portfolio of MMOT (initially a "shell" portfolio) with the same investment objective as the Trust. The permissible investments for the New Fund are the same as the permissible investments for the Trust, and the New Fund uses comparable investment strategies. The New Fund's investment objective, like the Trust's investment objective, is to provide for its shareholders current income exempt from federal income tax consistent with stability of principal. The New Fund and the Trust pursue their investment objectives by investing in a portfolio of tax-exempt securities maturing in thirteen months or less. The average maturity of money market instruments in the New Fund's and the Trust's portfolios, computed on a dollar-weighted basis, will be 90 days or less. Both the New Fund and the Trust are money market mutual funds that seek to stabilize their offering and redemption prices at $1.00 per share, although there can be no assurance that either the New Fund or the Trust will be able to do so. (See "Comparison of Investment Policies and Risk Factors" below.) Investments in the New Fund and the Trust are neither insured nor guaranteed by the U.S. government. As a condition to the Reorganization, the Trust and MMOT will receive an opinion of counsel that the Reorganization will be considered a tax-free "reorganization" under applicable provisions of the Internal Revenue Code, so that no gain or loss for federal income tax purposes will be recognized by either the Trust or the New Fund or by the shareholders of the Trust. The tax basis of the New Fund shares received by Trust shareholders will be the same as the tax basis of their shares in the Trust. Significant components of the Reorganization and provisions of the Reorganization Agreement are summarized below; however, this summary of the Reorganization Agreement is qualified in its entirety by reference to the full text of the Reorganization Agreement between the Trust and MMOT, a copy of which is attached as Appendix I to this Proxy Statement. DESCRIPTION OF THE REORGANIZATION AGREEMENT The Reorganization Agreement provides that all of the assets of the Trust will be transferred to the New Fund, subject to the liabilities of the Trust. Each holder of shares of the Trust will receive the same number (with the same aggregate value) of shares of the New Fund as the shareholder had in the Trust immediately prior to the Reorganization. The Trust's shareholders will not pay a sales charge, commission or other transaction cost in connection with their receipt of the shares of the New Fund. Following the transfer of assets subject to liabilities of the Trust to the New Fund, and the issuance of shares by the New Fund to the Trust, the Trust will distribute the shares of the New Fund received by the Trust among the shareholders of the Trust in proportion to the number of shares each such shareholder holds in the Trust. Following the Reorganization, shareholders of the Trust will be shareholders of the New Fund. Upon the completion of the Reorganization, the Trust will be deregistered as an investment company under the 1940 Act and its existence terminated under state law. The stock transfer books of the Trust will be permanently closed after the Reorganization. MMOT will not issue share certificates with respect to shares of the New Fund issued in connection with the Reorganization. The Reorganization is subject to certain conditions, including: approval of the Reorganization Agreement and the transactions and exchange contemplated thereby as described in this Proxy Statement by the shareholders of the Trust; the receipt of a legal opinion described in the Reorganization Agreement regarding tax matters; the receipt of certain certificates from the parties concerning the continuing accuracy of the representations and warranties in the Reorganization Agreement and other matters; and the parties' performance, in all material respects, of the agreements and undertakings in the Reorganization Agreement. Assuming satisfaction of the conditions in the Reorganization Agreement, the Reorganization is expected to occur on or after August 1, 2000. The Trust's investment adviser, Federated Investment Management Company, is responsible for the payment of all expenses of the Reorganization incurred by either party, whether or not the Reorganization is consummated. Such expenses include, but are not limited to, legal fees, registration fees, transfer taxes (if any), the fees of banks and transfer agents and a portion of the costs of preparing, printing, copying and mailing proxy solicitation materials to the Trust's shareholders. The Reorganization may be terminated at any time prior to its consummation by either the Trust or MMOT if circumstances should develop that, in the opinion of either the Board of the Trust or the Board of Trustees of MMOT, make proceeding with the Reorganization Agreement inadvisable. The Reorganization Agreement provides further that at any time prior to the consummation of the Reorganization: (i) the parties thereto may amend or modify any of the provisions of the Reorganization Agreement provided that such amendment or modification would not have a material adverse effect on the benefits intended under the Reorganization Agreement and it would be consistent with the best interests of the shareholders of the Trust and the New Fund; and (ii) either party may waive any of the conditions set forth in the Reorganization Agreement if, in the judgment of the waiving party, such waiver will not have a material adverse effect on the benefits intended under the Reorganization Agreement to the shareholders of the Trust or the shareholders of the New Fund, as the case may be. REASONS FOR THE PROPOSED REORGANIZATION The Trust was established as a Massachusetts business trust in 1981. Although the Board has been satisfied with the Trust's performance, it, and the Trust's distributor and administrator, believe that reorganizing the Trust as a portfolio of MMOT could improve the Trust's distribution and streamline administration. Accordingly, the Trust's distributor and administrator have recommended to the Board of Trustees of MMOT that the New Fund be organized for the purpose of acquiring the Trust's assets and thereby reorganizing the Trust as a portfolio of MMOT. The Trust's distributor and administrator similarly recommended to the Trustees of the Trust that the Trust's assets be transferred to MMOT, on behalf of the New Fund, in order to reorganize it as a separate portfolio of MMOT. In connection with this proposal, the Trust's distributor and administrator emphasized the comparable advisory services provided the Trust and the New Fund, the identical investment objectives and similar investment policies of the Trust and the New Fund, and the administrative convenience and simplification of management achievable by operating the Trust as a portfolio of MMOT. If the Reorganization is approved, it is presently anticipated that the fees and expenses of the New Fund will be the same as those of the Trust for the New Fund's initial fiscal year. There will be no increases in the fees payable to the New Fund's investment adviser and administrator. If the Reorganization is effected, the New Fund will adopt the prior performance and financial statements of the Trust. BOARD OF TRUSTEES' CONSIDERATIONS AND RECOMMENDATIONS The Trust's Board of Trustees, at its meeting on May 19, 1999, concluded that the reorganization of the Trust as a portfolio of MMOT could provide for improved distribution and streamlined administration. The Trust's Trustees also noted that Trust shareholders would continue to receive the same quality of investment management services from the New Fund's investment adviser, which is also the Trust's current investment adviser. The Trust's Board of Trustees, including a majority of the Trustees who are not "interested persons," additionally determined that participation in the Reorganization is in the best interests of the Trust and that the interests of the Trust shareholders would not be diluted as a result of its effecting the Reorganization. Based upon the foregoing considerations, and the fact that shareholders of the Trust will not suffer any adverse federal income tax consequences as a result of the Reorganization, the Board of Trustees of the Trust unanimously voted to approve, and recommended to Trust shareholders the approval of, the Reorganization. The Board of Trustees of MMOT, including the Trustees who are not "interested persons," at the Board's meeting on May 19, 1999, unanimously concluded that consummation of the Reorganization is in the best interests of MMOT and the shareholders of the New Fund, and that the interests of New Fund shareholders would not be diluted as a result of effecting the Reorganization. As a consequence, the Board of Trustees of MMOT unanimously approved the Reorganization Agreement. Under the current terms of the Declaration of Trust, the approval of the Reorganization requires the affirmative vote of a majority of the outstanding voting shares of the Trust as described in this Proxy Statement. (See "PROXIES, QUORUM AND VOTING AT THE MEETING" below.) FEDERAL INCOME TAX CONSEQUENCES As a condition to the Reorganization, the Trust and MMOT, on behalf of the New Fund, will receive an opinion from Dickstein Shapiro Morin & Oshinsky LLP, special counsel to the Trust and MMOT, to the effect that, on the basis of the existing provisions of the Internal Revenue Code of 1986, as amended (the "Code"), current administrative rules and court decisions, for federal income tax purposes: (1) the Reorganization as set forth in the Reorganization Agreement will constitute a tax-free reorganization under Section 368(a)(1)(F) of the Code, and the Trust and the New Fund each will be a "party to a reorganization" within the meaning of Section 368(b) of the Code; (2) no gain or loss will be recognized by the New Fund upon its receipt of the Trust's assets (subject to the liabilities of the Trust) in exchange for New Fund shares; (3) no gain or loss will be recognized by the Trust upon the transfer of its assets (subject to the liabilities of the Trust) to the New Fund in exchange for New Fund shares or upon the distribution (whether actual or constructive) of the New Fund shares to the Trust shareholders in exchange for their shares of the Trust; (4) no gain or loss will be recognized by shareholders of the Trust upon the exchange of their Trust shares for New Fund shares; (5) the tax basis of the Trust's assets acquired by the New Fund will be the same as the tax basis of such assets to the Trust immediately prior to the Reorganization; (6) the tax basis of New Fund shares received by each shareholder of the Trust pursuant to the Reorganization will be the same as the tax basis of Trust shares held by such shareholder immediately prior to the Reorganization; (7) the holding period of the assets of the Trust in the hands of the New Fund will include the period during which those assets were held by the Trust; and (8) the holding period of New Fund shares received by each shareholder of the Trust pursuant to the Reorganization will include the period during which the Trust shares exchanged therefor were held by such shareholder, provided the Trust shares were held as capital assets on the date of the Reorganization. The Trust and MMOT have not sought a tax ruling from the Internal Revenue Service ("IRS"), but are acting in reliance upon the opinion of counsel discussed in the previous paragraph. That opinion is not binding on the IRS and does not preclude the IRS from adopting a contrary position. Shareholders should consult their own advisers concerning the potential tax consequences to them, including state and local income taxes. COMPARISON OF INVESTMENT POLICIES AND RISK FACTORS The investment objective of the Trust is identical to the investment objective of the New Fund. Investments in the Trust and the New Fund are not insured or guaranteed by the U.S. government. Since the Trust and the New Fund are managed to maintain a constant net asset value, the Trust and the New Fund have little risk of principal loss. However, investments in the Trust and the New Fund are subject to certain risks, which include, but are not limited to, the following: the possibility that issuers of securities owned by the Trust and the New Fund will have their credit ratings downgraded; the ability of the issuers of securities owned by the Trust and the New Fund to meet their obligations for payment of principal and interest when due or to repurchase such securities as previously agreed; interest rate or market risk, which is the potential for fluctuations in the prices of debt securities owned by the Trust and the New Fund, due to changing interest rates (e.g., when interest rates rise, bond prices generally decline); and prepayment or call risk, which is the likelihood that, during periods of falling interest rates, debt securities will be prepaid (or "called") prior to maturity, requiring the proceeds to be invested by the Trust and the New Fund at a generally lower interest rate. These risks could result in a loss of value of an investment in the Trust, or in the New Fund when it commences operations. The investment policies and restrictions of the New Fund have been established so as to be comparable to the current investment policies and restrictions of the Trust. The differences between the investment policies and restrictions of the Trust and those of the New Fund result, in part, from the standardization of certain investment policies and restrictions among the Federated Funds, including the New Fund, and the elimination of certain investment limitations that govern the Trust and had been previously required under state law. A number of these investment limitations have been preempted and are no longer applicable, and hence, the New Fund is not required to adopt such limitations. Additionally, certain of the Trust's investment policies were originally adopted as fundamental policies, when there is no legal requirement that they be fundamental. Consequently, the New Fund is subject to identical (or nearly identical) non-fundamental investment policies. Appendix II to this Proxy Statement identifies the differences in the investment policies and restrictions of the Trust and the New Fund. The investment adviser to the Trust and the New Fund does not believe that the differences in investment policies and restrictions are material. In addition, the adviser believes that the level of risk of an investment in the Trust is comparable to, and does not materially differ from, the level of risk of an investment in the New Fund. COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS AND OBLIGATIONS Each of the Trust and MMOT is organized as a business trust pursuant to a Declaration of Trust under the laws of the Commonwealth of Massachusetts. The rights of shareholders of the Trust and of shareholders of MMOT relating to voting, distributions and redemptions, as set forth in the applicable Declaration of Trust and By-Laws, are substantively identical. Set forth below is a brief summary of the significant rights of shareholders of the Trust and of MMOT. Neither the Trust nor MMOT are required to hold annual meetings of shareholders. Shareholder approval is necessary only for certain changes in operations or the election of Trustees under certain circumstances. A special meeting of shareholders of either the Trust or MMOT for any permissible purpose shall be called by the Trustees upon the written request of the holders of at least 10% of the outstanding shares of the Trust or MMOT, as the case may be. Each share of the Trust and MMOT is entitled to one vote. All shares of MMOT have equal voting rights, except that only shares of the New Fund are entitled to vote on matters only affecting the New Fund. Under certain circumstances, shareholders of the Trust and shareholders of the New Fund may be held personally liable as partners under Massachusetts law for obligations of the Trust or of MMOT, respectively. To protect their shareholders, the Trust and MMOT have filed legal documents with the Commonwealth of Massachusetts that expressly disclaim the liability of their shareholders for such acts or obligations of the Trust or MMOT. These documents require that notice of this disclaimer be given in each agreement, obligation or instrument that the Trust or MMOT or their Trustees enter into or sign. In the unlikely event a shareholder is held personally liable for the Trust's or the New Fund's obligations, each of the Trust and the New Fund is required to use its property to protect or compensate the shareholder. On request, the Trust or the New Fund will defend any claim made and pay any judgment against a shareholder for any act or obligation of the New Fund. Therefore, financial loss resulting from liability as a shareholder will occur only if the Trust or MMOT cannot meet its obligations to indemnify shareholders and pay judgments against them from the assets of the Trust or MMOT. PURCHASE AND REDEMPTION INFORMATION, EXCHANGE PRIVILEGES, DISTRIBUTION AND PRICING The purchase, redemption, exchange privileges and distribution policies of the Trust and the New Fund are identical. THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF THE TRUST VOTE "FOR" APPROVAL OF THE REORGANIZATION AGREEMENT INFORMATION ABOUT THE TRUST PROXIES, QUORUM AND VOTING AT THE MEETING Only shareholders of record on the Record Date will be entitled to vote at the Meeting. Each share of the Trust is entitled to one vote. Fractional shares are entitled to proportionate shares of one vote. Under both the Investment Company Act of 1940 and the Declaration of Trust, the favorable vote of a "majority of the outstanding voting shares" of the Trust means: (a) the holders of 67% or more of the outstanding voting securities present at the Meeting, if the holders of 50% or more of the outstanding voting securities of the Trust are present or represented by proxy; or (b) the vote of the holders of more than 50% of the outstanding voting securities, whichever is less. The election of the Trustees is subject to the specific vote requirement described in Proposal #1 in this Proxy Statement. The favorable vote of a majority of the shares of all series and classes of the Trust then outstanding and entitled to vote thereon is required to approve the proposed amendment to the Declaration of Trust, as described in Proposal #2, and the Reorganization of the Trust, as described in Proposal #3. Any person giving a proxy has the power to revoke it any time prior to its exercise by executing a superseding proxy or by submitting a written notice of revocation to the Secretary of the Trust. In addition, although mere attendance at the Meeting will not revoke a proxy, a shareholder present at the Meeting may withdraw his or her proxy and vote in person. All properly executed and unrevoked proxies received in time for the Meeting will be voted in accordance with the instructions contained in the proxies. IF NO INSTRUCTION IS GIVEN ON THE PROXY, THE PERSONS NAMED AS PROXIES WILL VOTE THE SHARES REPRESENTED THEREBY IN FAVOR OF THE MATTERS SET FORTH IN THE ATTACHED NOTICE. In order to hold the Meeting, a "quorum" of shareholders must be present. Holders of more than fifty percent of the total number of outstanding shares of all series and classes of the Trust entitled to vote, present in person or by proxy, shall be required to constitute a quorum for the purpose of voting on the proposals. For purposes of determining a quorum for transacting business at the Meeting, abstentions and broker "non-votes" (that is, proxies from brokers or nominees indicating that such persons have not received instructions from the beneficial owner or other persons entitled to vote shares on a particular matter with respect to which the brokers or nominees do not have discretionary power) will be treated as shares that are PRESENT but which have not been VOTED. For this reason, abstentions and broker non-votes will have the effect of a "no" vote for purposes of obtaining the requisite approval of some of the proposals. If a quorum is not present, the persons named as proxies may vote those proxies which have been received to adjourn the Meeting to a later date. In the event that a quorum is present but sufficient votes in favor of one or more of the proposals have not been received, the persons named as proxies may propose one or more adjournments of the Meeting to permit further solicitations of proxies with respect to such proposal(s). All such adjournments will require the affirmative vote of a plurality of the shares present in person or by proxy at the session of the Meeting to be adjourned. The persons named as proxies will vote AGAINST any such adjournment those proxies which they are required to vote against the proposal and will vote in FAVOR of the adjournment other proxies which they are authorized to vote. A shareholder vote may be taken on other proposals in this Proxy Statement prior to any such adjournment if sufficient votes have been received for approval. As referred to in this Proxy Statement, the "Federated Fund Complex," "The Funds" or "Funds" include the following investment companies: Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Core Trust; Federated Equity Funds; Federated Equity Income Fund, Inc.; Federated Fixed Income Securities, Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated High Income Bond Fund, Inc.; Federated High Yield Trust; Federated Income Securities Trust; Federated Income Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance Series; Federated Investment Series Funds, Inc.; Federated Managed Allocation Portfolios; Federated Municipal Opportunities Fund, Inc.; Federated Municipal Securities Fund, Inc.; Federated Municipal Securities Income Trust; Federated Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; FirstMerit Funds; Intermediate Municipal Trust; International Series, Inc.; Money Market Obligations Trust; Regions Funds; RIGGS Funds; Tax-Free Instruments Trust; and World Investment Series, Inc. SHARE OWNERSHIP OF THE TRUSTEES Officers and Trustees of the Trust own less than 1% of the Trust's outstanding shares. At the close of business on the Record Date, the following persons owned, to the knowledge of management, more than 5% of the outstanding shares of the Trust: Fiduciary Trust Company International, New York, NY, on behalf of various customer accounts, owned approximately 142,518,230 Institutional Service Shares (30.84%); Union Federal Savings Bank and Trust Company, Indianapolis, IN, owned approximately 40,258,320 Institutional Service Shares (8.71%); Turtle & Company, Boston, MA, owned approximately 38,458,751 Institutional Service Shares (8.32%); and Stevens Inc., Little Rock, AR, owned approximately 43,798,132 Investment Shares (9.48%).
TRUSTEE COMPENSATION NAME AND POSITION AGGREGATE TOTAL COMPENSATION PAID WITH TRUST COMPENSATION FROM FUND COMPLEX+ FROM TRUST 1 # - -------------------------------------------------------------------------------- John F. Donahue*@ $0 $0 for the Trust and 43 other Chairman and Trustee investment companies in the Fund Complex Thomas G. Bigley $2,285.33 $116,760.63 for the Trust and 43 other Trustee investment companies in the Fund Complex John T. Conroy, Jr. $2,451.63 $128,455.37 for the Trust and 43 other Trustee investment companies in the Fund Complex Lawrence D. Ellis, M.D.* $2,228.44 $116,760.63 for the Trust and 43 other Trustee investment companies in the Fund Complex Peter E. Madden $2,042.40 $109,153.60 for the Trust and 43 other Trustee investment companies in the Fund Complex Charles F. Mansfield, Jr. $2,398.17 $102,573.91 for the Trust and 40 other Trustee investment companies in the Fund Complex John E. Murray, Jr., J.D., $2,394.74 $128,455.37 for the Trust and 43 other S.J.D.@ investment companies in the Fund Complex Trustee Marjorie P. Smuts $2,228.44 $116,760.63 for the Trust and 43 other Trustee investment companies in the Fund Complex John S. Walsh $2,228.44 $94,536.85 for the Trust and 39 other Trustee investment companies in the Fund Complex
1 Information is furnished for the fiscal year ended March 31, 2000. # The aggregate compensation is provided for the Trust which is comprised of one portfolio. + The information is provided for the last calendar year. * The Trustee is deemed to be an "interested person" as defined in the 1940 Act. @ Member of the Executive Committee. During the fiscal year ended March 31, 2000, there were four meetings of the Board of Trustees. The interested Trustees, other than Dr. Ellis, do not receive fees from the Trust. Dr. Ellis is an interested person by reason of the employment of his son-in-law by Federated Securities Corp. All Trustees were reimbursed for expenses for attendance at Board of Trustees meetings. The Executive Committee of the Board of Trustees handles the responsibilities of the Board between meetings of the Board. Other than its Executive Committee, the Trust has one Board committee, the Audit Committee. Generally, the function of the Audit Committee is to assist the Board of Trustees in fulfilling its duties relating to the Trust's accounting and financial reporting practices and to serve as a direct line of communication between the Board of Trustees and the independent auditors. The specific functions of the Audit Committee include recommending the engagement or retention of the independent auditors, reviewing with the independent auditors the plan and the results of the auditing engagement, approving professional services provided by the independent auditors prior to the performance of such services, considering the range of audit and non-audit fees, reviewing the independence of the independent auditors, reviewing the scope and results of the Trust's procedures for internal auditing, and reviewing the Trust's system of internal accounting controls. For the most recently completed fiscal year, Messrs. Conroy, Madden and Murray served on the Audit Committee. These Trustees are not interested persons of the Trust. During the fiscal year ended March 31, 2000, there were four meetings of the Audit Committee. All of the members of the Audit Committee were present for each meeting. Each member of the Audit Committee receives a fee of $3,125 for attendance at each meeting and is reimbursed for expenses of attendance. OFFICERS AND INCUMBENT TRUSTEES OF THE TRUST The executive officers of the Trust are elected annually by the Board of Trustees. Each officer holds the office until qualification of his successor. The names and birthdates of the executive officers of the Trust, as well as of the incumbent Trustees who have previously been elected by shareholders, and their principal occupations during the last five years, are set forth below: John F. Donahue Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: July 28, 1924 Chairman and Trustee Date Became a Trustee/Officer: November 17, 1981/November 18, 1982 Chief Executive Officer and Director or Trustee of the Federated Fund Complex; Chairman and Director, Federated Investors, Inc.; Chairman, Federated Investment Management Company, Federated Global Investment Management Corp. and Passport Research, Ltd.; formerly: Trustee, Federated Investment Management Company and Chairman and Director, Federated Investment Counseling. Mr. Donahue is the father of J. Christopher Donahue, Nominee for Trustee and Executive Vice President of the Trust. John T. Conroy, Jr. Grubb & Ellis/Investment Properties Corporation 3201 Tamiami Trail North Naples, FL Birthdate: June 23, 1937 Trustee Date Became a Trustee: November 13, 1991 Director or Trustee of the Federated Fund Complex; President, Investment Properties Corporation; Senior Vice President, John R. Wood and Associates, Inc., Realtors; Partner or Trustee in private real estate ventures in Southwest Florida; formerly: President, Naples Property Management, Inc. and Northgate Village Development Corporation. Lawrence D. Ellis, M.D. 3471 Fifth Avenue Suite 1111 Pittsburgh, PA Birthdate: October 11, 1932 Trustee Date Became a Trustee: August 26, 1987 Director or Trustee of the Federated Fund Complex; Professor of Medicine, University of Pittsburgh; Medical Director, University of Pittsburgh Medical Center-Downtown; Hematologist, Oncologist, and Internist, University of Pittsburgh Medical Center; Member, National Board of Trustees, Leukemia Society of America. Peter E. Madden One Royal Palm Way 100 Royal Palm Way Palm Beach, FL Birthdate: March 16, 1942 Trustee Date Became a Trustee: November 13, 1991 Director or Trustee of the Federated Fund Complex; formerly: Representative, Commonwealth of Massachusetts General Court; President, State Street Bank and Trust Company and State Street Corporation. Previous Positions: Director, VISA USA and VISA International; Chairman and Director, Massachusetts Bankers Association; Director, Depository Trust Corporation; Director, The Boston Stock Exchange. Marjorie P. Smuts 4905 Bayard Street Pittsburgh, PA Birthdate: June 21, 1935 Trustee Date Became a Trustee: February 24, 1984 Director or Trustee of the Federated Fund Complex; Public Relations/Marketing/Conference Planning. Previous Positions: National Spokesperson, Aluminum Company of America; television producer; business owner. J. Christopher Donahue Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: April 11, 1949 Executive Vice President Date Became an Officer: June 1, 1995 President or Executive Vice President of the Federated Fund Complex; Director or Trustee of some of the Funds in the Federated Fund Complex; President, Chief Executive Officer and Director, Federated Investors, Inc.; President, Chief Executive Officer and Trustee, Federated Investment Management Company; Trustee, Federated Investment Counseling; President, Chief Executive Officer and Director, Federated Global Investment Management Corp.; President and Chief Executive Officer, Passport Research, Ltd.; Trustee, Federated Shareholder Services Company; Director, Federated Services Company; formerly: President, Federated Investment Counseling. Mr. Donahue is the son of John F. Donahue, Chairman and Trustee of the Trust. Glen R. Johnson Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: May 2, 1929 President Date Became an Officer: November 18, 1982 President of some of the Funds in the Federated Fund Complex; Staff member, Federated Securities Corp.; formerly: Trustee or Director of some of the Funds in the Federated Fund Complex. Edward C. Gonzales Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: October 22, 1930 Executive Vice President Date Became an Officer: June 1, 1995 President, Executive Vice President and Treasurer of some of the Funds in the Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Trustee, Federated Administrative Services; formerly: Trustee or Director of some of the Funds in the Federated Fund Complex; Chief Executive Officer and Chairman, Federated Administrative Services; Vice President, Federated Investment Management Company, Federated Investment Counseling, Federated Global Investment Management Corp. and Passport Research Ltd.; Director and Executive Vice President, Federated Securities Corp.; Director, Federated Services Company; Trustee, Federated Shareholder Services Company. John W. McGonigle Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: October 26, 1938 Executive Vice President and Secretary Date Became an Officer: November 18, 1982 Executive Vice President and Secretary of the Federated Fund Complex; Executive Vice President, Secretary, and Director, Federated Investors, Inc.; formerly: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director, Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp. Richard B. Fisher Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: May 17, 1923 Vice President Date Became an Officer: November 18, 1982 President or Vice President of some of the Funds in the Federated Fund Complex; Vice Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.; formerly: Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice President, Federated Investors, Inc. and Director and Chief Executive Officer, Federated Securities Corp. Richard J. Thomas Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: June 17, 1954 Treasurer Date Became an Officer: November 19, 1998 Treasurer of the Federated Fund Complex; Senior Vice President, Federated Administrative Services; formerly: Vice President, Federated Administrative Services; held various management positions within Funds Financial Services Division of Federated Investors, Inc. William D. Dawson, III Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: March 3, 1949 Chief Investment Officer Date Became an Officer: November 19, 1998 Chief Investment Officer of the Company and various other Funds in the Federated Fund Complex; Executive Vice President, Federated Investment Counseling, Federated Global Research Corp., Federated Investment Management Company and Passport 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 Research Corp., Federated Advisers, and Passport Research, Ltd. Jeff A. Kozemchak Federated Investors Tower 1001 Liberty Avenue Pittsburgh, PA Birthdate: January 15, 1960 Vice President Date Became an Officer: November 18, 1998 Senior Vice President of Federated Investment Management Company; formerly, Vice President of Federated Investment Management Company. None of the Officers of the Trust received salaries from the Trust during the fiscal year ended March 31, 2000. OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY The Trust is not required, and does not intend, to hold regular annual meetings of shareholders. Shareholders wishing to submit proposals for consideration for inclusion in a proxy statement for the next meeting of shareholders should send their written proposals to Tax-Free Instruments Trust, Federated Investors Funds, 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, so that they are received within a reasonable time before any such meeting. No business other than the matters described above is expected to come before the Meeting, but should any other matter requiring a vote of shareholders arise, including any question as to an adjournment or postponement of the Meeting, the persons named on the enclosed proxy card will vote on such matters according to their best judgment in the interests of the Trust. SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. By Order of the Board of Trustees, John W. McGonigle Secretary May 24, 2000 TAX-FREE INSTRUMENTS TRUST INVESTMENT ADVISER FEDERATED INVESTMENT MANAGEMENT COMPANY Federated Investors Tower Pittsburgh, Pennsylvania 15222-3779 DISTRIBUTOR FEDERATED SECURITIES CORP. Federated Investors Tower Pittsburgh, Pennsylvania 15222-3779 ADMINISTRATOR FEDERATED SERVICES COMPANY Federated Investors Tower Pittsburgh, Pennsylvania 15222-3779 Cusip 876924200 Cusip 876924101 25476 (5/00) KNOW ALL PERSONS BY THESE PRESENTS that the undersigned Shareholders of Tax-Free Instruments Trust (the "Trust"), hereby appoint Gail Cagney, William Haas, Suzanne W. Land, Cathy Ryan and Ann M. Scanlon, or any one of them, true and lawful attorneys, with the power of substitution of each, to vote all shares of the Trust which the undersigned is entitled to vote at the Special Meeting of Shareholders (the "Meeting") to be held on June 30, 2000, at 5800 Corporate Drive, Pittsburgh, Pennsylvania, at 2:00 p.m. and at any adjournment thereof. The attorneys named will vote the shares represented by this proxy in accordance with the choices made on this ballot. If no choice is indicated as to the item, this proxy will be voted affirmatively on the matters. Discretionary authority is hereby conferred as to all other matters as may properly come before the Meeting or any adjournment thereof. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF TAX-FREE INSTRUMENTS TRUST. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS. BY CHECKING THE BOX "FOR" BELOW, YOU WILL VOTE TO APPROVE EACH OF THE PROPOSED ITEMS IN THIS PROXY, AND TO ELECT EACH OF THE NOMINEES AS TRUSTEES OF THE TRUST FOR [ ] PROPOSAL 1 TO ELECT THOMAS G. BIGLEY, NICHOLAS P. CONSTANTAKIS, JOHN F. CUNNINGHAM, J. CHRISTOPHER DONAHUE, CHARLES F. MANSFIELD, JR., JOHN E. MURRAY, JR. AND JOHN S. WALSH AS TRUSTEES OF THE TRUST FOR [ ] WITHHOLD AUTHORITY TO VOTE [ ] VOTE FOR ALL EXCEPT [ ] If you do not wish your shares to be voted "FOR" a particular nominee, mark the "VOTE FOR ALL EXCEPT" box and strike a line through the name of each nominee for whom you are NOT voting. Your shares will be voted for the remaining nominees. PROPOSAL 2 TO APPROVE AN AMENDMENT TO, AND A RESTATEMENT OF, THE TRUST'S DECLARATION OF TRUST TO PERMIT THE BOARD OF TRUSTEES TO LIQUIDATE THE ASSETS OF THE TRUST, OR OF ANY SERIES OR CLASS OF THE TRUST, WITHOUT SEEKING SHAREHOLDER APPROVAL FOR [ ] AGAINST [ ] ABSTAIN [ ] PROPOSAL 3 TO APPROVE A PROPOSED AGREEMENT AND PLAN OF REORGANIZATION BETWEEN THE TRUST AND MONEY MARKET OBLIGATIONS TRUST, ON BEHALF OF ITS SERIES, TAX-FREE INSTRUMENTS TRUST (THE "NEW FUND"), WHEREBY THE NEW FUND WOULD ACQUIRE ALL OF THE ASSETS OF THE TRUST IN EXCHANGE FOR SHARES OF THE NEW FUND TO BE DISTRIBUTED PRO RATA BY THE TRUST TO ITS SHAREHOLDERS IN COMPLETE LIQUIDATION AND TERMINATION OF THE TRUST FOR [ ] AGAINST [ ] ABSTAIN [ ] YOUR VOTE IS IMPORTANT Please complete, sign and return this card as soon as possible. Dated Signature Signature (Joint Owners) Please sign this proxy exactly as your name appears on the books of the Trust. Joint owners should each sign personally. Directors and other fiduciaries should indicate the capacity in which they sign, and where more than one name appears, a majority must sign. If a corporation, this signature should be that of an authorized officer who should state his or her title. YOU MAY ALSO VOTE YOUR SHARES BY TOUCHTONE PHONE BY CALLING 1-800-690-6903 OR THROUGH THE INTERNET AT WWW.PROXYVOTE.COM I-5 I-1 APPENDIX I AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION dated as of May 1, 2000 (the "Agreement") between Tax-Free Instruments Trust, a Massachusetts business trust (the "Fund"), with its principal place of business at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, and Money Market Obligations Trust, a Massachusetts business trust (the "Trust"), with its principal place of business located at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7000, on behalf of its newly-organized portfolio, Tax-Free Instruments Trust (the "Successor Fund")., WHEREAS, the Board of Trustees of the Fund and the Board of Trustees of the Trust have determined that it is in the best interests of the Fund and the Trust, respectively, that the assets of the Fund be acquired by the Successor Fund pursuant to this Agreement; and WHEREAS, the parties desire to enter into a plan of exchange which would constitute a reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the "Code"): NOW THEREFORE, in consideration of the premises and of the covenants and agreements hereinafter set forth, the parties hereto agree as follows: 1. PLAN OF EXCHANGE. ---------------- (a) Subject to the terms and conditions set forth herein, the Fund shall assign, transfer and convey its assets, including all securities and cash held by the Fund (subject to the liabilities of the Fund) to the Successor Fund, and the Successor Fund shall acquire all of the assets of the Fund (subject to the liabilities of the Fund) in exchange for full and fractional shares of beneficial interest of the Successor Fund (the "Successor Fund Shares"), to be issued by the Trust, having an aggregate net asset value equal to the value of the net assets of the Fund. The value of the assets of the Fund and the net asset value per share of the Successor Fund Shares shall be computed as of the close of the New York Stock Exchange (normally 4:00 p.m. Eastern Time) on the Exchange Date (such time and date being hereinafter called the "Valuation Time" in accordance with the procedures for determining the value of the Successor Fund's assets set forth in the Successor Fund's organizational documents and the then-current prospectus and statement of additional information for the Successor Fund that forms a part of the Successor Fund's Registration Statement on Form N-1A (the "Registration Statement"). In lieu of delivering certificates for the Successor Fund Shares, the Trust shall credit the Successor Fund Shares to the Fund's account on the share record books of the Trust and shall deliver a confirmation thereof to the Fund. The Fund shall then deliver written instructions to the Trust's transfer agent to establish accounts for the shareholders on the share record books relating to the Successor Fund. (b) Delivery of the assets of the Fund to be transferred shall be made on the Exchange Date (as defined herein). Assets transferred shall be delivered to State Street Bank and Trust Company, the Trust's custodian (the "Custodian"), for the account of the Trust and the Successor Fund with all securities not in bearer or book entry form duly endorsed, or accompanied by duly executed separate assignments or stock powers, in proper form for transfer, with signatures guaranteed, and with all necessary stock transfer stamps, sufficient to transfer good and marketable title thereto (including all accrued interest and dividends and rights pertaining thereto) to the Custodian for the account of the Trust and the Successor Fund free and clear of all liens, encumbrances, rights, restrictions and claims. All cash delivered shall be in the form of immediately available funds payable to the order of the Custodian for the account of the Trust and the Successor Fund. (c) The Fund will pay or cause to be paid to the Trust any interest received on or after the Exchange Date with respect to assets transferred from the Fund to the Successor Fund hereunder and to the Trust and any distributions, rights or other assets received by the Fund after the Exchange Date as distributions on or with respect to the securities transferred from the Fund to the Successor Fund hereunder. All such assets shall be deemed included in assets transferred to the Successor Fund on the Exchange Date and shall not be separately valued. (d) The Exchange Date shall be August 1, 2000, or such later date as may be mutually agreed upon by the parties. (e) As soon as practicable after the Exchange Date, the Fund shall distribute all of the Successor Fund Shares received by it among the shareholders of the Fund in proportion to the number of shares each such shareholder holds in the Fund and shall take all other steps necessary to effect its dissolution and termination. After the Exchange Date, the Fund shall not conduct any business except in connection with its dissolution and termination. 2. THE FUND'S REPRESENTATIONS AND WARRANTIES. The Fund represents and - --------------------------------------------- warrants to and agrees with the Trust on behalf of the Successor Fund as follows: (a) The Fund is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has power to own all of its properties and assets and, subject to the approval of its shareholders as contemplated hereby, to carry out this Agreement. (b) This Agreement has been duly authorized, executed and delivered by the Fund and is valid and binding on the Fund, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, and other similar laws of general applicability relating to or affecting creditors' rights and to general principles of equity. The execution and delivery of this Agreement does not and will not, and the consummation of the transactions contemplated by this Agreement will not, violate the Fund's Declaration of Trust or By-Laws or any agreement or arrangement to which it is a party or by which it is bound. (c) The Fund is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end management investment company, and such registration has not been revoked or rescinded and is in full force and effect. (d) Except as shown on the audited financial statements of the Fund for its most recently completed fiscal period and as incurred in the ordinary course of the Fund's business since then, the Fund has no known liabilities of a material amount, contingent or otherwise, and there are no legal, administrative or other proceedings pending or, to the Fund's knowledge, threatened against the Fund. (e) On the Exchange Date, the Fund will have full right, power and authority to sell, assign, transfer and deliver the Fund's assets to be transferred by it hereunder. 3. THE TRUST'S REPRESENTATIONS AND WARRANTIES. The Trust, on behalf of the - --------------------------------------------- Successor Fund, represents and warrants to and agrees with the Fund as follows: (a) The Trust is a business trust duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts and has power to carry on its business as it is now being conducted and to carry out this Agreement. (b) This Agreement has been duly authorized, executed and delivered by the Trust and is valid and binding on the Trust, enforceable in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, and other similar laws of general applicability relating to or affecting creditors' rights and to general principles of equity. The execution and delivery of this Agreement does not and will not, and the consummation of the transactions contemplated by this Agreement will not, violate the Trust's Declaration of Trust or By-Laws or any agreement or arrangement to which it is a party or by which it is bound. (c) The Trust is registered under the 1940 Act as an open-end management investment company and such registration has not been revoked or rescinded and is in full force and effect. (d) The Successor Fund does not have any known liabilities of a material amount, contingent or otherwise, and there are no legal, administrative or other proceedings pending or, to the Trust's knowledge, threatened against the Successor Fund. Other than organizational activities, the Successor Fund has not engaged in any business activities. (e) At the Exchange Date, the Successor Fund Shares to be issued to the Fund (the only Successor Fund shares to be issued as of the Exchange Date) will have been duly authorized and, when issued and delivered pursuant to this Agreement, will be legally and validly issued and will be fully paid and non-assessable. No Trust or Successor Fund shareholder will have any preemptive right of subscription or purchase in respect thereof. 4. THE TRUST'S CONDITIONS PRECEDENT. The obligations of the Trust hereunder - ---------------------------------- shall be subject to the following conditions: (a) The Fund shall have furnished to the Trust a statement of the Fund's assets, including a list of securities owned by the Fund with their respective tax costs and values determined as provided in Section 1 hereof, all as of the Exchange Date. (b) As of the Exchange Date, all representations and warranties of the Fund made in this Agreement shall be true and correct as if made at and as of such date, and the Fund shall have complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such date. (c) A vote of the shareholders of the Fund approving this Agreement and the transactions and exchange contemplated hereby shall have been adopted by the vote required by applicable law. 5. THE FUND'S CONDITIONS PRECEDENT. The obligations of the Fund hereunder with respect to the Fund shall be subject to the condition that as of the Exchange Date all representations and warranties of the Trust made in this Agreement shall be true and correct as if made at and as of such date, and that the Trust shall have complied with all of the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such date. 6. THE TRUST'S AND THE FUND'S CONDITIONS PRECEDENT. The obligations of both - ------------------------------------------------- the Trust and the Fund hereunder shall be subject to the following conditions: (a) The post-effective amendment to the Trust's Registration Statement on Form N-1A relating to the Successor Fund under the Securities Act of 1933, as amended, and the 1940 Act, if applicable, shall have become effective, and any additional post-effective amendments to such Registration Statement as are determined by the Trustees of the Trust to be necessary and appropriate shall have been filed with the Commission and shall have become effective. (b) No action, suit or other proceeding shall be threatened or pending before any court or governmental agency which seeks to restrain or prohibit, or obtain damages or other relief in connection with, this Agreement or the transaction contemplated herein. (c) Each party shall have received an opinion of Dickstein Shapiro Morin & Oshinsky LLP to the effect that the reorganization contemplated by this Agreement qualifies as a "reorganization" under Section 368(a)(1)(F) of the Code. Provided, however, that at any time prior to the Exchange Date, any of the foregoing conditions in this Section 6 may be waived by the parties if, in the judgment of the parties, such waiver will not have a material adverse effect on the benefits intended under this Agreement to the shareholders of the Fund. 7. TERMINATION OF AGREEMENT. This Agreement and the transactions contemplated hereby may be terminated and abandoned by resolution of the Board of Trustees of the Fund or the Board of Trustees of the Trust at any time prior to the Exchange Date (and notwithstanding any vote of the shareholders of the Fund) if circumstances should develop that, in the opinion of either the Board of Trustees of the Fund or the Board of Trustees of the Trust, make proceeding with this Agreement inadvisable. If this Agreement is terminated and the exchange contemplated hereby is abandoned pursuant to the provisions of this Section 7, this Agreement shall become void and have no effect, without any liability on the part of any party hereto or the Trustees, officers or shareholders of the Trust or the Trustees, officers or shareholders of the Fund, in respect of this Agreement. 8. WAIVER AND AMENDMENTS. At any time prior to the Exchange Date, any of the conditions set forth in Section 4 may be waived by the Board of the Trust, and any of the conditions set forth in Section 5 may be waived by the Board of the Fund, if, in the judgment of the waiving party, such waiver will not have a material adverse effect on the benefits intended under this Agreement to the shareholders of the Fund or the shareholders of the Successor Fund, as the case may be. In addition, prior to the Exchange Date, any provision of this Agreement may be amended or modified by the Boards of the Fund and the Trust if such amendment or modification would not have a material adverse effect upon the benefits intended under this Agreement and would be consistent with the best interests of shareholders of the Fund and the Successor Fund. 9. NO SURVIVAL OF REPRESENTATIONS. None of the representations and - ---------------------------------- warranties included or provided for herein shall survive consummation of the transactions contemplated hereby. 10. GOVERNING LAW. This Agreement shall be governed and construed in accordance with the laws of the Commonwealth of Pennsylvania, without giving effect to principles of conflict of laws; provided, however, that the due authorization, execution and delivery of this Agreement, in the case of the Fund and the Trust, shall be governed and construed in accordance with the laws of the Commonwealth of Massachusetts without giving effect to principles of conflict of laws. 11. CAPACITY OF TRUSTEES, ETC. ------------------------- (a) (i) The names "Tax-Free Instruments Trust" and "Board of Trustees of Tax-Free Instruments Trust" refer, respectively, to the trust created and the trustees, as trustees but not individually or personally, acting from time to time under the Fund's Declaration of Trust, which is hereby referred to and a copy of which is on file at the office of the State Secretary of the Commonwealth of Massachusetts and at the principal office of the Fund. The obligations of the Fund entered into in the name or on behalf thereof by any of the trustees, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the trustees, shareholders or representatives of the Fund personally, but bind only the trust property, and all persons dealing with any portfolio of shares of the Fund must look solely to the trust property belonging to such portfolio for the enforcement of any claims against the Fund. (ii) Both parties specifically acknowledge and agree that any liability of the Fund under this Agreement, or in connection with the transactions contemplated herein, shall be discharged only out of the assets of the Fund and that no other portfolio of the Fund shall be liable with respect thereto. (b) (i) The names "Money Market Obligations Trust" and "Board of Trustees of Money Market Obligations Trust" refer, respectively, to the trust created and the trustees, as trustees but not individually or personally, acting from time to time under the Trust's Declaration of Trust, which is hereby referred to and a copy of which is on file at the office of the State Secretary of the Commonwealth of Massachusetts and at the principal office of the Trust. The obligations of the Trust entered into in the name or on behalf of the Successor Fund by any of the trustees, representatives or agents are made not individually, but in such capacities, and are not binding upon any of the trustees, shareholders or representatives of the Trust personally, but bind only the Successor Fund's trust property, and all persons dealing with any portfolio of shares of the Trust must look solely to the trust property belonging to such portfolio for the enforcement of any claims against the Trust. (ii) Both parties specifically acknowledge and agree that any liability of the Trust under this Agreement, or in connection with the transactions contemplated herein, shall be discharged only out of the assets of the Successor Fund and that no other portfolio of the Trust shall be liable with respect thereto. 12. COUNTERPARTS. This Agreement may be executed in counterparts, each of - ------------ which, when executed and delivered, shall be deemed to be an original. IN WITNESS WHEREOF, the Fund and the Trust have caused this Agreement and Plan of Reorganization to be executed as of the date above first written. TAX-FREE INSTRUMENTS TRUST ATTEST: /S/ GAIL CAGNEY /S/ JOHN W. MCGONIGLE --------------------- -------------------------- Title: Assistant Secretary Title: Executive Vice President MONEY MARKET OBLIGATIONS TRUST, on behalf of its portfolio, Tax-Free Instruments Trust ATTEST: /S/ GAIL CAGNEY /S/ JOHN W. MCGONIGLE ---------------------- -------------------------- Title: Assistant Secretary Title: Executive Vice President II-7 II-1 APPENDIX II COMPARISON OF INVESTMENT POLICIES AND LIMITATIONS Set forth below is a comparison of the investment policies and restrictions of the Trust and the New Fund: FUNDAMENTAL INVESTMENT POLICIES AND LIMITATIONS PORTFOLIO MATURITY THE TRUST: "The Trust invests in municipal securities with remaining maturities of 397 days or less at the time of purchase by the Trust." THE NEW FUND: The New Fund is subject to a NON-fundamental investment policy that provides: "The Fund invests in municipal securities with remaining maturities of 397 days or less at the time of purchase by the Fund." INVESTMENTS IN TAX-EXEMPT SECURITIES THE TRUST: "The Trust invests its assets so that at least 80% of its annual interest income is exempt from federal income tax." THE NEW FUND: "As a fundamental investment policy, under normal market circumstances, at least 80% of the Fund's annual interest income will be exempt from federal regular income tax." RATINGS OF MUNICIPAL SECURITIES THE TRUST: "The municipal securities in which the Trust invests are rated within the two highest short-term municipal obligation rating categories issued by Moody's Investors Service, Inc. (MIG-1/VMIG-1/P-1 or MIG-2/VMIG-2/P-2), Standard & Poor's Corporation (A-1/SP-1 or A-2/SP-2), or Fitch Investors Service, Inc. (F-1 or F-2); or rated within the two highest long-term municipal obligation rating categories issued by Moody's Investors Service, Inc. (Aaa or Aa), or Standard & Poor's Corporation (AAA or AA), or Fitch Investors Service, Inc. (AAA or AA); or unrated and of high quality as determined by the Board of Trustees prior to purchase by the Trust." THE NEW FUND: The New Fund is subject to NON-fundamental investment policy that provides "The municipal securities in which the Fund invests must be rated in the two highest short-term rating categories or long-term rating categories by one or more nationally recognized rating services or be of comparable quality to securities having such ratings." PERMISSIBLE INVESTMENTS THE TRUST: "The municipal securities in which the Trust invests are: debt obligations, issued by or on behalf of any state, territory, or possession of the United States - including the District of Columbia - or any political subdivision therein, from which the interest is, in the opinion of bond counsel for the issuer or in the opinion of officers of and/or the investment adviser to the Trust, exempt from Federal income tax; and participation interests, as described below, in any of the above obligations. "The Trust may purchase participation interests from financial institutions such as commercial banks, savings and loan associations, and insurance companies. These participation interests give the Trust an undivided interest in municipal securities. The municipal securities subject to the participation interests are not limited to maturities of one year or less, so long as the participation interests include the right to demand payment, typically within seven days, from the issuers of those interests. The Trust will purchase only participation interests which have a demand feature. The financial institutions from which the Trust purchases participation interests frequently provide or secure irrevocable letters of credit or guarantees to assure that the participation interests are of high quality. The Board of Trustees of the Trust will determine that participation interests meet the prescribed quality standards for the Trust. "Some of the municipal securities which the Trust purchases may have variable interest rates. Variable interest rates are ordinarily stated as a percentage of the prime rate of a bank or some similar standard, such as the 91-day U.S. Treasury bill rate. Many variable rate municipal securities are subject to payment of principal on demand by the Trust (usually in not more than seven days) which is considered in computing maturity. While some variable rate municipal securities without this demand feature may not be considered liquid by the Trust's adviser, the Trust's investment limitations provide that it will not invest more than 10% of its total assets in illiquid securities. All variable rate municipal securities will meet the quality standards for the Trust. The investment adviser has been instructed by the Trust's Board of Trustees to monitor the pricing, quality, and liquidity of the variable rate municipal securities, including participation interests, held by the Trust on the basis of published financial information and reports of the rating agencies and other analytical services." THE NEW FUND: The New Fund is subject to identical NON-fundamental investment - --- policies. TEMPORARY INVESTMENTS THE TRUST: "From time to time on a temporary basis, or when the investment adviser determines that market conditions call for a temporary defensive posture, the Trust may invest in short-term tax-exempt or taxable temporary investments. These temporary investments include: obligations issued by or on behalf of municipal or corporate issuers having the same quality characteristics as municipal securities purchased by the Trust; marketable obligations issued or guaranteed by the U.S. government, its agencies, or instrumentalities; instruments issued by a U.S. branch of a domestic bank or savings and loan having capital, surplus and undivided profits in excess of $100,000,000 at the time of investment; repurchase agreements (arrangements in which the organization selling the Trust a temporary investment agrees at the time of sale to repurchase it at a mutually agreed upon time and price); and prime commercial paper rated A-1 by Standard & Poor's Corporation, Prime 1 by Moody's Investors Services, Inc. or F-1 by Fitch Investors Service. Although the Trust is permitted to make taxable, temporary investments, there is no current intention of generating income subject to federal income tax." THE NEW FUND: The New Fund is subject to a NON-fundamental investment policy that provides "During adverse market conditions, the Fund may temporarily depart from its principal investment strategies by investing in securities subject to federal regular income tax. Temporary investments will be of comparable quality to other securities in which the Fund invests." WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS THE TRUST: "The Trust may purchase short-term municipal securities on a when-issued or delayed delivery basis. In when-issued and delayed delivery transactions, the Trust relies on the seller to complete the transaction. The seller's failure to deliver the securities may cause the Trust to miss a price or yield considered to be advantageous." THE NEW FUND: The New Fund is subject to a NON-fundamental investment policy that provides that the Fund may engage in when-issued and delayed delivery transactions. DIVERSIFICATION OF INVESTMENTS THE TRUST: "With respect to securities comprising 75% of its assets, the Trust will not invest more than 5% of its total assets in the securities of any one issuer. Under this limitation, each governmental subdivision, including states and the District of Columbia, territories, possessions of the United States, or their political subdivisions, agencies, authorities, instrumentalities, or other similar entities, will be considered a separate issuer if its assets and revenues are separate from those to the governmental body creating it and the security is backed only by its own assets and revenues. Industrial development bonds backed only by the assets and revenues of a non-governmental user are considered to be issued solely by that user. If in the case of an industrial development bond or governmental issued security, a governmental or some other entity guarantees the security, such guarantee would be considered a separate security issued by the guarantor, as well as the other issuer, subject to limited exclusions allowed by the 1940 Act." THE NEW FUND: "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 TRUST: "The Trust will not borrow money except as a temporary measure for extraordinary or emergency purposes and then only in amounts not in excess of 5% of the value of its total assets. In addition, the Trust may enter into reverse repurchase agreements and otherwise borrow up to one-third of the value of its total assets, including the amount borrowed, in order to meet redemption requests without immediately selling portfolio securities. This latter practice is not for investment leverage but solely to facilitate management of the portfolio by enabling the Trust to meet redemption requests when the liquidation of portfolio securities would be inconvenient or disadvantageous. Interest paid on borrowed funds will serve to reduce the Trust's income. The Trust will liquidate any borrowings as soon as possible and may not purchase any portfolio instruments while any borrowings are outstanding." THE NEW FUND: "The Fund may borrow money, directly or indirectly, and issue senior securities to the maximum extent permitted under the 1940 Act." SELLING SHORT AND BUYING ON MARGIN THE TRUST: "The Trust will not sell any securities short or purchase any securities on margin but may obtain such short-term credits as may be necessary for clearance of purchases and sales of securities." THE NEW FUND: The New Fund is not subject to an investment limitation regarding selling securities short. The New Fund is subject to a NON-fundamental investment limitation relating to margin transactions that states: "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." INVESTING IN REAL ESTATE THE TRUST: "The Trust will not purchase or sell real estate, although it may invest in municipal securities secured by real estate or interests in real estate." THE NEW FUND: "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." INVESTING IN COMMODITIES THE TRUST: "The Trust will not purchase or sell commodities or commodity contracts." THE NEW FUND: "The Fund may not purchase or sell physical commodities, provided that the Fund may purchase securities of companies that deal in commodities." INVESTING IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS THE TRUST: "The Trust will not purchase or sell oil, gas or other mineral exploration or development programs." THE NEW FUND: The New Fund is not subject to an investment restriction pertaining to investing in these types of securities. PLEDGING ASSETS THE TRUST: "The Trust will not mortgage, pledge, or hypothecate its assets except to secure permitted borrowings. In those cases, it may pledge assets having a market value not exceeding 10% of the value of total assets at the time of the pledge." THE NEW FUND: The New Fund is subject to a NON-fundamental investment limitation pertaining to pledging assets that provides: "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." LENDING CASH OR SECURITIES THE TRUST: "The Trust will not lend any of its assets, except that it may acquire publicly or non-publicly issued municipal securities or temporary investments or enter into repurchase agreements, as permitted by its investment objective and policies." THE NEW FUND: "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 SECURITIES THE TRUST: "The Trust will not underwrite any issue of securities except as it may be deemed to be an underwriter under the Securities Act of 1933 in connection with the sale of securities in accordance with its investment objective, policies and limitations." THE NEW FUND: "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." CONCENTRATION OF INVESTMENTS THE TRUST: "The Trust will not purchase securities (other than securities issued or guaranteed by the U.S. government, its agencies, or instrumentalities) if, as a result of such purchase, more than 25% of the value of its assets would be invested in any one industry. This policy applies to securities which are related in such a way that an economic, business, or political development affecting one security would also affect the other securities (such as securities paid from revenues from selected projects in transportation, public works, education, or housing)." THE NEW FUND: "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." INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES THE TRUST: "The Trust will not purchase or retain the securities of any issuer other than the Trust if the officers and Trustees of the Trust or its investment adviser individually owning beneficially more than 1/2 of 1% of the issuer's securities together beneficially own more than 5% of the issuer's securities." THE NEW FUND: The New Fund is not subject to a comparable investment limitation. INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES THE TRUST: "The Trust will not acquire the voting securities of any issuer, except as part of a merger, consolidation, reorganization, or acquisition of assets. It may not invest in securities issued by any other investment company or investment trust." THE NEW FUND: The New Fund is subject to a NON-fundamental investment policy that provides that "The Fund may invest its assets in securities of other investment companies." INVESTING IN NEW ISSUERS THE TRUST: "The Trust will not invest more than 5% of the value of its total assets in securities of issuers (or in the alternative, guarantors, where applicable) which have records of less than three years of continuous operations, including the operation of any predecessor." THE NEW FUND: The New Fund is not subject to a comparable investment limitation. INVESTING IN ILLIQUID SECURITIES THE TRUST: "The Trust will not invest more than 10% of the value of its total assets in illiquid securities, including repurchase agreements maturing in more than seven days." THE NEW FUND: The New Fund is subject to a NON-fundamental operating policy that states: "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 PUTS AND CALLS THE TRUST: "The Trust will not purchase or sell puts, calls, straddles, spreads, or any combination of them, except that the Trust may purchase municipal securities from a bank, broker, dealer, or other person accompanied by the agreement of the seller to purchase them, at the Trust's option, prior to maturity." THE NEW FUND: The New Fund is not subject to a comparable investment limitation. NON-FUNDAMENTAL INVESTMENT POLICIES AND LIMITATIONS INVESTING FOR CONTROL THE TRUST: "The Trust will not invest in the securities of a company for the purpose of exercising control." THE NEW FUND: The New Fund is not subject to a comparable investment limitation. BORROWING MONEY THE TRUST: "The Trust did not borrow money or pledge securities in excess of 5% of the value of its net assets during the last fiscal year and has no present intent to do so during the coming fiscal year." THE NEW FUND: The New Fund is not subject to a comparable investment limitation. FEDERATED SECURITIES CORP. 5800 Corporate Drive Pittsburgh, PA 15237-7000 May 24, 2000 Dear Shareholder, It is with pleasure that I enclose the Proxy Statement and related materials for the special meeting of shareholders of Tax-Free Instruments Trust that will be held on June 30, 2000. Please read the Proxy Statement carefully, as it will help you to decide on the issues that are being presented for shareholder consideration at the special meeting. When reading the Proxy Statement, please delete the last sentence in the third paragraph on page 3 of the Proxy Statement, and replace it with the following sentence "On the Record Date, the Trust had outstanding 1,991,918,962.171 shares of beneficial interest." Thank you for your attention to the Proxy Statement. If you have any questions on the Proxy Statement, or any of the items being presented for shareholder consideration, call your Investment Professional or a Federated Client Service Representative. Federated's toll-free telephone number is 1-800-341-7400. Sincerely, John W. McGonigle -----END PRIVACY-ENHANCED MESSAGE-----