FEDERATED INDEX TRUST

485BPOS 1 form.htm FEDERATED INDEX TRUST



                                                      1933 Act File No. 33-33852
                                                      1940 Act File No. 811-6061


                          SECURITIES AND EXCHANGE COMMISSION
                                 Washington, DC 20549

                                      Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933              X

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

    Post-Effective Amendment No.   28 ......................         X

                                        and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940      X

    Amendment No.   30 .....................................         X

                                FEDERATED INDEX TRUST
                  (Exact Name of Registrant as Specified in Charter)
                              Federated Investors Funds
                                 5800 Corporate Drive
                         Pittsburgh, Pennsylvania 15237-7000
                       (Address of Principal Executive Offices)

                                    (412) 288-1900
                           (Registrant's Telephone Number)
                              John W. McGonigle, Esquire
                              Federated Investors Tower
                                 1001 Liberty Avenue
                         Pittsburgh, Pennsylvania 15222-3779
                       (Name and Address of Agent for Service)
                  (Notices should be sent to the Agent for Service)


It is proposed that this filing will become effective:

 _  immediately upon filing pursuant to paragraph (b)
 __ on _______________   pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a) (i)
 X  on December 30, 2003 pursuant to paragraph (a) (i)
    75 days after filing pursuant to paragraph (a)(ii)
    on ________________  pursuant to paragraph (a)(ii) of Rule 485.


If appropriate, check the following box:

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



                                      Copies To:

                             Matthew G. Maloney, Esquire
                       Dickstein, Shapiro, Morin & Oshinsky, LLP
                                  2101 L Street, NW
                                 Washington, DC 20037

[Logo of Federated Investors]

Federated Max-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

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December 31, 2003

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INSTITUTIONAL SERVICE SHARES

A mutual fund seeking to provide investment results that generally correspond to the aggregate price and dividend performance of publicly-traded common stocks comprising the Standard & Poor's Composite Stock Price Index. The Fund is neither sponsored by nor affiliated with Standard & Poor's.

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

Not FDIC Insured * May Lose Value * No Bank Guarantee

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Risk/Return Summary		1
What are the Fund's Fees and Expenses?		4
What are the Fund's Investment Strategies?		5
What are the Principal Securities in Which the Fund Invests?		6
What are the Specific Risks of Investing in the Fund?		8
What Do Shares Cost?		9
How is the Fund Sold?		10
How to Purchase Shares		10
How to Redeem Shares		12
Account and Share Information		14
Who Manages the Fund?		15
Legal Proceedings		16
Financial Information		17

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Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide investment results that generally correspond to the aggregate price and dividend performance of publicly-traded common stocks comprising the Standard & Poor's 500 Composite Stock Price Index (Index). While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund normally invests its assets primarily in common stocks included in the Index.

The Fund's investment manager ("Manager") has received an exemptive order from the SEC to permit the Trust and the Board of Trustees to appoint and replace subadvisers for the Fund and to enter into and amend the Fund's subadvisory agreements without further shareholder approval. See "Who Manages the Fund?"

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Fund. The primary factors that may reduce the Fund's returns include:

Stock Market Risks. The value of equity securities in the Fund's portfolio will fluctuate and, as a result, the Fund's share price may decline suddenly or over a sustained period of time.
Sector Risks. Because the Fund may allocate relatively more assets to certain industry sectors than others, the Fund's performance may be more susceptible to any developments which affect those sectors emphasized by the Fund.
Credit Risk. Credit risk includes the possibility that a party to a transaction involving the Fund will fail to meet its obligations.

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

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Risk/Return Bar Chart and Table

The performance information shown below will help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's Institutional Service Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund's performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The Fund's Institutional Service Shares are sold without a sales charge (load). The total returns shown in the bar chart above are based upon net asset value.

The Fund's Institutional Service Shares total return for the nine-month period from January 1, 2003 to September 30, 2003 was 14.01%.

Within the period shown in the bar chart, the Fund's Institutional Service Shares highest quarterly return was 21.13% (quarter ended December 31, 1998.) Its lowest quarterly return was (17.40)% (quarter ended September 30, 2002).

Average Annual Total Return Table

Return Before Taxes is shown. In addition, Return After Taxes is shown for Institutional Service Shares to illustrate the effect of federal taxes on Fund returns.Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. The table also shows returns for the Standard and Poor's 500 Index (S&P 500), a broad-based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. Indexes are unmanaged, and it is not possible to invest directly in an index.

(For the periods ended December 31, 2002)

	1 Year	5 Years	Start of Performance¹
Fund:
Return Before Taxes	(22.63)%	(1.30)%	8.41%
Return After Taxes on Distributions²	(22.93)%	(1.73)%	7.04%
Return After Taxes on Distributionsand Sale of Fund Shares²	(13.88)%	(1.16)%	6.41%
S&P 500	(22.10)%	(0.59)%	9.23%

1 The Fund's Institutional Service Shares start of performance date was September 7, 1993.

2 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding shares through tax-deferred programs, such as IRA or 401(k) plans.

What are the Fund's Fees and Expenses?

FEDERATED MAX-CAP INDEX FUND

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold
the Fund's Institutional Service Shares.

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

Annual Fund Operating Expenses (Before Waivers)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.30%
Distribution (12b-1) Fee³		0.30%
Shareholder Services Fee		0.25%
Other Expenses		0.09%
Total Annual Fund Operating Expenses		0.94%

1 Although not contractually obligated to do so, the Manager and distributor waived certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2003.
Total Waivers of Fund Expenses		0.29%
Total Actual Annual Fund Operating Expenses (after waivers)		0.65%
2 The Manager voluntarily waived a portion of the management fee. The Manager can terminate this voluntary waiver at any time. The management fee paid by the Fund (after the voluntary waiver) was 0.26% for the fiscal year ended October 31, 2003.
3 A portion of the distribution (12b-1) fee has been voluntarily waived. This voluntary waiver can be terminated at any time. The distribution (12b-1) fee paid by the Fund's Institutional Service Shares (after the voluntary waiver) was 0.05% for the fiscal year ended October 31, 2003.

EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's Institutional Service Shares with the cost of investing in other mutual funds.

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

1 Year		$ 96
3 Years		$ 300
5 Years		$ 520
10 Years		$1,155

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What are the Fund's Investment Strategies?

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In pursuing its investment objective, the Fund normally invests its assets primarily in common stocks included in the Index. As of November 30, 2002 the capitalization range of the issuers comprising the Index was $666 million to $287 billion. As of the same date, the weighted median market capitalization of the Fund was $48.5 billion. Market capitalization is determined by multiplying the number of outstanding shares of an issuer by the current market price per share. Except as noted below, the Fund seeks to reduce the difference in the Fund's portfolio performance relative to the Index ("tracking error") by investing in a portfolio that seeks to replicate, as closely as possible, the composition of the Index. The Fund attempts to achieve a 0.95 or better correlation between the performance of the Fund and, that of the Index. The Fund also may employ the following strategies to attempt to further reduce tracking error: (1) buying and selling securities after announced changes in the Index but before or after the effective date of the changes; (2) purchasing Index futures contracts in amounts approximating the cash held in the Fund's portfolio and any cash expected to be received upon the closing of pending acquisitions; (3) lending the Fund's securities to broker-dealers or other institutions to earn income for the Fund; and (4) purchasing domestically traded share classes of Index companies other than the share class included in the Index.

With respect to approximately 20% of the Fund's portfolio, the Sub-Manager, under normal circumstances, will use enhanced management techniques. The Sub-Manager's principal enhanced technique will be to slightly over- or under- weight positions in a limited number of securities within the Index based upon the Sub-Manager's quantitative analysis of the securities. The analysis seeks to identify securities likely to have predictable returns based on a number of strategies including events affecting the issuer (either positive or negative), valuation, price momentum, earnings surprises and seasonal patterns. Additionally, the Sub-Manager may purchase substitutes for securities within the Index when the Sub-Manager believes such substitutes will closely track the performance of a security within the Index but offer better returns. Such substitutes include purchasing convertible bonds, buying different share classes of Index securities, buying Index securities on different exchanges, purchasing the securities of companies targeted for acquisition by a company within the Index. or purchasing non-Index securities that are included on an index with a comparable style and capitalization (this may include buying and selling non-Index securities to be included in an index after the announced change in the index). Finally, the Sub-Manager may invest in stocks not represented in the Index that are subject to pending cash acquisitions when the Sub-Manager believes the risk of the acquisitions failing to close is minimal and offers better returns than available cash instruments. These enhanced management techniques are designed to help the Fund pursue its investment objective by seeking to improve its portfolio relative to the Index to compensate for Fund expenses and tracking error. Because the Fund refers to Index investments in its name, it will notify shareholders at least 60 days in advance of any changes in its investment policies that would enable the Fund to normally invest less than 80% of its assets in index investments.

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What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

Equity securities represent a share of an issuer's earnings and assets, after the issuer pays its liabilities. The Fund cannot predict the income it will receive from equity securities because issuers generally have discretion as to the payment of any dividends or distributions. However, equity securities offer greater potential for appreciation than many other types of securities, because their value increases directly with the value of the issuer's business. The following describes the types of equity securities in which the Fund may invest.

Common Stocks

Common stocks are the most prevalent type of equity security. Common stocks receive the issuer's earnings after the issuer pays its creditors and any preferred stockholders. As a result, changes in an issuer's earnings directly influence the value of its common stock.

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Convertible Securities

Convertible securities are fixed income securities that the Fund has the option to exchange for equity securities at a specified conversion price. The option allows the Fund to realize additional returns if the market price of the equity securities exceeds the conversion price. For example, the Fund may hold fixed income securities that are convertible into shares of common stock at a conversion price of $10 per share. If the market value of the shares of common stock reached $12, the Fund could realize an additional $2 per share by converting its fixed income securities.

Convertible securities have lower yields than comparable fixed income securities. In addition, at the time a convertible security is issued the conversion price exceeds the market value of the underlying equity securities. Thus, convertible securities may provide lower returns than non-convertible fixed income securities or equity securities depending upon changes in the price of the underlying equity securities. However, convertible securities permit the Fund to realize some of the potential appreciation of the underlying equity securities with less risk of losing its initial investment.

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STOCK INDEX FUTURES

Stock index futures provide for the future sale by one party and purchase by another party of a specified amount of an index at a price, date, and time specified when the contract is made. Entering into a contract to buy is commonly referred to as buying or purchasing a contract or holding a long position. Entering into a contract to sell is commonly referred to as selling a contract or holding a short position. Futures are considered to be commodity contracts.

Securities Lending

The Fund may lend portfolio securities to borrowers that the Manager deems creditworthy. In return, the Fund receives cash or liquid securities from the borrower as collateral. The borrower must furnish additional collateral if the market value of the loaned securities increases. Also, the borrower must pay the Fund the equivalent of any dividends or interest received on the loaned securities.

The Fund will reinvest cash collateral in securities that qualify as an acceptable investment for the Fund. However, the Fund must pay interest to the borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower. The Fund will not have the right to vote on securities while they are on loan, but it will terminate a loan in anticipation of any important vote. The Fund may pay administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the cash collateral to a securities lending agent or broker.

Securities lending activities are subject to credit risks.

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

The value of equity securities in the Fund's portfolio will rise and fall. These fluctuations could be a sustained trend or a drastic movement. The Fund's portfolio will reflect changes in prices of individual portfolio stocks or general changes in stock valuations. Consequently, the Fund's share price may decline. The Fund's investment in stock index futures will be subject to the same risk.

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The enhanced management techniques described in the investment strategy may not work as intended and therefore may cause the Fund's share price to decline or cause the Fund to underperform the Index.

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SECTOR RISKS

Companies with similar characteristics may be grouped together in broad categories called sectors. Sector risk is the possibility that a certain sector may underperform other sectors or the market as a whole. As the Manager allocates more of the Fund's portfolio holdings to a particular sector, the Fund's performance will be more susceptible to any economic, business or other developments which generally affect that sector.

CREDIT RISKS

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

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INTEREST RATE RISKS

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

Interest rate changes have a greater effect on the price of fixed income securities with longer durations. Duration measures the price sensitivity of a fixed income security to changes in interest rates.

Risks of Investing in Derivatives Contracts

The Fund's use of derivative contracts involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts in which the Fund invests may not be correlated with changes in the value of the underlying asset or if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivatives contracts may be mispriced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Finally, derivative contracts may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. Derivative contracts may also involve other risks described in this prospectus, such as stock market, credit, liquidity and leverage risks.

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What Do Shares Cost?

You can purchase or redeem Shares any day the New York Stock Exchange (NYSE) is open. When the Fund receives your transaction request in proper form (as described in this prospectus) it is processed at the next calculated net asset value (NAV).

The Fund does not charge a front-end sales charge.

NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The Fund generally values equity securities according to the last sale price in the market in which they are primarily traded (either a national securities exchange or the over-the-counter market).

Futures contracts and options are generally valued at market values established by the exchanges on which they are traded at the close of trading on such exchanges. Options traded in the over-the-counter market are generally valued according to the mean between the last bid and the last asked price for the option as provided by an investment dealer or other financial institution that deals in the option.

The Fund's current NAV and public offering price may be found in the mutual funds section of certain local newspapers under "Federated."

The required minimum initial investment for Fund Shares is $25,000. There is no required minimum subsequent investment amount. An institutional investor's minimum investment is calculated by combining all accounts it maintains with the Fund. Accounts established through investment professionals may be subject to a smaller minimum investment amount. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions.

How is the Fund Sold?

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The Fund offers four Share classes: Institutional Shares, Institutional Service Shares, Class C Shares and Class K Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Institutional Service Shares. All Share classes have different expenses which affect their performance. Contact your investment professional or call 1-800-341-7400 for more information concerning the other classes.

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The Fund's Distributor, Federated Securities Corp., markets the Shares described in this prospectus to institutions acting on behalf of their customers or to individuals, directly or through investment professionals.

When the Distributor receives marketing fees, it may pay some or all of them to investment professionals. The Distributor and its affiliates may pay out of their assets other amounts (including items of material value) to investment professionals for marketing and servicing Shares. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to the Distributor and investment professionals for the sale, distribution and customer servicing of the Fund's Institutional Service Shares. Because these Shares pay marketing fees on an ongoing basis, your investment cost may be higher over time than other shares with different marketing fees.

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and
Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Fund on the same day and the Fund receives payment within one business day. You will become the owner of Shares and receive dividends when the Fund receives your payment.

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

DIRECTLY FROM THE FUND

Establish your account with the Fund by submitting a completed New Account Form; and
Send your payment to the Fund by Federal Reserve wire or check.

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

An institution may establish an account and place an order by calling the Fund and the Shares will be priced at the next calculated NAV after the Fund receives the order.

By Wire

Send your wire to:

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

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

By Check

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

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

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

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

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

BY AUTOMATED CLEARING HOUSE (ACH)

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

How to Redeem Shares

You should redeem Shares:

through an investment professional if you purchased Shares through an investment professional; or
directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption request to your investment professional by the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption amount you will receive is based upon the next calculated NAV after the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

By Telephone

You may redeem Shares by simply calling the Fund at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) you will receive a redemption amount based on that day's NAV.

By Mail

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

You will receive a redemption amount based on the next calculated NAV after the Fund receives your written request in proper form.

Send requests by mail to:

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

Send requests by private courier or overnight delivery service to:

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

All requests must include:

Fund Name and Share Class, account number and account registration;
amount to be redeemed; and
signatures of all shareholders exactly as registered.

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

Signature Guarantees

Signatures must be guaranteed if:

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days; or
a redemption is payable to someone other than the shareholder(s) of record.

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

PAYMENT METHODS FOR REDEMPTIONS

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

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets.

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

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

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you will receive periodic statements reporting all account activity, including dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares and pays any dividends quarterly to shareholders. Dividends are paid to all shareholders invested in the Fund on the record date. The record date is the date on which a shareholder must officially own Shares in order to earn a dividend.

In addition, the Fund pays any capital gains at least annually. Your dividends and capital gains distributions will be automatically reinvested in additional Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a dividend or capital gain distribution, you will pay the full price for the Shares and then receive a portion of the price back in the form of a taxable distribution, whether or not you reinvest the distribution in Shares. Therefore, you should consider the tax implications of purchasing Shares shortly before the Fund declares a dividend or capital gain. Contact your investment professional or the Fund for information concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

The Fund sends an annual statement of your account activity to assist you in completing your federal, state and local tax returns. Fund distributions of dividends and capital gains are taxable to you whether paid in cash or reinvested in the Fund. Dividends are taxable as ordinary income; capital gains are taxable at different rates depending upon the length of time the Fund holds its assets.

Fund distributions are expected to be both dividends and capital gains. Redemptions are taxable sales. Please consult your tax adviser regarding your federal, state, and local tax liability.

Who Manages the Fund?

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The Board of Trustees (the "Board") governs the Fund. The Board selects and oversees the Manager, Federated Equity Management Company of Pennsylvania. The Manager, in turn, oversees the management of the Fund's assets by Sub-Manager, Fund Asset Management, L.P., doing business as Mercury Advisors, an indirect, wholly owned subsidiary of Merrill Lynch & Co., Inc. Federated Advisory Services Company (FASC), an affiliate of the Manager provides research, quantitative analysis equity trading and transaction settlement and certain support services to the Manager. The fee for these services is paid by the Manager and not by the Fund. The Manager's responsibilities include selecting the Sub-Manager and the continued review and evaluation of the Sub-Manager's performance. The address of the Manager and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

The Manager has delegated daily management of the Fund's assets to the Sub-Manager, who is paid by the Manager and not by the Fund, based on net assets under management. The Sub-Manager has complete discretion, subject to the Manager's oversight, to purchase and sell portfolio securities for the Fund. The Sub-Manager's address is 800 Scudders Mill Road, Plainsboro, NJ 08536. Mercury Advisors was organized as an investment adviser in 1976 and offers investment advisory services to more than 50 registered investment companies. As of December 31, 2002, Mercury Advisors and its advisory affiliates had approximately $462 billion in assets under management.

The Manager and other subsidiaries of Federated advise approximately 138 mutual funds and a variety of separate accounts, which totaled approximately $195 billion in assets as of December 31, 2002. Federated was established in 1955 and is one of the largest mutual fund investment managers in the United States with approximately 1,700 employees. More than 5,000 investment professionals make Federated funds available to their customers.

MANAGEMENT FEES

The Manager receives an annual investment advisory fee of 0.30% of the Fund's average daily net assets. The Manager may voluntarily waive a portion of its fee or reimburse the Fund for certain operating expenses.

Legal Proceedings

Like many other mutual fund companies, in September 2003, Federated, the parent company of the Federated funds' Adviser and distributor, received detailed requests for information on shareholder trading activities in the Federated funds from the SEC, the New York State Attorney General, and the National Association of Securities Dealers. Federated immediately retained the law firm of Reed Smith LLP to conduct an internal investigation, which is ongoing. Additionally, attorneys from the law firm of Dickstein Shapiro Morin & Oshinsky LLP, independent counsel to the Federated funds, are participating in the investigation and are reporting to the independent directors of the Federated funds on their progress.

The internal investigation is examining, among other things, circumstances in which it appears that a few Federated fund investors were granted exceptions to Federated's internal procedures for limiting frequent transactions, and that some of these investors made additional investments in other Federated funds. The investigation is also examining instances in which it appears that orders for Federated funds with variable NAVs were placed and accepted after the Federated funds' closing time at 4:00 p.m. Federated is taking steps to ensure that Federated fund shareholder trading policies are adhered to.

On October 22, 2003, Federated issued a press release that discusses these matters and announces that Federated is committed to taking remedial actions when and as appropriate, including compensating the Federated funds for any detrimental impact these transactions may have had on them. Based upon the progress of the investigation to date, Federated does not have sufficient information regarding these transactions to make a reasonable estimate of the amount, if any, by which the Federated funds have been impacted. The press release is available in the "About Us" section of Federated's website www.federatedinvestors.com, and any future press releases on this subject will also be posted there.

Shortly after the press release was issued, and notwithstanding Federated's commitment to taking remedial actions, Federated and various Federated funds were named as defendants in several class action lawsuits filed in the United States District Court for the Western District of Pennsylvania seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and the Federated funds are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. Although we do not believe that these lawsuits will have a material adverse effect on the Federated funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Federated fund redemptions, reduced sales of Federated fund shares, or other adverse consequences for the Federated funds.

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Financial Information

FINANCIAL HIGHLIGHTS

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The Financial Highlights will help you understand the Fund's financial performance for its past five fiscal years. Some of the information is presented on a per share basis. Total returns represent the rate an investor would have earned (or lost) on an investment in the Fund, assuming reinvestment of any dividends and capital gains.

This information has been audited by Ernst & Young LLP, whose report, along with the Fund's audited financial statements, is included in the Annual Report.

Financial Highlights

(For a Share Outstanding Throughout Each Period)

Year Ended October 31	2003		2002		2001		2000		1999
Net Asset Value, Beginning of Period	$17.93		$21.46		$29.01		$28.03		$22.86
Income From Investment Operations:
Net investment income	0.21		0.19		0.18		0.19		0.23
Net realized and unrealized gain (loss) on investments and futures contracts	3.32		(3.53	)	(7.52	)	1.23		5.37

TOTAL FROM INVESTMENT OPERATIONS	3.53		(3.34	)	(7.34	)	1.42		5.60

Less Distributions:
Distributions from net investment income	(0.22	)	(0.19	)	(0.21	)	(0.19	)	(0.21	)
Distributions from net realized gain on investments and futures contracts	--		--		--		(0.25	)	(0.22	)

TOTAL DISTRIBUTIONS	(0.22	)	(0.19	)	(0.21	)	(0.44	)	(0.43	)

Net Asset Value, End of Period	$21.24		$17.93		$21.46		$29.01		$28.03

Total Return^1,2	19.84	%	(15.67	)%	(25.39	)%	5.08	%	24.76	%


Ratios to Average Net Assets:

Expenses	0.65	%	0.64	%	0.64	%	0.64	%	0.62	%

Net investment income	1.14	%	0.92	%	0.73	%	0.67	%	0.88	%

Expense waiver/reimbursement³	0.29	%	0.29	%	0.26	%	0.25	%	0.28	%

Supplemental Data:

Net assets, end of period (000 omitted)	$605,437		$425,421		$578,776		$900,246		$726,976

Portfolio turnover	24	%	18	%	7	%	11	%	3	%

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

2 During the year, the Fund was reimbused by the sub-manager for certain losses on investments which had an impact of less than 0.01% on total return. See Note 7 on page 34 of the Fund's Annual Report.

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

Futher information about the Fund's performance is contained in the Fund's Annual Report, dated October 31, 2003, which can be obtained free of charge.

A Statement of Additional Information (SAI) dated December 31, 2003, is incorporated by reference into this prospectus. Additional information about the Fund and its investments is contained in the Fund's SAI and Annual and Semi-Annual Reports to shareholders as they become available. The Annual Report's Management's Discussion of Fund Performance discusses market conditions and investment strategies that significantly affected the Fund's performance during its last fiscal year. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your investment professional or the Fund at 1-800-341-7400.

</R>

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

[Log of Federated Investors]

Federated Max-Cap Index Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2003 ©Federated Investors, Inc.

Cusip 31420E403

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0032104A-SS (12/03)

</R>

FEDERATED MAX-CAP INDEX FUND
A Portfolio of Federated Index Trust

STATEMENT OF ADDITIONAL INFORMATION
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DECEMBER 31, 2003

</R>
INSTITUTIONAL SHARES

INSTITUTIONAL SERVICE SHARES

CLASS C SHARES

CLASS K SHARES
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This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectuses for Federated Max-Cap Fund
(Fund)- Institutional Shares, Institutional Service Shares, Class C Shares
and Class K Shares dated December 31, 2003.

This SAI incorporates by reference the Fund's Annual Report. Obtain the
prospectuses or the Annual Report without charge by calling 1-800-341-7400.

CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Exchanging Securities for Shares
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to
the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Financial Information
Standard & Poor's
Addresses
0032104B (12/03)

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HOW IS THE FUND ORGANIZED?

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The Fund is a diversified portfolio of Federated Index Trust (Trust). The
Trust is an open-end, management investment company that was established
under the laws of the Commonwealth of Massachusetts on January 30, 1990.
The Trust may offer separate series of shares representing interests in
separate portfolios of securities. The Fund changed its name from
Federated Max-Cap Fund to Federated Max-Cap Index Fund on July 21, 2001.

The Board of Trustees (the Board) has established four classes of shares
of the Fund, known as Institutional Shares, Institutional Service Shares,
Class C Shares and Class K Shares (Shares). This SAI relates to all
classes of Shares. The Fund's investment Manager is Federated Equity
Management Company of Pennsylvania (Manager). Prior to January 1, 2004,
Federated Investment Management Company was manager of the Fund. Both the
current Manager and the former manager are wholly owned subsidiaries of
Federated Investors, Inc. (Federated).

</R>

SECURITIES IN WHICH THE FUND INVESTS
In pursuing its investment strategy, the Fund may invest in the following
securities for any purpose that is consistent with its investment
objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common
stocks receive the issuer's earnings after the issuer pays its creditors
and any preferred stockholders. As a result, changes in an issuer's
earnings directly influence the value of its common stock.

PREFERRED STOCKS
Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock. The Fund may treat such redeemable preferred stock as a fixed
income security.

INTERESTS IN OTHER LIMITED LIABILITY COMPANIES
Entities such as limited partnerships, limited liability companies,
business trusts and companies organized outside the United States may
issue securities comparable to common or preferred stock.

REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax
if they limit their operations and distribute most of their income. Such
tax requirements limit a REIT's ability to respond to changes in the
commercial real estate market.

WARRANTS
Warrants give the Fund the option to buy the issuer's equity securities at
a specified price (the exercise price) at a specified future date (the
expiration date). The Fund may buy the designated securities by paying the
exercise price before the expiration date. Warrants may become worthless
if the price of the stock does not rise above the exercise price by the
expiration date. This increases the market risks of warrants as compared
to the underlying security. Rights are the same as warrants, except
companies typically issue rights to existing stockholders.

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

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

TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of
the United States. Treasury securities are generally regarded as having
the lowest credit risks.

AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a "GSE"). The
United States supports some GSEs with its full faith and credit. Other
GSEs receive support through federal subsidies, loans or other benefits. A
few GSEs have no explicit financial support, but are regarded as having
implied support because the federal government sponsors their activities.
Agency securities are generally regarded as having low credit risks, but
not as low as treasury securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it
does not reduce the market and prepayment risks of these mortgage backed
securities.

Derivative Contracts

Derivative contracts are financial instruments that require payments based
upon changes in the values of designated (or underlying) securities,
currencies, commodities, financial indices or other assets. Some
derivative contracts (such as futures, forwards and options) require
payments relating to a future trade involving the underlying asset. Other
derivative contracts (such as swaps) require payments relating to the
income or returns from the underlying asset. The other party to a
derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities
exchanges. In this case, the exchange sets all the terms of the contract
except for the price. Investors make payments due under their contracts
through the exchange. Most exchanges require investors to maintain margin
accounts through their brokers to cover their potential obligations to the
exchange. Parties to the contract make (or collect) daily payments to the
margin accounts to reflect losses (or gains) in the value of their
contracts. This protects investors against potential defaults by the
counterparty. Trading contracts on an exchange also allows investors to
close out their contracts by entering into offsetting contracts.

For example, the Fund could close out an open contract to buy an asset at
a future date by entering into an offsetting contract to sell the same
asset on the same date. If the offsetting sale price is more than the
original purchase price, the Fund realizes a gain; if it is less, the Fund
realizes a loss. Exchanges may limit the amount of open contracts
permitted at any one time. Such limits may prevent the Fund from closing
out a position. If this happens, the Fund will be required to keep the
contract open (even if it is losing money on the contract), and to make
any payments required under the contract (even if it has to sell portfolio
securities at unfavorable prices to do so). Inability to close out a
contract could also harm the Fund by preventing it from disposing of or
trading any assets it has been using to secure its obligations under the
contract.

The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty.
OTC contracts do not necessarily have standard terms, so they cannot be
directly offset with other OTC contracts. In addition, OTC contracts with
more specialized terms may be more difficult to price than exchange traded
contracts.

Depending upon how the Fund uses derivative contracts and the
relationships between the market value of a derivative contract and the
underlying asset, derivative contracts may increase or decrease the Fund's
exposure to interest rate and currency risks, and may also expose the Fund
to liquidity and leverage risks. OTC contracts also expose the Fund to
credit risks in the event that a counterparty defaults on the contract.

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Futures Contracts

Futures contracts provide for the future sale by one party and purchase
by another party of a specified amount of an underlying asset at a
specified price, date, and time. Entering into a contract to buy an
underlying asset is commonly referred to as buying a contract or
holding a long position in the asset. Entering into a contract to sell
an underlying asset is commonly referred to as selling a contract or
holding a short position in the asset. Futures contracts are
considered to be commodity contracts. The Fund has claimed an exclusion
from the definition of the term "commodity pool operator" under the
Commodity Exchange Act and, therefore, is not subject to registration
or regulation as a commodity pool operator under that Act. Futures
contracts traded OTC are frequently referred to as forward contracts.
The Fund can buy or sell stock index futures as a substitute for direct
investments in the Standard & Poor's 500 Composite Stock Price Index
("Index") in order to help replicate the performance of the Index. The
Fund may also purchase other index futures consistent with its
investment strategy.

Options

Options are rights to buy or sell an underlying asset or instrument for
a specified price (the exercise price) during, or at the end of, a
specified period. The seller (or writer) of the option receives a
payment, or premium, from the buyer, which the writer keeps regardless
of whether the buyer uses (or exercises) the option. Options can trade
on exchanges or in the OTC market and may be bought or sold on a wide
variety of underlying assets or instruments, including financial
indices, individual securities, and other derivative instruments, such
as futures contracts. Options that are written on futures contracts
will be subject to margin requirements similar to those applied to
futures contracts.

The Fund may buy the following types of options:

Call Options

A call option gives the holder (buyer) the right to buy the
underlying asset from the seller (writer) of the option. The Fund
may use call options in the following ways:

o Buy call options on the stock indices, stock index futures
contracts, and portfolio securities in anticipation of an increase in
the value of the underlying asset or instrument; and

o Write call options on the stock indices, stock index futures
contracts, and portfolio securities to generate income from premiums,
and in anticipation of a decrease or only limited increase in the value
of the underlying asset. If a call written by the Fund is exercised,
the Fund foregoes any possible profit from an increase in the market
price of the underlying asset over the exercise price plus the premium
received.

The Fund may also buy or write options, as needed, to close out
existing option positions.

Hybrid Instruments

Hybrid instruments combine elements of derivative contracts with those
of another security (typically a fixed income security). All or a
portion of the interest or principal payable on a hybrid security is
determined by reference to changes in the price of an underlying asset
or by reference to another benchmark (such as interest rates, currency
exchange rates or indices). Hybrid instruments also include
convertible securities with conversion terms related to an underlying
asset or benchmark.

</R>

DEPOSITARY RECEIPTS
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market
as the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are not traded in the United States. ADRs
provide a way to buy shares of foreign- based companies in the United
States rather than in overseas markets. In addition, ADRs are traded in
U.S. dollars, eliminating the need for foreign exchange transactions. The
foreign securities underlying European Depositary Receipts, Global
Depositary Receipts, and International Depositary Receipts, are traded
globally or outside the United States. Depositary receipts involve many of
the same risks of investing directly in foreign securities, including
currency risks and risks of foreign investing.

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FOREIGN SECURITIES
Foreign securities are securities of issuers based outside the United
States. The Fund considers an issuer to be based outside the United
States if:

o it is organized under the laws of, or has a principal office located
in, another country;

o the principal trading market for its securities is in another
country; or

o it (or its subsidiaries) derived in its most current fiscal year at
least 50% of its total assets, capitalization, gross revenue or profit
from goods produced, services performed, or sales made in another
country.

Foreign securities are primarily denominated in foreign currencies. Along
with the risks normally associated with domestic securities of the same
type, foreign securities are subject to currency risks and risks of
foreign investing. Trading in certain foreign markets is also subject to
liquidity risks.

FOREIGN EXCHANGE CONTRACTS
In order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received from the sale of a
foreign security into U.S. dollars, the Fund may enter into spot currency
trades. In a spot trade, the Fund agrees to exchange one currency for
another at the current exchange rate. The Fund may also enter into
derivative contracts in which a foreign currency is an underlying asset.
The exchange rate for currency derivative contracts may be higher or lower
than the spot exchange rate. Use of these derivative contracts may
increase or decrease the Fund's exposure to currency risks.

</R>

SPECIAL TRANSACTIONS

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

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

Repurchase agreements are subject to credit risks.

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

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

The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to
the borrower for the use of cash collateral.

Loans are subject to termination at the option of the Fund or the
borrower. The Fund will not have the right to vote on securities while
they are on loan, but it will terminate a loan in anticipation of any
important vote. The Fund may pay administrative and custodial fees in
connection with a loan and may pay a negotiated portion of the interest
earned on the cash collateral to a securities lending agent or broker.

Securities lending activities are subject to interest rate risks and
credit risks.

Asset Coverage
In order to secure its obligations in connection with derivatives
contracts or special transactions, the Fund will either own the underlying
assets, enter into an offsetting transaction or set aside readily
marketable securities with a value that equals or exceeds the Fund's
obligations. Unless the Fund has other readily marketable assets to set
aside, it cannot trade assets used to secure such obligations without
entering into an offsetting derivative contract or terminating a special
transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.

Inter-Fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that
permits the Fund and all other funds advised by subsidiaries of Federated
Investors, Inc. (Federated funds) to lend and borrow money for certain
temporary purposes directly to and from other Federated funds.
Participation in this inter-fund lending program is voluntary for both
borrowing and lending funds, and an inter-fund loan is only made if it
benefits each participating fund. Federated Investors, Inc. (Federated)
administers the program according to procedures approved by the Fund''s
Board, and the Board monitors the operation of the program. Any inter-
fund loan must comply with certain conditions set out in the exemption,
which are designed to assure fairness and protect all participating funds.

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For example, inter-fund lending is permitted only (a) to meet shareholder
redemption requests, and (b) to meet commitments arising from "failed"
trades. All inter-fund loans must be repaid in seven days or less. The
Fund's participation in this program must be consistent with its
investment policies and limitations, and must meet certain percentage
tests. Inter-fund loans may be made only when the rate of interest to be
charged is more attractive to the lending fund than market-competitive
rates on overnight repurchase agreements (Repo Rate) and more attractive
to the borrowing fund than the rate of interest that would be charged by
an unaffiliated bank for short-term borrowings (Bank Loan Rate), as
determined by the Board. The interest rate imposed on inter-fund loans is
the average of the Repo Rate and the Bank Loan Rate.

</R>

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

Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity
of a fixed income security to changes in interest rates.

If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates,
higher credit risks, or other less favorable characteristics.

Liquidity Risks
Trading opportunities are more limited for fixed income securities that
have not received any credit ratings, have received ratings below
investment grade or are not widely held. Consequently, the Fund may have
to accept a lower price to sell a security, sell other securities to raise
cash or give up an investment opportunity, any of which could have a
negative effect on the Fund's performance. Infrequent trading of
securities may also lead to an increase in their price volatility.

Liquidity risk also refers to the possibility that the Fund may not be
able to sell a security or close out a derivative contract when it wants
to. If this happens, the Fund will be required to continue to hold the
security or keep the position open, and the Fund could incur losses.

OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.

Risks Associated with Non-Investment Grade Securities
Securities rated below investment grade, also known as junk bonds,
generally entail greater market, credit and liquidity risks than
investment grade securities. For example, their prices are more volatile,
economic downturns and financial setbacks may affect their prices more
negatively, and their trading market may be more limited.

Risks of Investing in American Depositary Receipts
Because the Fund may invest in ADRs issued by foreign companies, the
Fund's share price may be more affected by foreign economic and political
conditions, taxation policies, and accounting and auditing standards, than
would otherwise be the case.

Risks Related to Company Size
Generally, the smaller the market capitalization of a company, the fewer
the number of shares traded daily, the less liquid its stock and the more
volatile its price. Market capitalization is determined by multiplying the
number of its outstanding shares by the current market price per share.

Companies with smaller market capitalizations also tend to have unproven
track records, a limited product or service base and limited access to
capital. These factors also increase risks and make these companies more
likely to fail than companies with larger market capitalizations.

Currency Risks
Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risk tends to make securities traded in foreign markets
more volatile than securities traded exclusively in the United States.

<R>
The Manager attempts to manage currency risk by limiting the amount the
Fund invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in
the value of the U.S. dollar relative to other currencies.

Risks of Foreign Investing
Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United
States. Securities in foreign markets may also be subject to taxation
policies that reduce returns for U.S. investors.

Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the
United States. Foreign companies may also receive less coverage than
United States companies by market analysts and the financial press. In
addition, foreign countries may lack uniform accounting, auditing and
financial reporting standards or regulatory requirements comparable to
those applicable to U.S. companies. These factors may prevent the Fund and
its Manager from obtaining information concerning foreign companies that
is as frequent, extensive and reliable as the information available
concerning companies in the United States.

Foreign countries may have restrictions on foreign ownership of
securities or may impose exchange controls, capital flow restrictions or
repatriation restrictions which could adversely affect the liquidity of
the Fund's investments.

Derivative Contracts and Hybrid Instrument Risks
The Fund's use of derivative contracts involves risks different from, or
possibly greater than, the risks associated with investing directly in
securities and other traditional investments. First, there is a
possibility that the correlation between the price movements of a
derivative and the underlying reference asset or index will be imperfectly
correlated or not correlated at all. This is often referred to as basis
risk. Second, while some strategies involving derivatives may reduce the
risk of loss, they may also reduce potential gains or, in some cases,
result in losses by offsetting favorable price movements in portfolio
holdings. Third, the Fund's use of derivatives may cause the Fund to
realize a higher amount of short-term capital gains, which are usually
taxed at ordinary income tax rates for Federal income tax purposes. This
may, in turn, increase the taxes payable by Fund shareholders. Finally,
there is a risk that derivatives could be mispriced or improperly valued
and, as a result, increased cash payments could need to be made to a
derivative counterparty. Derivatives are also subject to a number of other
risks described herein, such as interest rate, credit, liquidity and
leverage risks.

The risks of investing in hybrid instruments reflect a combination of the
risks of investing in securities, options, futures and currencies, and
depend upon the terms of the instrument. Thus, an investment in a hybrid
instrument may entail significant risks in addition to those associated
with traditional fixed income or convertible securities. Hybrid
instruments are also potentially more volatile and carry greater interest
rate risks than traditional instruments. Moreover, depending on the
structure of the particular hybrid, it may expose the Fund to leverage
risks or carry liquidity risks.

</R>

FUNDAMENTAL INVESTMENT OBJECTIVE
The Fund's fundamental investment objective is to provide investment
results that generally correspond to the aggregate price and dividend
performance of publicly-traded common stocks comprising the S&P 500. The
investment objective may not be changed by the Fund's Board without
shareholder approval.

INVESTMENT LIMITATIONS

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

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

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

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

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

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

Concentration
The Fund will not make investments that will result in the concentration
of its investments in the securities of issuers primarily engaged in the
same industry. Government securities, municipal securities and bank
instruments are not deemed to constitute an industry.

The above limitations cannot be changed unless authorized by the Board
and by the "vote of a majority of its outstanding voting securities," as
defined by the 1940 Act. The following limitations, however, may be
changed by the Board without shareholder approval. Shareholders will be
notified before any material change in these limitations becomes effective.

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

Investing in Restricted Securities
The Fund may invest in restricted securities. Restricted securities are
any securities in which the Fund may invest pursuant to its investment
objective and policies but which are subject to restrictions on resale
under federal securities law. Under criteria established by the Trustees
certain restricted securities are determined to be liquid. To the extent
that restricted securities are not determined to be liquid, the Fund will
limit their purchase, together with other illiquid securities to 15% of
its net assets.

Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily
available market, or enter into repurchase agreements or purchase time
deposits maturing in more than seven days, if immediately after and as a
result, the value of such securities would exceed, in the aggregate, 15%
of the Fund's net assets.

Purchases on Margin
The Fund will not purchase securities on margin provided that the Fund may
obtain short-term credits necessary for the clearance of purchases and
sales of securities, and further provided that the Fund may make margin
deposits in connection with its use of financial options and futures,
forward and spot currency contracts, swap transactions and other financial
contracts or derivative instruments.

In applying the Fund's concentration restriction: (a) utility companies
will be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (b) financial service companies will be classified according to
the end users of their services, for example, automobile finance, bank
finance and diversified finance will each be considered a separate
industry; and (c) asset backed securities will be classified according to
the underlying assets securing such securities. To conform to the current
view of the SEC staff that only domestic bank instruments may be excluded
from industry concentration limitations, as a matter of non-fundamental
policy, the Fund will not exclude foreign bank instruments from industry
concentration limitation tests so long as the policy of the SEC remains in
effect. In addition, investments in bank instruments, and investments in
certain industrial development bonds funded by activities in a single
industry, will be deemed to constitute investment in an industry, except
when held for temporary defensive purposes. The investment of more than
25% of the value of the Fund's total assets in any one industry will
constitute "concentration."

As a matter of non-fundamental operating policy, for purposes of the
commodities policy, investments in transactions involving futures
contracts and options, forward currency contracts, swap transactions and
other financial contract's that settle by payment of cash are not deemed
to be investments in commodities.

For purposes of the above limitations, the Fund considers certificates
of deposit and demand and time deposits issued by a U.S. branch of a
domestic bank or savings association having capital, surplus and undivided
profits in excess of $100,000,000 at the time of investment to be "cash
items." Except with respect to borrowing money, if a percentage limitation
is adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such limitation.

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as
follows:

<R>
o for equity securities, according to the last sale price in the
market in which they are primarily traded (either a national securities
exchange or the over-the-counter market), if available;

o in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;

o futures contracts and options are generally valued at market values
established by the exchanges on which they are traded at the close of
trading on such exchanges. Options traded in the over- the-counter
market are generally valued according to the mean between the last bid
and the last asked price for the option as provided by an investment
dealer or other financial institution that deals in the option. The
Board may determine in good faith that another method of valuing such
investments is necessary to appraise their fair market value;

o for fixed income securities, according to the mean between bid and
asked prices as furnished by an independent pricing service, except that
fixed income securities with remaining maturities of less than 60 days
at the time of purchase may be valued at amortized cost; and

o for all other securities at fair value as determined in good faith
by the Board.

Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider institutional
trading in similar groups of securities, yield, quality, stability, risk,
coupon rate, maturity, type of issue, trading characteristics, and other
market data or factors. From time to time, when prices cannot be obtained
from an independent pricing service, securities may be valued based on
quotes from broker-dealers or other financial institutions that trade the
securities.

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times which vary from
the closing of the New York Stock Exchange (NYSE). In computing its NAV,
the Fund values foreign securities at the latest closing price on the
exchange on which they are traded immediately prior to the closing of the
NYSE. Certain foreign currency exchange rates may also be determined at
the latest rate prior to the closing of the NYSE. Foreign securities
quoted in foreign currencies are translated into U.S. dollars at current
rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing
of the NYSE. If such events materially affect the value of portfolio
securities, these securities may be valued at their fair value as
determined in good faith by the Fund's Board, although the actual
calculation may be done by others.

</R>

WHAT DO SHARES COST?

<R>
The Fund's net asset value (NAV) per Share fluctuates and is based on the
market value of all securities and other assets of the Fund. The NAV for
each class of Shares may differ due to the variance in daily net income
realized by each class. Such variance will reflect only accrued net income
to which the shareholders of a particular class are entitled.

REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE (CLASS C SHARES)
You can reduce or eliminate the applicable front-end sales charge, as
follows:

Reinvestment Privilege
You may reinvest, within 120 days, your Share redemption proceeds at the
next determined NAV without any sales charge.

Purchases by Affiliates of the Fund
The following individuals and their immediate family members may buy
Shares at NAV without any sales charge because there are nominal sales
efforts associated with their purchases:

o the Trustees, employees and sales representatives of the Fund, the
Manager, the Distributor and their affiliates;

o any associated person of an investment dealer who has a sales
agreement with the Distributor; and

o trusts, pension or profit-sharing plans for these individuals.

Purchases Through Omnibus Accounts (Class C Shares)
Class C Shares may be purchased without an initial sales charge by any
investor who buys Class C Shares through an omnibus account with a
financial intermediary, such as a broker or a bank, that does not accept
or charge the initial sales charge.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE (CLASS C
SHARES)
These reductions or eliminations are offered because: no sales commissions
have been advanced to the investment professional selling Shares; the
shareholder has already paid a Contingent Deferred Sales Charge (CDSC); or
nominal sales efforts are associated with the original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC
will be imposed on redemptions:

o following the death or post-purchase disability, as defined in
Section 72(m)(7) of the Internal Revenue Code of 1986, of the last
surviving shareholder;

o representing minimum required distributions from an Individual
Retirement Account or other retirement plan to a shareholder who has
attained the age of 70 1/2;

o of Shares that represent a reinvestment within 120 days of a
previous redemption;

o of Shares held by the Trustees, employees, and sales representatives
of the Fund, the Manager, the Distributor and their affiliates;
employees of any investment professional that sells Shares according to
a sales agreement with the Distributor; and the immediate family members
of the above persons;

o of Shares originally purchased through a bank trust department, a
registered investment manager or retirement plans where the third party
administrator has entered into certain arrangements with the Distributor
or its affiliates, or any other investment professional, to the extent
that no payments were advanced for purchases made through these entities;

o which are involuntary redemptions processed by the Fund because the
accounts do not meet the minimum balance requirements; and

To keep the sales charge as low as possible, the Fund redeems your Shares
in this order:

o Shares that are not subject to a CDSC; and

o Shares held the longest (to determine the number of years your
Shares have been held, include the time you held shares of other
Federated funds that have been exchanged for Shares of this Fund).

The CDSC is then calculated using the share price at the time of purchase
or redemption, whichever is lower.

HOW IS THE FUND SOLD?

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

FRONT-END SALES CHARGE REALLOWANCES (CLASS C SHARES)
The Distributor receives a front-end sales charge on certain Share sales.
The Distributor pays a portion of this charge to investment professionals
that are eligible to receive it (the "Dealer Reallowance") and retains any
remaining portion of the front-end sales charge.

When an investment professional's customer purchases Shares, the
investment professional may receive a Dealer Reallowance as follows:

Dealer Reallowance
as a Percentage of
Public Offering Price
All Purchase Amounts 1.00%

ADVANCE COMMISSIONS
---------------------------------------------------------------------------
Class C Shares
Advance Commission
as a Percentage of
Public Offering
Price
All Purchase Amounts 1.00%

RULE 12B-1 PLAN (INSTITUTIONAL SERVICE SHARES, CLASS C SHARES AND CLASS K
SHARES)
---------------------------------------------------------------------------
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
for activities principally intended to result in the sale of Shares such
as advertising and marketing of Shares (including printing and
distributing prospectuses and sales literature to prospective shareholders
and financial institutions) and providing incentives to investment
professionals to sell Shares. The Rule 12b-1 Plan allows the Distributor
to contract with investment professionals to perform activities covered by
the Plan. The Rule 12b-1 Plan is expected to benefit the Fund in a number
of ways. For example, it is anticipated that the Plan will help the Fund
attract and retain assets, thus providing cash for orderly portfolio
management and Share redemptions and possibly helping to stabilize or
reduce other operating expenses.

In addition, the Plan is integral to the multiple class structure of the
Fund, which promotes the sale of Shares by providing a range of options to
investors. The Fund's service providers that receive asset-based fees also
benefit from stable or increasing Fund assets.

</R>
The Fund may compensate the Distributor more or less than its actual
marketing expenses. In no event will the Fund pay for any expenses of the
Distributor that exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be
paid in any one year may not be sufficient to cover the marketing-related
expenses the Distributor has incurred. Therefore, it may take the
Distributor a number of years to recoup these expenses.

<R>

SERVICE FEES (INSTITUTIONAL SHARES, INSTITUTIONAL SERVICE SHARES AND CLASS
C SHARES)
The Fund may pay fees not to exceed 0.25% of average daily net assets
(Service Fees) to investment professionals or to Federated Shareholder
Services Company (FSSC), a subsidiary of Federated, for providing services
to shareholders and maintaining shareholder accounts. . Under certain
agreements, rather than paying investment professionals directly, the Fund
may pay Service Fees to FSSC and FSSC will use the fees to compensate
investment professionals.

SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees, in significant amounts, out of
the assets of the Distributor. These fees do not come out of Fund assets.
The Distributor may be reimbursed by the Manager or its affiliates.

These supplemental payments may be based upon such factors as the number
or value of Shares the investment professional sells or may sell; the
value of client assets invested; and/or the type and nature of services,
sales support or marketing support furnished by the investment
professional. In addition to these supplemental payments, an investment
professional may also receive payments under the Rule 12b-1 Plan and/or
Service fees.

</R>

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Shares in
exchange for securities you own. The Fund reserves the right to determine
whether to accept your securities and the minimum market value to accept.
The Fund will value your securities in the same manner as it values its
assets. This exchange is treated as a sale of your securities for federal
tax purposes.

SUBACCOUNTING SERVICES

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

REDEMPTION IN KIND

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

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

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

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

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for obligations of the Trust. To protect
its shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of its shareholders for acts or
obligations of the Trust.

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

</R>

ACCOUNT AND SHARE INFORMATION

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

All Shares of the Trust have equal voting rights, except that in matters
affecting only a particular Fund or class, only Shares of that Fund or
class are entitled to vote.

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

<R>
As of December 1, 2003, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares:
Mitra & Co., Milwaukee, WI, owned approximately 7,181,530 Shares (16.12%).

As of December 1, 2003, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Service
Shares: IMS & Co., Englewood, CO, owned approximately 1,919,443 Shares
(6.86%); Saxon & Co, Philadelphia, PA, owned approximately 1,678,344
Shares (6.00%); and GE Financial Trust Co., Phoenix, AZ, owned
approximately 3,959,560 Shares (14.15%).

As of December 1, 2003, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Class C Shares: Edward
Jones & Co., Maryland Heights, MO, owned approximately 499,346 Shares
(10.17%); and MLPF&S Jacksonville, FL, owned approximately 499,346 Shares
(10.17%).

As of December 1, 2003, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Class K Shares:
Planmember Services Corp, Kansas City, MO, owned approximately 787,244
Shares (91.80%).

</R>

TAX INFORMATION

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

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

<R>

FOREIGN INVESTMENTS
If the Fund purchases foreign securities, their investment income may be
subject to foreign withholding or other taxes that could reduce the return
on these securities. Tax treaties between the United States and foreign
countries, however, may reduce or eliminate the amount of foreign taxes to
which the Fund would be subject. The effective rate of foreign tax cannot
be predicted since the amount of Fund assets to be invested within various
countries is uncertain. However, the Fund intends to operate so as to
qualify for treaty-reduced tax rates when applicable.

Distributions from a Fund may be based on estimates of book income for the
year. Book income generally consists solely of the income generated by the
securities in the portfolio, whereas tax-basis income includes, in
addition, gains or losses attributable to currency fluctuation. Due to
differences in the book and tax treatment of fixed-income securities
denominated in foreign currencies, it is difficult to project currency
effects on an interim basis. Therefore, to the extent that currency
fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than
income, for income tax purposes, which may be of particular concern to
simple trusts.

If the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may
be subject to federal income taxes upon disposition of PFIC investments.

If more than 50% of the value of the Fund's assets at the end of the tax
year is represented by stock or securities of foreign corporations, the
Fund will qualify for certain Code provisions that allow its shareholders
to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Code may limit a shareholder's ability to claim a foreign tax
credit. Shareholders who elect to deduct their portion of the Fund's
foreign taxes rather than take the foreign tax credit must itemize
deductions on their income tax returns.

</R>

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES
<R>
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's powers except those reserved for the
shareholders. The following tables give information about each Board
member and the senior officers of the Fund. Where required, the tables
separately list Board members who are "interested persons" of the Fund
(i.e., "Interested" Board members) and those who are not (i.e.,
"Independent" Board members). Unless otherwise noted, the address of each
person listed is Federated Investors Tower, 1001 Liberty Avenue,
Pittsburgh, PA. The Trust comprises three portfolios and the Federated
Fund Complex consists of 44 investment companies (comprising 138
portfolios). Unless otherwise noted, each Officer is elected annually.
Unless otherwise noted, each Board member oversees all portfolios in the
Federated Fund Complex; serves for an indefinite term; and also serves as
a Board member of the following investment company complexes: Banknorth
Funds-four portfolios; Golden Oak(R) Family of Funds-seven portfolios and
WesMark Funds-five portfolios.

As of December 1, 2003, the Fund's Board and Officers as a group owned
less than 1% of the Fund's outstanding Shares.

INTERESTED TRUSTEES BACKGROUND AND COMPENSATION

Name Principal Occupation(s) for Past
Birth Date Five Years, Other Directorships Held Aggregate Total Compensation
Address and Previous Position(s) Compensation From Trust and
Positions Held with From Fund Federated Fund
Trust (past fiscal Complex
Date Service Began year) (past calendar year)
Principal Occupations: Chairman and $0 $0
John F. Donahue* Director or Trustee of the Federated
Birth Date: July 28, Fund Complex; Chairman and Director,
1924 Federated Investors, Inc.
CHAIRMAN AND TRUSTEE -------------------------------------
Began serving: January
30, 1990 Previous Positions: Trustee,
Federated Investment Management
Company and Chairman and Director,
Federated Investment Counseling.

Principal Occupations: Principal $0 $0
J. Christopher Executive Officer and President of
Donahue* the Federated Fund Complex; Director
Birth Date: April 11, or Trustee of some of the Funds in
1949 the Federated Fund Complex;
PRESIDENT AND TRUSTEE President, Chief Executive Officer
Began serving: January and Director, Federated Investors,
30, 1990 Inc.; Chairman and Trustee,
Federated Investment Management
Company; Trustee, Federated
Investment Counseling; Chairman and
Director, Federated Global
Investment Management Corp.;
Chairman, Passport Research, Ltd.;
Trustee, Federated Shareholder
Services Company; Director,
Federated Services Company.

Previous Positions: President,
Federated Investment Counseling;
President and Chief Executive
Officer, Federated Investment
Management Company, Federated Global
Investment Management Corp. and
Passport Research, Ltd.

Principal Occupations: Director or $000.00 $148,500
Lawrence D. Ellis, Trustee of the Federated Fund
M.D.* Complex; Professor of Medicine,
Birth Date: October University of Pittsburgh; Medical
11, 1932 Director, University of Pittsburgh
3471 Fifth Avenue Medical Center Downtown;
Suite 1111 Hematologist, Oncologist and
Pittsburgh, PA Internist, University of Pittsburgh
TRUSTEE Medical Center.
Began serving: January
30, 1990 Other Directorships Held: Member,
National Board of Trustees, Leukemia
Society of America.

Previous Positions: Trustee,
University of Pittsburgh; Director,
University of Pittsburgh Medical
Center.

* Family relationships and reasons for "interested" status: John F.
Donahue is the father of J. Christopher Donahue; both are "interested" due
to the positions they hold with Federated and its subsidiaries. Lawrence
D. Ellis, M.D. is "interested" because his son-in-law is employed by the
Fund's principal underwriter, Federated Securities Corp.
---------------------------------------------------------------------------

INDEPENDENT TRUSTEES BACKGROUND AND COMPENSATION

Name Principal Occupation(s) for Past
Birth Date Five Years, Other Directorships Held Aggregate Total Compensation
Address and Previous Position(s) Compensation From Trust and
Positions Held with From Fund Federated Fund
Trust (past fiscal Complex
Date Service Began year) (past calendar year)
Principal Occupation: Director or $000.00 $163,350
Thomas G. Bigley Trustee of the Federated Fund
Birth Date: February Complex.
3, 1934
15 Old Timber Trail Other Directorships Held: Director,
Pittsburgh, PA Member of Executive Committee,
TRUSTEE Children's Hospital of Pittsburgh;
Began serving: October Director, University of Pittsburgh.
1, 1995
Previous Position: Senior Partner,
Ernst & Young LLP.

Principal Occupations: Director or $000.00 $163,350
John T. Conroy, Jr. Trustee of the Federated Fund
Birth Date: June 23, Complex; Chairman of the Board,
1937 Investment Properties Corporation;
Grubb & Partner or Trustee in private real
Ellis/Investment estate ventures in Southwest
Properties Corporation Florida.
3838 North Tamiami
Trail Previous Positions: President,
Suite 402 Investment Properties Corporation;
Naples, FL Senior Vice President, John R. Wood
TRUSTEE and Associates, Inc., Realtors;
Began serving: August President, Naples Property
21, 1991 Management, Inc. and Northgate
Village Development Corporation.

Principal Occupation: Director or $000.00 $163,350
Nicholas P. Trustee of the Federated Fund
Constantakis Complex.
Birth Date: September
3, 1939 Other Directorships Held: Director
175 Woodshire Drive and Member of the Audit Committee,
Pittsburgh, PA Michael Baker Corporation
TRUSTEE (engineering and energy services
Began serving: worldwide).
February 23, 1998
Previous Position: Partner, Anderson
Worldwide SC.

Principal Occupation: Director or $000.00 $148,500
John F. Cunningham Trustee of the Federated Fund
Birth Date: March 5, Complex.
1943
353 El Brillo Way Other Directorships Held: Chairman,
Palm Beach, FL President and Chief Executive
TRUSTEE Officer, Cunningham & Co., Inc.
Began serving: January (strategic business consulting);
1, 1999 Trustee Associate, Boston College.

Previous Positions: Director,
Redgate Communications and EMC
Corporation (computer storage
systems); Chairman of the Board and
Chief Executive Officer, Computer
Consoles, Inc.; President and Chief
Operating Officer, Wang
Laboratories; Director, First
National Bank of Boston; Director,
Apollo Computer, Inc.

Principal Occupation: Director or $000.00 $148,500
Peter E. Madden Trustee of the Federated Fund
Birth Date: March 16, Complex; Management Consultant.
1942
One Royal Palm Way Other Directorships Held: Board of
100 Royal Palm Way Overseers, Babson College.
Palm Beach, FL
TRUSTEE Previous Positions: Representative,
Began serving: August Commonwealth of Massachusetts
21, 1991 General Court; President, State
Street Bank and Trust Company and
State Street Corporation (retired);
Director, VISA USA and VISA
International; Chairman and
Director, Massachusetts Bankers
Association; Director, Depository
Trust Corporation; Director, The
Boston Stock Exchange.

Principal Occupations: Director or $000.00 $163,350
Charles F. Mansfield, Trustee of the Federated Fund
Jr. Complex; Management Consultant;
Birth Date: April 10, Executive Vice President, DVC Group,
1945 Inc. (marketing, communications and
80 South Road technology) (prior to 9/1/00).
Westhampton Beach, NY
TRUSTEE Previous Positions: Chief Executive
Began serving: January Officer, PBTC International Bank;
1, 1999 Partner, Arthur Young & Company (now
Ernst & Young LLP); Chief Financial
Officer of Retail Banking Sector,
Chase Manhattan Bank; Senior Vice
President, HSBC Bank USA (formerly,
Marine Midland Bank); Vice
President, Citibank; Assistant
Professor of Banking and Finance,
Frank G. Zarb School of Business,
Hofstra University.

John E. Murray, Jr., Principal Occupations: Director or $000.00 $178,200
J.D., S.J.D. Trustee of the Federated Fund
Birth Date: December Complex; Chancellor and Law
20, 1932 Professor, Duquesne University;
Chancellor, Duquesne Consulting Partner, Mollica &
University Murray.
Pittsburgh, PA
TRUSTEE Other Directorships Held: Director,
Began serving: Michael Baker Corp. (engineering,
February 14, 1995 construction, operations and
technical services).

Previous Positions: President,
Duquesne University; Dean and
Professor of Law, University of
Pittsburgh School of Law; Dean and
Professor of Law, Villanova
University School of Law.

Principal Occupations: Director or $000.00 $148,500
Marjorie P. Smuts Trustee of the Federated Fund
Birth Date: June 21, Complex; Public Relations/ Marketing
1935 Consultant/Conference Coordinator.
4905 Bayard Street
Pittsburgh, PA Previous Positions: National
TRUSTEE Spokesperson, Aluminum Company of
Began serving: January America; television producer;
30, 1990 President, Marj Palmer Assoc.;
Owner, Scandia Bord.

Principal Occupations: Director or $000.00 $148,500
John S. Walsh Trustee of the Federated Fund
Birth Date: November Complex; President and Director,
28, 1957 Heat Wagon, Inc. (manufacturer of
2604 William Drive construction temporary heaters);
Valparaiso, IN President and Director,
TRUSTEE Manufacturers Products, Inc.
Began serving: January (distributor of portable
1, 1999 construction heaters); President,
Portable Heater Parts, a division of
Manufacturers Products, Inc.

Previous Position: Vice President,
Walsh & Kelly, Inc.

OFFICERS**
---------------------------------------------------------------------------

Name
Birth Date
Address
Positions Held with Trust
Date Service Began Principal Occupation(s) and Previous Position(s)

Principal Occupations: Executive Vice President and
John W. McGonigle Secretary of the Federated Fund Complex; Executive
Birth Date: October 26, 1938 Vice President, Secretary and Director, Federated
EXECUTIVIE VICE PRESIDENT AND Investors, Inc.
SECRETARY
Began serving: February 1, 1990 Previous Positions: Trustee, Federated Investment
Management Company and Federated Investment
Counseling; Director, Federated Global Investment
Management Corp., Federated Services Company and
Federated Securities Corp.

Principal Occupations: Principal Financial Officer
Richard J. Thomas and Treasurer of the Federated Fund Complex; Senior
Birth Date: June 17, 1954 Vice President, Federated Administrative Services.
TREASURER
Began serving: November 19. 1998 Previous Positions: Vice President, Federated
Administrative Services; held various management
positions within Funds Financial Services Division of
Federated Investors, Inc.

Principal Occupations: Vice Chairman or Vice
Richard B. Fisher President of some of the Funds in the Federated Fund
Birth Date: May 17, 1923 Complex; Vice Chairman, Federated Investors, Inc.;
VICE PRESIDENT Chairman, Federated Securities Corp.
Began serving: February 1, 1990
Previous Positions: President and Director or Trustee
of some of the Funds in the Federated Fund Complex;
Executive Vice President, Federated Investors, Inc.
and Director and Chief Executive Officer, Federated
Securities Corp.

Principal Occupations: Chief Investment Officer of
Stephen F. Auth this Fund and various other Funds in the Federated
Birth Date: September 3, 1956 Fund Complex; Executive Vice President, Federated
CHIEF INVESTMENT OFFICER Investment Counseling, Federated Global Investment
Began serving: November 14, 2002 Management Corp., Federated Investment Management
Company and Passport Research, Ltd.

Previous Positions: Senior Vice President, Global
Portfolio Management Services Division; Senior Vice
President, Federated Investment Management Company
and Passport Research, Ltd; Senior Managing Director
and Portfolio Manager, Prudential Investments.

** Officers do not receive any compensation from the Fund.
---------------------------------------------------------------------------
Thomas R. Donahue, Chief Financial Officer, Vice President, Treasurer and
Assistant Secretary of Federated and an officer of its various advisory
and underwriting subsidiaries, has served as a Term Member on the Board of
Directors of Duquesne University, Pittsburgh, Pennsylvania, since May 12,
2000. Mr. John E. Murray, Jr., an Independent Trustee of the Fund, served
as President of Duquesne from 1988 until his retirement from that position
in 2001, and became Chancellor of Duquesne on August 15, 2001. It should
be noted that Mr. Donahue abstains on any matter that comes before
Duquesne''s Board that affects Mr. Murray personally.

COMMITTEES OF THE BOARD
Meetings
Held
Board Committee During Last
Committee Members Committee Functions Fiscal Year
Executive In between meetings of the full Board, the One
John F. Donahue Executive Committee generally may exercise
John E. Murray, all the powers of the full Board in the
Jr., J.D., S.J.D. management and direction of the business
and conduct of the affairs of the Trust in
such manner as the Executive Committee
shall deem to be in the best interests of
the Trust. However, the Executive
Committee cannot elect or remove Board
members, increase or decrease the number of
Trustees, elect or remove any Officer,
declare dividends, issue shares or
recommend to shareholders any action
requiring shareholder approval.

Audit The Audit Committee reviews and recommends Four
Thomas G. Bigley to the full Board the independent auditors
John T. Conroy, to be selected to audit the Fund'`s
Jr. financial statements; meets with the
Nicholas P. independent auditors periodically to review
Constantakis the results of the audits and reports the
Charles F. results to the full Board; evaluates the
Mansfield, Jr. independence of the auditors, reviews legal
and regulatory matters that may have a
material effect on the financial
statements, related compliance policies and
programs, and the related reports received
from regulators; reviews the Fund'`s
internal audit function; reviews compliance
with the Fund'`s code of conduct/ethics;
reviews valuation issues; monitors
inter-fund lending transactions; reviews
custody services and issues and
investigates any matters brought to the
Committee's attention that are within the
scope of its duties.

BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE FEDERATED FAMILY OF
INVESTMENT COMPANIES AS OF DECEMBER 31, 2002
---------------------------------------------------------------------------
Aggregate
Dollar Range of
Dollar Range of Shares Owned in
Interested Shares Owned Federated Family of
Board Member Name in Fund Investment Companies
John F. Donahue None Over $100,000
J. Christopher Donahue Over $100,000 Over $100,000
Lawrence D. Ellis, M.D. None Over $100,000

Independent
Board Member Name
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. Constantakis $10,001-$50,000 Over $100,000
John F. Cunningham None Over $100,000
Peter E. Madden Over $100,000 Over $100,000
Charles F. Mansfield, Jr. $10,001-$50,000 $50,001 - $100,000
John E. Murray, Jr., J.D., S.J.D. None Over $100,000
Marjorie P. Smuts None Over $100,000
John S. Walsh $1 - $10,000 Over $100,000

</R>
---------------------------------------------------------------------------

INVESTMENT MANAGER
The Manager is a wholly owned subsidiary of Federated.

<R>
The Manager oversees the Sub-Manager, Fund Asset Management, L.P., doing
business as Mercury Advisors, an indirect wholly owned subsidiary of
Merrill Lynch & Co., Inc., which conducts investment research and makes
investment decisions for the Fund. Subject to the supervision and
direction of the Board, the Manager provides to the Fund investment
management evaluation services principally by performing initial due
diligence on the Sub-Manager for the Fund and thereafter monitoring and
evaluating the performance of the Sub-Manager through quantitative and
qualitative analyses. In addition, the Manager conducts periodic
in-person, telephonic and written consultations with the Sub-Manager. In
initially evaluating the Sub-Manager, the Manager considered, among other
factors, the Sub-Manager's size, investment capabilities in the area of
indexed assets under management, performance history, its ongoing
commitment to client service and the stability and quality of the
organization (including the Sub-Manager's financial condition), as well as
the quality of the individuals that make up its investment team. On an
ongoing basis, the Manager is responsible for communicating performance
expectations and evaluations to the Sub-Manager; monitoring tracking
errors; monitoring and analyzing the use of futures contracts; monitoring
the futures holdings of the Fund as a percentage of Fund assets;
monitoring securities lending for the Funds; discussing with the
Sub-Manager the portfolio sampling techniques employed by the Sub-Manager;
and ultimately recommending to the Board whether the Sub-Management
Contract should be renewed, modified or terminated. The Manager provides
written reports to the Board regarding the results of its evaluation and
monitoring functions. In addition, the Manager is responsible for
providing the Fund with administrative services, including, but not
limited to, shareholder servicing and certain legal and accounting
services. The Manager is also responsible for conducting all operations of
the Fund, except those operations contracted to the Sub- Manager,
custodian, transfer agent and dividend disbursing agent. The
Manager receives an annual fee from the Fund for performing its
responsibilities under the Management Contract. The Manager and the
Sub-Manager shall not be liable to the Trust, the Fund, or any Fund
shareholder for any losses that maybe sustained in the purchase, holding,
or sale of any security or for anything done or omitted by it, except acts
or omissions involving willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties imposed upon it by its contract with
the Trust.

As required by the 1940 Act, the Fund's Board has reviewed the Fund's
investment management contract and submanagement contract. The Board's
decision to approve these contracts reflects the exercise of its business
judgment on whether to continue the existing arrangements. During its
review of these contracts, the Board considers many factors, among the
most material of which are: the Fund's investment objectives and long term
performance; the Manager's and submanager's management philosophy,
personnel and processes; the preferences and expectations of Fund
shareholders and their relative sophistication; the continuing state of
competition in the mutual fund industry; comparable fees in the mutual
fund industry; the range and quality of services provided to the Fund and
its shareholders by the Federated organization in addition to investment
management services; and the Fund's relationship to the Federated funds.

In assessing the Manager's and submanager's performance of its
obligations, the Board also considers whether there has occurred a
circumstance or event that would constitute a reason for it to not renew a
management contract. In this regard, the Board is mindful of the
potential disruptions of the Fund's operations and various risks,
uncertainties and other effects that could occur as a result of a decision
to terminate or not renew a management contract. In particular, the Board
recognizes that most shareholders have invested in the Fund on the
strength of the Manager's industry standing and reputation and in the
expectation that the Manager will have a continuing role in providing
management services to the Fund.

The Board also considers the compensation and benefits received by the
Manager and submanager. This includes fees received for services provided
to the Fund by other entities in the Federated organization and research
services received by the Manager from brokers that execute fund trades, as
well as management fees. In this regard, the Board is aware that various
courts have interpreted provisions of the 1940 Act and have indicated in
their decisions that the following factors may be relevant to an Manager's
compensation: the nature and quality of the services provided by the
Manager, including the performance of the Fund; the Manager's cost of
providing the services; the extent to which the Manager may realize
"economies of scale" as the Fund grows larger; any indirect benefits that
may accrue to the Manager and its affiliates as a result of the Manager's
relationship with the Fund; performance and expenses of comparable funds;
and the extent to which the independent Board members are fully informed
about all facts bearing on the Manager's service and fee. The Fund's
Board is aware of these factors and takes them into account in its review
of the Fund's management contract.

The Board considers and weighs these circumstances in light of its
substantial accumulated experience in governing the Fund and working with
Federated on matters relating to the Federated funds, and is assisted in
its deliberations by the advice of independent legal counsel. In this
regard, the Board requests and receives a significant amount of
information about the Fund and the Federated organization. Federated
provides much of this information at each regular meeting of the Board,
and furnishes additional reports in connection with the particular meeting
at which the Board's formal review of the management contracts occurs. In
between regularly scheduled meetings, the Board may receive information on
particular matters as the need arises. Thus, the Board's evaluation of a
management contract is informed by reports covering such matters as: the
Manager's investment philosophy, personnel, and processes; the Fund's
short- and long-term performance (in absolute terms as well as in
relationship to its particular investment program and certain competitor
or "peer group" funds), and comments on the reasons for performance; the
Fund's expenses (including the management fee itself and the overall
expense structure of the Fund, both in absolute terms and relative to
similar and/or competing funds, with due regard for contractual or
voluntary expense limitations); the use and allocation of brokerage
commissions derived from trading the Fund's portfolio securities; the
nature and extent of the management and other services provided to the
Fund by the Manager and its affiliates; compliance and audit reports
concerning the Federated funds and the Federated companies that service
them; and relevant developments in the mutual fund industry and how the
Federated funds and/or Federated are responding to them.

The Board also receives financial information about Federated, including
reports on the compensation and benefits Federated derives from its
relationships with the Federated funds. These reports cover not only the
fees under the management contracts, but also fees received by Federated's
subsidiaries for providing other services to the Federated funds under
separate contracts (e.g., for serving as the Federated funds'
administrator and transfer agent). The reports also discuss any indirect
benefit Federated may derive from its receipt of research services from
brokers who execute Federated fund trades.

The Board bases its decision to approve a management contract on the
totality of the circumstances and relevant factors, and with a view to
past and future long-term considerations. Not all of the factors and
considerations identified above are relevant to every Federated fund, nor
does the Board consider any one of them to be determinative. Because the
totality of circumstances includes considering the relationship of each
Federated fund, the Board does not approach consideration of every
Federated fund's management contract as if that were the only Federated
fund offered by Federated.

Services Agreement
Federated Advisory Services Company, an affiliate of the Manager, provides
research, quantitative analysis, equity trading and transaction settlement
and certain support services to the Manager. The fee for these services
is paid by the Manager and not by the Fund.

</R>

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

CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING

As required by SEC rules, the Fund, its Manager, and its Distributor have
adopted codes of ethics. These codes govern securities trading activities
of investment personnel, Fund Trustees, and certain other employees.
Although they do permit these people to trade in securities, including
those that the Fund could buy, they also contain significant safeguards
designed to protect the Fund and its shareholders from abuses in this
area, such as requirements to obtain prior approval for, and to report,
particular transactions.

<R>

VOTING PROXIES ON FUND PORTFOLIO SECURITIES
The Board has delegated to the Manager authority to vote proxies on the
securities held in the Fund's portfolio. The Board has also approved the
Manager's policies and procedures for voting the proxies, which are
described below.

Proxy Voting Policies
The Manager's general policy is to cast proxy votes in favor of proposals
that the Manager anticipates will enhance the long-term value of the
securities being voted. Generally, this will mean voting for proposals
that the Manager believes will: improve the management of a company;
increase the rights or preferences of the voted securities; and/or
increase the chance that a premium offer would be made for the company or
for the voted securities.

The following examples illustrate how these general policies may apply to
proposals submitted by a company's board of directors. However, whether
the Manager supports or opposes a proposal will always depend on the
specific circumstances described in the proxy statement and other
available information.

On matters of corporate governance, generally the Manager will vote for
proposals to: require independent tabulation of proxies and/or
confidential voting by shareholders; reorganize in another jurisdiction
(unless it would reduce the rights or preferences of the securities being
voted); and repeal a shareholder rights plan (also known as a "poison
pill"). The Manager will generally vote against the adoption of such a
plan (unless the plan is designed to facilitate, rather than prevent,
unsolicited offers for the company).

On matters of capital structure, generally the Manager will vote: against
proposals to authorize or issue shares that are senior in priority or
voting rights to the securities being voted; for proposals to grant
preemptive rights to the securities being voted; and against proposals to
eliminate such preemptive rights.

On matters relating to management compensation, generally the Manager will
vote: for stock incentive plans that align the recipients' interests with
the interests of shareholders without creating undue dilution; and against
proposals that would permit the amendment or replacement of outstanding
stock incentives with new stock incentives having more favorable terms.

On matters relating to corporate transactions, the Manager will vote
proxies relating to proposed mergers, capital reorganizations, and similar
transactions in accordance with the general policy, based upon its
analysis of the proposed transaction. The Manager will vote proxies in
contested elections of directors in accordance with the general policy,
based upon its analysis of the opposing slates and their respective
proposed business strategies. Some transactions may also involve proposed
changes to the company's corporate governance, capital structure or
management compensation. The Manager will vote on such changes based on
its evaluation of the proposed transaction or contested election. In
these circumstances, the Manager may vote in a manner contrary to the
general practice for similar proposals made outside the context of such a
proposed transaction or change in the board. For example, if the Manager
decides to vote against a proposed transaction, it may vote for
anti-takeover measures reasonably designed to prevent the transaction,
even though the Manager typically votes against such measures in other
contexts.

The Manager generally votes against proposals submitted by shareholders
without the favorable recommendation of a company's board. The Manager
believes that a company's board should manage its business and policies,
and that shareholders who seek specific changes should strive to convince
the board of their merits or seek direct representation on the board.

In addition, the Manager will not vote if it determines that the
consequences or costs outweigh the potential benefit of voting. For
example, if a foreign market requires shareholders casting proxies to
retain the voted shares until the meeting date (thereby rendering the
shares "illiquid" for some period of time), the Manager will not vote
proxies for such shares.

Finally, because the Fund is an "Index Fund," and therefore invests in
large numbers of securities without independent evaluation by the Manager,
the Manager will not independently analyze the Fund's interest in the
proxy. The Manager will vote its proxies in accordance with its
applicable general guidelines and in the same manner as a non-Index Fund
managed by the Manager that is voting on the same proxy matter. If
neither of these two conditions apply, the Manager will vote as
recommended by a submanager to the Index Fund; and, in absence of such
recommendation, as recommended by the subject company's board of directors.

Proxy Voting Procedures
The Manager has established a Proxy Voting Committee (Proxy Committee), to
exercise all voting discretion granted to the Manager by the Board in
accordance with the proxy voting policies. The Manager has hired Investor
Responsibility Research Center (IRRC) to obtain, vote, and record proxies
in accordance with the Proxy Committee's directions. The Proxy Committee
directs IRRC by means of Proxy Voting Guidelines, and IRRC may vote any
proxy as directed in the Proxy Voting Guidelines without further direction
from the Proxy Committee (and may make any determinations required to
implement the Proxy Voting Guidelines). However, if the Proxy Voting
Guidelines require case-by-case direction for a proposal, IRRC will
provide the Proxy Committee with all information that it has obtained
regarding the proposal and the Proxy Committee will provide specific
direction to IRRC. The Manager's proxy voting procedures generally permit
the Proxy Committee to amend the Proxy Voting Guidelines, or override the
directions provided in such Guidelines, whenever necessary to comply with
the proxy voting policies.

Conflicts of Interest
The Manager has adopted procedures to address situations where a matter on
which a proxy is sought may present a potential conflict between the
interests of the Fund (and its shareholders) and those of the Manager or
Distributor. This may occur where a significant business relationship
exists between the Manager (or its affiliates) and a company involved with
a proxy vote. A company that is a proponent, opponent, or the subject of
a proxy vote, and which to the knowledge of the Proxy Committee has this
type of significant business relationship, is referred to as an
"Interested Company."

The Manager has implemented the following procedures in order to avoid
concerns that the conflicting interests of the Manager have influenced
proxy votes. Any employee of the Manager who is contacted by an
Interested Company regarding proxies to be voted by the Manager must refer
the Interested Company to a member of the Proxy Committee, and must inform
the Interested Company that the Proxy Committee has exclusive authority to
determine how the Manager will vote. Any Proxy Committee member contacted
by an Interested Company must report it to the full Proxy Committee and
provide a written summary of the communication. Under no circumstances
will the Proxy Committee or any member of the Proxy Committee make a
commitment to an Interested Company regarding the voting of proxies or
disclose to an Interested Company how the Proxy Committee has directed
such proxies to be voted. If the Proxy Voting Guidelines already provide
specific direction on the proposal in question, the Proxy Committee shall
not alter or amend such directions. If the Proxy Voting Guidelines
require the Proxy Committee to provide further direction, the Proxy
Committee shall do so in accordance with the proxy voting policies,
without regard for the interests of the Manager with respect to the
Interested Company. If the Proxy Committee provides any direction as to
the voting of proxies relating to a proposal affecting an Interested
Company, it must disclose to the Fund's Board information regarding: the
significant business relationship; any material communication with the
Interested Company; the matter(s) voted on; and how, and why, the Manager
voted as it did.

If the Fund holds shares of another investment company for which the
Manager (or an affiliate) acts as an investment manager, the Proxy
Committee will vote the Fund's proxies in the same proportion as the votes
cast by shareholders who are not clients of the Manager at any
shareholders' meeting called by such investment company, unless otherwise
directed by the Board.

</R>

BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Manager looks for prompt execution of the order
at a favorable price. The Manager will generally use those who are
recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. The Manager
may select brokers and dealers based on whether they also offer research
services (as described below). In selecting among firms believed to meet
these criteria, the Manager may give consideration to those firms which
have sold or are selling Shares of the Fund and other funds distributed by
the Distributor and its affiliates. The Manager may also direct certain
portfolio trades to a broker that, in turn, pays a portion of the Fund''s
operating expenses. The Manager makes decisions on portfolio transactions
and selects brokers and dealers subject to review by the Fund's Board.

Investment decisions for the Fund are made independently from those of
other accounts managed by the Manager. Except as noted below, when the
Fund and one or more of those accounts invests in, or disposes of, the
same security, available investments or opportunities for sales will be
allocated among the Fund and the account(s) in a manner believed by the
Manager to be equitable. While the coordination and ability to participate
in volume transactions may benefit the Fund, it is possible that this
procedure could adversely impact the price paid or received and/ or the
position obtained or disposed of by the Fund. Investments for Federated
Kaufmann Fund and other accounts managed by that fund's portfolio managers
in initial public offerings (IPO) are made independently from any other
accounts, and much of their non-IPO trading may also be conducted
independently from other accounts.

Research Services
Research services may include advice as to the advisability of investing
in securities; security analysis and reports; economic studies; industry
studies; receipt of quotations for portfolio evaluations; and similar
services. Research services may be used by the Manager or by affiliates of
Federated in advising other accounts. To the extent that receipt of these
services may replace services for which the Manager or its affiliates
might otherwise have paid, it would tend to reduce their expenses. The
Manager and its affiliates exercise reasonable business judgment in
selecting those brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that
commissions charged by such persons are reasonable in relationship to the
value of the brokerage and research services provided.

<R>

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

Maximum Administrative Average Aggregate Daily
Fee Net Assets of the Federated Funds
0.150 of 1% on the first $5 billion
0.125 of 1% on the next $5 billion
0.100 of 1% on the next $10 billion
0.075 of 1% on assets over $20 billion
The administrative fee received during any fiscal year shall be at least
$150,000 per portfolio and $40,000 per each additional class of Shares.
FAS may voluntarily waive a portion of its fee and may reimburse the Fund
for expenses.
---------------------------------------------------------------------------

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

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

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

INDEPENDENT AUDITORS
The independent auditor for the Fund, Ernst & Young LLP, conducts its
audits in accordance with auditing standards generally accepted in the
United States of America, which require it to plan and perform its audits
to provide reasonable assurance about whether the Fund's financial
statements and financial highlights are free of material misstatement.

FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October 31
2003 2002 2001
Management Fee Earned $4,550,294 $5,325,675 $7,240,536
Management Fee Reduction 563,692 640,763 291,210
Management Fee
Reimbursement 3,802 5,299 5,931
525,127
Sub-Management Fee (Paid
by Manager) - 390,550 530,973
Brokerage Commissions 562,530 564,083 399,654
Administrative Fee
12b-1 Fee:
Institutional Service
Shares 258,833 -- --
Class C Shares 685,238 -- --
Class K Shares 4,406 -- --
Shareholder Services Fee:
Institutional Shares 0 -- --
Institutional Service
Shares 1,294,166 -- --
Class C Shares 228,413 -- --
Class K Shares -- -- --

</R>
---------------------------------------------------------------------------
Fees are allocated among classes based on their pro rata share of Fund
assets, except for marketing (Rule 12b-1) fees and shareholder services
fees, which are borne only by the applicable class of Shares.

HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the SEC's standard
methods for calculating performance applicable to all mutual funds. The
SEC also permits this standard performance information to be accompanied
by non-standard performance information.

Share performance reflects the effect of non-recurring charges, such as
maximum sales charges, which, if excluded, would increase the total return
and yield. The performance of Shares depends upon such variables as:
portfolio quality; average portfolio maturity; type and value of portfolio
securities; changes in interest rates; changes or differences in the
Fund's or any class of Shares'' expenses; and various other factors.

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

AVERAGE ANNUAL TOTAL RETURNS AND YIELD

<R>
Total returns are given for the one-year, five-year, ten-year and/or Start
of Performance periods ended October 31, 2003.

Yield is given for the 30-day period ended October 31, 2003.

30-Day Period 1 Year 5 Years 10 Years
Institutional Shares:
Total Return
Before Taxes N/A 20.18% 0.07% 9.98%
After Taxes on
Distributions N/A 19.57% (0.47)% 8.56%
After Taxes on
Distributions and
Sale of Shares N/A 13.06% (0.24)% 7.93%
Yield 1.31% N/A N/A

0-Day Period Start of
Performance on
3 1 Year 5 Years 9/7/1993
Institutional Service
Shares:
Total Return
Before Taxes N/A 19.84% (0.23) 9.68%
After Taxes on
Distributions N/A 19.34% (0.66) 8.38%
After Taxes on
Distributions and
Sale of Shares N/A 12.85% (0.42) 7.74%
Yield 0.99% N/A N/A

30-Day Period Start of
Performance on
1 Year 5 Years 11/10/1987
Class C Shares:
Total Return
Before Taxes N/A 16.83% (1.12)% 2.07%
After Taxes on
Distributions N/A 16.63% (1.29)% 1.73%
After Taxes on
Distributions and
Sale of Shares N/A 10.92% (1.02)% 1.60%
Yield 0.15%
30-Day Period Start of
Performance on
4/7/2003
Class K Shares:
Total Return
Before Taxes N/A 19.99%
After Taxes on
Distributions N/A 19.79%
After Taxes on
Distributions and
Sale of Shares N/A 12.98%
Yield 0.63%
----------------------------------------------------------------------------------------

</R>
---------------------------------------------------------------------------

TOTAL RETURN
Total return represents the change (expressed as a percentage) in the
value of Shares over a specific period of time, and includes the
investment of income and capital gains distributions.

The average annual total return for Shares is the average compounded rate
of return for a given period that would equate a $10,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of Shares owned at
the end of the period by the NAV per Share at the end of the period. The
number of Shares owned at the end of the period is based on the number of
Shares purchased at the beginning of the period with $10,000, less any
applicable sales charge, adjusted over the period by any additional
Shares, assuming the annual reinvestment of all dividends and
distributions. Total returns after taxes are calculated in a similar
manner, but reflect additional standard assumptions required by the SEC.

<R>
When Shares of a Fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather
than annualizing the total return.

</R>

YIELD
The yield of Shares is calculated by dividing: (i) the net investment
income per Share earned by the Shares over a 30-day period; by (ii) the
maximum offering price per Share on the last day of the period. This
number is then annualized using semi-annual compounding. This means that
the amount of income generated during the 30-day period is assumed to be
generated each month over a 12-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by
Shares because of certain adjustments required by the SEC and, therefore,
may not correlate to the dividends or other distributions paid to
shareholders.

To the extent investment professionals and broker/dealers charge fees in
connection with services provided in conjunction with an investment in
Shares, the Share performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS
Advertising and sales literature may include:

<R>
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;

o charts, graphs and illustrations using the Fund's returns, or
returns in general, that demonstrate investment concepts such as
tax-deferred compounding, dollar-cost averaging and systematic
investment;

o discussions of economic, financial and political developments and
their impact on the securities market, including the portfolio manager's
views on how such developments could impact the Fund; and

o information about the mutual fund industry from sources such as the
Investment Company Institute.

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

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

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

Dow Jones Industrial Average (DJIA)
The DJIA represents share prices of selected blue-chip industrial
corporations. The DJIA indicates daily changes in the average price of
stock of these corporations. Because it represents the top corporations of
America, the DJIA is a leading economic indicator for the stock market as
a whole.

Lipper, Inc.
Lipper, Inc. ranks funds in various fund categories by making comparative
calculations using total return. Total return assumes the reinvestment of
all capital gains distributions and income dividends and takes into
account any change in NAV over a specified period of time.

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

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S&P 500

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The S&P 500 is a composite index of common stocks in industry,
transportation, and financial and public utility companies. It can be used
to compare to the total returns of funds whose portfolios are invested
primarily in common stocks. In addition, the S&P 500 assumes reinvestments
of all dividends paid by stocks listed on its index. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in the S&P 500 figures.

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment
products have a history of competitive performance and have gained the
confidence of thousands of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound
methodologies backed by fundamental and technical research. At Federated,
success in investment management does not depend solely on the skill of a
single portfolio manager. It is a fusion of individual talents and
state-of-the-art industry tools and resources. Federated's investment
process involves teams of portfolio managers and analysts, and investment
decisions are executed by traders who are dedicated to specific market
sectors and who handle trillions of dollars in annual trading volume.

FEDERATED FUNDS OVERVIEW

Municipal Funds

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In the municipal sector, as of December 31, 2002, Federated managed 14
bond funds with approximately $3.2 billion in assets and 22 money market
funds with approximately $20.6 billion in total assets. In 1976, Federated
introduced one of the first municipal bond mutual funds in the industry
and is now one of the largest institutional buyers of municipal
securities. The Funds may quote statistics from organizations including
The Tax Foundation and the National Taxpayers Union regarding the tax
obligations of Americans.

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Equity Funds
In the equity sector, Federated has more than 31 years' experience. As of
December 31, 2002, Federated managed 37 equity funds totaling
approximately $16.2 billion in assets across growth, value, equity
income, international, index and sector (i.e. utility) styles.
Federated's value-oriented management style combines quantitative and
qualitative analysis and features a structured, computer-assisted
composite modeling system that was developed in the 1970s.

Corporate Bond Funds
In the corporate bond sector, as of December 31, 2002, Federated managed
10 money market funds and 9 bond funds with assets approximating $59.4
billion and $6.0 billion, respectively. Federated''s corporate bond
decision making--based on intensive, diligent credit analysis--is backed
by over 29 years of experience in the corporate bond sector. In 1972,
Federated introduced one of the first high-yield bond funds in the
industry. In 1983, Federated was one of the first fund managers to
participate in the asset backed securities market, a market totaling more
than $209 billion.

Government Funds
In the government sector, as of December 31, 2002, Federated managed 7
mortgage backed, 3 multi-sector government funds, 4 government/agency and
19 government money market mutual funds, with assets approximating $4.9
billion, $0.9 billion, $2.9 billion and $56.2 billion, respectively.
Federated trades approximately $90.4 billion in U.S. government and
mortgage backed securities daily and places approximately $35 billion in
repurchase agreements each day. Federated introduced the first U.S.
government fund to invest in U.S. government bond securities in 1969.
Federated has been a major force in the short- and intermediate-term
government markets since 1982 and currently manages approximately $50
billion in government funds within these maturity ranges.

Money Market Funds

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In the money market sector, Federated gained prominence in the mutual fund
industry in 1974 with the creation of the first institutional money market
fund. Simultaneously, the company pioneered the use of the amortized cost
method of accounting for valuing shares of money market funds, a principal
means used by money managers today to value money market fund shares.
Other innovations include the first institutional tax-free money market
fund. As of December 31, 2002, Federated managed $136.2 billion in
assets across 52 money market funds, including 19 government, 10 prime, 22
municipal and 1 euro-denominated with assets approximating $56.2 billion,
$59.4 billion, $20.6 billion and $173.9 million, respectively.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: Global Equity - Stephen F. Auth
is responsible for overseeing the management of Federated's domestic and
international equity products; Global Fixed Income - William D. Dawson III
is responsible for overseeing the management of Federated's domestic and
international fixed income and high yield products.

MUTUAL FUND MARKET
Forty-nine percent of American households are pursuing their financial
goals through mutual funds. These investors, as well as businesses and
institutions, have entrusted over $6.2 trillion to the approximately 8,300
funds available, according to the Investment Company Institute.

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FEDERATED CLIENTS OVERVIEW
Federated distributes mutual funds through its subsidiaries for a variety
of investment purposes. Specific markets include:

Institutional Clients

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Federated meets the needs of approximately 3,035 institutional clients
nationwide by managing and servicing separate accounts and mutual funds
for a variety of purposes, including defined benefit and defined
contribution programs, cash management, and asset/liability management.
Institutional clients include corporations, pension funds, tax exempt
entities, foundations/endowments, insurance companies, and investment and
financial advisers.

Bank Marketing
Other institutional clients include more than 1,600 banks and trust
organizations. Virtually all of the trust divisions of the top 100 bank
holding companies use Federated funds in their clients' portfolios.

Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated funds are available to consumers through major brokerage firms
nationwide--Federated has over 2,000 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any
other mutual fund distributor. Federated's service to financial
professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry
benchmark for service quality measurement.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended October
31, 2003 are incorporated herein by reference to the Annual Report to
Shareholders of Federated Max-Cap Index Fund dated October 31, 2003.

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STANDARD & POOR'S

The Fund is not sponsored, endorsed, sold or promoted by, or affiliated
with, Standard & Poor's ("S&P"). S&P makes no representation or warranty,
express or implied, to the owners of the Fund or any member of the public
regarding the advisability of investing in securities generally or in the
Fund particularly or the ability of the S&P 500 Index to track general
stock market performance. S&P's only relationship to Federated Securities
Corp. (the "Licensee") is the licensing of certain trademarks and trade
names of S&P and of the S&P 500 Index, which is determined, composed and
calculated by S&P without regard to the Licensee or the Fund. S&P has no
obligation to take the needs of the Licensee or the owners of the Fund
into consideration in determining, composing or calculating the S&P 500
Index. S&P is not responsible for and has not participated in the
determination of, the timing of, prices at, or quantities of the Fund to
be issued or in the determination or calculation of the equation by which
the Fund is to be converted into cash. S&P has no obligation or liability
in connection with the administration, marketing or trading of the Fund.

S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index or any data included therein. S&P makes no warranty, express or
implied, as to results to be obtained by Licensee, owners of the Fund, or
any other person or entity from the use of the S&P 500 Index or any data
included therein in connection with the rights licensed hereunder or for
any other use. S&P makes no express or implied warranties, and expressly
disclaims all warranties of merchantability or fitness for a particular
purpose or use with respect to the S&P 500 Index or any data included
therein. Without limiting any of the foregoing, in no event shall S&P have
any liability for any special, punitive, indirect, or consequential
damages (including lost profits), even if notified of the possibility of
such damages.

Addresses

FEDERATED MAX-CAP INDEX FUND
Institutional Shares

Institutional Service Shares

Class C Shares

Class K Shares

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

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

Investment Manager

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Federated Equity Management Company
of Pennsylvania

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Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Sub-Manager
Fund Asset Management, L.P. doing business as

Mercury Advisors

800 Scudders Mill Road

Plainsboro, NJ 08536

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

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

Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072

[Logo of Federated Investors]

Federated Mid-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

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December 31, 2003

A mutual fund seeking to provide investment results generally corresponding to the aggregate price and dividend performance of the publicly traded common stocks comprising the Standard & Poor's MidCap 400 Index. The Fund is neither sponsored by nor affiliated with Standard & Poor's.

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Not FDIC Insured * May Lose Value * No Bank Guarantee

Risk/Return Summary		1
What are the Fund's Fees and Expenses?		4
What are the Fund's Investment Strategies?		5
What are the Principal Securities in Which the Fund Invests?		6
What are the Specific Risks of Investing in the Fund?		7
What Do Shares Cost?		8
How is the Fund Sold?		9
How to Purchase Shares		9
How to Redeem Shares		11
Account and Share Information		13
Who Manages the Fund?		14
Legal Proceedings		15
Financial Information		16

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Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide investment results generally corresponding to the aggregate price and dividend performance of the publicly-traded common stocks that comprise the mid-level stock capitalization sector of the United States equity market. While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

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WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund normally invests its assets primarily in common stocks included in the Standard & Poor's MidCap 400 Index (S&P 400).

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Fund. The primary factors that may reduce the Fund's returns include:

Stock Market Risks. The value of equity securities in the Fund's portfolio will fluctuate and, as a result, the Fund's share price may decline suddenly or over a sustained period of time.
Risks Related to Company Size. Because the smaller companies in which the Fund may invest may have unproven track records, a limited product or service base and limited access to capital, they may be more likely to fail than larger companies.
Liquidity Risks. Equity securities that are not widely held may trade less frequently than more widely held securities. This limits trading opportunity, making it more difficult to sell or buy the securities at a favorable price or time.
Sector Risks. Because the Fund may allocate relatively more assets to certain industry sectors than others, the Fund's performance may be more susceptible to any developments that affect those sectors emphasized by the Fund.
Credit Risk. Credit risk includes the possibility that a party to a transaction involving the Fund will fail to meet its obligations.

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Risk/Return Bar Chart and Table

The performance information shown below will help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund's performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The Fund's Shares are sold without a sales charge (load). The total returns shown in the bar chart above are based upon net asset value.

The Fund's total return for the nine-month period from January 1, 2003 to September 30, 2003 was 19.40%.

Within the period shown in the bar chart, the Fund's highest quarterly return was 27.73% (quarter ended December 31, 1998). Its lowest quarterly return was (16.68)% (quarter ended September 30, 2001).

Average Annual Total Return Table

Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. The table also shows returns for the S&P 400, a broad based market index. Index returns do not reflect taxes, sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. Indexes are unmanaged, and it is not possible to invest directly in an index.

(For the periods ended December 31, 2002)

	1 Year	5 Years	10 Years
Fund:
Return Before Taxes	(15.16)%	5.62%	10.83%
Return After Taxes on Distributions¹	(15.38)%	3.44%	8.53%
Return After Taxes on Distributions and Sale of Fund Shares¹	(9.30)%	4.09%	8.29%
S&P 400	(14.50)%	6.42%	11.96%

1 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sale of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

What are the Fund's Fees and Expenses?

FEDERATED MID-CAP INDEX FUND

FEES AND EXPENSES

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

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

Annual Fund Operating Expenses (Before Waivers)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.40%
Distribution (12b-1) Fee		None
Shareholder Services Fee³		0.25%
Other Expenses		0.10%
Total Annual Fund Operating Expenses		0.75%

1 Although not contractually obligated to do so, the Manager and shareholder services provider waived certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2003.
Total Waivers of Fund Expenses		0.26%
Total Actual Annual Fund Operating Expenses (after waivers)		0.49%
2 The Manager voluntarily waived a portion of the management fee. The Manager can terminate this voluntary waiver at any time. The management fee paid by the Fund (after the voluntary waiver) was 0.36% for the fiscal year ended October 31, 2003.
3 A portion of the shareholder services fee has been voluntarily waived. This voluntary waiver can be terminated at any time. The shareholder services fee paid by the Fund (after the voluntary waiver) was 0.03% for the fiscal year ended October 31, 2003.

EXAMPLE

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

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

1 Year		$ 77
3 Years		$240
5 Years		$417
10 Years		$930

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What are the Fund's Investment Strategies?

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In pursuing its investment objective, the Fund normally invests its assets primarily in common stocks included in the S&P 400. As of November 30, 2002, the capitalization range of the issuers comprising the S&P 400 was $276 million to $11,816 million. As of the same date, the weighted median market capitalization of the Fund was $2.8 billion. Market capitalization is determined by multiplying the number of outstanding shares of an issuer by the current market price per share. The Fund seeks to reduce the difference in the Fund's portfolio performance relative to the S&P 400 ("tracking error") by investing in a portfolio that seeks to replicate, as closely as possible, the composition of the S&P 400. The Fund attempts to achieve a 0.95 or better correlation between the performance of the Fund and, that of the S&P 400. The Fund also may employ the following strategies to attempt to further reduce tracking error: (1) buying and selling securities after announced changes in the S&P 400 but before the effective date of the changes; (2) purchasing S&P 400 futures contracts in amounts approximating the cash held in the Fund's portfolio; (3) purchasing domestically traded share classes of S&P 400 companies other than the share classes included in the S&P 400 and (4) lending the Fund's securities to broker-dealers or other institutions to earn income for the Fund. Because the Fund refers to Index investments in its name, it will notify shareholders at least 60 days in advance of any change in its investment policies that would enable the Fund to normally invest less the 80% of its assets in Index investments.

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What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

Common Stocks

STOCK INDEX FUTURES

Securities Lending

The Fund will reinvest cash collateral in securities that qualify as an acceptable investment for the Fund. However, the Fund must pay interest to the borrower for the use of cash collateral.

Securities lending activities are subject to credit risks.

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

The value of equity securities in the Fund's portfolio will rise and fall. These fluctuations could be a sustained trend or a drastic movement. The Fund's portfolio will reflect changes in prices of individual portfolio stocks or general changes in stock valuations. Consequently, the Fund's share price may decline. The Fund's investment in stock index futures will be subject to the same risk.

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock and the more volatile its price. Market capitalization is determined by multiplying the number of its outstanding shares by the current market price per share.
Companies with smaller market capitalizations also tend to have unproven track records, a limited product or service base and limited access to capital. These factors also increase risks and make these companies more likely to fail than companies with larger market capitalizations.

LIQUIDITY RISKS

Trading opportunities are more limited for equity securities that are not widely held. This may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash or give up an investment opportunity, any of which could have a negative effect on the Fund's performance. Infrequent trading of securities may also lead to an increase in their price volatility.
Liquidity risk also refers to the possibility that the Fund may not be able to sell a security or close out a derivative contract when it wants to. If this happens, the Fund will be required to continue to hold the security or keep the position open, and the Fund could incur losses.
Over-the-counter (OTC) derivative contracts generally carry greater liquidity risk than exchange-traded contracts.

SECTOR RISKS

Companies with similar characteristics may be grouped together in broad categories called sectors. Sector risk is the possibility that a certain sector may underperform other sectors or the market as a whole. As the Manager allocates more of the Fund's portfolio holdings to a particular sector, the Fund's performance will be more susceptible to any economic, business or other developments which generally affect that sector.

CREDIT RISKS

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

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RISKS OF INVESTING IN DERIVATIVES CONTRACTS

The Fund's use of derivative contracts involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. First, changes in the value of the derivative contracts in which the Fund invests may not be correlated with changes in the value of the underlying asset or if they are correlated, may move in the opposite direction than originally anticipated. Second, while some strategies involving derivatives may reduce the risk of loss, they may also reduce potential gains or, in some cases, result in losses by offsetting favorable price movements in portfolio holdings. Third, there is a risk that derivatives contracts may be mispriced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Finally, derivative contracts may cause the Fund to realize increased ordinary income or short-term capital gains (which are treated as ordinary income for Federal income tax purposes) and, as a result, may increase taxable distributions to shareholders. Derivative contracts may also involve other risks described in this prospectus, such as stock market, credit, liquidity and leverage risks.

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What Do Shares Cost?

NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The Fund generally values equity securities according to the last sale price in the market in which they are primarily traded (either a national securities exchange or the over-the-counter market).

The Fund's current NAV and public offering price may be found in the mutual funds section of certain local newspapers under "Federated."

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

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

How is the Fund Sold?

The Distributor and its affiliates may pay out of their assets other amounts (including items of material value) to investment professionals for marketing and servicing Shares. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and
Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Fund on the same day and the Fund receives payment within one business day. You will become the owner of Shares and receive dividends when the Fund receives your payment.

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

DIRECTLY FROM THE FUND

Establish your account with the Fund by submitting a completed New Account Form; and
Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund and the Shares will be priced at the next calculated NAV after the Fund receives the order.

By Wire

Send your wire to:

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

By Check

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

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

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

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

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

through an investment professional if you purchased Shares through an investment professional; or
directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

You may redeem Shares by simply calling the Fund at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) you will receive a redemption amount based on that day's NAV.

By Mail

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

You will receive a redemption amount based on the next calculated NAV after the Fund receives your written request in proper form.

Send requests by mail to:

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

Send requests by private courier or overnight delivery service to:

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

All requests must include:

Fund Name and Share Class, account number and account registration;
amount to be redeemed; and
signatures of all shareholders exactly as registered.

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

Signature Guarantees

Signatures must be guaranteed if:

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days; or
a redemption is payable to someone other than the shareholder(s) of record.

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

PAYMENT METHODS FOR REDEMPTIONS

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets.

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you will receive periodic statements reporting all account activity, including dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions are expected to be both dividends and capital gains. Redemptions are taxable sales. Please consult your tax adviser regarding your federal, state, and local tax liability.

Who Manages the Fund?

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MANAGEMENT FEES

The Manager receives an annual investment management fee of 0.40% of the Fund's average daily net assets. The Manager may voluntarily waive a portion of its fee or reimburse the Fund for certain operating expenses.

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Legal Proceedings

Like many other mutual fund companies, in September 2003, Federated, the parent company of the Federated funds' advisers and distributor, received detailed requests for information on shareholder trading activities in the Federated funds from the Securities and Exchange Commission, the New York State Attorney General, and the National Association of Securities Dealers. Federated immediately retained the law firm of Reed Smith LLP to conduct an internal investigation, which is ongoing. Additionally, attorneys from the law firm of Dickstein Shapiro Morin & Oshinsky LLP, independent counsel to the Federated funds, are participating in the investigation and are reporting to the independent directors of the Federated funds on their progress.

On October 22, 2003, Federated issued a press release that discusses these matters and announces that Federated is committed to taking remedial actions when and as appropriate, including compensating the Federated funds for any detrimental impact these transactions may have had on them. Based upon the progress of the investigation to date, Federated does not have sufficient information regarding these transactions to make a reasonable estimate of the amount, if any, by which the Federated funds have been impacted. The press release is available in the "About Us" section of Federated's website www.federatedinvestors.com, and any future press releases on this subject will also be posted there.

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Financial Information

FINANCIAL HIGHLIGHTS

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This information has been audited by Ernst & Young LLP, whose report, along with the Fund's audited financial statements, is included in the Annual Report.

Financial Highlights

(For a Share Outstanding Throughout Each Period)

Year Ended October 31	2003		2002		2001		2000		1999
Net Asset Value, Beginning of Period	$14.11		$15.26		$20.13		$17.63		$16.53
Income From Investment Operations:
Net investment income	0.10		0.10		0.11		0.17		0.16
Net realized and unrealized gain (loss) on investments and futures contracts	4.12		(0.90	)	(2.51	)	4.71		2.92

TOTAL FROM INVESTMENT OPERATIONS	4.22		(0.80	)	(2.40	)	4.88		3.08

Less Distributions:
Distributions from net investment income	(0.11	)	(0.10	)	(0.14	)	(0.16	)	(0.15	)
Distributions from net realized gain on investments and futures contracts	--		(0.25	)	(2.33	)	(2.22	)	(1.83	)

TOTAL DISTRIBUTIONS	(0.11	)	(0.35	)	(2.47	)	(2.38	)	(1.98	)

Net Asset Value, End of Period	$18.22		$14.11		$15.26		$20.13		$17.63

Total Return¹	30.04	%	(5.47	)%	(12.97	)%	30.40	%	20.23	%


Ratios to Average Net Assets:

Expenses	0.49	%	0.50	%	0.58	%	0.57	%	0.60	%

Net investment income	0.69	%	0.66	%	0.72	%	1.03	%	0.98	%

Expense waiver/reimbursement²	0.26	%	0.23	%	0.22	%	0.22	%	0.22	%

Supplemental Data:

Net assets, end of period (000 omitted)	$564,618		$364,656		$304,982		$213,466		$110,100

Portfolio turnover	11	%	40	%	30	%	38	%	40	%

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

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

Further information about the Fund's performance is contained in the Annual Report dated October 31, 2003, which can be obtained free of charge.

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

[Logo of Federated Investors]

Federated Mid-Cap Index Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2003 © Federated Investors, Inc.

Cusip 31420E205

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2062304A (12/03)

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FEDERATED MID-CAP INDEX FUND
A Portfolio of Federated Index Trust

Statement of additional Information

December 31, 2003

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This Statement of Additional Information (SAI) is not a prospectus. Read this SAI in
conjunction with the prospectus for Federated Mid-Cap Index Fund (Fund), dated
December 31, 2003.

This SAI incorporates by reference the Fund's Annual Report. Obtain the prospectus
or the Annual Report without charge by calling 1-800-341-7400.

</R>

Contents
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Exchanging Securities for Shares
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Addresses
2062304B (12/03)

HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Index Trust (Trust). The Trust is an
open-end, management investment company that was established under the laws of the
Commonwealth of Massachusetts on January 30, 1990. The Trust may offer separate
series of shares representing interests in separate portfolios of securities. The
Fund changed its name from Federated Mid-Cap Fund to Federated Mid-Cap Index Fund on
July 16, 2001.

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The Fund's investment manager is Federated Equity Management Company of Pennsylvania
(Manager). Prior to January 1, 2004, Federated Investment Management Company was
investment manager to the Fund. Both the current manager and the former manager are
wholly owned subsidiaries of Federated Investors, Inc. (Federated).

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SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following securities
for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

Equity Securities
Equity securities represent a share of an issuer's earnings and assets, after the
issuer pays its liabilities. The Fund cannot predict the income it will receive from
equity securities because issuers generally have discretion as to the payment of any
dividends or distributions. However, equity securities offer greater potential for
appreciation than many other types of securities, because their value increases
directly with the value of the issuer's business. The following describes the types
of equity securities in which the Fund may invest.
Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks receive
the issuer's earnings after the issuer pays its creditors and any preferred
stockholders. As a result, changes in an issuer's earnings directly influence the
value of its common stock.
Preferred Stocks
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred stocks may
also permit the issuer to redeem the stock. The Fund may treat such redeemable
preferred stock as a fixed income security.
Interests in Other Limited Liability Companies
Entities such as limited partnerships, limited liability companies, business trusts
and companies organized outside the United States may issue securities comparable to
common or preferred stock.
Real Estate Investment Trusts (REITs)
REITs are real estate investment trusts that lease, operate and finance commercial
real estate. REITs are exempt from federal corporate income tax if they limit their
operations and distribute most of their income. Such tax requirements limit a REIT's
ability to respond to changes in the commercial real estate market.
Warrants
Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price before
the expiration date. Warrants may become worthless if the price of the stock does not
rise above the exercise price by the expiration date. This increases the market risks
of warrants as compared to the underlying security. Rights are the same as warrants,
except companies typically issue rights to existing stockholders.

Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified rate.
The rate may be a fixed percentage of the principal or adjusted periodically. In
addition, the issuer of a fixed income security must repay the principal amount of
the security, normally within a specified time. Fixed income securities provide more
regular income than equity securities. However, the returns on fixed income
securities are limited and normally do not increase with the issuer's earnings. This
limits the potential appreciation of fixed income securities as compared to equity
securities.
A security's yield measures the annual income earned on a security as a percentage
of its price. A security's yield will increase or decrease depending upon whether it
costs less (a discount) or more (a premium) than the principal amount. If the issuer
may redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields.
The following describes the types of fixed income securities in which the Fund may
invest.
Treasury Securities
Treasury securities are direct obligations of the federal government of the United
States. Treasury securities are generally regarded as having the lowest credit risks.
Agency Securities
Agency securities are issued or guaranteed by a federal agency or other government
sponsored entity acting under federal authority (a GSE). The United States supports
some GSEs with its full faith and credit. Other GSEs receive support through federal
subsidies, loans or other benefits. A few GSEs have no explicit financial support,
but are regarded as having implied support because the federal government sponsors
their activities. Agency securities are generally regarded as having low credit
risks, but not as low as treasury securities.
The Fund treats mortgage backed securities guaranteed by GSEs as agency securities.
Although a GSE guarantee protects against credit risks, it does not reduce the
interest rate and prepayment risks of these mortgage backed securities.

Derivative Contracts
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such as
futures, forwards and options) require payments relating to a future trade involving
the underlying asset. Other derivative contracts (such as swaps) require payments
relating to the income or returns from the underlying asset. The other party to a
derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make (or
collect) daily payments to the margin accounts to reflect losses (or gains) in the
value of their contracts. This protects investors against potential defaults by the
counterparty. Trading contracts on an exchange also allows investors to close out
their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a future
date by entering into an offsetting contract to sell the same asset on the same date.
If the offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. Exchanges may limit the
amount of open contracts permitted at any one time. Such limits may prevent the Fund
from closing out a position. If this happens, the Fund will be required to keep the
contract open (even if it is losing money on the contract), and to make any payments
required under the contract (even if it has to sell portfolio securities at
unfavorable prices to do so). Inability to close out a contract could also harm the
Fund by preventing it from disposing of or trading any assets it has been using to
secure its obligations under the contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between the Fund and the counterparty. OTC contracts do not
necessarily have standard terms, so they cannot be directly offset with other OTC
contracts. In addition, OTC contracts with more specialized terms may be more
difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships between
the market value of a derivative contract and the underlying asset, derivative
contracts may increase or decrease the Fund's exposure to interest rate and currency
risks, and may also expose the Fund to liquidity and leverage risks. OTC contracts
also expose the Fund to credit risks in the event that a counterparty defaults on the
contract.
The Fund may trade in the following types of derivative contracts in an amount not
to exceed 20% of its total net assets:
Futures Contracts
Futures contracts provide for the future sale by one party and purchase by another
party of a specified amount of an underlying asset at a specified price, date, and
time. Entering into a contract to buy an underlying asset is commonly referred to
as buying a contract or holding a long position in the asset. Entering into a
contract to sell an underlying asset is commonly referred to as selling a contract
or holding a short position in the asset. Futures contracts are considered to be
commodity contracts. Futures contracts traded OTC are frequently referred to as
forward contracts. The Fund may buy and sell stock index futures as a substitute
for direct investments in the Standard & Poor's MidCap 400 Index ("Index") in
order to help fully replicate the performance of the Index.
Options
Options are rights to buy or sell an underlying asset for a specified price (the
exercise price) during, or at the end of, a specified period. A call option gives
the holder (buyer) the right to buy the underlying asset from the seller (writer)
of the option. A put option gives the holder the right to sell the underlying asset
to the writer of the option. The writer of the option receives a payment, or
premium, from the buyer, which the writer keeps regardless of whether the buyer
uses (or exercises) the option.
The Fund may:
|X| Buy call options on the Index, stock index futures contracts, and portfolio
securities (in anticipation of an increase in the value of the underlying asset);
|X| Buy or write options to close out existing option positions; or
|X| Buy put options on the Index (in anticipation of a decrease in the value of the
underlying asset).
|X| Write listed call options on portfolio securities of securities that the Fund
can purchase without further consideration (or has segregated cash equivalents
for such consideration) on the Index (to generate income from premiums, and in
anticipation of a decrease or only limited increase in the value of the
underlying asset). If a call written by a Fund is exercised, the Fund foregoes
any possible profit from an increase in the market price of the underlying asset
over the exercise price plus the premium received.
When the Fund writes options on futures contracts, it will be subject to margin
requirements similar to those applied to futures contracts.

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Swaps

Swaps are contracts in which two parties agree to pay each other (swap) the
returns derived from underlying assets with differing characteristics. Most swaps
do not involve the delivery of the underlying assets by either party, and the
parties might not own the assets underlying the swap. The payments are usually
made on a net basis so that, on any given day, the Fund would receive (or pay)
only the amount by which its payment under the contract is less than (or exceeds)
the amount of the other party's payment. Swap agreements are sophisticated
instruments that can take many different forms, and are known by a variety of
names including caps, floors and collars. Common swap agreements that the Fund may
use include:

Interest Rate Swaps

Interest rate swaps are contracts in which one party agrees to make regular
payments equal to a fixed or floating interest rate times a stated principal
amount of fixed income securities, in return for payments equal to a different
fixed or floating rate times the same principal amount, for a specific period. For
example, a $10 million LIBOR swap would require one party to pay the equivalent of
the London Interbank Offer Rate of interest (which fluctuates) on $10 million
principal amount in exchange for the right to receive the equivalent of a stated
fixed rate of interest on $10 million principal amount.

Total Rate of Return Swaps

Total rate of return swaps are contracts in which one party agrees to make
payments of the total return from the underlying asset during the specified
period, in return for payments equal to a fixed or floating rate of interest or
the total return from another underlying asset.

Credit Default Swaps

Credit default swaps are agreements between two parties whereby one party (the
"protection buyer") agrees to make regular payments over the term of the agreement
to another party (the "protection seller"), provided that no designated event of
default on an underlying obligation has occurred. If an event of default occurs,
the protection seller must pay the protection buyer the full notional value, or
"par value," of the reference obligation in exchange for the reference
obligation. The fund may be either the protection buyer or the protection seller
in a credit default swap. If the fund is a protection buyer and no event of
default occurs, the fund will lose its entire investment in the swap agreement
(i.e., An amount equal to the payments made to the protection seller). However,
if an event of default occurs, the fund (as protection buyer) will deliver the
underlying obligation and receive a payment equal to the full notional value of
the underlying asset, even though the underlying asset may have little or no
value. If the fund is the protection seller and no default occurs, then the fund
will receive a fixed rate of income throughout the term of the agreement.
However, if an event of default occurs, the fund (as protection seller) will pay
the protection buyer the full notional value of the reference obligation and
receive the underlying obligation. Credit default swaps involve greater risks than
if the fund invested directly in the underlying obligation.

Currency Swaps

Currency swaps are contracts which provide for interest payments in different
currencies. The parties might agree to exchange the notional principal amount as
well.

Caps And Floors

Caps and Floors are contracts in which one party agrees to make payments only if
an interest rate or index goes above (Cap) or below (Floor) a certain level in
return for a fee from the other party.

Hybrid Instruments

Hybrid instruments combine elements of derivative contracts with those of another
security (typically a fixed income security). All or a portion of the interest or
principal payable on a hybrid security is determined by reference to changes in
the price of an underlying asset or by reference to another benchmark (such as
interest rates, currency exchange rates or indices). Hybrid instruments also
include convertible securities with conversion terms related to an underlying
asset or benchmark.

Foreign Securities

Foreign securities are securities of issuers based outside the United States. The
Fund considers an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in,
another country;

o the principal trading market for its securities is in another country; or

o it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods produced,
services performed, or sales made in another country.

Foreign securities are primarily denominated in foreign currencies. Along with the
risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading in
certain foreign markets is also subject to liquidity risks.

Foreign Exchange Contracts

In order to convert U.S. dollars into the currency needed to buy a foreign security,
or to convert foreign currency received from the sale of a foreign security into U.S.
dollars, the Fund may enter into spot currency trades. In a spot trade, the Fund
agrees to exchange one currency for another at the current exchange rate. The Fund
may also enter into derivative contracts in which a foreign currency is an underlying
asset. The exchange rate for currency derivative contracts may be higher or lower
than the spot exchange rate. Use of these derivative contracts may increase or
decrease the Fund's exposure to currency risks.
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Depositary Receipts
Depositary receipts represent interests in underlying securities issued by a foreign
company. Depositary receipts are not traded in the same market as the underlying
security. The foreign securities underlying American Depositary Receipts (ADRs) are
not traded in the United States. ADRs provide a way to buy shares of foreign-based
companies in the United States rather than in overseas markets. In addition, ADRs are
traded in U.S. dollars, eliminating the need for foreign exchange transactions. The
foreign securities underlying European Depositary Receipts (EDRs), Global Depositary
Receipts (GDRs), and International Depositary Receipts (IDRs), are traded globally or
outside the United States. Depositary receipts involve many of the same risks of
investing directly in foreign securities, including currency risks and risks of
foreign investing.

Special Transactions

Repurchase Agreements
Repurchase agreements are transactions in which the Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon time
and price. The repurchase price exceeds the sale price, reflecting the Fund's return
on the transaction. This return is unrelated to the interest rate on the underlying
security. The Fund will enter into repurchase agreements only with banks and other
recognized financial institutions, such as securities dealers, deemed creditworthy by
the Manager.
The Fund's custodian or subcustodian will take possession of the securities subject
to repurchase agreements. The Manager or subcustodian will monitor the value of the
underlying security each day to ensure that the value of the security always equals
or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.

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

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

Securities Lending
The Fund may lend portfolio securities to borrowers that the Manager deems
creditworthy. In return, the Fund receives cash or liquid securities from the
borrower as collateral. The borrower must furnish additional collateral if the market
value of the loaned securities increases. Also, the borrower must pay the Fund the
equivalent of any dividends or interest received on the loaned securities.
The Fund will reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the borrower for the
use of cash collateral.
Loans are subject to termination at the option of the Fund or the borrower. The
Fund will not have the right to vote on securities while they are on loan, but it
will terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a negotiated
portion of the interest earned on the cash collateral to a securities lending agent
or broker.
Securities lending activities are subject to interest rate risks and credit risks.

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Asset Coverage
In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into an
offsetting transaction or set aside readily marketable securities with a value that
equals or exceeds the Fund's obligations. Unless the Fund has other readily
marketable assets to set aside, it cannot trade assets used to secure such
obligations without entering into an offsetting derivative contract or terminating a
special transaction. This may cause the Fund to miss favorable trading opportunities
or to realize losses on derivative contracts or special transactions.

Inter-Fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that permits
the Fund and all other funds advised by subsidiaries of Federated Investors, Inc.
(Federated funds) to lend and borrow money for certain temporary purposes directly to
and from other Federated funds. Participation in this inter-fund lending program is
voluntary for both borrowing and lending funds, and an inter-fund loan is only made
if it benefits each participating fund. Federated administers the program according
to procedures approved by the Fund's Board, and the Board monitors the operation of
the program. Any inter-fund loan must comply with certain conditions set out in the
exemption, which are designed to assure fairness and protect all participating funds.

For example, inter-fund lending is permitted only (a) to meet shareholder redemption
requests, and (b) to meet commitments arising from "failed" trades. All inter-fund
loans must be repaid in seven days or less. The Fund's participation in this program
must be consistent with its investment policies and limitations, and must meet
certain percentage tests. Inter-fund loans may be made only when the rate of
interest to be charged is more attractive to the lending fund than market-competitive
rates on overnight repurchase agreements (Repo Rate) and more attractive to the
borrowing fund than the rate of interest that would be charged by an unaffiliated
bank for short-term borrowings (Bank Loan Rate), as determined by the Board. The
interest rate imposed on inter-fund loans is the average of the Repo Rate and the
Bank Loan Rate.

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

Interest Rate Risks
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates rise, prices
of fixed income securities fall. However, market factors, such as the demand for
particular fixed income securities, may cause the price of certain fixed income
securities to fall while the prices of other securities rise or remain unchanged.
Interest rate changes have a greater effect on the price of fixed income securities
with longer durations. Duration measures the price sensitivity of a fixed income
security to changes in interest rates.

Call Risks
Call risk is the possibility that an issuer may redeem a fixed income security before
maturity (a call) at a price below its current market price. An increase in the
likelihood of a call may reduce the security's price.
If a fixed income security is called, the Fund may have to reinvest the proceeds in
other fixed income securities with lower interest rates, higher credit risks, or
other less favorable characteristics.

Risks Associated with Non-Investment Grade Securities
Securities rated below investment grade, also known as junk bonds, generally entail
greater market, credit and liquidity risks than investment grade securities. For
example, their prices are more volatile, economic downturns and financial setbacks
may affect their prices more negatively, and their trading market may be more limited.

Risks of Investing in American Depositary Receipts
Because the Fund may invest in ADRs issued by foreign companies, the Fund's share
price may be more affected by foreign economic and political conditions, taxation
policies, and accounting and auditing standards, than would otherwise be the case.

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Risks of Foreign Investing

o Foreign securities pose additional risks because foreign economic or political
conditions may be less favorable than those of the United States. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors.

o Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States. Foreign
companies may also receive less coverage than United States companies by market
analysts and the financial press. In addition, foreign countries may lack uniform
accounting, auditing and financial reporting standards or regulatory requirements
comparable to those applicable to U.S. companies. These factors may prevent the
Fund and its Manager from obtaining information concerning foreign companies that
is as frequent, extensive and reliable as the information available concerning
companies in the United States.

Foreign countries may have restrictions on foreign ownership of securities or may
impose exchange controls, capital flow restrictions or repatriation restrictions
which could adversely affect the liquidity of the Fund's investments.

Derivative Contracts and Hybrid Instrument Risks

The Fund's use of derivative contracts involves risks different from, or possibly
greater than, the risks associated with investing directly in securities and other
traditional investments. First, there is a possibility that the correlation between
the price movements of a derivative and the underlying reference asset or index will
be imperfectly correlated or not correlated at all. This is often referred to as
basis risk. Second, while some strategies involving derivatives may reduce the risk
of loss, they may also reduce potential gains or, in some cases, result in losses by
offsetting favorable price movements in portfolio holdings. Third, the Fund's use of
derivatives may cause the Fund to realize a higher amount of short-term capital
gains, which are usually taxed at ordinary income tax rates for Federal income tax
purposes. This may, in turn, increase the taxes payable by Fund shareholders.
Finally, there is a risk that derivatives could be mispriced or improperly valued
and, as a result, increased cash payments could need to be made to a derivative
counterparty. Derivatives are also subject to a number of other risks described
herein, such as interest rate, credit, liquidity and leverage risks.

The risks of investing in hybrid instruments reflect a combination of the risks of
investing in securities, options, futures and currencies, and depend upon the terms
of the instrument. Thus, an investment in a hybrid instrument may entail significant
risks in addition to those associated with traditional fixed income or convertible
securities. Hybrid instruments are also potentially more volatile and carry greater
interest rate risks than traditional instruments. Moreover, depending on the
structure of the particular hybrid, it may expose the Fund to leverage risks or carry
liquidity risks.

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Fundamental INVESTMENT Objective
The Fund seeks to provide investment results generally corresponding to the aggregate
price and dividend performance of the publicly traded common stocks comprising the
mid-level stock capitalization sector of the United States equity market. The
investment objective may not be changed by the Fund's Board without shareholder
approval.

INVESTMENT LIMITATIONS

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

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

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

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

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

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

Concentration
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments are not deemed to
constitute an industry.

The above limitations cannot be changed unless authorized by the Board and by the
"vote of a majority of its outstanding voting securities," as defined by the 1940
Act. The following limitations, however, may be changed by the Board without
shareholder approval. Shareholders will be notified before any material change in
these limitations becomes effective.

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

Restricted Securities
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal securities
law. Under criteria established by the Board certain restricted securities are
determined to be liquid. To the extent that restricted securities are not determined
to be liquid, the Fund will limit their purchase, together with other illiquid
securities to 15% of its net assets.

Illiquid Securities
The Fund will not purchase securities for which there is no readily available market,
or enter into repurchase agreements or purchase time deposits maturing in more than
seven days, if immediately after and as a result, the value of such securities would
exceed, in the aggregate, 15% of the Fund's net assets.

Buying on Margin
The Fund will not purchase securities on margin, provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of securities,
and further provided that the Fund may make margin deposits in connection with its
use of financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.

Investing in Other Investment Companies
The Fund may invest its assets in securities of other investment companies, including
securities of affiliated investment companies, as an efficient means of carrying out
its investment policies and managing its uninvested cash.
In applying the Fund's concentration restriction: (a) utility companies will be
divided according to their services, for example, gas, gas transmission, electric and
telephone will each be considered a separate industry; (b) financial service
companies will be classified according to the end users of their services, for
example, automobile finance, bank finance and diversified finance will each be
considered a separate industry; and (c) asset backed securities will be classified
according to the underlying assets securing such securities. To conform to the
current view of the SEC staff that only domestic bank instruments may be excluded
from industry concentration limitations, as a matter of non-fundamental policy, the
Fund will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition, investments in
bank instruments, and investments in certain industrial development bonds funded by
activities in a single industry, will be deemed to constitute investment in an
industry, except when held for temporary defensive purposes. The investment of more
than 25% of the value of the Fund's total assets in any one industry will constitute
"concentration."
As a matter of non-fundamental operating policy, for purposes of the commodities
policy, investments in transactions involving futures contracts and options, forward
currency contracts, swap transactions and other financial contracts that settle by
payment of cash are not deemed to be investments in commodities.

For purposes of the above limitations, the Fund considers certificates of deposit and
demand and time deposits issued by a U.S. branch of a domestic bank or savings
association having capital, surplus and undivided profits in excess of $100,000,000
at the time of investment to be "cash items." Except with respect to borrowing
money, if a percentage limitations is adhered to at the time of investment, a later
increase or decrease in percentage resulting from any change in value or net assets
will not result in a violation of such limitation.

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:

o for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

o in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;

o futures contracts and options are generally valued at market values established
by the exchanges on which they are traded at the close of trading on such
exchanges. Options traded in the over-the-counter market are generally valued
according to the mean between the last bid and the last asked price for the option
as provided by an investment dealer or other financial institution that deals in
the option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value;

o for fixed income securities, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that fixed income securities
with remaining maturities of less than 60 days at the time of purchase may be
valued at amortized cost; and

o for all other securities at fair value as determined in good faith by the Board.

Prices provided by independent pricing services may be determined without relying
exclusively on quoted prices and may consider institutional trading in similar groups
of securities, yield, quality, stability, risk, coupon rate, maturity, type of issue,
trading characteristics, and other market data or factors. From time to time, when
prices cannot be obtained from an independent pricing service, securities may be
valued based on quotes from broker-dealers or other financial institutions that trade
the securities.

<R>

Trading in Foreign Securities

Trading in foreign securities may be completed at times which vary from the closing
of the New York Stock Exchange (NYSE). In computing its NAV, the Fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the NYSE. Certain foreign currency exchange rates
may also be determined at the latest rate prior to the closing of the NYSE. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at current
rates. Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the NYSE. If such
events materially affect the value of portfolio securities, these securities may be
valued at their fair value as determined in good faith by the Fund's Board, although
the actual calculation may be done by others.

</R>

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund.

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

<R>

SERVICE FEES

The Fund may pay fees not to exceed 0.25% of average daily net assets (Service Fees)
to investment professionals or to Federated Shareholder Services Company (FSSC), a
subsidiary of Federated, for providing services to shareholders and maintaining
shareholder accounts. . Under certain agreements, rather than paying investment
professionals directly, the Fund may pay Service Fees to FSSC and FSSC will use the
fees to compensate investment professionals.

SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees, in significant amounts, out of the assets
of the Distributor. These fees do not come out of Fund assets. The Distributor may be
reimbursed by the Manager or its affiliates.

These supplemental payments may be based upon such factors as the number or value of
Shares the investment professional sells or may sell; the value of client assets
invested; and/or the type and nature of services, sales support or marketing support
furnished by the investment professional. In addition to these supplemental payments,
an investment professional may also receive Service fees.
</R>

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept your
securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated as a
sale of your securities for federal tax purposes.

SUBACCOUNTING SERVICES

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

REDEMPTION IN KIND

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

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

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

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

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as partners
under Massachusetts law for obligations of the Trust. To protect its shareholders,
the Trust has filed legal documents with Massachusetts that expressly disclaim the
liability of its shareholders for acts or obligations of the Trust.

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

ACCOUNT AND SHARE INFORMATION

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

All Shares of the Trust have equal voting rights, except that in matters affecting
only a particular Fund or class, only Shares of that Fund or class are entitled to
vote.

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

<R>

As of December 1, 2003 , the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Shares:

Charles Schwab & Co., Inc. , San Francisco, CA, owned approximately 3,247,641
Shares (10.23%), and The Standard Insurance, Portland, OR, owned approximately
4,048,556 Shares (12.75%).

</R>

TAX INFORMATION

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

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

<R>

FOREIGN INVESTMENTS
If the Fund purchases foreign securities, their investment income may be subject to
foreign withholding or other taxes that could reduce the return on these securities.
Tax treaties between the United States and foreign countries, however, may reduce or
eliminate the amount of foreign taxes to which the Fund would be subject. The
effective rate of foreign tax cannot be predicted since the amount of Fund assets to
be invested within various countries is uncertain. However, the Fund intends to
operate so as to qualify for treaty-reduced tax rates when applicable.

Distributions from a Fund may be based on estimates of book income for the year. Book
income generally consists solely of the income generated by the securities in the
portfolio, whereas tax-basis income includes, in addition, gains or losses
attributable to currency fluctuation. Due to differences in the book and tax
treatment of fixed-income securities denominated in foreign currencies, it is
difficult to project currency effects on an interim basis. Therefore, to the extent
that currency fluctuations cannot be anticipated, a portion of distributions to
shareholders could later be designated as a return of capital, rather than income,
for income tax purposes, which may be of particular concern to simple trusts.

If the Fund invests in the stock of certain foreign corporations, they may constitute
Passive Foreign Investment Companies (PFIC), and the Fund may be subject to federal
income taxes upon disposition of PFIC investments.

If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund will qualify for
certain Code provisions that allow its shareholders to claim a foreign tax credit or
deduction on their U.S. income tax returns. The Code may limit a shareholder's
ability to claim a foreign tax credit. Shareholders who elect to deduct their portion
of the Fund's foreign taxes rather than take the foreign tax credit must itemize
deductions on their income tax returns.

</R>

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

<R>

BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for exercising
all the Trust's powers except those reserved for the shareholders. The following
tables give information about each Board member and the senior officers of the Fund.
Where required, the tables separately list Board members who are "interested persons"
of the Fund (i.e., "Interested" Board members) and those who are not (i.e.,
"Independent" Board members). Unless otherwise noted, the address of each person
listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA. The Trust
comprises three portfolios and the Federated Fund Complex consists of 44 investment
companies (comprising 138 portfolios). Unless otherwise noted, each Officer is
elected annually. Unless otherwise noted, each Board member oversees all portfolios
in the Federated Fund Complex; serves for an indefinite term; and also serves as a
Board member of the following investment company complexes: Banknorth Funds-four
portfolios; Golden Oak(R) Family of Funds-seven portfolios and WesMark Funds-five
portfolios.

As of December 1, 2003, the Fund's Board and Officers as a group owned less than 1%
of the Fund's outstanding Shares.

INTERESTED TRUSTEES BACKGROUND AND COMPENSATION

Name Principal Occupation(s) for Past Five Total Compensation
Birth Date Years, Other Directorships Held and Aggregate From Trust and
Address Previous Position(s) Compensation Federated Fund
Positions Held with From Fund Complex
Trust (past fiscal (past calendar
Date Service Began year) year)
Principal Occupations: Chairman and $0
John F. Donahue* Director or Trustee of the Federated $0
Birth Date: July 28, Fund Complex; Chairman and Director,
1924 Federated Investors, Inc.
CHAIRMAN AND TRUSTEE --------------------------------------
Began serving:
January 1990 Previous Positions: Trustee,
Federated Investment Management
Company and Chairman and Director,
Federated Investment Counseling.

Principal Occupations: Principal $0
J. Christopher Executive Officer and President of $0
Donahue* the Federated Fund Complex; Director
Birth Date: April 11, or Trustee of some of the Funds in
1949 the Federated Fund Complex;
PRESIDENT AND TRUSTEE President, Chief Executive Officer
Began serving: and Director, Federated Investors,
January 1990 Inc.; Chairman and Trustee, Federated
Investment Management Company;
Trustee, Federated Investment
Counseling; Chairman and Director,
Federated Global Investment
Management Corp.; Chairman, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company;
Director, Federated Services Company.

Principal Occupations: Director or $560.66
Lawrence D. Ellis, Trustee of the Federated Fund $148,500
M.D.* Complex; Professor of Medicine,
Birth Date: October University of Pittsburgh; Medical
11, 1932 Director, University of Pittsburgh
3471 Fifth Avenue Medical Center Downtown;
Suite 1111 Hematologist, Oncologist and
Pittsburgh, PA Internist, University of Pittsburgh
TRUSTEE Medical Center.
Began serving:
January 1990 Other Directorships Held: Member,
National Board of Trustees, Leukemia
Society of America.

Previous Positions: Trustee,
University of Pittsburgh; Director,
University of Pittsburgh Medical
Center.

* Family relationships and reasons for "interested" status: John F. Donahue is the
father of J. Christopher Donahue; both are "interested" due to the positions they
hold with Federated and its subsidiaries. Lawrence D. Ellis, M.D. is "interested"
because his son-in-law is employed by the Fund's principal underwriter, Federated
Securities Corp.
--------------------------------------------------------------------------------------

INDEPENDENT TRUSTEES BACKGROUND AND COMPENSATION

Name Principal Occupation(s) for Past Five Total Compensation
Birth Date Years, Other Directorships Held and Aggregate From Trust and
Address Previous Position(s) Compensation Federated Fund
Positions Held with From Fund Complex
Trust (past fiscal (past calendar
Date Service Began year) year)
Principal Occupation: Director or $616.72 $163,350
Thomas G. Bigley Trustee of the Federated Fund Complex.
Birth Date: February
3, 1934 Other Directorships Held: Director,
15 Old Timber Trail Member of Executive Committee,
Pittsburgh, PA Children's Hospital of Pittsburgh;
TRUSTEE Director, University of Pittsburgh.
Began serving:
October 1995 Previous Position: Senior Partner,
Ernst & Young LLP.

Principal Occupations: Director or $616.72 $163,350
John T. Conroy, Jr. Trustee of the Federated Fund
Birth Date: June 23, Complex; Chairman of the Board,
1937 Investment Properties Corporation;
Grubb & Partner or Trustee in private real
Ellis/Investment estate ventures in Southwest Florida.
Properties Corporation
3838 North Tamiami Previous Positions: President,
Trail Investment Properties Corporation;
Suite 402 Senior Vice President, John R. Wood
Naples, FL and Associates, Inc., Realtors;
TRUSTEE President, Naples Property
Began serving: August Management, Inc. and Northgate
1991 Village Development Corporation.

Principal Occupation: Director or $616.72 $163,350
Nicholas P. Trustee of the Federated Fund Complex.
Constantakis
Birth Date: September Other Directorships Held: Director
3, 1939 and Member of the Audit Committee,
175 Woodshire Drive Michael Baker Corporation
Pittsburgh, PA (engineering and energy services
TRUSTEE worldwide).
Began serving:
February 1998 Previous Position: Partner, Anderson
Worldwide SC.

Principal Occupation: Director or $560.66 $148,500
John F. Cunningham Trustee of the Federated Fund Complex.
Birth Date: March 5,
1943 Other Directorships Held: Chairman,
353 El Brillo Way President and Chief Executive
Palm Beach, FL Officer, Cunningham & Co., Inc.
TRUSTEE (strategic business consulting);
Began serving: Trustee Associate, Boston College.
January 1999
Previous Positions: Director, Redgate
Communications and EMC Corporation
(computer storage systems); Chairman
of the Board and Chief Executive
Officer, Computer Consoles, Inc.;
President and Chief Operating
Officer, Wang Laboratories; Director,
First National Bank of Boston;
Director, Apollo Computer, Inc.

Principal Occupation: Director or $560.66 $148,500
Peter E. Madden Trustee of the Federated Fund
Birth Date: March 16, Complex; Management Consultant.
1942
One Royal Palm Way Other Directorships Held: Board of
100 Royal Palm Way Overseers, Babson College.
Palm Beach, FL
TRUSTEE Previous Positions: Representative,
Began serving: August Commonwealth of Massachusetts General
1991 Court; President, State Street Bank
and Trust Company and State Street
Corporation (retired); Director, VISA
USA and VISA International; Chairman
and Director, Massachusetts Bankers
Association; Director, Depository
Trust Corporation; Director, The
Boston Stock Exchange.

Principal Occupations: Director or $616.72 $163,350
Charles F. Mansfield, Trustee of the Federated Fund
Jr. Complex; Management Consultant;
Birth Date: April 10, Executive Vice President, DVC Group,
1945 Inc. (marketing, communications and
80 South Road technology) (prior to 9/1/00).
Westhampton Beach, NY
TRUSTEE Previous Positions: Chief Executive
Began serving: Officer, PBTC International Bank;
January 1999 Partner, Arthur Young & Company
(now Ernst & Young LLP); Chief
Financial Officer of Retail Banking
Sector, Chase Manhattan Bank; Senior
Vice President, HSBC Bank USA
(formerly, Marine Midland Bank); Vice
President, Citibank; Assistant
Professor of Banking and Finance,
Frank G. Zarb School of Business,
Hofstra University.

John E. Murray, Jr., Principal Occupations: Director or $672.77 $178,200
J.D., S.J.D. Trustee of the Federated Fund
Birth Date: December Complex; Chancellor and Law
20, 1932 Professor, Duquesne University;
Chancellor, Duquesne Consulting Partner, Mollica &
University Murray.
Pittsburgh, PA
TRUSTEE Other Directorships Held: Director,
Began serving: Michael Baker Corp. (engineering,
February 1995 construction, operations and
technical services).

Previous Positions: President,
Duquesne University; Dean and
Professor of Law, University of
Pittsburgh School of Law; Dean and
Professor of Law, Villanova
University School of Law.

Principal Occupations: Director or $560.66 $148,500
Marjorie P. Smuts Trustee of the Federated Fund
Birth Date: June 21, Complex; Public Relations/Marketing
1935 Consultant/Conference Coordinator.
4905 Bayard Street
Pittsburgh, PA Previous Positions: National
TRUSTEE Spokesperson, Aluminum Company of
Began serving: America; television producer;
January 1990 President, Marj Palmer Assoc.; Owner,
Scandia Bord.

Principal Occupations: Director or $560.66 $148,500
John S. Walsh Trustee of the Federated Fund
Birth Date: November Complex; President and Director, Heat
28, 1957 Wagon, Inc. (manufacturer of
2604 William Drive construction temporary heaters);
Valparaiso, IN President and Director, Manufacturers
TRUSTEE Products, Inc. (distributor of
Began serving: portable construction heaters);
January 1999 President, Portable Heater Parts, a
division of Manufacturers Products,
Inc.

Previous Position: Vice President,
Walsh & Kelly, Inc.

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

OFFICERS**

Name Principal Occupation(s) and Previous Position(s)
Birth Date
Address
Positions Held with Trust
Date Service Began

Principal Occupations: Executive Vice President
John W. McGonigle and Secretary of the Federated Fund Complex;
Birth Date: October 26, 1938 Executive Vice President, Secretary and
EXECUTIVE VICE PRESIDENT AND Director, Federated Investors, Inc.
SECRETARY
Began serving: June 1995 Previous Positions: Trustee, Federated
Investment Management Company and Federated
Investment Counseling; Director, Federated
Global Investment Management Corp., Federated
Services Company and Federated Securities Corp.

Principal Occupations: Principal Financial
Richard J. Thomas Officer and Treasurer of the Federated Fund
Birth Date: June 17, 1954 Complex; Senior Vice President, Federated
TREASURER Administrative Services.
Began serving: November 1998
Previous Positions: Vice President, Federated
Administrative Services; held various
management positions within Funds Financial
Services Division of Federated Investors, Inc.

Principal Occupations: Vice Chairman or Vice
Richard B. Fisher President of some of the Funds in the Federated
Birth Date: May 17, 1923 Fund Complex; Vice Chairman, Federated
VICE PRESIDENT Investors, Inc.; Chairman, Federated Securities
Began serving: February 1990 Corp.

Previous Positions: President and Director or
Trustee of some of the Funds in the Federated
Fund Complex; Executive Vice President,
Federated Investors, Inc. and Director and
Chief Executive Officer, Federated Securities
Corp.

Principal Occupations: Chief Investment Officer
Stephen F. Auth of this Fund and various other Funds in the
Birth Date: September 3, 1956 Federated Fund Complex; Executive Vice
CHIEF INVESTMENT OFFICER President, Federated Investment Counseling,
Began serving: November 2002 Federated Global Investment Management Corp.,
Federated Investment Management Company and
Passport Research, Ltd.

Previous Positions: Senior Vice President,
Global Portfolio Management Services Division;
Senior Vice President, Federated Investment
Management Company and Passport Research, Ltd;
Senior Managing Director and Portfolio Manager,
Prudential Investments.

** Officers do not receive any compensation from the Fund.
--------------------------------------------------------------------------------------
Thomas R. Donahue, Chief Financial Officer, Vice President, Treasurer and Assistant
Secretary of Federated and an officer of its various advisory and underwriting
subsidiaries, has served as a Term Member on the Board of Directors of Duquesne
University, Pittsburgh, Pennsylvania, since May 12, 2000. Mr. John E. Murray, Jr., an
Independent Trustee of the Fund, served as President of Duquesne from 1988 until his
retirement from that position in 2001, and became Chancellor of Duquesne on August
15, 2001. It should be noted that Mr. Donahue abstains on any matter that comes
before Duquesne's Board that affects Mr. Murray personally.

COMMITTEES OF THE BOARD
Meetings Held
Board Committee During Last
Committee Members Committee Functions Fiscal Year
Executive In between meetings of the full Board, One
John F. Donahue the Executive Committee generally may
John E. Murray, exercise all the powers of the full Board
Jr., J.D., S.J.D. in the management and direction of the
business and conduct of the affairs of
the Trust in such manner as the Executive
Committee shall deem to be in the best
interests of the Trust. However, the
Executive Committee cannot elect or
remove Board members, increase or
decrease the number of Trustees, elect or
remove any Officer, declare dividends,
issue shares or recommend to shareholders
any action requiring shareholder approval.

Audit The Audit Committee reviews and Four
Thomas G. Bigley recommends to the full Board the
John T. Conroy, independent auditors to be selected to
Jr. audit the Fund`s financial statements;
Nicholas P. meets with the independent auditors
Constantakis periodically to review the results of the
Charles F. audits and reports the results to the
Mansfield, Jr. full Board; evaluates the independence of
the auditors, reviews legal and
regulatory matters that may have a
material effect on the financial
statements, related compliance policies
and programs, and the related reports
received from regulators; reviews the
Fund`s internal audit function; reviews
compliance with the Fund`s code of
conduct/ethics; reviews valuation issues;
monitors inter-fund lending transactions;
reviews custody services and issues and
investigates any matters brought to the
Committee's attention that are within the
scope of its duties.

Board ownership of shares in the fund and in the federated family of Investment
companies AS OF dECEMBER 31, 2002
--------------------------------------------------------------------------------------
Aggregate
Dollar Range of
Shares Owned in
Federated
Dollar Range of Family of
Interested Shares Owned Investment
Board Member Name in Fund Companies
John F. Donahue Over $100,000 Over $100,000
J. Christopher Donahue Over $100,000 Over $100,000
Lawrence D. Ellis, M.D. None Over $100,000

Independent
Board Member Name
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. Constantakis $10,001-$50,000 Over $100,000
John F. Cunningham None Over $100,000
Peter E. Madden None Over $100,000
Charles F. Mansfield, Jr. None $50,001 - $100,000
John E. Murray, Jr., J.D., S.J.D. None Over $100,000
Marjorie P. Smuts None Over $100,000
John S. Walsh None Over $100,000

INVESTMENT Manager
--------------------------------------------------------------------------------------
The Manager oversees the Sub-Manager, Fund Asset Management, L.P., doing business as
Mercury Advisors, an indirect, wholly owned subsidiary of Merrill Lynch & Co.,
Inc., which conducts investment research and makes investment decisions for the
Fund. Subject to the supervision and direction of the Board, the Manager provides to
the Fund investment management evaluation services principally by performing initial
due diligence on the Sub-Manager for the Fund and thereafter monitoring and
evaluating the performance of the Sub-Manager through quantitative and qualitative
analyses. In addition, the Manager conducts periodic in-person, telephonic and
written consultations with the Sub-Manager. In initially evaluating the Sub-Manager,
the Manager considered, among other factors, the Sub-Manager's size, investment
capabilities in the area of indexed assets under management, performance history, its
ongoing commitment to client service and the stability and quality of the
organization (including the Sub-Manager's financial condition), as well as the
quality of the individuals that make up its investment team. On an ongoing basis, the
Manager is responsible for communicating performance expectations and evaluations to
the Sub-Manager; monitoring tracking errors; monitoring and analyzing the use of
futures contracts; monitoring the futures holdings of the Fund as a percentage of
Fund assets; monitoring market timing in the Fund; monitoring securities lending for
the Funds; discussing with the Sub-Manager the portfolio sampling techniques employed
by the Sub-Manager; and ultimately recommending to the Board whether the
Sub-Management Contract should be renewed, modified or terminated. The Manager
provides written reports to the Board regarding the results of its evaluation and
monitoring functions. In addition, the Manager is responsible for providing the Fund
with administrative services, including, but not limited to, shareholder servicing
and certain legal and accounting services. The Manager is also responsible for
conducting all operations of the Fund, except those operations contracted to the
Sub-Manager, custodian, transfer agent and dividend disbursing agent. The Manager
receives an annual fee from the Fund for performing its responsibilities under the
Management Contract. The Manager and the Sub-Manager shall not be liable to the
Trust, the Fund, or any Fund shareholder for any losses that maybe sustained in the
purchase, holding, or sale of any security or for anything done or omitted by it,
except acts or omissions involving willful misfeasance, bad faith, gross negligence,
or reckless disregard of the duties imposed upon it by its contract with the Trust.

Services Agreement
Federated Advisory Services Company, an affiliate of the Manager, provides research,
quantitative analysis, equity trading and transaction settlement and certain support
services to the Manager. The fee for these services is paid by the Manager and not
by the Fund.

</R>

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

Code of Ethics Restrictions on Personal Trading

As required by SEC rules, the Fund, its Manager, and its Distributor have adopted
codes of ethics. These codes govern securities trading activities of investment
personnel, Fund Trustees, and certain other employees. Although they do permit these
people to trade in securities, including those that the Fund could buy, they also
contain significant safeguards designed to protect the Fund and its shareholders from
abuses in this area, such as requirements to obtain prior approval for, and to
report, particular transactions.

<R>

Voting Proxies on Fund Portfolio Securities
The Board has delegated to the Manager authority to vote proxies on the securities
held in the Fund's portfolio. The Board has also approved the Manager's policies and
procedures for voting the proxies, which are described below.

Proxy Voting Policies
The Manager's general policy is to cast proxy votes in favor of proposals that the
Manager anticipates will enhance the long-term value of the securities being voted.
Generally, this will mean voting for proposals that the Manager believes will:
improve the management of a company; increase the rights or preferences of the voted
securities; and/or increase the chance that a premium offer would be made for the
company or for the voted securities.

The following examples illustrate how these general policies may apply to proposals
submitted by a company's board of directors. However, whether the Manager supports
or opposes a proposal will always depend on the specific circumstances described in
the proxy statement and other available information.

On matters of corporate governance, generally the Manager will vote for proposals to:
require independent tabulation of proxies and/or confidential voting by shareholders;
reorganize in another jurisdiction (unless it would reduce the rights or preferences
of the securities being voted); and repeal a shareholder rights plan (also known as a
"poison pill"). The Manager will generally vote against the adoption of such a plan
(unless the plan is designed to facilitate, rather than prevent, unsolicited offers
for the company).

On matters of capital structure, generally the Manager will vote: against proposals
to authorize or issue shares that are senior in priority or voting rights to the
securities being voted; for proposals to grant preemptive rights to the securities
being voted; and against proposals to eliminate such preemptive rights.

On matters relating to management compensation, generally the Manager will vote: for
stock incentive plans that align the recipients' interests with the interests of
shareholders without creating undue dilution; and against proposals that would permit
the amendment or replacement of outstanding stock incentives with new stock
incentives having more favorable terms.

On matters relating to corporate transactions, the Manager will vote proxies relating
to proposed mergers, capital reorganizations, and similar transactions in accordance
with the general policy, based upon its analysis of the proposed transaction. The
Manager will vote proxies in contested elections of directors in accordance with the
general policy, based upon its analysis of the opposing slates and their respective
proposed business strategies. Some transactions may also involve proposed changes to
the company's corporate governance, capital structure or management compensation.
The Manager will vote on such changes based on its evaluation of the proposed
transaction or contested election. In these circumstances, the Manager may vote in a
manner contrary to the general practice for similar proposals made outside the
context of such a proposed transaction or change in the board. For example, if the
Manager decides to vote against a proposed transaction, it may vote for anti-takeover
measures reasonably designed to prevent the transaction, even though the Manager
typically votes against such measures in other contexts.

The Manager generally votes against proposals submitted by shareholders without the
favorable recommendation of a company's board. The Manager believes that a company's
board should manage its business and policies, and that shareholders who seek
specific changes should strive to convince the board of their merits or seek direct
representation on the board.

In addition, the Manager will not vote if it determines that the consequences or
costs outweigh the potential benefit of voting. For example, if a foreign market
requires shareholders casting proxies to retain the voted shares until the meeting
date (thereby rendering the shares "illiquid" for some period of time), the Manager
will not vote proxies for such shares.

Finally, because the Fund is an "Index Fund," and therefore invests in large numbers
of securities without independent evaluation by the Manager, the Manager will not
independently analyze the Fund's interest in the proxy. The Manager will vote its
proxies in accordance with its applicable general guidelines and in the same manner
as a non-Index Fund managed by the Manager that is voting on the same proxy matter.
If neither of these two conditions apply, the Manager will vote as recommended by a
sub-manager to the Index Fund; and, in absence of such recommendation, as recommended
by the subject company's board of directors.

Proxy Voting Procedures
The Manager has established a Proxy Voting Committee (Proxy Committee), to exercise
all voting discretion granted to the Manager by the Board in accordance with the
proxy voting policies. The Manager has hired Investor Responsibility Research Center
(IRRC) to obtain, vote, and record proxies in accordance with the Proxy Committee's
directions. The Proxy Committee directs IRRC by means of Proxy Voting Guidelines,
and IRRC may vote any proxy as directed in the Proxy Voting Guidelines without
further direction from the Proxy Committee (and may make any determinations required
to implement the Proxy Voting Guidelines). However, if the Proxy Voting Guidelines
require case-by-case direction for a proposal, IRRC will provide the Proxy Committee
with all information that it has obtained regarding the proposal and the Proxy
Committee will provide specific direction to IRRC. The Manager's proxy voting
procedures generally permit the Proxy Committee to amend the Proxy Voting Guidelines,
or override the directions provided in such Guidelines, whenever necessary to comply
with the proxy voting policies.

Conflicts of Interest
The Manager has adopted procedures to address situations where a matter on which a
proxy is sought may present a potential conflict between the interests of the Fund
(and its shareholders) and those of the Manager or Distributor. This may occur where
a significant business relationship exists between the Manager (or its affiliates)
and a company involved with a proxy vote. A company that is a proponent, opponent,
or the subject of a proxy vote, and which to the knowledge of the Proxy Committee has
this type of significant business relationship, is referred to as an "Interested
Company."

The Manager has implemented the following procedures in order to avoid concerns that
the conflicting interests of the Manager have influenced proxy votes. Any employee
of the Manager who is contacted by an Interested Company regarding proxies to be
voted by the Manager must refer the Interested Company to a member of the Proxy
Committee, and must inform the Interested Company that the Proxy Committee has
exclusive authority to determine how the Manager will vote. Any Proxy Committee
member contacted by an Interested Company must report it to the full Proxy Committee
and provide a written summary of the communication. Under no circumstances will the
Proxy Committee or any member of the Proxy Committee make a commitment to an
Interested Company regarding the voting of proxies or disclose to an Interested
Company how the Proxy Committee has directed such proxies to be voted. If the Proxy
Voting Guidelines already provide specific direction on the proposal in question, the
Proxy Committee shall not alter or amend such directions. If the Proxy Voting
Guidelines require the Proxy Committee to provide further direction, the Proxy
Committee shall do so in accordance with the proxy voting policies, without regard
for the interests of the Manager with respect to the Interested Company. If the
Proxy Committee provides any direction as to the voting of proxies relating to a
proposal affecting an Interested Company, it must disclose to the Fund's Board
information regarding: the significant business relationship; any material
communication with the Interested Company; the matter(s) voted on; and how, and why,
the Manager voted as it did.

If the Fund holds shares of another investment company for which the Manager (or an
affiliate) acts as an investment Manager, the Proxy Committee will vote the Fund's
proxies in the same proportion as the votes cast by shareholders who are not clients
of the Manager at any shareholders' meeting called by such investment company, unless
otherwise directed by the Board.

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BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Manager looks for prompt execution of the order at a favorable
price. The Manager will generally use those who are recognized dealers in specific
portfolio instruments, except when a better price and execution of the order can be
obtained elsewhere. The Manager may select brokers and dealers based on whether they
also offer research services (as described below). In selecting among firms believed
to meet these criteria, the Manager may give consideration to those firms which have
sold or are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The Manager may also direct certain portfolio trades to a broker
that, in turn, pays a portion of the Fund's operating expenses. The Manager makes
decisions on portfolio transactions and selects brokers and dealers subject to review
by the Fund's Board.

Investment decisions for the Fund are made independently from those of other accounts
managed by the Manager. Except as noted below, when the Fund and one or more of those
accounts invests in, or disposes of, the same security, available investments or
opportunities for sales will be allocated among the Fund and the account(s) in a
manner believed by the Manager to be equitable. While the coordination and ability to
participate in volume transactions may benefit the Fund, it is possible that this
procedure could adversely impact the price paid or received and/or the position
obtained or disposed of by the Fund. Investments for Federated Kaufmann Fund and
other accounts managed by that fund's portfolio managers in initial public offerings
("IPO") are made independently from any other accounts, and much of their non-IPO
trading may also be conducted independently from other accounts.

Research Services
Research services may include advice as to the advisability of investing in
securities; security analysis and reports; economic studies; industry studies;
receipt of quotations for portfolio evaluations; and similar services. Research
services may be used by the Manager or by affiliates of Federated in advising other
accounts. To the extent that receipt of these services may replace services for which
the Manager or its affiliates might otherwise have paid, it would tend to reduce
their expenses. The Manager and its affiliates exercise reasonable business judgment
in selecting those brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged by
such persons are reasonable in relationship to the value of the brokerage and
research services provided.

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CUSTODIAN
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund.

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

INDEPENDENT Auditors
The independent auditor for the Fund, Ernst & Young LLP, conducts its audits in
accordance with auditing standards generally accepted in the United States of
America, which require it to plan and perform its audits to provide reasonable
assurance about whether the Fund's financial statements and financial highlights are
free of material misstatement.

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FEES PAID BY THE FUND FOR SERVICES
For the Year Ended October
31 2003 2002 2001
Management Fee Earned $1,746,966 $1,559,610 $978,887
Management Fee Reduction $178,059 $54,187 --
Management Fee Reimbursement $3,022 $1,217 $1,319
Sub-Management Fee $131,022 $136,466 $85,653
Brokerage Commissions $78,815 $282,477 $151,404
Shareholder Services Fee $131,022 -- --

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HOW DOES THE FUND MEASURE PERFORMANCE?

The Fund may advertise Share performance by using the SEC's standard methods for
calculating performance applicable to all mutual funds. The SEC also permits this
standard performance information to be accompanied by non-standard performance
information.

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

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

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Average Annual Total Returns and Yield
Total returns are given for the one-year, five-year and ten-year periods ended
October 31, 2003.

Yield is given for the 30-day period ended October 31, 2003.

30-Day Period 1 Year 5 Years 10 Years
Total Return
Before Taxes N/A 29.97% 10.89% 12.65%
After Taxes on
Distributions N/A 29.64% 8.63% 10.36%
After Taxes on
Distributions
and Sale of Shares N/A 19.43% 8.32% 9.89%
Yield .54% N/A N/A N/A
-------------------------------------------------------------------------------------------------------

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TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of Shares
over a specific period of time, and includes the investment of income and capital
gains distributions.

The average annual total return for Shares is the average compounded rate of return
for a given period that would equate a $10,000 initial investment to the ending
redeemable value of that investment. The ending redeemable value is computed by
multiplying the number of Shares owned at the end of the period by the NAV per Share
at the end of the period. The number of Shares owned at the end of the period is
based on the number of Shares purchased at the beginning of the period with $10,000,
less any applicable sales charge, adjusted over the period by any additional Shares,
assuming the annual reinvestment of all dividends and distributions. Total returns
after taxes are calculated in a similar manner, but reflect additional standard
assumptions required by the SEC.

YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a 30-day period; by (ii) the maximum offering price
per Share on the last day of the period. This number is then annualized using
semi-annual compounding. This means that the amount of income generated during the
30-day period is assumed to be generated each month over a 12-month period and is
reinvested every six months. The yield does not necessarily reflect income actually
earned by Shares because of certain adjustments required by the SEC and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.

To the extent investment professionals and broker/dealers charge fees in connection
with services provided in conjunction with an investment in Shares, the Share
performance is lower for shareholders paying those fees.

PERFORMANCE COMPARISONS
Advertising and sales literature may include:

o references to ratings, rankings, and financial publications and/or performance
comparisons of Shares to certain indices;

o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment;

o discussions of economic, financial and political developments and their impact
on the securities market, including the portfolio manager's views on how such
developments could impact the Fund; and

o information about the mutual fund industry from sources such as the Investment
Company Institute.

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

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

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

Lipper, Inc.
Lipper, Inc. ranks funds in various fund categories by making comparative
calculations using total return. Total return assumes the reinvestment of all capital
gains distributions and income dividends and takes into account any change in NAV
over a specified period of time.

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

Standard & Poor's Composite Stock Index
Standard & Poor's Composite Stock Index comprises common stocks in industry,
transportation, and financial and public utility companies. Can be used to compare to
the total returns of funds whose portfolios are invested primarily in common stocks.
In addition, the S&P indexes assume reinvestments of all dividends paid by stocks
listed on its index. Taxes due on any of these distributions are not included, nor
are brokerage or other fees calculated in the S&P figures.

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S&P 400 Midcap Index is an unmanaged capitalization weighted index that
measures the performance of the mid-range of the U.S. stock market.

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Wilshire 5000 Equity Indexes

The Wilshire 5000 Equity Indexes consist of nearly 5,000 common equity securities,
covering all stocks in the United States for which daily pricing is available and can
be used to compare to the total returns of funds whose portfolios are invested
primarily in common stocks.

WHO IS FEDERATED INVESTORS, INC.?

Federated is dedicated to meeting investor needs by making structured,
straightforward and consistent investment decisions. Federated investment products
have a history of competitive performance and have gained the confidence of thousands
of financial institutions and individual investors.

Federated's disciplined investment selection process is rooted in sound methodologies
backed by fundamental and technical research. At Federated, success in investment
management does not depend solely on the skill of a single portfolio manager. It is a
fusion of individual talents and state-of-the-art industry tools and resources.
Federated's investment process involves teams of portfolio managers and analysts, and
investment decisions are executed by traders who are dedicated to specific market
sectors and who handle trillions of dollars in annual trading volume.

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Federated Funds overview

Municipal Funds
In the municipal sector, as of December 31, 2002, Federated managed 14 bond funds
with approximately $3.2 billion in assets and 22 money market funds with
approximately $20.6 billion in total assets. In 1976, Federated introduced one of the
first municipal bond mutual funds in the industry and is now one of the largest
institutional buyers of municipal securities. The Funds may quote statistics from
organizations including The Tax Foundation and the National Taxpayers Union regarding
the tax obligations of Americans.

Equity Funds
In the equity sector, Federated has more than 31 years' experience. As of December
31, 2002, Federated managed 37 equity funds totaling approximately $16.2 billion in
assets across growth, value, equity income, international, index and sector (i.e.
utility) styles. Federated's value-oriented management style combines quantitative
and qualitative analysis and features a structured, computer-assisted composite
modeling system that was developed in the 1970s.

Corporate Bond Funds
In the corporate bond sector, as of December 31, 2002, Federated managed 10 money
market funds and 9 bond funds with assets approximating $59.4 billion and $6.0
billion, respectively. Federated's corporate bond decision making--based on
intensive, diligent credit analysis--is backed by over 29 years of experience in the
corporate bond sector. In 1972, Federated introduced one of the first high-yield bond
funds in the industry. In 1983, Federated was one of the first fund managers to
participate in the asset backed securities market, a market totaling more than $209
billion.

Government Funds
In the government sector, as of December 31, 2002, Federated managed 7 mortgage
backed, 3 multi-sector government funds, 4 government/agency and 19 government money
market mutual funds, with assets approximating $4.9 billion, $0.9 billion, $2.9
billion and $56.2 billion, respectively. Federated trades approximately $90.4 billion
in U.S. government and mortgage backed securities daily and places approximately $35
billion in repurchase agreements each day. Federated introduced the first U.S.
government fund to invest in U.S. government bond securities in 1969. Federated has
been a major force in the short- and intermediate-term government markets since 1982
and currently manages approximately $50 billion in government funds within these
maturity ranges.

Money Market Funds
In the money market sector, Federated gained prominence in the mutual fund industry
in 1974 with the creation of the first institutional money market fund.
Simultaneously, the company pioneered the use of the amortized cost method of
accounting for valuing shares of money market funds, a principal means used by money
managers today to value money market fund shares. Other innovations include the first
institutional tax-free money market fund. As of December 31, 2002, Federated managed
$136.2 billion in assets across 52 money market funds, including 19 government, 10
prime, 22 municipal and 1 euro-denominated with assets approximating $56.2 billion,
$59.4 billion, $20.6 billion and $173.9 million, respectively.

The Chief Investment Officers responsible for oversight of the various investment
sectors within Federated are: Global Equity - Stephen F. Auth is responsible for
overseeing the management of Federated's domestic and international equity products;
Global Fixed Income - William D. Dawson III is responsible for overseeing the
management of Federated's domestic and international fixed income and high yield
products.

Mutual Fund Market
Forty-nine percent of American households are pursuing their financial goals through
mutual funds. These investors, as well as businesses and institutions, have entrusted
over $6.2 trillion to the approximately 8,300 funds available, according to the
Investment Company Institute.

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

Institutional Clients
Federated meets the needs of approximately 3,035 institutional clients nationwide by
managing and servicing separate accounts and mutual funds for a variety of purposes,
including defined benefit and defined contribution programs, cash management, and
asset/liability management. Institutional clients include corporations, pension
funds, tax exempt entities, foundations/endowments, insurance companies, and
investment and financial advisers.

Bank Marketing
Other institutional clients include more than 1,600 banks and trust organizations.
Virtually all of the trust divisions of the top 100 bank holding companies use
Federated funds in their clients' portfolios.

Broker/Dealers and Bank Broker/Dealer Subsidiaries
Federated funds are available to consumers through major brokerage firms
nationwide--Federated has over 2,000 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other mutual
fund distributor. Federated's service to financial professionals and institutions has
earned it high ratings in several surveys performed by DALBAR, Inc. DALBAR is
recognized as the industry benchmark for service quality measurement.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended October 31, 2003 are
incorporated herein by reference to the Annual Report to Shareholders of Federated
Mid-Cap Index Fund dated October 31, 2003.

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STANDARD & POOR'S

"Standard & Poor's," "S&P," "S&P MidCap 400 Index," and Standard and
Poor's MidCap 400 Index" are trademarks of The McGraw-Hill Companies, Inc. and have
been licensed for use by Federated Securities Corp. The Fund is not sponsored,
endorsed, sold or promoted by, or affiliated with, Standard & Poor's ("S&P").
S&P makes no representation or warranty, express or implied, to the owners of the
Fund or any member of the public regarding the advisability of investing in
securities generally or in the Fund particularly or the ability of the S&P 400
Index to track general stock market performance. S&P's only relationship to
Federated Securities Corp. (the "Licensee") is the licensing of certain trademarks
and trade names of S&P and of the S&P 400 Index which is determined, composed
and calculated by S&P without regard to the Licensee or the Fund. S&P has no
obligation to take the needs of the Licensee or the owners of the Fund into
consideration in determining, composing or calculating the S&P 400 Index. S&P
is not responsible for and has not participated in the determination of, the timing
of, prices at, or quantities of the Fund to be issued or in the determination or
calculation of the equation by which the Fund is to be converted into cash. S&P
has no obligation or liability in connection with the administration, marketing or
trading of the Fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P 400
Index or any data included therein. S&P makes no warranty, express or implied, as
to results to be obtained by Licensee, owners of the Fund, or any other person or
entity from the use of the S&P 400 Index or any data included therein in
connection with the rights licensed hereunder or for any other use. S&P makes no
express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
S&P 400 Index or any data included therein. Without limiting any of the
foregoing, in no event shall S&P have any liability for any special, punitive,
indirect, or consequential damages (including lost profits), even if notified of the
possibility of such damages.
Addresses

federated mid-cap index fund

Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

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

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Investment Manager
Federated Equity Management Company of Pennsylvania
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Sub-Manager

Fund Asset Management, L.P. doing business as
Mercury Advisors
800 Scudders Mill Road
Plainsboro, NJ 08536

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

</R>

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

Independent Auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072

[Logo of Federated Investors]

Federated Mini-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

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December 31, 2003

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CLASS C SHARES

A mutual fund seeking to provide investment results that correspond to the aggregate price and dividend performance of publicly-traded common stocks comprising the Russell 2000^® Index (Index).

The Fund is neither affiliated with nor promoted, sponsored or endorsed by the Frank Russell Company. Frank Russell's only relationship to the Fund is the licensing of the use of the Index. Frank Russell Company is the owner of the trademarks and copyrights relating to the Index. The Russell 2000® Index is a trademark/service mark of the Frank Russell Company. Russell™ is a trademark of the Frank Russell Company. Frank Russell Company is not responsible for and has not reviewed the Fund or any associated literature or publications and Frank Russell Company makes no representation or warranty, express or implied, as to their accuracy, or completeness.

Not FDIC Insured * May Lose Value * No Bank Guarantee

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Risk/Return Summary		1
What are the Fund's Fees and Expenses?		5
What are the Fund's Investment Strategies?		6
What are the Principal Securities in Which the Fund Invests?		7
What are the Specific Risks of Investing in the Fund?		8
What Do Shares Cost?		9
How is the Fund Sold?		11
How to Purchase Shares		12
How to Redeem and Exchange Shares		14
Account and Share Information		17
Who Manages the Fund?		18
Legal Proceedings		19
Financial Information		20

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Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

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The Fund's investment objective is to provide investment results that correspond to the aggregate price and dividend performance of the approximately 2,000 publicly traded common stocks that are ranked in terms of capitalization below the top 1,000 stocks that comprise the large and mid-range capitalization sector of the United States equity market. This group of stocks is known as the Russell 2000® Index (Index). While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

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WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund normally invests its assets primarily in common stocks included in the Index.

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The Fund's investment Manager (Manager) has received an exemptive order from the SEC to permit the Trust and the Board of Trustees to appoint and replace subadvisers for the Fund and to enter into and amend the Fund's subadvisory agreements without further shareholder approval. See "Who Manages the Fund?"

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WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Fund. The primary factors that may reduce the Fund's returns include:

Stock Market Risks. The value of equity securities in the Fund's portfolio will fluctuate and, as a result, the Fund's share price may decline suddenly or over a sustained period of time.
Risks Related to Company Size. Because the smaller companies in which the Fund may invest may have unproven track records, a limited product or service base and limited access to capital, they may be more likely to fail than larger companies.
Liquidity Risks. Equity securities that are not widely held may trade less frequently than more widely held securities. This limits trading opportunity, making it more difficult to sell or buy the securities at a favorable price or time.
Sector Risks. Because the Fund may allocate relatively more assets to certain industry sectors than others, the Fund's performance may be more susceptible to any developments which affect those sectors emphasized by the Fund.
Credit Risk. Credit risk includes the possibility that a party to a transaction involving the Fund will fail to meet its obligations.

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Risk/Return Bar Chart and Table

The performance information shown below will help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's Class C Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund's performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The total return shown in the bar chart do not reflect the payment of any sales charges or recurring shareholder account fees. If these charges or fees had been included, the returns shown would have been lower.

The Fund's Class C Shares total return for the nine-month period from January 1, 2003 to September 30, 2003 was 26.87%.

Within the period shown in the bar chart, the Fund's Class C Shares highest quarterly return was 20.35% (quarter ended December 31, 2001). Its lowest quarterly return was (21.64)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

The Average Annual Total Returns for the Fund's Class C Shares are reduced to reflect applicable sales charges. Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund's Class C Shares to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. The table also shows returns for the Russell 2000 Index (RUS2), a broad based market index. Index returns do not reflect sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. Indexes are unmanaged, and it is not possible to invest directly in an index.

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(For the periods ended December 31, 2002)

	1 Year	5 Years	Start of Performance¹
Fund:
Return Before Taxes	(22.44)%	(3.65)%	(3.55)%
Return After Taxes on Distributions²	(22.44)%	(5.08)%	(5.35)%
Return After Taxes on Distributions and Sale of Fund Shares²	(13.78)%	(2.91)%	(2.86)%
RUS2	(20.48)%	(1.36)%	(1.21)%

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1 The Fund's Class C Shares start of performance date was November 10, 1997.

2 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sales of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After tax-returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

What are the Fund's Fees and Expenses?

FEDERATED MINI-CAP INDEX FUND

FEES AND EXPENSES

This table describes the fees and expenses that you may pay if you buy and hold the Fund's Class C Shares.

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Shareholder Fees
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price)		1.00%
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)		1.00%
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)		None
Redemption Fee (as a percentage of amount redeemed, if applicable)		None
Exchange Fee		None

Annual Fund Operating Expenses (Before Waiver)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.50%
Distribution (12b-1) Fee		0.75%
Shareholder Services Fee		0.25%
Other Expenses		0.58%
Total Annual Fund Operating Expenses		2.08%


1 Although not contractually obligated to do so, the manager waived certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2003.
Total Waiver of Fund Expenses		0.31%
Total Actual Annual Fund Operating Expenses (after waiver)		1.77%
2 The manager voluntarily waived a portion of the management fee. The manager can terminate this voluntary waiver at any time. The management fee paid by the Fund (after the voluntary waiver) was 0.19% for the fiscal year ended October 31, 2003

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EXAMPLE

This Example is intended to help you compare the cost of investing in the Fund's Class C Shares with the cost of investing in other mutual funds.

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The Example assumes that you invest $10,000 in the Class C Shares for the time periods indicated and then redeem all of your Shares at the end of those periods. Expenses assuming no redemption are also shown. The Example also assumes that your investment has a 5% return each year and that the Fund's Class C Shares operating expenses are before the waiver as shown in the table and remain the same. Although your actual costs and returns may be higher or lower, based on these assumptions your costs would be:

	1 Year	3 Years	5 Years	10 Years
Expenses assuming redemption	$409	$745	$1,207	$2,486
Expenses assuming no redemption	$309	$745	$1,207	$2,486

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What are the Fund's Investment Strategies?

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In pursuing its investment objective, the Fund normally invests its assets primarily in common stocks included in the Index. As of November 30, 2002, the capitalization range of the issuers comprising the Index was $48 million to $2.23 billion. As of the same date, the weighted median market capitalization of the Fund was $785 million. Market capitalization is determined by multiplying the number of outstanding shares of an issuer by the current market price per share. The Fund seeks to reduce the difference in the Fund's portfolio performance relative to the Index ("tracking error") by investing in a portfolio that seeks to replicate, as closely as possible, the composition of the Index. The Fund attempts to achieve a 0.95 or better correlation between the performance of the Fund and, that of the Index. The Fund also may employ the following strategies to attempt to further reduce tracking error: (1) buying and selling securities after announced changes in the Index but before the effective date of the changes; (2) purchasing index futures contracts in amounts approximating the cash held in the Fund's portfolio; (3) lending the Fund's securities to broker/dealers or other institutions to earn income for the Fund; and (4) purchasing domestically traded share classes of Index companies other than the share class included in the Index. Because the Fund refers to Index investments in its name, it will notify shareholders at least 60 days in advance of any change in its investment policies that would enable the Fund to normally invest less than 80% of its assets in index investments.

What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

Common Stocks

STOCK INDEX FUTURES

Securities Lending

The Fund will reinvest cash collateral in securities that qualify as an acceptable investment for the Fund. However, the Fund must pay interest to the borrower for the use of cash collateral.

Securities lending activities are subject to credit risks.

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

RISKS RELATED TO COMPANY SIZE

Generally, the smaller the market capitalization of a company, the fewer the number of shares traded daily, the less liquid its stock and the more volatile its price. Market capitalization is determined by multiplying the number of its outstanding shares by the current market price per share.

Companies with smaller market capitalizations also tend to have unproven track records, a limited product or service base and limited access to capital. These factors also increase risks and make these companies more likely to fail than companies with larger market capitalizations.

LIQUIDITY RISKS

Trading opportunities are more limited for equity securities that are not widely held. This may make it more difficult to sell or buy a security at a favorable price or time. Consequently, the Fund may have to accept a lower price to sell a security, sell other securities to raise cash or give up an investment opportunity, any of which could have a negative effect on the Fund's performance. Infrequent trading of securities may also lead to an increase in their price volatility.

Liquidity risk also refers to the possibility that the Fund may not be able to sell a security or close out a derivative contract when it wants to. If this happens, the Fund will be required to continue to hold the security or keep the position open, and the Fund could incur losses. Over-the-Counter (OTC) derivative contracts generally carry greater liquidity risk than exchange-traded contracts.

SECTOR RISKS

CREDIT RISKS

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RISKS OF INVESTING IN DERIVATIVES CONTRACTS

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What do Shares Cost?

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You can purchase, redeem or exchange Shares any day the New York Stock Exchange (NYSE) is open. When the Fund receives your transaction request in proper form (as described in this prospectus) it is processed at the next calculated net asset value (NAV) plus any applicable front-end sales charge (public offering price). NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

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The Fund generally values equity securities according to the last sale price in the market in which they are primarily traded (either a national securities exchange or the over-the-counter market).

The Fund's current NAV and public offering price may be found in the mutual funds section of certain local newspapers under "Federated."

The required minimum initial investment for Fund Shares is $1,500. The required minimum subsequent investment amount is $100. The minimum initial and subsequent investment amounts for retirement plans are $250 and $100, respectively.

An account may be opened with a smaller amount as long as the $1,500 minimum is reached within 90 days. An institutional investor's minimum investment is calculated by combining all accounts it maintains with the Fund. Accounts established through investment professionals may be subject to a smaller minimum investment amount. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions.

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The following table summarizes the minimum required investment amount and the maximum sales charge, if any, that you will pay on an investment in the Fund. Keep in mind that investment professionals may charge you fees for their services in connection with your Share transactions.

	Minimum Initial/Subsequent Investment Amounts	Maximum Sales Charge
Shares Offered	Minimum Initial/Subsequent Investment Amounts	Front-End Sales Charge¹	Contingent Deferred Sales Charge²
Class C	$1,500/$100	1.00%	1.00%

1 Front-End Sales Charge is expressed as a percentage of public offering price. See "Sales Charge When You Purchase."

2 See "Sales Charge When You Redeem."

SALES CHARGE WHEN YOU PURCHASE

Class C Shares
Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV
All Purchases	1.00%	1.01%

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SALES CHARGE WHEN YOU REDEEM

Your redemption proceeds may be reduced by a sales charge, commonly referred to as a contingent deferred sales charge (CDSC).

Class C Shares:

You will pay a 1% CDSC if you redeem Shares within one year of the purchase date.

If your investment qualifies for an elimination of the CDSC as described below, you or your investment professional should notify the Distributor at the time of redemption. If the Distributor is not notified, the CDSC will apply.

You will not be charged a CDSC when redeeming Shares:

purchased with reinvested dividends or capital gains;
purchased within 120 days of redeeming Shares of an equal or lesser amount;
that you exchanged into the same share class of another Federated fund if the shares were held for the applicable CDSC holding period (other than a money market fund);
purchased through investment professionals who did not receive advanced sales payments;
if, after you purchase Shares, you become disabled as defined by the IRS;
if the Fund redeems your Shares and closes your account for not meeting the minimum balance requirement;
if your redemption is a required retirement plan distribution; or
upon the death of the last surviving shareholder of the account. The beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder of the account.

To keep the sales charge as low as possible, the Fund redeems your Shares in this order:

Shares that are not subject to a CDSC; and
Shares held the longest (to determine the number of years your Shares have been held, include the time you held shares of other Federated funds that have been exchanged for Shares of this Fund).

The CDSC is then calculated using the Share price at the time of purchase or redemption, whichever is lower.

How is the Fund Sold?

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The Fund offers two Share classes: Institutional Shares and Class C Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Class C Shares. All Share classes have different sales charges and other expenses which affect their performance. Contact your investment professional or call 1-800-341-7400 for more information concerning the other class.

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When the Distributor receives marketing fees and sales charges, it may pay some or all of them to investment professionals. The Distributor and its affiliates may pay out of their assets other amounts (including items of material value) to investment professionals for marketing and servicing Shares. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

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RULE 12B-1 PLAN

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The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees to the Distributor and investment professionals for the sale, distribution and customer servicing of the Fund's Class C Shares. Because these Shares pay marketing fees on an ongoing basis, your investment cost may be higher over time than other shares with different sales charges and marketing fees.

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How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and
Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Fund on the same day and the Fund receives payment within one business day. You will become the owner of Shares and receive dividends when the Fund receives your payment.

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

DIRECTLY FROM THE FUND

Establish your account with the Fund by submitting a completed New Account Form; and
Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund and the Shares will be priced at the next calculated NAV after the Fund receives the order.

By Wire

Send your wire to:

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

By Check

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

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

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

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

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

THROUGH AN EXCHANGE

You may purchase Shares through an exchange from the same share class of another Federated fund. You must meet the minimum initial investment requirement for purchasing Shares and both accounts must have identical registrations.

BY SYSTEMATIC INVESTMENT PROGRAM

Once you have opened an account, you may automatically purchase additional Shares on a regular basis by completing the Systematic Investment Program (SIP) section of the New Account Form or by contacting the Fund or your investment professional. The minimum investment amount for SIPs is $50.

BY AUTOMATED CLEARING HOUSE (ACH)

RETIREMENT INVESTMENTS

You may purchase Shares as retirement investments (such as qualified plans and IRAs or transfer or rollover of assets). Call your investment professional or the Fund for information on retirement investments. We suggest that you discuss retirement investments with your tax adviser. You may be subject to an annual IRA account fee.

How to Redeem and Exchange Shares

You should redeem or exchange Shares:

through an investment professional if you purchased Shares through an investment professional; or
directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

Submit your redemption or exchange request to your investment professional by the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). The redemption amount you will receive is based upon the next calculated NAV after the Fund receives the order from your investment professional.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange Shares by simply calling the Fund at 1-800-341-7400.

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If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time), you will receive a redemption amount based on that day's NAV.

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By Mail

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

You will receive a redemption amount based on the next calculated NAV after the Fund receives your written request in proper form.

Send requests by mail to:

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

Send requests by private courier or overnight delivery service to:

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

All requests must include:

Fund Name and Share Class, account number and account registration;
amount to be redeemed or exchanged;
signatures of all shareholders exactly as registered; and
if exchanging , the Fund Name and Share Class, account number and account registration into which you are exchanging.

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

Signature Guarantees

Signatures must be guaranteed if:

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days;
a redemption is payable to someone other than the shareholder(s) of record; or
if exchanging (transferring) into another fund with a different shareholder registration.

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

PAYMENT METHODS FOR REDEMPTIONS

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets.

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

REDEMPTIONS FROM RETIREMENT ACCOUNTS

In the absence of your specific instructions, 10% of the value of your redemption from a retirement account in the Fund may be withheld for taxes. This withholding only applies to certain types of retirement accounts.

EXCHANGE PRIVILEGE

You may exchange Shares of the Fund into shares of the same class of another Federated fund. To do this, you must:

ensure that the account registrations are identical;
meet any minimum initial investment requirements; and
receive a prospectus for the fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a taxable transaction.

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The Fund may modify or terminate the exchange privilege at any time. The Fund's management or Adviser may determine from the amount, frequency and pattern of exchanges that a shareholder is engaged in excessive trading that is detrimental to the Fund and other shareholders. If this occurs, the Fund may terminate the availability of exchanges to that shareholder and may bar that shareholder from purchasing other Federated funds.

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SYSTEMATIC WITHDRAWAL/EXCHANGE PROGRAM

You may automatically redeem or exchange Shares in a minimum amount of $100 on a regular basis. Complete the appropriate section of the New Account Form or an Account Service Options Form or contact your investment professional or the Fund. Your account value must meet the minimum initial investment amount at the time the program is established. This program may reduce, and eventually deplete, your account. Payments should not be considered yield or income.

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Generally, it is not advisable to continue to purchase Class C Shares subject to a sales charge while redeeming Shares using this program.

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ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

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

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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You will receive confirmation of purchases, redemptions and exchanges (except for systematic transactions). In addition, you will receive periodic statements reporting all account activity, including systematic transactions, dividends and capital gains paid.

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DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

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

TAX INFORMATION

Fund distributions are expected to be both dividends and capital gains. Redemptions and exchanges are taxable sales. Please consult your tax adviser regarding your federal, state, and local tax liability.

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Who Manages the Fund?

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MANAGEMENT FEES

The Manager receives an annual investment management fee of 0.50% of the Fund's average daily net assets. The Manager may voluntarily waive a portion of its fee or reimburse the Fund for certain operating expenses.

Legal Proceedings

On October 22, 2003, Federated issued a press release that discusses these matters and announces that Federated is committed to taking remedial actions when and as appropriate, including compensating the Federated funds for any detrimental impact these transactions may have had on them. Based upon the progress of the investigation to date, Federated does not have sufficient information regarding these transactions to make a reasonable estimate of the amount, if any, by which the Federated funds have been impacted. The press release is available in the "About Us" section of Federated's website www.federatedinvestors.com , and any future press releases on this subject will also be posted there.

Shortly after the press release was issued, and notwithstanding Federated's commitment to taking remedial actions, Federated and various Federated funds were named as defendants in several class action lawsuits filed in the United States District Court for the Western District of Pennsylvania seeking damages of unspecified amounts. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated funds during specified periods beginning November 1, 1998. The suits are generally similar in alleging that Federated engaged in illegal and improper trading practices including market timing and late trading in concert with certain institutional traders, which allegedly caused financial injury to the mutual fund shareholders. Federated and the Federated funds are reviewing the allegations and will respond appropriately. Additional lawsuits based upon similar allegations may be filed in the future. Although we do not believe that these lawsuits will have a material a dverse effect on the Federated funds, there can be no assurance that these suits, the ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Federated fund redemptions, reduced sales of Federated fund shares, or other adverse consequences for the Federated funds.

Financial Information

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FINANCIAL HIGHLIGHTS

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This information has been audited by Ernst & Young LLP, whose report, along with the Fund's audited financial statements, is included in the Annual Report.

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Financial Highlights

(For a Share Outstanding Throughout Each Period)

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Year Ended October 31	2003		2002		2001		2000		1999
Net Asset Value, Beginning of Period	$ 8.85		$10.18		$13.91		$13.59		$13.00
Income From Investment Operations:
Net operating loss	(0.03	)	(0.03	)	(0.03	)	(0.00	)1	(0.00	)¹
Net realized and unrealized gain (loss) on investments and futures contracts	3.65		(1.30	)	(1.80	)	1.82		1.42

TOTAL FROM INVESTMENT OPERATIONS	3.62		(1.33	)	(1.83	)	1.82		1.42

Less Distributions:
Distributions from net investment income	--		--		--		--		(0.01	)
Distributions from net realized gain on investments and futures contracts	--		--		(1.90	)	(1.50	)	(0.82	)

TOTAL DISTRIBUTIONS	--		--		(1.90	)	(1.50	)	(0.83	)

Net Asset Value, End of Period	$12.47		$ 8.85		$10.18		$13.91		$13.59

Total Return²	40.90	%	(13.06	)%	(14.39	)%	14.09	%	11.44	%


Ratios to Average Net Assets:

Expenses	1.77	%	1.82	%	1.93	%	1.84	%	1.81	%

Net operating loss	(0.47	)%	(0.41	)%	(0.34	)%	(0.06	)%	(0.09	)%

Expense waiver/reimbursement³	0.31	%	0.09	%	--		--		--
Supplemental Data:

Net assets, end of period (000 omitted)	$8,643		$5,302		$5,375		$6,236		$4,252

Portfolio turnover	48	%	75	%	56	%	56	%	47	%

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1 Represents less than $0.01 per share.

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

3 This voluntary expense decrease is reflected in both the expense and the net operating loss ratios shown above.

Further information about the Fund's performance is contained in the Annual Report, dated October 31, 2003, which can be obtained free of charge.

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

[Logo of Federated Investors]

Federated Mini-Cap Index Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com

Federated Securities Corp., Distributor

Federated is a registered mark of Federated Investors, Inc.
2003 ©Federated Investors, Inc.

Investment Company Act File No. 811-6061

Cusip 31420E601

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G01169-01 (12/03)

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[Logo of Federated Investors]

Federated Mini-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

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December 31, 2003

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INSTITUTIONAL SHARES

A mutual fund seeking to provide investment results that correspond to the aggregate price and dividend performance of publicly-traded common stocks comprising the Russell 2000^® Index (Index).

Not FDIC Insured * May Lose Value * No Bank Guarantee

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Risk/Return Summary		1
What are the Fund's Fees and Expenses?		5
What are the Fund's Investment Strategies?		6
What are the Principal Securities in Which the Fund Invests?		7
What are the Specific Risks of Investing in the Fund?		8
What Do Shares Cost?		9
How is the Fund Sold?		10
How to Purchase Shares		10
How to Redeem and Exchange Shares		12
Account and Share Information		14
Who Manages the Fund?		15
Legal Proceedings		16
Financial Information		17

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Risk/Return Summary

WHAT IS THE FUND'S INVESTMENT OBJECTIVE?

The Fund's investment objective is to provide investment results that correspond to the aggregate price and dividend performance of the approximately 2,000 publicly traded common stocks that are ranked in terms of capitalization below the top 1,000 stocks that comprise the large and mid-range capitalization sector of the United States equity market. This group of stocks is known as the Russell 2000® Index (RUS2). While there is no assurance that the Fund will achieve its investment objective, it endeavors to do so by following the strategies and policies described in this prospectus.

WHAT ARE THE FUND'S MAIN INVESTMENT STRATEGIES?

The Fund normally invests its assets primarily in common stocks included in the Index.

WHAT ARE THE MAIN RISKS OF INVESTING IN THE FUND?

All mutual funds take investment risks. Therefore, it is possible to lose money by investing in the Fund. The primary factors that may reduce the Fund's returns include:

Stock Market Risks. The value of equity securities in the Fund's portfolio will fluctuate and, as a result, the Fund's share price may decline suddenly or over a sustained period of time.
Risks Related to Company Size. Because the smaller companies in which the Fund may invest may have unproven track records, a limited product or service base and limited access to capital, they may be more likely to fail than larger companies.
Liquidity Risks. Equity securities that are not widely held may trade less frequently than more widely held securities. This limits trading opportunity, making it more difficult to sell or buy the securities at a favorable price or time.
Sector Risks. Because the Fund may allocate relatively more assets to certain industry sectors than others, the Fund's performance may be more susceptible to any developments which affect those sectors emphasized by the Fund.
Credit Risk. Credit risk includes the possibility that a party to a transaction involving the Fund will fail to meet its obligations.

Risk/Return Bar Chart and Table

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The performance information shown below will help you analyze the Fund's investment risks in light of its historical returns. The bar chart shows the variability of the Fund's Institutional Shares total returns on a calendar year-by-year basis. The Average Annual Total Return table shows returns averaged over the stated periods, and includes comparative performance information. The Fund's performance will fluctuate, and past performance (before and after taxes) is no guarantee of future results.

The Fund's Institutional Shares are sold without a sales charge (load). The total returns shown in the bar chart above are based upon net asset value.

The Fund's Institutional Shares total return for the nine-month period from January 1, 2003 to September 30, 2003 was 27.59%.

Within the period shown in the bar chart, the Fund's Institutional Shares highest quarterly return was 20.70% (quarter ended December 31, 2001). Its lowest quarterly return was (21.52)% (quarter ended September 30, 2002).

Average Annual Total Return Table

Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund's Institutional Shares to illustrate the effect of federal taxes on Fund returns. Actual after-tax returns depend on each investor's personal tax situation, and are likely to differ from those shown. The table also shows returns for the Russell 2000 Index (RUS2), a broad based market index. Index returns do not reflect sales charges, expenses or other fees that the SEC requires to be reflected in the Fund's performance. Indexes are unmanaged, and it is not possible to invest directly in an index.

(For the periods ended December 31, 2002)

	1 Year	5 Years	10 Years
Fund:
Return Before Taxes	(21.05)%	(2.87)%	5.44%
Return After Taxes on Distributions¹	(21.18)%	(4.54)%	3.36%
Return After Taxes on Distributions and Sale of Fund Shares¹	(12.92)%	(2.43)%	3.92%
RUS2	(20.48)%	(1.36)%	7.15%

1 After-tax returns are calculated using a standard set of assumptions. The stated returns assume the highest historical federal income and capital gains tax rates. Return After Taxes on Distributions assumes a continued investment in the Fund and shows the effect of taxes on Fund distributions. Return After Taxes on Distributions and Sales of Fund Shares assumes all shares were redeemed at the end of each measurement period, and shows the effect of any taxable gain (or offsetting loss) on redemption, as well as the effects of taxes on Fund distributions. These after-tax returns do not reflect the effect of any applicable state and local taxes. After-tax returns are not relevant to investors holding Shares through tax-deferred programs, such as IRA or 401(k) plans.

What are the Fund's Fees and Expenses?

FEDERATED MINI-CAP INDEX FUND

FEES AND EXPENSES

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

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

Annual Fund Operating Expenses (Before Waivers)¹
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee²		0.50%
Distribution (12b-1) Fee		None
Shareholder Services Fee³		0.25%
Other Expenses		0.58%
Total Annual Fund Operating Expenses		1.33%


1 Although not contractually obligated to do so, the manager and shareholder services provider waived certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2003.
Total Waivers of Fund Expenses		0.44%
Total Actual Annual Fund Operating Expenses (after waivers)		0.89%
2 The manager voluntarily waived a portion of the management fee. The manager can terminate this voluntary waiver at any time. The management fee paid by the Fund (after the voluntary waiver) was 0.19% for the fiscal year ended October 31, 2003.
3 A portion of the shareholder services fee has been voluntarily waived. This voluntary waiver can be terminated at any time. The shareholder services fee paid by the Fund's Institutional Shares (after the voluntary waiver) was 0.12% for the fiscal year ended October 31, 2003.

EXAMPLE

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

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

1 Year		$ 135
3 Years		$ 421
5 Years		$ 729
10 Years		$1,601

What are the Fund's Investment Strategies?

Market capitalization is determined by multiplying the number of outstanding shares of an issuer by the current market price per share. The Fund seeks to reduce the difference in the Fund's portfolio performance relative to the Index ("tracking error") by investing in a portfolio that seeks to replicate, as closely as possible, the composition of the Index. The Fund attempts to achieve a 0.95 or better correlation between the performance of the Fund and, that of the Index. The Fund also may employ the following strategies to attempt to further reduce tracking error: (1) buying and selling securities after announced changes in the Index but before the effective date of the changes; (2) purchasing index futures contracts in amounts approximating the cash held in the Fund's portfolio; (3) lending the Fund's securities to broker/dealers or other institutions to earn income for the Fund; and (4) purchasing domestically traded share classes of Index companies other than the share class included in the Index. Because the Fund refers to Index investments in its name, it will notify shareholders at least 60 days in advance of any change in its investment policies that would enable the Fund to normally invest less than 80% of its assets in index investments.

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What are the Principal Securities in Which the Fund Invests?

EQUITY SECURITIES

Common Stocks

STOCK INDEX FUTURES

Securities Lending

The Fund will reinvest cash collateral in securities that qualify as an acceptable investment for the Fund. However, the Fund must pay interest to the borrower for the use of cash collateral.

Securities lending activities are subject to credit risks.

What are the Specific Risks of Investing in the Fund?

STOCK MARKET RISKS

RISKS RELATED TO COMPANY SIZE

Companies with smaller market capitalizations also tend to have unproven track records, a limited product or service base and limited access to capital. These factors also increase risks and make these companies more likely to fail than companies with larger market capitalizations.

LIQUIDITY RISKS

Liquidity risk also refers to the possibility that the Fund may not be able to sell a security or close out a derivative contract when it wants to. If this happens, the Fund will be required to continue to hold the security or keep the position open, and the Fund could incur losses. Over-the-Counter (OTC) derivative contracts generally carry greater liquidity risk than exchange-traded contracts.

SECTOR RISKS

CREDIT RISKS

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Risks of Investing in Derivatives Contracts

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What do Shares Cost?

The Fund does not charge a front-end sales charge. NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern time) each day the NYSE is open.

The Fund generally values equity securities according to the last sale price in the market in which they are primarily traded (either a national securities exchange or the over-the-counter market).

The Fund's current NAV and public offering price may be found in the mutual funds section of certain local newspapers under "Federated."

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

How is the Fund Sold?

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The Fund offers two Share classes: Institutional Shares and Class C Shares, each representing interests in a single portfolio of securities. This prospectus relates only to Institutional Shares. All Share classes have different sales charges and other expenses which affect their performance. Contact your investment professional or call 1-800-341-7400 for more information concerning the other class.

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How to Purchase Shares

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

THROUGH AN INVESTMENT PROFESSIONAL

Establish an account with the investment professional; and
Submit your purchase order to the investment professional before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time). You will receive the next calculated NAV if the investment professional forwards the order to the Fund on the same day and the Fund receives payment within one business day. You will become the owner of Shares and receive dividends when the Fund receives your payment.

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

DIRECTLY FROM THE FUND

Establish your account with the Fund by submitting a completed New Account Form; and
Send your payment to the Fund by Federal Reserve wire or check.

An institution may establish an account and place an order by calling the Fund and the Shares will be priced at the next calculated NAV after the Fund receives the order.

By Wire

Send your wire to:

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

By Check

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

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

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

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

Payment should be made in U.S. dollars and drawn on a U.S. bank. The Fund reserves the right to reject any purchase request. For example, to protect against check fraud the Fund may reject any purchase request involving a check that is not made payable to The Federated Funds (including, but not limited to, requests to purchase Shares using third-party checks), or involving temporary checks or credit card checks.

BY AUTOMATED CLEARING HOUSE (ACH)

How to Redeem Shares

You should redeem Shares:

through an investment professional if you purchased Shares through an investment professional; or
directly from the Fund if you purchased Shares directly from the Fund.

THROUGH AN INVESTMENT PROFESSIONAL

DIRECTLY FROM THE FUND

By Telephone

You may redeem Shares by simply calling the Fund at 1-800-341-7400.

If you call before the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) you will receive a redemption amount based on that day's NAV.

By Mail

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

You will receive a redemption amount based on the next calculated NAV after the Fund receives your written request in proper form.

Send requests by mail to:

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

Send requests by private courier or overnight delivery service to:

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

All requests must include:

Fund Name and Share Class, account number and account registration;
amount to be redeemed; and
signatures of all shareholders exactly as registered.

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

Signature Guarantees

Signatures must be guaranteed if:

your redemption will be sent to an address other than the address of record;
your redemption will be sent to an address of record that was changed within the last 30 days; or
a redemption is payable to someone other than the shareholder(s) of record.

PAYMENT METHODS FOR REDEMPTIONS

an electronic transfer to your account at a financial institution that is an ACH member; or
wire payment to your account at a domestic commercial bank that is a Federal Reserve System member.

Redemption in Kind

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

LIMITATIONS ON REDEMPTION PROCEEDS

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

to allow your purchase to clear;
during periods of market volatility; or
when a shareholder's trade activity or amount adversely impacts the Fund's ability to manage its assets.

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

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

You will receive confirmation of purchases and redemptions. In addition, you will receive periodic statements reporting all account activity, including dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions are expected to be both dividends and capital gains. Redemptions are taxable sales. Please consult your tax adviser regarding your federal, state, and local tax liability.

Who Manages the Fund?

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MANAGEMENT FEES

Legal Proceedings

On October 22, 2003, Federated issued a press release that discusses these matters and announces that Federated is committed to taking remedial actions when and as appropriate, including compensating the Federated funds for any detrimental impact these transactions may have had on them. Based upon the progress of the investigation to date, Federated does not have sufficient information regarding these transactions to make a reasonable estimate of the amount, if any, by which the Federated funds have been impacted. The press release is available in the "About Us" section of Federated's website www.federatedinvestors.com , and any future press releases on this subject will also be posted there.

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Financial Information

FINANCIAL HIGHLIGHTS

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This information has been audited by Ernst & Young LLP, whose report, along with the Fund's audited financial statements, is included in the Annual Report.

Financial Highlights

(For a Share Outstanding Throughout Each Period)

Year Ended October 31	2003		2002		2001		2000		1999
Net Asset Value, Beginning of Period	$ 8.95		$10.25		$13.99		$13.63		$13.02
Income From Investment Operations:
Net investment income	0.04		0.05		0.06		0.12		0.11
Net realized and unrealized gain (loss) on investments and futures contracts	3.70		(1.30	)	(1.82	)	1.84		1.43

TOTAL FROM INVESTMENT OPERATIONS	3.74		(1.25	)	(1.76	)	1.96		1.54

Less Distributions:
Distributions from net investment income	(0.04	)	(0.05	)	(0.08)		(0.10	)	(0.11	)
Distributions from net realized gain on investments and futures contracts	--		--		(1.90	)	(1.50	)	(0.82	)

TOTAL DISTRIBUTIONS	(0.04	)	(0.05	)	(1.98	)	(1.60	)	(0.93	)

Net Asset Value, End of Period	$12.65		$ 8.95		$10.25		$13.99		$13.63

Total Return¹	41.96	%	(12.31	)%	(13.76	)%	15.14	%	12.43	%


Ratios to Average Net Assets:

Expenses	0.89	%	0.94	%	1.05	%	0.96	%	0.93	%

Net investment income	0.41	%	0.46	%	0.56	%	0.85	%	0.79	%

Expense waiver/reimbursement²	0.44	%	0.22	%	0.13	%	0.13	%	0.13	%
Supplemental Data:

Net assets, end of period (000 omitted)	$89,785		$61,495		$82,393		$101,330		$97,235

Portfolio turnover	48	%	75	%	56	%	56	%	47	%

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

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

Further information about the Fund's performance is contained in the Annual Report, dated October 31, 2003, which can be obtained free of charge.

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

[Logo of Federated Investors]

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Federated Mini-Cap Index Fund

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Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000
www.federatedinvestors.com

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2003 ©Federated Investors, Inc.

Cusip 31420E304

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2602305A (12/03)

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FEDERATED MINI-CAP INDEX FUND
A Portfolio of Federated Index Trust

STATEMENT OF ADDITIONAL INFORMATION

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DECEMBER 31, 2003
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INSTITUTIONAL SHARES

CLASS C SHARES

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This Statement of Additional Information (SAI) is not a prospectus. Read this SAI in
conjunction with the prospectuses for Institutional Shares and Class C Shares for
Federated Mini-Cap Index Fund (Fund), dated December 31, 2003.

This SAI incorporates by reference the Fund's Annual Report. Obtain the prospectuses
or the Annual Report without charge by calling
1-800-341-7400.

CONTENTS
How is the Fund Organized?
Securities in Which the Fund Invests
What do Shares Cost?
How is the Fund Sold?
Exchanging Securities for Shares
Subaccounting Services
Redemption in Kind
Massachusetts Partnership Law
Account and Share Information
Tax Information
Who Manages and Provides Services to the Fund?
How Does the Fund Measure Performance?
Who is Federated Investors, Inc.?
Frank Russell Company
Financial Information
Addresses
2062305B (12/03)

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HOW IS THE FUND ORGANIZED?

The Fund is a diversified portfolio of Federated Index Trust (Trust). The Trust is an
open-end, management investment company that was established under the laws of the
Commonwealth of Massachusetts on January 30, 1990. The Trust may offer separate
series of shares representing interests in separate portfolios of securities. The
Fund changed its name from Federated Mini-Cap Fund to Federated Mini-Cap Index Fund
on July 16, 2001.

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The Board of Trustees (the Board) has established two classes of shares of the Fund,
known as Institutional Shares and Class C Shares (Shares). This SAI relates to both
classes of Shares. The Fund's investment Manager is Federated Equity Management
Company of Pennsylvania (Manager). Prior to January 1, 2004, Federated Investment
Management Company was manager of the Fund. Both the current Manager and the former
manager are wholly owned subsidiaries of Federated Investors, Inc. (Federated).

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SECURITIES IN WHICH THE FUND INVESTS

In pursuing its investment strategy, the Fund may invest in the following securities
for any purpose that is consistent with its investment objective.

SECURITIES DESCRIPTIONS AND TECHNIQUES

COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks receive
the issuer's earnings after the issuer pays its creditors and any preferred
stockholders. As a result, changes in an issuer's earnings directly influence the
value of its common stock.

PREFERRED STOCKS
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred stocks may
also permit the issuer to redeem the stock. The Fund may treat such redeemable
preferred stock as a fixed income security.

INTERESTS IN OTHER LIMITED LIABILITY COMPANIES
Entities such as limited partnerships, limited liability companies, business trusts
and companies organized outside the United States may issue securities comparable to
common or preferred stock.

REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are real estate investment trusts that lease, operate and finance commercial
real estate. REITs are exempt from federal corporate income tax if they limit their
operations and distribute most of their income. Such tax requirements limit a REIT's
ability to respond to changes in the commercial real estate market.

WARRANTS
Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price before
the expiration date. Warrants may become worthless if the price of the stock does not
rise above the exercise price by the expiration date. This increases the market risks
of warrants as compared to the underlying security. Rights are the same as warrants,
except companies typically issue rights to existing stockholders.

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

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

TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the United
States. Treasury securities are generally regarded as having the lowest credit risks.

AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other government
sponsored entity acting under federal authority (a GSE). The United States supports
some GSEs with its full faith and credit. Other GSEs receive support through federal
subsidies, loans or other benefits. A few GSEs have no explicit financial support,
but are regarded as having implied support because the federal government sponsors
their activities. Agency securities are generally regarded as having low credit
risks, but not as low as treasury securities.

The Fund treats mortgage backed securities guaranteed by GSEs as agency securities.
Although a GSE guarantee protects against credit risks, it does not reduce the market
and prepayment risks of these mortgage backed securities.

Derivative Contracts

Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such as
futures, forwards and options) require payments relating to a future trade involving
the underlying asset. Other derivative contracts (such as swaps) require payments
relating to the income or returns from the underlying asset. The other party to a
derivative contract is referred to as a counterparty.

Many derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make (or
collect) daily payments to the margin accounts to reflect losses (or gains) in the
value of their contracts. This protects investors against potential defaults by the
counterparty. Trading contracts on an exchange also allows investors to close out
their contracts by entering into offsetting contracts.

For example, the Fund could close out an open contract to buy an asset at a future
date by entering into an offsetting contract to sell the same asset on the same date.
If the offsetting sale price is more than the original purchase price, the Fund
realizes a gain; if it is less, the Fund realizes a loss. Exchanges may limit the
amount of open contracts permitted at any one time. Such limits may prevent the Fund
from closing out a position. If this happens, the Fund will be required to keep the
contract open (even if it is losing money on the contract), and to make any payments
required under the contract (even if it has to sell portfolio securities at
unfavorable prices to do so). Inability to close out a contract could also harm the
Fund by preventing it from disposing of or trading any assets it has been using to
secure its obligations under the contract.

The Fund may also trade derivative contracts over-the-counter (OTC) in transactions
negotiated directly between the Fund and the counterparty. OTC contracts do not
necessarily have standard terms, so they cannot be directly offset with other OTC
contracts. In addition, OTC contracts with more specialized terms may be more
difficult to price than exchange traded contracts.

Depending upon how the Fund uses derivative contracts and the relationships between
the market value of a derivative contract and the underlying asset, derivative
contracts may increase or decrease the Fund's exposure to interest rate and currency
risks, and may also expose the Fund to liquidity and leverage risks. OTC contracts
also expose the Fund to credit risks in the event that a counterparty defaults on the
contract.

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Futures Contracts

Futures contracts provide for the future sale by one party and purchase by another
party of a specified amount of an underlying asset at a specified price, date, and
time. Entering into a contract to buy an underlying asset is commonly referred to
as buying a contract or holding a long position in the asset. Entering into a
contract to sell an underlying asset is commonly referred to as selling a contract
or holding a short position in the asset. Futures contracts are considered to be
commodity contracts. The Fund has claimed an exclusion from the definition of the
term "commodity pool operator" under the Commodity Exchange Act and, therefore, is
not subject to registration or regulation as a commodity pool operator under that
Act. Futures contracts traded OTC are frequently referred to as forward
contracts. The Fund can buy or sell stock index futures as a substitute for direct
investments in the Russell 2000(R) Index ("Index") in order to help fully replicate
the performance of the Index.

Options

Options are rights to buy or sell an underlying asset or instrument for a
specified price (the exercise price) during, or at the end of, a specified period.
The seller (or writer) of the option receives a payment, or premium, from the
buyer, which the writer keeps regardless of whether the buyer uses (or exercises)
the option. Options can trade on exchanges or in the OTC market and may be bought
or sold on a wide variety of underlying assets or instruments, including financial
indices, individual securities, and other derivative instruments, such as futures
contracts. Options that are written on futures contracts will be subject to
margin requirements similar to those applied to futures contracts.

The Fund may buy the following types of options:

Call Options

A call option gives the holder (buyer) the right to buy the underlying asset
from the seller (writer) of the option. The Fund may use call options in the
following ways:

o Buy call options on the Index, stock index futures contracts, and portfolio
securities in anticipation of an increase in the value of the underlying asset
or instrument; and

o Write call options on the Index, stock index futures contracts, and portfolio
securities to generate income from premiums, and in anticipation of a decrease
or only limited increase in the value of the underlying asset. If a call
written by the Fund is exercised, the Fund foregoes any possible profit from an
increase in the market price of the underlying asset over the exercise price
plus the premium received.

The Fund may also buy or write options, as needed, to close out existing option
positions.

Hybrid Instruments

Hybrid instruments combine elements of derivative contracts with those of another
security (typically a fixed income security). All or a portion of the interest or
principal payable on a hybrid security is determined by reference to changes in
the price of an underlying asset or by reference to another benchmark (such as
interest rates, currency exchange rates or indices). Hybrid instruments also
include convertible securities with conversion terms related to an underlying
asset or benchmark.

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DEPOSITARY RECEIPTS

Depositary receipts represent interests in underlying securities issued by a foreign
company. Depositary receipts are not traded in the same market as the underlying
security. The foreign securities underlying American Depositary Receipts (ADRs) are
not traded in the United States. ADRs provide a way to buy shares of foreign-based
companies in the United States rather than in overseas markets. In addition, ADRs are
traded in U.S. dollars, eliminating the need for foreign exchange transactions. The
foreign securities underlying European Depositary Receipts (EDRs), Global Depositary
Receipts (GDRs), and International Depositary Receipts (IDRs), are traded globally or
outside the United States. Depositary receipts involve many of the same risks of
investing directly in foreign securities, including currency risks and risks of
foreign investing.

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Foreign Securities

Foreign securities are securities of issuers based outside the United States. The
Fund considers an issuer to be based outside the United States if:

o it is organized under the laws of, or has a principal office located in,
another country;

o the principal trading market for its securities is in another country; or

o it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods produced,
services performed, or sales made in another country.

Foreign securities are primarily denominated in foreign currencies. Along with the
risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing.

FOREIGN EXCHANGE CONTRACTS
In order to convert U.S. dollars into the currency needed to buy a foreign security,
or to convert foreign currency received from the sale of a foreign security into U.S.
dollars, the Fund may enter into spot currency trades. In a spot trade, the Fund
agrees to exchange one currency for another at the current exchange rate. The Fund
may also enter into derivative contracts in which a foreign currency is an underlying
asset. The exchange rate for currency derivative contracts may be higher or lower
than the spot exchange rate. Use of these derivative contracts may increase or
decrease the Fund's exposure to currency risks.

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SPECIAL TRANSACTIONS

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

Repurchase agreements are subject to credit risks.

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

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

The Fund will reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the borrower for the
use of cash collateral.

Loans are subject to termination at the option of the Fund or the borrower. The Fund
will not have the right to vote on securities while they are on loan, but it will
terminate a loan in anticipation of any important vote. The Fund may pay
administrative and custodial fees in connection with a loan and may pay a negotiated
portion of the interest earned on the cash collateral to a securities lending agent
or broker.

Securities lending activities are subject to interest rate risks and credit risks.

Asset Coverage
In order to secure its obligations in connection with derivatives contracts or
special transactions, the Fund will either own the underlying assets, enter into an
offsetting transaction or set aside readily marketable securities with a value that
equals or exceeds the Fund's obligations. Unless the Fund has other readily
marketable assets to set aside, it cannot trade assets used to secure such
obligations without entering into an offsetting derivative contract or terminating a
special transaction. This may cause the Fund to miss favorable trading opportunities
or to realize losses on derivative contracts or special transactions.

Inter-Fund Borrowing and Lending Arrangements
The Securities and Exchange Commission (SEC) has granted an exemption that permits
the Fund and all other funds advised by subsidiaries of Federated Investors, Inc.
(Federated funds) to lend and borrow money for certain temporary purposes directly to
and from other Federated funds. Participation in this inter-fund lending program is
voluntary for both borrowing and lending funds, and an inter-fund loan is only made
if it benefits each participating fund. Federated Investors, Inc. (Federated)
administers the program according to procedures approved by the Fund''s Board, and
the Board monitors the operation of the program. Any inter-fund loan must comply
with certain conditions set out in the exemption, which are designed to assure
fairness and protect all participating funds.

For example, inter-fund lending is permitted only (a) to meet shareholder redemption
requests, and (b) to meet commitments arising from "failed" trades. All inter-fund
loans must be repaid in seven days or less. The Fund''s participation in this
program must be consistent with its investment policies and limitations, and must
meet certain percentage tests. Inter-fund loans may be made only when the rate of
interest to be charged is more attractive to the lending fund than market-competitive
rates on overnight repurchase agreements (Repo Rate) and more attractive to the
borrowing fund than the rate of interest that would be charged by an unaffiliated
bank for short-term borrowings (Bank Loan Rate), as determined by the Board. The
interest rate imposed on inter-fund loans is the average of the Repo Rate and the
Bank Loan Rate.

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

Interest rate changes have a greater effect on the price of fixed income securities
with longer durations. Duration measures the price sensitivity of a fixed income
security to changes in interest rates.

If a fixed income security is called, the Fund may have to reinvest the proceeds in
other fixed income securities with lower interest rates, higher credit risks, or
other less favorable characteristics.

Risks Associated with Non-Investment Grade Securities
Securities rated below investment grade, also known as junk bonds, generally entail
greater market, credit and liquidity risks than investment grade securities. For
example, their prices are more volatile, economic downturns and financial setbacks
may affect their prices more negatively, and their trading market may be more limited.

Risks of Investing in American Depositary Receipts
Because the Fund may invest in ADRs issued by foreign companies, the Fund's share
price may be more affected by foreign economic and political conditions, taxation
policies, and accounting and auditing standards, than would otherwise be the case.

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Derivative Contracts and Hybrid Instrument Risks
The Fund's use of derivative contracts involves risks different from, or possibly
greater than, the risks associated with investing directly in securities and other
traditional investments. First, there is a possibility that the correlation between
the price movements of a derivative and the underlying reference asset or index will
be imperfectly correlated or not correlated at all. This is often referred to as
basis risk. Second, while some strategies involving derivatives may reduce the risk
of loss, they may also reduce potential gains or, in some cases, result in losses by
offsetting favorable price movements in portfolio holdings. Third, the Fund's use of
derivatives may cause the Fund to realize a higher amount of short-term capital
gains, which are usually taxed at ordinary income tax rates for Federal income tax
purposes. This may, in turn, increase the taxes payable by Fund shareholders.
Finally, there is a risk that derivatives could be mispriced or improperly valued
and, as a result, increased cash payments could need to be made to a derivative
counterparty. Derivatives are also subject to a number of other risks described
herein, such as interest rate, credit, liquidity and leverage risks.

The risks of investing in hybrid instruments reflect a combination of the risks of
investing in securities, options, futures and currencies, and depend upon the terms
of the instrument. Thus, an investment in a hybrid instrument may entail significant
risks in addition to those associated with traditional fixed income or convertible
securities. Hybrid instruments are also potentially more volatile and carry greater
interest rate risks than traditional instruments. Moreover, depending on the
structure of the particular hybrid, it may expose the Fund to leverage risks or carry
liquidity risks.

Currency Risks

o Exchange rates for currencies fluctuate daily. The combination of currency risk
and market risks tends to make securities traded in foreign markets more volatile
than securities traded exclusively in the U.S.

o The Manager attempts to manage currency risk by limiting the amount the Fund
invests in securities denominated in a particular currency. However,
diversification will not protect the Fund against a general increase in the value
of the U.S. dollar relative to other currencies.

Risks of Foreign Investing

o Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's investments.

</R>

FUNDAMENTAL INVESTMENT OBJECTIVE
The Fund's fundamental investment objective is to provide investment results that
correspond to the aggregate price and dividend performance of the approximately 2,000
publicly traded common stocks that are ranked in terms of capitalization below the
top 1,000 stocks that comprise the large and mid-range capitalization sector of the
United States equity market. The investment objective may not be changed by the
Fund's Board without shareholder approval.

INVESTMENT LIMITATIONS

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

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

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

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

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

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

Concentration
The Fund will not make investments that will result in the concentration of its
investments in the securities of issuers primarily engaged in the same industry.
Government securities, municipal securities and bank instruments are not deemed to
constitute an industry.

The above limitations cannot be changed unless authorized by the Board and by the
"vote of a majority of its outstanding voting securities," as defined by the 1940
Act. The following limitations, however, may be changed by the Board without
shareholder approval. Shareholders will be notified before any material change in
these limitations becomes effective.

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

Investing in Restricted Securities
The Fund may invest in restricted securities. Restricted securities are any
securities in which the Fund may invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal securities
law. Under criteria established by the Trustees certain restricted securities are
determined to be liquid. To the extent that restricted securities are not determined
to be liquid, the Fund will limit their purchase, together with other illiquid
securities to 15% of its net assets.

Investing in Illiquid Securities
The Fund will not purchase securities for which there is no readily available market,
or enter into repurchase agreements or purchase time deposits maturing in more than
seven days, if immediately after and as a result, the value of such securities would
exceed, in the aggregate, 15% of the Fund's net assets.

Purchases on Margin
The Fund will not purchase securities on margin provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of securities,
and further provided that the Fund may make margin deposits in connection with its
use of financial options and futures, forward and spot currency contracts, swap
transactions and other financial contracts or derivative instruments.

In applying the Fund's concentration restriction: (a) utility companies will be
divided according to their services, for example, gas, gas transmission, electric and
telephone will each be considered a separate industry; (b) financial service
companies will be classified according to the end users of their services, for
example, automobile finance, bank finance and diversified finance will each be
considered a separate industry; and (c) asset backed securities will be classified
according to the underlying assets securing such securities. To conform to the
current view of the SEC staff that only domestic bank instruments may be excluded
from industry concentration limitations, as a matter of non-fundamental policy, the
Fund will not exclude foreign bank instruments from industry concentration limitation
tests so long as the policy of the SEC remains in effect. In addition, investments in
bank instruments, and investments in certain industrial development bonds funded by
activities in a single industry, will be deemed to constitute investment in an
industry, except when held for temporary defensive purposes. The investment of more
than 25% of the value of the Fund's total assets in any one industry will constitute
"concentration."
As a matter of non-fundamental operating policy, for purposes of the commodities
policy, investments in transactions involving futures contracts and options, forward
currency contracts, swap transactions and other financial contracts that settle by
payment of cash are not deemed to be investments in commodities.

For purposes of the above limitations, the Fund considers certificates of deposit and
demand and time deposits issued by a U.S. branch of a domestic bank or savings
association having capital, surplus and undivided profits in excess of $100,000,000
at the time of investment to be "cash items." Except with respect to borrowing money,
if a percentage limitation is adhered to at the time of investment, a later increase
or decrease in percentage resulting from any change in value or net assets will not
result in a violation of such limitation.

DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:

<R>
o for equity securities, according to the last sale price in the market in which
they are primarily traded (either a national securities exchange or the
over-the-counter market), if available;

o in the absence of recorded sales for equity securities, according to the mean
between the last closing bid and asked prices;

o futures contracts and options are generally valued at market values established
by the exchanges on which they are traded at the close of trading on such
exchanges. Options traded in the over-the-counter market are generally valued
according to the mean between the last bid and the last asked price for the option
as provided by an investment dealer or other financial institution that deals in
the option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value;

o for fixed income securities, according to the mean between bid and asked prices
as furnished by an independent pricing service, except that fixed income securities
with remaining maturities of less than 60 days at the time of purchase may be
valued at amortized cost; and

o for all other securities at fair value as determined in good faith by the Board.

</R>

Prices provided by independent pricing services may be determined without relying
exclusively on quoted prices and may consider institutional trading in similar groups
of securities, yield, quality, stability, risk, coupon rate, maturity, type of issue,
trading characteristics, and other market data or factors. From time to time, when
prices cannot be obtained from an independent pricing service, securities may be
valued based on quotes from broker-dealers or other financial institutions that trade
the securities.

<R>

TRADING IN FOREIGN SECURITIES

Trading in foreign securities may be completed at times which vary from the closing
of the New York Stock Exchange (NYSE). In computing its NAV, the Fund values foreign
securities at the latest closing price on the exchange on which they are traded
immediately prior to the closing of the NYSE. Certain foreign currency exchange rates
may also be determined at the latest rate prior to the closing of the NYSE. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at current
rates. Occasionally, events that affect these values and exchange rates may occur
between the times at which they are determined and the closing of the NYSE. If such
events materially affect the value of portfolio securities, these securities may be
valued at their fair value as determined in good faith by the Fund's Board, although
the actual calculation may be done by others.

WHAT DO SHARES COST?

The Fund's net asset value (NAV) per Share fluctuates and is based on the market
value of all securities and other assets of the Fund. The NAV for each class of
Shares may differ due to the variance in daily net income realized by each class.
Such variance will reflect only accrued net income to which the shareholders of a
particular class are entitled.

REDUCING OR ELIMINATING THE FRONT-END SALES CHARGE
You can reduce or eliminate the applicable front-end sales charge, as follows:

Reinvestment Privilege
You may reinvest, within 120 days, your Share redemption proceeds at the next
determined NAV without any sales charge.

Purchases by Affiliates of the Fund
The following individuals and their immediate family members may buy Shares at NAV
without any sales charge because there are nominal sales efforts associated with
their purchases:

o the Trustees, employees and sales representatives of the Fund, the Manager, the
Distributor and their affiliates;

o any associated person of an investment dealer who has a sales agreement with
the Distributor; and

o trusts, pension or profit-sharing plans for these individuals.

Purchases Through Omnibus Accounts (Class C Shares)
Class C Shares may be purchased without an initial sales charge by any investor who
buys Class C Shares through an omnibus account with a financial intermediary, such as
a broker or a bank, that does not accept or charge the initial sales charge.

REDUCING OR ELIMINATING THE CONTINGENT DEFERRED SALES CHARGE (CLASS C SHARES)
These reductions or eliminations are offered because: no sales commissions have been
advanced to the investment professional selling Shares; the shareholder has already
paid a Contingent Deferred Sales Charge (CDSC); or nominal sales efforts are
associated with the original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC will be
imposed on redemptions:

o following the death or post-purchase disability, as defined in Section 72(m)(7)
of the Internal Revenue Code of 1986, of the last surviving shareholder;

o representing minimum required distributions from an Individual Retirement
Account or other retirement plan to a shareholder who has attained the age of 70
1/2;

o of Shares that represent a reinvestment within 120 days of a previous
redemption;

o of Shares held by the Trustees, employees, and sales representatives of the
Fund, the Manager, the Distributor and their affiliates; employees of any
investment professional that sells Shares according to a sales agreement with the
Distributor; and the immediate family members of the above persons;

o of Shares originally purchased through a bank trust department, a registered
investment adviser or retirement plans where the third party administrator has
entered into certain arrangements with the Distributor or its affiliates, or any
other investment professional, to the extent that no payments were advanced for
purchases made through these entities;

o which are involuntary redemptions processed by the Fund because the accounts do
not meet the minimum balance requirements; and

To keep the sales charge as low as possible, the Fund redeems your Shares in this
order:

o Shares that are not subject to a CDSC; and

o Shares held the longest (to determine the number of years your Shares have been
held, include the time you held shares of other Federated funds that have been
exchanged for Shares of this Fund).

The CDSC is then calculated using the share price at the time of purchase or
redemption, whichever is lower.

HOW IS THE FUND SOLD?

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

FRONT-END SALES CHARGE REALLOWANCES (CLASS C SHARES)
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor pays a portion of this charge to investment professionals that are
eligible to receive it (the "Dealer Reallowance") and retains any remaining portion
of the front-end sales charge.

When an investment professional's customer purchases Shares, the investment
professional may receive a Dealer Reallowance as follows:

Dealer Reallowance
as a Percentage of
Public Offering
Price
All Purchase Amounts 1.00%

ADVANCE COMMISSIONS
--------------------------------------------------------------------------------------
When an investment professional's customer purchases Shares, the investment
professional may receive an advance commission as follows:

Class C Shares
Advance Commission
as a Percentage of
Public Offering
Price
All Purchase Amounts 1.00%

RULE 12B-1 PLAN (CLASS C SHARES)
--------------------------------------------------------------------------------------
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the Distributor
for activities principally intended to result in the sale of Shares such as
advertising and marketing of Shares (including printing and distributing prospectuses
and sales literature to prospective shareholders and financial institutions) and
providing incentives to investment professionals to sell Shares. The Rule 12b-1
Plan allows the Distributor to contract with investment professionals to perform
activities covered by the Plan. The Rule 12b-1 Plan is expected to benefit the Fund
in a number of ways. For example, it is anticipated that the Plan will help the Fund
attract and retain assets, thus providing cash for orderly portfolio management and
Share redemptions and possibly helping to stabilize or reduce other operating
expenses. In addition, the Plan is integral to the multiple class structure of the
Fund, which promotes the sale of Shares by providing a range of options to investors.
The Fund's service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.

</R>
The Fund may compensate the Distributor more or less than its actual marketing
expenses. In no event will the Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

For some classes of Shares, the maximum Rule 12b-1 Plan fee that can be paid in any
one year may not be sufficient to cover the marketing-related expenses the
Distributor has incurred. Therefore, it may take the Distributor a number of years to
recoup these expenses.

<R>

SERVICE FEES
The Fund may pay fees not to exceed 0.25% of average daily net assets (Service Fees)
to investment professionals or to Federated Shareholder Services Company (FSSC), a
subsidiary of Federated, for providing services to shareholders and maintaining
shareholder accounts. . Under certain agreements, rather than paying investment
professionals directly, the Fund may pay Service Fees to FSSC and FSSC will use the
fees to compensate investment professionals. SUPPLEMENTAL PAYMENTS
Investment professionals may be paid fees, in significant amounts, out of the assets
of the Distributor. These fees do not come out of Fund assets. The Distributor may
be reimbursed by the Manager or its affiliates.

In addition to these supplemental payments, an investment professional may also
receive payments under the Rule 12b-1 Plan and/or Service fees.

</R>

EXCHANGING SECURITIES FOR SHARES

You may contact the Distributor to request a purchase of Shares in exchange for
securities you own. The Fund reserves the right to determine whether to accept your
securities and the minimum market value to accept. The Fund will value your
securities in the same manner as it values its assets. This exchange is treated as a
sale of your securities for federal tax purposes.

SUBACCOUNTING SERVICES

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

REDEMPTION IN KIND

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

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

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

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

MASSACHUSETTS PARTNERSHIP LAW

Under certain circumstances, shareholders may be held personally liable as partners
under Massachusetts law for obligations of the Trust. To protect its shareholders,
the Trust has filed legal documents with Massachusetts that expressly disclaim the
liability of its shareholders for acts or obligations of the Trust.

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

</R>

ACCOUNT AND SHARE INFORMATION

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

All Shares of the Trust have equal voting rights, except that in matters affecting
only a particular Fund or class, only Shares of that Fund or class are entitled to
vote.

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

<R>
As of December 1, 2003, the following shareholders owned of record, beneficially, or
both, 5% or more of outstanding Class C Shares: Edward Jones & Co., Maryland
Heights, MO, owned approximately 42,927 Shares (6.18%); and MLPF&S, Jacksonville,
FL, owned approximately 35,925 Shares (5.17%).

As of December 1, 2003, the following shareholders owned of record, beneficially, or
both, 5% or more of the outstanding Institutional Shares: Charles Schwab & Co,
Inc., San Francisco, CA, owned approximately 502,007 Shares (6.91%); IMS & Co.,
Englewood, CO, owned approximately 535,001 Shares (7.36%); and Paychex Securities
Corp., W. Henrietta, NY, owned approximately 851,238 Shares (11.71%).

</R>

TAX INFORMATION

WHO MANAGES AND PROVIDES SERVICES TO THE FUND?

BOARD OF TRUSTEES

<R>

The Board is responsible for managing the Trust's business affairs and for exercising
all the Trust's powers except those reserved for the shareholders. The following
tables give information about each Board member and the senior officers of the Funds.
Where required, the tables separately list Board members who are "interested persons"
of the Fund (i.e., "Interested" Board members) and those who are not (i.e.,
"Independent" Board members). Unless otherwise noted, the address of each person
listed is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA. The Trust
comprises three portfolios and the Federated Fund Complex consists of 44 investment
companies (comprising 138 portfolios). Unless otherwise noted, each Officer is
elected annually. Unless otherwise noted, each Board member oversees all portfolios
in the Federated Fund Complex; serves for an indefinite term; and also serves as a
Board member of the following investment company complexes: Banknorth Funds-four
portfolios; Golden Oak(R) Family of Funds-seven portfolios and WesMark Funds-five
portfolios.

As of December 1, the Fund's Board and Officers as a group owned approximately 78,081
(1.07%) of the Fund's outstanding Shares.

INTERESTED TRUSTEES BACKGROUND AND COMPENSATION

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

Aggregate Total Compensation
Name Compensation From Trust and
Birth Date From Fund Federated Fund
Address Principal Occupation(s) for Past Five (past fiscal year) Complex
Positions Held with Years, (past calendar
Trust Other Directorships Held and Previous year)
Date Service Began Position(s)
Principal Occupations: Chairman and $0 $0
John F. Donahue* Director or Trustee of the Federated
Birth Date: July 28, Fund Complex; Chairman and Director,
1924 Federated Investors, Inc.
CHAIRMAN AND TRUSTEE
Began serving: ---------------------------------------
January 30, 1990
Previous Positions: Trustee, Federated
Investment Management Company and
Chairman and Director, Federated
Investment Counseling.

Principal Occupations: Principal $0 $0
J. Christopher Executive Officer and President of the
Donahue* Federated Fund Complex; Director or
Birth Date: April 11, Trustee of some of the Funds in the
1949 Federated Fund Complex; President,
PRESIDENT AND TRUSTEE Chief Executive Officer and Director,
Began serving: Federated Investors, Inc.; Chairman
January 30, 1990 and Trustee, Federated Investment
Management Company; Trustee, Federated
Investment Counseling; Chairman and
Director, Federated Global Investment
Management Corp.; Chairman, Passport
Research, Ltd.; Trustee, Federated
Shareholder Services Company;
Director, Federated Services Company.

Previous Positions: President,
Federated Investment Counseling;
President and Chief Executive Officer,
Federated Investment Management
Company, Federated Global Investment
Management Corp. and Passport
Research, Ltd.

Principal Occupations: Director or $000.00 $148,500
Lawrence D. Ellis, Trustee of the Federated Fund Complex;
M.D.* Professor of Medicine, University of
Birth Date: October Pittsburgh; Medical Director,
11, 1932 University of Pittsburgh Medical
3471 Fifth Avenue Center Downtown; Hematologist,
Suite 1111 Oncologist and Internist, University
Pittsburgh, PA of Pittsburgh Medical Center.
TRUSTEE
Began serving: Other Directorships Held: Member,
January 30, 1990 National Board of Trustees, Leukemia
Society of America.

Previous Positions: Trustee,
University of Pittsburgh; Director,
University of Pittsburgh Medical
Center.

* Family relationships and reasons for "interested" status: John F. Donahue is the
father of J. Christopher Donahue; both are "interested" due to the positions they
hold with Federated and its subsidiaries. Lawrence D. Ellis, M.D. is "interested"
because his son-in-law is employed by the Fund's principal underwriter, Federated
Securities Corp.
--------------------------------------------------------------------------------------

INDEPENDENT TRUSTEES BACKGROUND AND COMPENSATION

Principal Occupation: Director or $000.00 $163,350
Thomas G. Bigley Trustee of the Federated Fund Complex.
Birth Date: February
3, 1934 Other Directorships Held: Director,
15 Old Timber Trail Member of Executive Committee,
Pittsburgh, PA Children's Hospital of Pittsburgh;
TRUSTEE Director, University of Pittsburgh.
Began serving:
October 1, 1995 Previous Position: Senior Partner,
Ernst & Young LLP.

Principal Occupations: Director or $000.00 $163,350
John T. Conroy, Jr. Trustee of the Federated Fund Complex;
Birth Date: June 23, Chairman of the Board, Investment
1937 Properties Corporation; Partner or
Grubb & Trustee in private real estate
Ellis/Investment ventures in Southwest Florida.
Properties
Corporation Previous Positions: President,
3838 North Tamiami Investment Properties Corporation;
Trail N. Senior Vice President, John R. Wood
Suite 402 and Associates, Inc., Realtors;
Naples, FL President, Naples Property Management,
TRUSTEE Inc. and Northgate Village Development
Began serving: Corporation.
August 21, 1991

Principal Occupation: Director or $000.00 $163,350
Nicholas P. Trustee of the Federated Fund Complex.
Constantakis
Birth Date: September Other Directorships Held: Director and
3, 1939 Member of the Audit Committee, Michael
175 Woodshire Drive Baker Corporation (engineering and
Pittsburgh, PA energy services worldwide).
TRUSTEE
Began serving: Previous Position: Partner, Anderson
February 23, 1998 Worldwide SC.

Principal Occupation: Director or $000.00 $148,500
John F. Cunningham Trustee of the Federated Fund Complex.
Birth Date: March 5,
1943 Other Directorships Held: Chairman,
353 El Brillo Way President and Chief Executive Officer,
Palm Beach, FL Cunningham & Co., Inc. (strategic
TRUSTEE business consulting); Trustee
Began serving: Associate, Boston College.
January 1, 1999
Previous Positions: Director, Redgate
Communications and EMC Corporation
(computer storage systems); Chairman
of the Board and Chief Executive
Officer, Computer Consoles, Inc.;
President and Chief Operating Officer,
Wang Laboratories; Director, First
National Bank of Boston; Director,
Apollo Computer, Inc.

Principal Occupation: Director or $000.00 $148,500
Peter E. Madden Trustee of the Federated Fund Complex;
Birth Date: March 16, Management Consultant.
1942
One Royal Palm Way Other Directorships Held: Board of
100 Royal Palm Way Overseers, Babson College.
Palm Beach, FL
TRUSTEE Previous Positions: Representative,
Began serving: August Commonwealth of Massachusetts General
21, 1991 Court; President, State Street Bank
and Trust Company and State Street
Corporation (retired); Director, VISA
USA and VISA International; Chairman
and Director, Massachusetts Bankers
Association; Director, Depository
Trust Corporation; Director, The
Boston Stock Exchange.

Principal Occupations: Director or $000.00 $163,350
Charles F. Mansfield, Trustee of the Federated Fund Complex;
Jr. Management Consultant; Executive Vice
Birth Date: April 10, President, DVC Group, Inc. (marketing,
1945 communications and technology) (prior
80 South Road to 9/1/00).
Westhampton Beach, NY
TRUSTEE Previous Positions: Chief Executive
Began serving: Officer, PBTC International Bank;
January 1, 1999 Partner, Arthur Young & Company
(now Ernst & Young LLP); Chief
Financial Officer of Retail Banking
Sector, Chase Manhattan Bank; Senior
Vice President, HSBC Bank USA
(formerly, Marine Midland Bank); Vice
President, Citibank; Assistant
Professor of Banking and Finance,
Frank G. Zarb School of Business,
Hofstra University.

John E. Murray, Jr., Principal Occupations: Director or $000.00 $178,200
J.D., S.J.D. Trustee of the Federated Fund Complex;
Birth Date: December Chancellor and Law Professor, Duquesne
20, 1932 University; Consulting Partner,
Chancellor, Duquesne Mollica & Murray.
University
Pittsburgh, PA Other Directorships Held: Director,
TRUSTEE Michael Baker Corp. (engineering,
Began serving: construction, operations and technical
February 14, 1995 services).

Previous Positions: President,
Duquesne University; Dean and
Professor of Law, University of
Pittsburgh School of Law; Dean and
Professor of Law, Villanova University
School of Law.

Principal Occupations: Director or $000.00 $148,500
Marjorie P. Smuts Trustee of the Federated Fund Complex;
Birth Date: June 21, Public Relations/ Marketing
1935 Consultant/Conference Coordinator.
4905 Bayard Street
Pittsburgh, PA Previous Positions: National
TRUSTEE Spokesperson, Aluminum Company of
Began serving: America; television producer;
January 30, 1990 President, Marj Palmer Assoc.; Owner,
Scandia Bord.

Principal Occupations: Director or $000.00 $148,500
John S. Walsh Trustee of the Federated Fund Complex;
Birth Date: November President and Director, Heat Wagon,
28, 1957 Inc. (manufacturer of construction
2604 William Drive temporary heaters); President and
Valparaiso, IN Director, Manufacturers Products, Inc.
TRUSTEE (distributor of portable construction
Began serving: heaters); President, Portable Heater
January 1, 1999 Parts, a division of Manufacturers
Products, Inc.

Previous Position: Vice President,
Walsh & Kelly, Inc.

OFFICERS**
Name
Birth Date
Address
Positions Held with Trust
Date Service Began Principal Occupation(s) and Previous Position(s)

Principal Occupations: Principal Financial Officer and
Richard J. Thomas Treasurer of the Federated Fund Complex; Senior Vice
Birth Date: June 17, 1954 President, Federated Administrative Services.
TREASURER
Began serving: November 19. 1998 Previous Positions: Vice President, Federated
Administrative Services; held various management
positions within Funds Financial Services Division of
Federated Investors, Inc.

Principal Occupations: Vice Chairman or Vice President
Richard B. Fisher of some of the Funds in the Federated Fund Complex;
Birth Date: May 17, 1923 Vice Chairman, Federated Investors, Inc.; Chairman,
VICE PRESIDENT Federated Securities Corp.
Began serving: February 1, 1990
Previous Positions: President and Director or Trustee
of some of the Funds in the Federated Fund Complex;
Executive Vice President, Federated Investors, Inc.
and Director and Chief Executive Officer, Federated
Securities Corp.

Previous Positions: Senior Vice President, Global
Portfolio Management Services Division; Senior Vice
President, Federated Investment Management Company and
Passport Research, Ltd.; Senior Managing Director and
Portfolio Manager, Prudential Investments.

COMMITTEES OF THE BOARD

Meetings Held
Board Committee During Last
Committee Members Committee Functions Fiscal Year
Executive In between meetings of the full Board, the One
John F. Donahue Executive Committee generally may exercise all
John E. Murray, the powers of the full Board in the management
Jr., J.D., S.J.D. and direction of the business and conduct of the
affairs of the Trust in such manner as the
Executive Committee shall deem to be in the best
interests of the Trust . However, the Executive
Committee cannot elect or remove Board members,
increase or decrease the number of Trustees,
elect or remove any Officer, declare dividends,
issue shares or recommend to shareholders any
action requiring shareholder approval.

Audit The Audit Committee reviews and recommends to Four
Thomas G. Bigley the full Board the independent auditors to be
John T. Conroy, selected to audit the Fund`s financial
Jr. statements; meets with the independent auditors
Nicholas P. periodically to review the results of the audits
Constantakis and reports the results to the full Board;
Charles F. evaluates the independence of the auditors,
Mansfield, Jr. reviews legal and regulatory matters that may
have a material effect on the financial
statements, related compliance policies and
programs, and the related reports received from
regulators; reviews the Fund`s internal audit
function; reviews compliance with the Fund `s
code of conduct/ethics; reviews valuation
issues; monitors inter-fund lending
transactions; reviews custody services and
issues and investigates any matters brought to
the Committee's attention that are within the
scope of its duties.

BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE
FEDERATED FAMILY OF INVESTMENT COMPANIES AS OF
DECEMBER 31, 2002
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Aggregate
Dollar Range of
Dollar Range of Shares Owned in
Interested Shares Owned Federated Family of
Board Member Name in Fund Investment Companies
John F. Donahue None Over $100,000
J. Christopher Donahue Over $100,000 Over $100,000
Lawrence D. Ellis, M.D. None Over $100,000

Independent
Board Member Name
Thomas G. Bigley None Over $100,000
John T. Conroy, Jr. None Over $100,000
Nicholas P. Constantakis $10,001-$50,000 Over $100,000
John F. Cunningham None Over $100,000
Peter E. Madden $50,001- $100,000 Over $100,000
Charles F. Mansfield, Jr. $10,001-$50,000 $50,001 - $100,000
John E. Murray, Jr., J.D., S.J.D. None Over $100,000
Marjorie P. Smuts None Over $100,000
John S. Walsh $1 - $10,000 Over $100,000

INVESTMENT MANAGER
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The Manager is a wholly owned subsidiary of Federated.

The Manager oversees the Sub-Manager, Fund Asset Management, L.P., doing business as
Mercury Advisors, an indirect, wholly owned subsidiary of Merrill Lynch & Co.,
which conducts investment research and makes investment decisions for the Fund.
Subject to the supervision and direction of the Board, the Manager provides to the
Fund investment management evaluation services principally by performing initial due
diligence on the Sub-Manager for the Fund and thereafter monitoring and evaluating
the performance of the Sub-Manager through quantitative and qualitative analyses. In
addition, the Manager conducts periodic in-person, telephonic and written
consultations with the Sub-Manager. In initially evaluating the Sub-Manager, the
Manager considered, among other factors, the Sub-Manager's size, investment
capabilities in the area of indexed assets under management, performance history, its
ongoing commitment to client service and the stability and quality of the
organization (including the Sub-Manager's financial condition), as well as the
quality of the individuals that make up its investment team. On an ongoing basis, the
Manager is responsible for communicating performance expectations and evaluations to
the Sub-Manager; monitoring tracking errors; monitoring and analyzing the use of
futures contracts; monitoring the futures holdings of the Fund as a percentage of
Fund assets; monitoring securities lending for the Funds; discussing with the
Sub-Manager the portfolio sampling techniques employed by the Sub-Manager; and
ultimately recommending to the Board whether the Sub-Management Contract should be
renewed, modified or terminated. The Manager provides written reports to the Board
regarding the results of its evaluation and monitoring functions. In addition, the
Manager is responsible for providing the Fund with administrative services,
including, but not limited to, shareholder servicing and certain legal and accounting
services. The Manager is also responsible for conducting all operations of the Fund,
except those operations contracted to the Sub-Manager, custodian, transfer agent and
dividend disbursing agent. The Manager receives an annual fee from the Fund for
performing its responsibilities under the Management Contract. The Manager and the
Sub-Manager shall not be liable to the Trust, the Fund, or any Fund shareholder for
any losses that maybe sustained in the purchase, holding, or sale of any security or
for anything done or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties imposed
upon it by its contract with the Trust.

As required by the 1940 Act, the Fund's Board has reviewed the Fund's investment
advisory contract and subadvisory contract. The Board's decision to approve these
contracts reflects the exercise of its business judgment on whether to continue the
existing arrangements. During its review of these contracts, the Board considers
many factors, among the most material of which are: the Fund's investment objectives
and long term performance; the Manager's and submanager's management philosophy,
personnel and processes; the preferences and expectations of Fund shareholders and
their relative sophistication; the continuing state of competition in the mutual fund
industry; comparable fees in the mutual fund industry; the range and quality of
services provided to the Fund and its shareholders by the Federated organization in
addition to investment advisory services; and the Fund's relationship to the
Federated funds.

In assessing the Manager's and submanager's performance of its obligations, the Board
also considers whether there has occurred a circumstance or event that would
constitute a reason for it to not renew an advisory contract. In this regard, the
Board is mindful of the potential disruptions of the Fund's operations and various
risks, uncertainties and other effects that could occur as a result of a decision to
terminate or not renew an advisory contract. In particular, the Board recognizes
that most shareholders have invested in the Fund on the strength of the Manager's
industry standing and reputation and in the expectation that the Manager will have a
continuing role in providing advisory services to the Fund.

The Board also considers the compensation and benefits received by the Manager and
submanager. This includes fees received for services provided to the Fund by other
entities in the Federated organization and research services received by the Manager
from brokers that execute fund trades, as well as management fees. In this regard,
the Board is aware that various courts have interpreted provisions of the 1940 Act
and have indicated in their decisions that the following factors may be relevant to
an Manager's compensation: the nature and quality of the services provided by the
Manager, including the performance of the Fund; the Manager's cost of providing the
services; the extent to which the Manager may realize "economies of scale" as the
Fund grows larger; any indirect benefits that may accrue to the Manager and its
affiliates as a result of the Manager's relationship with the Fund; performance and
expenses of comparable funds; and the extent to which the independent Board members
are fully informed about all facts bearing on the Manager's service and fee. The
Fund's Board is aware of these factors and takes them into account in its review of
the Fund's management contract.

The Board considers and weighs these circumstances in light of its substantial
accumulated experience in governing the Fund and working with Federated on matters
relating to the Federated funds, and is assisted in its deliberations by the advice
of independent legal counsel. In this regard, the Board requests and receives a
significant amount of information about the Fund and the Federated organization.
Federated provides much of this information at each regular meeting of the Board, and
furnishes additional reports in connection with the particular meeting at which the
Board's formal review of the advisory contracts occurs. In between regularly
scheduled meetings, the Board may receive information on particular matters as the
need arises. Thus, the Board's evaluation of an advisory contract is informed by
reports covering such matters as: the Manager's investment philosophy, personnel, and
processes; the Fund's short- and long-term performance (in absolute terms as well as
in relationship to its particular investment program and certain competitor or "peer
group" funds), and comments on the reasons for performance; the Fund's expenses
(including the management fee itself and the overall expense structure of the Fund,
both in absolute terms and relative to similar and/or competing funds, with due
regard for contractual or voluntary expense limitations); the use and allocation of
brokerage commissions derived from trading the Fund's portfolio securities; the
nature and extent of the advisory and other services provided to the Fund by the
Manager and its affiliates; compliance and audit reports concerning the Federated
funds and the Federated companies that service them; and relevant developments in the
mutual fund industry and how the Federated funds and/or Federated are responding to
them.

The Board also receives financial information about Federated, including reports on
the compensation and benefits Federated derives from its relationships with the
Federated funds. These reports cover not only the fees under the management
contracts, but also fees received by Federated's subsidiaries for providing other
services to the Federated funds under separate contracts (e.g., for serving as the
Federated funds' administrator and transfer agent). The reports also discuss any
indirect benefit Federated may derive from its receipt of research services from
brokers who execute Federated fund trades.

The Board bases its decision to approve an management contract on the totality of the
circumstances and relevant factors, and with a view to past and future long-term
considerations. Not all of the factors and considerations identified above are
relevant to every Federated fund, nor does the Board consider any one of them to be
determinative. Because the totality of circumstances includes considering the
relationship of each Federated fund, the Board does not approach consideration of
every Federated fund's advisory contract as if that were the only Federated fund
offered by Federated.

Services Agreement
Federated Advisory Services Company, an affiliate of the Manager, provides research,
quantitative analysis, equity trading and transaction settlement and certain support
services to the Manager. The fee for these services is paid by the Manager and not
by the Fund.

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

CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING

As required by SEC rules, the Fund, its Manager, and its Distributor have adopted
codes of ethics. These codes govern securities trading activities of investment
personnel, Fund Trustees, and certain other employees. Although they do permit these
people to trade in securities, including those that the Fund could buy, they also
contain significant safeguards designed to protect the Fund and its shareholders from
abuses in this area, such as requirements to obtain prior approval for, and to
report, particular transactions.

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VOTING PROXIES ON FUND PORTFOLIO SECURITIES
The Board has delegated to the Manager authority to vote proxies on the securities
held in the Fund's portfolio. The Board has also approved the Manager's policies and
procedures for voting the proxies, which are described below.