10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2003

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 1-14818

FEDERATED INVESTORS, INC.

(Exact name of registrant as specified in its charter)

Pennsylvania	25-1111467
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Federated Investors Tower

Pittsburgh, Pennsylvania 15222-3779

(Address of principal executive offices, including zip code)

Securities registered pursuant to Section 12(b) of the Act:

Class B Common Stock, no par value	New York Stock Exchange
(Title of each class)	(Name of each exchange on which registered)

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in the definitive proxy or information statement incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).    Yes  x    No  ¨

The aggregate market value of the Class B Common Stock held by non-affiliates of the registrant as of June 30, 2003 was approximately $2.2 billion, based on the last reported sales price of $27.42 as reported by the New York Stock Exchange. For purposes of this calculation, the registrant has deemed all of its executive officers and directors to be affiliates, but has made no determination as to whether any other persons are “affiliates” within the meaning of Rule 12b-2 under the Securities Exchange Act of 1934. The number of shares of Class A and Class B Common Stock outstanding on March 5, 2004, was 9,000 and 108,650,957, respectively.

Documents incorporated by reference:

Selected portions of the 2003 Annual Report to Shareholders – Part I, Part II and Part IV of this Report.

Selected portions of the 2004 Information Statement – Part III of this Report.

Part I

ITEM 1 – BUSINESS

General

Federated Investors, Inc., a Pennsylvania corporation, together with its consolidated subsidiaries (collectively, “Federated”), is a leading provider of investment management products and related financial services. Federated has been in the asset management business since 1955 and is one of the largest mutual fund managers in the United States with $197.9 billion in assets under management at December 31, 2003.

Federated sponsors, markets and provides investment-related services to various investment products, including mutual funds and separately managed accounts. Federated’s principal source of revenue is investment advisory fee income earned by various subsidiaries of Federated pursuant to investment advisory contracts with the investment products. These subsidiaries are registered as investment advisers under the Investment Advisers Act of 1940. Investment advisers are compensated for their services in the form of investment advisory fees based upon the net assets of the fund or separately managed account.

Federated provided investment advisory services to 136 Federated-sponsored funds as of December 31, 2003. Federated markets these funds to banks, broker/dealers and other financial intermediaries who use them to meet the needs of their customers, including retail investors, corporations and retirement plans. The funds sponsored by Federated are domiciled in the U.S., with the exception of Federated International Funds Plc and Federated Unit Trust, which are domiciled in Dublin, Ireland. Federated’s U.S.-domiciled funds (with the exception of a collective investment trust) are registered under the Investment Company Act of 1940 (“Investment Company Act”) and under applicable federal and state laws. Each of the funds enters into an advisory agreement that is subject to annual approval by the fund directors or trustees, including a majority of the directors who are not “interested persons” of the funds or Federated as defined under the Investment Company Act. In general, amendments to such advisory agreements must be approved by the funds’ shareholders. A significant portion of Federated’s revenue is derived from these advisory agreements, which generally are terminable upon 60 days notice.

Of the 136 mutual funds sponsored by Federated (the “Federated Funds”), Federated’s investment advisory subsidiaries managed 52 money market funds (and cash equivalents) totaling $128.9 billion in assets, 48 fixed-income funds with $24.0 billion in assets and 36 equity funds with $22.8 billion in assets. Appendix “A” hereto lists all of these funds, including asset levels and dates of inception.

As of December 31, 2003, Federated provided investment advisory services to $22.2 billion in separately managed account assets. These separate accounts (together with the Federated Funds, “Managed Assets”) represented assets from government entities, pension and other employee benefit plans, corporations, trusts, foundations, endowments, mutual funds sponsored by third parties, and other investors. Fees for separate accounts are typically based on the value of assets under management pursuant to investment advisory agreements that may be terminated at any time.

Certain funds sponsored by Federated have adopted distribution plans that, subject to applicable law, provide for payment to Federated for marketing expenses, including sales commissions paid to broker/dealers. These distribution plans are implemented through a distribution agreement between Federated and each respective fund. Although the specific terms of each such agreement vary, the basic terms of the agreements are similar. Pursuant to the agreements, Federated acts as underwriter for the funds and distributes shares of the funds primarily through unaffiliated dealers. Each distribution plan and agreement is initially approved by the directors or trustees of the respective fund and is reviewed for approval annually.

Federated also provides a broad range of services to support the operation, administration and distribution of Federated-sponsored funds. These services, for which Federated receives fees pursuant to agreements with the Federated Funds, include administrative services, transfer agency services, shareholder servicing, accounting and general support. Effective January 1, 2004, Federated is no longer responsible for providing accounting services to the Federated-sponsored funds. Rather the funds began contracting directly with an independent third-party provider of portfolio accounting services. As a result, beginning in 2004, Federated no longer recognizes revenue or third-party expenses in the Consolidated Statements of Income for portfolio accounting services provided to the Federated-sponsored funds. In addition, on February 3, 2004, Federated announced its intent to outsource its transfer agency function to an independent third-party provider of

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these services by June 30, 2004. Negotiations are in the preliminary stages and, as such, management cannot reasonably estimate the total impact this transaction will have on Federated’s results of operations or financial condition.

Total Managed Assets for the past three years were as follows:

Managed Assets by Asset Class

	As of December 31,						Growth Rate
(dollars in millions)	2003		2002		2001		3 Yr. CAGR1		2003
Money Market	$	142,773	$	150,745	$	136,034	13	%	(5	)%
Fixed-Income		29,517		26,541		21,055	18	%	11	%
Equity		25,627		18,067		22,598	5	%	42	%
Total Managed Assets	$	197,917	$	195,353	$	179,687	12	%	1	%

1 Compound Annual Growth Rate

Average Managed Assets for the past three years were as follows:

Average Managed Assets by Asset Class

	Year ended December 31,						Growth Rate
(dollars in millions)	2003		2002		2001		3 Yr. CAGR1		2003
Money Market	$	149,703	$	145,288	$	118,622	20	%	3	%
Fixed-Income		28,931		23,673		19,466	18	%	22	%
Equity		20,849		20,281		22,505	(4	)%	3	%
Total Average Managed Assets	$	199,483	$	189,242	$	160,593	16	%	5	%

1 Compound Annual Growth Rate

Federated also derives revenue from providing mutual fund administrative services and various other fund-related services to institutions seeking to outsource all or part of their mutual fund service and distribution functions. Through various subsidiaries, Federated provides its experience and expertise in these areas to expand its relationships with key financial intermediaries, primarily banks, who sponsor proprietary mutual funds. Federated receives fees from these bank-sponsored funds for providing fund services. Federated provided these services for $43.4 billion of assets in funds sponsored by third parties (“Administered Assets”) as of December 31, 2003.

The following chart shows period-end and average Administered Assets for the past three years:

Administered Assets

	As of and for the year ended December 31,						Growth Rate
(dollars in millions)	2003		2002		2001		3 Yr. CAGR1		2003
Period-End Administered Assets	$	43,428	$	34,827	$	44,684	3	%	25	%
Average Administered Assets		39,513		38,032		41,982	(2	)%	4	%

1 Compound Annual Growth Rate

Federated also provides retirement plan recordkeeping services and trade execution and settlement services through various subsidiaries.

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Federated’s revenues from investment advisory, administrative and other service fees provided under agreements with the funds and other entities over the last three years were as follows (certain amounts previously reported have been reclassified to conform with the current year’s presentation):

Revenue

	Year ended December 31,						Growth Rate
(dollars in thousands)	2003		2002		2001		3 Yr. CAGR1		2003
Investment advisory fees, net	$	528,370	$	516,409	$	482,212	7	%	2	%
Administrative service fees, net		144,873		145,406		134,606	9	%	(0	)%
Other service fees, net2		142,322		141,806		192,640	(10	)%	0	%
Other		7,683		5,132		5,239	(3	)%	50	%
Total revenue	$	823,248	$	808,753	$	814,697	3	%	2	%

1 Compound Annual Growth Rate

2 Other service fees, net for 2001 and 2000 included certain B-share-related distribution fee income that was not recorded in revenue in 2002 and 2003. See the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of the 2003 Annual Report for further details.

Investment Products

Federated offers a wide range of products, including money market, equity and fixed-income investments. Federated’s mix includes products that the Company expects to be in demand under a variety of economic and market conditions.

Federated is one of the largest U.S. managers of money market assets, with $142.8 billion in such assets under management at December 31, 2003. Federated has developed expertise in managing cash for institutions, which typically have stringent requirements for regulatory compliance, relative safety, liquidity and competitive yields. Federated has managed money market funds for almost 30 years and began selling money market fund products to institutions in 1974. Federated also manages retail money market products that are typically distributed through broker/dealers. Federated manages money market assets in the following asset classes: prime corporate ($61.7 billion); government ($58.1 billion); and tax free ($23.0 billion).

In recent years, Federated has emphasized growth of its equity business as an important component of its growth strategy and has broadened its range of equity investment products. Equity assets are managed across a wide range of styles including mid-large cap value ($6.9 billion); small-mid cap growth ($6.7 billion); equity income ($2.7 billion); core equity ($3.1 billion); international ($1.5 billion); and mid-large cap growth ($1.4 billion). Federated also manages assets in equity index funds ($2.4 billion) and balanced and asset allocation funds ($0.9 billion). These asset allocation funds include fixed-income assets.

Federated’s fixed-income assets are managed in a wide range of sectors including multi-sector ($6.7 billion); mortgage-backed ($4.6 billion); high-yield ($5.4 billion); municipal ($3.8 billion); U.S. corporate ($3.4 billion); U.S. government ($3.9 billion); and international ($1.7 billion). Federated’s fixed-income products offer fiduciaries and others a broad range of highly defined products designed to meet many of their investment needs and requirements.

Each investment product is managed by a team of portfolio managers and analysts. Federated’s proprietary, independent investment research process is centered on the integration of several fundamentals: quantitative research models, fundamental research and credit analysis, style-consistent and disciplined portfolio construction and management, portfolio attribution and trading. Federated’s disciplined and integrated investment process meets the needs of a broad array of global clients.

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Distribution Channels

Federated’s distribution strategy is to provide products geared to financial intermediaries, primarily banks, broker/dealers, investment advisers and directly to institutions such as corporations and government entities. Through substantial investments in distribution for more than 20 years, Federated has developed relationships with 5,900 intermediaries and sells its products directly to another 500 corporations and government entities. Federated uses its trained sales force of approximately 190 representatives and managers to add new customer relationships and strengthen and expand existing relationships.

Product Markets

Federated’s investment products are distributed in four principal markets: the trust market, the broker/dealer market, the institutional market and the international market. The following chart shows Federated Managed Assets by market for the dates indicated:

Managed Assets by Market

	As of December 31,						Growth Rate
(dollars in millions)	2003		2002		2001		3 Yr. CAGR1		2003
Trust	$	96,131	$	102,186	$	96,568	10	%	(6	)%
Broker/Dealer		47,792		44,060		46,592	3	%	8	%
Institutional		30,561		27,730		27,531	20	%	10	%
International		2,452		1,795		1,367	22	%	37	%
Other		20,981		19,582		7,629	61	%	7	%
Total Managed Assets	$	197,917	$	195,353	$	179,687	12	%	1	%

1 Compound Annual Growth Rate

Trust Market. Federated pioneered the concept of providing cash management to bank trust departments through money market mutual funds almost 30 years ago. In addition, Federated initiated a strategy to provide a broad range of equity and fixed-income funds, termed MultiTrust^™, to meet the evolving needs of bank trust departments. Federated’s bank trust customers invest the assets subject to their control, or upon direction from their customers, in one or more funds managed by Federated. Federated employs a dedicated sales force backed by a support staff to offer its products and services in the trust market. In addition to bank trust departments, Federated provides products and services to bank capital markets (institutional brokerages within banks) and to certain other institutions.

Money market funds contain the majority of Federated’s Managed Assets in the trust market. In allocating investments across various asset classes, investors typically maintain a portion of their portfolios in cash or cash equivalents, including money market funds, irrespective of trends in bond or stock prices. Federated also offers an extensive menu of equity and fixed-income mutual funds and separately managed accounts structured for use in the trust market. As of December 31, 2003, Managed Assets in the trust market included $83.7 billion in money market assets, $7.9 billion in fixed-income assets and $4.5 billion in equity assets.

Broker/Dealer Market. Federated distributes its products in this market through a large, diversified group of approximately 2,200 national, regional, independent and bank broker/dealers. Federated maintains a sales staff dedicated to this market which includes a separate group focused on the bank broker/dealers. Broker/dealers use Federated’s products to meet the needs of their customers, who are typically retail investors. Federated offers products with a variety of commission structures that enable brokers to offer their customers a choice of pricing options. Federated also offers money market mutual funds as cash management products designed for use by its broker/dealer clients. As of December 31, 2003, Managed Assets in the broker/dealer market included $26.4 billion in money market assets, $9.6 billion in fixed-income assets and $11.8 billion in equity assets.

Institutional Market. Federated has structured its investment process to meet the requirements of fiduciaries and others who use Federated’s products to meet the needs of their customers. Fiduciaries typically have stringent demands related to portfolio composition, risk and investment performance. Federated maintains a dedicated sales

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staff to focus on the distribution of its products to a wide variety of users: investment advisers, corporations, corporate and public pension funds, insurance companies, government entities, foundations, endowments, hospitals, and non-Federated investment companies. As of December 31, 2003, Managed Assets in the institutional market included $17.5 billion in money market assets, $7.5 billion in fixed-income assets and $5.6 billion in equity assets.

International Market. Federated continues to broaden distribution to areas outside of the U.S. Federated partnered with LVM-Versicherungen (“LVM”), a large German insurance company, to create a joint-venture company named Federated Asset Management GmbH (“Federated GmbH”), to pursue institutional separate accounts in German-speaking Europe. In addition, Federated sponsors six retail funds (“Federated Unit Trust”) for which Federated GmbH acts as a distributor in German-speaking countries in Europe. LVM also distributes a separate share class of these retail funds through its network of insurance agents throughout Germany. As of December 31, 2003, Managed Assets in the international market included $2.0 billion in fixed-income assets and $0.5 billion in equity assets.

Other Markets. Other markets at December 31, 2003, included assets under management from the following sources: TexPool, a local government investment pool in the state of Texas ($12.1 billion); certain affinity groups and direct sales efforts including the retail assets associated with the Federated Kaufmann Fund ($7.9 billion); and collateralized bond obligation (CBO) products for which Federated acts as the investment adviser ($1.0 billion). The CBOs package Federated’s investment management expertise into an alternative product structure and offer another source of investment advisory fee revenue.

Competition

The investment management business is highly competitive. Competition is particularly intense among mutual fund providers. According to the Investment Company Institute, at the end of 2003, there were over 8,100 registered open-end investment companies, of varying sizes and investment policies, whose shares are currently being offered to the public both on a load and no-load basis. In addition to competition from other mutual fund managers and investment advisers, Federated and the mutual fund industry compete with investment alternatives offered by insurance companies, commercial banks, broker/dealers, other financial institutions and hedge funds.

Competition for sales of investment products is influenced by various factors including investment performance in terms of attaining the stated objectives of the particular products and in terms of fund yields and total returns, advertising and sales promotional efforts, investor confidence and type and quality of services.

Changes in the mix of customers for mutual fund distribution and administrative services are expected to continue. Competition for fund administration services is extremely high. In addition to competing with other service providers, banks sponsoring mutual funds may choose to internalize certain service functions. Consolidation within the banking industry also impacts the fund administration business as merging bank funds typically choose a single fund administration provider. Due to the fact that Federated derives a smaller portion of its revenue from Administered Assets as compared to Managed Assets, changes in the amount of Administered Assets generally have less impact on Federated’s results of operations than changes in Managed Assets.

Recent Acquisitions

In the third quarter 2003, Federated signed an agreement with Riggs Investment Advisors, Inc. and Riggs Bank N.A. pursuant to which the assets of eight mutual funds previously advised by Riggs Investment Advisors, Inc. were acquired by eight Federated-sponsored funds. The assets totaled approximately $465 million.

In the second quarter 2002, Federated signed an agreement with FirstMerit Advisors Inc. pursuant to which the assets previously advised by FirstMerit Advisors, Inc., totaling approximately $250 million, were acquired by various Federated funds.

In 2001, Federated completed two acquisitions. In the second quarter, Federated acquired substantially all of the business of Edgemont Asset Management Corporation, the former adviser of the Kaufmann Fund. As a result of the acquisition, the $3.2 billion Kaufmann Fund was reorganized into the Federated Kaufmann Fund. In the fourth quarter, assets of three mutual funds previously advised by Rightime Econometrics, Inc., totaling approximately $148 million, were acquired by a Federated-sponsored fund in connection with an agreement between Federated, Lincoln Investment Planning, Inc. and Rightime Econometrics, Inc.

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Federated continues to look for new alliances and acquisition opportunities.

Regulatory Matters

Substantially all aspects of Federated’s business are subject to federal and state regulation and to the extent operations take place outside the United States, they are subject to the regulations of foreign countries. Depending upon the nature of any non-compliance, the results could include the suspension or revocation of licenses or registration, including broker/dealer licenses and registrations and transfer agent registrations, as well as the imposition of civil fines and penalties and in certain limited circumstances, prohibition from acting as an adviser to registered investment companies. Federated’s advisory companies are registered with the Securities and Exchange Commission (the “Commission”) under the Investment Advisers Act of 1940 and with certain states. All of the mutual funds managed, distributed, and administered by Federated are registered with the Commission under the Investment Company Act of 1940. Certain wholly owned subsidiaries of Federated are registered as broker/dealers with the Commission under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and with various states and are members of the National Association of Securities Dealers (the “NASD”). Their activities are regulated by the Commission, the NASD, and the various states in which they are registered. These subsidiaries are required to meet capital requirements established by the Commission pursuant to the Exchange Act. Two other subsidiaries are registered with the Commission as transfer agents. Federated Investors Trust Company is regulated by the State of New Jersey. Amendments to current laws and regulations or newly promulgated laws and regulations governing Federated’s operations could have a material adverse impact on Federated.

The federal, state and foreign laws and regulations applicable to most aspects of Federated’s business are primarily intended to benefit or protect Federated’s customers and the funds’ shareholders and generally grant supervisory agencies and bodies broad administrative powers, including the power to limit or restrict Federated from carrying on its business in the event that it fails to comply with such laws and regulations. In such event, the possible sanctions that may be imposed include the suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of broker/dealer licenses and registrations and transfer agent registrations, censure and fines.

Employees

At December 31, 2003, Federated employed 1,643 persons. Federated considers its relationships with its employees to be satisfactory.

Forward-Looking Information

This Annual Report on Form 10-K and the 2003 Annual Report to Shareholders contain certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve certain known and unknown risks, uncertainties and other factors, including among others, those discussed under the caption “General,” “Competition” and “Regulatory Matters” above and “Risk Factors and Cautionary Statements” below, that could cause actual results, levels of activity, performance, or achievements of Federated, or industry results, to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by such forward-looking statements. Many of these factors may be more likely to occur as a result of the ongoing threat of terrorism and the ongoing investigation into the mutual fund industry by federal and state regulators. Federated cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made, and should be read in conjunction with the risk disclosure below. Federated will not undertake and specifically declines any obligation to release publicly the result of any revisions which may be made to any forward-looking statements to reflect events or circumstances after the date of such statements or reflect the occurrence of anticipated or unanticipated events. As a result of the foregoing, and other factors, no assurance can be given as to future results, levels of activity, performance, or achievements of Federated, and neither Federated nor any other person assumes responsibility for the accuracy or completeness of such statements.

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Risk Factors and Cautionary Statements

Potential Adverse Effects of Increased Competition in the Investment Management Business. The investment management business is highly competitive. Federated competes in the distribution of mutual funds and separately managed accounts with other independent fund management companies, national and regional broker/dealers, commercial banks, insurance companies and other institutions. Many of these competitors have substantially greater resources and brand recognition than Federated. Competition is based on various factors, including business reputation, investment performance, quality of service, the strength and continuity of management and selling relationships, marketing and distribution services offered, the range of products offered and fees charged. See “Business—Competition.”

Many of Federated’s products are designed for use by institutions such as banks, insurance companies and other corporations. A large portion of Federated’s Managed Assets, particularly money market and fixed-income Managed Assets, are held by institutional investors. Because most institutional investment vehicles are sold without sales commissions at either the time of purchase or the time of redemption, institutional investors may be more inclined to transfer their assets among various institutional funds than investors in retail mutual funds. Of Federated’s 136 managed funds, 92 are sold without a sales commission.

A significant portion of Federated’s revenue is derived from providing mutual funds to the trust market, comprising approximately 1,400 banks and other financial institutions. Future profitability of Federated will be affected by its ability to retain its share of this market, and could also be adversely affected by the general consolidation which is occurring in the banking industry as well as regulatory changes. In addition, bank consolidation trends could not only cause changes in Federated’s customer mix, but could also affect the scope of services provided and fees received by Federated, depending upon the degree to which banks internalize administrative functions attendant to proprietary mutual funds.

Potential Adverse Effects of a Decline in Securities Markets. Changes in economic or market conditions may adversely affect the profitability and performance of and demand for Federated’s investment products and services. The ability of Federated to compete and grow is dependent, in part, on the relative attractiveness of the types of investment products Federated offers and its investment performance and strategies under prevailing market conditions. A significant portion of Federated’s revenue is derived from investment advisory fees, which are based on the value of Managed Assets and vary with the type of asset being managed, with higher fees generally earned on equity products than on fixed-income and money market products. Consequently, significant fluctuations in the prices of securities held by, or the level of redemptions from, the funds or other products advised by Federated may materially affect the amount of Managed Assets and thus Federated’s revenue, profitability and ability to grow. Substantially all of Federated’s Managed Assets are in investment products that permit investors to redeem their investment at any time.

Potential Adverse Affects on Money Market and Other Fixed-Income Assets Resulting From Changes in Interest Rates. Approximately 47% of Federated’s revenue in 2003 was from managed assets in money market products. These assets are largely from institutional investors. In a period of rapidly rising interest rates, institutional investors may redeem shares in money market funds to invest in direct securities offering higher yields. These redemptions would reduce Managed Assets, thereby reducing Federated’s advisory and administrative service fee revenue. In addition, rising interest rates diminish the total return of many bond investments due to lower market valuations of existing bonds in a rising rate environment. Lower total returns or losses may cause investors to redeem their holdings, which reduces Federated’s revenue. As a result of Federal Reserve Bank easings, interest rates reached historic lows in 2003. Further decreases in interest rates from levels in existence on the filing date of this report could also have an adverse effect on Federated’s revenue from money market funds. As a result of the last reduction in interest rates in mid 2003, Federated and other service providers to the funds began waiving a portion of their fees in order to maintain positive yields. Management estimates the impact of waiving these fees to range between $0.01 to $0.02 in earnings per share over a twelve-month period and further estimates that a decrease of 0.25% or more in interest rates on money market investments could cause an adverse effect on Federated’s revenue. Federated has been actively diversifying its products to expand its Managed Assets in equity products which may be less sensitive to interest rate increases. There can be no assurance that Federated will be successful in these diversification efforts.

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Adverse Effects of Poor Investment Performance. Success in the investment management business is largely dependent on investment performance relative to market conditions and the performance of competing products. Good performance generally assists retention and growth of assets, resulting in additional revenues. Conversely, poor performance tends to result in decreased sales and increased redemptions with corresponding decreases in revenues to Federated. Poor performance could, therefore, have a material adverse effect on Federated.

Adverse Effects of Termination or Failure to Renew Fund Agreements. A substantial majority of Federated’s revenues are derived from investment management agreements with the funds that, as required by law, are terminable on 60 days’ notice. In addition, each such investment management agreement must be approved and renewed annually by each fund’s board, including disinterested members of the board, or its shareholders, as required by law. Generally, Federated’s administrative servicing agreements with bank proprietary fund customers have an initial term of three years with a provision for automatic renewal unless notice is otherwise given and provide for termination for cause. Failure to renew or termination of a significant number of these agreements could have a material adverse impact on Federated. In addition, as required by the Investment Company Act, each investment advisory agreement with a mutual fund automatically terminates upon its “assignment,” although new investment advisory agreements may be approved by the mutual fund’s directors or trustees and shareholders. A sale of a sufficient number of shares of Federated’s voting securities to transfer control of Federated could be deemed an “assignment” in certain circumstances. An assignment, actual or constructive, will trigger these termination provisions and may adversely affect Federated’s ability to realize the value of these assets.

Potential Adverse Effects of Changes in Laws and Regulations on Federated’s Investment Management Business. Federated and its investment management business are subject to extensive regulation in the United States and abroad. Federated and the Federated Funds are subject to Federal securities laws, principally the Investment Company Act and the Advisers Act, state laws regarding securities fraud and regulations promulgated by the Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange. Federated is also affected by the regulations governing banks and other financial institutions and, to the extent operations take place outside the United States, by foreign regulations. During the past five years, the Federal securities laws have been augmented substantially by, among other measures, the Sarbanes-Oxley Act of 2002, the Patriot Act and the Gramm-Leach-Bliley Act of 1999. Currently, several bills are pending in Congress that would amend the Investment Company Act to impose additional requirements and restrictions on Federated and the Federated Funds. In addition, during the past year the Securities and Exchange Commission, National Association of Securities Dealers and the New York Stock Exchange have adopted regulations that will increase Federated’s operating expenses and affect the conduct of its business. The Securities and Exchange Commission has proposed other significant regulations or amendments to regulations that, if adopted, will affect Federated and the Federated Funds, and Federated anticipates that other reforms and regulatory actions affecting the mutual fund industry are more likely to occur. Changes in laws or regulations or in governmental policies could materially and adversely affect the business and operations of Federated.

No Assurance of Successful Future Acquisitions. Federated’s business strategy contemplates the acquisition of other investment management companies as well as investment assets. There can be no assurance that Federated will find suitable acquisition candidates at acceptable prices, have sufficient capital resources to realize its acquisition strategy, be successful in entering into definitive agreements for desired acquisitions, or successfully integrate acquired companies into Federated, or that any such acquisitions, if consummated, will prove to be advantageous to Federated.

Systems and Technology Risks. Federated utilizes software and related technologies throughout its businesses including both proprietary systems and those provided by outside vendors. Unanticipated issues could occur and it is not possible to predict with certainty all of the adverse effects that could result from a failure of a third party to address computer system problems. Accordingly, there can be no assurance that potential system interruptions or the cost necessary to rectify the problems would not have a material adverse effect on Federated’s business, financial condition, results of operations or business prospects.

Adverse Effects of Rising Costs of Risk Management. Since 2001, insurance expenses have increased and management expects further increases to be significant going forward. In addition, certain insurance coverage may not be available or may only be available at prohibitive costs. Renewals of insurance policies may expose the company to additional costs through the assumption of higher deductibles and/or co-insurance liability. Higher insurance costs and incurred deductibles reduce Federated’s operating and net income.

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Potential Adverse Effects Related to Federated’s Internal Review into Certain Mutual Fund Trading Practices and Investigations by Regulatory Authorities. In 2003, Federated responded to detailed requests for information from the Securities and Exchange Commission, the New York State Attorney General and the National Association of Securities Dealers regarding a number of mutual fund practices, including market timing, late trading and fair valuation of foreign securities. These requests prompted Federated to conduct an internal review that found instances in which Federated employees improperly permitted frequent trading or improperly accepted orders for fluctuating net asset value funds after the close of the New York Stock Exchange (see Note (20) to the Consolidated Financial Statements incorporated by reference in Item 15(a)(1) herein). Federated has also received requests from the U.S. Attorney’s Office in Pittsburgh and authorities in West Virginia for copies of the information provided to other authorities regarding market timing and late trading. During the first quarter of 2004, Federated has received additional requests from the Securities and Exchange Commission regarding revenue-sharing and directed brokerage arrangements, valuation of municipal securities, and the operation of index funds and for information relating to the Securities and Exchange Commission’s investigation of other financial services companies. Federated continues to cooperate with their inquiries.

Settlements with other investment management companies regarding frequent trading arrangements have required substantial monetary payments, reductions in advisory fees, changes in corporate and fund governance and retention of independent consultants to review compliance. Regulatory authorities have brought civil actions against other investment management companies seeking similar remedies. As Federated’s involvement with these matters is ongoing, management cannot predict the eventual outcome of its discussions with regulatory authorities, which could have a material adverse effect on Federated’s business, financial condition, results of operations or business prospects. Any material losses in client or shareholder confidence in Federated or in the mutual fund industry could increase redemptions from and reduce sales of Federated Funds and other investment management services, resulting in a decrease in future revenues. Responding to continued requests from regulatory authorities and defending pending litigation will increase Federated’s operating expenses and could have other material adverse effects on Federated’s business.

Executive Officers

The following table sets forth certain information regarding the executive officers of Federated as of March 12, 2004:

Name	Position	Age
John F. Donahue	Chairman and Director	79
J. Christopher Donahue	President, Chief Executive Officer and Director	54
Arthur L. Cherry	President and Chief Executive Officer, Federated Services Company and Director	50
Thomas R. Donahue	President, Federated Investors Management Company and Vice President, Treasurer, Chief Financial Officer and Director	45
John B. Fisher	President, Institutional Sales Division of Federated Securities Corp. and Federated Investment Counseling and Director	47
James F. Getz	President, Retail Sales Division of Federated Securities Corp. and Director	57
Eugene F. Maloney	Vice President and Director	59
Denis McAuley III	Vice President and Principal Accounting Officer	57
John W. McGonigle	Vice Chairman, Executive Vice President, Chief Legal Officer, Secretary and Director	65
Keith M. Schappert	President and/or Chief Executive Officer of Federated Advisory Companies*	53

* Federated Advisory Companies include the following subsidiaries of Federated: Federated Advisory Services Company, Federated Equity Management Company of Pennsylvania, Federated Global Investment Management Corp., Passport Research Limited, Passport Research II Limited, Federated Investment Counseling and Federated Investment Management Company.

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Mr. John F. Donahue is a founder of Federated. He has served as director and Chairman of Federated since Federated’s initial public offering in May 1998. He is Chairman or President and a director or trustee of 42 investment companies managed by subsidiaries of Federated. Mr. Donahue is the father of J. Christopher Donahue who serves as Chief Executive Officer and director of Federated and Thomas R. Donahue who serves as Chief Financial Officer and director of Federated.

Mr. J. Christopher Donahue has served as director, President and Chief Executive Officer of Federated since 1998. He is President or Executive Vice President and director, trustee or managing general partner of 42 investment companies managed by subsidiaries of Federated. Mr. Donahue is the son of John F. Donahue and the brother of Thomas R. Donahue who serves as Chief Financial Officer and director of Federated.

Mr. Arthur L. Cherry is a director of Federated, and is the President and Chief Executive Officer of Federated Services Company, a wholly owned subsidiary of Federated. Prior to joining Federated in January 1997, he was a managing partner of AT&T Solutions, former president of Scudder Services Corporation and a managing director of Scudder, Stevens & Clark.

Mr. Thomas R. Donahue serves as a director, Vice President, Treasurer and Chief Financial Officer of Federated. He is President of Federated Investors Management Company, a wholly owned subsidiary of Federated. Prior to joining Federated, Mr. Donahue was in the venture capital business and was employed by PNC Bank in its Investment Banking Division. Mr. Donahue is the son of John F. Donahue and the brother of J. Christopher Donahue.

Mr. John B. Fisher is a director of Federated and is President of the Institutional Sales Division of Federated Securities Corp., a wholly owned subsidiary of Federated. He is responsible for the distribution of Federated’s products and services to investment advisers, insurance companies, retirement plans and corporations. In addition, Mr. Fisher serves as President and director of Federated Investment Counseling, a wholly owned subsidiary of Federated involved in the management of separate accounts and sub-advised mandates.

Mr. James F. Getz is a director of Federated, serves as President of the Retail Sales Division of Federated Securities Corp., a wholly owned subsidiary of Federated, and is responsible for the marketing and sales efforts in the trust and broker/dealer markets. Mr. Getz is a Chartered Financial Analyst.

Mr. Eugene F. Maloney is a director and a Vice President of Federated. He provides certain legal, technical and management expertise to Federated’s sales divisions, including regulatory and legal requirements relating to a bank’s use of mutual funds in both trust and commercial environments.

Mr. Denis McAuley III serves as Vice President and Principal Accounting Officer of Federated and as Senior Vice President, Treasurer or Assistant Treasurer for various subsidiaries of Federated. Mr. McAuley is a Certified Public Accountant.

Mr. John W. McGonigle has been a director of Federated since 1998. He serves as Vice Chairman, Executive Vice President and Secretary of Federated. Mr. McGonigle is also Chairman of Federated International Management Limited. He has been Chief Legal Officer of Federated since 1998. Mr. McGonigle is also Executive Vice President and Secretary of the investment companies managed by subsidiaries of Federated.

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Mr. Keith M. Schappert became President and/or Chief Executive Officer of the Federated Advisory Companies in February 2002. Prior to joining Federated, he spent 28 years with J.P. Morgan, most recently in the position of President of J.P. Morgan Fleming Asset Management, Inc. Prior to J.P. Morgan’s merger with Chase Manhattan Corp., Mr. Schappert was President and Chief Executive Officer of J.P. Morgan Asset Management Services.

Internet Address and Website Access

Federated’s internet address is http://www.federatedinvestors.com. Federated makes available free of charge on its website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934 as soon as reasonably practicable after Federated electronically files such material with, or furnishes it to, the Securities and Exchange Commission.

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ITEM 2 – PROPERTIES

Federated’s facilities are concentrated in Pittsburgh, Pennsylvania where it leases space sufficient to meet its operating needs. Federated’s headquarters are located in the Federated Investors Tower, where Federated occupies approximately 325,000 square feet. Federated leases approximately 100,000 square feet at the Pittsburgh Office and Research Park and an aggregate of 25,000 square feet at other locations in Pittsburgh. Federated also leases approximately 51,000 square feet of office space for a portion of its servicing business in Rockland, Massachusetts. Federated maintains office space in Frankfurt, Germany for certain international initiatives; in New York, New York, where Federated Global Investment Management Corp. and InvestLink Technologies, Inc. conduct their business; and in Gibbsboro, New Jersey, where Federated Investors Trust Company is located. Additional offices in Wilmington, Delaware are subleased by Federated.

ITEM 3 – LEGAL PROCEEDINGS

During the period October 2003 through February 2004, Federated was named as a defendant in 11 class action or derivative lawsuits filed on behalf of certain alleged shareholders in various Federated-sponsored mutual funds. Eight of these actions are pending in the United States District Court for the Western District of Pennsylvania, one is pending in the United States District Court for the Southern District of New York, one is pending in the United States District Court for the Central District of California and one is pending in the United States District Court for the Middle District of Florida. The Company is awaiting a court decision as to the consolidation of these cases and their proper venue. The cases generally involve claims arising from allegations that Federated illegally permitted improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused injury to the mutual fund shareholders. The case in Florida involves claims for excessive advisory and Rule 12b-1 fees allegedly charged to the Federated Kaufmann Fund. The suits seek unquantified damages, attorneys’ fees and expenses. Federated intends to defend this litigation.

For additional information, see the information contained in Federated’s 2003 Annual Report to Shareholders under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Contingent Liabilities” incorporated by reference in Part II, Item 7 of this report, and under the caption “Notes to the Consolidated Financial Statements – Note (20) – Commitments and Contingencies – (b) Internal Review of Mutual Fund Trading Activities and (c) Legal Proceedings” incorporated by reference in Part IV, Item 15(a)(1) of this report.

ITEM 4 – SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

None.

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PART II

ITEM 5 – MARKET FOR THE COMPANY’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The information required by this Item is contained in Federated’s 2003 Annual Report to Shareholders under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Notes to the Consolidated Financial Statements” and is incorporated herein by reference.

ITEM 6 – SELECTED FINANCIAL DATA

The information required by this Item is contained in Federated’s 2003 Annual Report to Shareholders under the caption “Selected Consolidated Financial Data” and is incorporated herein by reference.

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The information required by this Item is contained in Federated’s 2003 Annual Report to Shareholders under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated herein by reference.

ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this Item is contained in Federated’s 2003 Annual Report to Shareholders under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and is incorporated herein by reference.

ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this Item is contained in Federated’s 2003 Annual Report to Shareholders under the captions “Report of Ernst & Young LLP, Independent Auditors,” “Consolidated Balance Sheets,” “Consolidated Statements of Income,” “Consolidated Statements of Changes in Shareholders’ Equity,” “Consolidated Statements of Cash Flows,” and “Notes to the Consolidated Financial Statements” and is incorporated herein by reference.

ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A – CONTROLS AND PROCEDURES

Federated carried out an evaluation, under the supervision and with the participation of management, including Federated’s President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Federated’s disclosure controls and procedures as of December 31, 2003. Based upon that evaluation, the President and Chief Executive Officer and the Chief Financial Officer concluded that Federated’s disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the registrant in the reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

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There has been no change in Federated’s internal control over financial reporting that occurred during the fourth quarter ended December 31, 2003 that has materially affected, or is reasonably likely to materially affect, Federated’s internal control over financial reporting.

PART III

ITEM 10 – DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The information required by this Item (other than the information set forth below) will be contained in Federated’s Information Statement for its 2004 Annual Meeting of Shareholders under the captions “Board of Directors and Election of Directors” and “Security Ownership – Section 16(a) Beneficial Ownership Reporting Compliance,” and is incorporated herein by reference.

Executive Officers

The information required by this Item with respect to Federated’s executive officers is contained in Item 1 of Part I of this Form 10-K under the section “Executive Officers”.

Code of Ethics

In October 2003, Federated adopted a code of ethics for its senior financial officers. This code meets the requirements provided by Item 406 of Regulation S-K and is filed herewith as Exhibit 14.01.

ITEM 11 – EXECUTIVE COMPENSATION

The information required by this Item is contained in Federated’s Information Statement for the 2004 Annual Meeting of Shareholders under the captions “Board of Directors and Election of Directors” and “Executive Compensation” and is incorporated herein by reference.

ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding Federated’s stock-based compensation as of December 31, 2003:

Category of stock-based compensation plan	Number of securities to be issued upon exercise of outstanding options	Weighted-average exercise price of outstanding options	Number of securities remaining available for future issuance under equity compensation plans
Approved by shareholders	11,145,542	16.58	1,671,196
Not approved by shareholders	—	—	—
Total	11,145,542	16.58	1,671,196

All other information required by this Item is contained in Federated’s Information Statement for the 2004 Annual Meeting of Shareholders under the caption “Security Ownership” and is incorporated herein by reference.

ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is contained in Federated’s Information Statement for the 2004 Annual Meeting of Shareholders under the caption “Executive Compensation” and is incorporated herein by reference.

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ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is contained in Federated’s Information Statement for the 2004 Annual Meeting of Shareholders under the caption “Independent Auditors” and is incorporated herein by reference.

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PART IV

ITEM 15 – EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)(1) Financial Statements:

The information required by this Item is contained in Federated’s 2003 Annual Report to Shareholders under the captions “Report of Ernst & Young LLP, Independent Auditors,” “Consolidated Balance Sheets,” “Consolidated Statements of Income,” “Consolidated Statements of Changes in Shareholders’ Equity,” “Consolidated Statements of Cash Flows” and “Notes to the Consolidated Financial Statements” and is incorporated herein by reference.

(a)(2) Financial Statement Schedules:

Schedule II, Valuation and Qualifying Accounts, is filed herewith on page S-1 of this Form 10-K.

All other schedules for which provisions are made in the applicable accounting regulations of the Commission have been omitted because such schedules are not required under the related instructions or are inapplicable.

(a)(3) Exhibits:

The following exhibits are filed or incorporated as part of this report:

Exhibit Number	Description
2.01	Agreement and Plan of Merger, dated as of February 20, 1998, between Federated Investors and Federated (incorporated by reference to Exhibit 2.01 to the Registration Statement on Form S-1 (File No. 333-48405))
2.02	Asset Purchase Agreement dated as of October 20, 2000, by and among Federated Investors, Inc., Edgemont Asset Management Corporation, Lawrence Auriana and Hans P. Utsch (incorporated by reference to Exhibit 2.1 of Amendment No. 2 to the Current Report on Form 8-K dated April 20, 2001, filed with the Securities and Exchange Commission on July 3, 2001 (File No. 001-14818))
2.03	Amendment No. 1, dated April 11, 2001, to the Asset Purchase Agreement dated as of October 20, 2000, by and among Federated Investors, Inc., Edgemont Asset Management Corporation, Lawrence Auriana and Hans P. Utsch (incorporated by reference to Exhibit 2.2 of Amendment No. 2 to the Current Report on Form 8-K dated April 20, 2001, filed with the Securities and Exchange Commission on July 3, 2001 (File No. 001-14818))
3.01	Restated Articles of Incorporation of Federated (incorporated by reference to Exhibit 3.01 to the Registration Statement on Form S-1 (File No. 333-48405))
3.02	Restated By-Laws of Federated (incorporated by reference to Exhibit 3.02 to the Registration Statement on Form S-1 (File No. 333-48405))
4.01	Form of Class A Common Stock certificate (incorporated by reference to Exhibit 4.01 to the Registration Statement on Form S-1 (File No. 333-48405))
4.02	Form of Class B Common Stock certificate (incorporated by reference to Exhibit 4.02 to the Registration Statement on Form S-1 (File No. 333-48405))

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4.05	Shareholder Rights Agreement, dated August 1, 1989, between Federated and The Standard Fire Insurance Company, as amended January 31, 1996 (incorporated by reference to Exhibit 4.06 to the Registration Statement on Form S-1 (File No. 333-48405))
9.01	Voting Shares Irrevocable Trust dated May 31, 1989 (incorporated by reference to Exhibit 9.01 to the Registration Statement on Form S-1 (File No. 333-48405))
10.06	Federated Program Master Agreement, dated as of October 24, 1997, among Federated, Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, PLT Finance, L.P., Putnam, Lovell & Thornton Inc. and Bankers Trust Company (incorporated by reference to Exhibit 4.09 to the Registration Statement on Form S-1 (File No. 333-48405))
10.07	Federated Investors, Inc. Employee Stock Purchase Plan, amended as of July 20, 1999 (incorporated by reference to Exhibit 10.2 of the June 30, 1999 Quarterly Report on Form 10-Q (File No. 001-14818))
10.08	Federated Investors Program Initial Purchase Agreement, dated as of October 24, 1997, between Federated Funding 1997-1, Inc. and Wilmington Trust Company, solely as Trustee of the PLT Finance Trust 1997-1 (incorporated by reference to Exhibit 4.10 to the Registration Statement on Form S-1 (File No. 333-48405))
10.09	Federated Investors Program Revolving Purchase Agreement, dated as of October 24, 1997, between Federated Funding 1997-1, Inc. and PLT Finance, L.P. (incorporated by reference to Exhibit 4.11 to the Registration Statement on Form S-1 (File No. 333-48405))
10.10	Federated Investors Program Fee Agreement, dated as October 24, 1997, between Federated Investors and PLT Finance, L.P. (incorporated by reference to Exhibit 4.12 to the Registration Statement on Form S-1 (File No. 333-48405))
10.11	Schedule X to Federated Program Master Agreement, dated as of October 24, 1997, among Federated, Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, PLT Finance, L.P., Putnam, Lovell & Thornton Inc. and Bankers Trust Company (incorporated by reference to Exhibit 4.13 to the Registration Statement on Form S-1 (File No. 333-48405))
10.12	Stock Incentive Plan, as amended as of July 20, 1999 (incorporated by reference to Exhibit 10.3 to the June 30, 1999 Quarterly Report on Form 10-Q (File No. 001-14818))
10.13	Executive Annual Incentive Plan (incorporated by reference to Exhibit 10.02 to the Registration Statement on Form S-1 (File No. 333-48405))
10.14	Form of Bonus Stock Option Agreement (incorporated by reference to Exhibit 10.13 of the Form 10-K for the fiscal year ended December 31, 1998 (File No. 001-14818))
10.15	Federated Investors Tower Lease dated January 1, 1993 (incorporated by reference to Exhibit 10.03 to the Registration Statement on Form S-1 (File No. 333-48405))
10.16	Federated Investors Tower Lease dated February 1, 1994 (incorporated by reference to Exhibit 10.04 to the Registration Statement on Form S-1 (File No. 333-48405))
10.18	Employment Agreement, dated January 16, 1997, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.06 to the Registration Statement on Form S-1 (File No. 333-48405))

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10.19	Employment Agreement, dated December 28, 1990, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.08 to the Registration Statement on Form S-1 (File No. 333-48405))
10.20	Employment Agreement, dated December 22, 1993, between Federated Securities Corp. and an executive officer (incorporated by reference to Exhibit 10.09 to the Registration Statement on Form S-1 (File No. 333-48405))
10.21	Employment Agreement, dated March 17, 1995, between Federated Investors and an executive officer (incorporated by reference to Exhibit 10.07 to the Registration Statement on Form S-1 (File No. 333-48405))
10.23	Federated Investors, Inc. Guaranty and Suretyship Agreement, dated as of March 28, 2000 (incorporated by reference to Exhibit 10.2 to the March 31, 2000 Quarterly Report on Form 10-Q (File No. 001-14818))
10.26	Purchase and Sale Agreement, dated as of December 21, 2000, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. Company (incorporated by reference to Exhibit 10.26 of the Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 001-14818))
10.27	Amendment No. 2 to the Federated Investors Program Documents dated as of December 21, 2000, among Federated Investors, Inc., Federated Funding 1997-1, Inc., Federated Investors Management Company, Federated Securities Corp., Wilmington Trust Company, Putnam Lovell Finance L.P., Putnam Lovell Securities Inc., and Bankers Trust Company (incorporated by reference to Exhibit 10.27 of the Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 001-14818))
10.29	Second Amended and Restated Credit Agreement, dated as of January 22, 2002, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.29 of the Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-14818))
10.30	Federated Investors, Inc. Stock Incentive Plan, amended as of January 29, 2002 (incorporated by reference to Exhibit 10.30 of the Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-14818))
10.31	Federated Investors, Inc. Annual Incentive Plan, dated January 29, 2002 (incorporated by reference to Exhibit 10.31 of the Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 001-14818))
10.32	Amendment No. 1 to the Second Amended and Restated Credit Agreement, dated April 8, 2002, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to the March 31, 2002 Quarterly Report on Form 10-Q (File No. 001-14818))
10.33	Employment agreement, dated May 13, 2002, between Federated Investors, Inc. and an executive officer (incorporated by reference to Exhibit 10.2 to the March 31, 2002 Quarterly Report on Form 10-Q (File No. 001-14818))
10.34	Annual Stock Option Agreement dated April 24, 2002 between Federated Investors, Inc. and the independent directors (incorporated by reference to Exhibit 10.1 to the June 30, 2002 Quarterly Report on Form 10-Q (File No. 001-14818))

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10.35	Federated Investors, Inc. Stock Incentive Plan as approved by shareholders April 24, 2002 (incorporated by reference to Exhibit 10.2 to the June 30, 2002 Quarterly Report on Form 10-Q (File No. 001-14818))
10.36	Federated Investors, Inc. Annual Incentive Plan as approved by shareholders April 24, 2002, as amended (incorporated by reference to Exhibit 10.3 to the June 30, 2002 Quarterly Report on Form 10-Q (File No. 001-14818))
10.37	Amendment No. 2 to the Second Amended and Restated Credit Agreement, dated January 20, 2003, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association (incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K for the fiscal year ended December 31, 2002 (File No. 001-14818))
10.38	Edgewood Services, Inc. Discretionary Line of Credit Demand Note, dated as of September 30, 2003 (incorporated by reference to Exhibit 10.1 to the September 30, 2003 Quarterly Report on Form 10-Q (File No. 001-14818))
10.39	Federated Investors, Inc. Guaranty and Suretyship Agreement, dated as of September 30, 2003 (incorporated by reference to Exhibit 10.2 to the September 30, 2003 Quarterly Report on Form 10-Q (File No. 001-14818))
10.40	Amendment to Purchase and Sale Agreement, dated as of December 31, 2003, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. Company (Filed herewith)
10.41	Amendments No. 6, 5, 4, 3 and 2 to Federated Investors Tower Lease dated as of December 31, 2003; November 10, 2000; June 30, 2000; February 10, 1999; and September 19, 1996 (Filed herewith)
10.42	Amendment No. 3 to the Second Amended and Restated Credit Agreement, dated January 16, 2004, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association (Filed herewith)
13.01	Selected Portions of 2003 Annual Report to Shareholders (Filed herewith)
14.01	Federated Investors, Inc. Code of Ethics for Senior Financial Officers (Filed herewith)
21.01	Subsidiaries of the Registrant (Filed herewith)
23.01	Consent of Ernst & Young LLP (Filed herewith)
31.01	Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith)
32.01	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Filed herewith)

(b) Reports on Form 8-K: During the fourth quarter 2003, Federated furnished or filed the following reports on Form 8-K to the Securities and Exchange Commission:

(1) Under Item 12, Form 8-K dated October 22, 2003, reporting third quarter 2003 results and issuing a statement regarding the recent inquiries from regulatory authorities into mutual fund shareholder trading practices.

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(2) Under Item 5, Form 8-K dated November 26, 2003, issuing a statement regarding the progress of the internal investigation and certain remedial actions being taken.

During the period from January 1, 2004 through March 12, 2004, Federated filed or furnished the following reports on Form 8-K to the Securities and Exchange Commission:

(1) Under Item 5, Form 8-K dated February 3, 2004, issuing a statement regarding the status of Federated’s internal review.

(2) Under Item 12, Form 8-K dated February 9, 2004, reporting fourth quarter and annual 2003 results.

(c) Exhibits:

See (a)(3) above.

(d) Financial Statement Schedules:

See (a)(2) above.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

FEDERATED INVESTORS, INC.
By:	/s/ J. Christopher Donahue
	J. Christopher Donahue
	President and Chief Executive Officer
	Date: March 12, 2004

Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ John F. Donahue John F. Donahue	Chairman and Director	March 12, 2004
/s/ J. Christopher Donahue J. Christopher Donahue	President, Chief Executive Officer and Director (Principal Executive Officer)	March 12, 2004
/s/ Thomas R. Donahue Thomas R. Donahue	Chief Financial Officer and Director	March 12, 2004
/s/ Michael J. Farrell Michael J. Farrell	Director	March 12, 2004
/s/ John B. Fisher John B. Fisher	Director	March 12, 2004

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Signature	Title	Date
/s/ James F. Getz James F. Getz	Director	March 12, 2004
/s/ Eugene F. Maloney Eugene F. Maloney	Director	March 12, 2004
/s/ Denis McAuley III Denis McAuley III	Principal Accounting Officer	March 12, 2004
/s/ John W. McGonigle John W. McGonigle	Director	March 12, 2004
/s/ James L. Murdy James L. Murdy	Director	March 12, 2004
/s/ Edward G. O’Connor Edward G. O’Connor	Director	March 12, 2004

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EXHIBIT INDEX

Exhibit Number	Description
10.40	Amendment to Purchase and Sale Agreement, dated as of December 31, 2003, among Federated Investors Management Company, Federated Securities Corp., Federated Funding 1997-1, Inc., Federated Investors, Inc., Citibank, N.A., and Citicorp North America, Inc. Company
10.41	Amendments No. 6, 5, 4, 3 and 2 to Federated Investors Tower Lease dated as of December 31, 2003; November 10, 2000; June 30, 2000; February 10, 1999; and September 19, 1996
10.42	Amendment No. 3 to the Second Amended and Restated Credit Agreement, dated January 16, 2004, by and among Federated Investors, Inc., the banks set forth therein and PNC Bank, National Association
13.01	Selected Portions of 2003 Annual Report to Shareholders
14.01	Federated Investors, Inc. Code of Ethics for Senior Financial Officers
21.01	Subsidiaries of the Registrant
23.01	Consent of Ernst & Young LLP
31.01	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.01	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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APPENDIX A

FEDERATED FUNDS

Fund Name	Number of Share Classes as of 12/31/03	Fund Category	Assets as of 12/31/03	Load	Fund Effective Date
EQUITY FUNDS:
FEDERATED AMERICAN LEADERS FUND INC.	5	Equity Fund - Growth and Income	2,746,361,186	Y	2/26/1969
FEDERATED AMERICAN LEADERS FUND II	2	Equity Fund - Growth and Income	352,504,899	N	12/15/1993
FEDERATED CAPITAL APPRECIATION FUND	4	Equity Fund - Growth	3,107,134,055	Y	11/14/1995
FEDERATED CAPITAL APPRECIATION FUND II	2	Equity Fund - Growth	21,284,687	N	6/17/2000
FEDERATED CAPITAL INCOME FUND	4	Equity	484,955,391	Y	5/29/1988
FEDERATED CAPITAL INCOME FUND II	0	Equity	82,397,878	N	12/15/1993
FEDERATED CONSERVATIVE ALLOCATION FUND	2	Balanced	114,397,756	N	3/11/1994
FEDERATED EQUITY INCOME FUND INC.	4	Equity	1,411,969,300	Y	12/30/1986
FEDERATED EQUITY INCOME FUND II	0	Equity	73,930,787	N	12/16/1996
FEDERATED EUROPEAN EQUITY FUND	3	International/Global	22,934,810	Y	1/31/1996
FEDERATED GLOBAL EQUITY FUND	3	International/Global	27,897,907	Y	3/8/1998
FEDERATED GLOBAL VALUE FUND	3	International/Global	44,786,994	Y	4/22/1994
FEDERATED GROWTH ALLOCATION FUND	2	Balanced	85,691,529	N	3/11/1994
FEDERATED GROWTH STRATEGIES FUND	3	Equity Fund - Growth	719,666,636	Y	8/23/1984
FEDERATED GROWTH STRATEGIES FUND II	0	Equity Fund - Growth	64,272,817	N	9/30/1995
FEDERATED INTERNATIONAL CAPITAL APPRECIATION FUND	3	International Equity Fund	95,628,954	Y	6/30/1997
FEDERATED INTERNATIONAL EQUITY FUND	3	International Equity Fund	331,949,780	Y	8/17/1984
FEDERATED INTERNATIONAL EQUITY FUND II	0	International Equity Fund	45,950,293	N	4/4/1995
FEDERATED INTERNATIONAL SMALL COMPANY FUND	3	International/Global	460,771,868	Y	6/21/2000
FEDERATED INTERNATIONAL VALUE FUND	3	International/Global	39,962,087	Y	8/24/1998
FEDERATED KAUFMANN FUND	4	Equity Fund - Growth	6,122,946,872	Y	4/23/2001
FEDERATED KAUFMANN FUND II	2	Equity Fund - Growth	20,394,006	N	4/30/2002
FEDERATED KAUFMANN SMALL CAP FUND	3	Equity Fund - Growth	270,855,015	Y	12/18/2002
FEDERATED LARGE CAP GROWTH FUND	3	Equity Fund - Growth	288,366,092	Y	12/23/1998
FEDERATED MARKET OPPORTUNITY FUND	3	Equity Fund - Growth and Income	1,084,271,367	Y	12/4/2000
FEDERATED MAX-CAP INDEX FUND	4	Equity Fund - Growth and Income/Index	1,716,683,467	N	7/2/1990
FEDERATED MID-CAP INDEX FUND	0	Equity Fund - Growth and Income/Index	612,767,034	N	7/7/1992
FEDERATED MINI-CAP INDEX FUND	2	Equity Fund - Growth and Income/Index	106,353,374	N	7/7/1992
FEDERATED MODERATE ALLOCATION FUND	2	Balanced	151,253,895	N	3/11/1994
FEDERATED MUNI AND STOCK ADVANTAGE FUND	3	Balanced	77,904,984	Y	9/22/2003
FEDERATED STOCK AND BOND FUND INC.	4	Balanced	335,680,399	N	10/31/1984
FEDERATED STOCK TRUST	0	Equity Fund - Growth and Income	1,398,804,949	N	3/31/1982
FEDERATED TECHNOLOGY FUND	3	Equity Fund - Growth	145,804,534	Y	9/13/1999
LVM EUROPA-AKTIEN	2	International/Global	56,626,062	Y	1/26/2000
LVM INTER-AKTIEN	2	International/Global	43,251,558	Y	1/26/2000
LVM PROFUTUR	2	International/Global	50,167,749	Y	1/26/2000
Total Equity Funds			22,816,580,971

25

Fund Name	Number of Share Classes as of 12/31/03	Fund Category	Assets as of 12/31/03	Load	Fund Effective Date
FIXED-INCOME FUNDS:
CAPITAL PRESERVATION FUND	2	Short-Term Corporate Bond Fund - High Grade	1,574,551,192	N	8/1/1988
FEDERATED ADJUSTABLE RATE SECURITIES FUND	2	Adjustable Rate Mortgage-Backed Fund	607,812,168	N	12/3/1985
FEDERATED BOND FUND	4	Long Corporate Bond Fund - High Grade	1,203,938,665	Y	6/27/1995
FEDERATED CALIFORNIA MUNICIPAL INCOME FUND	2	Municipal Bond Fund	87,489,823	Y	11/24/1992
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES	3	Mortgage Backed Fund	1,372,441,633	Y	10/6/1969
FEDERATED FUND FOR U.S. GOVERNMENT SECURITIES II	0	Mortgage Backed Fund	405,370,007	N	12/15/1993
FEDERATED GNMA TRUST	2	Mortgage Backed Fund	839,972,380	N	3/23/1982
FEDERATED GOVERNMENT INCOME SECURITIES INC.	4	Mortgage Backed Fund	892,295,442	Y	8/2/1996
FEDERATED GOVERNMENT ULTRASHORT DURATION FUND	3	Government Bond Fund	1,017,159,467	N	9/29/1999
FEDERATED HIGH INCOME ADVANTAGE FUND	2	High Yield Fund	59,938,585	Y	9/20/1993
FEDERATED HIGH INCOME BOND FUND INC.	3	High Yield Fund	2,182,890,678	Y	11/30/1977
FEDERATED HIGH INCOME BOND FUND II	2	High Yield Fund	421,396,282	N	12/15/1993
FEDERATED HIGH YIELD TRUST	0	High Yield Fund	615,639,197	N	8/23/1984
FEDERATED INCOME TRUST	2	Mortgage Backed Fund	619,231,834	N	3/30/1982
FEDERATED INSTITUTIONAL HIGH YIELD BOND FUND	1	High Yield Fund	50,741,223	N	10/30/2002
FEDERATED INTERMEDIATE INCOME FUND	2	General Investment Grade	320,137,898	N	12/8/1993
FEDERATED INTERMEDIATE MUNICIPAL TRUST	2	Municipal Bond Fund	186,587,822	N	12/26/1985
FEDERATED INTERNATIONAL BOND FUND	3	International Bond Fund	143,790,141	Y	5/15/1991
FEDERATED INTERNATIONAL HIGH INCOME FUND	3	International Bond Fund	169,984,889	Y	9/9/1996
FEDERATED LIMITED DURATION FUND	2	Mortgage Backed Fund	89,881,008	N	9/16/1996
FEDERATED LIMITED DURATION GOVERNMENT FUND INC.	2	Government Bond Fund	116,076,491	Y	3/2/1992
FEDERATED LIMITED TERM FUND	2	Short-Term Corporate Bond Fund - High Grade	194,232,225	Y	12/24/1991
FEDERATED LIMITED TERM MUNICIPAL FUND	2	Municipal Bond Fund	242,601,011	Y	8/31/1993
FEDERATED MICHIGAN INTERMEDIATE MUNICIPAL TRUST	0	Municipal Bond Fund	155,014,916	Y	9/9/1991
FEDERATED MORTGAGE FUND	2	US Government Int. Muni. Bond	333,005,425	N	6/30/1998
FEDERATED MUNICIPAL OPPORTUNITIES FUND INC.	4	Municipal Bond Fund	435,939,719	Y	5/3/1996
FEDERATED MUNICIPAL SECURITIES FUND INC.	3	Municipal Bond Fund	551,473,748	N	10/4/1976
FEDERATED MUNICIPAL ULTRASHORT FUND	2	Municipal Bond Fund	962,133,465	N	10/23/2000
FEDERATED NEW YORK MUNICIPAL INCOME FUND	2	Municipal Bond Fund	49,474,170	Y	11/24/1992
FEDERATED NORTH CAROLINA MUNICIPAL INCOME FUND	1	Municipal Bond Fund	84,009,497	Y	6/4/1999
FEDERATED OHIO MUNICIPAL INCOME FUND	1	Municipal Bond Fund	97,200,429	Y	10/10/1990
FEDERATED PENNSYLVANIA MUNICIPAL INCOME FUND	2	Municipal Bond Fund	280,327,215	Y	10/10/1990
FEDERATED PREMIER INTERMEDIATE MUNI INCOME FD	1	Municipal Bond Fund	102,256,290	Y	12/19/2002
FEDERATED PREMIER MUNICIPAL INCOME FUND	1	Municipal Bond Fund	89,381,483	Y	12/19/2002

26

Fund Name	Number of Share Classes as of 12/31/03	Fund Category	Assets as of 12/31/03	Load	Fund Effective Date
FEDERATED QUALITY BOND FUND II	2	Short-Term Corporate Bond Fund - High Grade	621,225,008	N	4/21/1999
FEDERATED SHORT-TERM INCOME FUND	2	Short-Term Corporate Bond Fund - High Grade	228,415,618	N	7/1/1986
FEDERATED SHORT-TERM MUNICIPAL TRUST	2	Municipal Bond Fund	400,534,828	N	8/20/1981
FEDERATED STRATEGIC INCOME FUND	4	Balanced	1,084,385,659	Y	4/5/1994
FEDERATED TOTAL RETURN BOND FUND	6	Mortgage Backed Fund	1,220,685,239	N	8/16/2001
FEDERATED TOTAL RETURN BOND FUND II	0	Mortgage Backed Fund	5,928,367	N	5/21/1999
FEDERATED TOTAL RETURN GOVERNMENT BOND FUND	2	Government Bond Fund	219,100,581	N	9/13/1995
FEDERATED U.S.GOVERNMENT BOND FUND	0	Mortgage Backed Fund	121,394,440	N	12/2/1985
FEDERATED ULTRASHORT BOND FUND	3	US Government ST	1,771,071,346	N	10/27/1998
FEDERATED US GOVERNMENT SECURITIES FUND: 1-3 YEARS	3	Government Bond Fund	564,140,906	N	3/15/1984
FEDERATED US GOVERNMENT SECURITIES FUND: 2-5 YEARS	3	Government Bond Fund	942,303,775	N	2/18/1983
LVM EURO-KURZLAUFER	2	International/Global	78,210,860	Y	1/26/2000
LVM EURO-RENTEN	3	International/Global	139,640,499	Y	1/26/2000
LVM INTER-RENTEN	2	International/Global	52,315,810	Y	1/26/2000
Total Fixed-Income Funds			24,003,729,354
Total Non-Money Market Funds			46,820,310,325
MONEY MARKET FUNDS:
ALABAMA MUNICIPAL CASH TRUST	1	Municipal Money Market	340,184,645	N	12/1/1993
ARIZONA MUNICIPAL CASH TRUST	1	Municipal Money Market	69,345,933	N	5/30/1998
AUTOMATED CASH MANAGEMENT TRUST	2	Prime Money Market Fund	2,386,166,187	N	9/19/1996
AUTOMATED GOVERNMENT CASH RESERVES	1	Government Money Market Fund	517,749,247	N	2/2/1990
AUTOMATED GOVERNMENT MONEY TRUST	1	Government Money Market Fund	979,284,008	N	6/1/1982
AUTOMATED TREASURY CASH RESERVES	1	Government Money Market Fund	170,325,918	N	8/5/1991
CALIFORNIA MUNICIPAL CASH TRUST	3	Municipal Money Market	1,183,140,431	N	2/29/1996
CONNECTICUT MUNICIPAL CASH TRUST	1	Municipal Money Market	299,837,615	N	11/1/1989
EDWARD JONES MONEY MARKET FUND	2	Government Money Market Fund	10,698,810,741	N	5/9/1980
FEDERATED MASTER TRUST	1	Prime Money Market Fund	163,176,127	N	12/16/1977
FEDERATED PRIME MONEY FUND II	1	Prime Money Market Fund	106,722,469	N	12/15/1993
FEDERATED SHORT-TERM EURO FUND	3	Prime Money Market Fund	212,224,190	N	11/9/1999
FEDERATED SHORT-TERM U.S. GOVERNMENT TRUST	1	Government Money Market Fund	169,786,410	N	4/16/1987
FEDERATED SHORT-TERM U.S. PRIME FUND	2	Government Money Market Fund	2,823,284,769	N	9/20/1993
FEDERATED SHORT-TERM U.S.GOVT SECURITIES FUND	5	Government Money Market Fund	1,538,854,082	N	1/18/1991
FEDERATED SHORT-TERM U.S.TREASURY SECURITIES FUND	2	Government Money Market Fund	1,872,156,997	N	4/16/1992
FEDERATED TAX-FREE TRUST	1	Municipal Money Market	326,136,636	N	3/6/1979
FLORIDA MUNICIPAL CASH TRUST	2	Municipal Money Market	1,240,434,660	N	11/16/1995
GEORGIA MUNICIPAL CASH TRUST	1	Municipal Money Market	417,004,131	N	8/14/1995
GOVERNMENT CASH SERIES	1	Government Money Market Fund	531,477,088	N	8/15/1989
GOVERNMENT OBLIGATIONS FUND	2	Government Money Market Fund	8,785,203,983	N	12/11/1989
GOVERNMENT OBLIGATIONS TAX MANAGED FUND	2	Government Money Market Fund	4,026,744,227	N	5/7/1995
LIBERTY U.S. GOVERNMENT MONEY MARKET TRUST	2	Government Money Market Fund	460,633,673	N	6/6/1980
LIQUID CASH TRUST	1	Government Money Market Fund	145,322,485	N	12/12/1980
MARYLAND MUNICIPAL CASH TRUST	1	Municipal Money Market	84,318,478	N	5/4/1994
MASSACHUSETTS MUNICIPAL CASH TRUST	2	Municipal Money Market	397,043,522	N	2/22/1993
MICHIGAN MUNICIPAL CASH TRUST	3	Municipal Money Market	308,668,490	N	2/29/1996
MINNESOTA MUNICIPAL CASH TRUST	2	Municipal Money Market	541,189,458	N	12/31/1990
MONEY MARKET MANAGEMENT INC.	1	Prime Money Market Fund	53,840,272	N	2/25/1993

27

Fund Name	Number of Share Classes as of 12/31/03	Fund Category	Assets as of 12/31/03	Load	Fund Effective Date
MONEY MARKET TRUST	1	Prime Money Market Fund	109,902,590	N	10/13/1978
MUNICIPAL CASH SERIES	1	Municipal Money Market	387,136,894	N	8/15/1989
MUNICIPAL CASH SERIES II	1	Municipal Money Market	464,083,263	N	1/25/1991
MUNICIPAL OBLIGATIONS FUND	3	Municipal Money Market	2,758,576,911	N	2/5/1993
NEW JERSEY MUNICIPAL CASH TRUST	2	Municipal Money Market	268,362,236	N	12/10/1990
NEW YORK MUNICIPAL CASH TRUST	2	Municipal Money Market	1,009,824,654	N	5/30/1994
NORTH CAROLINA MUNICIPAL CASH TRUST	1	Municipal Money Market	341,534,047	N	12/1/1993
OHIO MUNICIPAL CASH TRUST	3	Municipal Money Market	334,057,116	N	3/26/1991
PENNSYLVANIA MUNICIPAL CASH TRUST	3	Municipal Money Market	430,611,267	N	12/21/1990
PRIME CASH OBLIGATIONS FUND	3	Prime Money Market Fund	12,843,140,926	N	2/5/1993
PRIME CASH SERIES	1	Prime Money Market Fund	4,698,437,523	N	8/15/1989
PRIME OBLIGATIONS FUND	2	Prime Money Market Fund	24,330,726,409	N	7/5/1994
PRIME VALUE OBLIGATIONS FUND	3	Prime Money Market Fund	12,388,688,865	N	2/5/1993
TAX FREE INSTRUMENTS TRUST	2	Municipal Money Market	2,718,615,384	N	12/21/1982
TAX-FREE OBLIGATIONS FUND	2	Municipal Money Market	8,027,228,534	N	12/11/1989
TREASURY CASH SERIES	1	Government Money Market Fund	345,293,803	N	2/5/1990
TREASURY CASH SERIES II	1	Government Money Market Fund	285,076,436	N	1/25/1991
TREASURY OBLIGATIONS FUND	3	Government Money Market Fund	11,705,494,396	N	4/14/1997
TRUST FOR GOVERNMENT CASH RESERVES	1	Government Money Market Fund	142,432,246	N	3/30/1989
TRUST FOR SHORT-TERM U.S. GOVERNMENT SECURITIES	1	Government Money Market Fund	183,787,660	N	12/29/1975
TRUST FOR U.S. TREASURY OBLIGATIONS	1	Government Money Market Fund	677,964,631	N	11/8/1979
U.S. TREASURY CASH RESERVES	2	Government Money Market Fund	3,129,948,201	N	5/14/1991
VIRGINIA MUNICIPAL CASH TRUST	2	Municipal Money Market	448,342,641	N	8/30/1993
Total Money Market Funds			128,878,333,505
MANAGED FUND TOTAL	282		175,698,643,830
Other Managed Assets*			22,218,511,998
TOTAL MANAGED ASSETS			197,917,155,828

Summary:

Total Number of Load Funds: 44

Total Number of No-Load Funds: 92

Total Number of Funds: 136

* Other Managed Assets include Separate Account and Repo Assets

28

REPORT OF INDEPENDENT AUDITORS ON

FINANCIAL STATEMENT SCHEDULE

We have audited the consolidated financial statements of Federated Investors, Inc. and subsidiaries (Federated) as of December 31, 2003 and 2002, and for each of the three years in the period ended December 31, 2003, and have issued our report thereon dated February 19, 2004 (incorporated by reference elsewhere in this Form 10-K). Our audits also included the financial statement schedule (Schedule II) listed in Item 15(a)(2) of this Form 10-K. The schedule is the responsibility of Federated’s management. Our responsibility is to express an opinion based on our audits.

In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Ernst & Young LLP

Pittsburgh, Pennsylvania

February 19, 2004

SCHEDULE II

FEDERATED INVESTORS, INC.

VALUATION AND QUALIFYING ACCOUNTS

(in thousands)	Balance at Beginning of year		Additions charged to expenses		Deductions			Balance at End of year
Allowance accounts for:
Year ended December 31, 2001
Uncollectible accounts receivable	$	86	$	382	$	(153	)	$	315
Year ended December 31, 2002
Uncollectible accounts receivable	$	315	$	79	$	(119	)	$	275
Valuation allowance on capital loss carry-forwards		—		2,348		—			2,348
Year ended December 31, 2003
Uncollectible accounts receivable	$	275	$	106	$	(92	)	$	289
Valuation allowance on capital loss carry-forwards		2,348		—		—			2,348

S-1

EX-10.40

Exhibit 10.40

AGREEMENT OF AMENDMENT

Dated as of December 31,2003

Reference is made to (i) that certain Purchase and Sale Agreement dated as of December 21, 2000 (as from time to time amended, the “Purchase Agreement”) among Federated Investors Management Company (the “Transferor”), Federated Securities Corp. (the “Distributor”), Federated Funding 1997-1, Inc. (the “Seller”), Federated Investors, Inc. (the “Parent”), Citibank, N.A. (the “Purchaser”) and Citicorp North America, Inc. as agent for the Purchaser (the “Program Agent”), and (ii) that certain Funding Agreement dated as of December 21, 2000 (as from time to time amended, the “Funding Agreement”) among the Purchaser, the Program Agent, the Seller, the Transferor and Deutsche Bank Trust Company Americas (formerly known as Bankers Trust Company), as funding agent (the “Funding Agent”).

Section 1. Definitions.

As used in this Amendment, the term “Amendment Effective Date” means the later to occur of the day on which the Program Agent shall have (i) executed and delivered one or more counterparts of this Agreement of Amendment and shall have received one or more counterparts of this Agreement of Amendment executed by each of the other parties hereto, and (ii) received such opinions, certificates and documents as the Program Agent shall have reasonably requested, all in form and substance reasonably satisfactory to the Program Agent.

Capitalized terms used and not defined herein shall have the meanings assigned to them in Appendix A to the Purchase Agreement.

Section 2. Amendments to the Purchase Agreement.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Appendix A to the Purchase Agreement is hereby amended by deleting the words “Funding Agreement” set forth in the first paragraph therein.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, the definition of the term “CDSC” set forth in Appendix A to the Purchase Agreement is hereby amended by replacing the language set forth therein in its entirety with the following language:

“CDSC” means with respect to any Fund, the contingent deferred sales charges, or other similar charges howsoever denominated, payable, either directly or by withholding from the proceeds of the redemption, cancellation or

repurchase of the Shares of such Fund, by the shareholders of such Fund, on any redemption, cancellation or repurchase of Shares relating to such Fund in the percentages of NAV specified in the Prospectus relating to such Fund.”

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, the definition of the term “Collection Agent” set forth in Appendix A to the Purchase Agreement is hereby amended by deleting the words “and as funding agent under the Funding Agreement” set forth therein.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Appendix A to the Purchase Agreement is hereby amended by deleting the definition of the term “Funding Agreement” set forth therein.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, the definition of the term “Free Redemptions” set forth in Appendix A to the Purchase Agreement is hereby amended by replacing the language set forth therein in its entirety with the following language:

““Free Redemptions” means a redemption, cancellation or repurchase of Shares of any Fund (other than Reinvested Shares of such Fund) under any arrangement or circumstance (including in connection with any Liquidation Plan adopted by such Fund) which relieves or defers, in whole or in part, such shareholder’s obligation to pay the maximum CDSC which would have been payable in the absence of such arrangement or circumstance by any other shareholder of such Fund redeeming a Share of such Fund that had been held by such other shareholder for the same period the Shares of such Fund had been held by the shareholder in question (at the time of such redemption, cancellation or repurchase, or in the case of any thereof pursuant to a Liquidation Plan, at the time such Liquidation Plan is adopted), including (i) arrangements pursuant to which certain Persons are entitled to acquire Shares of such Fund under circumstances in which no CDSC will be payable by them, and (ii) arrangements pursuant to which CDSCs are deferred in connection with the redemption of Shares of such Fund because the redeeming shareholder is reinvesting all or a portion of the proceeds of such redemption in shares of another fund; provided, however, that the term “Free Redemptions” shall not include any Permitted Free Exchanges.”

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, the definition of the term “Program Documents” set forth in Appendix A to the Purchase Agreement is hereby amended by deleting the words “the Funding Agreement,” set forth therein.

2

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Appendix A to the Purchase Agreement is hereby amended by deleting the definition of the term “Purchaser’s Funding Account” set forth therein.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, the definition of the term “Termination Date” set forth in Appendix A to the Purchase Agreement is hereby amended by replacing the date “December 31, 2003” set forth therein with the date “December 31, 2006”.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Appendix A to the Purchase Agreement is hereby amended by deleting the definition of the term “Termination of Funding Notice” set forth therein.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Section 2.02 of the Purchase Agreement is hereby amended by (i) deleting the words “(with a copy to the Collection Agent)” set forth in the first sentence therein, and (ii) inserting the words “no more frequently than once per calendar week and” after the word “but” and before the words “no less frequently” set forth in the second sentence therein.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Section 3.01(a) of the Purchase Agreement is hereby amended by deleting the words “the Funding Agreement,” set forth in the second line therein.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Section 5.01(s) of the Purchase Agreement is hereby amended by replacing it in its entirety with the following language:

“(s) not take any action to cancel, terminate, amend, supplement, modify or waive any of the provisions of any Distribution Agreement, any Principal Shareholder Servicer’s Agreement, any Shareholder Servicer’s Agreement, any Distribution Plan, the Conversion Features or the CDSC arrangements applicable to the holders of any Shares of any Fund (including any action to allow, facilitate, or that will result in, Free Redemptions of Shares of any Fund under any circumstances where such Free Redemptions are not expressly required by the Prospectus of such Fund in effect on the date of this Agreement), or request, consent or agree to any such cancellation, termination, amendment, supplement, modification or waiver or to any event or circumstance that will result in any such cancellation, termination, amendment, supplement, modification or waiver, except with the prior written consent of the Program Agent, except that it may from time to time waive a CDSC that becomes payable provided it pays in accordance with the Program Servicing Procedures an amount to the Purchaser equal to the CDSC to which such Purchaser would have been entitled;”

3

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Section 9.04 (b) of the Purchase Agreement is hereby amended by inserting the following sentence at the end thereto immediately after the words “clauses (i) through (viii) above.”:

“Notwithstanding anything in this Section 9.04(b) to the contrary, in the case of Purchased Receivables relating to Shares the Date of Original Issuance of which occurs after December 31, 2003, clause (viii) of this Section 9.04(b) shall not be taken into account for purposes of clause (B) of the proviso set forth above in the case of Liquidation Plans of the type covered by that clause if the adoption of such Liquidation Plan did not arise out of, and is not attributable in whole or in part to, one or more breaches by Federated Entities of their representations, warranties or covenants set forth in this Agreement or the other Program Documents.”

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective date, Section 9.10(a) of the Purchase Agreement is hereby amended by deleting the words “the Funding Agreement,” set forth in the third line therein.

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Section 9.10 of the Purchase Agreement is hereby amended by adding the following clause (c) at the end thereof:

“(c) Notwithstanding anything in this Section 9.10 to the contrary, each party to this Agreement and each of its officers, directors, partners, employees, legal counsel and auditors may disclose to any and all Persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the facility contemplated by the Program Documents and all materials of any kind (including opinions or other tax analyses) that are provided to it, relating to such U.S. tax treatment and U.S. tax structure.”

The parties to the Purchase Agreement agree that, effective as of the Amendment Effective Date, Section 9.14(a) of the Purchase Agreement is hereby amended by replacing it in its entirety with the following language:

“(a) Each of the Seller, the Transferor, the Distributor and the Parent acknowledges and agrees that any Person who purchases or otherwise acquires any interest in any Purchased Receivables (or the right to receive any Collections with respect thereto in a Take-out Transaction) (each such Person, a “Transferee”), (and in the case of indemnitees, their respective Affiliates and their officers, directors, employees and agents) shall each, to the extent of such Transferee’s interest, be a beneficiary of the representations, warranties, indemnities, covenants, agreements and undertakings of the Seller, the Transferor, the Distributor and the Parent under this Agreement and the other Program

4

Documents; provided, however, that such rights of the Transferees in a Take-out Transaction may be enforced on behalf of such Transferees only by the Master Servicer for the related Master Trust. Each of the Seller, the Transferor, the Distributor and the Parent shall execute and deliver such instruments and documents and shall take all such actions as the Program Agent, the Purchaser or any Master Trust shall reasonably deem necessary in order to confer upon any such Transferee the rights and privileges in and to the Purchased Receivables and the Ancillary Rights and Collections with respect thereto to which such Transferee has an interest and under the Program Documents to the extent of such transfer and assignment. Without limiting the foregoing, if any Program Document is amended, waived or modified and the Program Agent has not in connection with such amendment, waiver or modification required that a new True Sale opinion be delivered in connection therewith, and subsequent to the effective date of such amendment, modification or waiver the Program Agent has notified the Seller, the Transferor, the Distributor or the Parent that S&P, Moody’s or any other nationally recognized rating agency has requested that the Program Agent obtain a new True Sale opinion, each of the Seller, the Transferor, the Distributor and the Parent agrees to, as promptly as possible (and in any event within thirty (30) days after receipt of such notice) use its best efforts to cause its outside counsel to deliver a new True Sale opinion to the Purchaser and the Program Agent, which is in form, scope and substance reasonably satisfactory to the Program Agent. In addition, the Seller acknowledges and agrees that unless waived in writing by the Program Agent the effectiveness of any extension of the Termination Date is conditioned upon the Seller and the Distributor delivering to the Purchaser and the Program Agent a True Sale opinion dated on or about the effective date of such extension, in form, scope and substance reasonably satisfactory to the Program Agent; provided, however, that the delivery of such new True Sale opinion shall not be required as a condition to any such extension if such extension does not extend the then current Termination Date for a period which is more than sixty (60) days (a “Temporary Extension”) and all such consecutive Temporary Extensions do not extend the Termination Date by periods which aggregate more than 120 days. Notwithstanding anything in this Section 9.14 to the contrary, no Transferee shall be deemed to have assumed any of the obligations or liabilities of the Seller, the Transferor, the Distributor or the Parent under this Agreement or any other Program Document.”

Section 3. Termination of the Funding Agreement.

Pursuant to Section 6.01 of the Funding Agreement, the parties to the Funding Agreement agree that, effective as of the Amendment Effective Date, the Funding Agreement is hereby terminated.

The Funding Agent shall, upon written notice from the Program Agent that the Amendment Effective Date has occurred, remit in immediately available funds all

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amounts on deposit in the Purchaser’s Funding Account to the account designated by the Program Agent in such notice.

Section 4. Representations and Warranties.

Each of the Seller, the Distributor, the Transferor and the Parent represents and warrants that (i) this Amendment has been duly authorized, executed and delivered by it and each of its obligations hereunder constitute its legal, valid and binding obligation enforceable against it in accordance with its terms, and (ii) immediately after giving effect to this Amendment and the transactions contemplated hereunder, its representations and warranties set forth in the Program Documents will be true and correct and no Event of Termination has occurred, or will result therefrom.

Section 5. Execution in Counterparts.

This Agreement of Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement.

Section 6. Governing Law.

THIS AGREEMENT OF AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 7. Amended Documents.

All references in any Program Document to the Purchase Agreement on and after the date hereof shall be deemed to refer to the Purchase Agreement as amended hereby, and the parties hereto agree that on and after the date hereof, the Purchase Agreement, as amended hereby, is in full force and effect.

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IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed and delivered by their duly authorized officers as of the date first above written.

CITICORP NORTH AMERICA, INC.,     as Program Agent		CITIBANK, N.A.,     as Purchaser
By:	/s/    Kenneth McDermott	By:	/s/    Kenneth McDermott
	Name:		Name:
	Title:		Title:
FEDERATED INVESTORS MANAGEMENT COMPANY,     as Transferor		FEDERATED SECURITIES CORP.,     as Distributor, Principal Shareholder Servicer and     Servicer
By:		By:
	Name:		Name:
	Title:		Title:
FEDERATED FUNDING 1997-1, INC.,     as Seller		FEDERATED INVESTORS, INC.,     as Parent
By:		By:
	Name:		Name:
	Title:		Title:
DEUTSCHE BANK TRUST COMPANY AMERICAS,     as Funding Agent
By:
	Name:
	Title:

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed and delivered by their duly authorized officers as of the date first above written.

CITICORP NORTH AMERICA, INC., as Program Agent		CITIBANK, NA., as Purchaser
By:		By:
	Name: Title:		Name: Title:

FEDERATED INVESTORS MANAGEMENT COMPANY, as Transferor		FEDERATED SECURITIES CORP., as Distributor, Principal Shareholder Servicer and Servicer
By:	/s/    DENIS MCAULEY III	By:	/s/    DENIS MCAULEY III
	Name: Denis McAuley III Title: Senior Vice President		Name: Denis McAuley III Title: Treasurer

FEDERATED FUNDING 1997-1, INC., as Seller		FEDERATED INVESTORS, INC., as Parent
By:	/s/    DENIS MCAULEY III	By:	/s/    DENIS MCAULEY III
	Name: Denis McAuley III Title: Vice President		Name: Denis McAuley III Title: Vice President

DEUTSCHE BANK TRUST COMPANY AMERICAS, as Funding Agent
By:
	Name: Title:

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed and delivered by their duly authorized officers as of the date first above written.

CITICORP NORTH AMERICA, INC.,     as Program Agent		CITIBANK, N.A.,     as Purchaser
By:		By:
	Name:		Name:
	Title:		Title:
FEDERATED INVESTORS MANAGEMENT COMPANY,     as Transferor		FEDERATED SECURITIES CORP.,     as Distributor, Principal Shareholder Servicer and     Servicer
By:		By:
	Name:		Name:
	Title:		Title:
FEDERATED FUNDING 1997-1, INC.,     as Seller		FEDERATED INVESTORS, INC.,     as Parent
By:		By:
	Name:		Name:
	Title:		Title:
DEUTSCHE BANK TRUST COMPANY AMERICAS,     as Funding Agent
By:	/s/    LOUIS BODI
	Name: Louis Bodi
	Title:   Vice President

EX-10.41

Exhibit 10.41

SIXTH AMENDMENT TO AGREEMENT OF LEASE

FOR PREMISES IN THE FEDERATED INVESTORS TOWER

THIS SIXTH AMENDMENT TO AGREEMENT OF LEASE (“Amendment”) is dated as of the 31^st day of December, 2003, by and between LIBERTY CENTER VENTURE, a Pennsylvania general partnership comprised of Grant Liberty Development Group Associates, a Pennsylvania general partnership, and New Liberty Center Partnership, a Pennsylvania limited partnership, having its principal offices at Terminal Tower, 50 Public Square, Suite 1100, Cleveland, Ohio 44113-2267 (collectively called the “Landlord”), and FEDERATED INVESTORS, INC., a Pennsylvania corporation, having its principal offices at Federated Investors Tower, Liberty Center, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222 (the “Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord and Tenant entered into an Agreement of Lease dated as of the 1^st day of January, 1993 (the “Original Master Lease”) for certain office space on the eighth (8^th), tenth (10^th), eleventh (11^th), and fifteenth (15^th) through the twenty-seventh (27^th) floors, inclusive, (“Original Premises”) containing 318,983 Square Feet in the Federated Investors Tower located at 1001 Liberty Avenue in Pittsburgh, Pennsylvania (the “Building”); and

WHEREAS, the Original Master Lease was amended by Amendment to Agreement of Lease dated May 1, 1995 (“Amendment”), First Amendment to Agreement of Lease dated November 2, 1995 (“First Amendment”), Second Amendment to Agreement of Lease dated September 19, 1996 (“Second Amendment”), Third Amendment to Agreement of Lease dated February 10, 1999 (“Third Amendment”), Fourth Amendment to Agreement of Lease dated

June 30, 2000 (“Fourth Amendment”) and Fifth Amendment to Agreement of Lease dated November 10, 2000 (“Fifth Amendment”); and

WHEREAS, the Original Master Lease, as amended by the Amendment, First Amendment, Second Amendment, Third Amendment, Fourth Amendment and Fifth Amendment shall be hereinafter referred to collectively as the “Master Lease”; and

WHEREAS, pursuant to the Third Amendment, the twelfth (12^th) floor of the Building containing 20,510 Square Feet (“Twelfth Floor”) was added to the total Rentable Area of the Original Premises with the result that the Original Premises under the Master Lease was increased to 339,493 Square Feet; and

WHEREAS, pursuant to the Fifth Amendment, a portion of the seventh (7^th) floor of the Building containing 2,380 Square Feet was added to the Original Premises with the result that the total Rentable Area of the Original Premises under the Master Lease was increased to 341,873 Square Feet; and

WHEREAS, the Original Premises, as increased by the Twelfth Floor and seventh (7^th) floor space described above shall be hereinafter referred to as the “Premises;” and

WHEREAS, Landlord and Tenant desire to enter into this Amendment in order to amend the Master Lease effective January 1, 2004 (the “Effective Date”), for the purposes of, among other matters:

(i) surrendering the fifteenth (15^th) floor, the eleventh (11^th) floor and the portion of the seventh (7^th) floor of the Building which are part of the Premises;

(ii) extending the term of the Master Lease by seven (7) years from January 1, 2008 through December 31, 2014;

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(iii) providing for a new Basic Rent for the eighth (8^th), tenth (10^th) and sixteenth (16^th) through twenty-seventh (27^th) floors, inclusive;

(iv) paying Tenant a refurbishment allowance of One Million Dollars ($1,000,000.00);

(v) establishing a new Base Year of 2004 for purposes of computing Tenant’s Share of Operating Expenses and Taxes;

(vi) recalculating Tenant’s Share following the surrender of the Surrendered Space (as defined herein);

(vii) modifying the market rent calculation for Tenant’s renewal options;

(viii) revising the method of annually increasing Tenant’s Share of Operating Expenses;

(ix) providing for the possible relocation of Reed Smith LLP (“Reed Smith”) from the Twelfth Floor to the eleventh (11^th) floor of the Premises;

(x) granting Tenant the right from time to time to elect a fixed (rather than hourly) annual charge for after-hours HVAC service to the twenty-fifth (25^th) and twenty-sixth (26^th) floors of the Premises;

(xi) obligating Landlord and Tenant to use diligent and good faith efforts to establish mutually acceptable ways of addressing Tenant’s future security concerns in the Building; and

(xii) allowing Tenant the option to terminate the Master Lease prior to its expiration date in return for the payment of a pre-determined termination fee upon the occurrence of certain conditions hereinafter more specifically described.

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

1. Defined Terms. Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Master Lease.

2. Premises. Effective as of the Effective Date, the Premises leased by Landlord to Tenant pursuant to the Master Lease during the remainder of the Initial Term (as extended in this Amendment) and any Renewal Terms (subject, however, to Tenant’s surrender options hereinafter described and the Tenant’s right to lease Available Space) is hereby decreased to exclude the entire fifteenth (15^th) floor of the Building containing 20,518 Square Feet, the entire eleventh (11^th) floor of the Building containing 21,352 Square Feet and 2,380 Square Feet on the seventh (7^th) floor (the foregoing spaces being sometimes hereinafter referred to as the “Surrendered Space”), with the result that the Premises shall contain 297,623 Square Feet.

3. Basic Rent. Notwithstanding the provisions of Section 3.1(a) of the Master Lease regarding Basic Rent, the parties agree that the Basic Rent payable by Tenant shall be modified as follows:

(a) 16^th through 27^th Floors: (244,482 Square Feet in the aggregate)

(i) For the period beginning January 1, 2004 and ending December 31, 2005, Tenant shall pay Landlord, with respect to these floors of the Building, Basic Rent in the amount of Twenty-One and 75/100 Dollars ($21.75) per Square Foot per year, being the sum of Five Million Three Hundred Seventeen Thousand Four Hundred Eighty-Three and 50/100 Dollars ($5,317,483.50) per calendar year, payable at the rate of Four Hundred Forty-Three Thousand One Hundred Twenty-Three and 63/100 Dollars ($443,123.63) per month;

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(ii) For the period beginning January 1, 2006 and ending December 31, 2014, Tenant shall pay Landlord with respect to these floors Basic Rent in the amount of Twenty-Three and 25/100 Dollars ($23.25) per Square Foot per year, being the sum of Five Million Six Hundred Eighty-Four Thousand, Two Hundred Six and 50/100 Dollars ($5,684,206.50) per calendar year, payable at the rate of Four Hundred Seventy-Three Thousand Six Hundred Eighty-Three and 88/100 Dollars ($473,683.88) per month;

(b) Tenth (10^th) Floor: (21,352 Square Feet)

(i) For the period beginning January 1, 2004 and ending December 31, 2005, Tenant shall pay Landlord, with respect to this floor of the Building, Basic Rent in the amount of Twenty-One and 25/100 Dollars ($21.25) per Square Foot per year, being the sum of Four Hundred Fifty Three Thousand Seven Hundred Thirty and 00/100 Dollars ($453,730.00) per calendar year, payable at the rate of Thirty-Seven Thousand Eight Hundred Ten and 83/100 Dollars ($37,810.83) per month;

(ii) For the period beginning January 1, 2006 and ending December 31, 2014, Tenant shall pay Landlord, with respect to this floor of the Building, Basic Rent in the amount of Twenty-Two and 75/100 Dollars ($22.75) per Square Foot per year, being the sum of Four Hundred Eighty-Five Thousand Seven Hundred Fifty-Eight and 00/100 Dollars ($485,758.00) per calendar year, payable at the rate of Forty Thousand Four Hundred Seventy-Nine and 84/100 Dollars ($40,479.84) per month;

(c) Eighth (8^th) Floor: (11,279 Square Feet)

(i) For the period beginning January 1, 2004 and ending December 31, 2005, Tenant shall pay Landlord, with respect to this floor, Basic Rent in

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the amount of Twenty-One and 25/100 Dollars ($21.25) per Square Foot, being the sum of Two Hundred Thirty-Nine Thousand Six Hundred Seventy-Eight and 75/100 Dollars ($239,678.75) per calendar year, payable at the rate of Nineteen Thousand Nine Hundred Seventy-Three and 23/100 Dollars ($19,973.23) per month;

(ii) For the period beginning January 1, 2006 and ending December 31, 2014, provided Tenant has not surrendered the eighth (8^th) floor space as hereinafter provided, Tenant shall pay Landlord, with respect to this floor, Basic Rent in the amount of Twenty-Two and 25/100 Dollars ($22.25) per Square Foot, being the sum of Two Hundred Fifty Thousand Nine Hundred Fifty-Seven and 75/100 Dollars ($250,957.75) per calendar year, payable at the rate of Twenty Thousand Nine Hundred Thirteen and 15/100 Dollars ($20,913.15) per month.

(d) Twelfth Floor: (20,510 Square Feet)

Landlord and Tenant acknowledge that Tenant’s existing Basic Rent and Operating Rent obligations with respect to the Twelfth Floor are not amended or modified by this Sixth Amendment and remain in effect, except as otherwise provided in Paragraph 7 hereof in connection with any extended term with respect to the Twelfth Floor.

4. Additional Tenant Improvement Allowance. Landlord acknowledges and agrees that, subject to the provisions of Paragraph 18 hereof, upon the execution and delivery of this Amendment by the parties hereto, Landlord shall pay to Tenant, in cash, One Million Dollars ($1,000,000.00). Such amount is in addition to, and not in substitution or in lieu of, any other allowance provided or available to Tenant under the Master Lease, including without limitation, under Article 6 and Exhibit I of the Master Lease. Tenant’s right to receive such payment shall

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accrue immediately upon the mutual execution and delivery of this Amendment, subject to the provisions of Paragraph 18 hereof, and there shall be no other conditions to Tenant’s right to receive such payment. In furtherance of the foregoing, Tenant shall not be required to submit or provide any receipts or other evidence regarding the costs of any improvements undertaken by Tenant in the Premises, and there shall be no restrictions as to the use made by Tenant of such payment.

5. Extension of Initial Term; Amendment Regarding Renewal Terms. The parties hereto acknowledge and agree that the expiration date of the Initial Term is currently December 31, 2007. By this Amendment, the Initial Term of the Master Lease with respect to all floors of the Premises (except the Twelfth Floor) is hereby extended from January 1, 2008 through December 31, 2014. The Initial Term of the Master Lease with respect to the Twelfth Floor shall end on December 31, 2007, subject to Tenant’s right to renew the term with respect to Twelfth Floor set forth in Paragraph 8 hereof. The parties further acknowledge and agree that the provisions of Section 2.3 of the Master Lease are hereby amended to provide that the Renewal Options (except with respect to the Twelfth Floor) shall consist of Tenant’s right to renew this Lease for two (2) successive terms of five (5) years each, and such terms shall be the Renewal Terms. The reference in Section 2.3 of the Master Lease to “one final term of four (4) years” is hereby deleted.

6. Renewal Term Basic Rent. The first sentence of Section 3.1(b) of the Master Lease is hereby deleted and replaced with the following sentence: “For each Renewal Term, Basic Rent shall be adjusted to an amount (“Renewal Term Rent”) which shall be equal to ninety five percent (95%) of fair market rent (“Value”) for such Renewal Term.”

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7. Operating Rent.

(a) Premises (other than the Twelfth Floor). For purposes of calculating Tenant’s Operating Rent for the balance of the Initial Term as extended hereunder (except with respect to the Twelfth Floor):

(i) the Base Year shall be calendar year 2004. The Base Year for the first Renewal Term shall be calendar year 2015 and the Base Year for the second Renewal Term shall be calendar year 2020.

(ii) Tenant’s Share shall be deemed to be 53.94%, with respect to the Premises other than the Twelfth Floor, subject to adjustment from time to time based on changes in the size of the Premises pursuant to the Master Lease and any subsequent amendments to the Master Lease;

(iii) Annual increases in Tenant’s Share of Controllable Operating Expenses (as hereinafter defined) shall not exceed four percent (4%) of the corresponding charge for the immediately preceding calendar year. “Controllable Operating Expenses” shall mean all Operating Expenses other than Non-Controllable Operating Expenses. “Non-Controllable Operating Expenses” shall mean Taxes, Utility Charges, Insurance Premiums and costs and expenses paid by Landlord pursuant to prevailing union wage rates and benefits included in amounts paid by Landlord for Building janitorial services;

(iv) There shall be no limitation on increases in Tenant’s Share of Non-Controllable Operating Expenses and there shall be no automatic or minimum increases in Non-Controllable Operating Expenses; and

(v) Notwithstanding anything in the Master Lease or this Sixth Amendment to the contrary, Landlord acknowledges and agrees that any reduction in any category of Non-Controllable Operating Expenses (including, without limitation, reductions

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resulting in any category of Non-Controllable Expenses in any Lease Year being less than such category of Non-Controllable Expenses in the Base Year) shall be applied to reduce any increases in other Operating Expenses (but shall not be applied to reduce Base Rent) during that Lease Year or subsequent Lease Years.

(b) Twelfth Floor. Landlord and Tenant acknowledge and agree that Tenant’s obligations with respect to Operating Rent payable with respect to the Twelfth Floor are not changed or modified in any respect by this Sixth Amendment during the balance of the term of the Master Lease relating to the Twelfth Floor, which expires on December 31, 2007. In furtherance of, but not in limitation of, the foregoing, the Base Year with respect to the Twelfth Floor shall remain calendar year 1993 for the balance of such term, and Tenant’s Share for purposes of determining Tenant’s Operating Rent obligations with respect to the Twelfth Floor shall be 3.99%. If Tenant exercises its right set forth in Paragraph 8 of this Sixth Amendment to extend the term of the Master Lease with respect to the Twelfth Floor, then the Base Year with respect to the Twelfth Floor during such extended term or terms shall be 2004 and the foregoing provisions of this Paragraph 7 preceding this grammatical paragraph shall apply to the Twelfth Floor during such extended term or terms.

(c) Base Years. Landlord covenants and agrees that with respect to each Base Year hereunder, it shall operate the Building in accordance with its customary practice and shall not accelerate the payment of any Taxes, Utility Charges, Insurance Premiums or other components of Operating Rent into the calendar year prior to the Base Year or defer any of such charges to years subsequent to the Base Year for the purpose of reducing the Taxes, Utility Charges, Insurance Premiums and other components of Operating Rent during the Base Year. Landlord further acknowledges that the “gross-up” provision set forth in the final sentence of

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paragraph (i) in the definition of “Operating Expenses” in Section 1.1 (nn) of the Master Lease shall apply to the determination of Operating Expenses in any Base Year.

8. Reed Smith LLP. Landlord acknowledges that if Tenant’s subtenant Reed Smith elects to relocate to the eleventh (11th) floor of the Building as either a subtenant of Tenant or a direct tenant of Landlord, Landlord will cooperate with Tenant and Reed Smith to effect such relocation. Alternatively, if Reed Smith desires to enter into a direct lease with Landlord for the Twelfth Floor, Landlord will cooperate with Tenant and Reed Smith regarding such direct lease. Upon either occurrence, Landlord and Tenant shall enter into a further amendment to the Lease reflecting Tenant’s resulting surrender of the Twelfth Floor. Landlord shall have the right, but not the obligation, to enter into direct lease negotiations with Reed Smith for the eleventh [11^th] or Twelfth Floor space upon commercially reasonable terms and conditions. If, despite such negotiations, Landlord and Reed Smith cannot consummate a lease for either floor to extend its tenancy beyond the December 31, 2007 expiration date of its sublease with Tenant, then Tenant shall have the right, but not the obligation, to extend the term of the Master Lease with respect to the Twelfth Floor for a period of not less than three (3) years, nor more than seven (7) years at a Base Rent equal to Twenty-Two and 75/100 Dollars ($22.75) per Square Foot per year. To exercise such right to extend the term with respect to the Twelfth Floor, Tenant shall deliver written notice to Landlord no later than June 30, 2007 specifying the duration of the extended term as provided above. If Tenant elects to extend the term with respect to the Twelfth Floor for five (5) years (until December 31, 2012) then Tenant shall have the right, by written notice to Landlord no later than June 30, 2012, to further extend the term with respect to the Twelfth Floor until December 31, 2014. In addition, if Tenant elects to extend the term of the Master Lease with respect to the Twelfth Floor until December 31, 2014, Tenant shall have the right to include

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or not include the Twelfth Floor in any exercise by Tenant of its Renewal Options hereunder, subject to the terms and conditions of the Master Lease.

9. Right to Reduce Size of Premises. As of the Effective Date, all references in the Master Lease, as amended, to Tenant’s right to reduce the size of the Premises, including but not limited to Section 2.5 thereof, shall be deemed deleted in their entirety and shall be replaced by the following:

(a) By no later than November 30, 2004, Tenant may elect to provide Landlord with written notice of its intention to reduce the size of the Premises by surrendering either or both of the following: (i) no less than one-half (1/2) of the tenth (10^th) floor (containing 21,352 Square Feet), and/or (ii) the portion of the eighth (8^th) floor of the Building which is part of the Premises (11,279 Square Feet), in each case effective 365 days from the date such written notice is received by Landlord (“First Surrender Date”) (said space being sometimes hereinafter referred to as “Reduction Space” or “Reduction Spaces”). If such notice should be given in a timely manner, Tenant shall vacate and surrender possession of whichever Reduction Space Tenant has elected to surrender in broom-clean condition by no later than the First Surrender Date and the Master Lease will be amended to reflect the surrender of such Reduction Space as of the First Surrender Date. If such written notice is not served in a timely manner as required above, Tenant’s right to surrender such Reduction Space as of such date shall lapse and become null and void and of no further force and effect.

(b) If any Reduction Space remains to be surrendered following the First Surrender Date, by no later than December 31, 2006, Tenant may elect to provide Landlord with written notice of its intention to reduce the size of the Premises by surrendering whichever Reduction Space remains to be surrendered effective 365 days from the date such written notice

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is received by Landlord (“Second Surrender Date”). If such notice should be given in a timely manner, Tenant shall vacate and surrender possession of such Reduction Space in broom-clean condition by no later than the Second Surrender Date and the Master Lease will be amended to reflect the surrender of such Reduction Space as of the Second Surrender Date. If such written notice is not served in a timely manner as required above, Tenant’s right to surrender whatever Reduction Space which has not been surrendered shall lapse and become null and void and of no further force and effect.

(c) Any Refurbishment Allowance otherwise due and owing with respect to these Reduction Spaces shall be deferred as provided in this paragraph (c). Tenant shall forfeit any Refurbishment Allowance otherwise due and owing with respect to any Reduction Space which Tenant has surrendered to Landlord effective as of the date on which Tenant delivers such Reduction Space to Landlord. With respect to all Reduction Space that is not surrendered by Tenant pursuant to this Section 9, Landlord shall pay to Tenant, on January 1, 2007, any and all Refurbishment Allowances otherwise due and owing with respect to such space.

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10. Tenant’s Right to Terminate.

(a) Landlord and Tenant mutually acknowledge and agree that the City of Pittsburgh, Allegheny County and/or the Commonwealth of Pennsylvania (individually, a “Government Authority” and collectively, “Governmental Authorities”) are facing current revenue shortfalls and that, accordingly, any or all of these Governmental Authorities may, at some time during the balance of the term of the Master Lease, impose additional taxes (excluding ad valorem real property taxes), materially increase existing tax rates (excluding ad valorem real property taxes), expand the scope or applicability of existing taxes (excluding ad valorem real property taxes) or eliminate or reduce existing tax exemptions, exclusions or abatements (excluding ad valorem real property taxes) (“Future Adverse Tax Changes”). In the event that Future Adverse Tax Changes are imposed or enacted by any one or more of the Governmental Authorities after the Effective Date and, as a direct and proximate consequence thereof: (i) Tenant can demonstrate to Landlord, by the production of commercially reasonable documentary evidence prepared by an independent public accounting firm, that such Future Adverse Tax Changes have caused Tenant’s business operations in the Premises to incur an additional tax liability of at least Five Million Dollars ($5,000,000.00) during any calendar year; and (ii) Tenant elects to relocate its business from the Premises to a location outside of the jurisdiction of the Governmental Authority responsible for imposing or enacting the Future Adverse Change, then, in such an event, Tenant may elect to terminate the Master Lease upon one hundred eighty (180) days’ prior written notice to Landlord.

(b) If the foregoing termination right should arise and Tenant should exercise such right, Landlord shall be entitled to recoup from Tenant the sum more particularly detailed in Exhibit “A” attached hereto and made a part hereof (based on the dollar amounts and line items

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set forth in Exhibit A and the amortization set forth in the schedules prepared by Landlord attached to Exhibit A) and which is further described as the unearned portion of that benefit which will have accrued to Tenant by virtue of this Amendment based on the date upon which such termination shall have occurred. Such payment shall be made by Tenant to Landlord no later than the expiration date of the Term as determined by the exercise of the foregoing termination right.

11. After-Hours HVAC Service. As of the Effective Date, Tenant shall have the right, from time to time, but no more frequently than once per calendar year, to elect by written notice to Landlord to pay, in lieu of hourly charges for After-Hours HVAC service on Mondays through Saturdays on the twenty-fifth (25^th) and/or twenty-sixth (26^th) floors, a flat annual charge of Eighteen Thousand Five Hundred Sixty and 00/100 Dollars ($18,560.00) per floor. If Tenant elects to exercise such right, then HVAC operation on the floor or floors selected by Tenant shall be extended to twenty-four (24) hours per day from 7:00 A.M. to 7:00 A.M. Tenant shall have the right thereafter, from time to time, to change its election from hourly to the foregoing flat charge and vice versa based on its use of one or both of such floors.

12. Building Security. Landlord and Tenant agree to meet on an as-needed basis to discuss Tenant’s Building Security concerns and use mutual good faith and diligent efforts to develop a workable plan to respond to Tenant’s Building Security concerns.

13. Applicable Law. The laws of the Commonwealth of Pennsylvania shall govern the validity, performance and enforcement of this Amendment. The invalidity or unenforceability of any provision of this Amendment shall not affect or impair any other provision.

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14. Interpretation. In the event of any conflict between the provisions of the Master Lease and the provisions of this Amendment, the provisions of this Amendment shall control.

15. Execution. This Amendment may be signed in counterparts, each of which shall be deemed an original, but all of which shall be deemed but one and the same instrument.

16. Full Force and Effect. Except as specifically set forth herein, the terms, covenants and conditions of the Master Lease shall remain in full force and effect. Neither the Master Lease, as amended, nor this Sixth Amendment may be further modified or amended, except in writing signed by both Landlord and Tenant. This Sixth Amendment sets forth the entire understanding of the parties hereto with respect to the matters set forth herein. Landlord and Tenant each hereby ratify and reaffirm all of the remaining terms and conditions of the Master Lease, as amended. Landlord acknowledges that notwithstanding the reduction in the size of the Premises contemplated by this Sixth Amendment and notwithstanding the provisions of Section 8 of the Fourth Amendment to the Master Lease, Tenant shall not be required to pay any rent for the sign space on the roof of the Building occupied by Tenant pursuant to the Fourth Amendment to the Master Lease. However, in the event that at any time during the balance of the Initial Term or any Renewal Term, Tenant shall occupy less than 100,000 Square Feet in the Building, Tenant’s sign rights as set forth in the Fourth Amendment shall be deemed null and void and of no further force and effect. Tenant hereby acknowledges that, to the best of Tenant’s knowledge as of the date of this Sixth Amendment, Landlord is not in default under the terms and conditions of the Master Lease, as amended. Landlord hereby acknowledges that, to the best of Landlord’s knowledge as of the date of this Sixth Amendment, Tenant is not in default under the terms and conditions of the Master Lease, as amended.

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17. Confidentiality of Terms. Landlord and Tenant covenant and agree to maintain the terms of this Amendment and all documents produced in connection therewith as strictly confidential. In no event shall Landlord or Tenant disclose or publish any such information to any third persons or parties except: (i) either party may disclose the terms of this Amendment to its lenders, accountants, attorneys, employees or tax advisors to whom disclosure is necessary, provided that such individuals are advised of the confidentiality provisions hereof; or (ii) as may be agreed upon in writing by the other party. Notwithstanding the foregoing, Landlord, with Tenant’s prior written consent as to both form and content, may generate an announcement regarding Tenant’s extension of the Master Lease without divulging any specifics of the Amendment.

18. Lender Consent. This Amendment and the rights and obligations of the parties hereunder shall not become effective until Tenant and Landlord shall have received the written consent of Teachers Insurance Annuity Association of America, 730 Third Avenue, New York, New York 10017, Attention: Senior Vice President – Mortgage and Real Estate, to this Amendment, and Landlord agrees to use commercially reasonable efforts to obtain such consent as soon as possible following the mutual execution and delivery of this Amendment.

19. Brokers. Landlord hereby warrants to Tenant that no real estate broker other than Grant Street Associates has or will represent Landlord in this transaction. Tenant hereby warrants to Landlord that no real estate broker has or will represent Tenant in this transaction. Landlord and Tenant shall indemnify each other against and hold the other harmless from all liabilities, claims, and expenses (including reasonable attorney’s fees) arising out of a breach of their respective warranty. Landlord shall pay a commission to Grant Street Associates pursuant to a separate agreement between Landlord and Grant Street Associates.

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20. Exhibit I. The parties agree that Exhibit I attached to the Fifth Amendment is hereby deleted, and Exhibit I attached hereto (which reflects changes to the schedule of tenant improvement and refurbishment allowances agreed to by the parties in connection with the modifications to the Master Lease set forth in this Amendment) is hereby substituted into the Master Lease in its place.

IN WITNESS WHEREOF, this Sixth Amendment has been duly executed by the parties hereto as of the date first above written.

ATTEST:	FEDERATED INVESTORS, INC.
/s/    Maroon L. DeVito	By:	/s/    Thomas R. Donahue
/s/    Richard L. Bennett	Its:	Vice President
	LIBERTY CENTER VENTURE
	By:	New Liberty Center Partnership, General Partner
ATTEST:
		By:	F.C. Liberty, Inc., General Partner
/s/    Janet M. Franklin			By:	/s/    David J. LaRue
/s/    Gayle Spider			Its:	Vice President

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EXHIBIT “A”

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EXHIBIT “I”

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FIFTH AMENDMENT TO AGREEMENT OF LEASE FOR

PREMISES IN THE FEDERATED INVESTORS TOWER

THIS FIFTH AMENDMENT TO AGREEMENT OF LEASE (this “Fifth Amendment”) is made and entered into the 10th day of November, 2000, by and between LIBERTY CENTER VENTURE, a Pennsylvania general partnership (“Landlord”), and FEDERATED INVESTORS, INC. (“Tenant”).

WHEREAS, Landlord and Tenant are parties to an Agreement of Lease for certain premises in the Federated Investors Tower dated as of the 1st day of January, 1993, as amended (as with respect to matters relating to the 8th Floor Premises) by an Amendment dated May 1, 1995, a First Amendment dated November 2, 1995, a Second Amendment dated September 19, 1996, a Third Amendment dated February 10, 1999, and a Fourth Amendment dated June 30, 2000 (collectively the “Master Lease”);

WHEREAS, pursuant to previous documentation superceded by the Master Lease, Landlord is also leasing to Tenant certain premises (the “7th Floor Premises”) consisting of 2,380 rentable square feet on the 7th floor of the Federated Investors Tower;

WHEREAS, Tenant desires to now include the 7th Floor Premises as part of the Tenant’s “Premises” as leased under the Master Lease for the remainder of the Initial Term and for any Renewal Terms;

WHEREAS, Tenant desires to continue include the 11,279 rentable square feet located on the 8th floor of the Building (“8th Floor Premises”) as part of the Tenant’s “Premises” as leased under the Master Lease for the remainder of the Initial Term and for any Renewal Terms;

WHEREAS, Tenant and Landlord desire to enter into this Fifth Amendment in order to amend the Master Lease for the purposes of, among other matters, (i) agreeing that the 7th Floor Premises shall become part of the Premises under the Master Lease for the remainder of the Initial Term and for any Renewal Terms, (ii) agreeing that the 8th Floor Premises shall continue as part of the Premises under the Master Lease for the remainder of the Initial Term and for any Renewal Terms, (iii) providing the Basic Rent payable by Tenant with respect to the 7th Floor Premises and 8th Floor Premises, and (iv) providing for the Improvement Allowance to Tenant with respect to the 7th Floor Premises and 8th Floor Premises.

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

1. Defined Terms. Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Master Lease, as amended.

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2. Premises. The Premises leased by Landlord to Tenant pursuant to the Master Lease during the remainder of the Initial Term and any Renewal Terms is hereby increased effective on January 1, 2000 to include the 7th Floor Premises consisting of 2,380 Square Feet located on the 7th Floor of the Building. The parties acknowledge and agree that beginning on January 1, 2000 the Tenant’s Share shall be 66.60% (which percentage includes the 2,380 square feet of the 7th Floor Premises), and Exhibit C to the Master Lease is hereby revised to change Tenant’s Share from 66.13% to 66.60% so as to include the 7th Floor Premises. The Premises shall also continue to include the 8th Floor Premises for the remainder of the Initial Term and for any Renewal Terms of the Master Lease.

3. Basic Rent. Notwithstanding the provisions of Section 3.1 (a) of the Master Lease regarding Basic Rent, the parties agree that the Basic Rent payable by Tenant during the remainder of the Initial Term, beginning on January 1, 2000 with respect to the 7th Floor Premises and 8th Floor Premises leased by Tenant (containing 13,659 Square Feet in the aggregate), shall be as follows:

(i) For the period beginning January 1, 2000, and ending December 31, 2001, Tenant shall pay to Landlord Basic Rent (for the 7th Floor Premises consisting of 2,380 Square Feet and the 8th Floor Premises consisting of 11,279 Square Feet, being an aggregate of 13,659 Square Feet) in the amount of Twenty and 50/100 Dollars per Square Foot per year, being the sum of Two Hundred Eighty Thousand and Nine and 50/100 Dollars ($280,009.50) per calendar year, payable at the rate of Twenty Three Thousand Three Hundred Thirty Four and 13/100 Dollars ($23,334.13) per month;

(ii) For the period beginning January 1, 2002, and ending December 31, 2005, Tenant shall pay to Landlord Basic Rent (for the 7th Floor Premises consisting of 2,380 Square Feet and the 8th Floor Premises consisting of 11,279 Square Feet, being an aggregate of 13,659 Square Feet) in the amount of Twenty-two Dollars per Square Foot per year, being the sum of Three Hundred Thousand Four Hundred Ninety Eight and 00/100 Dollars ($300,498.00) per calendar year, payable at the rate of Twenty Five Thousand and Forty One and 50/100 Dollars ($25,041.50) per month; and

(iii) For the period beginning January 1, 2006, and ending December 31, 2007, Tenant shall pay to Landlord Basic Rent (for the 7th Floor Premises consisting of 2,380 Square Feet and the 8th Floor Premises consisting of 11,279 Square Feet, being an aggregate of 13,659 Square Feet) in the amount of Twenty-Three and 50/100 Dollars per Square Foot per year, being the sum of Three Hundred Twenty Thousand Nine Hundred Eighty Six and 50/100 Dollars ($320,986.50) per calendar year, payable at the rate of Twenty Six Thousand Seven Hundred Forty Eight and 88/100 Dollars ($26,748.88) per month.

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4. Improvement Allowance.

(a) Seventh Floor Premises. Landlord has agreed to provide Tenant with an Improvement Allowance, to be calculated in accordance with Section 6.2(c) of the Master Lease, as follows:

7th Floor Premises is 2,380 rentable square feet and will be leased under the Master Lease.

$26.15 x 2,380 rsf

Tenant Improvement Allowance for 7th Floor Premises = $62,237.00

(b) Eighth Floor Premises.

Improvement Allowance. For the 8th Floor Premises, Tenant shall receive the Improvement Allowance contemplated pursuant to Section 6.2(c) of the Master Lease, to be calculated as follows:

7 3/120 x $43.00 = $26.158 x 11,279.00 rsf =	$	295,039.84
less amount paid per 2/10/99 Amendment (Section 4(a)(2))		(96,999.00	)
Tenant Improvement Allowance for 8th Floor Premises =	$	198,040.84

(c) Future Refurbishment Allowance. With respect to Section 6.4 of the Master Lease, the parties agree that Tenant shall be entitled to receive a Refurbishment Allowance (as such term is defined in Section 6.4 of the Master Lease) on January 1, 2010 with respect to the 7th Floor if Tenant has exercised its first Renewal Option. Exhibit I to the Master Lease and Third Amendment is hereby deleted, and Exhibit I attached hereto is hereby substituted into the Master Lease in its place. The parties acknowledge and agree that the only changes on the revised Exhibit I from the Master Lease and Third Amendment Exhibit I is the inclusion of the 7th Floor column and the allowance of $31,321 payable on January 1, 2010 with respect to the 7th Floor. The amount of the foregoing Refurbishment Allowance applicable to the 7th Floor shall be determined by reference to Section 6.4 of the Master Lease and the revised Exhibit I attached hereto.

5. Applicable Law. The laws of the Commonwealth of Pennsylvania shall govern the validity, performance and enforcement of this Amendment. The invalidity or unenforceability of any provision of this Amendment shall not affect or impair any other provision.

6. Interpretation. In the event of any conflict between the provisions of the Master Lease and the provisions of this Amendment, the provisions of this Amendment

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shall control. As amended hereby, all of the terms, covenants and conditions of the Master Lease as heretofore in effect shall remain in full force and effect after the date hereof and are hereby ratified and confirmed in all respects.

7. Execution. This Amendment may be signed in counterparts, each of which shall be deemed an original, but all of which shall be deemed but one and the same instrument.

8. Full Force and Effect. Except as specifically set forth herein, the terms, covenants and conditions of the Master Lease shall remain in full force and effect. Neither the Master Lease, as amended, nor this Fifth Amendment may be further modified or amended, except in writing signed by both Landlord and Tenant. This Fifth Amendment sets forth the entire understanding of the parties hereto with respect to the matters set forth herein. Landlord and Tenant each hereby ratify and reaffirm all of the remaining terms and conditions of the Master Lease, as amended. Tenant hereby acknowledges that, to the best of Tenant’s knowledge as of the date of this Fifth Amendment, Landlord is not in default under the terms and conditions of the Master Lease, as amended.

IN WITNESS WHEREOF, this Fifth Amendment has been duly executed by the parties hereto as of the date first above written.

ATTEST:		FEDERATED INVESTORS, INC.
By:	/s/    Maroon L. DeVito	By:	/s/    Denis McAuley III
Its:	Vice President	Its:	Vice President
		LIBERTY CENTER VENTURE
		By:	New Liberty Center Partnership, General Partner
			By:	F. C. Liberty, Inc., General Partner
		By:	/s/    R. H. Marques
		Its:	V. P. Bus. Development

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FOURTH AMENDMENT TO AGREEMENT OF LEASE

FOR PREMISES IN THE FEDERATED INVESTORS TOWER

THIS FOURTH AMENDMENT TO AGREEMENT OF LEASE (this “Amendment”) is made and entered into the 30th day of June, 2000, by and between LIBERTY CENTER VENTURE, a Pennsylvania general partnership (“Landlord”), and FEDERATED INVESTORS, INC. (“Tenant”).

WITNESSETH

Whereas, Landlord and Tenant are parties to an Agreement of Lease for certain premises in the Federated Investors Tower dated as of the 1st day of January, 1993, as amended by an Amendment dated May 1, 1995, a First Amendment dated November 2, 1995, a Second Amendment dated September 19, 1996, and a Third Amendment dated February 10, 1999 (the “Master Lease”); and

Whereas, Tenant has requested permission to install two (2) signs (the “Signs”) at the Premises; and

Whereas, Landlord is willing to permit the installation of the Signs subject to certain restrictions and approvals as hereinafter set forth; and

NOW THEREFORE, in consideration of the sum of One Dollar ($1.00), other good and valuable consideration and of the agreement of the parties hereinafter set forth, Landlord and Tenant hereby agree as follows:

1. The Signs shall be of the size, style and composition as described in the construction plans (the “Plans”) contained in the proposal submitted by Federated Investors, the Design Alliance Architects, the Kachele Group and Dynamic Design Engineering, Inc. (the “Proposal”) which is incorporated herein by reference.

2. Landlord shall have the right, but not the obligation to review and approve the final plans (“Final Plans”), which approval shall not be unreasonably withheld.

3. The Signs must be installed by a professional installer in strict accordance with the Proposal and the Final Plans at Tenant’s sole cost and expense. Tenant further agrees that maintenance and operation of the sign is at Tenant’s sole cost and expense.

4. Tenant acknowledges that the roof of the Premises contains lighting fixtures which illuminate the existing preformed metal roof. Tenant shall ensure that the installation of the Signs shall not interfere with such illumination and that such lighting shall remain functional and in use for various occasions, including “Light Up Nights”.

5. Before installing the Signs and so long as the Signs are in place, Tenant must maintain public liability insurance acceptable to Landlord in the amount of at least $1,000,000.00 on a combined single limit per occurrence basis for property damage and personal and bodily injury or death which names Landlord and Owner as additional insureds. Tenant must furnish Landlord with a certificate of insurance proving compliance with the foregoing which also states that the insurance will not be changed or terminated without at least 30 days prior written notice to Landlord and Owner. Tenant shall furnish Landlord with replacement certificates before the expiration of the current certificate.

This requirement shall not be construed to require an additional $1,000,000.00 of insurance above the insurance requirements in the Lease, but represents the minimum amount of insurance the Tenant shall carry.

6. Tenant hereby agrees to indemnify and save and hold harmless Landlord, Owner and their respective employees from all loss, cost and expense, including, without limitation, attorney fees arising out of or by reason of Tenant’s installation, use, enjoyment and removal of the Signs whether foreseen or unforeseen. This indemnity is intended to be interpreted as broadly as possible to protect Landlord and Owner and their employees.

7. The Signs shall be installed and operated in accordance with all applicable laws and regulations. Tenant shall be responsible for any interference caused or generated by the Signs. Landlord and Owner shall not be liable in any manner by reason of their approval of the Final Plans or the Proposal and Tenant assumes all such liability and is solely responsible for the Final Plans and Proposal and the compliance of the Final Plans and Proposal with all applicable laws and regulations.

8. Tenant acknowledges that in the event Tenant’s occupancy level decreases below the square footage covered by the Master Lease. Landlord may, at Landlord’s sole option and sole discretion require Tenant to pay commercially reasonable rent for the sign space at a price to be

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mutually agreed upon by the parties acting in good faith at that time or if no agreement is reached, Tenant will remove the sign.

9. Tenant acknowledges and agrees that should the Signs be removed at any time and for any reason, Tenant shall repair all damage caused by the removal and shall restore the Premises to its prior condition before the installation of the Signs, including restoration of the existing preformed metal roof at Tenant’s sole cost and expense.

10. Applicable Law. The laws of the Commonwealth of Pennsylvania shall govern the validity, performance and enforcement of this Amendment. The invalidity or unenforceability of any provision of this Amendment shall not affect or impair any other provision.

11. Interpretation. In the event of any conflict between the provisions of the Master Lease and the provisions of this Amendment, the provisions of this Amendment shall control. As amended hereby, all of the terms, covenants and conditions of the Master Lease as heretofore in effect shall remain in full force and effect after the date hereof and are hereby ratified and confirmed in all respects.

12. Execution. This Amendment may be signed in counterparts, each of which shall be deemed an original, but all of which shall be deemed but one and the same instrument.

IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the date first above written.

LANDLORD
LIBERTY CENTER VENTURE
By:	New Liberty Center Partnership, L.P.
By:	FC Liberty, Inc., General Partner
By:	/s/    R. H. Marques
TENANT
FEDERATED INVESTORS, INC.
By:	/s/    Denis McAuley III
Its:	Vice President

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THIRD AMENDMENT TO AGREEMENT OF LEASE FOR

PREMISES IN THE FEDERATED INVESTORS TOWER

THIS THIRD AMENDMENT TO AGREEMENT OF LEASE (this “Amendment”) is made and entered into the 10th day of February, 1999, by and between LIBERTY CENTER VENTURE, a Pennsylvania general partnership (“Landlord”), and FEDERATED INVESTORS, INC. (“Tenant”).

WHEREAS, Landlord and Tenant are parties to an Agreement of Lease for certain premises in the Federated Investors Tower dated as of the 1st day of January, 1993, as amended by an Amendment dated May 1, 1995, a First Amendment dated November 2, 1995, and a Second Amendment dated September 19, 1996 (the “Master Lease”);

WHEREAS, Landlord and Tenant are also parties to an Agreement of Lease for Premises on the 12th floor of the Federated Investors Tower dated as of the 1st day of February, 1994, as amended by a First Amendment dated November 2, 1995, and a Second Amendment dated September 19, 1996 (the “12th Floor Lease”);

WHEREAS, Section 2.2 of the 12^th Floor Lease provides that Tenant has the right to include the 12^th floor of the Building as part of the Tenant’s “Premises” as leased under the Master Lease;

WHEREAS, Tenant and Landlord have agreed that the 12^th floor became part of the Premises following the expiration of the term of the 12^th Floor Lease on December 31, 1998;

WHEREAS, Section 2.5 of the Master Lease provides that Tenant had the right to reduce the size of the Premises by returning to Landlord up to 53,983 Square Feet constituting all of the 10^th and 11^th floors of the Building and one-half of the 8^th floor of the Building;

WHEREAS, Tenant exercised such right pursuant to the letter dated March 27, 1997 from Tenant to Landlord in which Tenant notified Landlord that it had elected to return the 53,983 Square Feet to Landlord on either December 31, 1998 or December 31, 1999 and that if Tenant desired to continue occupying such space until December 31,1999 it would so inform Landlord no later than December 31, 1997;

WHEREAS, Tenant and Landlord have now agreed that Tenant shall continue to occupy the 10^th and 11^th floors of the Building pursuant to the terms of the Master Lease for the remainder of the Initial Term of the Master Lease, subject to the provisions of this Amendment;

WHEREAS, Tenant and Landlord have agreed that Tenant shall notify Landlord no later than March 31, 1999 of Tenant’s decision regarding its continued occupancy of one-half of the 8^th floor of the Building as set forth herein; and

WHEREAS, Tenant and Landlord desire to enter into this Amendment in order to amend the Master Lease for the purposes of, among other matters, (i) agreeing that the 12^th floor shall become part of the Premises under the Master Lease, (ii) agreeing that the 10^th and 11^th floors of the Building shall remain part of the Premises under the Master Lease; (iii) providing for a new Basic Rent payable by Tenant with respect to the portion of the Premises located on the 10^th, 11^th and 12^th floors of the Building, and (iv) setting forth the parties’ understandings regarding certain allowances to be paid by Landlord to Tenant in connection with the execution and delivery of this Amendment.

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

1. Defined Terms. Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Master Lease.

2. Premises. The Premises leased by Landlord to Tenant pursuant to the Master Lease during the remainder of the Initial Term and any Renewal Terms is hereby increased effective on January 1, 1999 to include the entire 12th floor of the Building containing 20,510 Square Feet and shall continue to include the 10^th and 11^th floors of the Building. The parties acknowledge and agree that beginning on January 1, 1999 Tenant’s Share shall be 66.13% (which percentage includes the 11,279 Square Feet on the 8^th floor of the Building currently occupied by Tenant), and Exhibit C to the Master Lease is hereby revised to change Tenant’s percentage of occupancy from 62.13% to 66.13%.

3. Basic Rent. Notwithstanding the provisions of Section 3.1 (a) of the Master Lease regarding Basic Rent, the parties agree that the Basic Rent payable by Tenant during the remainder of the Initial Term beginning on January 1, 1999 with respect to the 10^th, 11^th and 12^th floors of the Building (containing 63,214 Square Feet in the aggregate) shall be as follows:

(a) For the period beginning January 1, 1999, and ending December 31,2001, Tenant shall pay to Landlord Basic Rent in the amount of Twenty and 50/100 Dollars per Square Foot per year, being the sum of One Million Two Hundred Ninety Five Thousand Eight Hundred Eighty Seven and 00/100 Dollars ($1,295,887.00) per calendar year, payable at the rate of One Hundred Seven Thousand Nine Hundred Ninety and 58/100 Dollars ($107,990.58) per month;

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(b) For the period beginning January 1, 2002, and ending December 31, 2005, Tenant shall pay to Landlord Basic Rent in the amount of Twenty-Two Dollars per Square Foot per year, being the sum of One Million Three Hundred Ninety Thousand Seven Hundred Eight and 00/100 Dollars ($1,390,708.00) per calendar year, payable at the rate of One Hundred Fifteen Thousand Eight Hundred Ninety Two and 33/100 Dollars ($115,892.33) per month; and

(c) For the period beginning January 1, 2006, and ending December 31, 2007, Tenant shall pay to Landlord Basic Rent in the amount of Twenty-Three and 50/100 Dollars per Square Foot per year, being the sum of One Million Four Hundred Eighty Five Thousand Five Hundred Twenty Nine and 00/100 Dollars ($1,485,529.00) per calendar year, payable at the rate of One Hundred Twenty Three Thousand Seven Hundred Ninety Four and 08/100 Dollars ($123,794.08) per month.

4. Tenant Improvement Allowances.

(a) Existing Allowances. Landlord acknowledges and agrees that following the execution and delivery of this Amendment by the parties hereto Landlord shall pay to Tenant in cash One Million Four Hundred Fifty-Nine Thousand, Eight Hundred Twenty-Nine Dollars ($1,459,829) within thirty days following Landlord’s receipt of Tenant’s written request therefor representing the sum of the following tenant improvement allowances payable to Tenant in connection with improvement and refurbishment work completed by Tenant in the Premises prior to the date of this Amendment:

(1) The tenant improvement allowance in the amount of $1,116,710 applicable to the 10^th and 11^th floors pursuant to Section 6.2 (a) of the Master Lease (equal to $26.15 multiplied by 42,704 Square Feet);

(2) The tenant improvement allowance in the amount of $96,999 pursuant to Section 6.2(c) of the Master Lease with respect to 11,279 Square Feet on the 8^th floor of the Building (equal to $26.15 multiplied by 11,279 Square Feet multiplied by 24/73); and

(3) The tenant refurbishment allowance in the amount of $246,120 applicable to the 12^th floor pursuant to Article 40 of the 12^th Floor Lease (equal to $12.00 multiplied by 20,510 Square Feet).

(b) Future Refurbishment Allowance. With respect to Section 6.4 of the Master Lease, the parties agree that Tenant shall be entitled to receive a Refurbishment Allowance (as such term is defined in Section 6.4 of the Master Lease) on January 1, 2009 with respect to the 12^th floor if Tenant has exercised its first Renewal Option. Exhibit I to the Master Lease is hereby deleted, and Exhibit I attached hereto is hereby substituted into the Master Lease in its place. The parties acknowledge and agree that the only changes on the attached revised Exhibit I from the original Exhibit I attached to the Master Lease are the inclusion of the Floor 12

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column and the allowance of $259,452 payable on January 1, 2009 with respect to the 12^th floor. The amounts of the foregoing Refurbishment Allowance applicable to the 12^th floor shall be determined by reference to Section 6.4 of the Master Lease and the revised Exhibit I attached hereto.

5. Eighth Floor. Tenant agrees that it shall notify Landlord in writing no later than March 31, 1999 (the “Notification Date”) whether Tenant: (i) shall vacate the 8^th floor premises no later than the date set forth in such notice, which date shall not be earlier than December 31,1999 and shall be prior to December 31, 2007; or (ii) desires to include the 8^th floor premises as part of the Premises under the Master Lease.

(a) Vacation No Earlier than December 31,1999. If Tenant notifies Landlord on or prior to the Notification Date that it desires to occupy the 8^th floor premises until a date set forth in such notice (the “Termination Date”) which shall not be earlier than December 31, 1999 and shall be prior to December 31, 2007, then the parties shall negotiate in good faith regarding the terms and conditions, including Basic Rent and tenant improvement allowance, applicable to such occupancy by Tenant until the Termination Date and shall set forth their understanding in a written instrument signed by each party no later than April 30, 1999.

(b) Inclusion into Master Lease. If Tenant notifies Landlord on or prior to the Notification Date that it desires to include the 8^th floor premises as part of the Premises under the Master Lease, then the parties shall prepare, execute and deliver a further amendment to the Master Lease in which the parties shall agree that such space shall become part of the Premises under the Master Lease at an annual rental rate per Square Foot equal to the Square Foot annual rental rates set forth in Section 3 of this Agreement. Such amendment shall provide that the new rental rate shall become effective as of January 1, 1999, and any amounts owed by Landlord to Tenant as a result of Basic Rent payments made by Tenant to Landlord for periods subsequent to January 1, 1999 at the existing Basic Rent rate under the Master Lease shall be credited to Tenant against the next payment of Basic Rent due under the Master Lease following the execution and delivery by the parties of the further amendment to the Master Lease.

6. Applicable Law. The laws of the Commonwealth of Pennsylvania shall govern the validity, performance and enforcement of this Amendment. The invalidity or unenforceability of any provision of this Amendment shall not affect or impair any other provision.

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7. Interpretation. In the event of any conflict between the provisions of the Master Lease and the provisions of this Amendment, the provisions of this Amendment shall control. As amended hereby, all of the terms, covenants and conditions of the Master Lease as heretofore in effect shall remain in full force and effect after the date hereof and are hereby ratified and confirmed in all respects.

8. Execution. This Amendment may be signed in counterparts, each of which shall be deemed an original, but all of which shall be deemed but one and the same instrument.

IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto as of the date first above written.

ATTEST:		FEDERATED INVESTORS, INC.
By:	/s/    Maroon L. DeVito	By:	/s/    Denis McAuley III
Its:	Vice President	Its:	Vice President
		LIBERTY CENTER VENTURE
		By:	New Liberty Center Partnership, General Partner
			By:	F. C. Liberty, Inc., General Partner
				By:	/s/    R. H. Marques
				Its:	Vice President

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SECOND AMENDMENT TO AGREEMENT OF LEASE FOR

PREMISES IN THE FEDERATED INVESTORS TOWER A

THIS SECOND AMENDMENT TO AGREEMENT OF LEASE FOR PREMISES IN THE FEDERATED INVESTORS TOWER is made and entered into as of the 19th day of September, 1996, by and between:

LIBERTY CENTER VENTURE, a Pennsylvania General Partnership (“Landlord”);

AND

FEDERATED INVESTORS, INC. (“Tenant”).

WHEREAS, Landlord and Tenant entered into an Agreement of Lease for Premises in The Federated Investors Tower (the “Lease”) dated as of the 1st day of January, 1993; and

WHEREAS, Landlord and Tenant executed a First Amendment to Agreement of Lease for Premises in The Federated Investors Tower (the “First Amendment”) dated as of the 2nd day of November, 1995; and

WHEREAS, Landlord and Tenant now wish to further amend the Lease under the following terms and conditions;

NOW THEREFORE, Landlord and Tenant, in consideration of the mutual covenants herein contained and intending to be legally bound, agree as follows:

I Term. Notwithstanding anything contained in the Lease and in the First Amendment, Landlord and Tenant agree that the Term of the Lease for the Reduction Space, as that term is defined in the First Amendment, shall end on December 31, 1998, except as hereinafter stated.

II Option to Extend Term. Tenant shall have an option, exercisable by notice in writing to Landlord on or before December 31, 1997, to extend the Term of the Lease for the Reduction Space, so that the said Term will end on December 31, 1999.

III Access to Premises. Article 10 of the Lease is hereby amended so as to grant to Landlord the right of access to the

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Premises for the purpose of showing the Premises to prospective tenants at any time after execution hereof, without being limited to such access during the final twelve (12) months of the Lease Term.

IV Republication of Lease and First Amendment. All terms and conditions of the Lease and the First Amendment not inconsistent herewith shall remain in full force and effect.

IN WITNESS WHEREOF, this instrument has been duly executed by the parties hereto as of the date first above written.

TENANT:	FEDERATED INVESTORS, INC.
	By:	/s/    John W. McGonigle
	Its:
	ATTEST:
	By:	/s/    John H. Cummings, Jr.
	Its:	Operations and Special Projects Manager

LANDLORD:	LIBERTY CENTER VENTURE
	By:	New Liberty Center Partnership, General Partner
	By:	F. C. Liberty, Inc., General Partner
		By:	/s/    R. H. Marques
	Its:	V. P. Fin. & Admin.

Title

3

SECOND AMENDMENT TO AGREEMENT OF LEASE FOR

PREMISES IN THE FEDERATED INVESTORS TOWER B

THIS SECOND AMENDMENT TO AGREEMENT OF LEASE FOR PREMISES IN THE FEDERATED INVESTORS TOWER is made and entered into as of the 19^th day of September, 1996, by and between:

LIBERTY CENTER VENTURE, a Pennsylvania General Partnership (“Landlord”);

AND

FEDERATED INVESTORS, INC. (“Tenant”).

WHEREAS, Landlord and Tenant entered into a certain Agreement of Lease (the “Lease”) for Premises in The Federated Investors Tower (the “Building”) dated as of the 1st day of January, 1993; and

WHEREAS, in the Lease, the term “Premises” is defined as the actual space leased by Tenant from time to time under this Lease; and

WHEREAS, Landlord and Tenant have subsequently amended the Lease by First Amendment to Lease dated November 2nd, 1995; and

WHEREAS, pursuant to previous documentation superceded by the Lease, Landlord is leasing to Tenant certain premises (the “Additional Premises”) consisting of 2,380 rentable square feet located on the seventh (7th) floor of the Building; and

WHEREAS, Landlord and Tenant now wish to further amend the Lease.

NOW THEREFORE, Landlord and Tenant, in consideration of the mutual covenants herein contained and intending to be legally bound, agree as follows:

I. Renewal Term. The Term of the Lease for the Additional Premises is hereby extended for an additional three (3) years (the “Renewal Term”) and shall terminate on December 31, 1999, unless sooner terminated as otherwise provided in the Lease, as amended.

2

II. Basic Rent. The Basic Rent for the Renewal Term from January 1, 1997 to December 31, 1999 shall be EIGHTEEN DOLLARS AND NO CENTS ($18.00) per square foot of rentable area or FORTY TWO THOUSAND EIGHT HUNDRED FORTY AND NO ONE HUNDREDTHS DOLLARS ($42,840.00) per year, payable in equal monthly installments of THREE THOUSAND FIVE HUNDRED SEVENTY AND NO ONE HUNDREDTHS DOLLARS ($3,570.00) per month.

III. Option to Renew. Tenant shall have the right to renew the Lease for the Additional Premises for an additional renewal term of five (5) years commencing on January 1, 2000, by giving Landlord written notice to such effect by January 1, 1999, provided that the Lease, as amended, is in full force and effect and Tenant is not in default thereunder both at the time of giving such notice and as of the commencement of the new renewal term. In the event that the option to renew described herein is exercised, the Basic Rent for the additional renewal term shall be an amount per square foot equal to the amount per square foot then prevailing under the Lease.

IV. As is; No Construction Improvements. Tenant shall lease the Additional Premises in an “as is” condition and Landlord shall not be required to construct any improvements for Tenant during the Renewal Term or during any additional renewal term.

3

V. Base Year. For purposes of any and all calculations which are made with reference to “Base Year”, the Base Year shall continue to be the year 1993.

VII. Republication of Lease. All terms and conditions of the Lease, as amended, not inconsistent herewith shall remain in full force and effect through and during the Renewal Term and shall be applicable to the Additional Premises as if the Additional Premises were specifically listed in Exhibit Al of the Lease.

IN WITNESS WHEREOF, this instrument has been duly executed by the parties hereto as of the date first above written.

TENANT:	FEDERATED INVESTORS, INC.
	By:	/s/    John W. McGonigle
	Its:
	ATTEST:
	By:	/s/    John H. Cummings, Jr.
	Its:	Operations and Special Projects Manager

LANDLORD:	LIBERTY CENTER VENTURE
	By:	New Liberty Center Partnership, General Partner
	By:	F. C. Liberty, Inc., General Partner
		By:	/s/    R. H. Marques
	Its:	V. P. Fin. & Admin.

Title

4

EX-10.42

Exhibit 10.42

AMENDMENT NO. 3

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS AMENDMENT NO. 3 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”) is dated as of January 16, 2004, and is by and among FEDERATED INVESTORS, INC., a Pennsylvania corporation (the “Borrower”), the BANKS set forth herein (collectively, the “Banks”), and PNC BANK, NATIONAL ASSOCIATION, as agent for the Banks (the “Agent”).

WHEREAS, the Borrower, the Banks and the Agent are parties to that certain Second Amended and Restated Credit Agreement dated as of January 22, 2002, as amended by Amendment No. 1 to Second Amended and Restated Credit Agreement dated as of April 8, 2002 and Amendment No. 2 to Second Amended and Restated Credit Agreement dated as of January 20, 2003 (the “Credit Agreement”);

WHEREAS, the Borrower, the Banks and the Agent wish to amend the Credit Agreement as set forth herein.

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

1. Definitions.

Capitalized terms used herein unless otherwise defined herein shall have the meanings ascribed to them in the Credit Agreement as amended by this Amendment.

2. Amendment of Credit Agreement.

(a) Section 1.1 of the Credit Agreement is hereby amended by inserting the following new definitions in alphabetical order:

CBOs shall mean collateralized bond obligation structures for which any of the Companies provides investment advice.

FIN 46 shall mean the Financial Accounting Standards Board Interpretation No. 46 “Consolidation of Variable Interest Entities.”

(b) The definitions of “Consolidated Subsidiaries” and “Revolving Credit Expiration Date” in Section 1.1 of the Credit Agreement are hereby amended and restated as follows:

Consolidated Subsidiaries shall mean and include those subsidiaries or other entities whose accounts are consolidated with the accounts of the Borrower in accordance with GAAP provided that for the purpose of calculating the financial ratios in Sections 8.2(a)-(c): (i) the impact of the sale or assignment of any Designated Assets, in

either case pursuant to the Master Agreement, the Purchase and Sale Agreement or any similar agreement or program and in accordance with Section 8.2(k)(i), shall be excluded and (ii) to the extent that FIN 46 requires the consolidation of the accounts of the CBOs with the accounts of the Borrower, the impact of FIN 46 shall be excluded.

Revolving Credit Expiration Date shall mean January 14, 2005 (which is the date 364 days after the effective date of Amendment No. 3 to Second Amended and Restated Credit Agreement among the Borrower, the Banks and the Agent) or such later date as determined pursuant to Section 2.13(a).

(c) Section 8.3(b) [Quarterly Financial Statements] and Section 8.3(c) [Annual Financial Statements] of the Credit Agreement are both hereby amended by inserting the following new sentence immediately following the end of the first sentence of such sections:

To the extent that FIN 46 requires that the accounts of the CBOs be consolidated with the accounts of the Borrower in accordance with GAAP, in addition to and at the same time as the foregoing financial statements are required to be provided, the Borrower shall provide segment level reporting in the same format as the foregoing financial statements, one for current operations (which shall exclude the impact of the CBOs) and one for the CBOs.

3. Conditions of Effectiveness of Amendment of Credit Agreement. The effectiveness of this Amendment of the Credit Agreement is expressly conditioned upon satisfaction of each of the following conditions precedent on the date hereof:

(a) Representations and Warranties; No Defaults. The representations and warranties of the Borrower contained in Article VI of the Credit Agreement shall be true and accurate on the date hereof with the same effect as though such representations and warranties had been made on and as of such date (except representations and warranties which relate solely to an earlier date or time, which representations and warranties shall be true and correct on and as of the specific dates or times referred to therein), and the Borrower shall have performed and complied with all covenants and conditions under the Senior Loan Documents and hereof; and no Event of Default or Potential Default under the Credit Agreement and the other Senior Loan Documents shall have occurred and be continuing or shall exist.

(b) Authorization and Incumbency. There shall be delivered to the Agent for the benefit of each Bank a certificate, dated as of the date hereof, and signed by the Secretary or an Assistant Secretary of the Borrower, certifying as appropriate as to:

(i) all action taken by the Borrower in connection with this Amendment and the other Senior Loan Documents; and

(ii) the names of the officer or officers authorized to sign this Amendment and the other documents executed and delivered in connection herewith and described in this Section 3 and the true signatures of such officer or officers.

2

(c) Acknowledgment. There shall be delivered to the Agent for the benefit of each Bank the Confirmation in the form attached hereto as Exhibit 1 hereto executed by each of the Loan Parties (other than the Borrower).

(d) Legal Details; Counterparts. All legal details and proceedings in connection with the transactions contemplated by this Amendment shall be in form and substance satisfactory to the Agent. The Agent shall have received from the Borrower and each of the Banks an executed original of this Amendment. Each of this Amendment and the Confirmation may be executed by the parties hereto or thereto in any number of separate counterparts, each of which when taken together shall constitute one and the same instrument.

(e) Amendment Fee. The Borrower shall pay to each of the Banks which executes this Amendment on or before January 14, 2004 in immediately available funds an amendment fee equal to five (5) basis points of each Bank’s Revolving Credit Commitment, determined as of the date of this Amendment.

4. Fees and Expenses. The Borrower hereby agrees to reimburse the Agent and the Banks on demand for all legal costs, expenses and disbursements relating to this Amendment which are payable by the Borrower as provided in Sections 10.5 and 11.3 of the Credit Agreement.

5. Force and Effect. Except as expressly modified by this Amendment, the Credit Agreement and the other Senior Loan Documents are hereby ratified and confirmed and shall remain in full force and effect after the date hereof.

6. Governing Law. This Amendment shall be deemed to be a contract under the laws of the Commonwealth of Pennsylvania and for all purposes shall be governed by and construed and enforced in accordance with the internal laws of the Commonwealth of Pennsylvania without regard to its conflict of laws principles.

[SIGNATURE PAGES FOLLOW]

3

SIGNATURE PAGE 1 OF 10 TO AMENDMENT NO. 3

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly authorized, have executed this Amendment No. 3 to Second Amended and Restated Credit Agreement as of the date first above written.

FEDERATED INVESTORS, INC.
By:	/s/    DENIS MCAULEY, III
Name:    Denis McAuley, III
Title:    Vice President

SIGNATURE PAGE 2 OF 10 TO AMENDMENT NO. 3

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

PNC BANK, NATIONAL ASSOCIATION individually and as Agent
By:	/S/ ENRICO DELLA CORNA
Name:  Enrico Della Corna
Title:    Vice President

SIGNATURE PAGE 3 OF 10 TO AMENDMENT NO. 3
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BANK OF AMERICA, NATIONAL ASSOCIATION
By:	/S/ SEAN CASSIDY
Name:  Sean Cassidy
Title:    Principal

SIGNATURE PAGE 4 OF 10 TO AMENDMENT NO. 3
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

US BANK, N.A.
By:	/S/ DAVID J. DANNEMILLER
Name:  David J. Dannemiller
Title:    Vice President

SIGNATURE PAGE 5 OF 10 TO AMENDMENT NO. 3

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

STATE STREET BANK AND TRUST COMPANY
By:	/S/ JOHN T. DALEY
Name:  John T. Daley
Title:    Vice President

SIGNATURE PAGE 6 OF 10 TO AMENDMENT NO. 3
TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

BANKONE, NA (Main Office Chicago)
By:	/S/ ISOLDE O’HANLON
Name:  Isolde O’Hanlon
Title:    Managing Director

SIGNATURE PAGE 7 OF 10 TO AMENDMENT NO. 3

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

CITIBANK, N.A.
By:	/S/ MATTHEW NICHOLLS
Name:  Matthew Nicholls
Title:    Director

SIGNATURE PAGE 8 OF 10 TO AMENDMENT NO. 3

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

FLEET NATIONAL BANK
By:	/S/ LAWRENCE DAVIS
Name:  Lawrence Davis
Title:    Portfolio Manager

SIGNATURE PAGE 9 OF 10 TO AMENDMENT NO. 3

TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

FIFTH THIRD BANK
By:	/S/ JOHN L. HAYES, IV
Name:  John L. Hayes, IV
Title:    Vice President

SIGNATURE PAGE 10 OF 10 TO AMENDMENT NO. 3 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT

CITIZENS BANK OF PENNSYLVANIA
By:	/S/ DWAYNE FINNEY
Name:  Dwayne Finney
Title:    Vice President

Exhibit 1

Form of

CONFIRMATION

Reference is hereby made to that certain Second Amended and Restated Credit Agreement by and between FEDERATED INVESTORS, INC., the BANKS set forth therein, and PNC BANK, NATIONAL ASSOCIATION, as Agent for the Banks, dated as of January 22, 2002, as amended by Amendment No. 1 to Second Amended and Restated Credit Agreement dated as of April 8, 2002 and Amendment No. 2 to Second Amended and Restated Credit Agreement dated as of January 20, 2003 (the “Credit Agreement”). All terms used herein unless otherwise defined herein shall have the meanings given to them in the Credit Agreement.

On the date hereof, the Borrower, the Banks and the Agent are entering into that certain Amendment No. 3 to Second Amended and Restated Credit Agreement (the “Amendment”), a copy of which has been provided to the undersigned. This Confirmation is delivered to the Bank pursuant to Section 3(c) of the Amendment.

Pursuant to the Credit Agreement, (i) the Guarantors are party to that certain Continuing Agreement of Guaranty and Suretyship dated as of January 22, 2002 in favor of the Agent for the benefit of the Banks (the “Guaranty Agreement”) and (ii) the Borrower and its Subsidiaries are party to that certain Intercompany Subordination Agreement dated as of January 22, 2002 in favor of the Agent for the benefit of the Banks (the “Intercompany Subordination Agreement”). This Confirmation will confirm to the Agent and the Banks that the undersigned Guarantors and Subsidiaries of the Borrower have read and understand the Amendment which provides for, subject to certain conditions set forth in the Credit Agreement, the extension of the Revolving Credit Expiration Date and the modification of certain covenants.

The Guarantors hereby ratify and confirm the Guaranty Agreement. The Subsidiaries of the Borrower hereby ratify and confirm the Intercompany Subordination Agreement.

This Confirmation is dated as of January 16, 2004.

[SIGNATURE PAGES FOLLOW]

[SIGNATURE PAGE 1 OF 6 OF CONFIRMATION]

IN WITNESS WHEREOF, intending to be legally bound hereby, the undersigned, by their duly authorized officers, have executed this Confirmation as of the date set forth above.

EDGEWOOD SERVICES, INC.
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Treasurer

FEDERATED ADMINISTRATIVE SERVICES
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Assistant Treasurer

FEDERATED ADMINISTRATIVE SERVICES, INC.
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Assistant Treasurer

FEDERATED INVESTMENT MANAGEMENT COMPANY
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Assistant Treasurer

[SIGNATURE PAGE 2 OF 6 OF CONFIRMATION]

FEDERATED INVESTORS TRUST COMPANY
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Assistant Treasurer

FEDERATED FINANCIAL SERVICES, INC.
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Treasurer

FEDERATED GLOBAL INVESTMENT MANAGEMENT CORP.
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Assistant Treasurer

FEDERATED INTERNATIONAL MANAGEMENT LIMITED
By:	/s/    J. CHRISTOPHER DONAHUE
	J. Christopher Donahue Title: Director

Federated Investors, Inc
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Vice President

[SIGNATURE PAGE 3 OF 6 OF CONFIRMATION]

FEDERATED INVESTORS MANAGEMENT COMPANY
By:	/s/    DENIS MCAULEY, III
Name:	Denis McAuley, III
Title:	Senior Vice President
FEDERATED INVESTMENT COUNSELING
By:	/s/    DENIS MCAULEY, III
Name:	Denis McAuley, III
Title:	Assistant Treasurer
FEDERATED SECURITIES CORP.
By:	/s/    DENIS MCAULEY, III
Name:	Denis McAuley, III
Title:	Treasurer
FEDERATED SERVICES COMPANY
By:	/s/    DENIS MCAULEY, III
Name:	Denis McAuley, III
Title:	Assistant Treasurer
FEDERATED SHAREHOLDER SERVICES COMPANY
By:	/s/    DENIS MCAULEY, III
Name:	Denis McAuley, III
Title:	Assistant Treasurer

[SIGNATURE PAGE 4 OF 6 OF CONFIRMATION]

FII HOLDINGS, INC.
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Treasurer

PASSPORT RESEARCH, LTD
By:	/s/    DENIS MCAULEY, III
	Name: Denis McAuley, III Title: Assistant Treasurer

FEDERATED INTERNATIONAL HOLDINGS BV
By:	/s/    J. CHRISTOPHER DONAHUE
	Name: J. Christopher Donahue Title: Director

FEDERATED INTERNATIONAL—EUROPE GMBH
By:	/s/    J. CHRISTOPHER DONAHUE
	Name: J. Christopher Donahue Title: Director

[SIGNATURE PAGE 5 OF 6 OF CONFIRMATION]

FEDERATED ASSET MANAGEMENT GMBH
By:	/s/    J. CHRISTOPHER DONAHUE
Name:	J. Christopher Donahue
Title:	Supervisory Board Member
FEDERATED PRIVATE ASSET MANAGEMENT, INC.
By:	/s/    DENIS MCAULEY, III
Name:	Denis McAuley, III
Title:	Assistant Treasurer
INVESTLINK TECHNOLOGIES, INC.
By:	/s/    DENIS MCAULEY, III
Name:	Denis McAuley, III
Title:	Assistant Treasurer
RETIREMENT PLAN SERVICES COMPANY OF AMERICA
By:	/s/    DENIS MCAULEY, III
Name:	Denis McAuley, III
Title:	Assistant Treasurer
FEDERATED ADVISORY SERVICES COMPANY
By:	/s/    THOMAS R. DONAHUE
Name:	Thomas R. Donahue
Title:	Treasurer

[SIGNATURE PAGE 6 OF 6 OF CONFIRMATION]

FEDERATED EQUITY MANAGEMENT COMPANY OF PENNSYLVANIA
By:	/s/    THOMAS R. DONAHUE
Name:	Thomas R. Donahue
Title:	Treasurer
PASSPORT RESEARCH LTD. II
By:	/s/    THOMAS R. DONAHUE
Name:	Thomas R. Donahue
Title:	Treasurer

EX-13.01

Exhibit 13.01

SELECTED CONSOLIDATED FINANCIAL DATA

(in thousands, except per share data and managed and administered assets)

The selected consolidated financial data below should be read in conjunction with Federated Investors, Inc. and its subsidiaries’ (Federated) Consolidated Financial Statements and Notes. The selected consolidated financial data (except managed and administered assets) of Federated for the five years ended December 31, 2003, have been derived from the audited Consolidated Financial Statements of Federated. See Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements which follow.

Years Ended December 31,	2003		2002		2001		2000		1999
Statement of Income Data
Total revenue1	$	823,248	$	808,753	$	814,697	$	743,620	$	653,792
Operating income1,2,3		312,462		331,630		314,190		271,084		219,375
Income before income taxes1,2,3		299,600		315,714		263,035		242,522		194,881
Net income1,2,3		191,485		203,760		168,447		155,360		124,020
Share Data4
Basic earnings per share	$	1.78	$	1.81	$	1.46	$	1.32	$	0.99
Diluted earnings per share	$	1.71	$	1.74	$	1.40	$	1.27	$	0.96
Book value per share at period end	$	3.64	$	3.03	$	2.06	$	1.26	$	0.97
Cash dividends per share	$	0.2970	$	0.2170	$	0.1750	$	0.1387	$	0.1093
Weighted-average shares outstanding – basic		107,839		112,375		115,012		117,557		125,238
Weighted-average shares outstanding – assuming dilution		112,059		117,304		119,992		122,295		129,086
Balance Sheet Data at Period End
Total assets	$	879,228	$	795,451	$	693,748	$	704,750	$	673,193
Long-term debt—recourse5		542		1,385		0		70,174		84,446
Long-term debt—nonrecourse		327,142		319,328		312,871		323,818		309,741
Total liabilities and minority interest		483,375		454,734		456,651		556,882		554,381
Shareholders’ equity		395,853		340,717		237,097		147,868		118,812
Managed and Administered Assets (in millions)
As of period end:
Managed assets	$	197,917	$	195,353	$	179,687	$	139,584	$	124,820
Administered assets		43,428		34,827		44,684		39,732		41,234
Average for the period:
Managed assets		199,483		189,242		160,593		128,394		117,573
Administered assets		39,513		38,032		41,982		41,966		35,079

1 Revenue and expenses for the years ended December 31, 2001, 2000 and 1999 included certain Class B share distribution- and financing-related income and expenses. In 2002 and 2003, Federated did not recognize such B-share distribution- and financing-related income or expenses. See Note (1)(k) to the Consolidated Financial Statements.

2 Operating expenses for the year ended December 31, 2003 included a $21.1 million pretax charge related to Federated’s internal review regarding past mutual fund trading practices. See Note (20) to the Consolidated Financial Statements for information concerning the review.

3 Beginning January 1, 2002, Federated no longer amortizes goodwill in accordance with the provisions of Statement of Financial Accounting Standards No.142, “Goodwill and Other Intangible Assets” (SFAS 142). See Note (3) to the Consolidated Financial Statements for pro forma information for 2001 that assumes SFAS 142 was adopted as of January 1, 2001.

4 The share data presented as of and for the year ended December 31, 1999 has been restated to reflect the three-for-two stock split paid in 2000.

5 See Note (5) to the Consolidated Financial Statements for information concerning the early retirement of recourse debt in 2001.

18

MANAGEMENT’S DISCUSSION AND ANALYSIS

of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Selected Consolidated Financial Data and the Consolidated Financial Statements appearing elsewhere in this report.

General

Federated Investors, Inc. (together with its subsidiaries, “Federated”) is one of the largest investment management companies in the United States with $197.9 billion in managed assets as of December 31, 2003. The majority of Federated’s revenue is derived from advising and administering Federated mutual funds, separately managed accounts and other Federated-sponsored products, in both domestic and international markets. Federated also derives revenue from administering mutual funds sponsored by third parties and from providing various other mutual fund-related services, including distribution, shareholder, transfer agency, trade execution, trade clearing and retirement plan recordkeeping services (collectively, “Other Services”).

Investment advisory fees, administrative fees and certain fees for Other Services, such as distribution and shareholder service fees, are contract-based fees that are calculated as a percentage of the net assets of the investment portfolios that are managed or administered by Federated. As such, Federated’s revenue is primarily dependent upon factors that affect the value of managed and administered assets including market conditions and the ability to attract and maintain assets. Rates for Federated’s services generally vary by asset type and investment objective and, in certain instances, decline as the average net assets of the individual portfolios exceed certain threshold levels. Generally, rates charged for services provided to equity products are higher than rates charged on money market and fixed-income products. Accordingly, revenue is also dependent upon the relative composition of average assets under management.

Federated pays a significant portion of its distribution and shareholder service fees to financial intermediaries that sell and service Federated-sponsored products. These payments are generally calculated as a percentage of net assets attributable to the party receiving the payment and are recorded on the Consolidated Statements of Income either as reductions to revenue as in the case of certain shareholder service fee payments or as an expense as in the case of distribution fee payments.

Federated’s remaining Other Services fees are based on fixed rates per shareholder account, transaction or retirement plan participant. Revenue relating to these services will vary with changes in the number of shareholder accounts, transactions and plan participants which are impacted by sales and marketing efforts, competitive fund performance, introduction and market reception of new products and acquisitions.

Federated’s most significant operating expenses include compensation and related costs, which represent fixed and variable compensation and related employee benefits, and marketing and distribution costs.

Business Developments

Effective January 1, 2004, Federated will no longer be responsible for providing accounting services to the Federated-sponsored funds. Rather, the funds began contracting directly with an independent third-party provider of portfolio accounting services. As a result, beginning in 2004, Federated will no longer recognize revenue or third-party expenses in the Consolidated Statements of Income for portfolio accounting services provided to the Federated-sponsored funds. Federated’s revenue in 2003, 2002 and 2001 included $16.6 million, $16.3 million and $15.3 million, respectively, for these portfolio accounting services. In addition, on February 3, 2004, Federated announced its intent to outsource its transfer agency function to an independent third-party provider of these services by June 30, 2004. As negotiations are in the preliminary stages, management cannot reasonably estimate the total impact this transaction will have on Federated’s results of operations or financial condition. However, it is likely that upon completion of the outsourcing transaction, Federated will no longer recognize revenue for transfer agency services. Federated’s revenue in 2003, 2002 and 2001 included $27.5 million, $29.8 million and $30.6 million, respectively, for transfer agency services.

In the third quarter 2003, assets of eight mutual funds previously advised by Riggs Investment Advisors, Inc., a subsidiary of Riggs National Corporation, totaling approximately $465 million were acquired by eight Federated-sponsored mutual funds (Riggs Acquisition). This acquisition occurred in connection with an agreement between Federated, Riggs Investment Advisors, Inc., and Riggs Bank N.A. In the second quarter 2002, Federated signed an agreement with FirstMerit Advisors, Inc. and FirstMerit Corporation pursuant to which assets totaling approximately $250 million, previously advised by FirstMerit, were acquired by various Federated funds (FirstMerit Acquisition). In the fourth quarter 2001, assets of three mutual funds previously advised by Rightime Econometrics, Inc., totaling approximately $148 million were acquired by Federated Capital Appreciation Fund in connection with an agreement between Federated, Lincoln Investment Planning, Inc. and Rightime Econometrics, Inc. (Rightime Acquisition). In the second quarter 2001, Federated completed the acquisition of substantially all of the business of Edgemont Asset Management Corporation, the former adviser of The Kaufmann Fund (Edgemont Acquisition).

Federated Investors 2003 Annual Report 19

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

Asset Highlights

Managed and Administered Assets at Period End

in millions as of December 31,	2003		2002		Percent Change
Managed Assets
By Asset Type
Money market	$	142,773	$	150,745	(5	)%
Fixed-income		29,517		26,541	11	%
Equity		25,627		18,067	42	%
Total managed assets	$	197,917	$	195,353	1	%
By Product Type
Mutual Funds:
Money market	$	128,878	$	136,374	(5	)%
Fixed-income		24,004		22,169	8	%
Equity		22,817		16,240	40	%
Total mutual fund assets		175,699		174,783	1	%
Separate Accounts:
Money market		13,895		14,371	(3	)%
Fixed-income		5,513		4,372	26	%
Equity		2,810		1,827	54	%
Total separate account assets		22,218		20,570	8	%
Total managed assets	$	197,917	$	195,353	1	%
Administered Assets	$	43,428	$	34,827	25	%

Average Managed and Administered Assets

in millions for the years ended December 31,	2003		2002		2001		2003 vs. 2002		2002 vs. 2001
Average Managed Assets
By Asset Type
Money market	$	149,703	$	145,288	$	118,622	3	%	22	%
Fixed-income		28,931		23,673		19,466	22	%	22	%
Equity		20,849		20,281		22,505	3	%	(10	)%
Total average managed assets	$	199,483	$	189,242	$	160,593	5	%	18	%
By Product Type
Mutual Funds:
Money market	$	134,413	$	135,506	$	117,784	(1	)%	15	%
Fixed-income		23,869		19,773		15,859	21	%	25	%
Equity		18,702		18,483		20,682	1	%	(11	)%
Total average mutual fund assets		176,984		173,762		154,325	2	%	13	%
Separate Accounts:
Money market		15,290		9,782		838	56	%	1,067	%
Fixed-income		5,062		3,900		3,607	30	%	8	%
Equity		2,147		1,798		1,823	19	%	(1	)%
Total average separate account assets		22,499		15,480		6,268	45	%	147	%
Total average managed assets	$	199,483	$	189,242	$	160,593	5	%	18	%
Average Administered Assets	$	39,513	$	38,032	$	41,982	4	%	(9	)%

20

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

Changes in Federated’s average asset mix year over year have a direct impact on Federated’s total revenue due to the difference in the fees per invested dollar earned on each asset type. Equity products generally have a higher management fee rate than fixed-income or money market products. The following table presents the relative composition of average managed assets and the percent of total revenue derived from each asset type over the last three years:

	Percentage of Total Average Managed Assets						Percent of Total Revenue
	2003		2002		2001		2003		2002		2001
Money market assets	75	%	77	%	74	%	47	%	50	%	44	%
Fixed-income assets	15	%	12	%	12	%	20	%	17	%	17	%
Equity assets	10	%	11	%	14	%	27	%	27	%	33	%
Other activities	—		—		—		6	%	6	%	6	%

Federated grew total and average assets in 2003. Period-end managed assets increased slightly over 2002 period-end managed assets as a result of significant growth in total equity assets at a rate of 42% for the year. Equity assets benefited from improved market conditions and strong net sales during the year. Strong fixed-income asset sales in the first half of 2003 also contributed to overall growth in assets in 2003. Money market assets declined during the year as the rate advantage from the Federal Reserve Bank easings in late 2002 and in the first half of 2003 dissipated and as equity markets improved during the second half of 2003. Average managed assets grew 5% in 2003 due in large part to significant growth in fixed-income assets during the latter half of 2002 and the first half of 2003. Average equity assets also grew 3% in 2003 primarily as a result of market appreciation and to a lesser extent, positive net sales in equity fund assets during 2003. Money market average assets grew 3% in 2003 and ended the year with an average of $149.7 billion in assets.

Federated grew total and average managed assets in 2002. Period-end managed assets increased 9% in 2002 and average managed assets grew 18% in 2002. Net sales of fixed-income fund assets grew 43% in 2002. This growth was reflective of a shift toward short-term bond funds during the year as interest rates and yields on money market funds continued to fall. Money market average assets grew 22% in 2002 and ended the year with an average of more than $145 billion in assets. This strong growth included the addition in the second quarter of 2002 of $13.2 billion in money market assets for TexPool, Texas’ local government investment pool. Average equity assets declined in 2002 primarily as a result of market depreciation, although net equity sales were positive for 2002.

Components of Changes in Equity and Fixed-Income Fund Managed Assets

in millions for the years ended December 31,	2003			2002			Percent Change
Equity Funds
Beginning assets	$	16,240		$	20,760		(22	)%
Sales		6,320			5,817		9	%
Redemptions		(5,208	)		(5,770	)	(10	)%
Net sales		1,112			47		2,266	%
Net exchanges		298			(191	)	256	%
Acquisition related		47			41		15	%
Other1		5,120			(4,417	)	216	%
Ending assets	$	22,817		$	16,240		40	%
Fixed-Income Funds
Beginning assets	$	22,169		$	17,378		28	%
Sales		14,206			14,701		(3	)%
Redemptions		(13,134	)		(10,771	)	22	%
Net sales		1,072			3,930		(73	)%
Net exchanges		(362	)		188		(293	)%
Acquisition related		118			0		N/A
Other1		1,007			673		50	%
Ending assets	$	24,004		$	22,169		8	%

1 Includes changes in the market value of securities held by the funds, reinvested dividends and distributions and net investment income.

Federated’s investment products are primarily distributed in four markets. These markets and the relative percentage of managed assets at December 31, 2003 attributable to such markets are as follows: trust market (49%), broker/dealer market (24%), institutional market (15%) and international market (1%).

Federated Investors 2003 Annual Report 21

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

Results of Operations

Net Income. The following table sets forth highlights of Federated’s operations for the three years ended December 31:

in millions, except per share data	2003		2002		2001		2003 vs. 2002		2002 vs. 2001
Net income	$	191.5	$	203.8	$	168.4	(6	)%	21	%
Diluted earnings per share	$	1.71	$	1.74	$	1.40	(2	)%	24	%
Weighted-average outstanding diluted shares		112.1		117.3		120.0	(4	)%	(2	)%

Net income decreased by 6% in 2003 as compared to 2002 primarily as a result of increased operating expenses partially offset by increased revenue. Operating expenses in 2003 were higher than in the prior year as a result of the inclusion of a $21.1 million pretax charge relating to costs associated with Federated’s internal review regarding past mutual fund trading practices ($13.5 million) as well as the establishment of a restoration fund ($7.6 million) (for more information, see the section entitled “Contractual Obligations and Contingent Liabilities – Restoration Fund” herein). Diluted earnings per share decreased by 2% in 2003 as compared to 2002. Stock repurchases in 2003 resulted in lower weighted-average diluted shares outstanding which helped to offset the impact of decreased net income on diluted earnings per share for 2003.

Net income and diluted earnings per share increased 21% and 24%, respectively, in 2002 as compared to 2001. The increases are primarily the result of improved operating margins and reduced nonoperating expenses in 2002 as compared to the prior year.

B-Share Sales Commission Funding Arrangements. Since 1997, Federated has funded the payment of commissions on the sale of Class B shares of Federated-sponsored mutual funds by selling its right to future cash flow streams associated with the B-share deferred sales commissions to independent third parties. During this period, these funding arrangements were accounted for as financings or sales based on the terms of the arrangements. In December 2003, after discussions with the staff at the Securities and Exchange Commission, Federated recorded deferred sales commissions and nonrecourse debt in the Consolidated Balance Sheets as of December 31, 2003, 2002 and 2001 to reflect financing accounting treatment consistently for all such funding arrangements. The Consolidated Statement of Income for 2001 reflects financing treatment and thus includes B-share distribution-related revenue of $48.1 million, amortization expense of $26.3 million and nonrecourse debt expense of $19.1 million. Federated previously applied sale accounting treatment to account for the sale of distribution fees (including CDSCs) in 2003 and 2002. No adjustments were made to the Consolidated Statements of Income for 2003 or 2002 to reflect financing accounting based on materiality. For purposes of evaluating trends in the company’s operating results, management generally excludes the impact of these income and expense items. See Note (6) to the Consolidated Financial Statements for more information regarding Federated’s accounting for B-share funding arrangements.

Revenue. The following table sets forth components of total revenue for the three years ended December 31:

in millions	2003		2002		2001		2003 vs. 2002		2002 vs. 2001
Revenue from managed assets
Investment advisory fees, net	$	528.3	$	516.4	$	482.2	2	%	7	%
Administrative service fees, net		129.6		127.9		113.8	1	%	12	%
B-share-related distribution fees		0		0		48.1	0	%	(100	)%
All other		121.4		119.8		119.5	1	%	0	%
Revenue from managed assets		779.3		764.1		763.6	2	%	0	%
Revenue from sources other than managed assets		43.9		44.7		51.1	(2	)%	(13	)%
Total revenue	$	823.2	$	808.8	$	814.7	2	%	(1	)%

Total revenue increased $14.4 million in 2003 as compared to 2002. The increase is the result of increased revenue from managed assets which reflects significant asset growth in equity and fixed-income products and significant equity product sales in 2003. These increases more than offset the decrease in money market assets. Revenue from managed assets grew year over year in 2003 and 2002, but to a lesser degree than growth in average assets due to a higher composition of money market and fixed-income products.

Total revenue decreased $5.9 million in 2002 as compared to 2001. 2001 revenue included B-share-related distribution fee income as a result of using financing treatment to account for the B-share funding arrangements. Excluding this B-share income, all other revenue for 2002 increased as compared to 2001. The increase reflects asset and sales growth in money market and fixed-income products, partially offset by the impact of decreases in the market value of equity assets.

Revenue from sources other than managed assets decreased $0.8 million in 2003 and $6.4 million in 2002. The decreases were due largely to certain bank customers internalizing administrative services previously provided by Federated, as well as other changes in services provided to bank customers.

22

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

Future revenue may be adversely affected by the recent and ongoing increased scrutiny by regulators and the financial press on fee levels associated with the mutual fund industry.

Operating Expenses. The following table sets forth operating expenses for the three years ended December 31:

in millions	2003		2002		2001		2003 vs. 2002		2002 vs. 2001
Compensation and related	$	182.7	$	177.8	$	173.5	3	%	2	%
Marketing and distribution		156.1		146.2		131.9	7	%	11	%
Amortization of deferred sales commissions		14.9		14.5		43.9	3	%	(67	)%
Amortization of intangible assets		10.5		11.3		17.1	(7	)%	(34	)%
Other		146.6		127.3		134.1	15	%	(5	)%
Total operating expenses	$	510.8	$	477.1	$	500.5	7	%	(5	)%

Total operating expenses for 2003 increased 7% or $33.7 million over 2002. The 7% increase in marketing and distribution expense primarily reflects increases in distribution expenses due to increases in the cost of distributing our products through intermediaries during the year and increased equity and fixed-income assets. Other operating expenses for 2003 included a $21.1 million charge relating to the internal review into past mutual fund trading practices (for more information, see the section entitled “Contractual Obligations and Contingent Liabilities – Restoration Fund” herein). All other operating expenses remained relatively flat year over year.

Total operating expenses for 2002 decreased 5% from 2001. Marketing and distribution expense increased 11% due primarily to increases in the cost of marketing our products to intermediaries during the year and increased assets. 2001 operating expenses included higher amortization expenses as a result of using financing treatment to account for the B-share funding arrangements and the change in accounting for goodwill in 2002. Other operating expenses for 2002 decreased 5% from 2001 due primarily to decreased professional service fees largely as a result of changes in services provided to certain bank customers.

Nonoperating Income (Expenses). Nonoperating income (expenses) for the three years ended December 31 are set forth in the following table:

in millions	2003			2002			2001			Note Reference
Collateralized Bond Obligation (CBO) impairments	$	0		$	(1.8	)	$	(14.1	)	(2)
Performance seed investment losses		0			(0.2	)		(7.5	)	(2)
Extinguishment of recourse debt		0			0			(6.6	)	(5)
B-share distribution-related net expense		0			0			(10.1	)	(1)(k), (6)
All other nonoperating expenses, net		(2.7	)		(3.1	)		(2.0	)
Total nonoperating expenses, net	$	(2.7	)	$	(5.1	)	$	(40.3	)

Federated reported total net nonoperating expenses of $2.7 million for 2003 as compared to $5.1 million for 2002. Of the $2.4 million decline in nonoperating expenses for 2003, $2.0 million related to investment losses recognized in 2002 for other-than-temporary and realized declines in the fair values of certain of Federated’s CBO and performance seed investments. The remaining $0.4 million decrease in nonoperating expenses for 2003 primarily relates to realized losses on the sale of trading securities in 2002, partially offset by lower interest and dividend income in 2003.

Total net nonoperating expenses for 2002 decreased $35.2 million as compared to 2001. Total net nonoperating expenses for 2001 included investment losses in excess of those recognized in 2002 as a result of other-than-temporary and realized declines in the fair values of certain CBO and performance seed investments. 2001 net nonoperating expenses also included a make-whole charge on the early extinguishment of Federated’s recourse debt, higher nonrecourse debt expense related to the use of financing treatment to account for the B-share funding arrangements and a gain on the sale of retained interests in residual cash flows associated with B-share funding arrangements. Excluding these items in 2002 and 2001, all other net nonoperating expenses increased $1.1 million in 2002 as compared to 2001. This fluctuation reflects a decrease in interest and dividend income in 2002 due mainly to lower investment yields, partially offset by lower recourse debt expense in 2002 as a result of the lower level of outstanding debt following the early extinguishment in 2001.

Income Taxes. The income tax provision for 2003, 2002 and 2001 was $108.1 million, $112.0 million and $94.6 million, respectively. The changes in the provision for 2003 as compared to 2002 and 2001 primarily reflect changes in the level of income before income taxes. The effective tax rate was 36.1% for 2003, 35.5% for 2002 and 36.0% for 2001.

Federated Investors 2003 Annual Report 23

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

Liquidity and Capital Resources

At December 31, 2003, liquid assets, consisting of cash and cash equivalents, marketable securities and receivables, totaled $272.3 million as compared to $186.1 million in 2002. The balance at the end of 2003 was higher than the balance at the end of 2002 as a result of cash generated by operations during 2003. Federated also had a B-share funding arrangement with an independent third party and $150.0 million available for borrowings under its credit facility as of December 31, 2003 (see Notes (5) and (6) to the Consolidated Financial Statements).

Operating Activities. Net cash provided by operating activities totaled $248.8 million for 2003 as compared to $215.8 million for 2002. This increase is primarily attributable to the effects of certain cash payments made in 2002 including taxes paid on the sale of retained interests in residual cash flows associated with Class B shares of Federated-sponsored mutual funds.

Investing Activities. In 2003, Federated paid $6.3 million to acquire office-related equipment and to develop internally used software.

Financing Activities. In 2003, Federated used $158.3 million for financing activities. Of this amount, Federated used $120.0 million to repurchase 4.7 million shares of Class B common stock in the open market under the stock repurchase programs. As of December 31, 2003, Federated can repurchase an additional 4.9 million shares through its authorized programs.

Federated paid dividends in 2003 equal to $32.5 million or $0.297 per share. In February 2004, Federated’s board of directors declared a dividend of $0.085 per share that was paid on February 27, 2004.

Stock repurchases and dividend payments are subject to restrictions under the Second Amended and Restated Credit Agreement, as amended on January 16, 2004. These restrictions limit cash payments for additional stock repurchases and dividends to 50% of net income from January 1, 2000 to and including the payment date. After considering earnings through December 31, 2003 Federated, given current debt covenants as disclosed in the Subsequent Events footnote (Note (21) to the Consolidated Financial Statements), has the ability to make additional stock repurchase or dividend payments of more than $213 million.

Contractual Obligations and Contingent Liabilities

Contractual. The following table presents as of December 31, 2003, Federated’s significant fixed and determinable contractual obligations by payment date. The payment amounts represent amounts contractually due to the recipient and do not include any unamortized discounts or other similar carrying value adjustments. Further discussion of the nature of each obligation is included either in the referenced Note to the Consolidated Financial Statements or in a footnote to the table.

	Note Reference	Payments due in
in millions		2004		2005-2006		2007-2008		After 2008		Total
Capital lease obligations	(5)	$	1.2	$	0.6	$	0	$	0	$	1.8
Operating lease obligations	(10)		13.2		24.2		19.2		39.4		96.0
Purchase obligations1			9.6		5.4		1.9		0		16.9
Employment-related commitments2			3.0		1.9		0		0		4.9
Total		$	27.0	$	32.1	$	21.1	$	39.4	$	119.6

1 Federated is a party to various contracts pursuant to which it receives certain services including legal, trade order transmission and recovery services, as well as access to various fund-related information systems and research databases. These contracts contain certain minimum noncancelable payments, cancellation provisions and renewal terms. The contracts expire on various dates through the year 2008. Costs for such services are expensed as incurred.

2 Federated has certain domestic and international employment arrangements pursuant to which Federated is obligated to make minimum compensation payments. These contracts expire on various dates through the year 2006.

Pursuant to various acquisition agreements entered into by Federated in 2001, 2002 and 2003, Federated may be required to make additional payments to the seller in each acquisition contingent upon the occurrence of certain events. In 2001, Federated completed the Edgemont Acquisition. In addition to the upfront purchase price paid at the date of the acquisition, the acquisition agreement provides for additional payments based upon the achievement of specified revenue growth through 2007. Federated could pay an additional $159.2 million between 2004 and 2007 as contingent payments if revenue targets are met, with as much as $79.6 million payable in the second quarter 2004. In addition, pursuant to the terms of the Rightime Acquisition, FirstMerit Acquisition and the Riggs Acquisition, Federated is required to make contingent payments on a periodic basis calculated as a percentage of average assets under management in any Federated fund shareholder account for which the seller is the named broker/dealer of record. In the case of the Rightime Acquisition, the payments occur quarterly and could continue through first quarter 2007. Contingent payments relating to the FirstMerit Acquisition occur on a monthly basis through third quarter 2005. Contingent payments for the Riggs Acquisition occur quarterly and could continue through fourth quarter 2008.

Restoration Fund. In September 2003, Federated received detailed requests for information on shareholder trading activity in Federated-sponsored mutual funds from the Securities and Exchange Commission, the New York State Attorney General and the National Association of Securities Dealers. Federated’s Board of Directors (Board) retained the law firm of Reed Smith LLP to assist

24

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

Federated in responding to these requests and to conduct an internal review of the trading activity matters identified in the requests. The Board established a special investigative committee consisting of three independent directors, Federated’s chief executive officer and its chief legal officer, to oversee the review and make recommendations to the full Board. Attorneys from the law firm of Dickstein Shapiro Morin & Oshinsky, LLP, independent counsel for the Federated mutual funds, participated in the review and reported on its progress to the independent directors of the funds. In November, the Board also retained the law firm of Davis Polk & Wardwell to assist in the review.

The internal review found instances in which Federated personnel improperly permitted frequent trading or improperly accepted orders for fluctuating net asset value funds after the close of the New York Stock Exchange, as more fully detailed in Note (20)(b) to the Consolidated Financial Statements. In response to these findings and to Federated’s offer to remedy any damages to the Federated funds, the independent directors of the Federated funds retained an independent expert to determine the impact on the funds from the improper trading activities identified in the review. Based upon this expert’s findings, Federated established a restoration fund of approximately $7.6 million to compensate for the detrimental impact of the trading activities described above. The independent directors of the funds have not yet determined how to distribute the restoration fund and no government agency has passed on the establishment or amount of the restoration fund.

The Consolidated Financial Statements for the year ended December 31, 2003 reflect pretax charges of approximately $7.6 million for the restoration fund and approximately $13.5 million ($12.4 million of which was recorded in the fourth quarter of 2003) for other expenses related to the review, including expenses incurred by the funds. These amounts do not include fines, penalties or other amounts that may be sought by governmental agencies or through claims asserted in private litigation. In order to estimate the accrual for certain other expenses relating to Federated’s commitment to remedy any damages to the Federated funds, management made assumptions concerning the timing and effort involved to finalize the internal review and distribute the restoration fund. If actual experience differs significantly from the judgments used to determine the initial estimate, the amount recorded at December 31, 2003 would be subject to revision.

Federated is continuing to cooperate with ongoing governmental investigations, and will conduct further investigations as necessary.

Legal Proceedings. Federated has provided the Securities and Exchange Commission and the New York State Attorney General with information regarding frequent trading arrangements and improperly accepted orders. Federated has also furnished the National Association of Securities Dealers, the U.S. Attorney’s office in Pittsburgh and authorities in West Virginia with copies of all or a portion of this information. Representatives of the Securities and Exchange Commission and the New York State Attorney General have interviewed several current and former officers of Federated in connection with their investigation. Federated cannot predict what actions, if any, these authorities may take upon completion of their investigation.

Commencing with the public announcement of Federated’s internal investigation in October 2003 through February 2004, Federated was named as a defendant in 11 class action or derivative lawsuits filed on behalf of certain alleged shareholders in various Federated-sponsored mutual funds. Eight of these actions are pending in the United States District Court for the Western District of Pennsylvania, one is pending in the United States District Court for the Southern District of New York, one is pending in the United States District Court for the Central District of California and one is pending in the United States District Court for the Middle District of Florida. The Company is awaiting a court decision as to the consolidation of these cases and their proper venue. The cases generally involve claims arising from allegations that Federated illegally permitted improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused injury to the mutual fund shareholders. The case in Florida involves claims for excessive advisory and Rule 12b-1 fees allegedly charged to the Federated Kaufmann Fund. The suits seek unquantified damages, attorneys’ fees and expenses. Federated intends to defend this litigation.

Future Cash Needs. In addition to the acquisition-related contingent liabilities and costs associated with the aforementioned internal review, related legal proceedings and the restoration fund, management expects that principal uses of cash will include paying incentive and base compensation, advancing sales commissions, funding marketing and promotion expenditures, repurchasing company stock, paying shareholder dividends, funding business acquisitions including contingent payments on prior acquisitions, funding property and equipment acquisitions and seeding new products. As a result of recently adopted regulations and frequent requests for information from regulatory authorities, management expects that expenditures for compliance personnel, compliance systems and related professional and consulting fees will increase. Federated has also experienced increases in the cost of insurance, including professional liability, fidelity bond coverage and health care. Management expects these increases, including the assumption of additional risk, to be significant going forward. Management believes that Federated’s existing liquid assets, together with the expected continuing cash flow from operations, its borrowing capacity under the current credit facility, the current B-share funding arrangement and its ability to issue stock will be sufficient to meet its present and reasonably foreseeable cash needs. Management signed an agreement with an independent financial institution to continue financing the B-share sales commissions through December 2006.

In September 2003, a wholly owned subsidiary of Federated entered into a discretionary line of credit agreement with a bank under which it can borrow up to $50 million for the payment of obligations associated with daily net settlements of mutual funds processed through the National Securities Clearing Corporation. Borrowings under this 364-day agreement bear interest at a rate mutually agreed upon by the bank and the borrower at the time of the borrowing and are payable on demand. At December 31, 2003, the outstanding balance under this agreement was zero. Federated guarantees the payment of any obligation owed by the subsidiary in connection with this line of credit.

Federated Investors 2003 Annual Report 25

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

Variable Interest Entities

In 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities,” (FIN 46). FIN 46 provides guidance on how to identify a variable interest entity (VIE) and determine when the assets, liabilities, noncontrolling interests, and results of operations of a VIE need to be included in a company’s consolidated financial statements. Under FIN 46, a VIE must be consolidated by the entity that will absorb a majority of the VIE’s expected losses and/or receive a majority of the VIE’s expected residual returns. The consolidating entity is referred to as the primary beneficiary of the VIE.

Federated acts as the investment manager for two high-yield CBO products and a mortgage-backed CBO product pursuant to the terms of an investment management agreement between Federated and each CBO. The CBOs are alternative investment vehicles created in 1999 and 2000 for the sole purpose of issuing collateralized debt instruments that offer investors the opportunity for high return. The CBOs are subject to greater risk than traditional investment products. The notes issued by the CBOs are backed by diversified portfolios consisting primarily of structured debt and had original expected maturities of five to twelve years. As a result of their corporate governance, the CBOs meet the definition of a VIE under FIN 46. After performing an expected cash flow analysis for each CBO, management determined that Federated is not the primary beneficiary of the CBOs as defined by FIN 46 and thus is not required to consolidate the financial condition and results of operations of these CBOs in Federated’s Consolidated Financial Statements. As of December 31, 2003, aggregate total assets and aggregate total obligations of the CBOs approximated $1.1 billion, respectively.

Federated holds a minor investment in each CBO, which exposes it to risk of loss to the extent of the carrying value of the investments. As of December 31, 2003, the remaining $0.6 million carrying value of these investments represented Federated’s maximum exposure to loss over the remaining life of the CBOs.

Recent Accounting Pronouncements

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (FIN 45). This statement elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. Federated has not issued any guarantees other than on an intercompany basis and as such, the adoption of FIN 45 did not have a material impact on Federated’s results of operations or financial position.

In December 2002, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (SFAS 148). This statement provides alternative methods of transition for a voluntary change to the fair-value-based method of accounting for stock-based employee compensation and amends the disclosure requirements of SFAS 123, “Accounting for Stock-Based Compensation,” to require prominent annual and interim disclosures about the method used to account for stock-based compensation. This statement is effective for financial statements for fiscal years ending after December 15, 2002. Federated adopted the expense recognition provisions of recording the fair value of stock-based compensation under the guidance of SFAS 123 on a prospective basis for all awards granted, modified or settled on or after January 1, 2003.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity” (SFAS 150). This statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. SFAS 150 represents a significant change in the accounting for a number of financial instruments, including mandatorily redeemable equity instruments and certain equity derivatives that frequently are used in connection with share repurchase programs. Federated adopted the provisions of this statement beginning July 1, 2003. The adoption did not have a material impact on Federated’s results of operations or financial position.

On December 31, 2003, Federated adopted the provisions of FIN 46 for all special-purpose entities, as that term is defined by FIN 46. See Note (16) to the Consolidated Financial Statements for a discussion regarding Federated’s variable interests as of December 31, 2003. The provisions of FIN 46 must be applied to account for all other variable interest entities by no later than March 31, 2004 for calendar-year companies. Management has substantially completed its analysis of the impact of adopting FIN 46 to account for any additional variable interest entities with which Federated interacts and has concluded that the adoption is not expected to have a material impact on Federated’s results of operations or financial position.

26

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

Critical Accounting Policies

Federated’s Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States. In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Management continually evaluates the accounting policies and estimates it uses to prepare the Consolidated Financial Statements. In general, management’s estimates are based on historical experience, on information from third-party professionals and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results may differ from those estimates made by management and those differences may be significant.

Of the significant accounting policies described in Note (1) to the Consolidated Financial Statements, management believes that its policies regarding accounting for intangible assets, income taxes and stock-based employee compensation involve a higher degree of judgment and complexity (see Note (1) of the Consolidated Financial Statements).

Accounting for Intangible Assets. Two aspects of accounting for intangible assets require significant management estimates and judgment: (1) valuation in connection with the initial purchase price allocation and (2) ongoing evaluation for impairment. The process of allocating purchase price based on the fair value of identifiable intangible assets at the date of acquisition requires management estimates and judgment as to expectations for profit margins on the assets, asset redemption rates, growth from sales efforts and the effects of market conditions. If actual operating margins or the rate of changes in assets, among other assumptions, differ significantly from the estimates and judgments used in the initial valuation for the purchase price allocation, the intangible asset amounts recorded in the financial statements could be subject to possible impairment or could require an acceleration in amortization expense that could have a material adverse effect on Federated’s consolidated financial position and results of operations.

The level, if any, of impairment of customer-related intangible assets, such as advisory contract intangible assets, is highly dependent upon the level of managed assets acquired in connection with a business combination. Over 80% of the carrying value of Federated’s customer-related intangible assets as of December 31, 2003 relates to a single renewable investment advisory contract with one fund. A decline in the managed asset balance in this particular fund in excess of the estimated rate of change in the acquired assets could have a considerable impact on the underlying value of Federated’s customer-related intangible assets. To date, the actual compound annual rate of change in the acquired assets in this fund since the acquisition in 2001 has been more favorable than the estimated rate. No changes have been made to this estimate in the current year.

Accounting for Income Taxes. Significant management judgment is required in developing Federated’s provision for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowances that might be required against the deferred tax assets. As of December 31, 2003, Federated has not recorded a valuation allowance on the $6.6 million deferred tax assets relating to Federated’s CBO other-than-temporary impairment losses. Federated considered the following facts in connection with its evaluation of the realizability of the deferred tax asset: (1) the impairment losses do not represent capital losses for tax purposes until the losses are realized, (2) the actual amount of capital loss associated with Federated’s investment in the CBOs will not be known until such time as Federated’s investments are either redeemed by the CBOs or sold by Federated, (3) the carry-forward period for capital losses is five years, and (4) Federated has historically generated capital gains in times of favorable market conditions. Based on these factors, management believes it is more likely than not that Federated will be able to utilize the capital loss carry-forwards in the future. In the event that Federated’s preliminary strategies do not materialize, Federated may be required to record a valuation allowance of as much as $6.6 million for these deferred tax assets.

Accounting for Stock-Based Employee Compensation. Federated adopted the fair-value recognition provisions of SFAS 123 for stock-based employee compensation for all stock-based awards granted, modified or settled on or after January 1, 2003. Awards granted prior to 2003 continue to be accounted for using the intrinsic-value method prescribed by Accounting Principles Board Opinion No. 25. Had compensation costs for all stock options and employee restricted stock been determined based upon fair values at the grant

Federated Investors 2003 Annual Report 27

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)

of Financial Condition and Results of Operations

dates in accordance with SFAS 123, Federated would have experienced net income and earnings per share similar to the pro forma amounts indicated below for the years ended December 31.

in thousands, except per share data	2003			2002			2001
Net income	$	191,485		$	203,760		$	168,447
Add back: Stock-based employee compensation expense included in reported net income, net of related tax effects		217			30			214
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards1, net of related tax effects		(4,735	)		(6,926	)		(6,527	)
Pro forma net income	$	186,967		$	196,864		$	162,134
Earnings per share:
Basic earnings per share	$	1.78		$	1.81		$	1.46
Pro forma basic earnings per share	$	1.73		$	1.75		$	1.41
Diluted earnings per share	$	1.71		$	1.74		$	1.40
Pro forma diluted earnings per share	$	1.67		$	1.68		$	1.35

1 “All awards” refers to awards granted, modified or settled on or after January 1, 1995, as required by SFAS 123.

Federated estimated the grant-date fair value using the Black-Scholes option-pricing model with the following weighted-average assumptions for options granted in 2003, 2002 and 2001, respectively: dividend yields of 1.03%, 0.72% and 0.53%; expected volatility factors of 27.8%, 28.4% and 29.9%; risk-free interest rates of 2.77%, 4.22% and 5.30%; and an expected life of 5.0 years, 6.7 years and 8.3 years.

Quantitative and Qualitative Disclosures About Market Risk

Market Risk – Investments. In the normal course of our business, Federated is exposed to the risk of loss due to fluctuations in the securities market and general economy. Management is responsible for identifying, assessing and managing market and other risks. Federated’s investments are primarily money market funds and mutual funds with investments which have a duration of two years or less. Federated also invests in mutual funds sponsored by Federated (performance seeds) in order to provide investable cash to the fund, thereby allowing the fund to establish a performance history. Federated may use derivative financial instruments to hedge these investments. At December 31, 2003, Federated was exposed to price risk with regard to its $0.9 million of investments in fluctuating-value mutual funds. Price risk is the risk that the fair value of the investments will decline and ultimately result in the recognition of a loss for Federated. Federated did not hold any derivative investments to hedge its performance seeds at December 31, 2003.

During 2002, Federated recorded a $1.8 million pretax impairment charge related to an other-than-temporary decline in the fair value of its investment in its mortgage-backed CBO product. Federated’s remaining investment in this product, which totaled $0.6 million at December 31, 2003, is subject to interest rate risk and may be adversely affected by increases in interest rates.

Market Risk – Revenue. It is important to note that a significant portion of Federated’s revenue is based on the market value of managed and administered assets. Declines in the market values of assets as a result of changes in the market or other conditions will therefore negatively impact revenue and net income.

Approximately 47% of Federated’s revenue in 2003 was from managed assets in money market products. In June 2003, the Federal Reserve Bank reduced the Federal Funds Rate by an additional 0.25%. Further decreases in interest rates from the record low levels at December 31, 2003 could have an adverse effect on Federated’s revenue from money market funds. As a result of the last 0.25% reduction in interest rates in June 2003, Federated and other service providers to the funds began waiving a portion of their fees in order to maintain positive yields, the impact of which is estimated to range between $0.01 to $0.02 in earnings per diluted share over a twelve-month period. Management estimates that an additional decrease of 0.25% or more in interest rates on money market investments could cause an adverse effect on Federated’s revenue.

For further discussion of managed assets and factors that impact Federated’s revenue, see the sections entitled “General,” “Asset Highlights” and “Contractual Obligations and Contingent Liabilities” herein as well as the sections entitled “Regulatory Matters” and “Risk Factors and Cautionary Statements” in Federated’s Annual Report on Form 10-K for the year ended December 31, 2003 on file with the Securities and Exchange Commission.

28

MANAGEMENT’S REPORT

Federated Investors, Inc.’s (Federated) management takes responsibility for the integrity and fair presentation of the financial statements in this annual report. These financial statements were prepared from accounting records which management believes fairly and accurately reflect Federated’s operations and financial position.

The financial statements were prepared in conformity with accounting principles generally accepted in the United States and, as such, include amounts based on management’s best estimates and judgments considering currently available information and management’s view of current conditions and circumstances. Management also prepared the other information in this report and is responsible for its accuracy and consistency with the financial statements.

Management is responsible for establishing and maintaining effective disclosure controls and procedures, including internal controls designed to provide reasonable assurance that assets are protected from improper use and accounted for in accordance with its policies and that transactions are recorded accurately in Federated’s records. The concept of reasonable assurance is based upon a recognition that the cost of the controls should not exceed the benefit derived. Even effective internal control, no matter how well designed, has inherent limitations—including the possibility of circumvention or overriding of controls—and therefore can only provide reasonable assurance with respect to financial statement preparation and safeguarding of assets.

The financial statements of Federated have been audited by Ernst & Young LLP, independent auditors. Their accompanying report is based on an audit conducted in accordance with auditing standards generally accepted in the United States.

Federated Investors, Inc.

J. Christopher Donahue	Thomas R. Donahue
President and Chief Executive Officer	Chief Financial Officer

February 19, 2004

Federated Investors 2003 Annual Report 29

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Shareholders and Board of Directors

Federated Investors, Inc.

We have audited the accompanying consolidated balance sheets of Federated Investors, Inc. and subsidiaries (Federated) as of December 31, 2003 and 2002, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of Federated’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Federated Investors, Inc. and subsidiaries at December 31, 2003 and 2002, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States.

As discussed in Note (1)(c), certain adjustments were made to the 2002 and 2001 consolidated financial statements.

Pittsburgh, Pennsylvania

February 19, 2004

30

CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

December 31,	2003			2002
Current Assets
Cash and cash equivalents	$	232,464		$	149,909
Marketable securities		1,526			1,023
Receivables—affiliates		33,196			28,168
Receivables—other, net of reserve of $289 and $275, respectively		5,065			6,991
Accrued revenue		6,999			6,033
Prepaid expenses		8,219			7,335
Current deferred tax asset, net		3,545			1,166
Other current assets		318			3,037
Total current assets		291,332			203,662
Long-Term Assets
Goodwill, net		165,007			164,944
Investment advisory contracts, net		53,579			58,995
Other intangible assets, net		7,682			11,227
Deferred sales commissions, net of accumulated amortization of $240,657 and $218,423, respectively		327,717			320,076
Property and equipment, net		30,892			33,722
Other long-term assets		3,019			2,825
Total long-term assets		587,896			591,789
Total assets	$	879,228		$	795,451
Current Liabilities
Cash overdraft	$	4,629		$	5,548
Accrued expenses—affiliates		9,245			185
Accrued expenses—other		75,733			67,641
Accounts payable		34,626			31,410
Income taxes payable		1,819			708
Other current liabilities		4,349			6,402
Total current liabilities		130,401			111,894
Long-Term Liabilities
Long-term debt—recourse		542			1,385
Long-term debt—nonrecourse		327,142			319,328
Long-term deferred tax liability, net		19,614			15,065
Other long-term liabilities		5,116			6,482
Total long-term liabilities		352,414			342,260
Total liabilities		482,815			454,154
Minority interest		560			580
Commitments and contingencies (Note (20))
Shareholders’ Equity
Common stock:
Class A, no par value, 20,000 shares authorized, 9,000 issued and outstanding		189			189
Class B, no par value, 900,000,000 shares authorized, 129,505,456 shares issued		87,932			82,374
Additional paid-in capital from treasury stock transactions		3,809			3,610
Retained earnings		749,410			590,418
Treasury stock, at cost, 20,849,698 and 16,953,735 shares Class B common stock, respectively		(445,153	)		(335,699	)
Employee restricted stock awards		(706	)		(196	)
Accumulated other comprehensive income, net of tax		372			21
Total shareholders’ equity		395,853			340,717
Total liabilities, minority interest, and shareholders’ equity	$	879,228		$	795,451

(The accompanying notes are an integral part of these Consolidated Financial Statements.)

Federated Investors 2003 Annual Report 31

CONSOLIDATED STATEMENTS OF INCOME

(dollars in thousands, except per share data)

Years Ended December 31,	2003			2002			2001
Revenue
Investment advisory fees, net—affiliates	$	511,618		$	503,409		$	471,649
Investment advisory fees, net—other		16,752			13,000			10,563
Administrative service fees, net—affiliates		129,612			127,862			113,761
Administrative service fees, net—other		15,261			17,544			20,845
Other service fees, net—affiliates		116,518			116,507			164,489
Other service fees, net—other		25,804			25,299			28,151
Other		7,683			5,132			5,239
Total revenue		823,248			808,753			814,697
Operating Expenses
Compensation and related		182,742			177,816			173,462
Marketing and distribution		156,093			146,235			131,850
Professional service fees		45,367			27,697			31,969
Office and occupancy		26,410			26,132			27,124
Systems and communications		26,012			27,720			29,142
Advertising and promotional		17,533			21,426			25,583
Travel and related		13,115			12,930			12,993
Amortization of deferred sales commissions		14,911			14,513			43,860
Amortization of intangible assets		10,540			11,266			17,121
Other		18,063			11,388			7,403
Total operating expenses		510,786			477,123			500,507
Operating income		312,462			331,630			314,190
Nonoperating Income (Expenses)
Interest and dividends		2,154			2,422			9,743
Gain/(loss) on securities, net		4			(2,547	)		(22,269	)
Debt expense—recourse		(491	)		(484	)		(13,168	)
Debt expense—nonrecourse		(4,215	)		(4,304	)		(23,121	)
Other, net		(108	)		(151	)		8,540
Total nonoperating expenses, net		(2,656	)		(5,064	)		(40,275	)
Income before minority interest and income taxes		309,806			326,566			273,915
Minority interest		10,206			10,852			10,880
Income before income taxes		299,600			315,714			263,035
Income tax provision		108,115			111,954			94,588
Net income	$	191,485		$	203,760		$	168,447
Earnings Per Share
Net income per share—basic	$	1.78		$	1.81		$	1.46
Net income per share—diluted	$	1.71		$	1.74		$	1.40
Cash dividends per share	$	0.2970		$	0.2170		$	0.1750

(The accompanying notes are an integral part of these Consolidated Financial Statements.)

32

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(dollars in thousands)

Years Ended December 31, 2003, 2002 and 2001

	Shares					Common Stock			Additional Paid-in Capital from Treasury Stock Transactions			Retained Earnings			Treasury Stock			Employee Restricted Stock Awards			Accumulated Other Comprehensive Income (Loss), Net of Tax			Total Shareholders’ Equity
	Class A	Class B		Treasury
Balance at January 1, 2001	9,000	117,120,809		12,384,647		$	75,476		$	0		$	263,456		$	(187,582	)	$	(736	)	$	(2,746	)	$	147,868
Net income	0	0		0			0			0			168,447			0			0			0			168,447
Other comprehensive income, net of tax:
Unrealized loss on securities available for sale, net of reclassification adjustment	0	0		0			0			0			0			0			0			2,510			2,510
Foreign currency translation	0	0		0			0			0			0			0			0			(50	)		(50	)
Comprehensive income																									170,907
Amortization of employee restricted stock and other compensation plans	0	0		0			309			0			0			0			267			0			576
Dividends declared	0	0		0			0			0			(20,456	)		0			0			0			(20,456	)
Stock issuance for business combination	0	315,732		(315,732	)		0			6,683			0			2,237			0			0			8,920
Exercise of stock options	0	693,600		(693,600	)		6,703			(3,140	)		0			4,227			0			0			7,790
Purchase of treasury stock	0	(2,769,200	)	2,769,200			0			0			0			(78,508	)		0			0			(78,508	)
Balance at December 31, 2001	9,000	115,360,941		14,144,515			82,488			3,543			411,447			(259,626	)		(469	)		(286	)		237,097
Net income	0	0		0			0			0			203,760			0			0			0			203,760
Other comprehensive income, net of tax:
Unrealized loss on securities available for sale, net of reclassification adjustment	0	0		0			0			0			0			0			0			113			113
Foreign currency translation	0	0		0			0			0			0			0			0			194			194
Comprehensive income																									204,067
Amortization of employee restricted stock and other compensation plans	0	0		0			165			0			0			0			101			0			266
Restricted stock forfeitures	0	(146,250	)	146,250			(172	)		0			0			(16	)		172			0			(16	)
Dividends declared	0	0		0			0			0			(24,789	)		0			0			0			(24,789	)
Exercise of stock options	0	14,000		(14,000	)		82			67			0			151			0			0			300
Purchase of treasury stock	0	(2,676,970	)	2,676,970			0			0			0			(76,208	)		0			0			(76,208	)
Balance at December 31, 2002	9,000	112,551,721		16,953,735			82,563			3,610			590,418			(335,699	)		(196	)		21			340,717
Net income	0	0		0			0			0			191,485			0			0			0			191,485
Other comprehensive income, net of tax:
Unrealized loss on securities available for sale, net of reclassification adjustment	0	0		0			0			0			0			0			0			77			77
Foreign currency translation	0	0		0			0			0			0			0			0			274			274
Comprehensive income																									191,836
Amortization of employee restricted stock and other compensation plans	0	0		0			1,191			0			0			0			373			0			1,564
Restricted stock issuance	0	40,000		(40,000	)		883			116			0			4			(883	)		0			120
Dividends declared	0	0		0			0			0			(32,493	)		0			0			0			(32,493	)
Exercise of stock options	0	479,037		(479,037	)		3,469			83			0			4,068			0			0			7,620
Purchase of treasury stock	0	(4,415,000	)	4,415,000			0			0			0			(113,526	)		0			0			(113,526	)
Other	0	0		0			15			0			0			0			0			0			15
Balance at December 31, 2003	9,000	108,655,758		20,849,698		$	88,121		$	3,809		$	749,410		$	(445,153	)	$	(706	)	$	372		$	395,853

(The accompanying notes are an integral part of these Consolidated Financial Statements.)

Federated Investors 2003 Annual Report 33

CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

Years Ended December 31,	2003			2002			2001
Operating Activities
Net income	$	191,485		$	203,760		$	168,447
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities
Amortization of deferred sales commissions		14,911			14,513			43,860
Depreciation and other amortization		20,632			19,229			25,980
Minority interest		10,206			10,852			10,880
Gain on disposal of assets		(4,669	)		(3,223	)		(5,099	)
Provision (benefit) for deferred income taxes		1,992			7,654			(18,633	)
Tax benefit from exercise of stock options		3,469			82			6,703
Net payment for trading securities		0			(640	)		0
Deferred sales commissions paid		(74,724	)		(78,391	)		(69,135	)
Contingent deferred sales charges received		595			716			30,872
Proceeds from sale of certain B-share-related future revenues		63,152			66,766			59,580
Other changes in assets and liabilities:
(Increase) decrease in receivables, net		(1,387	)		1,396			3,544
(Increase) decrease in other assets		(1,357	)		423			15,128
Increase in accounts payable and accrued expenses		24,694			372			58
Increase (decrease) in income taxes payable		1,111			(25,835	)		18,381
(Decrease) increase in other current liabilities		(3,350	)		(1,970	)		4,919
Increase (decrease) in other long-term liabilities		2,057			93			(14,839	)
Net cash provided by operating activities		248,817			215,797			280,646
Investing Activities
Proceeds from disposal of property and equipment		18			116			43
Additions to property and equipment		(6,288	)		(7,323	)		(7,089	)
Cash paid for business acquisitions		(1,263	)		(33,487	)		(173,375	)
Purchases of securities available for sale		(834	)		(414	)		(25,505	)
Proceeds from redemptions of securities available for sale		451			4,656			102,321
Net cash used by investing activities		(7,916	)		(36,452	)		(103,605	)
Financing Activities
Distributions to minority interest		(10,228	)		(10,635	)		(11,055	)
Dividends paid		(32,493	)		(24,789	)		(20,456	)
Proceeds from shareholders for stock-based compensation and other		4,286			218			1,087
Purchases of treasury stock		(120,037	)		(69,714	)		(78,508	)
Proceeds from new borrowings—nonrecourse		12,935			13,675			12,214
Payments on debt—recourse		(997	)		(654	)		(84,297	)
Payments on debt—nonrecourse		(11,572	)		(10,771	)		(72,435	)
Payments on acquired customer relationship obligation		(240	)		(277	)		0
Net cash used by financing activities		(158,346	)		(102,947	)		(253,450	)
Net increase (decrease) in cash and cash equivalents		82,555			76,398			(76,409	)
Cash and cash equivalents, beginning of year		149,909			73,511			149,920
Cash and cash equivalents, end of year	$	232,464		$	149,909		$	73,511
Supplemental Disclosure of Cash Flow Information
Cash paid during the year for:
Interest	$	160		$	2,279		$	9,581
Income taxes		103,032			133,270			102,608

(The accompanying notes are an integral part of these Consolidated Financial Statements.)

34

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(December 31, 2003, 2002 and 2001)

(1) Summary of Significant Accounting Policies

(a) Nature of Operations

Federated Investors, Inc. and its subsidiaries (Federated) provide investment advisory, administrative, distribution and other services primarily to Federated mutual funds, separately managed accounts and other Federated-sponsored products in both domestic and international markets. Federated also provides investment advisory and administrative services to corporations, employee benefit plans and private investment advisory accounts.

The majority of Federated’s revenue is derived from investment advisory services provided to mutual funds and separately managed accounts through various subsidiaries pursuant to investment advisory contracts. These subsidiaries are registered as investment advisers under the Investment Advisers Act of 1940 and with certain states.

Federated also derives revenue from providing administrative and other fund-related services to both Federated-sponsored and third party investment products. Other fund-related services include distribution, shareholder, transfer agency, fund accounting, trade execution, trade clearing and retirement plan recordkeeping services.

Shares of the portfolios or classes of shares under management or administration by Federated are distributed by wholly owned subsidiaries, which are registered broker/dealers under the Securities Exchange Act of 1934 and under applicable state laws. Federated’s investment products are primarily distributed within the bank trust, broker/dealer and institutional markets.

(b) Basis of Presentation

The Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States. In preparing the financial statements, management is required to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results may differ from those estimates, and such differences may be material to the Consolidated Financial Statements.

(c) Prior Period Financial Statements

Previously reported Consolidated Statements of Income reflect the reclassification of certain distribution-related and other third-party payments to better reflect Federated’s contractual obligations under the terms of the related third-party arrangements. These payments, which were previously recorded as an offset to revenue, have been reclassified primarily to “Marketing and distribution” and “Professional service fees” in the Consolidated Statements of Income.

The Consolidated Balance Sheet as of December 31, 2002, has been adjusted to record deferred sales commissions and nonrecourse debt of $261.5 million, respectively. The asset and nonrecourse debt balances are the result of applying financing accounting treatment to Federated’s ongoing arrangements with third parties to sell the rights to future revenue streams associated with deferred sales commissions of Class B shares of Federated-sponsored mutual funds. The adjustment was recorded to provide consistent application of financing accounting treatment to all such arrangements for all periods. No adjustments were made to the Consolidated Statements of Income. See Note (6) Deferred Sales Commissions and Nonrecourse Debt for additional details regarding these arrangements.

In addition, certain other items previously reported have been reclassified to conform with the current year presentation.

(d) Principles of Consolidation

Voting interest entities

The Consolidated Financial Statements include the accounts of Federated Investors, Inc. and entities in which Federated holds a controlling financial interest as determined by the extent of Federated’s decision-making ability and participation in the economic risks and rewards of ownership. Federated provides for minority interests in consolidated entities for which Federated’s controlling financial interest is less than 100 percent. All significant intercompany accounts and transactions have been eliminated.

The equity method of accounting is used to account for investments in entities in which Federated’s ownership is between 20 and 50 percent. The equity investment is carried at Federated’s share of net assets and is included in “Other long-term assets” on the Consolidated Balance Sheets. The proportionate share of income or loss from this entity is included in “Revenue – Other” in the Consolidated Statements of Income.

Variable interest entities

In 2003, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities” (FIN 46). FIN 46 established a new consolidation model for certain entities in which equity investors do not have the characteristics of a controlling financial interest or which require subordinated financial support in excess of the equity investment at risk. Under the FIN 46 consolidation model, these entities, referred to as Variable Interest Entities (VIEs), must be consolidated by the entity that will absorb a majority of the VIE’s expected losses or receive a majority of the VIE’s expected residual returns. The consolidating entity is referred to as the primary beneficiary of the VIE. As prescribed by FIN 46, expected losses and residual returns of a VIE represent the present value of the expected variability in net income or loss of the VIE.

Federated Investors 2003 Annual Report 35

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

Determining the expected losses and residual returns of the VIE require management to make certain assumptions, including the timing and level of future cash flows and discount rates.

In determining whether consolidation of a VIE is appropriate, Federated applies the provisions of FIN 46 to determine whether Federated is the primary beneficiary of the entity. See Note (16) Variable Interest Entities for information regarding VIEs with which Federated is involved.

(e) Business Combinations

Business combinations have been accounted for under the purchase method of accounting. Results of operations of an acquired business are included from the date of acquisition. Management allocates the cost of an acquired entity to acquired assets, including identifiable intangible assets, and assumed liabilities based on their estimated fair values as of the date of acquisition. Any excess cost of the acquired entity that exists after this allocation process is recorded as “Goodwill, net” on the Consolidated Balance Sheets.

(f) Cash and Cash Equivalents

Cash and cash equivalents include interest-bearing deposits with banks, overnight federal funds sold, money market accounts, and other investments with an original maturity of less than three months.

(g) Marketable Securities

Marketable securities include available-for-sale and trading securities held by Federated. Federated’s available-for-sale securities include investments in fluctuating-value mutual funds and asset-backed securities. These investments are carried at fair value based on quoted market prices or, in the absence of quoted market prices, discounted cash flows. These investments are classified as current or long-term assets and are included in “Marketable securities” or “Other long-term assets,” respectively, on the Consolidated Balance Sheets based on management’s intention to sell the investment. The unrealized gains or losses on securities available-for-sale are included net of tax in “Accumulated other comprehensive income, net of tax” on the Consolidated Balance Sheets. Realized gains and losses on these securities are computed on a specific identification basis and recognized in “Gain/(loss) on securities, net” in the Consolidated Statements of Income.

On a periodic basis, management evaluates the carrying value of marketable securities for impairment. With respect to its investments in fluctuating-value mutual funds, management considers various criteria, including the duration and extent of a decline in fair value, the ability and intent of management to retain the investment for a period of time sufficient to allow the value to recover and the financial condition and near-term prospects of the investment, to determine whether a decline in fair value is other than temporary. If, after considering these criteria, management believes that a decline is other than temporary, the carrying value of the security is written down to fair value through the Consolidated Statements of Income. With respect to Federated’s investments in asset-backed securities, estimates of future cash flows are updated each quarter based on actual defaults, changes in anticipated default rates or other portfolio changes. The carrying values of these investments are written down to fair value at that time, as appropriate. Impairment adjustments are recognized in “Gain/(loss) on securities, net” in the Consolidated Statements of Income.

Federated classifies an investment as a trading security when it is management’s intent at the time of purchase to sell the security within a short period of time. Trading securities are carried at fair value based on quoted market prices. The unrealized and realized gains and losses on trading securities are recognized in “Gain/(loss) on securities, net” in the Consolidated Statements of Income.

(h) Property and Equipment

Property and equipment are recorded at cost, or fair value if acquired in connection with a business combination, and are depreciated using the straight-line method over their estimated useful lives ranging from two to 25 years. Leasehold improvements are depreciated using the straight-line method over their estimated useful lives or their respective lease terms, whichever is shorter. As property and equipment are placed out-of-service, the cost and related accumulated depreciation are removed and any residual net book value is reflected as a loss in “Nonoperating Income (Expenses) - Other, net” in the Consolidated Statements of Income.

Management reviews the remaining useful lives and carrying values of property and equipment assets to determine whether events and circumstances indicate that a change in the useful life or impairment in value may have occurred. Indicators of impairment monitored by management include a decrease in the market price of the asset, an accumulation of costs significantly in excess of the amount originally expected in the acquisition or development of the asset, historical and projected cash flow losses associated with the asset and an expectation that the asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. Should there be an indication of a change in the useful life or an impairment in value, Federated compares the carrying value of the asset to the probability-weighted undiscounted cash flows expected to be generated from the underlying asset over its remaining useful life to determine whether an impairment has occurred. If the carrying value of the asset exceeds the undiscounted cash flows, the asset is written down to fair value determined based on prices of similar assets if available or discounted cash flows. Impairment adjustments are recognized in “Operating Expenses – Other” in the Consolidated Statements of Income.

36

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

(i) Costs of Computer Software Developed or Obtained for Internal Use

Certain internal and external costs incurred in connection with developing or obtaining software for internal use are capitalized. These capitalized costs are included in “Property and equipment, net” on the Consolidated Balance Sheets and are amortized using the straight-line method over the shorter of the estimated useful life of the software or four years. These assets are subject to the impairment test used for other categories of property and equipment described in Note (1)(h).

(j) Intangible Assets

Intangible assets, consisting primarily of goodwill, investment advisory contracts and employment and noncompete agreements acquired in connection with various business combinations, are recorded at fair value determined using a discounted cash flow model as of the date of acquisition. The discounted cash flow model considers various factors to project the present value of future cash flows expected to be generated from the asset. Given the investment advisory nature of Federated’s business and of the businesses acquired over the years, these factors typically include: (1) an estimated rate of change for underlying managed assets; (2) expected revenue per managed asset; (3) incremental operating expenses; (4) useful life of the acquired asset; and (5) a discount rate. Management estimates a rate of change for underlying managed assets based on a combination of an estimated rate of market appreciation or depreciation and an estimated redemption rate. Expected revenue per managed asset, incremental operating expenses and the useful life of the acquired asset are generally based on contract terms and historical experience. The discount rate is equal to Federated’s weighted-average cost of capital. After the fair value of all separately identifiable assets has been estimated, the cost of the acquisition in excess of the sum of the fair values of these assets is allocated to goodwill.

In accordance with Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,” (SFAS 142) which Federated adopted in January 2002, Federated no longer amortizes goodwill but rather tests it for impairment at least annually or when indicators of potential impairment exist. Federated uses a two-step process to test for and measure impairment that begins with an estimation of the fair value of its reporting unit. This first step is a screen for potential impairment, and if impairment has occurred, the second step measures the amount of impairment.

Federated amortizes separately identifiable intangible assets using the straight-line method, or an accelerated method if deemed more appropriate, over their estimated useful lives, which range from four to 14 years. Management periodically evaluates the remaining useful lives and carrying values of the intangible assets to determine whether events and circumstances indicate that a change in the useful life or impairment in value may have occurred. Indicators of impairment monitored by management include a decline in the level of managed assets, changes to contractual provisions underlying certain intangible assets and reductions in operating cash flows. Should there be an indication of a change in the useful life or an impairment in value, Federated compares the carrying value of the asset and its related useful life to the projected undiscounted cash flows expected to be generated from the underlying asset over its remaining useful life to determine whether an impairment has occurred. If the carrying value of the asset exceeds the undiscounted cash flows, the asset is written down to its fair value determined using discounted cash flows. Federated reverses the cost and accumulated amortization balances for all fully amortized intangible assets.

(k) Deferred Sales Commissions

Federated pays commissions to broker/dealers to promote the sale of certain mutual fund shares. Under various fund-related contracts, Federated is entitled to distribution and servicing fees from the mutual fund over the life of such shares. Both of these fees are calculated as a percentage of average managed assets associated with the related classes of shares. For certain share classes, Federated is also entitled to receive a contingent deferred sales charge (CDSC), which is collected from redeeming shareholders.

For share classes that offer both a distribution fee and CDSC, excluding B-shares, Federated capitalizes all or a portion of the upfront commissions as deferred sales commissions, dependent upon expected recoverability rates. The deferred sales commission asset is amortized over the estimated period of benefit ranging from one to four years. The distribution and servicing fees are recognized in the Consolidated Statements of Income over the life of the mutual fund share class. CDSCs collected on these share classes are used to reduce the deferred sales commission asset.

For share classes that do not offer both a distribution fee and CDSC, Federated expenses the cost of the upfront commission in “Marketing and distribution” in the Consolidated Statements of Income as it is incurred and credits “Marketing and distribution” for any CDSCs collected.

For Class B shares, Federated funds the payment of upfront commissions through arrangements with independent third parties by selling the rights to all future distribution fees, servicing fees and CDSCs. For financial reporting purposes, these arrangements are treated as financings. As a result, Federated capitalizes all of the upfront commissions as deferred sales commissions and recognizes B-share-related distribution fees and servicing fees in the Consolidated Statements of Income even though legal title to these fees has been transferred to the third party. The deferred sales commission asset is amortized over the estimated life of the B-share fund asset dependent upon the cash flows of the sold future revenue streams, not to exceed eight years. CDSCs collected on the B-share fund assets are used to reduce the deferred sales commission asset.

Federated Investors 2003 Annual Report 37

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

As previously reported in Federated’s Consolidated Financial Statements, sale accounting treatment was applied to account for the sale of distribution fees (including CDSCs) pursuant to the B-share funding arrangements in recent years. As a result, B-share-related distribution fees and related expenses are not reflected in Federated’s Consolidated Statements of Income for 2003 and 2002.

(l) Foreign Currency Translation

The balance sheet of one of Federated’s wholly owned foreign subsidiaries, as well as Federated’s equity investment in a German-based joint-venture company are translated at the current exchange rate as of the end of the accounting period and the related income or loss are translated at the average exchange rate in effect during the period. Net exchange gains and losses resulting from these translations are excluded from income and are recorded in “Accumulated other comprehensive income, net of tax” on the Consolidated Balance Sheets. Foreign currency transaction gains and losses relating to Federated’s foreign subsidiaries are reflected in the Consolidated Statements of Income.

(m) Treasury Stock

Federated accounts for acquisitions of treasury stock at cost and reports total treasury stock held as a deduction from total shareholders’ equity on the Consolidated Balance Sheets. At the date of subsequent reissue, the treasury stock account is reduced by the cost of such stock on a specific identification basis. If Federated reissues treasury stock for more or less than the cost of the shares, the “Additional paid-in capital from treasury stock transactions” account on the Consolidated Balance Sheets is credited or debited, respectively.

(n) Revenue Recognition

Revenue from providing investment advisory, administrative and other services (including distribution, shareholder servicing and accounting) is recognized during the period in which the services are performed. Investment advisory, administrative and the majority of other service fees are based on the net asset value of the investment portfolios that are managed or administered by Federated. Federated may waive certain fees for services for competitive reasons or to meet regulatory requirements.

Federated has contractual arrangements with third parties to provide certain fund-related services. Based on the nature of Federated’s involvement and obligations under these arrangements, Federated’s revenue is recorded gross or net of third-party payments. Investment advisory fees, administrative service fees, distribution fees and certain other service fees are recorded gross of payments made to third parties while shareholder service fees are recorded net of certain third-party payments. Third-party payments for shareholder services recorded as an offset to revenue for the years ended December 31, 2003, 2002 and 2001 were $171.5 million, $176.4 million and $171.8 million, respectively.

(o) Stock-Based Compensation

Effective January 1, 2003, Federated adopted, on a prospective basis, the fair-value-based method of accounting for stock-based awards under the provisions of SFAS No. 123, “Accounting for Stock-Based Compensation” as amended by SFAS 148, “Accounting for Stock-Based Compensation – Transition and Disclosure” (SFAS 123). As a result of this adoption, Federated recognizes the estimated fair value of stock-based awards granted, modified or settled on or after January 1, 2003 as compensation expense on a straight-line basis over the awards’ vesting periods, which vary in length from 0 to 10 years. For all employee-related stock option awards granted prior to 2003, Federated continues to apply the intrinsic-value method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” (APB 25) and related interpretations. Under APB 25, compensation expense is not recognized for stock option awards granted with an exercise price equal to or greater than the market value of Federated’s Class B common stock on the date of grant.

With respect to restricted stock awards, the fair value of the award (the difference between the market value of Federated’s Class B common stock on the date of grant and the purchase price paid by the employee) is charged to “Employee restricted stock plan” on the Consolidated Balance Sheets when the restricted stock is awarded and recognized as compensation expense on a straight-line basis over the period of employee performance during which the restrictions lapse, which is typically 10 years. The adoption of the expense recognition provisions of SFAS 123 did not have a significant impact on the determination of compensation expense for restricted stock awards.

38

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

Had compensation costs for all stock options and employee restricted stock been determined based upon fair values at the grant dates in accordance with SFAS 123, Federated would have experienced net income and earnings per share similar to the pro forma amounts indicated below for the years ended December 31.

in thousands, except per share data	2003			2002			2001
Net income	$	191,485		$	203,760		$	168,447
Add back: Stock-based employee compensation expense included in reported net income, net of related tax effects		217			30			214
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards1, net of related tax effects		(4,735	)		(6,926	)		(6,527	)
Pro forma net income	$	186,967		$	196,864		$	162,134
Earnings per share:
Basic earnings per share	$	1.78		$	1.81		$	1.46
Pro forma basic earnings per share	$	1.73		$	1.75		$	1.41
Diluted earnings per share	$	1.71		$	1.74		$	1.40
Pro forma diluted earnings per share	$	1.67		$	1.68		$	1.35

1 “All awards” refers to awards granted, modified or settled on or after January 1, 1995, as required by SFAS 123.

Federated estimated the grant-date fair value using the Black-Scholes option-pricing model with the following weighted-average assumptions for options granted in 2003, 2002 and 2001, respectively: dividend yields of 1.03%, 0.72% and 0.53%; expected volatility factors of 27.8%, 28.4% and 29.9%; risk-free interest rates of 2.77%, 4.22% and 5.30%; and an expected life of 5.0 years, 6.7 years and 8.3 years.

The effects of applying SFAS 123 on the pro forma disclosures may not be representative of the effects on pro forma disclosures for future years.

(p) Advertising Costs

Federated expenses the cost of all advertising as incurred. Advertising expense for 2003, 2002 and 2001 was $1.4 million, $4.5 million and $6.3 million, respectively.

(q) Income Taxes

Federated accounts for income taxes under the liability method, which requires the recognition of deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Federated recognizes a valuation allowance if, based on the weight of available evidence regarding future taxable income, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

(r) Earnings Per Share

Earnings per share are calculated in accordance with SFAS No. 128, “Earnings Per Share,” which requires that both basic and diluted earnings per share be presented. Basic earnings per share is based on the weighted-average number of common shares outstanding during each period excluding nonvested restricted stock. Diluted earnings per share are based on basic shares as determined above plus incremental shares that would be issued upon the assumed exercise of in-the-money stock options and nonvested restricted stock using the treasury stock method.

(s) Comprehensive Income

Federated reports all changes in comprehensive income in the Consolidated Statements of Changes in Shareholders’ Equity, in accordance with the provisions of SFAS No. 130, “Reporting Comprehensive Income.” Comprehensive income includes net income, unrealized gains and losses on securities available for sale, net of tax, and foreign currency translation adjustments, net of tax.

(t) Business Segments

Federated has not presented business segment data in accordance with SFAS No. 131, “Disclosure About Segments of an Enterprise and Related Information,” because it operates predominantly in one business segment, the investment advisory and asset management business.

Federated Investors 2003 Annual Report 39

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

(u) Recent Accounting Pronouncements

In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” (FIN 45). This statement elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees that it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified after December 31, 2002. Federated has not issued any guarantees other than on an intercompany basis and as such, the adoption of FIN 45 did not have a material impact on Federated’s results of operations or financial position.

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity,” (SFAS 150). This statement establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. SFAS 150 represents a significant change in the accounting for a number of financial instruments, including mandatorily redeemable equity instruments and certain equity derivatives that frequently are used in connection with share repurchase programs. Federated adopted the provisions of this statement beginning July 1, 2003. The adoption did not have a material impact on Federated’s results of operations or financial position.

On December 31, 2003, Federated adopted the provisions of FIN 46 for all special-purpose entities, as that term is defined by FIN 46. See Note (16) Variable Interest Entities for a discussion regarding Federated’s variable interests as of December 31, 2003. The provisions of FIN 46 must be applied to account for all other variable interest entities by no later than March 31, 2004 for calendar-year companies. Management has substantially completed its analysis of the impact of adopting FIN 46 to account for any additional variable interest entities with which Federated interacts and has concluded that the adoption is not expected to have a material impact on Federated’s results of operations or financial position.

(2) Marketable Securities

Marketable securities as of December 31, 2003 and 2002 included available-for-sale securities only as no trading securities were held at either date. Marketable securities (see Note (1)(g)) were as follows:

			Gross Unrealized					Estimated Market Value
in thousands	Cost		Gains		(Losses)
Fluctuating-value mutual funds	$	852	$	110	$	0		$	962
Asset-backed securities1		564		0		0			564
Total as of December 31, 2003	$	1,416	$	110	$	0		$	1,526
Fluctuating-value mutual funds	$	412	$	1	$	(8	)	$	405
Asset-backed securities1		618		0		0			618
Total as of December 31, 2002	$	1,030	$	1	$	(8	)	$	1,023

1 Amount represents Federated’s remaining investment in its mortgage-backed collateralized bond obligation (CBO) product which has an expected maturity of May 2005.

The following table presents gains and losses recognized in connection with marketable securities for the years ended December 31:

in thousands	2003		2002			2001
CBO impairment losses2	$	0	$	(1,836	)	$	(14,127	)
Performance seed impairment losses		0		0			(1,092	)
Unrealized gain on trading security		0		105			0
Realized gains3		4		23			245
Realized losses3		0		(839	)		(7,295	)
Gain/(loss) on securities, net	$	4	$	(2,547	)	$	(22,269	)

2 In 2001, the CBO impairment losses relate to the write-off of the two high-yield CBO investments due to other-than-temporary declines in their fair values as a result of the rise in default rates over the two-year period. In 2002, an impairment loss was recognized on the mortgage-backed CBO investment due to the significant declines in the value of the underlying securities held by the CBO.

3 Of the 2002 realized gains and (losses), $10 and $(650), respectively, related to the disposal of trading securities previously held by Federated.

40

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

(3) Intangible Assets and Goodwill

Federated’s identifiable intangible assets consisted of the following at December 31:

	2003							2002
in thousands	Cost		Accumulated Amortization			Carrying Value		Cost		Accumulated Amortization			Carrying Value
Investment advisory contracts	$	72,834	$	(19,255	)	$	53,579	$	71,255	$	(12,260	)	$	58,995
Noncompete agreements		15,400		(8,299	)		7,101		15,400		(5,219	)		10,181
Other		1,612		(1,031	)		581		1,786		(740	)		1,046
Total identifiable intangible assets	$	89,846	$	(28,585	)	$	61,261	$	88,441	$	(18,219	)	$	70,222

Amortization expense for identifiable intangible assets was $10.5 million, $11.3 million and $11.2 million for the years ended December 31, 2003, 2002 and 2001, respectively. Following is a schedule of expected aggregate annual amortization expense for intangible assets in each of the five years following December 31, 2003 assuming no new acquisitions or impairments:

in thousands
2004	$	10,532
2005	$	10,312
2006	$	7,953
2007	$	6,989
2008	$	6,968

Goodwill at December 31, 2003 and 2002 was $165.0 million and $164.9 million, respectively. More than 80% of the balances at December 31, 2003 and 2002 represented goodwill resulting from Federated’s acquisition of substantially all of the business of Edgemont Asset Management Corporation in 2001 (see Note (19) Business Combinations).

The following table presents adjusted net income for the years ended December 31, 2003, 2002 and 2001, reflecting net income and basic and diluted earnings per share as though Federated had adopted the provisions of SFAS 142 on January 1, 2001:

in thousands, except per share data	2003		2002		2001
Net income	$	191,485	$	203,760	$	168,447
Add back: Goodwill amortization, net of tax		0		0		4,613
Adjusted net income	$	191,485	$	203,760	$	173,060
Basic earnings per share	$	1.78	$	1.81	$	1.46
Add back: Goodwill amortization, net of tax		0.00		0.00		0.04
Adjusted basic earnings per share	$	1.78	$	1.81	$	1.50
Diluted earnings per share	$	1.71	$	1.74	$	1.40
Add back: Goodwill amortization, net of tax		0.00		0.00		0.04
Adjusted diluted earnings per share	$	1.71	$	1.74	$	1.44

Federated Investors 2003 Annual Report 41

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

(4) Property and Equipment

Property and equipment consisted of the following at December 31:

in thousands	Estimated Useful Life	2003			2002
Computer equipment1	Up to 4 years	$	23,220		$	19,104
Transportation equipment	25 years		11,933			11,920
Leasehold improvements	Term of lease		10,992			10,727
Software development	4 years		10,114			13,744
Office furniture and equipment	10 years		9,055			12,185
Total cost/fair value			65,314			67,680
Accumulated depreciation			(34,422	)		(33,958	)
Property and equipment, net		$	30,892		$	33,722

1 Amounts include $3,185 and $2,901 recorded under capital lease arrangements for 2003 and 2002, respectively.

Depreciation expense was $9.3 million for the year ended December 31, 2003 and $8.4 million for both years ended December 31, 2002 and 2001, and included the depreciation of assets recorded under capital lease arrangements.

During the fourth quarter 2002, Federated evaluated the recoverability of the assets associated with its retirement services operations, consisting primarily of internally developed software. The implementation date of the internally developed software was significantly delayed as a result of ongoing development efforts. This delay negatively impacted the estimate of future cash flows expected to be generated by the assets. Based on this evaluation, management determined that the assets were impaired and recorded a $2.1 million pretax charge in “Operating Expenses – Other” to write down the carrying value of the assets to estimated fair value as of December 31, 2002. Fair value was estimated based on expected future cash flows discounted using a risk-free rate.

(5) Recourse Debt

Federated’s total recourse debt balance of $1.6 million and $2.3 million at December 31, 2003 and 2002, respectively, represented liabilities on capital leases. During 2002, Federated repaid all outstanding liabilities on the capital leases held as of December 31, 2001. Federated entered into three new capital leases for computer hardware in 2002 and one in 2003. The capital leases carry interest rates ranging from 2.90% to 4.55% with weighted-average interest rates of 3.77% and 3.92% at December 31, 2003 and 2002, respectively. The four capital leases outstanding at December 31, 2003 have expiration dates that range from the first quarter 2005 to the first quarter 2006. The aggregate contractual maturities of the capital leases are $1.2 million and $0.6 million in 2004 and 2005, respectively. These contractual maturity amounts include executory costs of $0.1 million and imputed interest costs of $0.1 million.

As of December 31, 2003, Federated was able to borrow up to $150.0 million under the provisions of the Second Amended and Restated Credit Agreement as amended (the Credit Facility), the term of which expired in January 2004. Under this agreement, Federated paid a facility fee of 0.10% on the revolving credit commitment. At December 31, 2003, the outstanding balance under the Credit Facility was zero. The Credit Facility contained various financial and nonfinancial covenants. Federated was in compliance with all such covenants at December 31, 2003. On January 16, 2004, Federated renewed the Credit Facility (see Note (21)) for an additional 364-day term. Several of Federated’s wholly owned subsidiaries guarantee any obligation of Federated that arises pursuant to the Credit Facility.

In September 2003, a wholly owned subsidiary of Federated entered into a discretionary line of credit agreement with a bank under which it can borrow up to $50 million for the payment of obligations associated with daily net settlements of mutual funds processed through the National Securities Clearing Corporation. Borrowings under this 364-day agreement bear interest at a rate mutually agreed upon by the bank and the borrower at the time of the borrowing and are payable on demand. At December 31, 2003, there was no outstanding balance under this agreement. Federated guarantees the payment of any obligation owed by the subsidiary in connection with this line of credit.

On December 31, 2001, Federated repaid the remaining balance of $70.0 million on the Senior Secured Note Purchase Agreements (the Notes), which were scheduled to mature in June 2006. The Notes carried a fixed interest rate of 7.96%. In connection with the early retirement of the Notes, Federated paid a make-whole amount equal to $6.6 million pretax. The make-whole payment was recorded as “Debt expense – recourse” in the Consolidated Statements of Income.

42

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

(6) Deferred Sales Commissions and Nonrecourse Debt

Deferred sales commissions consisted of the following at December 31:

in millions	2003		2002
Deferred sales commissions on B shares, net	$	324.0	$	318.2
Other deferred sales commissions, net		3.7		1.9
Deferred sales commissions, net	$	327.7	$	320.1

In 2003, Federated recorded deferred sales commissions relating to sales commissions on B shares as of December 31, 2003 and 2002, to reflect financing accounting treatment consistently for all periods.

Since 1997, Federated has funded sales commissions paid for Class B shares of Federated-sponsored mutual funds under various arrangements with independent third parties by selling its right to future cash flow streams associated with the B-share deferred sales commissions. As a result of these funding arrangements, Federated has recorded nonrecourse debt, which comprised the following at December 31:

	Weighted- Average Interest Rates				Remaining Amortization Period	2003		2002
dollars in millions	2003		2002
Financings through March 1997	7.60	%	7.60	%	1.3 years	$	13.2	$	17.1
Financings between April 1997 and September 2000	8.06	%	7.93	%	5 years		147.0		172.8
Financings between October 2000 and December 2003	5.55	%	6.58	%	8 years		166.9		129.4
Total long-term debt – nonrecourse						$	327.1	$	319.3

In 2003, Federated recorded nonrecourse debt as of December 31, 2003 and 2002, to reflect financing accounting treatment consistently for all periods.

Federated’s nonrecourse debt does not contain a contractual maturity but is amortized over eight years dependent upon the cash flows of the related B-share fund assets, which are applied first to interest and then principal. Interest rates are imputed based on current market conditions at the time of issuance.

In December 2003, Federated signed an agreement with an independent financial institution to continue funding the B-share sales commissions through December 2006.

In 2001, Federated sold its retained interest in residual cash flows under its first funding arrangement. As a result, Federated recorded a $9.0 million pretax gain in “Nonoperating Income (Expenses) – Other, net” in the Consolidated Statements of Income.

(7) Employee Benefit Plans

(a) 401(k)/Profit Sharing Plan

Federated offers a 401(k) plan covering substantially all employees. Under the 401(k) plan, employees can make salary deferral contributions at a rate of 1% to 25% of their annual compensation (as defined in the 401(k) plan), subject to Internal Revenue Code limitations. Federated makes a matching contribution in an amount equal to 100% of the first 2% that each participant deferred and 50% of the next 4% of deferral contributions. Forfeitures of nonvested matching contributions are used to offset future matching contributions.

Vesting in Federated’s matching contributions commences once a participant in the 401(k) plan has been employed at least two years and worked at least 1,000 hours per year. Upon completion of two years of service, 20% of Federated’s contribution included in a participant’s account vests and 20% vests for each of the following four years if the participant works 1,000 hours per year. Employees are immediately vested in their 401(k) salary deferral contributions.

Matching contributions to the 401(k) plan amounted to $3.3 million, $3.5 million and $3.4 million for the years ended December 31, 2003, 2002 and 2001, respectively.

A Federated employee becomes eligible to participate in the Profit Sharing Plan upon the first day of employment. The Profit Sharing Plan is a defined contribution plan to which Federated may contribute amounts as authorized by its board of directors. No contributions have been made to the Profit Sharing Plan in 2003, 2002 or 2001. At December 31, 2003, the Profit Sharing Plan held 1.6 million shares of Federated Class B common stock.

Federated Investors 2003 Annual Report 43

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

(b) Employee Stock Purchase Plan

Federated offers an Employee Stock Purchase Plan which allows employees to purchase a maximum of 750,000 shares of Class B common stock. Employees may contribute up to 10% of their salary to purchase shares of Federated’s Class B common stock on a quarterly basis at the market price. The shares under the plan may be newly issued shares, treasury shares or shares purchased on the open market. As of December 31, 2003, 65,170 shares were purchased by the plan on the open market since the plan’s inception in 1998.

(8) Other Compensation Plans

Federated’s long-term incentive compensation has been provided for under the Stock Incentive Plan, as amended and subsequently approved by shareholders in April 2002. Stock-based awards are granted to reward Federated’s employees and independent directors who have contributed to the success of Federated and to provide incentive to increase their efforts on behalf of Federated. Under the plan, a total of 20.3 million shares of Class B common stock have been authorized for granting stock-based awards in the form of restricted stock, stock options or other stock-based awards. For existing plans, vesting occurs over a 0- to 10-year period and, in certain cases, may be accelerated as a result of meeting specific performance criteria.

(a) Restricted Stock

Under the Stock Incentive Plan and subject to restrictions, Federated has sold shares of Class B common stock to certain key employees. During the restricted period, the recipient receives dividends on the shares. In 2003, 40,000 shares of Class B common stock with a fair value of $22.08 per share were sold under the Stock Incentive Plan. No such sales under the Stock Incentive Plan occurred in 2002 and 2001. Forfeitures of 146,250 shares occurred in 2002; no forfeitures occurred in either 2003 or 2001. Compensation expense related to the Stock Incentive Plan was $0.5 million, $0.1 million and $0.3 million for the years ended 2003, 2002 and 2001, respectively.

(b) Stock Options

In 2001, 45,000 employee stock options were granted, 199,980 options were awarded to executive officers in lieu of a portion of their 2000 earned bonus awards and 12,000 options were awarded to independent directors. In 2002, 430,000 employee stock options were granted, 200,000 options were awarded to executive officers in lieu of a portion of their 2001 earned bonus awards, 315,624 options were awarded to executive and senior management in connection with their 2002 earned bonus awards and 6,750 options were awarded to independent directors. In 2003, 6,750 employee stock options were awarded to independent directors. Each vested option may be exercised, during the stated exercise period, for the purchase of one share of Class B common stock at the exercise price. In 2003, 479,037 stock options were exercised.

The following table summarizes the status of and changes in Federated’s stock option program during the past three years:

	Options		Weighted-Average Exercise Price		Options Exercisable	Weighted-Average Exercise Price
Outstanding at beginning of 2001	12,167,200		$	13.88	1,744,500	$	6.54
Granted	256,980		$	29.50
Exercised	(693,600	)	$	1.57
Forfeited	(174,175	)	$	12.09
Outstanding at end of 2001	11,556,405		$	15.00	1,259,880	$	13.07
Granted	952,374		$	28.96
Exercised	(14,000	)	$	15.55
Forfeited	(583,975	)	$	15.13
Outstanding at end of 2002	11,910,804		$	16.11	1,771,254	$	17.37
Granted	6,750		$	27.22
Exercised	(479,037	)	$	8.67
Forfeited	(292,975	)	$	10.55
Outstanding at end of 2003	11,145,542		$	16.58	1,302,217	$	20.64

44

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

Additional information regarding stock options outstanding at December 31, 2003, follows:

Range of Exercise Prices	Outstanding	Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in Years)	Exercisable	Weighted-Average Exercise Price of Exercisable Options
$1.28 to $1.29	2,186,100	$	1.28	1.6	0	$	0.00
$4.00 to $6.20	1,766,175	$	4.19	3.6	150,000	$	6.20
$11.00 to $13.29	1,800,150	$	12.65	5.3	416,850	$	12.52
$17.75 to $25.35	2,268,887	$	24.23	7.6	314,137	$	25.30
$26.95 to $35.00	3,124,230	$	31.00	7.7	421,230	$	30.35
	11,145,542	$	16.58	5.5	1,302,217	$	20.64

Information regarding the fair value of options granted in 2003, 2002 and 2001 follows:

	2003		2002		2001
Exercise price equals market price on date of grant:
Weighted-average grant-date fair value	$	7.16	$	10.29	$	13.07
Weighted-average exercise price	$	27.22	$	28.96	$	29.50

No awards were granted with an exercise price that was less than or greater than the market price on the date of grant in 2003, 2002 or 2001.

Total compensation expense related to stock options was $1.1 million, $0.2 million and $0.3 million for the years ended December 31, 2003, 2002 and 2001, respectively.

(9) Common Stock

The Class A common stockholder has the entire voting rights of Federated; however, without the consent of the majority of the holders of the Class B common stock, the Class A common stockholder cannot alter Federated’s structure, dispose of all or substantially all of Federated’s assets, amend the Articles of Incorporation or Bylaws of Federated to adversely affect the Class B common stockholders, or liquidate or dissolve Federated.

Cash dividends of $32.5 million, $24.8 million and $20.5 million were paid in 2003, 2002 and 2001, respectively, to holders of common stock.

In 2003, 2002 and 2001, the board of directors approved various share repurchase programs authorizing Federated to purchase Federated Class B common stock. Under the programs, shares can be repurchased in open market and private transactions through the life of the program. The programs authorize executive management to determine the timing and the amount of shares for each purchase. The repurchased stock will be held in treasury for employee benefit plans, potential acquisitions and other corporate activities. As of December 31, 2003, under these programs, Federated can repurchase an additional 4.9 million shares.

Stock repurchases and dividend payments are subject to restrictions under Federated’s Credit Facility, as amended. These restrictions limit cash payments for additional stock repurchases and dividends to 50% of net income earned during the period from January 1, 2000, to and including the payment date, less certain payments for dividends and stock repurchases. As of December 31, 2003, Federated, given current debt covenants as disclosed in Note (21), had the ability to make additional stock repurchase or dividend payments of more than $213 million under these restrictions.

(10) Leases

Federated has various operating lease agreements primarily involving facilities, office and computer equipment and vehicles. These leases are noncancelable and expire on various dates through the year 2014. Most leases include renewal options and, in certain leases, escalation clauses.

Federated extended the term of its operating lease for its corporate headquarters building in Pittsburgh, Pennsylvania, by signing an amendment, dated as of December 31, 2003, to the original lease agreement. The amended building lease expires in 2014, with renewal options for two successive terms of five years each. The amendment also provides for escalation clauses and certain penalties for early termination.

Federated Investors 2003 Annual Report 45

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

The following is a schedule by year of future minimum rental payments required under the operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2003:

in thousands
2004	$	13,245
2005		12,558
2006		11,618
2007		10,110
2008		9,078
2009 and thereafter		39,354
Total minimum lease payments	$	95,963

Federated began subleasing certain leased property in 2002. As of December 31, 2003, aggregate future minimum rentals to be received under a noncancelable sublease that expires in 2007 totaled $2.2 million.

Rental expenses were $14.1 million, $16.0 million and $17.3 million for the years ended December 31, 2003, 2002 and 2001, respectively.

(11) Income Taxes

Federated files a consolidated federal income tax return. Financial statement tax expense is determined under the liability method.

Income tax expense consisted of the following components for the years ended December 31:

in thousands	2003		2002		2001
Current:
Federal	$	101,870	$	102,022	$	111,729
State		3,655		1,760		984
Foreign		598		518		508
		106,123		104,300		113,221
Deferred:
Federal		1,992		7,654		(18,633	)
Total	$	108,115	$	111,954	$	94,588

For the years ended December 31, 2003, 2002 and 2001, the foreign subsidiaries had net income of $4.7 million, $4.0 million and $4.4 million, respectively, for which income tax expense of $1.9 million, $1.6 million and $1.7 million, respectively, has been provided.

Federated’s effective income tax rate was 36.1%, 35.5% and 36.0% for the years ended December 31, 2003, 2002 and 2001, respectively. Differences between the statutory federal tax rate and the effective tax rate for these years are due primarily to state income taxes and the nondeductibility of certain meals and entertainment expenses and in 2001, the amortization of certain nondeductible goodwill.

46

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

The tax effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities consisted of the following as of December 31:

in thousands	2003			2002
Deferred Tax Assets
Unrealized losses and impairment losses on marketable securities1	$	7,041		$	6,948
Capital losses2		2,968			3,936
Intangible assets		0			3,298
Other		4,618			2,377
Total gross deferred tax asset		14,627			16,559
Valuation allowance for capital loss carry-forwards2		(2,348	)		(2,348	)
Total deferred tax asset, net of valuation allowance	$	12,279		$	14,211
Deferred Tax Liabilities
Intangible assets	$	635		$	0
Deferred sales commissions		22,183			21,928
Costs of internal-use software		2,164			3,055
Other		3,366			3,127
Total gross deferred tax liability	$	28,348		$	28,110
Net deferred tax liability	$	16,069		$	13,899

1 $6,614 of this amount represents deferred tax assets generated by the impairment charges recorded to write down the value of Federated’s three CBOs. The amount of actual capital loss associated with Federated’s investment in the CBOs will not be known until such time as Federated’s investments in the CBOs are either redeemed or sold. The five-year carry-forward period will begin in the first tax year after Federated’s CBO investments are disposed. Management believes it is more likely than not that Federated will be able to utilize the capital loss carry-forwards in the future.

2 $2,613, $249, and $106 of this capital loss deferred tax asset will be carried forward and will expire in 2006, 2007 and 2008, respectively. A valuation allowance has been recognized on a portion of this deferred tax asset due to management’s uncertainty of realizing the benefit of these capital loss carry-forwards.

(12) Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share for the years ended December 31:

in thousands, except per share data	2003		2002		2001
Numerator
Net income	$	191,485	$	203,760	$	168,447
Denominator
Denominator for basic earnings per share - weighted-average shares less nonvested restricted stock		107,839		112,375		115,012
Effect of dilutive securities:
Dilutive potential shares from stock-based compensation		4,220		4,929		4,980
Denominator for diluted earnings per share - adjusted weighted-average shares and assumed conversions		112,059		117,304		119,992
Basic earnings per share	$	1.78	$	1.81	$	1.46
Diluted earnings per share	$	1.71	$	1.74	$	1.40

Federated uses the treasury stock method to reflect the dilutive effect of unvested restricted stock and unexercised stock options in diluted earnings per share. For the years ended December 31, 2003, 2002 and 2001, options to purchase 2.9 million, 1.8 million and 1.7 million shares of common stock, respectively, at a weighted-average exercise price per share of $31.37, $32.93 and $32.59, respectively, were outstanding but not included in the computation of diluted earnings per share for each year because the option exercise price was greater than the average market price of Federated Class B common stock. Under the treasury stock method, if the average market price of Federated common stock increases above the option’s exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be assumed to be used to acquire outstanding shares of Federated common stock. As such, the dilutive effect of such shares of options would result in the addition of a net number of shares to the weighted-average number of shares used in the calculation of diluted earnings per share.

Federated Investors 2003 Annual Report 47

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

(13) Accumulated Other Comprehensive Income

The components of accumulated other comprehensive income (loss), net of tax, are as follows:

in thousands	Unrealized Gain/(Loss) on Securities Available for Sale			Foreign Currency Translation Gain/(Loss)			Total
Balance at January 1, 2001	$	(2,628	)	$	(118	)	$	(2,746	)
Total change in market value1		(2,072	)		0			(2,072	)
Reclassification adjustment – net realized loss2		4,582			0			4,582
Loss on currency conversion3		0			(50	)		(50	)
Balance at December 31, 2001		(118	)		(168	)		(286	)
Total change in market value1		(1	)		0			(1	)
Reclassification adjustment – net realized loss2		114			0			114
Gain on currency conversion3		0			194			194
Balance at December 31, 2002		(5	)		26			21
Total change in market value1		78			0			78
Reclassification adjustment – net realized gain2		(1	)		0			(1	)
Gain on currency conversion3		0			274			274
Balance at December 31, 2003	$	72		$	300		$	372

1 The tax (expense)/benefit on the change in market value of securities available for sale was $(42), $1 and $1,116 for 2003, 2002 and 2001, respectively.

2 The tax (expense)/benefit on the reclassification adjustment for securities available for sale was $(1), $62 and $2,468 for 2003, 2002 and 2001, respectively.

3 The tax (expense)/benefit on the foreign currency translation gain/loss was $(148), $(104) and $27 for 2003, 2002 and 2001, respectively.

(14) Disclosures of Fair Value

Estimated fair values of Federated’s financial instruments have been determined using available market information and appropriate valuation methodologies, as set forth below. These fair values are not necessarily indicative of the amounts that would be realized upon exchange of these instruments or Federated’s intent to dispose of these instruments.

Carrying amounts approximate fair value for the following financial instruments due to their short maturities:

• Cash and cash equivalents

• Receivables

• Accrued revenue

• Accrued expenses

• Accounts payable

Marketable securities are carried at fair value (see Note (1)(g)).

Federated’s recourse debt is comprised of capital lease liabilities. The fair value of each capital lease liability is estimated based on the current market rate for debt with a similar remaining maturity. Based on this fair value estimate, the carrying value of capital lease liabilities appearing in the Consolidated Balance Sheets approximate fair value.

With respect to Federated’s nonrecourse debt, based on the nature of the debt and the uncertainty of the amounts and timing of the cash flows, Federated is not able to determine its fair value. (See Note (6) for further information regarding Federated’s nonrecourse debt.)

(15) Minority Interest in Subsidiaries and Equity Investments

A subsidiary of Federated Investors, Inc. has a majority interest (50.5%) and acts as the general partner in Passport Research Ltd., a limited partnership. Edward D. Jones & Co., L.P. is the limited partner with a 49.5% interest. The partnership acts as investment adviser to two registered investment companies.

Another subsidiary of Federated Investors, Inc. owns a majority interest (90%) in InvestLink Technologies, Inc., a software developer and marketer of applications for the recordkeeping, administration and servicing of defined contribution plans.

48

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

Federated owns a 50% interest in a joint-venture company, Federated Asset Management GmbH, which administers separate accounts and distributes Federated offshore fund products in Germany. This joint venture is accounted for under the equity method of accounting.

(16) Variable Interest Entities

Federated acts as the investment manager for two high-yield CBO products and a mortgage-backed CBO product pursuant to the terms of an investment management agreement between Federated and each CBO. The CBOs are alternative investment vehicles created in 1999 and 2000 for the sole purpose of issuing collateralized debt instruments that offer investors the opportunity for high return. The CBOs are subject to greater risk than traditional investment products. The notes issued by the CBOs are backed by diversified portfolios consisting primarily of structured debt and had original expected maturities of five to twelve years. As a result of their corporate governance, the CBOs meet the definition of a VIE under FIN 46. After performing an expected cash flow analysis for each CBO, management determined that Federated is not the primary beneficiary of the CBOs as defined by FIN 46 and thus is not required to consolidate the financial condition and results of operations of these CBOs in Federated’s Consolidated Financial Statements. As of December 31, 2003, aggregate total assets and aggregate total obligations of the CBOs approximated $1.1 billion, respectively.

Federated holds a minor investment in each CBO, which exposes it to risk of loss to the extent of the carrying value of the investments. As of December 31, 2003, the remaining $0.6 million carrying value of these investments represented Federated’s maximum exposure to loss over the remaining life of the CBOs.

(17) Related Party Transactions

Federated provides investment advisory, administrative, distribution and shareholder services to various Federated products including the Federated group of funds (Federated funds or affiliates). All of these services provided for the Federated funds are under contracts that definitively set forth the fees to be charged for these services and are approved by the funds’ independent directors/trustees. Federated may waive certain fees charged for these services in order to make the Federated funds more competitive or to meet regulatory requirements. At December 31, 2003 and 2002, Federated’s receivable from affiliates totaled $33.2 million and $28.2 million, respectively.

At December 31, 2003 and 2002, Federated’s payable to affiliates totaled $9.2 million and $0.2 million, respectively. For 2003, $9.1 million of this amount related to past mutual fund trading practices (see Note (20) Commitments and Contingencies for more detail). The remaining amounts primarily represent fund-related expenses assumed by Federated in certain cases in order to help a fund meet regulatory requirements.

(18) Concentration Risk

In terms of revenue concentration by product, approximately 10% of Federated’s total revenue for 2003 was derived from services provided to one Federated-sponsored fund. In addition, approximately 12% of Federated’s total revenue for 2003 related to one customer. In both cases, the majority of this revenue is dependent upon the level of assets under management in numerous individual fund shareholder accounts.

(19) Business Combinations

In the third quarter 2003, assets of eight mutual funds previously advised by Riggs Investment Advisors, Inc., a subsidiary of Riggs National Corporation, totaling approximately $465 million were acquired by eight Federated-sponsored mutual funds (Riggs Acquisition). This acquisition occurred in connection with an agreement between Federated, Riggs Investment Advisors, Inc., and Riggs Bank N.A. In the second quarter 2002, Federated signed an agreement with FirstMerit Advisors, Inc. and FirstMerit Corporation pursuant to which assets totaling approximately $250 million, previously advised by FirstMerit, were acquired by various Federated funds (FirstMerit Acquisition). In the fourth quarter 2001, assets of three mutual funds previously advised by Rightime Econometrics, Inc., totaling approximately $148 million, were acquired by Federated Capital Appreciation Fund in connection with an agreement between Federated, Lincoln Investment Planning, Inc. and Rightime Econometrics, Inc. (Rightime Acquisition). The upfront purchase price for each of these acquisitions was capitalized as an investment advisory contract intangible asset. The agreements also require Federated to pay certain contingent payments on a periodic basis (either monthly or quarterly) over the three- to five-year periods following the completion of the acquisitions calculated as a percentage of assets under management. See Note (20) Commitments and Contingencies for details regarding these contingent payments.

In the second quarter 2001, Federated completed the acquisition of substantially all of the business of Edgemont Asset Management Corporation, the former adviser of The Kaufmann Fund (Edgemont Acquisition). The purchase price for this acquisition was $182.9 million. This price included cash payments of $174.0 million, including transaction costs, and 315,732 shares of Federated Class B common stock valued at $8.9 million. The acquisition agreement provides for additional purchase price payments and incentive compensation payments based upon the achievement of specified revenue growth through 2007 (see Note (20) Commitments and Contingencies). This acquisition was accounted for using the purchase method of accounting and, accordingly, the fair value of the

Federated Investors 2003 Annual Report 49

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

assets acquired, primarily $77.0 million of identifiable intangible assets and $105.7 million of goodwill as of the acquisition date, as well as the results of those assets were included in Federated’s Consolidated Financial Statements beginning on the date of acquisition. The amount assigned to intangible assets represents the fair value of the advisory contract, the noncompete agreement and the workforce as of the acquisition date. These assets are being amortized on a straight-line basis over their useful lives, which range from four to ten years with a weighted average life of nine years. In addition, $33.1 million of additional purchase price was paid in 2002 and was recorded as goodwill.

(20) Commitments and Contingencies

(a) Contractual

Pursuant to various acquisition agreements entered into by Federated in 2003, 2002 and 2001, Federated is required to make additional payments to the seller in each acquisition contingent upon the occurrence of certain events. Pursuant to the Edgemont Acquisition agreement, Federated could pay an additional $132.3 million as contingent purchase price and $26.9 million as contingent incentive compensation between 2004 and 2007 with as much as $79.6 million in total contingent payments payable in the second quarter 2004 if certain revenue targets are met. The purchase price payments are recorded as additional goodwill at the time of payment while the incentive compensation payments are recognized as compensation expense during the periods in which the payments are earned. In 2003, no contingent payments were made. In 2002, Federated made contingent payments of $40.0 million, $33.1 million of which was recorded as goodwill.

Pursuant to the Rightime, FirstMerit and Riggs Acquisitions, Federated is required to make contingent payments on a periodic basis calculated as a percentage of average assets under management in certain Federated fund shareholder accounts for which the seller is the named broker/dealer of record. In the case of the Rightime Acquisition, the payments occur quarterly and could continue through first quarter 2007. These contingent payments are considered to be additional purchase price payments. As of December 31, 2003, Federated had recorded a liability of $0.7 million representing the present value of expected future contingent purchase price payments relating to the assets under management originally acquired in connection with the Rightime Acquisition. Contingent payments relating to the FirstMerit Acquisition occur on a monthly basis through third quarter 2005. Contingent payments for the Riggs Acquisition occur quarterly and could continue through fourth quarter 2008. As the level of payments eligible under the FirstMerit and Riggs Acquisitions are commensurate with payments made to other brokers for similar services, these payments are expensed as incurred.

Federated has various lease agreements primarily involving facilities, office and computer equipment and vehicles. See Notes (5) Recourse Debt and (10) Leases for additional information on these contractual obligations.

(b) Internal Review of Mutual Fund Trading Activities

In September 2003, Federated received detailed requests for information on shareholder trading activity in Federated-sponsored mutual funds from the Securities and Exchange Commission, the New York State Attorney General and the National Association of Securities Dealers. Federated’s Board of Directors (Board) retained the law firm of Reed Smith LLP to assist Federated in responding to these requests and to conduct an internal review of the trading activity matters identified in the requests. The Board established a special investigative committee consisting of three independent directors, Federated’s chief executive officer and its chief legal officer, to oversee the review and make recommendations to the full Board. Attorneys from the law firm of Dickstein Shapiro Morin & Oshinsky, LLP, independent counsel for the Federated mutual funds, participated in the review and reported on its progress to the independent directors of the funds. In November, the Board also retained the law firm of Davis Polk & Wardwell to assist in the review.

The internal review of trading activity matters found that Federated personnel had arranged with three customers to permit frequent trading to occur in six domestic equity and two high-yield funds advised by Federated. Two arrangements were made in 2002 and one in 2003. The review also found that certain internal frequent trading reports were not reviewed during the period from May to September 2003, enabling two customers to engage in frequent trading in Federated funds during the period.

The review found that one of the investors who, without arrangement with Federated, engaged in frequent trading, also made late trades in Federated-advised funds by placing orders after the 4:00 p.m. cut-off time as stated in the fund’s prospectus. The review determined that during the past five years, Federated employees incorrectly accepted certain other late orders, but that these amounted to no more than a fraction of one percent of the total orders processed, and did not have any material impact on the funds. The review found no evidence that Federated or any of its employees had an arrangement with investors to accept late trades.

The internal review also found instances in which two portfolio managers engaged in trading within funds they managed that the Company regarded as unacceptable and two instances in which Federated employees improperly placed orders for fluctuating net asset value funds after 4:00 p.m. During the course of the review, attorneys also identified one instance in which an employee intentionally deleted e-mail messages related to the information subject to the investigation. Two employees have been terminated, two officers have resigned and five officers have been sanctioned in connection with the internal review.

The independent directors of the Federated mutual funds retained an independent expert to determine the impact on the funds from the trading activities identified in the review. Based upon this expert’s findings, Federated established a restoration fund of approximately $7.6 million to compensate for the detrimental impact of the improper trading activities described above. The independent directors of the funds have not yet determined how to distribute the restoration fund and no government agency has passed on the establishment or amount of the restoration fund.

50

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

The Consolidated Financial Statements for the year ended December 31, 2003 reflect pretax charges of approximately $7.6 million for the restoration fund and approximately $13.5 million ($12.4 million of which was recorded in the fourth quarter of 2003) for other expenses related to the review, including expenses incurred by the funds. These amounts do not include fines, penalties or other amounts that may be sought by governmental agencies or through claims asserted in private litigation. In order to estimate the accrual for certain other expenses relating to Federated’s commitment to remedy any damages to the Federated funds, management made assumptions concerning the timing and effort involved to finalize the internal review and distribute the restoration fund. If actual experience differs significantly from the judgments used to determine the initial estimate, the amount recorded at December 31, 2003 would be subject to revision.

Federated is continuing to cooperate with ongoing governmental investigations, and will conduct further investigation as necessary.

(c) Legal Proceedings

During the period October 2003 through February 2004, Federated was named as a defendant in 11 class action or derivative lawsuits filed on behalf of certain alleged shareholders in various Federated-sponsored mutual funds. Eight of these actions are pending in the United States District Court for the Western District of Pennsylvania, one is pending in the United States District Court for the Southern District of New York, one is pending in the United States District Court for the Central District of California and one is pending in the United States District Court for the Middle District of Florida. The Company is awaiting a court decision as to the consolidation of these cases and their proper venue. The cases generally involve claims arising from allegations that Federated illegally permitted improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused injury to the mutual fund shareholders. The case in Florida involves claims for excessive advisory and Rule 12b-1 fees allegedly charged to the Federated Kaufmann Fund. The suits seek unquantified damages, attorneys’ fees and expenses. Federated intends to defend this litigation.

In addition, Federated has other claims asserted against it that result from litigation in the ordinary course of business. In the opinion of management, after consultation with counsel, it is unlikely that any adverse determination for any pending other claim will materially affect the financial position or results of operations of Federated.

(21) Subsequent Events

On January 16, 2004, Federated renewed its $150.0 million Credit Facility by signing Amendment No. 3 to the Second Amended and Restated Credit Agreement (the Renewed Credit Facility). The Renewed Credit Facility has a term of 364 days and can be renewed for additional 364-day terms. Under the Renewed Credit Facility, borrowings bear interest, at the option of Federated, at a defined prime rate or at a spread over the Federal Funds rate or the London Interbank Offering Rate. Federated will pay a facility fee of 0.10% on the revolving credit commitment. The Renewed Credit Facility contains restrictions that limit cash payments for dividends and stock repurchases. Cash payments for dividends and stock repurchases are restricted to 50% of net income earned during the period from January 1, 2000, to and including the payment date, less certain payments for dividends and stock repurchases. The Renewed Credit Facility includes financial and nonfinancial covenants, which are similar in nature to the covenants contained in the original Credit Facility.

On February 3, 2004, management announced its intention to outsource its transfer agent functions to Boston Financial Data Services (Boston Financial). The Company has entered into a non-binding letter of intent with Boston Financial and its parent company, State Street Bank & Trust Company, regarding negotiation of an agreement to effect the outsourcing of transfer agent activities by June 30, 2004. Negotiations with Boston Financial are in the preliminary stages and, as such, management cannot reasonably estimate the total impact this transaction will have on Federated’s results of operations or financial condition.

On February 5, 2004, the board of directors declared a $0.085 per share dividend, which was paid on February 27, 2004.

Federated Investors 2003 Annual Report 51

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

(December 31, 2003, 2002 and 2001)

(22) Supplementary Quarterly Financial Data (Unaudited)

in thousands, except per share data, for the quarters ended	March 31,		June 30,		September 30,		December 31,
2003
Revenue1	$	194,054	$	202,468	$	209,976	$	216,750
Operating income		78,805		79,984		83,169		70,504
Net income		48,711		49,060		50,940		42,774
Basic earnings per share		0.44		0.46		0.48		0.40
Diluted earnings per share		0.43		0.44		0.46		0.38
Cash dividends per share		0.057		0.070		0.085		0.085
Stock price per share2
High		27.83		28.70		30.94		31.90
Low		23.85		25.24		26.96		26.50
2002
Revenue1	$	207,289	$	206,684	$	197,495	$	197,285
Operating income		85,671		84,088		83,718		78,153
Net income		52,323		52,611		49,927		48,899
Basic earnings per share		0.46		0.47		0.45		0.44
Diluted earnings per share		0.44		0.45		0.43		0.42
Cash dividends per share		0.046		0.057		0.057		0.057
Stock price per share2
High		34.62		35.75		36.18		28.51
Low		30.01		30.05		24.45		23.43

1 Previously reported revenue reflects certain reclassifications to conform with current year presentation (see Note (1)(c) Summary of Significant Accounting Policies-Prior Period Financial Statements).

2 Federated’s common stock is traded on the New York Stock Exchange under the symbol “FII.”

The approximate number of beneficial shareholders of Federated’s Class A and Class B common stock as of March 1, 2004, was one and 16,538, respectively.

52

EX-14.01

Exhibit 14.01

Federated Investors, Inc.

Code of Ethics for Senior Financial Officers

Pursuant to the Sarbanes-Oxley Act, the Board of Directors of Federated Investors, Inc. (“Federated”) has adopted the following Code of Ethics, governing the conduct of the principal executive officer, the principal financial officer, the principal accounting officer or controller or persons performing similar functions (the “Covered Officers”). This Code of Ethics (the “Code”) is designed to deter wrongdoing and to promote:

1. Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

2. Full, fair, accurate, timely, and understandable disclosure in reports and documents that Federated files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by Federated (“Disclosure Documents”);

3. Compliance with applicable governmental laws, rules and regulations (“Regulations”);

4. The prompt internal reporting to the General Counsel or Director of Internal Audit (each a “Reporting Officer”) of violations of this Code and

5. Accountability for adherence to this Code.

General Standards

It is the policy of Federated to conduct its business and operations with integrity and high ethical and legal business standards. The Covered Officers are expected to use prudent behavior and discretion in all transactions and relationships with or on behalf of Federated. Each Covered Officer should direct the business and operations of Federated in a manner that he or she believes would deter wrongful conduct by Federated or any agent of Federated under the Covered Officer’s direct supervision.

Conflicts of Interest

A “Conflict of Interest” may arise when Federated enters into a contract or transaction with a Covered Officer, an Immediate Family Member of a Covered Officer or with a corporation, partnership, association or other organization for which a Covered Officer or an Immediate Family Member of a Covered Officer is a director, partner, officer or employee, or has a financial interest. For purposes of this Code, the following “financial interests” shall not be deemed as sufficient to create a Conflict of Interest: (a) ownership of not more than 5 % of any class of equity securities or securities convertible into equity securities, issued by a publicly traded corporation, partnership, association or other organization or (b) ownership of shares in any diversified investment company (whether or not registered with the SEC) not controlled (directly or indirectly) by a Covered Officer.

For purposes of this Code, an “Immediate Family Member” includes a spouse, parent, child, sibling, mother in law, father in law, son and daughter in law, brother and sister in law and anyone who shares such persons home.

This section sets forth what steps, if any, are appropriate to handle a Covered Officer’s Conflict of Interest in an ethical manner.

With regard to any Conflict of Interest with Federated, regardless of materiality, of which a Covered Officer becomes aware prior to Federated’s entering into the contract or transaction, giving rise to the Conflict of Interest, the Covered Officer shall notify a Reporting Officer and provide full details regarding the Conflict of Interest and the basis for its determination. Prior to Federated entering into such contract or transaction, a Reporting Officer shall make the following disclosures to the Audit Committee of the Board and to the Chief Legal Officer and the Principal Executive Officer, if such person is not the subject of the Conflict of Interest:

• the parties to and terms of the contract or transaction;

• the relationship of the contract or transaction to the Covered Officer giving rise to the Conflict of Interest;

• any conditions or procedures imposed to regulate the Conflict of Interest or safeguard Federated’s interest; and

• any other information the Audit Committee requests.

Federated shall not enter into any such contract or transaction unless the Audit Committee gives its approval, in writing, after reviewing these disclosures.

With regard to a Conflict of Interest of which a Covered Officer becomes aware after Federated’s entering into the related contract or transaction, the Covered Officer shall disclose such Conflict of Interest in the manner specified in this subsection, provided that: (a) the Covered Officer shall also disclose the circumstances that made him or her aware of the Conflict of Interest, and (b) the Reporting Officer shall investigate such circumstances and report his or her conclusions to the Audit Committee and to the Chief Legal Officer and the Principal Executive Officer, if such person is not the subject of the Conflict of Interest. A Covered Officer’s failure to disclose a Conflict of Interest shall not constitute a departure from this Code if the Audit Committee determines that the Covered Officer was not aware of such Conflict of Interest at the time of the related contract or transaction; provided that such determination shall not limit any legal right or remedy Federated may have as a result of such Conflict of Interest.

Disclosure Documents

In addition to any disclosure controls and procedures which the Covered Officers are required to establish and maintain under the Securities and Exchange Act of 1934, each Covered Officer, in directing the business and operations of Federated, shall adhere to the following standards regarding Disclosure Documents.

1. Disclosure Documents shall fully disclose all material information, in an understandable manner, as required by Regulations;

2. Disclosure Documents shall be accurate and fairly comply with applicable Regulations; and

3. Disclosure Documents shall be filed with, or otherwise submitted to, the SEC, if so required, within the time required by the SEC.

Each Covered Officer shall use reasonable efforts to provide information, direction or other support as may be reasonably requested to complete Disclosure Documents in accordance with these standards.

Compliance

Each Covered Officer shall direct Federated’s business and operations in a manner that he or she believes, in good faith, will comply with any Regulations of which he or she is aware. Each Covered Officer shall review and, if appropriate, respond to any information that the Board and the Covered Officer receives, regarding Federated’s compliance with Regulations, or the adoption or modification of Regulations. Further, each Covered Officer shall comply with, and direct those under his or her immediate supervision to comply with, any policy or procedure adopted by the Board to promote compliance with Regulations.

Reporting Violations/Sanctions

If a Covered Officer becomes aware that he has departed from this Code, he or she shall report such departure immediately to a Reporting Officer. The Reporting Officer shall report the departure to the Chief Legal Officer and the Principal Executive Officer, if such person is not the Covered Officer reporting the departure from the Code, and shall investigate promptly the circumstances relating to the potential infraction. Each Reporting Officer is also charged with investigating any allegation by a member of the Board, a shareholder of Federated, the SEC or other regulatory authority of a possible departure from this Code.

The Reporting Officer may retain legal counsel, auditors or other advisors, as he or she considers appropriate for the investigation.

Upon completion of the investigation, the Reporting Officer will report his or her findings and recommendations to the Audit Committee and the Chief Legal Officer and the Principal Executive Officer, if such person is not the subject of the investigation, in writing. If the Audit Committee concludes that the Covered Officer has violated this Code, it may impose appropriate sanctions, including:

• A reprimand,

• Disgorgement of any profit or restitution of any loss,

• Imposition of additional controls and procedures,

• Suspension,

• Termination as an officer of Federated; and

• Any other measure that the Audit Committee may decide is appropriate under the circumstances.

If warranted, the Audit Committee may also direct the Reporting Officer to notify the SEC of the violation.

No one other than the Audit Committee has the right to waive compliance with this Code by a Covered Officer. All reports and records prepared or maintained pursuant to this Code shall be

considered confidential and shall be maintained and protected accordingly. Except as otherwise required by Regulation or this Code, such matters shall not be disclosed to anyone other than the members of the Board.

Other Policies and Procedures

Any Code of Ethics, Code of Conduct or other procedures applicable to the Covered Officers and others, are separate from this Code and are not part of this Code.

Amendments

This Code may not be amended except in written form, which is specifically approved by a majority vote of the Board.

Internal Use

The Code is intended solely for the internal use by Federated and does not constitute an admission, by or on behalf of Federated, as to any fact, circumstance, or legal conclusion.

Annual Certification

Each Covered Officer shall acknowledge in writing at least annually that: (i) he or she has reviewed this Code and (ii) since the date of his or her last certification, he or she has complied in all material respects with this Code.

Adopted: October 21, 2003

EX-21.01

EXHIBIT 21.01

SIGNIFICANT SUBSIDIARIES OF FEDERATED INVESTORS, INC.:

Federated Securities Corp., a Pennsylvania corporation

Federated Investors Management Company, a Pennsylvania corporation

FII Holdings, Inc., a Delaware corporation

Federated Investment Management Company, a Delaware statutory trust

Federated Investment Counseling, a Delaware statutory trust

Federated Global Investment Management Corp., a Delaware corporation

Federated International Management Limited, an Ireland company

Passport Research Ltd., a Pennsylvania general partnership

Federated Services Company, a Pennsylvania corporation

Federated Funding 1997-1, Inc., a Delaware corporation

Federated Investors Trust Company, a New Jersey bank

Federated Administrative Services, a Delaware statutory trust

Federated Shareholder Services Company, a Delaware statutory trust

Retirement Plan Service Company of America, a Delaware statutory trust,

doing business as “Federated Retirement Plan Services Company” and “Federated

Retirement Solutions”

Edgewood Services, Inc., a New York corporation

Federated Administrative Services, Inc., a Pennsylvania corporation

Federated Private Asset Management, Inc., a Delaware corporation

Federated International Holdings B.V., a Netherlands company

InvestLink Technologies, Inc., a Delaware corporation

Federated International—Europe GmbH, a German company

Federated Advisory Services Company, a Delaware statutory trust

Federated Financial Services, Inc., a Pennsylvania corporation

Federated Equity Management Company of Pennsylvania, Delaware statutory trust

Passport Research II, Ltd., a Pennsylvania general partnership

EX-23.01

Exhibit 23.01

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-56429) pertaining to the Federated Investors, Inc. Employee Stock Purchase Plan and the Registration Statement (Form S-8 No. 333-62471) pertaining to the Federated Investors, Inc. 2000 Stock Incentive Plan of our report dated February 19, 2004, with respect to the consolidated financial statements of Federated Investors, Inc. incorporated by reference in the Annual Report (Form 10-K) for the year ended December 31, 2003.

/s/    Ernst & Young LLP

Pittsburgh, Pennsylvania

March 10, 2004

EX-31.01

EXHIBIT 31.01

CERTIFICATIONS

I, J. Christopher Donahue, certify that:

1. I have reviewed this annual report on Form 10-K of Federated Investors, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date	March 12, 2004	By:	/s/    J. Christopher Donahue
			J. Christopher Donahue President and Chief Executive Officer

EXHIBIT 31.01

CERTIFICATIONS

I, Thomas R. Donahue, certify that:

1. I have reviewed this annual report on Form 10-K of Federated Investors, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonable likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date	March 12, 2004	By:	/s/    Thomas R. Donahue
			Thomas R. Donahue Chief Financial Officer

EX-32.01

EXHIBIT 32.01

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Federated Investors, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date	March 12, 2004	By:	/s/    J. Christopher Donahue
			J. Christopher Donahue President and Chief Executive Officer

Date	March 12, 2004	By:	/s/    Thomas R. Donahue
			Thomas R. Donahue Chief Financial Officer