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.   33 ............................         X

                                     and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940            X

    Amendment No.   35 ...........................................         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:

 X  immediately upon filing pursuant to paragraph (b)
  _ on December 29, 2006 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(i)
_   on _________________ 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 LLP
                               1825 Eye Street, NW
                             Washington, DC  20006

Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Max-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

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December 31, 2006

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INSTITUTIONAL 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 500 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

CONTENTS

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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?	8
What are the Specific Risks of Investing in the Fund?	11
What Do Shares Cost?	13
How is the Fund Sold?	14
Payments to Financial Intermediaries	15
How to Purchase Shares	16
How to Redeem and Exchange Shares	18
Account and Share Information	21
Who Manages the Fund?	25
Legal Proceedings	27
Financial Information	28
Appendix A: Hypothetical Investment and Expense Information	30

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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 (the “Board”) 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.
• Leverage Risks. Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain.
• Liquidity Risks. Liquidity risk 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.

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• Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund’s use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or in the Fund’s Statement of Additional Information (SAI), such as stock market, credit, liquidity and leverage risks.

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

Risk/Return Bar Chart and Table

The 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.

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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.

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The Fund’s Institutional Shares total return for the nine-month period from January 1, 2006 to September 30, 2006 was 8.32%.

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Within the period shown in the bar chart, the Fund’s Institutional Shares highest quarterly return was 21.22% (quarter ended December 31, 1998). Its lowest quarterly return was (17.34)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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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 Standard and Poor’s 500 Index (S&P 500), a broad-based market index that measures the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 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.

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(For the Periods Ended December 31, 2005)

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	1 Year	5 Years	10 Years
Institutional Shares:
Return Before Taxes	4.75%	0.23%	8.69%
Return After Taxes on Distributions1	3.87%	(0.22)%	7.95%
Return After Taxes on Distributions and Sale of Fund Shares1	3.51%	(0.00)%	7.28%
S&P 500	4.92%	0.55%	9.07%

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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 MAX-CAP INDEX FUND

FEES AND EXPENSES

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

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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)	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, Reimbursement and Reduction)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee2	0.30%
Distribution (12b-1) Fee	None
Other Expenses3	0.34%
Total Annual Fund Operating Expenses4	0.64%
1 The percentages shown are based on expenses for the entire fiscal year ended October 31, 2006. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so (except as discussed in Note 4, below), the Manager and shareholder services provider waived, reimbursed and/or elected not to charge certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2006.
Total Waivers, Reimbursement and Reduction of Fund Expenses	0.29%
Total Actual Annual Fund Operating Expenses (after waivers, reimbursement and reduction)	0.35%
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 0.28% for the fiscal year ended October 31, 2006.
3 Includes a shareholder service fee/account administration fee which is used to compensate intermediaries for shareholder services or account administrative services. Also includes a recordkeeping fee which is used to compensate intermediaries for recordkeeping services. Please see “Payments to Financial Intermediaries” herein. The shareholder services provider voluntarily waived a portion of its fee, and the Manager voluntarily reimbursed certain operating expenses. Additionally, the shareholder services provider voluntarily elected not to charge, and therefore the Fund did not accrue, a portion of its fee. The voluntary waivers, reimbursement and reduction can be terminated at any time. Total other expenses paid by the Fund’s Institutional Shares (after the voluntary waivers, reimbursement and reduction) were 0.07% for the fiscal year ended October 31, 2006.
4 The Manager and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses (including the distribution (12b-1) fee) so that the total operating expenses paid by the Fund’s Institutional Shares (after the voluntary waivers and reimbursements) will not exceed 0.35% for the fiscal year ending October 31, 2007. Although these actions are voluntary, the Manager and its affiliates have agreed not to terminate these waivers and/or reimbursements until after December 31, 2007.

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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.

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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, reimbursement and reduction 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:

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1 Year	$	65
3 Years	$	205
5 Years	$	357
10 Years	$	798

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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, 2006, the capitalization range of the issuers comprising the Index was $1.6 billion to $456 billion. As of the same date, the weighted median market capitalization of the Fund was $56.0 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, before expenses, 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.

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With respect to approximately 20% of the Fund’s portfolio, the subadviser, under normal circumstances, will use enhanced management techniques. The subadviser’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 subadviser’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. The Fund may also sell covered call options and sell put options on the portion of the positions that are being over or underweighted or positions not replicated within the enhanced portion of the Fund. Additionally, the subadviser may purchase substitutes for securities within the Index when the subadviser 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 subadviser may invest in stocks not represented in the Index that are subject to pending cash acquisitions when the subadviser 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.

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.

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.

DERIVATIVE CONTRACTS

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Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, currencies, indices, or other assets or instruments including other derivative contracts, (each a “Reference Instrument” and collectively, “Reference Instruments”). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as “physically settled” derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as “cash settled” derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

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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.

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.

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Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund’s exposure to the risks of the Reference Instrument, 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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Payment obligations arising in connection with derivative contracts are frequently required to be secured with collateral (in the case of OTC contracts) or margin (in the case of exchange-traded contracts, as previously noted).

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The Fund may not invest in a derivative contract if it is not permitted to own, invest in, or otherwise have economic exposure to the Reference Instrument (or, in the case of a Reference Instrument that is an index, the securities or derivatives that comprise the index). The Fund may trade in the following specific types and/or combinations of derivative contracts:

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Futures Contracts

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. 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 financial futures (such as index futures).

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HYBRID INSTRUMENTS

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Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of designated securities, commodities, currencies, indices, or other assets or instruments (each a, “Valuation Instrument”). Hybrid instruments can take on many forms including, but not limited to, the following three forms: First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Valuation Instrument. Second, a hybrid instrument may also combine elements of a fixed-income security and an equity security. Third, hybrid instruments may include convertible securities with conversion terms related to a Valuation Instrument.

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Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in securities, currencies and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional securities or the Valuation Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Valuation Instrument. 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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ASSET SEGREGATION

In order to secure its obligations in connection with derivative contracts or special transactions, the Fund will either own the underlying assets, enter into offsetting transactions or set aside cash or readily marketable securities. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

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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.

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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 attempt to 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.

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Securities lending activities are subject to credit and leverage risks.

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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.

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.

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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LIQUIDITY RISKS

Liquidity risk 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.

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RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

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The Fund’s use of derivative contracts and hybrid instruments 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 and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference or Valuation Instruments 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 derivative contracts and hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, derivative contracts and hybrid instruments 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. Fifth, a common provision in over-the-counter (OTC) derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described in this prospectus or in the Fund’s SAI, such as stock market, credit, liquidity and leverage risks.

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LEVERAGE RISKS

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Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain. Investments can have these same results if their returns are based on a multiple of a specified index, security or other benchmark.

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What Do Shares Cost?

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). From time to time the Fund may purchase foreign securities that trade in foreign markets on days the NYSE is closed. The value of the Fund’s assets may change on days you cannot purchase or redeem Shares. The Fund does not charge a front-end sales charge. NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund’s current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

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The Fund generally values equity securities according to the last sale price or official closing price reported 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.

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If prices are not available from an independent pricing service, securities and derivative contracts 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 security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board of Trustees (Board). The Fund may use the fair value of a security to calculate its NAV when, for example: (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed; (2) trading in a portfolio security is suspended and not resumed prior to the normal market close; (3) a portfolio security is not traded in significant volume for a substantial period; or (4) the Fund’s Manager determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, or based on market quotations.

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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 Shares. All Share classes have different sales charges and expenses which affect their performance. Contact your financial intermediary 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 financial intermediaries. Under the Distributor’s Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

Payments to Financial Intermediaries

The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

SERVICE FEES

The Fund may pay Service Fees of up to 0.25% of average net assets to financial intermediaries 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 financial intermediaries directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial intermediaries. If a financial intermediary receives Service Fees on an account, it is not eligible to also receive Account Administration Fees on that same account.

ACCOUNT ADMINISTRATION FEES

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The Fund may pay Account Administration Fees of up to 0.25% of average net assets to banks that are not registered as broker-dealers or investment advisers for providing administrative services to the Funds and shareholders. If a financial intermediary receives Account Administration Fees on an account, it is not eligible to also receive Service Fees or Recordkeeping Fees on that same account.

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RECORDKEEPING FEES

The Fund may pay Recordkeeping Fees on an average net assets basis or on a per account per year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

NETWORKING FEES

The Fund may reimburse Networking Fees on a per account per year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Manager). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, 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.

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

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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 financial intermediaries may be subject to a smaller minimum investment amount. Keep in mind that financial intermediaries may charge you fees for their services in connection with your Share transactions.

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THROUGH A FINANCIAL INTERMEDIARY

• Establish an account with the financial intermediary; and
• Submit your purchase order to the financial intermediary 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 financial intermediary 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.

Financial intermediaries 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 State Street Bank and Trust 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 send it to:

The Federated Funds
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, send it to:

The Federated Funds

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30 Dan Road
Canton, MA 02021

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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.

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BY SYSTEMATIC INVESTMENT PROGRAM (SIP)

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

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THROUGH AN EXCHANGE

You may purchase Shares through an exchange from any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. You must meet the minimum initial investment requirement for purchasing Shares and both accounts must have identical registrations.

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 and Exchange Shares

You should redeem or exchange Shares:

• through a financial intermediary if you purchased Shares through a financial intermediary; or
• directly from the Fund if you purchased Shares directly from the Fund.

Shares of the Fund may be redeemed for cash or exchanged for shares of the same class of other Federated funds on days on which the Fund computes its NAV. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary 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 financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange 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 or exchange Shares by sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

The Federated Funds

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30 Dan Road
Canton, MA 02021

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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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program 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 Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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 for up to seven days:

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• to allow your purchase to clear (as discussed below);

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• during periods of market volatility;

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• when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets; or

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• during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

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If you request a redemption of Shares recently purchased by check (including a cashier’s check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be canceled and you will be responsible for any losses incurred by the Fund as a result of your canceled order.

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In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

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• when the NYSE is closed, other than customary weekend and holiday closings;

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• when trading on the NYSE is restricted, as determined by the SEC; or

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• in which an emergency exists, as determined by the SEC, so that disposal of the Fund’s investments or determination of its NAV is not reasonably practicable.

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

EXCHANGE PRIVILEGE

You may exchange Shares of the Fund for shares of any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. 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.

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information--Frequent Trading Policies.”

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

You will receive confirmation of purchases, redemptions and exchanges. 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.

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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. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

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If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as “undeliverable,” or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution checks.

If you purchase Shares just before the record date for 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 record date for a dividend or capital gain. Contact your financial intermediary 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 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

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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 at different rates depending on the source of dividend income. Capital gains are taxable at different rates depending upon the length of time the Fund holds its assets.

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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.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Manager may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

The Fund’s frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund’s portfolio and its performance.

The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

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Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s website at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten holdings, recent purchase and sale transactions and a percentage breakdown of the portfolio by sector.

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To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

You may also access from the “Products” section of the website portfolio information as of the end of the Fund’s fiscal quarters. The Fund’s annual and semi-annual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

Who Manages the Fund?

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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 the subadviser, BlackRock Investment Management, LLC (BlackRock or the “Subadviser”). BlackRock began managing the portfolio as of the close of business September 29, 2006.

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BlackRock is a wholly owned subsidiary of BlackRock, Inc. On September 29, 2006, BlackRock, Inc. consummated a transaction with Merrill Lynch & Co., Inc. whereby Merrill Lynch & Co., Inc.’s investment management business combined with that of BlackRock to create a new independent company that is one of the world’s largest asset management firms with over $1 trillion in assets under management. The combined company has over 4,500 employees in 18 countries.

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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 Subadviser and the continued review and evaluation of the Subadviser’s performance. The address of the Manager and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Manager has delegated daily management of all of the Fund assets to BlackRock, who is paid by the Manager and not by the Fund. The Subadviser has complete discretion, subject to the Manager’s oversight, to purchase and sell portfolio securities for the Fund. The Subadviser’s address is P.O. Box 9011, Princeton, NJ 08543-9011.

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The Manager and other subsidiaries of Federated advise approximately 136 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $213 billion in assets as of December 31, 2005. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,305 employees. Federated provides investment products to more than 5,500 investment professionals and institutions.

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PORTFOLIO MANAGEMENT INFORMATION

John W. Harris

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John W. Harris has been the Fund’s Portfolio Manager since January 2003. He is Vice President of the Trust. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Fund’s Manager in December 1998. In January 2000, Mr. Harris became a Vice President of the Fund’s Manager. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh. Mr. Harris is responsible for overseeing the subadviser. In such a capacity, Mr. Harris is involved in monitoring and evaluating the performance of the subadviser.

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Leon Roisenberg, Debra L. Jelilian, Jeffrey L. Russo, CFA

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Subject to the oversight of the Manager, BlackRock Investment Management’s Quantitative Index Management Team is responsible for the day-to-day management of the Fund. The Fund is managed by Leon Roisenberg, Debra L. Jelilian and Jeffrey L. Russo, CFA, who are members of the Quantitative Index Management Team. The team is jointly responsible for the day-to-day management of the Fund’s portfolio. Mr. Roisenberg is a Director of and a portfolio manager with BlackRock. Prior to joining BlackRock^® in 2006, Mr. Roisenberg was a Director of Merrill Lynch Investment Managers, L.P., (“MLIM”), an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. from 2001 until 2006. He has been a member of the Funds’ management team since 2001. Prior to joining MLIM, Mr. Roisenberg was employed at J.P. Morgan Investment Management. He has seventeen years’ experience in investments. Mr. Russo is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Mr. Russo was a Director of MLIM from 2004 to 2006, and was a Vice President there from 1999 to 2004. He has been a member of the Funds’ management team since 2000. Mr. Russo has eleven years’ experience as a portfolio manager and trader. Ms. Jelilian is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Ms. Jelilian was a Director of MLIM from 1999 to 2006, and has been a member of the Funds’ management team since 2000. Ms. Jelilian has fourteen years’ experience in investing and in managing index investments.

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The Fund’s SAI provides additional information about the Portfolio Managers’ compensation, management of other accounts, and ownership of securities in the Fund.

MANAGEMENT FEES

The Manager receives an annual management 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.

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A discussion of the Board’s review of the Fund’s investment advisory contract is available in the Fund’s Annual Report dated October 31, 2006.

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Legal Proceedings

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Since October 2003, Federated and related entities (collectively, “Federated”), and various Federated funds (“Funds”), have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual 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. These lawsuits began to be filed shortly after Federated’s first public announcement that it had received requests for information on shareholder trading activities in the Funds from the SEC, the Office of the New York State Attorney General (“NYAG”), and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. Specifically, the SEC and NYAG settled proceedings against three Federated subsidiaries involving undisclosed market timing arrangements and late trading. The SEC made findings: that Federated Investment Management Company (“FIMC”), an SEC-registered investment adviser to various Funds, and Federated Securities Corp., an SEC-registered broker-dealer and distributor for the Funds, violated provisions of the Investment Advisers Act and Investment Company Act by approving, but not disclosing, three market timing arrangements, or the associated conflict of interest between FIMC and the funds involved in the arrangements, either to other fund shareholders or to the funds’ board; and that Federated Shareholder Services Company, formerly an SEC-registered transfer agent, failed to prevent a customer and a Federated employee from late trading in violation of provisions of the Investment Company Act. The NYAG found that such conduct violated provisions of New York State law. Federated entered into the settlements without admitting or denying the regulators’ findings. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay disgorgement and a civil money penalty in the aggregate amount of an additional $72 million and, among other things, agreed that it would not serve as investment adviser to any registered investment company unless: (i) at least 75% of the fund’s directors are independent of Federated; (ii) the chairman of each such fund is independent of Federated; (iii) no action may be taken by the fund’s board or any committee thereof unless approved by a majority of the independent trustees of the fund or committee, respectively; and (iv) the fund appoints a “senior officer” who reports to the independent trustees and is responsible for monitoring compliance by the fund with applicable laws and fiduciary duties and for managing the process by which management fees charged to a fund are approved. The settlements are described in Federated’s announcement which, along with previous press releases and related communications on those matters, is available in the “About Us” section of Federated’s website at FederatedInvestors.com.

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Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees.

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The Board of the Funds has retained the law firm of Dickstein Shapiro LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and intend to defend this litigation. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys’ fees, and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

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Financial Information

FINANCIAL HIGHLIGHTS

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.

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This information has been audited by Ernst & Young LLP, an independent registered public accounting firm, 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	2006			2005			2004			2003			2002
Net Asset Value, Beginning of Period	$24.47			$22.93			$21.29			$17.97			$21.51
Income From Investment Operations:
Net investment income	0.42			0.43			0.32			0.28			0.26
Net realized and unrealized gain (loss) on investments and futures contracts	3.40			1.53			1.63			3.31			(3.55	)
TOTAL FROM INVESTMENT OPERATIONS	3.82			1.96			1.95			3.59			(3.29	)
Less Distributions:
Distributions from net investment income	(0.41	)		(0.42	)		(0.31	)		(0.27	)		(0.25	)
Distributions from net realized gain on investments and futures contracts	(0.52	)		--			--			--			--
TOTAL DISTRIBUTIONS	(0.93	)		(0.42	)		(0.31	)		(0.27	)		(0.25	)
Net Asset Value, End of Period	$27.36			$24.47			$22.93			$21.29			$17.97
Total Return1	15.99	%		8.58	%		9.21	%		20.18	%		(15.41	)%
Ratios to Average Net Assets:
Net expenses	0.35	%		0.35	%		0.35	%		0.35	%		0.34	%
Net investment income	1.63	%		1.76	%		1.35	%		1.44	%		1.22	%
Expense waiver/reimbursement2	0.17	%		0.28	%		0.28	%		0.29	%		0.29	%
Supplemental Data:
Net assets, end of period (000 omitted)	$660,249		$628,948			$705,040			$962,928			$906,710
Portfolio turnover	42	%		30	%		19	%		24	%		18	%

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1 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year, if any, are not annualized.

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

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated October 31, 2006, which can be obtained free of charge.

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Appendix A: Hypothetical Investment and Expense Information

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The following chart provides additional hypothetical information about the effect of the Fund’s expenses, including investment advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year period. The chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. The chart also assumes that the Fund’s annual expense ratio stays the same throughout the 10-year period and that all dividends and distributions are reinvested. The annual expense ratio used in the chart is the same as stated in the “Fees and Expenses” table of this prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the “Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

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FEDERATED MAX-CAP INDEX FUND: INSTITUTIONAL SHARES
ANNUAL EXPENSE RATIO: 0.64%
MAXIMUM FRONT-END SALES CHARGE: 0.00%

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Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$65.40	$10,436.00
2	$10,436.00	$521.80	$10,957.80	$68.25	$10,891.01
3	$10,891.01	$544.55	$11,435.56	$71.22	$11,365.86
4	$11,365.86	$568.29	$11,934.15	$74.33	$11,861.41
5	$11,861.41	$593.07	$12,454.48	$77.57	$12,378.57
6	$12,378.57	$618.93	$12,997.50	$80.95	$12,918.28
7	$12,918.28	$645.91	$13,564.19	$84.48	$13,481.52
8	$13,481.52	$674.08	$14,155.60	$88.16	$14,069.31
9	$14,069.31	$703.47	$14,772.78	$92.01	$14,682.73
10	$14,682.73	$734.14	$15,416.87	$96.02	$15,322.90
Cumulative		$6,104.24		$798.39

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A Statement of Additional Information (SAI) dated December 31, 2006, 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. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund at 1-800-341-7400.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at FederatedInvestors.com.

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 website at 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.

Federated Investors
World-Class Investment Manager

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

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2006 © Federated Investors, Inc.

Cusip 31420E106

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0032104A-IS (12/06)

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Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Max-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

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December 31, 2006

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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 500 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

CONTENTS

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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?	8
What are the Specific Risks of Investing in the Fund?	11
What Do Shares Cost?	13
How is the Fund Sold?	15
Payments to Financial Intermediaries	15
How to Purchase Shares	17
How to Redeem and Exchange Shares	19
Account and Share Information	23
Who Manages the Fund?	26
Legal Proceedings	28
Financial Information	29
Appendix A: Hypothetical Investment and Expense Information	31

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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 (the “Board”) 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.
• Leverage Risks. Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain.
• Liquidity Risks. Liquidity risk 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.

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• Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund’s use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or in the Fund’s Statement of Additional Information (SAI), such as stock market, credit, liquidity and leverage risks.

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

Risk/Return Bar Chart and Table

The 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.

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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.

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The Fund’s Institutional Service Shares total return for the nine-month period from January 1, 2006 to
September 30, 2006 was 8.09%.

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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).

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Average Annual Total Return Table

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Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund’s 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, that measures the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 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.

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(For the Periods Ended December 31, 2005)

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	1 Year	5 Years	10 Years
Institutional Service Shares:
Return Before Taxes	4.44%	(0.07)%	8.35%
Return After Taxes on Distributions1	3.67%	(0.43)%	7.72%
Return After Taxes on Distributions and Sale of Fund Shares1	3.31%	(0.21)%	7.04%
S&P 500	4.92%	0.55%	9.07%

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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 MAX-CAP INDEX FUND

FEES AND EXPENSES

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

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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)	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 and Reimbursement)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%
Other Expenses4	0.34%
Total Annual Fund Operating Expenses5	0.94%
1 The percentages shown are based on expenses for the entire fiscal year ended October 31, 2006. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so (except as discussed in Note 5, below), the Manager and distributor waived and/or reimbursed certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2006.
Total Waivers and Reimbursement of Fund Expenses	0.29%
Total Actual Annual Fund Operating Expenses (after waivers and reimbursement)	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 0.28% for the fiscal year ended October 31, 2006.
3 The distributor has voluntarily waived a portion of its fee. The distributor can terminate this voluntary waiver 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, 2006.
4 Includes a shareholder service fee/account administration fee which is used to compensate intermediaries for shareholder services or account administrative services. Also includes a recordkeeping fee which is used to compensate intermediaries for recordkeeping services. Please see “Payments to Financial Intermediaries” herein. The Manager voluntarily reimbursed certain operating expenses. The Manager can terminate this voluntary reimbursement at any time. Total other expenses paid by the Fund’s Institutional Service Shares (after the voluntary reimbursement) were 0.32% for the fiscal year ended October 31, 2006.
5 The Manager and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses (including the distribution (12b-1) fee) so that the total operating expenses paid by the Fund's Institutional Service Shares (after the voluntary waivers and reimbursements) will not exceed 0.65% for the fiscal year ending October 31, 2007. Although these actions are voluntary, the Manager and its affiliates have agreed not to terminate these waivers and/or reimbursements until after December 31, 2007.

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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.

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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 and reimbursement 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

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, 2006, the capitalization range of the issuers comprising the Index was $1.6 billion to $456 billion. As of the same date, the weighted median market capitalization of the Fund was $56.0 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, before expenses, 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.

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With respect to approximately 20% of the Fund’s portfolio, the subadviser, under normal circumstances, will use enhanced management techniques. The subadviser’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 subadviser’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. The Fund may also sell covered call options and sell put options on the portion of the positions that are being over or underweighted or positions not replicated within the enhanced portion of the Fund. Additionally, the subadviser may purchase substitutes for securities within the Index when the subadviser 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 subadviser may invest in stocks not represented in the Index that are subject to pending cash acquisitions when the subadviser 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.

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.

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.

DERIVATIVE CONTRACTS

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Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, currencies, indices, or other assets or instruments including other derivative contracts, (each a “Reference Instrument” and collectively, “Reference Instruments”). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as “physically settled” derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as “cash settled” derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

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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.

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.

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Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund’s exposure to the risks of the Reference Instrument, 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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Payment obligations arising in connection with derivative contracts are frequently required to be secured with collateral (in the case of OTC contracts) or margin (in the case of exchange-traded contracts, as previously noted).

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The Fund may not invest in a derivative contract if it is not permitted to own, invest in, or otherwise have economic exposure to the Reference Instrument (or, in the case of a Reference Instrument that is an index, the securities or derivatives that comprise the index). The Fund may trade in the following specific types and/or combinations of derivative contracts:

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Futures Contracts

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. 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 financial futures (such as index futures).

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HYBRID INSTRUMENTS

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Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of designated securities, commodities, currencies, indices, or other assets or instruments (each a, “Valuation Instrument”). Hybrid instruments can take on many forms including, but not limited to, the following three forms: First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Valuation Instrument. Second, a hybrid instrument may also combine elements of a fixed-income security and an equity security. Third, hybrid instruments may include convertible securities with conversion terms related to a Valuation Instrument.

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Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in securities, currencies and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional securities or the Valuation Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Valuation Instrument. 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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ASSET SEGREGATION

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In order to secure its obligations in connection with derivative contracts or special transactions, the Fund will either own the underlying assets, enter into offsetting transactions or set aside cash or readily marketable securities. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

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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.

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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 attempt to 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.

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Securities lending activities are subject to credit and leverage risks.

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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.

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.

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.

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RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

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The Fund’s use of derivative contracts and hybrid instruments 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 and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference or Valuation Instruments 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 derivative contracts and hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, derivative contracts and hybrid instruments 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. Fifth, a common provision in over-the-counter (OTC) derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described in this prospectus or in the Fund’s SAI, such as stock market, credit, liquidity and leverage risks.

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CREDIT RISKS

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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.

LIQUIDITY RISKS

Liquidity risk 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.

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LEVERAGE RISKS

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Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain. Investments can have these same results if their returns are based on a multiple of a specified index, security or other benchmark.

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What Do Shares Cost?

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). From time to time the Fund may purchase foreign securities that trade in foreign markets on days the NYSE is closed. The value of the Fund’s assets may change on days you cannot purchase or redeem Shares. The Fund does not charge a front-end sales charge. NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund’s current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

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The Fund generally values equity securities according to the last sale price or official closing price reported 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.

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If prices are not available from an independent pricing service, securities and derivative contracts 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 security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board of Trustees (Board). The Fund may use the fair value of a security to calculate its NAV when, for example: (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed; (2) trading in a portfolio security is suspended and not resumed prior to the normal market close; (3) a portfolio security is not traded in significant volume for a substantial period; or (4) the Fund’s Manager determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, or based on market quotations.

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How is the Fund Sold?

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 sales charges and expenses which affect their performance. Contact your financial intermediary or call 1-800-341-7400 for more information concerning the other classes.

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 financial intermediaries. Under the Distributor’s Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

Payments to Financial Intermediaries

The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

RULE 12B-1 FEES

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees of up to 0.30% of average net assets to the Distributor for the sale, distribution, administration and customer servicing of the Fund’s Institutional Service Shares. When the Distributor receives Rule 12b-1 Fees, it may pay some or all of them to financial intermediaries whose customers purchase 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.

SERVICE FEES

The Fund may pay Service Fees of up to 0.25% of average net assets to financial intermediaries 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 financial intermediaries directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial intermediaries. If a financial intermediary receives Service Fees on an account, it is not eligible to also receive Account Administration Fees on that same account.

ACCOUNT ADMINISTRATION FEES

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The Fund may pay Account Administration Fees of up to 0.25% of average net assets to banks that are not registered as broker-dealers or investment advisers for providing administrative services to the Funds and shareholders. If a financial intermediary receives Account Administration Fees on an account, it is not eligible to also receive Service Fees or Recordkeeping Fees on that same account.

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RECORDKEEPING FEES

The Fund may pay Recordkeeping Fees on an average net assets basis or on a per account per year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

NETWORKING FEES

The Fund may reimburse Networking Fees on a per account per year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Manager). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Rule 12b-1 Plan and/or Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, 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.

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

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An institutional investor’s minimum investment is calculated by combining all accounts it maintains with the Fund. Accounts established through financial intermediaries may be subject to a smaller minimum investment amount. Keep in mind that financial intermediaries may charge you fees for their services in connection with your Share transactions.

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THROUGH A FINANCIAL INTERMEDIARY

• Establish an account with the financial intermediary; and
• Submit your purchase order to the financial intermediary 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 financial intermediary 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.

Financial intermediaries 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 State Street Bank and Trust 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 send it to:

The Federated Funds
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, send it to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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.

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BY SYSTEMATIC INVESTMENT PROGRAM (SIP)

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

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THROUGH AN EXCHANGE

You may purchase Shares through an exchange from any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. You must meet the minimum initial investment requirement for purchasing Shares and both accounts must have identical registrations.

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 and Exchange Shares

You should redeem or exchange Shares:

• through a financial intermediary if you purchased Shares through a financial intermediary; or
• directly from the Fund if you purchased Shares directly from the Fund.

Shares of the Fund may be redeemed for cash or exchanged for shares of the same class of other Federated funds on days on which the Fund computes its NAV. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary 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 financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange 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 or exchange Shares by sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program 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 Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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

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

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• to allow your purchase to clear (as discussed below);

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• during periods of market volatility;

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• when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets; or

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• during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

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If you request a redemption of Shares recently purchased by check (including a cashier’s check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be cancelled and you will be responsible for any losses incurred by the Fund as a result of your cancelled order.

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In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

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• when the NYSE is closed, other than customary weekend and holiday closings;

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• when trading on the NYSE is restricted, as determined by the SEC; or

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• in which an emergency exists, as determined by the SEC, so that disposal of the Fund’s investments or determination of its NAV is not reasonably practicable.

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

EXCHANGE PRIVILEGE

You may exchange Shares of the Fund for shares of any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. 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.

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information--Frequent Trading Policies.”

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

You will receive confirmation of purchases, redemptions and exchanges. 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.

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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. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

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If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as “undeliverable,” or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution checks.

If you purchase Shares just before the record date for 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 record date for a dividend or capital gain. Contact your financial intermediary 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 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

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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 at different rates depending on the source of dividend income. Capital gains are taxable at different rates depending upon the length of time the Fund holds its assets.

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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.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

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The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Adviser may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

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The Fund’s frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund’s portfolio and its performance.

The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

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Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s website at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten holdings, recent purchase and sale transactions and a percentage breakdown of the portfolio by sector.

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To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

You may also access from the “Products” section of the website portfolio information as of the end of the Fund’s fiscal quarters. The Fund’s annual and semi-annual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

Who Manages the Fund?

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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 the subadviser, BlackRock Investment Management, LLC (BlackRock or the “Subadviser”). BlackRock began managing the portfolio as of the close of business September 29, 2006.

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BlackRock is a wholly owned subsidiary of BlackRock, Inc. On September 29, 2006, BlackRock, Inc. consummated a transaction with Merrill Lynch & Co., Inc. whereby Merrill Lynch & Co., Inc.’s investment management business combined with that of BlackRock to create a new independent company that is one of the world’s largest asset management firms with over $1 trillion in assets under management. The combined company has over 4,500 employees in 18 countries.

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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 Subadviser and the continued review and evaluation of the Subadviser’s performance. The address of the Manager and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Manager has delegated daily management of all of the Fund assets to BlackRock, who is paid by the Manager and not by the Fund. The Subadviser has complete discretion, subject to the Manager’s oversight, to purchase and sell portfolio securities for the Fund. The Subadviser’s address is P.O. Box 9011, Princeton, NJ 08543-9011.

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The Manager and other subsidiaries of Federated advise approximately 136 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $213 billion in assets as of December 31, 2005. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,305 employees. Federated provides investment products to more than 5,500 investment professionals and institutions.

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PORTFOLIO MANAGEMENT INFORMATION

John W. Harris

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John W. Harris has been the Fund’s Portfolio Manager since January 2003. He is Vice President of the Trust. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Fund’s Manager in December 1998. In January 2000, Mr. Harris became a Vice President of the Fund’s Manager. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh. Mr. Harris is responsible for overseeing the subadviser. In such a capacity, Mr. Harris is involved in monitoring and evaluating the performance of the subadviser.

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Leon Roisenberg, Debra L. Jelilian, Jeffrey L. Russo, CFA

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Subject to the oversight of the Manager, BlackRock Investment Management’s Quantitative Index Management Team is responsible for the day-to-day management of the Fund. The Fund is managed by Leon Roisenberg, Debra L. Jelilian and Jeffrey L. Russo, CFA, who are members of the Quantitative Index Management Team. The team is jointly responsible for the day-to-day management of the Fund’s portfolio. Mr. Roisenberg is a Director of and a portfolio manager with BlackRock. Prior to joining BlackRock^® in 2006, Mr. Roisenberg was a Director of Merrill Lynch Investment Managers, L.P., (“MLIM”), an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. from 2001 until 2006. He has been a member of the Funds’ management team since 2001. Prior to joining MLIM, Mr. Roisenberg was employed at J.P. Morgan Investment Management. He has seventeen years’ experience in investments. Mr. Russo is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Mr. Russo was a Director of MLIM from 2004 to 2006, and was a Vice President there from 1999 to 2004. He has been a member of the Funds’ management team since 2000. Mr. Russo has eleven years’ experience as a portfolio manager and trader. Ms. Jelilian is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Ms. Jelilian was a Director of MLIM from 1999 to 2006, and has been a member of the Funds’ management team since 2000. Ms. Jelilian has fourteen years’ experience in investing and in managing index investments.

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The Fund’s SAI provides additional information about the Portfolio Managers’ compensation, management of other accounts, and ownership of securities in the Fund.

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MANAGEMENT FEES

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The Manager receives an annual management 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.

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A discussion of the Board’s review of the Fund’s investment advisory contract is available in the Fund’s Annual Report dated October 31, 2006.

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Legal Proceedings

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Since October 2003, Federated and related entities (collectively, “Federated”), and various Federated funds (“Funds”), have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual 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. These lawsuits began to be filed shortly after Federated’s first public announcement that it had received requests for information on shareholder trading activities in the Funds from the SEC, the Office of the New York State Attorney General (“NYAG”), and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. Specifically, the SEC and NYAG settled proceedings against three Federated subsidiaries involving undisclosed market timing arrangements and late trading. The SEC made findings: that Federated Investment Management Company (“FIMC”), an SEC-registered investment adviser to various Funds, and Federated Securities Corp., an SEC-registered broker-dealer and distributor for the Funds, violated provisions of the Investment Advisers Act and Investment Company Act by approving, but not disclosing, three market timing arrangements, or the associated conflict of interest between FIMC and the funds involved in the arrangements, either to other fund shareholders or to the funds’ board; and that Federated Shareholder Services Company, formerly an SEC-registered transfer agent, failed to prevent a customer and a Federated employee from late trading in violation of provisions of the Investment Company Act. The NYAG found that such conduct violated provisions of New York State law. Federated entered into the settlements without admitting or denying the regulators’ findings. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay disgorgement and a civil money penalty in the aggregate amount of an additional $72 million and, among other things, agreed that it would not serve as investment adviser to any registered investment company unless: (i) at least 75% of the fund’s directors are independent of Federated; (ii) the chairman of each such fund is independent of Federated; (iii) no action may be taken by the fund’s board or any committee thereof unless approved by a majority of the independent trustees of the fund or committee, respectively; and (iv) the fund appoints a “senior officer” who reports to the independent trustees and is responsible for monitoring compliance by the fund with applicable laws and fiduciary duties and for managing the process by which management fees charged to a fund are approved. The settlements are described in Federated’s announcement which, along with previous press releases and related communications on those matters, is available in the “About Us” section of Federated’s website at FederatedInvestors.com.

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Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees.

The Board of the Funds has retained the law firm of Dickstein Shapiro LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and intend to defend this litigation. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys’ fees, and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

Financial Information

FINANCIAL HIGHLIGHTS

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.

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This information has been audited by Ernst & Young LLP, an independent registered public accounting firm, 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		2006			2005			2004			2003			2002
Net Asset Value, Beginning of Period		$24.42			$22.88			$21.24			$17.93			$21.46
Income From Investment Operations:
Net investment income		0.34			0.35			0.23			0.21			0.19
Net realized and unrealized gain (loss) on investments and futures contracts		3.40			1.54			1.65			3.32			(3.53	)
TOTAL FROM INVESTMENT OPERATIONS		3.74			1.89			1.88			3.53			(3.34	)
Less Distributions:
Distributions from net investment income		(0.34	)		(0.35	)		(0.24	)		(0.22	)		(0.19	)
Distributions from net realized gain on investments and futures contracts		(0.52	)		--			--			--			--
TOTAL DISTRIBUTIONS		(0.86	)		(0.35	)		(0.24	)		(0.22	)		(0.19	)
Net Asset Value, End Of Period		$27.30			$24.42			$22.88			$21.24			$17.93
Total Return1		15.63	%		8.27	%		8.89	%		19.84	%		(15.67	)%
Ratios to Average Net Assets:
Net expenses		0.65	%		0.65	%		0.65	%		0.65	%		0.64	%
Net investment income		1.34	%		1.45	%		1.05	%		1.14	%		0.92	%
Expense waiver/reimbursement2		0.29	%		0.29	%		0.28	%		0.29	%		0.29	%
Supplemental Data:
Net assets, end of period (000 omitted)	$526,622			$526,555			$556,243			$605,437			$425,421
Portfolio turnover		42	%		30	%		19	%		24	%		18	%

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1 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year, if any, are not annualized.

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

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated October 31, 2006, which can be obtained free of charge.

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Appendix A: Hypothetical Investment and Expense Information

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The following chart provides additional hypothetical information about the effect of the Fund’s expenses, including investment advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year period. The chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. The chart also assumes that the Fund’s annual expense ratio stays the same throughout the 10-year period and that all dividends and distributions are reinvested. The annual expense ratio used in the chart is the same as stated in the “Fees and Expenses” table of this prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the “Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

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FEDERATED MAX-CAP INDEX FUND: INSTITUTIONAL SERVICE SHARES
ANNUAL EXPENSE RATIO: 0.94%
MAXIMUM FRONT-END SALES CHARGE: 0.00%

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Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$95.91	$10,406.00
2	$10,406.00	$520.30	$10,926.30	$99.80	$10,828.48
3	$10,828.48	$541.42	$11,369.90	$103.85	$11,268.12
4	$11,268.12	$563.41	$11,831.53	$108.07	$11,725.61
5	$11,725.61	$586.28	$12,311.89	$112.46	$12,201.67
6	$12,201.67	$610.08	$12,811.75	$117.02	$12,697.06
7	$12,697.06	$634.85	$13,331.91	$121.78	$13,212.56
8	$13,212.56	$660.63	$13,873.19	$126.72	$13,748.99
9	$13,748.99	$687.45	$14,436.44	$131.86	$14,307.20
10	$14,307.20	$715.36	$15,022.56	$137.22	$14,888.07
Cumulative		$6,019.78		$1,154.69

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A Statement of Additional Information (SAI) dated December 31, 2006, 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. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund
at 1-800-341-7400.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at FederatedInvestors.com.

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 website at 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.

Federated Investors
World-Class Investment Manager

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

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Federated is a registered mark of Federated Investors, Inc.
2006 © Federated Investors, Inc.

Investment Company Act File No. 811-6061

Cusip 31420E403

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0032104A-SS (12/06)

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Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Max-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

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December 31, 2006

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CLASS K 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 500 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

CONTENTS

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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?	11
What Do Shares Cost?	12
How is the Fund Sold?	14
Payments to Financial Intermediaries	14
How to Purchase Shares	16
How to Redeem and Exchange Shares	18
Account and Share Information	21
Who Manages the Fund?	24
Legal Proceedings	27
Financial Information	28
Appendix A: Hypothetical Investment and Expense Information	30

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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 (the “Board”) 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.
• Leverage Risks. Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain.
• Liquidity Risks. Liquidity risk 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.

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• Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund’s use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or in the Fund’s Statement of Additional Information (SAI), such as stock market, credit, liquidity and leverage risks.

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

Risk/Return Bar Chart and Table

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The Fund’s Class K Shares commenced operations on April 8, 2003. The Fund offers three other classes of shares: Institutional Shares, Institutional Service Shares and Class C Shares. For the period prior to the commencement of operations of Class K Shares, the performance information shown in the bar chart below is for the Fund’s Institutional Shares, adjusted to reflect expenses of Class K Shares. 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 K 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.

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

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The Fund’s Class K Shares total return for the nine-month period from January 1, 2006 to September 30, 2006 was 7.70%.

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Within the period shown in the bar chart, the Fund’s Class K Shares highest quarterly return was 20.99% (quarter ended December 31, 1998). Its lowest quarterly return was (17.53)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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As previously discussed, the Fund’s Class K Shares commenced operations on April 8, 2003. Accordingly, for the period prior to the commencement of operations, the performance information shown in the Average Annual Total Return Table is for the Fund’s Institutional Shares, adjusted to reflect the expenses of the Class K Shares. Return Before Taxes is shown. In addition, Return After Taxes is shown for the Fund’s Class K 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 that measures the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 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.

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(For the periods ended December 31, 2005)

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	1 Year	5 Years	10 Years
Class K Shares:
Return Before Taxes	3.98%	(0.51)%	7.88%
Return After Taxes on Distributions1	3.38%	(0.75)%	7.42%
Return After Taxes on Distributions and Sale of Fund Shares1	3.01%	(0.52)%	6.72%
S&P 500	4.92%	0.55%	9.07%

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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 MAX-CAP INDEX FUND

FEES AND EXPENSES

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

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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)	None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as applicable)	None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of offering price)	None
Redemption Fee (as a percentage of amount redeemed, if applicable)	None
Exchange Fee	None
Annual Fund Operating Expenses (Before Waiver)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee2	0.30%
Distribution (12b-1) Fee	0.50%
Other Expenses3	0.32%
Total Annual Fund Operating Expenses4	1.12%
1 The percentages shown are based on expenses for the entire fiscal year ended October 31, 2006. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so (except as discussed in Note 4, below), 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, 2006.
Total Waiver of Fund Expenses	0.02%
Total Actual Annual Fund Operating Expenses (after waiver)	1.10%
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 0.28% for the fiscal year ended October 31, 2006.
3 Includes a recordkeeping fee which is used to compensate intermediaries for record keeping services. Please see “Payments to Financial Intermediaries” herein.
4 The Manager and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses (including the distribution (12b-1) fee) so that the total operating expenses paid by the Fund's Class K Shares (after the voluntary waivers and reimbursements) will not exceed 1.10% for the fiscal year ending October 31, 2007. Although these actions are voluntary, the Manager and its affiliates have agreed not to terminate these waivers and/or reimbursements until after December 31, 2007.

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EXAMPLE

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

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The Example assumes that you invest $10,000 in the Fund’s Class K 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 Class K Shares operating expenses are before 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:

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1 Year	$114
3 Years	$356
5 Years	$617
10 Years	$1,363

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, 2006 the capitalization range of the issuers comprising the Index was $1.6 billion to $456 billion. As of the same date, the weighted median market capitalization of the Fund was $56.0 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, before expenses, 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.

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With respect to approximately 20% of the Fund’s portfolio, the subadviser, under normal circumstances, will use enhanced management techniques. The subadviser’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 subadviser’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. The Fund may also sell covered call options and sell put options on the portion of the positions that are being over or underweighted or positions not replicated within the enhanced portion of the Fund. Additionally, the subadviser may purchase substitutes for securities within the Index when the subadviser 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 subadviser may invest in stocks not represented in the Index that are subject to pending cash acquisitions when the subadviser 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.

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.

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.

DERIVATIVE CONTRACTS

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Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, currencies, indices, or other assets or instruments including other derivative contracts, (each a “Reference Instrument” and collectively, “Reference Instruments”). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as “physically settled” derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as “cash settled” derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

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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.

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.

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Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund’s exposure to the risks of the Reference Instrument, 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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Payment obligations arising in connection with derivative contracts are frequently required to be secured with collateral (in the case of OTC contracts) or margin (in the case of exchange-traded contracts, as previously noted).

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The Fund may not invest in a derivative contract if it is not permitted to own, invest in, or otherwise have economic exposure to the Reference Instrument (or, in the case of a Reference Instrument that is an index, the securities or derivatives that comprise the index). The Fund may trade in the following specific types and/or combinations of derivative contracts:

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Futures Contracts

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. 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 financial futures (such as index futures).

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HYBRID INSTRUMENTS

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Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of designated securities, commodities, currencies, indices, or other assets or instruments (each a, “Valuation Instrument”). Hybrid instruments can take on many forms including, but not limited to, the following three forms: First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Valuation Instrument. Second, a hybrid instrument may also combine elements of a fixed-income security and an equity security. Third, hybrid instruments may include convertible securities with conversion terms related to a Valuation Instrument.

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Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in securities, currencies and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional securities or the Valuation Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Valuation Instrument. 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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ASSET SEGREGATION

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In order to secure its obligations in connection with derivative contracts or special transactions, the Fund will either own the underlying assets, enter into offsetting transactions or set aside cash or readily marketable securities. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

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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.

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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 attempt to 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.

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Securities lending activities are subject to credit and leverage risks.

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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.

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.

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.

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RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

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The Fund’s use of derivative contracts and hybrid instruments 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 and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference or Valuation Instruments 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 derivative contracts and hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, derivative contracts and hybrid instruments 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. Fifth, a common provision in over-the-counter (OTC) derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described in this prospectus or in the Fund’s SAI, such as stock market, credit, liquidity and leverage risks.

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CREDIT RISKS

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

LEVERAGE RISKS

Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain. Investments can have these same results if their returns are based on a multiple of a specified index, security or other benchmark.

LIQUIDITY RISKS

Liquidity risk 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.

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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). From time to time the Fund may purchase foreign securities that trade in foreign markets on days the NYSE is closed. The value of the Fund’s assets may change on days you cannot purchase or redeem Shares. The Fund does not charge a front-end sales charge. NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund’s current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

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The Fund generally values equity securities according to the last sale price or official closing price reported 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.

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If prices are not available from an independent pricing service, securities and derivatives contracts 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 security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board of Trustees (Board). The Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Fund’s Manager determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, or based on market quotations.

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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 Class K Shares. All Share classes have different sales charges and other expenses which affect their performance. Contact your financial intermediary 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 generally to 401(k) plans, 457 plans, employer sponsored 403(b) plans, profit sharing and money purchase pension plans, defined benefit plans and non-qualified deferred compensation plans and IRA Rollovers from such plans, directly or through financial intermediaries. Class K Shares are generally available only to retirement plans where plan level omnibus accounts are held on the books of the Fund. Under the Distributor’s Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

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Payments to Financial Intermediaries

The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

RULE 12B-1 FEES

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees of up to 0.50% of average net assets to the Distributor for the sale, distribution, administration and customer servicing of the Fund’s Class K Shares. When the Distributor receives Rule 12b-1 Fees, it may pay some or all of them to financial intermediaries whose customers purchase 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.

RECORDKEEPING FEES

The Fund may pay Recordkeeping Fees on an average net assets basis or on a per account per year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

NETWORKING FEES

The Fund may reimburse Networking Fees on a per account per year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Manager). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Rule 12b-1 Plan and/or Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, 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.

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The minimum initial and subsequent investment amounts for retirement plans are $250 and $100, respectively.

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An retirement plan’s minimum investment is calculated by combining all accounts it maintains with the Fund. Accounts established through financial intermediaries may be subject to a smaller minimum investment amount. Keep in mind that financial intermediaries may charge you fees for their services in connection with your Share transactions.

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THROUGH A FINANCIAL INTERMEDIARY

• Establish an account with the financial intermediary; and
• Submit your purchase order to the financial intermediary 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 financial intermediary 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.

Financial intermediaries 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 State Street Bank and Trust 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 send it to:

The Federated Funds
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, send it to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 financial intermediary. The minimum investment amount for SIPs is $50.

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 and Exchange Shares

You should redeem or exchange Shares:

• through a financial intermediary if you purchased Shares through a financial intermediary; or
• directly from the Fund if you purchased Shares directly from the Fund.

Shares of the Fund may be redeemed for cash or exchanged for shares of the same class of other Federated funds on days on which the Fund computes its NAV. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary 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 financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange 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 or exchange Shares by sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program 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 Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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 for up to seven days:

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• to allow your purchase to clear (as discussed below);

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• during periods of market volatility;

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• when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets; or

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• during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

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If you request a redemption of Shares recently purchased by check (including a cashier’s check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be cancelled and you will be responsible for any losses incurred by the Fund as a result of your cancelled order.

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In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

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• when the NYSE is closed, other than customary weekend and holiday closings;

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• when trading on the NYSE is restricted, as determined by the SEC; or

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• in which an emergency exists, as determined by the SEC, so that disposal of the Fund’s investments or determination of its NAV is not reasonably practicable.

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

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.

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information--Frequent Trading Policies.”

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 financial intermediary 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.

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 investing, dividends and capital gains paid.

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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.

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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. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

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If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as “undeliverable,” or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution checks.

If you purchase Shares just before the record date for 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 record date for a dividend or capital gain. Contact your financial intermediary or the Fund for information concerning when dividends and capital gains will be paid.

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ACCOUNTS WITH LOW BALANCES

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Due to the high cost of maintaining accounts with low balances, 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.

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TAX INFORMATION

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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 at different rates depending on the source of dividend income. Capital gains are taxable at different rates depending upon the length of time the Fund holds its assets.

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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.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

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The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Adviser may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

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The Fund’s frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund’s portfolio and its performance.

The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

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Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s website at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten holdings, recent purchase and sale transactions and a percentage breakdown of the portfolio by sector.

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To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

You may also access from the “Products” section of the website portfolio information as of the end of the Fund’s fiscal quarters. The Fund’s annual and semiannual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

Who Manages the Fund?

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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 the subadviser, BlackRock Investment Management, LLC (BlackRock or the “Subadviser”). BlackRock began managing the portfolio as of the close of business September 29, 2006.

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BlackRock is a wholly owned subsidiary of BlackRock, Inc. On September 29, 2006, BlackRock, Inc. consummated a transaction with Merrill Lynch & Co., Inc. whereby Merrill Lynch & Co., Inc.’s investment management business combined with that of BlackRock to create a new independent company that is one of the world’s largest asset management firms with over $1 trillion in assets under management. The combined company has over 4,500 employees in 18 countries.

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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 Subadviser and the continued review and evaluation of the Subadviser’s performance. The address of the Manager and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Manager has delegated daily management of all of the Fund assets to BlackRock, who is paid by the Manager and not by the Fund. The Subadviser has complete discretion, subject to the Manager’s oversight, to purchase and sell portfolio securities for the Fund. The Subadviser’s address is P.O. Box 9011, Princeton, NJ 08543-9011.

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The Manager and other subsidiaries of Federated advise approximately 136 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $213 billion in assets as of December 31, 2005. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,305 employees. Federated provides investment products to more than 5,500 investment professionals and institutions.

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PORTFOLIO MANAGEMENT INFORMATION

John W. Harris

John W. Harris has been the Fund’s Portfolio Manager since January 2003. He is Vice President of the Trust. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Fund’s Manager in December 1998. In January 2000, Mr. Harris became a Vice President of the Fund’s Manager. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh. Mr. Harris is responsible for overseeing the subadviser. In such a capacity, Mr. Harris is involved in monitoring and evaluating the performance of the subadviser.

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Leon Roisenberg, Debra L. Jelilian, Jeffrey L. Russo, CFA

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Subject to the oversight of the Manager, BlackRock Investment Management’s Quantitative Index Management Team is responsible for the day-to-day management of the Fund. The Fund is managed by Leon Roisenberg, Debra L. Jelilian and Jeffrey L. Russo, CFA , who are members of the Quantitative Index Management Team. The team is jointly responsible for the day-to-day management of the Fund’s portfolio. Mr. Roisenberg is a Director of and a portfolio manager with BlackRock. Prior to joining BlackRock^® in 2006, Mr. Roisenberg was a Director of Merrill Lynch Investment Managers, L.P., (“MLIM”), an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. from 2001 until 2006. He has been a member of the Funds’ management team since 2001. Prior to joining MLIM, Mr. Roisenberg was employed at J.P. Morgan Investment Management. He has seventeen years’ experience in investments. Mr. Russo is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Mr. Russo was a Director of MLIM from 2004 to 2006, and was a Vice President there from 1999 to 2004. He has been a member of the Funds’ management team since 2000. Mr. Russo has eleven years’ experience as a portfolio manager and trader. Ms. Jelilian is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Ms. Jelilian was a Director of MLIM from 1999 to 2006, and has been a member of the Funds’ management team since 2000. Ms. Jelilian has fourteen years’ experience in investing and in managing index investments.

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The Fund’s SAI provides additional information about the Portfolio Managers’ compensation, management of other accounts, and ownership of securities in the Fund.

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MANAGEMENT FEES

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The Manager receives an annual management 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.

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A discussion of the Board’s review of the Fund’s investment advisory contract is available in the Fund’s Annual Report dated October 31, 2006.

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Legal Proceedings

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Since October 2003, Federated and related entities (collectively, “Federated”), and various Federated funds (“Funds”), have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual 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. These lawsuits began to be filed shortly after Federated’s first public announcement that it had received requests for information on shareholder trading activities in the Funds from the SEC, the Office of the New York State Attorney General (“NYAG”), and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. Specifically, the SEC and NYAG settled proceedings against three Federated subsidiaries involving undisclosed market timing arrangements and late trading. The SEC made findings: that Federated Investment Management Company (“FIMC”), an SEC-registered investment adviser to various Funds, and Federated Securities Corp., an SEC-registered broker-dealer and distributor for the Funds, violated provisions of the Investment Advisers Act and Investment Company Act by approving, but not disclosing, three market timing arrangements, or the associated conflict of interest between FIMC and the funds involved in the arrangements, either to other fund shareholders or to the funds’ board; and that Federated Shareholder Services Company, formerly an SEC-registered transfer agent, failed to prevent a customer and a Federated employee from late trading in violation of provisions of the Investment Company Act. The NYAG found that such conduct violated provisions of New York State law. Federated entered into the settlements without admitting or denying the regulators’ findings. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay disgorgement and a civil money penalty in the aggregate amount of an additional $72 million and, among other things, agreed that it would not serve as investment adviser to any registered investment company unless (i) at least 75% of the fund’s directors are independent of Federated, (ii) the chairman of each such fund is independent of Federated, (iii) no action may be taken by the fund’s board or any committee thereof unless approved by a majority of the independent trustees of the fund or committee, respectively, and (iv) the fund appoints a “senior officer” who reports to the independent trustees and is responsible for monitoring compliance by the fund with applicable laws and fiduciary duties and for managing the process by which management fees charged to a fund are approved. The settlements are described in Federated’s announcement which, along with previous press releases and related communications on those matters, is available in the “About Us” section of Federated’s website at FederatedInvestors.com.

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Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees.

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The board of the Funds has retained the law firm of Dickstein Shapiro LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and intend to defend this litigation. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys’ fees, and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the 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, or since inception if the life of the Fund’s Class K Shares are shorter. 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.

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This information has been audited by Ernst & Young LLP, an independent registered public accounting firm, whose report, along with the Fund’s audited financial statements, is included in the Annual Report.

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Financial Highlights

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(For a Share Outstanding Throughout Each Period)

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Year Ended October 31	2006			2005			2004			2003	1
Net Asset Value, Beginning of Period	$24.43			$22.90			$21.27			$17.81
Income From Investment Operations:
Net investment income	0.22			0.24			0.14			0.10
Net realized and unrealized gain on investments and futures contracts	3.41			1.53			1.65			3.45
TOTAL FROM INVESTMENT OPERATIONS	3.63			1.77			1.79			3.55
Less Distributions:
Distributions from net investment income	(0.24	)		(0.24	)		(0.16	)		(0.09	)
Distributions from net realized gain on investments and futures contracts	(0.52	)		--			--			--
TOTAL DISTRIBUTIONS	(0.76	)		(0.24	)		(0.16	)		(0.09	)
Net Asset Value, End of Period	$27.30			$24.43			$22.90			$21.27
Total Return2	15.14	%		7.75	%		8.42	%3		19.99	%
Ratios to Average Net Assets:
Net expenses	1.10	%		1.10	%		1.10	%		1.09	%4
Net investment income	0.85	%		0.96	%		0.60	%		0.70	%4
Expense waiver/reimbursement5	0.02	%		0.02	%		0.01	%		0.04	%4
Supplemental Data:
Net assets, end of period (000 omitted)	$76,756		$39,617			$31,940			$16,228
Portfolio turnover	42	%		30	%		19	%		24	%6

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1 Reflects operations for the period from April 8, 2003 (date of initial public investment) to October 31, 2003.

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2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year, if any, are not annualized.

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3 During the year, the Fund was reimbursed by the Manager, which had an impact of 0.05% on the total return.

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4 Computed on an annualized basis.

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

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6 Portfolio turnover is calculated at the Fund level. Percentage indicated was calculated for the year ended October 31, 2003.

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated October 31, 2006, which can be obtained free of charge.

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Appendix A: Hypothetical Investment and Expense Information

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The following chart provides additional hypothetical information about the effect of the Fund’s expenses, including investment advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year period. The chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. The chart also assumes that the Fund’s annual expense ratio stays the same throughout the 10-year period and that all dividends and distributions are reinvested. The annual expense ratio used in the chart is the same as stated in the “Fees and Expenses” table of this prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the “Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

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FEDERATED MAX-CAP INDEX FUND: CLASS K SHARES
ANNUAL EXPENSE RATIO: 1.12%
MAXIMUM FRONT-END SALES CHARGE: 0.00%

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Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$114.17	$10,388.00
2	$10,388.00	$519.40	$10,907.40	$118.60	$10,791.05
3	$10,791.05	$539.55	$11,330.60	$123.20	$11,209.74
4	$11,209.74	$560.49	$11,770.23	$127.98	$11,644.68
5	$11,644.68	$582.23	$12,226.91	$132.95	$12,096.49
6	$12,096.49	$604.82	$12,701.31	$138.11	$12,565.83
7	$12,565.83	$628.29	$13,194.12	$143.47	$13,053.38
8	$13,053.38	$652.67	$13,706.05	$149.03	$13,559.85
9	$13,559.85	$677.99	$14,237.84	$154.82	$14,085.97
10	$14,085.97	$704.30	$14,790.27	$160.82	$14,632.51
Cumulative		$5,969.74		$1,363.15

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A Statement of Additional Information (SAI) dated December 31, 2006, 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. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund at 1-800-341-7400.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at FederatedInvestors.com.

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 website at 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.

Federated Investors
World-Class Investment Manager

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

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2006 © Federated Investors, Inc.

Cusip 31420E809

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28211 (12/06)

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Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Max-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

December 31, 2006

CLASS C 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 500 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

CONTENTS

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?	8
What are the Specific Risks of Investing in the Fund?	11
What Do Shares Cost?	13
How is the Fund Sold?	17
Payments to Financial Intermediaries	17
How to Purchase Shares	20
How to Redeem and Exchange Shares	22
Account and Share Information	25
Who Manages the Fund?	28
Legal Proceedings	30
Financial Information	31
Appendix A: Hypothetical Investment and Expense Information	33

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 (the “Board”) 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.
• Leverage Risks. Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain.
• Liquidity Risks. Liquidity risk 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.

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• Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund’s use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or in the Fund’s Statement of Additional Information (SAI), such as stock market, credit, liquidity and leverage risks.

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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

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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 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.

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The total returns 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.

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The Fund’s Class C Shares total return for the nine-month period from January 1, 2006 to September 30, 2006 was 7.48%.

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Within the period shown in the bar chart, the Fund’s Class C Shares highest quarterly return was 20.87% (quarter ended December 31, 1998). Its lowest quarterly return was (17.55)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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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 Standard and Poor’s 500 Index (S&P 500), a broad-based market index that measures the performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. 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.

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(For the periods ended December 31, 2005)

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	1 Year	5 Years	Start of Performance1
Class C Shares:2
Return Before Taxes	1.72%	(0.97)%	3.86%
Return After Taxes on Distributions3	1.20%	(1.12)%	3.54%
Return After Taxes on Distributions and Sale of Fund Shares3	1.54%	(0.86)%	3.19%
S&P 500	4.92%	0.55%	5.41%

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

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2 The returns shown for Class C Shares include the effect of a 1% front-end sales charge on Class C Shares purchased on or before January 31, 2007. Effective February 1, 2007, the front-end sales charge will be eliminated.

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3 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.

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What are the Fund’s Fees and Expenses?

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FEDERATED MAX-CAP INDEX FUND

FEES AND EXPENSES

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

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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) Through January 31, 2007*	1.00%
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) Beginning February 1, 2007*	None
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 and Reduction)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee2	0.30%
Distribution (12b-1) Fee	0.75%
Other Expenses3	0.38%
Total Annual Fund Operating Expenses4	1.43%
1 The percentages shown are based on expenses for the entire fiscal year ended October 31, 2006. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so (except as discussed in Note 4, below), the Manager and shareholder services provider waived and/or elected not to charge certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2006.
Total Waiver and Reduction of Fund Expenses	0.08%
Total Actual Annual Fund Operating Expenses (after waiver and reduction)	1.35%
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 0.28% for the fiscal year ended October 31, 2006.
3 Includes a shareholder service fee/account administration fee which is used to compensate intermediaries for shareholder services or account administrative services. Also includes a recordkeeping fee which is used to compensate intermediaries for recordkeeping services. Please see “Payments to Financial Intermediaries” herein. The shareholder services provider voluntarily elected not to charge and therefore the Fund did not accrue, a portion of its fee. The shareholder services provider can terminate this voluntary reduction at any time. Total other expenses paid by the Fund’s Class C Shares (after the voluntary reduction) were 0.32% for the fiscal year ended October 31, 2006.
4 The Manager and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses (including the distribution (12b-1) fee) so that the total operating expenses paid by the Fund's Class C Shares (after the voluntary waivers and reimbursements) will not exceed 1.45% for the fiscal year ending October 31, 2007. Although these actions are voluntary, the Manager and its affiliates have agreed not to terminate these waivers and/or reimbursements until after December 31, 2007.
* There is a 1.00% front-end sales charge applicable to Class C Shares on or before 1/31/2007. Effective 2/1/2007, this front-end sales charge will be eliminated.

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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 Fund’s 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 waiver and reduction 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:

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Through January 31, 2007*	1 Year	3 Years	5 Years	10 Years
Expenses assuming redemption	$344	$548	$874	$1,796
Expenses assuming no redemption	$244	$548	$874	$1,796
Beginning February 1, 2007*
Expenses assuming redemption	$246	$452	$782	$1,713
Expenses assuming no redemption	$146	$452	$782	$1,713

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* There is a 1.00% front-end sales charge applicable to Class C Shares on or before 1/31/2007. Effective 2/1/2007, this front-end sales charge will be eliminated.

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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, 2006, the capitalization range of the issuers comprising the Index was $1.6 billion to $456 billion. As of the same date, the weighted median market capitalization of the Fund was $56.0 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, before expenses, 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.

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With respect to approximately 20% of the Fund’s portfolio, the subadviser, under normal circumstances, will use enhanced management techniques. The subadviser’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 subadviser’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. The Fund may also sell covered call options and sell put options on the portion of the positions that are being over or underweighted or positions not replicated within the enhanced portion of the Fund. Additionally, the subadviser may purchase substitutes for securities within the Index when the subadviser 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 subadviser may invest in stocks not represented in the Index that are subject to pending cash acquisitions when the subadviser 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.

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.

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.

DERIVATIVE CONTRACTS

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Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, currencies, indices, or other assets or instruments including other derivative contracts, (each a “Reference Instrument” and collectively, “Reference Instruments”). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as “physically settled” derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as “cash settled” derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

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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.

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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.

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Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund’s exposure to the risks of the Reference Instrument, 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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Payment obligations arising in connection with derivative contracts are frequently required to be secured with collateral (in the case of OTC contracts) or margin (in the case of exchange-traded contracts, as previously noted).

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The Fund may not invest in a derivative contract if it is not permitted to own, invest in, or otherwise have economic exposure to the Reference Instrument (or, in the case of a Reference Instrument that is an index, the securities or derivatives that comprise the index). The Fund may trade in the following specific types and/or combinations of derivative contracts:

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Futures Contracts

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. 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 financial futures (such as index futures).

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HYBRID INSTRUMENTS

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Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of designated securities, commodities, currencies, indices, or other assets or instruments (each a, “Valuation Instrument”). Hybrid instruments can take on many forms including, but not limited to, the following three forms: First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Valuation Instrument. Second, a hybrid instrument may also combine elements of a fixed-income security and an equity security. Third, hybrid instruments may include convertible securities with conversion terms related to a Valuation Instrument.

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ASSET SEGREGATION

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In order to secure its obligations in connection with derivative contracts or special transactions, the Fund will either own the underlying assets, enter into offsetting transactions or set aside cash or readily marketable securities. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

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Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in securities, currencies and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional securities or the Valuation Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Valuation Instrument. 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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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.

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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 attempt to 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.

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Securities lending activities are subject to credit and leverage risks.

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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.

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.

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.

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RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

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The Fund’s use of derivative contracts and hybrid instruments 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 and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference or Valuation Instruments 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 derivative contracts and hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, derivative contracts and hybrid instruments 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. Fifth, a common provision in over-the-counter (OTC) derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described in this prospectus or in the Fund’s SAI, such as stock market, credit, liquidity and leverage risks.

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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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LIQUIDITY RISKS

Liquidity risk 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.

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LEVERAGE RISKS

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Leverage risk is created when an investment exposes the Fund to a level of risk that exceeds the amount invested. Changes in the value of such an investment magnify the Fund’s risk of loss and potential for gain. Investments can have these same results if their returns are based on a multiple of a specified index, security or other benchmark.

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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). From time to time the Fund may purchase foreign securities that trade in foreign markets on days the NYSE is closed. The value of the Fund’s assets may change on days you cannot purchase or redeem Shares. NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund’s current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

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The Fund generally values equity securities according to the last sale price or official closing price reported 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.

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If prices are not available from an independent pricing service, securities and derivative contracts 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 security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board of Trustees (Board). The Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Fund’s Manager determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, or based on market quotations.

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 financial intermediaries may charge you fees for their services in connection with your Share transactions.

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	Minimum Initial/Subsequent Investment Amounts1	Maximum Sales Charges
Shares Offered		Front-End Sales Charge2	Contingent Deferred Sales Charge3
Class C Shares purchased on or before 1/31/2007*	$1,500/$100	1.00%	1.00%
Class C Shares purchased on or after 2/1/2007*	$1,500/$100	None	1.00%

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1 The minimum initial and subsequent investment amounts for retirement plans are $250 and $100, respectively. The minimum subsequent investment amounts for Systematic Investment Programs (SIP) is $50. Investment professionals may impose higher or lower minimum investment requirements on their customers than those imposed by the Fund.

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2 Front-End Sales Charge is expressed as a percentage of public offering price. See “Sales Charge When You Purchase.”

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3 See “Sales Charge When You Redeem.”

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* There is a 1.00% front-end sales charge applicable to purchases of Class C Shares on or before 1/31/2007. Effective 2/1/2007, the front-end sales charge will be eliminated.

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SALES CHARGE WHEN YOU PURCHASE

The following table lists the sales charges which will be applied to your Share purchase, subject to the breakpoint discounts indicated in the table and described below.

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Class C Shares:
Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV
Shares purchased on or before 1/31/2007	1.00%	1.01%
Shares purchased on or after 2/1/2007	None	None

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ELIMINATING THE SALES CHARGE (ON CLASS C SHARES PURCHASED ON OR BEFORE JANUARY 31, 2007)

Contingent upon notification to the Transfer Agent, the sales charge applicable to Class C Shares purchased on or before January 31, 2007, will be eliminated when you purchase Shares:

• within 120 days of redeeming Shares of an equal or greater amount;
• through a financial intermediary that did not receive a dealer reallowance on the purchase;
• with reinvested dividends or capital gains;
• as a shareholder that originally became a shareholder of a Federated fund pursuant to the terms of an agreement and plan of reorganization which permits shareholders to acquire Shares at NAV;
• as a Federated Life Member (Federated shareholders who originally were issued shares through the “Liberty Account,” which was an account for the Liberty Family of Funds on February 28, 1987, or who invested through an affinity group prior to August 1, 1987, into the Liberty Account) (Class A Shares only); or
• as a Trustee, employee or former employee of the Fund, the Adviser, the Distributor and their affiliates, an employee of any financial intermediary that sells Shares according to a sales agreement with the Distributor, an immediate family member of these individuals or a trust, pension or profit-sharing plan for these individuals; or
• pursuant to the exchange privilege.

The sales charge will not be eliminated if you purchase Shares of the Fund through an exchange of shares of Liberty U.S. Government Money Market Trust unless your Liberty shares were acquired through an exchange of shares on which the sales charge had previously been paid.

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).

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.

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Class C Shares:

You will pay a 1.00% CDSC if you redeem Shares within 12 months of the purchase date.

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If your investment qualifies for an elimination of the CDSC, you or your financial intermediary must notify the Transfer Agent at the time of redemption. If the Transfer Agent is not notified, the CDSC will apply.

Contingent upon notification to the Transfer Agent, you will not be charged a CDSC when redeeming Shares:

• following the death of the last surviving shareholder on the account or your post-purchase disability, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986 (the beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder on the account);
• representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70½;
• purchased within 120 days of a previous redemption of Shares, to the extent that the value of the Shares purchased was equal to or less than the value of the previous redemption;
• purchased by Trustees, employees of the Fund, the Adviser, the Distributor and their affiliates, by employees of a financial intermediary that sells Shares according to a sales agreement with the Distributor, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;
• purchased through a financial intermediary that did not receive an advance commission on the purchase;
• purchased with reinvested dividends or capital gains;

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• redeemed by the Fund when it closes an account for not meeting the minimum balance requirements; or

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• purchased pursuant to the exchange privilege if the Shares were held for the applicable CDSC holding period (the holding period on the shares purchased in the exchange will include the holding period of the shares sold in the exchange).

How is the Fund Sold?

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 Class C Shares. All Share classes have different expenses which affect their performance. Contact your financial intermediary or call 1-800-341-7400 for more information concerning the other classes.

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 financial intermediaries. Under the Distributor’s Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

Payments to Financial Intermediaries

The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

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FRONT-END SALES CHARGE REALLOWANCES

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The Distributor receives a front-end sales charge on certain Share sales. The Distributor pays a portion of this charge to financial intermediaries that are eligible to receive it (the “Dealer Reallowance”) and retains any remaining portion of the front-end sales charge.

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When a financial intermediary’s customer purchases Shares, the financial intermediary may receive a Dealer Reallowance as follows:

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Class C Shares:
Purchase Amounts	Dealer Reallowance as a Percentage of Public Offering Price
Shares purchased prior to 1/31/2007	1.00%
Shares purchased after 2/1/2007	None

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ADVANCE COMMISSIONS

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When a financial intermediary’s customer purchases Shares, the financial intermediary may receive an advance commission as follows:

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

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RULE 12b-1 FEES

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees of up to 0.75% of average net assets to the Distributor for the sale, distribution, administration and customer servicing of the Fund’s Class C Shares. When the Distributor receives Rule 12b-1 Fees, it may pay some or all of them to financial intermediaries whose customers purchase 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.

SERVICE FEES

The Fund may pay Service Fees of up to 0.25% of average net assets to financial intermediaries 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 financial intermediaries directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial intermediaries. If a financial intermediary receives Service Fees on an account, it is not eligible to also receive Account Administration Fees on that same account.

ACCOUNT ADMINISTRATION FEES

The Fund may pay Account Administration Fees of up to 0.25% of average net assets to banks that are not registered as broker-dealers or investment advisers for providing administrative services to the Funds and shareholders. If a financial intermediary receives Account Administration Fees on an account, it is not eligible to also receive Service Fees or Recordkeeping Fees on that same account.

RECORDKEEPING FEES

The Fund may pay Recordkeeping Fees on an average net assets basis or on a per account per year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

NETWORKING FEES

The Fund may reimburse Networking Fees on a per account per year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Manager). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Rule 12b-1 Plan and/or Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, 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 A FINANCIAL INTERMEDIARY

• Establish an account with the financial intermediary; and
• Submit your purchase order to the financial intermediary 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 financial intermediary 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.

Financial intermediaries 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 State Street Bank and Trust 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 send it to:

The Federated Funds
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, send it to:

The Federated Funds
30 Dan Road
Canton, MA 02021

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 SIP section of the New Account Form or by contacting the Fund or your financial intermediary.

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.

RETIREMENT INVESTMENTS

You may purchase Shares as retirement investments (such as qualified plans and IRAs or transfer or rollover of assets). Call your financial intermediary 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 a financial intermediary if you purchased Shares through a financial intermediary; or
• directly from the Fund if you purchased Shares directly from the Fund.

Shares of the Fund may be redeemed for cash or exchanged for shares of the same class of other Federated funds on days on which the Fund computes its NAV. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary 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 financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange 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 or exchange Shares by sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

The Federated Funds
30 Dan Road
Canton, MA 02021

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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program 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 Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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 for up to seven days:

• to allow your purchase to clear (as discussed below);
• during periods of market volatility;
• when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets; or
• during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

If you request a redemption of Shares recently purchased by check (including a cashier’s check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be cancelled and you will be responsible for any losses incurred by the Fund as a result of your cancelled order.

In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

• when the NYSE is closed, other than customary weekend and holiday closings;
• when trading on the NYSE is restricted, as determined by the SEC; or
• in which an emergency exists, as determined by the SEC, so that disposal of the Fund’s investments or determination of its NAV is not reasonably practicable.

You will not accrue interest or dividends on uncashed redemption 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.

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information--Frequent Trading Policies.”

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 financial intermediary 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.

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

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.

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. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as “undeliverable,” or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution checks.

If you purchase Shares just before the record date for 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 record date for a dividend or capital gain. Contact your financial intermediary 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, 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

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 at different rates depending on the source of dividend 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 and exchanges are taxable sales. Please consult your tax adviser regarding your federal, state, and local tax liability.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

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The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Manager may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

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The Fund’s frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund’s portfolio and its performance.

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The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s website at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten holdings, recent purchase and sale transactions and a percentage breakdown of the portfolio by sector.

To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

You may also access from the “Products” section of the website portfolio information as of the end of the Fund’s fiscal quarters. The Fund’s annual and semiannual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

Who Manages the Fund?

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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 the subadviser, BlackRock Investment Management, LLC (BlackRock or the “Subadviser”). BlackRock began managing the portfolio as of the close of business September 29, 2006.

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BlackRock is a wholly owned subsidiary of BlackRock, Inc. On September 29, 2006, BlackRock, Inc. consummated a transaction with Merrill Lynch & Co., Inc. whereby Merrill Lynch & Co., Inc.’s investment management business combined with that of BlackRock to create a new independent company that is one of the world’s largest asset management firms with over $1 trillion in assets under management. The combined company has over 4,500 employees in 18 countries.

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 Subadviser and the continued review and evaluation of the Subadviser’s performance. The address of the Manager and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Manager has delegated daily management of all of the Fund assets to BlackRock, who is paid by the Manager and not by the Fund. The Subadviser has complete discretion, subject to the Manager’s oversight, to purchase and sell portfolio securities for the Fund. The Subadviser’s address is P.O. Box 9011, Princeton, NJ 08543-9011

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The Manager and other subsidiaries of Federated advise approximately 136 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $213 billion in assets as of December 31, 2005. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,305 employees. Federated provides investment products to more than 5,500 investment professionals and institutions.

PORTFOLIO MANAGEMENT INFORMATION

John W. Harris

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John W. Harris has been the Fund’s Portfolio Manager since January 2003. He is Vice President of the Trust. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Fund’s Manager in December 1998. In January 2000, Mr. Harris became a Vice President of the Fund’s Manager. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh. Mr. Harris is responsible for overseeing the subadviser. In such a capacity, Mr. Harris is involved in monitoring and evaluating the performance of the subadviser.

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Leon Roisenberg, Debra L. Jelilian, Jeffrey L. Russo, CFA

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Subject to the oversight of the Manager, BlackRock Investment Management’s Quantitative Index Management Team is responsible for the day-to-day management of the Fund. The Fund is managed by Leon Roisenberg, Debra L. Jelilian and Jeffrey L. Russo, CFA, who are members of the Quantitative Index Management Team. The team is jointly responsible for the day-to-day management of the Fund’s portfolio. Mr. Roisenberg is a Director of and a portfolio manager with BlackRock. Prior to joining BlackRock^® in 2006, Mr. Roisenberg was a Director of Merrill Lynch Investment Managers, L.P., (“MLIM”), an indirect wholly owned subsidiary of Merrill Lynch & Co., Inc. from 2001 until 2006. He has been a member of the Funds’ management team since 2001. Prior to joining MLIM, Mr. Roisenberg was employed at J.P. Morgan Investment Management. He has seventeen years’ experience in investments. Mr. Russo is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Mr. Russo was a Director of MLIM from 2004 to 2006, and was a Vice President there from 1999 to 2004. He has been a member of the Funds’ management team since 2000. Mr. Russo has eleven years’ experience as a portfolio manager and trader. Ms. Jelilian is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Ms. Jelilian was a Director of MLIM from 1999 to 2006, and has been a member of the Funds’ management team since 2000. Ms. Jelilian has fourteen years’ experience in investing and in managing index investments.

The Fund’s SAI provides additional information about the Portfolio Managers’ compensation, management of other accounts, and ownership of securities in the Fund.

MANAGEMENT FEES

The Manager receives an annual management 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.

A discussion of the Board’s review of the Fund’s investment advisory contract is available in the Fund’s Annual Report dated October 31, 2006.

Legal Proceedings

Since October 2003, Federated and related entities (collectively, “Federated”), and various Federated funds (“Funds”), have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual 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. These lawsuits began to be filed shortly after Federated’s first public announcement that it had received requests for information on shareholder trading activities in the Funds from the SEC, the Office of the New York State Attorney General (“NYAG”), and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. Specifically, the SEC and NYAG settled proceedings against three Federated subsidiaries involving undisclosed market timing arrangements and late trading. The SEC made findings: that Federated Investment Management Company (“FIMC”), an SEC-registered investment adviser to various Funds, and Federated Securities Corp., an SEC-registered broker-dealer and distributor for the Funds, violated provisions of the Investment Advisers Act and Investment Company Act by approving, but not disclosing, three market timing arrangements, or the associated conflict of interest between FIMC and the funds involved in the arrangements, either to other fund shareholders or to the funds’ board; and that Federated Shareholder Services Company, formerly an SEC-registered transfer agent, failed to prevent a customer and a Federated employee from late trading in violation of provisions of the Investment Company Act. The NYAG found that such conduct violated provisions of New York State law. Federated entered into the settlements without admitting or denying the regulators’ findings. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay disgorgement and a civil money penalty in the aggregate amount of an additional $72 million and, among other things, agreed that it would not serve as investment adviser to any registered investment company unless (i) at least 75% of the fund’s directors are independent of Federated, (ii) the chairman of each such fund is independent of Federated, (iii) no action may be taken by the fund’s board or any committee thereof unless approved by a majority of the independent trustees of the fund or committee, respectively, and (iv) the fund appoints a “senior officer” who reports to the independent trustees and is responsible for monitoring compliance by the fund with applicable laws and fiduciary duties and for managing the process by which management fees charged to a fund are approved. The settlements are described in Federated’s announcement which, along with previous press releases and related communications on those matters, is available in the “About Us” section of Federated’s website at FederatedInvestors.com.

Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees.

The board of the Funds has retained the law firm of Dickstein Shapiro LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and intend to defend this litigation. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys’ fees, and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

Financial Information

FINANCIAL HIGHLIGHTS

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, an independent registered public accounting firm, whose report, along with the Fund’s audited financial statements, is included in the Annual Report.

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Financial Highlights

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(For a Share Outstanding Throughout Each Period)

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Year Ended October 31	2006			2005			2004			2003			2002
Net Asset Value, Beginning of Period	$24.35			$22.81			$21.18			$17.88			$21.40
Income From Investment Operations:
Net investment income	0.15			0.17			0.07			0.08			0.04
Net realized and unrealized gain (loss) on investments and futures contracts	3.41			1.55			1.64			3.31			(3.52	)
TOTAL FROM INVESTMENT OPERATIONS	3.56			1.72			1.71			3.39			(3.48	)
Less Distributions:
Distributions from net investment income	(0.16	)		(0.18	)		(0.08	)		(0.09	)		(0.04	)
Distributions from net realized gain on investments and futures contracts	(0.52	)		--			--			--			--
TOTAL DISTRIBUTIONS	(0.68	)		(0.18	)		(0.08	)		(0.09	)		(0.04	)
Net Asset Value, End of Period	$27.23			$24.35			$22.81			$21.18			$17.88
Total Return1	14.86	%		7.55	%		8.07	%		19.01	%		(16.28	)%
Ratios to Average Net Assets:
Net expenses	1.35	%		1.32	%		1.41	%		1.37	%		1.34	%
Net investment income	0.64	%		0.80	%		0.29	%		0.42	%		0.22	%
Expense waiver/reimbursement2	0.02	%		0.02	%		0.01	%		0.04	%		0.04	%
Supplemental Data:
Net assets, end of period (000 omitted)	$78,043		$86,361			$102,614			$104,086			$88,070
Portfolio turnover	42	%		30	%		19	%		24	%		18	%

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1 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year, if any, are not annualized.

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

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated October 31, 2006, which can be obtained free of charge.

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Appendix A: Hypothetical Investment and Expense Information

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The following charts provide additional hypothetical information about the effect of the Fund’s expenses, including investment advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year period. Each chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. Each chart also assumes that the Fund’s annual expense ratio stays the same throughout the 10-year period and that all dividends and distributions are reinvested. The annual expense ratio used in each chart is the same as stated in the “Fees and Expenses” table of this prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the “Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

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FEDERATED MAX-CAP INDEX FUND: CLASS C SHARES¹
ANNUAL EXPENSE RATIO: 1.43%
MAXIMUM FRONT-END SALES CHARGE THROUGH
JANUARY 31, 2007: 1.00%

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Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$495.00	$10,395.00	$244.10	$10,253.43
2	$10,253.43	$512.67	$10,766.10	$149.24	$10,619.48
3	$10,619.48	$530.97	$11,150.45	$154.57	$10,998.60
4	$10,998.60	$549.93	$11,548.53	$160.09	$11,391.25
5	$11,391.25	$569.56	$11,960.81	$165.80	$11,797.92
6	$11,797.92	$589.90	$12,387.82	$171.72	$12,219.11
7	$12,219.11	$610.96	$12,830.07	$177.85	$12,655.33
8	$12,655.33	$632.77	$13,288.10	$184.20	$13,107.13
9	$13,107.13	$655.36	$13,762.49	$190.78	$13,575.05
10	$13,575.05	$678.75	$14,253.80	$197.59	$14,059.68
Cumulative		$5,825.87		$1,795.94

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1 There is a 1% front-end sales charge applicable to purchases of Class C Shares on or before 1/31/2007. Effective 2/1/2007, this front-end sales charge will be eliminated.

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FEDERATED MAX-CAP INDEX FUND: CLASS C SHARES
ANNUAL EXPENSE RATIO: 1.43%
MAXIMUM FRONT-END SALES CHARGE BEGINNING
FEBRUARY 1, 2007: 0.00%

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Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$145.55	$10,357.00
2	$10,357.00	$517.85	$10,874.85	$150.75	$10,726.74
3	$10,726.74	$536.34	$11,263.08	$156.13	$11,109.68
4	$11,109.68	$555.48	$11,665.16	$161.70	$11,506.30
5	$11,506.30	$575.32	$12,081.62	$167.48	$11,917.07
6	$11,917.07	$595.85	$12,512.92	$173.46	$12,342.51
7	$12,342.51	$617.13	$12,959.64	$179.65	$12,783.14
8	$12,783.14	$639.16	$13,422.30	$186.06	$13,239.50
9	$13,239.50	$661.98	$13,901.48	$192.70	$13,712.15
10	$13,712.15	$685.61	$14,397.76	$199.58	$14,201.67
Cumulative		$5,884.72		$1,713.06

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A Statement of Additional Information (SAI) dated December 31, 2006, 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. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund
at 1-800-341-7400.

These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at FederatedInvestors.com.

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 website at 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.

Federated Investors
World-Class Investment Manager

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

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2006 © Federated Investors, Inc.

Cusip 31420E502

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G00717-01(12/06)

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FEDERATED MAX-CAP INDEX FUND

A PORTFOLIO OF FEDERATED INDEX TRUST


STATEMENT OF ADDITIONAL INFORMATION

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DECEMBER 31, 2006

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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 Institutional Shares, Institutional
Service Shares, Class C Shares and Class K Shares of Federated Max-Cap Index
Fund (Fund), dated December 31, 2006.  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.

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                                         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..............................
                                         Appendix...............................




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 Max-Cap Fund to Federated
Max-Cap Index Fund on July 21, 2001.

The Board of Trustees (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).



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 (GSE) acting under federal authority. Some GSE
securities are supported by the full faith and credit of the United States.
These include the Government National Mortgage Association, Small Business
Administration, Farm Credit System Financial Assistance Corporation, Farmer's
Home Administration, Federal Financing Bank, General Services Administration,
Department of Housing and Urban Development, Export-Import Bank, Overseas
Private Investment Corporation, and Washington Metropolitan Area Transit
Authority Bonds.

Other GSE securities receive support through federal subsidies, loans or other
benefits. For example, the U.S. Treasury is authorized to purchase specified
amounts of securities issued by (or otherwise make funds available to) the
Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, and Tennessee Valley Authority in support of such
obligations.

A few GSE securities have no explicit financial support, but are regarded as
having implied support because the federal government sponsors their activities.
These include the Farm Credit System, Financing Corporation, and Resolution
Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as
Treasury securities.

A Fund treats mortgage-backed securities guaranteed by a GSE as if issued or
guaranteed by a federal agency.

Although such a guarantee protects against credit risks, it does not reduce
market and prepayment risks.

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DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated securities, commodities, currencies,
indices, or other assets or instruments including other derivative contracts,
(each a "Reference Instrument" and collectively, "Reference Instruments").  Each
party to a derivative contract is referred to as a counterparty.  Some
derivative contracts require payments relating to an actual, future trade
involving the Reference Instrument.  These types of derivatives are frequently
referred to as "physically settled" derivatives.  Other derivative contracts
require payments relating to the income or returns from, or changes in the
market value of, a Reference Instrument.  These types of derivatives are known
as "cash settled" derivatives, since they require cash payments in lieu of
delivery of the Reference Instrument.

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 on how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the Reference Instrument,
derivative contracts may increase or decrease the Fund's exposure to the risks
of the Reference Instrument, 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, including
combinations thereof:

FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a Reference Instrument at a specified
price, date and time.  Entering into a contract to buy a Reference Instrument is
commonly referred to as buying a contract or holding a long position in the
asset.  Entering into a contract to sell a Reference Instrument is commonly
referred to as selling a contract or holding a short position in the Reference
Instrument  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 financial futures (such as index futures and security futures).

OPTION CONTRACTS
Option contracts (also called "options") are rights to buy or sell a Reference
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 Reference Instruments.
Options that are written on futures contracts will be subject to margin
requirements similar to those applied to futures contracts.  The Fund may buy or
sell options on a Reference Instrument if it is permitted to own, invest, or
otherwise have economic exposure to that instrument.  The Fund is not required
to own a Reference Instrument, in order to buy or write an option on that
Reference Instrument.

The Fund may buy and/or sell the following types of options:

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

{circle}Buy call options on a Reference Instrument in anticipation of an
   increase in the value of the Reference Instrument; and

{circle}Write call options on a Reference Instrument to generate income from
   premiums, and in anticipation of a decrease or only limited increase in the
   value of the Reference Instrument.  If the Fund writes a call option on a
   Reference Instrument that it owns and that call option is exercised, the Fund
   foregoes any possible profit from an increase in the market price of the
   Reference Instrument over the exercise price plus the premium received.

PUT OPTIONS
A put option gives the holder the right to sell the Reference Instrument to the
writer of the option. The Fund may use put options in the following ways:

{circle}Buy put options on a Reference Instrument in anticipation of a decrease
   in the value of the Reference Instrument; and

{circle}Write put options on a Reference Instrument to generate income from
   premiums, and in anticipation of an increase or only limited decrease in the
   value of the Reference Instrument. In writing puts, there is a risk that the
   Fund may be required to take delivery of the Reference Instrument when its
   current market price is lower than the exercise price.

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

Finally, the Fund may enter into combinations of options contracts in an attempt
to benefit from changes in the prices of those options contracts (without regard
to changes in the value of the Reference Instrument).

SWAP CONTRACTS
A swap contract (also known as a "swap") is a type of derivative contract in
which two parties agree to pay each other (swap) the returns derived from
Reference Instruments.  Most swaps do not involve the delivery of the underlying
assets by either party, and the parties might not own the Reference Instruments.
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.  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 (commonly referred to as a "notional principal amount") 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 London Interbank
Offered Rate (LIBOR) swap would require one party to pay the equivalent of the
London Interbank Offered 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 RETURN SWAPS
A total return swap is an agreement between two parties whereby one party agrees
to make payments of the total return from a Reference Instrument (or a basket of
such instruments) during the specified period, in return for payments equal to a
fixed or floating rate of interest or the total return from another Reference
Instrument.  Alternately, a total return swap can be structured so that one
party will make payments to the other party if the value of a Reference
Instrument increases, but receive payments from the other party if the value of
that instrument decreases.

CREDIT DEFAULT SWAPS
A credit default swap (CDS) is an agreement between two parties whereby one
party (the "Protection Buyer") agrees to make payments over the term of the CDS
to the other party (the "Protection Seller"), provided that no designated event
of default, restructuring or other credit related event (each a "Credit Event")
occurs with respect to Reference Instrument that is usually a particular bond or
the unsecured credit of an issuer, in general (the "Reference Obligation"). Many
CDS are physically settled, which means that if a Credit Event occurs, the
Protection Seller must pay the Protection Buyer the full notional value, or "par
value," of the Reference Obligation in exchange for delivery by the Protection
Buyer of the Reference Obligation or another similar obligation issued by the
issuer of the Reference Obligation (the "Deliverable Obligation").  The
Counterparties agree to the characteristics of the Deliverable Obligation at the
time that they enter into the CDS. Alternately, a CDS can be "cash settled,"
which means that upon the occurrence of a Credit Event, the Protection Buyer
will receive a payment from the Protection Seller equal to the difference
between the par amount of the Reference Obligation and its market value at the
time of the Credit Event.  The Fund may be either the Protection Buyer or the
Protection Seller in a CDS.  If the Fund is a Protection Buyer and no Credit
Event occurs, the Fund will lose its entire investment in the CDS (i.e., an
amount equal to the payments made to the Protection Seller over the term of the
CDS). However, if a Credit Event occurs, the Fund (as Protection Buyer) will
deliver the Deliverable Obligation and receive a payment equal to the full
notional value of the Reference Obligation, even though the Reference Obligation
may have little or no value. If the Fund is the Protection Seller and no Credit
Event occurs, the Fund will receive a fixed rate of income throughout the term
of the CDS. However, if a Credit Event occurs, the Fund (as Protection Seller)
will pay the Protection Buyer the full notional value of the Reference
Obligation and receive the Deliverable Obligation from the Protection Buyer.  A
CDS may involve greater risks than if the Fund invested directly in the
Reference Obligation. For example, a CDS may increase credit risk since the Fund
has exposure to both the issuer of the Reference Obligation and the Counterparty
to the CDS.

CURRENCY SWAPS
Currency swaps are contracts which provide for interest payments in different
currencies. The parties might agree to exchange the notional principal amounts
of the currencies as well (commonly called a "foreign exchange swap") 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.

</R>


HYBRID INSTRUMENTS
<R>

Hybrid instruments combine elements of two different kinds of securities or
financial instruments (such as a derivative contract). Frequently, the value of
a hybrid instrument is determined by reference to changes in the value of
designated securities, commodities, currencies, indices, or other assets or
instruments (each a, "Valuation Instrument").  Hybrid instruments can take on
many forms including, but not limited to, the following three forms: First, a
common form of a hybrid instrument combines elements of a derivative contract
with those of another security (typically a fixed-income security). In this case
all or a portion of the interest or principal payable on a hybrid security is
determined by reference to changes in the price of a Valuation Instrument.
Second, a hybrid instrument may also combine elements of a fixed-income security
and an equity security. Third, hybrid instruments may include convertible
securities with conversion terms related to a Valuation Instrument.

Depending on the type and terms of the hybrid instrument, its risks may reflect
a combination of the risks of investing in securities, currencies and derivative
contracts.  Thus, an investment in a hybrid instrument may entail significant
risks in addition to those associated with traditional securities or the
Valuation Instrument.  Hybrid instruments are also potentially more volatile
than traditional securities or the Valuation Instrument.  Moreover, depending on
the structure of the particular hybrid, it may expose the Fund to leverage risks
or carry liquidity risks.

CREDIT LINKED NOTE
A credit linked note (CLN) is a type of hybrid instrument in which a special
purpose entity issues a structured note (the "Note Issuer") with respect to
which the Valuation Instrument is a single bond, a portfolio of bonds, or the
unsecured credit of an issuer, in general (each a "Reference Credit").  The
purchaser of the CLN (the "Note Purchaser") invests a par amount and receives a
payment during the term of the CLN that equals a fixed or floating rate of
interest equivalent to a high rated funded asset (such as a bank certificate of
deposit) plus an additional premium that relates to taking on the credit risk of
the Reference Credit. Upon maturity of the CLN, the Note Purchaser will receive
a payment equal to (i) the original par amount paid to the Note Issuer, if there
is no occurrence of a designated event of default, restructuring or other credit
event (each, a "Credit Event") with respect to the issuer of the Reference
Credit or (ii) the market value of the Reference Credit, if a Credit Event has
occurred.  Depending upon the terms of the CLN, it is also possible that the
Note Purchaser may be required to take physical delivery of the Reference Credit
in the event of Credit Event. Most credit linked notes use a corporate bond (or
a portfolio of corporate bonds) as the Reference Credit. However, almost any
type of fixed-income security (including foreign government securities), index,
or derivative contract (such as a credit default swap) can be used as the
Reference Credit.

EQUITY LINKED NOTE
An equity linked note (ELN) is a type of hybrid instrument that provides the
noteholder with exposure to a single equity security, a basket of equity
securities, or an equity index (the "Reference Equity Instrument").  Typically,
an ELN pays interest at agreed rates over a specified time period and, at
maturity, either converts into shares of a Reference Equity Instrument or
returns a payment to the noteholder based on the change in value of a Reference
Equity Instrument.

</R>


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:

   {circle}it is organized under the laws of, or has a principal office located
      in, another country;
   {circle}the principal trading market for its securities is in another
      country; or
   {circle}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.

ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN ISSUERS
American Depositary Receipts, which are traded in United States markets,
represent interests in underlying securities issued by a foreign company and 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.  ADRs are also
traded in U.S. dollars, eliminating the need for foreign exchange transactions.
The Fund may also invest in securities issued directly by foreign companies and
traded in U.S. Dollars in United States markets.


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.

<R>

ASSET SEGREGATION
In accordance with SEC and SEC staff positions regarding the interpretation of
the 1940 Act, with respect to derivatives that create a future payment
obligation of the Fund, the Fund must "set aside" (referred to sometimes as
"asset segregation") liquid assets, or engage in other SEC- or staff-approved
measures, while the derivative contracts are open. For example, with respect to
forwards and futures contracts that are not contractually required to "cash-
settle," the Fund must cover its open positions by setting aside cash or readily
marketable securities equal to the contracts' full, notional value. With respect
to forwards and futures that are contractually required to "cash-settle,"
however, the Fund is permitted to set aside cash or readily marketable
securities in an amount equal to the Fund's daily marked-to-market (net)
obligations, if any (i.e., the Fund's daily net liability, if any), rather than
the notional value.

The Fund will employ another approach to segregating assets to cover options
that it sells. If the Fund sells a call option, the Fund will set aside either
the Reference Instrument subject to the option, cash or readily marketable
securities with a value that equals or exceeds the current market value of the
Reference Instrument. In no event, will the value of the cash or readily
marketable securities set aside by the Fund be less than the exercise price of
the call option. If the Fund sells a put option, the Fund will set aside cash or
readily marketable securities with a value that equals or exceeds the exercise
price of the put option.

The Fund's asset segregation approach for swap agreements varies among different
types of swaps. For example, if the Fund enters into a credit default swap as
the Protection Buyer, then it will set aside cash or readily marketable
securities necessary to meet any accrued payment obligations under the swap. By
comparison, if the Fund enters into a credit default swap as the Protection
Seller, then the Fund will set aside cash or readily marketable securities equal
to the full notional amount of the swap that must be paid upon the occurrence of
a Credit Event. For some other types of swaps, such as interest rate swaps, the
Fund will calculate the obligations of the counterparties to the swap on a net
basis. Consequently, the Fund's current obligation (or rights) under this type
of swap will equal only the net amount to be paid or received under based on the
relative values of the positions held by each counterparty to the swap (the "net
amount"). The net amount currently owed by or to the Fund will be accrued daily
and the Fund will set aside cash or readily marketable securities equal to any
accrued but unpaid net amount owed by the Fund under the swap.

The Fund may reduce the liquid assets segregated to cover obligations under a
derivative contract by entering into an offsetting derivative contract. For
example, if the Fund sells a put option for the same Reference Instrument as a
call option the Fund has sold, and the exercise price of the call option is the
same as or higher than the exercise price of the put option, then the Fund may
net its obligations under the options and set aside cash or readily marketable
securities (including any margin deposited for the options) with a value equal
to the greater of (a) the current market value of the Reference Instrument
deliverable under the call option or (b) the exercise price of the put option.

By setting aside cash or readily marketable securities equal to only its net
obligations under swaps and certain cash-settled derivative contracts, the Fund
will have the ability to employ leverage to a greater extent than if the Fund
were required to segregate cash or readily marketable securities equal to the
full notional value of such contracts. The use of leverage involves certain
risks. See "Risk Factors." Unless the Fund has other cash or readily marketable
securities to set aside, it cannot trade assets set aside in connection with
derivative contracts or special transactions 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. The Fund reserves the right to modify its
asset segregation policies in the future to comply with any changes in the
positions articulated from time to time by the SEC and its staff.

Generally, special transactions do not cash-settle on a net basis. Consequently,
with respect to special transactions, the Fund will set aside cash or readily
marketable securities with a value that equals or exceeds the Fund's
obligations.

</R>

<R>


HEDGING
Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may also attempt to hedge by using combinations of different derivative
contracts, or derivative contracts and securities. The Fund's ability to hedge
may be limited by the costs of the derivative contracts. The Fund may attempt to
lower the cost of hedging by entering into transactions that provide only
limited protection, including transactions that (1) hedge only a portion of its
portfolio, (2) use derivative contracts that cover a narrow range of
circumstances or (3) involve the sale of derivative contracts with different
terms. Consequently, hedging transactions will not eliminate risk even if they
work as intended. In addition, hedging strategies are not always successful, and
could result in increased expenses and losses to the Fund.

</R>


INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including securities of affiliated money market funds, as an efficient means of
carrying out its investment policies and managing its uninvested cash. These
other investment companies are managed independently of the Fund and incur
additional expenses. Therefore, any such investment by the Fund may be subject
to duplicate expenses. However, the Manager believes that the benefits and
efficiencies of this approach should outweigh the additional expenses.


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 Federated
funds, and an inter-fund loan is only made if it benefits each participating
Federated 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 Federated 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 Federated fund than market-competitive rates on overnight repurchase
agreements (Repo Rate) and more attractive to the borrowing Federated 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
   {circle}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.

   {circle}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
   {circle}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.

   {circle}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
   {circle}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.

   {circle}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.


RISKS ASSOCIATED WITH NON-INVESTMENT GRADE SECURITIES
   {circle}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 ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN
ISSUERS.
   {circle}Because the Fund may invest in ADRs and other domestically traded
      securities of 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.
      Foreign companies may not provide information as frequently or to as great
      an extent as companies in the United States.  Foreign companies may also
      receive less coverage than U.S. companies by market analysts and the
      financial press.  In addition, foreign companies 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 concerning companies in the United States.

RISKS RELATED TO COMPANY SIZE
   {circle}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.

   {circle}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
   {circle}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.

   {circle}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
   {circle}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.

   {circle}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 U.S.
      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.

   {circle}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>

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

   {circle}Investments can have these same results if their returns are based on
      a multiple of a specified index, security, or other benchmark.


CREDIT RISKS
   {circle}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.


RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS
   {circle}The Fund's use of derivative contracts and hybrid instruments
      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 and
      hybrid instruments in which the Fund invests may not be correlated with
      changes in the value of the underlying Reference or Valuation Instruments
      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 derivative
      contracts and hybrid instruments may be erroneously priced or improperly
      valued and, as a result, the Fund may need to make increased cash payments
      to the counterparty.  Fourth, derivative contracts and hybrid instruments
      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. Fifth, a common provision in OTC derivative contracts
      permits the counterparty to terminate any such contract between it and the
      Fund, if the value of the Fund's total net assets declines below a
      specified level over a given time period. Factors that may contribute to
      such a decline (which usually must be substantial) include significant
      shareholder redemptions and/or a marked decrease in the market value of
      the Fund's investments. Any such termination of the Fund's OTC derivative
      contracts may adversely affect the Fund (for example, by increasing losses
      and/or costs, and/or preventing the Fund from fully implementing its
      investment strategies). Finally, derivative contracts and hybrid
      instruments may also involve other risks described herein or in the Fund's
      prospectus, such as stock market, credit, liquidity and leverage 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 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.


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 that the
Fund cannot dispose of within 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.


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 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
<R>

Market values of the Fund's portfolio securities are determined as follows:

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

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

{circle}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;

{circle}for investments in other open-end regulated investment companies, based
  on net asset value;

{circle}or fixed income securities, according to the 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 are valued
  at amortized cost; and

{circle}for all other securities at fair value as determined in accordance with
  procedures established by and under the general supervision of the Board.

Prices for fixed income securities furnished by a pricing service may be based
  on a valuation matrix which incorporates both dealer-supplied valuations and
  electronic data processing techniques. Such prices are generally intended to
  be indicative of the bid prices currently offered to institutional investors
  for the securities. The Board has approved the use of such pricing services. A
  number of pricing services are available, and the Fund may use various pricing
  services or discontinue the use of any pricing service.

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 net asset value
(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 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.



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.


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
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
intermediaries) and providing incentives to financial intermediaries to sell
Shares.  The Plan is also designed to cover the cost of administrative services
performed in conjunction with the sale of Shares, including, but not limited to,
shareholder services, recordkeeping services and educational services, as well
as the costs of implementing and operating the Plan.  The Rule 12b-1 Plan allows
the Distributor to contract with financial intermediaries 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.

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, 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.


ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES
The Distributor may pay out of its own resources amounts (including items of
material value) to certain financial intermediaries.  In some cases, such
payments may be made by, or funded from the resources of, companies affiliated
with the Distributor (including the Manager).  While National Association of
Securities Dealers (NASD) regulations limit the sales charges that you may bear,
there are no limits with regard to the amounts that the Distributor may pay out
of its own resources.  In addition to the payments which are generally described
herein and in the prospectus, the financial intermediary also may receive
payments under the Rule 12b-1 Plan and/or Service Fees. In connection with these
payments, the financial intermediary may elevate the prominence or profile of
the Fund and/or other Federated funds within the financial intermediary's
organization by, for example, placement on a list of preferred or recommended
funds, and/or granting the Distributor preferential or enhanced opportunities to
promote the funds in various ways within the financial intermediary's
organization. You can ask your financial intermediary for information about any
payments it receives from the Distributor or the Federated funds and any
services provided.

The following examples illustrate the types of instances in which the
Distributor may make additional payments to financial intermediaries.


SUPPLEMENTAL PAYMENTS
The Distributor may make supplemental payments to certain financial
intermediaries that are holders or dealers of record for accounts in one or more
of the Federated funds.  These payments may be based on such factors as the
number or value of Shares the financial intermediary sells or may sell; the
value of client assets invested; or the type and nature of services or support
furnished by the financial intermediary.


PROCESSING SUPPORT PAYMENTS
The Distributor may make payments to financial intermediaries that sell
Federated fund shares to help offset their costs associated with client account
maintenance support, statement processing and transaction processing.  The types
of payments that the Distributor may make under this category include payment of
ticket charges on a per transaction basis; payment of networking fees; and
payment for ancillary services such as setting up funds on the financial
intermediary's mutual fund trading system.


RETIREMENT PLAN PROGRAM SERVICING PAYMENTS
The Distributor may make payments to certain financial intermediaries who sell
Federated fund shares through retirement plan programs.  A financial
intermediary may perform retirement plan program services itself or may arrange
with a third party to perform retirement plan program services.  In addition to
participant recordkeeping, reporting, or transaction processing, retirement plan
program services may include services rendered to a plan in connection with
fund/investment selection and monitoring; employee enrollment and education;
plan balance rollover or separation, or other similar services.


OTHER BENEFITS TO FINANCIAL INTERMEDIARIES
From time to time, the Distributor, at its expense, may provide additional
compensation to financial intermediaries that sell or arrange for the sale of
Shares.  Such compensation may include financial assistance to financial
intermediaries that enable the Distributor to participate in or present at
conferences or seminars, sales or training programs for invited employees,
client and investor events and other financial intermediary-sponsored events.

The Distributor also may hold or sponsor, at its expense, sales events,
conferences and programs for employees or associated persons of financial
intermediaries and may pay the travel and lodging expenses of attendees.  The
Distributor also may provide, at its expense, meals and entertainment in
conjunction with meetings with financial intermediaries.  Other compensation may
be offered to the extent not prohibited by applicable laws, regulations or the
rules of any self-regulatory agency, such as the NASD.


UNDERWRITING COMMISSIONS
<R>

The following chart reflects the total front-end sales charges and contingent
deferred sales charges paid in connection with the sale of Class C Shares of the
Fund and the amount retained by the Distributor for the last three fiscal years
ended October 31:

                            2006                       2005                        2004

                 TOTAL SALES                 TOTAL SALES
                 CHARGES        AMOUNT       CHARGES        AMOUNT       TOTAL SALES    AMOUNT
                                RETAINED                    RETAINED     CHARGES        RETAINED
Class C          $1,651         $654         $6,443         $1,468       $34,531        $2,693
Shares


</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 financial intermediaries 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. Financial intermediaries 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 financial intermediary 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
<R>

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 Corporation's outstanding
Shares of all series entitled to vote.

As of December 1, 2006, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares: Teachers
Defined Contribution Retirement Plan, Greenwood Village, CO, owned approximately
2,616,325 Shares (10.38)%; Maril Co., Milwaukee, WI, owned approximately
1,316,161 Shares (5.22)%; Transco & Co., Milwaukee, WI, owned approximately
1,315,482 Shares (5.22)%; Emjay Corporation, Greenwood Village, CO, owned
approximately 1,294,567 Shares (5.13)%.

As  of  December  1,  2006,   the  following   shareholders   owned  of  record,
beneficially,  or both, 5% or more of outstanding  Institutional Service Shares:
Emjay Corporation,  Greenwood Village, CO, owned approximately  3,699,007 Shares
(17.95)%;  Saxon &  Co.,  Philadelphia,  PA, owned  approximately  1,824,963
Shares (8.85)%;  IMS & Co.,  Englewood,  CO, owned  approximately  1,788,490
Shares  (8.68)%;  Paychex  Securities  Corporation,   W.  Henrietta,  NY,  owned
approximately  1,454,265  Shares (7.06)% and Genworth  Financial  Trust Company,
Phoenix, AZ, owned approximately 1,315,134 Shares (6.38)%.

As  of  December  1,  2006,   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  316,418 Shares (10.36)%;
MLPF&S, Jacksonville, FL, owned approximately 295,537 Shares (9.68)% and NFS
LLC, Muncie, IN, owned approximately 232,868 Shares (7.63)%.

As of December 1, 2006, 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 2,119,586 Shares (69.38)%.

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

Planmember Services Corp.,  is organized in the state of California and is a
subsidiary of Planmember Services; organized in the state of California.

</R>



TAX INFORMATION


FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code (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.


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.



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.  As of December 31, 2005, the Trust comprised three
portfolios, and the Federated Fund Complex consisted of 43 investment companies
(comprising 136 portfolios). Unless otherwise noted, each Officer is elected
annually. Unless otherwise noted, each Board member oversees all portfolios in
the Federated Fund Complex and serves for an indefinite term.

As of December 1, 2006, the Fund's Board and Officers as a group owned less than
1% of each class of the Fund's outstanding Shares.


INTERESTED TRUSTEES BACKGROUND AND COMPENSATION







NAME
BIRTH DATE                                                                                                AGGREGATE            TOTAL
ADDRESS                                                                                                COMPENSATION     COMPENSATION
POSITIONS        PRINCIPAL OCCUPATION(S) FOR PAST FIVE YEARS,                                             FROM FUND       FROM TRUST
HELD WITH        OTHER DIRECTORSHIPS HELD AND PREVIOUS POSITION(S)                                     (PAST FISCAL              AND
TRUST                                                                                                         YEAR)        FEDERATED
DATE SERVICE                                                                                                            FUND COMPLEX
BEGAN                                                                                                                          (PAST
                                                                                                                            CALENDAR
                                                                                                                               YEAR)
JOHN F.          PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                       $0               $0
DONAHUE*         Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund
Birth Date:      Complex's Executive Committee.
July 28,
1924             PREVIOUS POSITIONS: Chairman of the Federated Fund Complex; Trustee, Federated
TRUSTEE          Investment Management Company and Chairman and Director, Federated Investment
Began            Counseling.
serving:
January 1990

J.               PRINCIPAL OCCUPATIONS: Principal Executive Officer and President of the Federated               $0               $0
CHRISTOPHER      Fund Complex; Director or Trustee of some of the Funds in the Federated Fund
DONAHUE*         Complex; President, Chief Executive Officer and Director, Federated Investors,
Birth Date:      Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee,
April 11,        Federated Investment Counseling; Chairman and Director, Federated Global
1949             Investment Management Corp.; Chairman, Federated Equity Management Company of
PRESIDENT        Pennsylvania and Passport Research, Ltd. (Investment advisory subsidiary of
AND TRUSTEE      Federated); Trustee, Federated Shareholder Services Company; Director, Federated
Began            Services Company.
serving:
January 1990     PREVIOUS POSITIONS: President, Federated Investment Counseling; President and
                 Chief Executive Officer, Federated Investment Management Company, Federated
                 Global Investment Management Corp. and Passport Research, Ltd.

LAWRENCE D.      PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                $1,295.31         $148,500
ELLIS, M.D.*     Professor of Medicine, University of Pittsburgh; Medical Director, University of
Birth Date:      Pittsburgh Medical Center Downtown; Hematologist, Oncologist and Internist,
October 11,      University of Pittsburgh Medical Center.
1932
3471 Fifth       OTHER DIRECTORSHIPS HELD: Member, National Board of Trustees, Leukemia Society of
Avenue           America.
Suite 1111
Pittsburgh,      PREVIOUS POSITIONS: Trustee, University of Pittsburgh; Director, University of
PA               Pittsburgh Medical Center.
TRUSTEE
Began
serving:
January 1990

* 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
BIRTH DATE                                                                                                AGGREGATE            TOTAL
ADDRESS                                                                                                COMPENSATION     COMPENSATION
POSITIONS        PRINCIPAL OCCUPATION(S) FOR PAST FIVE YEARS,                                             FROM FUND       FROM TRUST
HELD WITH        OTHER DIRECTORSHIPS HELD AND PREVIOUS POSITION(S)                                     (PAST FISCAL              AND
TRUST                                                                                                         YEAR)        FEDERATED
DATE SERVICE                                                                                                            FUND COMPLEX
BEGAN                                                                                                                          (PAST
                                                                                                                            CALENDAR
                                                                                                                               YEAR)
THOMAS G.        PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                 $1,424.83         $163,350
BIGLEY
Birth Date:      OTHER DIRECTORSHIPS HELD: Director, Member of Executive Committee, Children's
February 3,      Hospital of Pittsburgh; Director, University of Pittsburgh.
1934
15 Old           PREVIOUS POSITION: Senior Partner, Ernst & Young LLP.
Timber Trail
Pittsburgh,
PA
TRUSTEE
Began
serving:
October 1995

JOHN T.          PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                $1,424.83         $163,350
CONROY, JR.      Chairman of the Board, Investment Properties Corporation; Partner or Trustee in
Birth Date:      private real estate ventures in Southwest Florida.
June 23,
1937             PREVIOUS POSITIONS: President, Investment Properties Corporation; Senior Vice
Investment       President, John R. Wood and Associates, Inc., Realtors; President, Naples
Properties       Property Management, Inc. and Northgate Village Development Corporation.
Corporation
3838 North
Tamiami
Trail
Suite 402
Naples, FL
TRUSTEE
Began
serving:
August, 1991

NICHOLAS P.      PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                 $1,424.83         $163,350
CONSTANTAKIS
Birth Date:      OTHER DIRECTORSHIPS HELD: Director and Member of the Audit Committee, Michael
September 3,     Baker Corporation (engineering and energy services worldwide).
1939
175              PREVIOUS POSITION: Partner, Andersen Worldwide SC.
Woodshire
Drive
Pittsburgh,
PA
TRUSTEE
Began
serving:
February
1998

JOHN F.          PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex;                 $1,295.31         $148,500
CUNNINGHAM       Director, WinsorTech.
Birth Date:
March 5,         OTHER DIRECTORSHIPS HELD: Chairman, President and Chief Executive Officer,
1943             Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston
353 El           College.
Brillo Way
Palm Beach,      PREVIOUS POSITIONS: Director, Redgate Communications and EMC Corporation
FL               (computer storage systems); Chairman of the Board and Chief Executive Officer,
TRUSTEE          Computer Consoles, Inc.; President and Chief Operating Officer, Wang
Began            Laboratories; Director, First National Bank of Boston; Director, Apollo Computer,
serving:         Inc.
January 1999

PETER E.         PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                 $1,295.31         $148,500
MADDEN
Birth Date:      OTHER DIRECTORSHIPS HELD: Board of Overseers, Babson College.
March 16,
1942             PREVIOUS POSITIONS: Representative, Commonwealth of Massachusetts General Court;
One Royal        President, State Street Bank and Trust Company and State Street Corporation
Palm Way         (retired); Director, VISA USA and VISA International; Chairman and Director,
100 Royal        Massachusetts Bankers Association; Director, Depository Trust Corporation;
Palm Way         Director, The Boston Stock Exchange.
Palm Beach,
FL
TRUSTEE
Began
serving:
August 1991

CHARLES F.       PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                $1,424.83         $163,350
MANSFIELD,       Management Consultant.
JR.
Birth Date:      PREVIOUS POSITIONS: Chief Executive Officer, PBTC International Bank; Partner,
April 10,        Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail
1945             Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA
80 South         (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of
Road             Banking and Finance, Frank G. Zarb School of Business, Hofstra University;
Westhampton      Executive Vice President DVC Group, Inc.
Beach, NY
TRUSTEE
Began
serving:
January 1999

JOHN E.          PRINCIPAL OCCUPATIONS: Director or Trustee, and Chairman of the Board of                 $1,643.67         $178,200
MURRAY, JR.,     Directors or Trustees, of the Federated Fund Complex; Chancellor and Law
J.D., S.J.D.     Professor, Duquesne University; Partner, Murray, Hogue & Lannis.
Birth Date:
December 20,     OTHER DIRECTORSHIPS HELD: Director, Michael Baker Corp. (engineering,
1932             construction, operations and technical services).
Chancellor,
Duquesne         PREVIOUS POSITIONS: President, Duquesne University; Dean and Professor of Law,
University       University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
Pittsburgh,      University School of Law.
PA
TRUSTEE
Began
serving:
February
1995

THOMAS M.        PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                       $0               $0
O'NEILL          Managing Director and Partner, Navigator Management Company, L.P. (investment and
Birth Date:      strategic consulting).
June 14,
1951             OTHER DIRECTORSHIPS HELD: Director, Midway Pacific (lumber); Board of Overseers,
95 Standish      Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College.
Street
P.O. Box         PREVIOUS POSITIONS: Chief Executive Officer and President, Managing Director and
2779             Chief Investment Officer, Fleet Investment Advisors; President and Chief
Duxbury, MA      Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman,
Trustee          Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam
Began            Companies, Boston, MA; and Credit Analyst and Lending Officer, Fleet Bank.
serving:
October 2006
MARJORIE P.      PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex; Public        $1,295.31         $148,500
SMUTS            Relations/Marketing Consultant/Conference Coordinator.
Birth Date:
June 21,         PREVIOUS POSITIONS: National Spokesperson, Aluminum Company of America;
1935             television producer; President, Marj Palmer Assoc.; Owner, Scandia Bord.
4905 Bayard
Street
Pittsburgh,
PA
TRUSTEE
Began
serving:
January 1990

JOHN S.          PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex;               $1,295.31         $148,500
WALSH            President and Director, Heat Wagon, Inc. (manufacturer of construction temporary
Birth Date:      heaters); President and Director, Manufacturers Products, Inc. (distributor of
November 28,     portable construction heaters); President, Portable Heater Parts, a division of
1957             Manufacturers Products, Inc.
2604 William
Drive            PREVIOUS POSITION: Vice President, Walsh & Kelly, Inc.
Valparaiso,
IN
TRUSTEE
Began
serving:
January 1999
JAMES F.         PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex; Vice          $1,295.31               $0
WILL             Chancellor and President, Saint Vincent College.
Birth Date:
October 12,      OTHER DIRECTORSHIPS HELD: Alleghany Corporation.
1938
Saint            PREVIOUS POSITIONS: Chairman, President and Chief Executive Officer, Armco, Inc.;
Vincent          President and Chief Executive Officer, Cyclops Industries; President and Chief
College          Operating Officer, Kaiser Steel Corporation.
Latrobe, PA
TRUSTEE
Began
serving:
April 2006


OFFICERS**

NAME
BIRTH DATE
ADDRESS
POSITIONS HELD
WITH TRUST       PRINCIPAL OCCUPATION(S) AND PREVIOUS POSITION(S)
DATE SERVICE
BEGAN
JOHN W.          PRINCIPAL OCCUPATIONS: Executive Vice President and Secretary of the Federated Fund Complex; Vice Chairman,
MCGONIGLE        Executive Vice President, Secretary and Director, Federated Investors, Inc.
Birth Date:
October 26, 1938 PREVIOUS POSITIONS: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director,
EXECUTIVE VICE   Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp.
PRESIDENT AND
SECRETARY
Began serving:
February 1990

RICHARD A. NOVAK PRINCIPAL OCCUPATIONS: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice
Birth Date:      President, Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp.,
December 25,     Edgewood Services, Inc. and Southpointe Distribution Services, Inc.
1963
TREASURER
Began serving:   PREVIOUS POSITIONS: Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company;
January 2006     held various financial management positions within The Mercy Hospital of Pittsburgh; Auditor, Arthur Andersen & Co.

RICHARD B.       PRINCIPAL OCCUPATIONS: Vice Chairman or Vice President of some of the Funds in the Federated Fund Complex; Vice
FISHER           Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Birth Date: May
17, 1923         PREVIOUS POSITIONS: President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive
VICE PRESIDENT   Vice President, Federated Investors, Inc. and Director and Chief Executive Officer, Federated Securities Corp.
Began serving:
February 1990

BRIAN P. BOUDA   PRINCIPAL OCCUPATIONS: Senior Vice President and Chief Compliance Officer of the Federated Fund Complex; Vice
Birth Date:      President and Chief Compliance Officer of Federated Investors, Inc.; and Chief Compliance Officer of its
February 28,     subsidiaries. Mr. Bouda joined Federated in 1999 and is a member of the American Bar Association and the State Bar
1947             Association of Wisconsin.
SENIOR VICE
PRESIDENT
Began serving:
January 2006

STEPHEN F. AUTH  PRINCIPAL OCCUPATIONS: Chief Investment Officer of this Fund and various other Funds in the Federated Fund Complex;
Birth Date:      Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and
September 3,     Federated Equity Management Company of Pennsylvania.
1956
CHIEF INVESTMENT PREVIOUS POSITIONS: Executive Vice President, Federated Investment Management Company, and Passport Research, Ltd.
OFFICER          (Investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services
Began serving:   Division; Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior
November 2002    Managing Director and Portfolio Manager, Prudential Investments.

JOHN W.   PRINCIPAL OCCUPATIONS: John W. Harris has been the Fund's Portfolio Manager since January 2003. He is Vice President of
HARRIS    the Trust.   Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst
Birth     and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May
Date:     1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment
June 6,   Analyst and became a Portfolio Manager and an Assistant Vice President of the Fund's Adviser in December 1998.  Mr. Harris
1954      continues to be a Portfolio Manager of certain Federated Funds.  In January 2000, Mr. Harris became a Vice President of
VICE      the Fund's Adviser. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh.
PRESIDENT
Began
serving:
May 2004

* Officers do not receive any compensation from the Fund.

In addition, the Fund has appointed an Anti-Money Laundering Compliance Officer.


COMMITTEES OF THE BOARD
                                                                                                                           MEETINGS
BOARD          COMMITTEE                                                                                                   HELD
COMMITTEE      MEMBERS          COMMITTEE FUNCTIONS                                                                        DURING
                                                                                                                           LAST
                                                                                                                           FISCAL
                                                                                                                           YEAR
EXECUTIVE      John F.          In between meetings of the full Board, the Executive Committee generally may exercise      Two
               Donahue          all the powers of the full Board in the management and direction of the business and
               John E.          conduct of the affairs of the Trust in such manner as the Executive Committee shall
               Murray, Jr.,     deem to be in the best interests of the Trust.  However, the Executive Committee
               J.D., S.J.D.     cannot elect or remove Board members, increase or decrease the number of Trustees,
               John S.          elect or remove any Officer, declare dividends, issue shares or recommend to
               Walsh            shareholders any action requiring shareholder approval.

AUDIT          Thomas G.        The purposes of the Audit Committee are to oversee the accounting and financial            Ten
               Bigley           reporting process of the Fund, the Fund's internal control over financial reporting,
               John T.          and the quality, integrity and independent audit of the Fund's financial statements.
               Conroy, Jr.      The Committee also oversees or assists the Board with the oversight of compliance with
               Nicholas P.      legal requirements relating to those matters, approves the engagement and reviews the
               Constantakis     qualifications, independence and performance of the Fund's independent registered
               Charles F.       public accounting firm, acts as a liaison between the independent registered public
               Mansfield,       accounting firm and the Board and reviews the Fund's internal audit function.
               Jr.



NOMINATING     Thomas G.        The Nominating Committee, whose members consist of all Independent Trustees, selects       One
               Bigley           and nominates persons for election to the Fund's Board when vacancies occur. The
               John T.          Committee will consider candidates recommended by shareholders, Independent Trustees,
               Conroy, Jr.      officers or employees of any of the Fund's agents or service providers and counsel to
               Nicholas P.      the Fund. Any shareholder who desires to have an individual considered for nomination
               Constantakis     by the Committee must submit a recommendation in writing to the Secretary of the Fund,
               John F.          at the Fund's address appearing on the back cover of this Statement of Additional
               Cunningham       Information. The recommendation should include the name and address of both the
               Peter E.         shareholder and the candidate and detailed information concerning the candidate's
               Madden           qualifications and experience. In identifying and evaluating candidates for
               Charles F.       consideration, the Committee shall consider such factors as it deems appropriate.
               Mansfield,       Those factors will ordinarily include:  integrity, intelligence, collegiality,
               Jr.              judgment, diversity, skill, business and other experience, qualification as an
               John E.          "Independent Trustee," the existence of material relationships which may create the
               Murray, Jr.      appearance of a lack of independence, financial or accounting knowledge and
               Thomas M.        experience, and dedication and willingness to devote the time and attention necessary
               O'Neill          to fulfill Board responsibilities.
               Marjorie P.
               Smuts
               John S.
               Walsh
               James F.
               Will


BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE FEDERATED FAMILY OF INVESTMENT
COMPANIES AS OF DECEMBER 31, 2005

                                                                                     AGGREGATE
                                                      DOLLAR RANGE OF          DOLLAR RANGE OF
                                                         SHARES OWNED          SHARES OWNED IN
INTERESTED                            IN FEDERATED MAX-CAP INDEX FUND      FEDERATED FAMILY OF
BOARD MEMBER NAME                                                         INVESTMENT 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.                                     Over $100,000            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.                           $10,001 - $50,000            Over $100,000
John E. Murray, Jr., J.D., S.J.D.                                None            Over $100,000
Thomas M. O'Neill                                                None                     None
Marjorie P. Smuts                                                None            Over $100,000
John S. Walsh                                      $50,001 - $100,000            Over $100,000
James F. Will                                                    None                     None

</R>

INVESTMENT MANAGER
<R>

The Manager oversees the Subadviser. Effective the close of business on
September 29, 2006, BlackRock Investment Management, LLC (Subadviser), a
subsidiary of BlackRock, Inc., 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 Subadviser for the Fund
and thereafter monitoring and evaluating the performance of the Subadviser
through quantitative and qualitative analyses. In addition, the Manager conducts
periodic in-person, telephonic and written consultations with the Subadviser. In
initially evaluating the Subadviser, the Manager considered, among other
factors, the Subadviser'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
Subadviser'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
Subadviser; 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 Fund; discussing with the Subadviser the portfolio sampling
techniques employed by the Subadviser; and ultimately recommending to the Board
whether the Subadvisory Agreement 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 Subadviser, 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 Subadviser 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.


PORTFOLIO MANAGER INFORMATION
The following information about the Fund's Portfolio Managers is provided as of
August 31, 2006, except information regarding compensation for Leon Rosenberg,
Jeffrey L. Russo and Debra L. Jelilian and Potential Material Conflicts of
Interest is provided as of September 29, 2006.

OTHER ACCOUNTS MANAGED           TOTAL NUMBER OF OTHER ACCOUNTS MANAGED
                                 / TOTAL ASSETS*

Registered Investment Companies  13 funds /  $3,132.14 million
Other Pooled Investment Vehicles 0
Other Accounts                   0


*  None of the Accounts has an advisory fee that is based on the performance of
the account.

Dollar value range of shares owned in the Fund:  none.


John Harris is paid a fixed base salary and a variable annual incentive.  Base
salary is determined within a market competitive position-specific salary range,
based on the portfolio manager's experience and performance.  The annual
incentive amount is determined based on multiple performance criteria using a
Balanced Scorecard methodology, and may be paid entirely in cash, or in a
combination of cash and restricted stock of Federated Investors, Inc.
(Federated).  There are Four weighted performance categories in the Balanced
Scorecard.  Investment Product Performance (IPP) is the predominant factor.  Of
lesser importance are: Leadership/Teamwork/Communication, Research Performance,
and Financial Success.  The total Balanced Scorecard "score" is applied against
an annual incentive opportunity that is competitive in the market for this
portfolio manager role to determine the annual incentive payment.


IPP is determined with regard to certain other accounts serviced by Mr. Harris,
and measured by applying two components.  The first component includes accounts
for which Mr. Harris serves as portfolio manager and assesses performance of
asset allocation decisions over rolling 1, 3 and 5 calendar years versus
performance of pre-defined allocation models.  For certain funds, 1, 3, and 5
calendar year pre-tax gross returns, or taxable equivalent returns, are measured
vs. designated peer groups of comparable accounts.  In addition, for certain
accounts, performance is measured by comparing the account's average one-year
distribution yield, or taxable equivalent, for 1, 3 and 5 calendar year periods
to those of designated peer group accounts.  The second component includes
certain additional accounts for which Mr. Harris provides quantitative
analytical support, measured on a rolling 1, 3, and 5 calendar year, pre-tax
gross return basis vs. fund benchmarks and/or on a rolling 1, 3, and 5 calendar
year, pre-tax gross return basis vs. designated peer groups of comparable
accounts.  With respect to this component, accounts are categorized according to
investment strategy, and performance of each strategy category receives equal
weighting.  Performance of each account within a strategy also receives equal
weighting.  Performance periods are adjusted if the portfolio manager has been
managing the fund for less than five years; funds with less than one year of
performance history under the portfolio manager may be excluded.  The IPP score
can be reduced based on management's assessment of the Fund's comparative risk
profile.


Leadership/Teamwork/Communication is assessed by Federated's management.


Research performance focuses on the quality and timeliness of allocation
recommendations, the quality and timeliness of quantitative support and other
qualitative factors and is assessed by the Chief Investment Officer.


The Financial Success category is designed to tie the portfolio manager's bonus,
in part, to Federated's overall financial health, and any awards are predicated
on Federated's attainment of specified financial targets.  Senior management
determines individual Financial Success scores on a discretionary basis,
considering overall contributions, including factors not fully reflected in the
other Balanced Scorecard categories.


As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a fund's investments, on the one hand, and
the investments of other accounts for which the portfolio manager is
responsible, on the other.  For example, it is possible that the various
accounts managed could have different investment strategies that, at times,
might conflict with one another to the possible detriment of the Fund.
Alternatively, to the extent that the same investment opportunities might be
desirable for more than one account, possible conflicts could arise in
determining how to allocate them.  Other potential conflicts might include
conflicts created by specific portfolio manager compensation arrangements, and
conflicts relating to selection of brokers or dealers to execute fund portfolio
trades and/or specific uses of commissions from Fund portfolio trades (for
example, research, or "soft dollars").  The Adviser has structured the portfolio
managers' compensation in a manner, and the Fund has adopted policies and
procedures, reasonably designed to safeguard the Fund from being negatively
affected as a result of any such potential conflicts.

                                         NUMBER OF OTHER ACCOUNTS MANAGED             NUMBER OF ACCOUNTS AND ASSETS FOR WHICH
 NAME OF INVESTMENT ADVISER AND             AND ASSETS BY ACCOUNT TYPE                   ADVISORY FEE IS PERFORMANCE-BASED
       PORTFOLIO MANAGER

                                   REGISTERED      OTHER POOLED                     REGISTERED      OTHER POOLED
                                   INVESTMENT       INVESTMENT                      INVESTMENT       INVESTMENT    OTHER ACCOUNTS
                                    COMPANIES        VEHICLES     OTHER ACCOUNTS     COMPANIES        VEHICLES
         LEON ROSENBERG                 3               11              10              1*               3*              2
(FEDERATED MAX-CAP INDEX FUND     $904,877,749    $3,155,231,081  $6,546,942,850   $155,168,962    $1,204,466,504  $3,251,114,501
ONLY)
        JEFFREY L. RUSSO               11               26              34              1*               3*              2
                                 $5,308,387,252  $14,102,055,855  $42,406,933,220  $155,168,962    $1,204,466,504  $3,251,114,501
       DEBRA L. JELILIAN               13               15              24               0               0               0
                                 $5,538,678,934  $10,946,824,774  $35,859,990,370

* A portion of the assets in the master fund of a master-feeder structure are
subject to a performance fee.

FUND OWNERSHIP

Each portfolio manager owned no shares of the Fund as of August 31, 2006.

PORTFOLIO MANAGER COMPENSATION

The Portfolio Manager Compensation Program of BlackRock Advisors, LLC and its
affiliates, including the Subadviser, ("BlackRock Advisors") is critical to
BlackRock Advisors' ability to attract and retain the most talented asset
management professionals. This program ensures that compensation is aligned with
maximizing investment returns and it provides a competitive pay opportunity for
competitive performance.

COMPENSATION PROGRAM

The elements of total compensation for BlackRock Advisors portfolio managers are
base salary, annual performance-based cash and stock compensation (cash and
stock bonus) and other benefits. BlackRock Advisors has balanced these
components of pay to provide portfolio managers with a powerful incentive to
achieve consistently superior investment performance.  By design, portfolio
manager compensation levels fluctuate - both up and down - with the relative
investment performance of the portfolios that they manage.

   BASE SALARY

   Under the BlackRock Advisors approach, like that of many asset management
   firms, base salaries represent a relatively small portion of a portfolio
   manager's total compensation. This approach serves to enhance the
   motivational value of the performance-based (and therefore variable)
   compensation elements of the compensation program.

   PERFORMANCE-BASED COMPENSATION

   BlackRock Advisors believes that the best interests of investors are served
   by recruiting and retaining exceptional asset management talent and managing
   their compensation within a consistent and disciplined framework that
   emphasizes pay for performance in the context of an intensely competitive
   market for talent. To that end, the portfolio manager incentive compensation
   is based on a formulaic compensation program. BlackRock Advisors' formulaic
   portfolio manager compensation program includes: pre-tax investment
   performance relative to appropriate competitors or benchmarks over 1-3- and
   5-year performance periods. If a portfolio manager's tenure is less than 5
   years, performance periods will reflect time in position. In addition,
   portfolio manager's compensation can be based on BlackRock's investment
   performance, financial results of BlackRock, expense control, profit margins,
   strategic planning and implementation, quality of client service, market
   share, corporate reputation, capital allocation, compliance and risk control,
   leadership, workforce diversity, technology and innovation. All factors are
   considered collectively by BlackRock Advisors management.

   CASH BONUS

   Performance-based compensation is distributed to portfolio managers in a
   combination of cash and stock. Typically, the cash bonus, when combined with
   base salary, represents more than 60% of total compensation for portfolio
   managers.

   STOCK BONUS

   A portion of the dollar value of the total annual performance-based bonus is
   paid in restricted shares of BlackRock, Inc. (the "Company") stock.  Paying a
   portion of annual bonuses in stock puts compensation earned by a portfolio
   manager for a given year "at risk" based on the Company's ability to sustain
   and improve its performance over future periods.

   The ultimate value of stock bonuses is dependent on future Company stock
   price performance. As such, the stock bonus aligns each portfolio manager's
   financial interests with those of the Company's shareholders and encourages a
   balance between short-term goals and long-term strategic objectives.

   Management strongly believes that providing a significant portion of
   competitive performance-based compensation in stock is in the best interests
   of investors and shareholders. This approach ensures that portfolio managers
   participate as shareholders in both the "downside risk" and "upside
   opportunity" of the Company's performance.  Portfolio managers therefore have
   a direct incentive to protect Company's reputation for integrity.

   OTHER BENEFITS

   Portfolio managers are also eligible to participate in broad-based plans
   offered generally to BlackRock employees, including broad-based retirement,
   401(k), health, and other employee benefit plans.

POTENTIAL MATERIAL CONFLICTS OF INTEREST

Real, potential or apparent conflicts of interest may arise when a portfolio
manager has day-today portfolio management responsibilities with respect to more
than one fund or account, including the following:

Certain investments may be appropriate for the portfolios and also for other
clients advised by BlackRock Advisors and its affiliates (including the
Subadviser), including other client accounts managed by a portfolio's portfolio
management team.  Investment decisions for a portfolio and other clients are
made with a view to achieving their respective investment objectives and after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investments generally.  Frequently, a
particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, because clients of BlackRock Advisors and its affiliates may have
differing investment strategies, a particular security may be bought for one or
more clients when one or more other clients are selling the security. The
investment results for a portfolio may differ from the results achieved by other
clients of BlackRock Advisors and its affiliates and results among clients may
differ.  In addition, purchases or sales of the same security may be made for
two or more clients on the same day.  In such event, such transactions will be
allocated among the clients in a manner believed by BlackRock Advisors to be
equitable to each.  BlackRock Advisors will not determine allocations based on
whether it receives a performance based fee from the client.  In some cases, the
allocation procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a portfolio.  Purchase and sale orders for a
portfolio may be combined with those of other clients of BlackRock Advisors and
its affiliates in the interest of achieving the most favorable net results to
the portfolio.

To the extent that the portfolio's portfolio management team has
responsibilities for managing accounts in addition to the portfolios, a
portfolio manager will need to divide his or her time and attention among
relevant accounts.


      In some cases, a real, potential or apparent conflict may also arise where
(i) BlackRock Advisors or a portfolio manager may have an incentive, such as a
performance based fee, in managing one account and not with respect to other
accounts it manages or (ii) a portfolio manager owns an interest in one fund or
account he or she manages and not another.


</R>


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.


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, as well as Shares of the Fund, 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.


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 Adviser 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 subadviser 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 Institutional Shareholder
Services (ISS) to obtain, vote, and record proxies in accordance with the Proxy
Committee's directions.  The Proxy Committee directs ISS by means of Proxy
Voting Guidelines, and ISS 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, ISS
will provide the Proxy Committee with all information that it has obtained
regarding the proposal and the Proxy Committee will provide specific direction
to ISS.  The Manger'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 Adviser (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.

PROXY VOTING REPORT
A report on "Form N-PX" of how the Fund voted any proxies during the most recent
12-month period ended June 30 is available through Federated's website.  Go to
FederatedInvestors.com; select "Products;" select the Fund; then use the link to
"Prospectuses and Regulatory Reports" to access the link to Form N-PX. Form N-PX
filings are also available at the SEC's website at www.sec.gov.


PORTFOLIO HOLDINGS INFORMATION
Information concerning the Fund's portfolio holdings is available in the
"Products" section of Federated's website at FederatedInvestors.com. A complete
listing of the Fund's portfolio holdings as of the end of each calendar quarter
is posted on the website 30 days (or the next business day) after the end of the
quarter and remains posted until replaced by the information for the succeeding
quarter. Summary portfolio composition information as of the close of each month
is posted on the website 15 days (or the next business day) after month-end and
remains until replaced by the information for the succeeding month.  The summary
portfolio composition information may include identification of the Fund's top
ten holdings and a percentage breakdown of the portfolio by sector.

To access this information from the "Products" section of the website, click on
"Portfolio Holdings" and select the appropriate link opposite the name of the
Fund, or select the name of the Fund from the menus on the "Products" section,
and from the Fund's page click on the "Portfolio Holdings" or "Composition"
link.  A user is required to register on the website the first time the user
accesses this information.

You may also access from the "Products" section of the website portfolio
information as of the end of the Fund's fiscal quarters.  The Fund's annual and
semiannual reports, which contain complete listings of the Fund's portfolio
holdings as of the end of the Fund's second and fourth fiscal quarters, may be
accessed by selecting the name of the Fund, clicking on "Prospectuses and
Regulatory Reports" and selecting the link to the appropriate PDF.  Complete
listings of the Fund's portfolio holdings as of the end of the Fund's first and
third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the
"Products" section and then selecting the appropriate link opposite the name of
the Fund.  Fiscal quarter information is made available on the website within 70
days after the end of the fiscal quarter.  This information is also available in
reports filed with the SEC at the SEC's website at www.sec.gov.

The disclosure policy of the Fund and the Manager prohibits the disclosure of
portfolio holdings information to any investor or intermediary before the same
information is made available to other investors.  Employees of the Manager or
its affiliates who have access to nonpublic information concerning the Fund's
portfolio holdings are prohibited from trading securities on the basis of this
information.  Such persons must report all personal securities trades and obtain
pre-clearance for all personal securities trades other than mutual fund shares.

Firms that provide administrative, custody, financial, accounting, legal or
other services to the Fund may receive nonpublic information about Fund
portfolio holdings for purposes relating to their services.  The Fund may also
provide portfolio holdings information to publications that rate, rank or
otherwise categorize investment companies.  Traders or portfolio managers may
provide "interest" lists to facilitate portfolio trading if the list reflects
only that subset of the portfolio for which the trader or portfolio manager is
seeking market interest.  A list of service providers, publications and other
third parties who may receive nonpublic portfolio holdings information appears
in the Appendix to this SAI.

The furnishing of nonpublic portfolio holdings information to any third party
(other than authorized governmental or regulatory personnel) requires the prior
approval of the President of the Manager and of the Chief Compliance Officer of
the Fund.  The President of the Manager and the Chief Compliance Officer will
approve the furnishing of nonpublic portfolio holdings information to a third
party only if they consider the furnishing of such information to be in the best
interests of the Fund and its shareholders.  In that regard, and to address
possible conflicts between the interests of Fund shareholders and those of the
Manager and its affiliates, the following procedures apply.  No consideration
may be received by the Fund, the Manager, any affiliate of the Manager or any of
their employees in connection with the disclosure of portfolio holdings
information.  Before information is furnished, the third party must sign a
written agreement that it will safeguard the confidentiality of the information,
will use it only for the purposes for which it is furnished and will not use it
in connection with the trading of any security.  Persons approved to receive
nonpublic portfolio holdings information will receive it as often as necessary
for the purpose for which it is provided.  Such information may be furnished as
frequently as daily and often with no time lag between the date of the
information and the date it is furnished.  The Board receives and reviews
annually a list of the persons who receive nonpublic portfolio holdings
information and the purposes for which it is furnished.


BROKERAGE TRANSACTIONS AND INVESTMENT ALLOCATION
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).  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.


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
State Street Bank and Trust Company, the Fund's registered transfer agent,
maintains all necessary shareholder records.


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The independent  registered  public  accounting  firm for the Fund,  Ernst &
Young LLP,  conducts its audits in  accordance  with the standards of the Public
Company Accounting Oversight Board (United States), 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.

<R>


FEES PAID BY THE FUND FOR SERVICES
 FOR THE YEAR ENDED OCTOBER 31           2006        2005              2004
 Management Fee Earned             $3,883,865     $1,119,634     $6,640,389
 Management Fee Reduction          243,094        242,439        145,675
 Management Fee Reimbursement      0              51             1,690
 Sub-Advisory Fee                  543,741        576,749        649,978
 Brokerage Commissions             194,439        197,597        239,600
 12B-1 FEE:
  Institutional Service Shares     265,293        --             --
  Class C Shares                   600,877        --             --
  Class K Shares                   299,615        --             --
 SHAREHOLDER SERVICES FEE:
  Institutional Shares             0              --             --
  Institutional Service Shares     1,296,268      --             --
  Class C Shares                   152,387        --             --
  Class K Shares                   0              --             --
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.

</R>



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.


AVERAGE ANNUAL TOTAL RETURNS AND YIELD
<R>

Total returns are given for the one-year, five-year and ten-year or Start of
Performance periods ended October 31, 2006.

Yield is given for the 30-day period ended October 31, 2006.

                                    30-DAY PERIOD  1 YEAR   5 YEARS  10 YEARS
INSTITUTIONAL SHARES:
Total Return
  Before Taxes                      N/A            15.99%   6.93%    8.23%
  After Taxes on Distributions      N/A            15.09%   6.50%    7.55%
  After Taxes on Distributions
       and Sale of Shares
                                    N/A            10.87%   5.81%    6.89%
Yield                               1.52%          N/A      N/A      N/A




                                   30-DAY PERIOD   1 YEAR   5 YEARS    10 YEARS
INSTITUTIONAL SERVICE SHARES:
Total Return
  Before Taxes                     N/A             15.63%   6.62%      7.91%
  After Taxes on Distributions     N/A             14.84%   6.26%      7.33%
  After Taxes on Distributions
       and Sale of Shares
                                   N/A             10.63%   5.58%      6.66%
Yield                              1.22%           N/A      N/A        N/A




                                                                       START OF
                                                                       PERFORMANCE ON
                                     30-DAY PERIOD  1 YEAR   5 YEARS   NOVEMBER 10, 1997
CLASS C SHARES:
Total Return
  Before Taxes                       N/A            12.71%   5.65%     4.69%
  After Taxes on Distributions       N/A            12.16%   5.48%     4.39%
  After Taxes on Distributions
      and Sale of Shares
                                     N/A            8.70%    4.82%     3.94%
Yield                                0.48%          N/A      N/A       N/A




                                   30-DAY PERIOD   1 YEAR     5 YEARS   10 YEARS
CLASS K SHARES:
Total Return
  Before Taxes                     N/A             15.14%     6.15%     7.42%
  After Taxes on Distributions     N/A             14.48%     5.90%     6.99%
  After Taxes on Distributions
       and Sale of Shares
                                   N/A             10.29%     5.22%     6.32%
Yield                              0.78%           N/A        N/A       N/A

</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.


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 financial intermediaries charge fees in connection with services
provided in conjunction with an investment in Shares, the Share performance is
lower for shareholders paying those fees.



WHO IS FEDERATED INVESTORS, INC.?

Federated and its subsidiaries are dedicated to providing you with world-class
investment management.  With offices in Pittsburgh, New York City and Frankfurt,
Federated is a firm with independent research, product breadth and industry
standing.

Federated seeks to achieve superior and sustainable investment performance for a
broad array of global clients through a disciplined investment process and an
information advantage created by proprietary fundamental research.  Federated is
distinctive in our disciplined process that integrates proprietary research with
trading and portfolio management.


FEDERATED FUNDS OVERVIEW

EQUITIES
As of December 31, 2005, Federated managed 35 equity funds totaling
approximately $26.0 billion in assets across growth, value, equity income,
international, index and sector allocation styles.


TAXABLE FIXED INCOME
As of December 31, 2005, Federated managed 33 taxable bond funds including:
high-yield, multi-sector, mortgage-backed, U.S. government, U.S. corporate and
international, with assets approximating $16.0 billion.


TAX FREE FIXED INCOME
As of December 31, 2005, Federated managed 15 municipal bond funds with
approximately $3.1 billion in assets and 22 municipal money market funds with
approximately $27.6 billion in total assets.


MONEY MARKET FUNDS
As of December 31, 2005, Federated managed $145.3 billion in assets across 53
money market funds, including 18 government, 12 prime, 22 municipal and 1 euro-
denominated with assets approximating $54.9 billion, $62.6 billion, $27.6
billion and $113.8 million.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: Stephen F. Auth, CFA, for Global
Equity; Robert J. Ostrowski, CFA, for Taxable Fixed Income; Mary Jo Ochson, CFA,
for Tax Free Fixed Income; and Deborah A. Cunningham, CFA, for Money Market
Funds.



FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended October 31,
2006, are incorporated herein by reference to the Annual Report to Shareholders
of Federated Max-Cap Index Fund dated October 31, 2006.


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


SUBADVISER
BlackRock Investment Management, LLC
P.O. Box 9011
Princeton, NJ 08543-9011

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072





APPENDIX

<R>

The following is a list of persons other than the Adviser and its affiliates
that may receive nonpublic portfolio holdings information concerning the Fund:


CUSTODIAN
State Street Bank and Trust Company


SECURITIES LENDING AGENT
Citigroup
Metropolitan West Securities, LLC

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP


LEGAL COUNSEL
Dickstein Shapiro LLP
Reed Smith LLP

SERVICE PROVIDERS
Bloomberg
Factset
Institutional Shareholder Services
Investor Responsibility Research Center
Wilshire Associates, Inc.

SECURITY PRICING SERVICES
Reuters
Standard & Poor's
FT Interactive Data
Bear Stearns

RATINGS AGENCIES
Standard & Poor's


PERFORMANCE REPORTING/PUBLICATIONS
Fidelity Strategic Advisors

Lipper

Morningstar

NASDAQ

Value Line

Wiesenberger/Thomson Financial


OTHER
Investment Company Institute
Astec Consulting Group, Inc.

</R>





[Graphic Omitted]


[Graphic Omitted]
Federated Max-Cap Index Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Contact us at FEDERATEDINVESTORS.COM
or call 1-800-341-7400.

Federated Securities Corp., Distributor

0032104B (12/06)

Federated is a registered mark
of Federated Investors, Inc.
2006 {copyright}Federated Investors, Inc.

[Graphic Omitted]

Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Mid-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

<R>

December 31, 2006

</R>

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.

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

CONTENTS

<R>

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?	10
What Do Shares Cost?	13
How is the Fund Sold?	14
Payments to Financial Intermediaries	15
How to Purchase Shares	16
How to Redeem and Exchange Shares	19
Account and Share Information	22
Who Manages the Fund?	26
Legal Proceedings	28
Financial Information	29
Appendix A: Hypothetical Investment and Expense Information	31

</R>

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.

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). The Fund may invest in derivative contracts to implement its investment strategies as more fully described in this prospectus.

The Fund’s investment manager (Manager) has received an exemptive order from the SEC to permit the Trust and the Board of Trustees (the “Board”) 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.
• 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. 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.
• 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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• Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund’s use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or the Fund’s Statement of Additional Information (SAI), such as stock market, credit, liquidity and leverage risks.

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

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

Risk/Return Bar Chart and Table

The 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.

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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.

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The Fund’s total return for the nine-month period from January 1, 2006 to September 30, 2006 was 2.77%.

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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).

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Average Annual Total Return Table

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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 MidCap 400 Index (S&P 400), a broad based market capitalization-weighted index of common stocks representing all major industries in the mid-range of the U.S. stock market. 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.

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(For the Periods Ended December 31, 2005)

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	1 Year	5 Years	10 Years
Fund:
Return Before Taxes	12.01%	7.96%	13.56%
Return After Taxes on Distributions1	10.64%	7.30%	11.68%
Return After Taxes on Distributions and Sale of Fund Shares1	8.79%	6.67%	11.08%
S&P 400	12.58%	8.61%	14.36%

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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.

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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)	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 and Reduction)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee2	0.40%
Distribution (12b-1) Fee	None
Other Expenses3	0.32%
Total Annual Fund Operating Expenses4	0.72%
1 The percentages shown are based on expenses for the entire fiscal year ended October 31, 2006. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so (except as discussed in Note 4, below), the Manager and shareholder services provider waived and/or elected not to charge certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2006.
Total Waivers and Reduction of Fund Expenses	0.23%
Total Actual Annual Fund Operating Expenses (after waivers and reduction)	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 0.28% for the fiscal year ended October 31, 2006.
3 Includes a shareholder services fee/account administration fee which is used to compensate intermediaries for shareholder services or account administrative services. Also includes a recordkeeping fee which is used to compensate intermediaries for recordkeeping services. Please see “Payments to Financial Intermediaries” herein. The shareholder services provider voluntarily waived a portion of its fee. Additionally, the shareholder services provider elected not to charge, and therefore the Fund did not accrue, a portion of its fee. The shareholder services provider can terminate the voluntary waiver and/or reduction at any time. Total other expenses paid by the Fund’s Shares (after the voluntary waiver and reduction) were 0.21% for the fiscal year ended October 31, 2006.
4 The manager and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses so that the total operating expenses paid by the Fund (after the voluntary waivers and reimbursements) will not exceed 0.49% for the fiscal year ending October 31, 2007. Although these actions are voluntary, the manager and its affiliates have agreed not to terminate these waivers and/or reimbursements until after December 31, 2007.

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EXAMPLE

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

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The Example assumes that you invest $10,000 in the Fund’s 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 Shares operating expenses are before waivers and reduction 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:

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1 Year	$	74
3 Years	$	230
5 Years	$	401
10 Years	$	894

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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, 2006, the capitalization range of the issuers comprising the S&P 400 was $1.6 billion to $10.2 billion. As of the same date, the weighted median market capitalization of the Fund was $3.4 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, before expenses, 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 or after 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.

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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

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

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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.

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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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Derivative Contracts

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Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, currencies, indices, or other assets or instruments including other derivative contracts, (each a “Reference Instrument” and collectively, “Reference Instruments”). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as “physically settled” derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as “cash settled” derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

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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.

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.

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Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund’s exposure to the risks of the Reference Instrument, 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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Payment obligations arising in connection with derivative contracts are frequently required to be secured with collateral (in the case of OTC contracts) or margin (in the case of exchange-traded contracts, as previously noted).

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The Fund may not invest in a derivative contract if it is not permitted to own, invest in, or otherwise have economic exposure to the Reference Instrument (or, in the case of a Reference Instrument that is an index, the securities or derivatives that comprise the index). The Fund may trade in the following specific types and/or combinations of derivative contracts:

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FUTURES CONTRACTS

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. 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 financial futures (such as index futures).

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HYBRID INSTRUMENTS

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Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of designated securities, commodities, currencies, indices, or other assets or instruments (each a, “Valuation Instrument”). Hybrid instruments can take on many forms including, but not limited to, the following three forms: First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Valuation Instrument. Second, a hybrid instrument may also combine elements of a fixed-income security and an equity security. Third, hybrid instruments may include convertible securities with conversion terms related to a Valuation Instrument.

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Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in securities, currencies and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional securities or the Valuation Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Valuation Instrument. 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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ASSET SEGREGATION

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In order to secure its obligations in connection with derivative contracts or special transactions, the Fund will either own the underlying assets, enter into offsetting transactions or set aside cash or readily marketable securities. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

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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.

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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 attempt to 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.

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Securities lending activities are subject to credit and leverage risks.

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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.

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 DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

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The Fund’s use of derivative contracts and hybrid instruments 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 and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference or Valuation Instruments 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 derivative contracts and hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, derivative contracts and hybrid instruments 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. Fifth, a common provision in over-the-counter (OTC) derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described herein or in the Fund’s SAI, such as stock market, credit, liquidity and leverage risks.

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LEVERAGE RISKS

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

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Investments can have these same results if their returns are based on a multiple of a specified index, security, or other benchmark.

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What Do Shares Cost?

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). From time to time the Fund may purchase foreign securities that trade in foreign markets on days the NYSE is closed. The value of the Fund’s assets may change on days you cannot purchase or redeem Shares. The Fund does not charge a front-end sales charge. NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund’s current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

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The Fund generally values equity securities according to the last sale price or official closing price reported 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.

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If prices are not available from an independent pricing service, securities and derivative contracts 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 security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board of Trustees (Board). The Fund may use the fair value of a security to calculate its NAV when, for example: (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed; (2) trading in a portfolio security is suspended and not resumed prior to the normal market close; (3) a portfolio security is not traded in significant volume for a substantial period; or (4) the Fund’s Manager determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, or based on market quotations.

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How is the Fund Sold?

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 financial intermediaries. Under the Distributor’s Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

Payments to Financial Intermediaries

The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

SERVICE FEES

The Fund may pay Service Fees of up to 0.25% of average net assets to financial intermediaries 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 financial intermediaries directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial intermediaries. If a financial intermediary receives Service Fees on an account, it is not eligible to also receive Account Administration Fees on that same account.

ACCOUNT ADMINISTRATION FEES

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The Fund may pay Account Administration Fees of up to 0.25% of average net assets to banks that are not registered as broker-dealers or investment advisers for providing administrative services to the Funds and shareholders. If a financial intermediary receives Account Administration Fees on an account, it is not eligible to also receive Service Fees or Recordkeeping Fees on that same account.

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RECORDKEEPING FEES

The Fund may pay Recordkeeping Fees on an average net assets basis or on a per account per year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

NETWORKING FEES

The Fund may reimburse Networking Fees on a per account per year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Manager). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, 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.

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

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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 financial intermediaries may be subject to a smaller minimum investment amount. Keep in mind that financial intermediaries may charge you fees for their services in connection with your Share transactions.

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THROUGH A FINANCIAL INTERMEDIARY

• Establish an account with the financial intermediary; and
• Submit your purchase order to the financial intermediary 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 financial intermediary 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.

Financial intermediaries 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 State Street Bank and Trust 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 send it to:

The Federated Funds
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, send it to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. You must meet the minimum initial investment requirement for purchasing Shares and both accounts must have identical registrations.

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BY SYSTEMATIC INVESTMENT PROGRAM (SIP)

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

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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 and Exchange Shares

You should redeem or exchange Shares:

• through a financial intermediary if you purchased Shares through a financial intermediary; or
• directly from the Fund if you purchased Shares directly from the Fund.

Shares of the Fund may be redeemed for cash or exchanged for shares of the same class of other Federated funds on days on which the Fund computes its NAV. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary 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 financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange 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 or exchange Shares by sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program 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 Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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

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

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• to allow your purchase to clear (as discussed below);

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• during periods of market volatility;

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• when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets; or

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• during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

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If you request a redemption of Shares recently purchased by check (including a cashier’s check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be canceled and you will be responsible for any losses incurred by the Fund as a result of your canceled order.

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In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

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• when the NYSE is closed, other than customary weekend and holiday closings;

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• when trading on the NYSE is restricted, as determined by the SEC; or

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• in which an emergency exists, as determined by the SEC, so that disposal of the Fund’s investments or determination of its NAV is not reasonably practicable.

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

EXCHANGE PRIVILEGE

You may exchange Shares of the Fund for shares of any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. 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.

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information--Frequent Trading Policies.”

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

You will receive confirmation of purchases, redemptions and exchanges. 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.

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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. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

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If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as “undeliverable,” or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution checks.

If you purchase Shares just before the record date for 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 record date for a dividend or capital gain. Contact your financial intermediary or the Fund for information concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

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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.

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TAX INFORMATION

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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 at different rates depending on the source of dividend income. Capital gains are taxable at different rates depending upon the length of time the Fund holds its assets.

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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.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Manager may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

The Fund’s frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund’s portfolio and its performance.

The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s website at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten holdings and a percentage breakdown of the portfolio by sector.

To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

You may also access from the “Products” section of the website portfolio information as of the end of the Fund’s fiscal quarters. The Fund’s annual and semi-annual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

Who Manages the Fund?

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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 the subadviser, BlackRock Investment Management, LLC (BlackRock or the “Subadviser”). BlackRock began managing the portfolio as of the close of business September 29, 2006.

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BlackRock is a wholly owned subsidiary of BlackRock, Inc. On September 29, 2006, BlackRock, Inc. consummated a transaction with Merrill Lynch & Co., Inc. whereby Merrill Lynch & Co., Inc.’s investment management business combined with that of BlackRock to create a new independent company that is one of the world’s largest asset management firms with over $1 trillion in assets under management. The combined company has over 4,500 employees in 18 countries.

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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 Subadviser and the continued review and evaluation of the Subadviser’s performance. The address of the Manager and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Manager has delegated daily management of all of the Fund assets to BlackRock, who is paid by the Manager and not by the Fund. The Subadviser has complete discretion, subject to the Manager’s oversight, to purchase and sell portfolio securities for the Fund. The Subadviser’s address is P.O. Box 9011, Princeton, NJ 08543-9011.

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The Manager and other subsidiaries of Federated advise approximately 136 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $213 billion in assets as of December 31, 2005. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,305 employees. Federated provides investment products to more than 5,500 investment professionals and institutions.

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PORTFOLIO MANAGEMENT INFORMATION

John W. Harris

John W. Harris has been the Fund’s Portfolio Manager since January 2003. He is Vice President of the Trust. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Fund’s Manager in December 1998. In January 2000, Mr. Harris became a Vice President of the Fund’s Manager. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh. Mr. Harris is responsible for overseeing the Subadviser. In such a capacity, Mr. Harris is involved in monitoring and evaluating the performance of the Subadviser.

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Debra L. Jelilian, Jeffrey L. Russo, CFA

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Subject to the oversight of the Manager, BlackRock Investment Management’s Quantitative Index Management Team is responsible for the day-to-day management of the Fund. The Fund is managed by Debra L. Jelilian and Jeffrey L. Russo, CFA, who are members of the Quantitative Index Management Team. The team is jointly responsible for the day-to-day management of the Fund’s portfolio. Mr. Russo is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Mr. Russo was a Director of MLIM from 2004 to 2006, and was a Vice President there from 1999 to 2004. He has been a member of the Funds’ management team since 2000. Mr. Russo has eleven years’ experience as a portfolio manager and trader. Ms. Jelilian is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Ms. Jelilian was a Director of MLIM from 1999 to 2006, and has been a member of the Funds’ management team since 2000. Ms. Jelilian has fourteen years’ experience in investing and in managing index investments.

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The Fund’s SAI provides additional information about the Portfolio Managers’ compensation, management of other accounts, and ownership of securities in the Fund.

MANAGEMENT FEES

The Manager receives an annual 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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A discussion of the Board’s review of the Fund’s investment management contract is available in the Fund’s Annual Report dated October 31, 2006.

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Legal Proceedings

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Since October 2003, Federated and related entities (collectively, “Federated”), and various Federated funds (“Funds”), have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual 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. These lawsuits began to be filed shortly after Federated’s first public announcement that it had received requests for information on shareholder trading activities in the Funds from the SEC, the Office of the New York State Attorney General (“NYAG”), and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. Specifically, the SEC and NYAG settled proceedings against three Federated subsidiaries involving undisclosed market timing arrangements and late trading. The SEC made findings: that Federated Investment Management Company (“FIMC”), an SEC-registered investment adviser to various Funds, and Federated Securities Corp., an SEC-registered broker-dealer and distributor for the Funds, violated provisions of the Investment Advisers Act and Investment Company Act by approving, but not disclosing, three market timing arrangements, or the associated conflict of interest between FIMC and the funds involved in the arrangements, either to other fund shareholders or to the funds’ board; and that Federated Shareholder Services Company, formerly an SEC-registered transfer agent, failed to prevent a customer and a Federated employee from late trading in violation of provisions of the Investment Company Act. The NYAG found that such conduct violated provisions of New York State law. Federated entered into the settlements without admitting or denying the regulators’ findings. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay disgorgement and a civil money penalty in the aggregate amount of an additional $72 million and, among other things, agreed that it would not serve as investment adviser to any registered investment company unless: (i) at least 75% of the fund’s directors are independent of Federated; (ii) the chairman of each such fund is independent of Federated; (iii) no action may be taken by the fund’s board or any committee thereof unless approved by a majority of the independent trustees of the fund or committee, respectively; and (iv) the fund appoints a “senior officer” who reports to the independent trustees and is responsible for monitoring compliance by the fund with applicable laws and fiduciary duties and for managing the process by which management fees charged to a fund are approved. The settlements are described in Federated’s announcement which, along with previous press releases and related communications on those matters, is available in the “About Us” section of Federated’s website at FederatedInvestors.com.

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Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees.

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The Board of the Funds has retained the law firm of Dickstein Shapiro LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and intend to defend this litigation. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys’ fees, and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

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Financial Information

FINANCIAL HIGHLIGHTS

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.

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This information has been audited by Ernst & Young LLP, an independent registered public accounting firm, 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	2006			2005			2004			2003			2002
Net Asset Value, Beginning of Period	$22.19			$19.84			$18.22			$14.11			$15.26
Income From Investment Operations:
Net investment income	0.30			0.22			0.13			0.10			0.10
Net realized and unrealized gain (loss) on investments and futures contracts	2.48			3.09			1.75			4.12			(0.90	)
TOTAL FROM INVESTMENT OPERATIONS	2.78			3.31			1.88			4.22			(0.80	)
Less Distributions:
Distributions from net investment income	(0.32	)		(0.19	)		(0.12	)		(0.11	)		(0.10	)
Distributions from net realized gain on investments and futures contracts	(1.16	)		(0.77	)		(0.14	)		--			(0.25	)
TOTAL DISTRIBUTIONS	(1.48	)		(0.96	)		(0.26	)		(0.11	)		(0.35	)
Net Asset Value, End of Period	$23.49			$22.19			$19.84			$18.22			$14.11
Total Return1	12.91	%		17.09	%		10.38	%		30.04	%		(5.47	)%
Ratios to Average Net Assets:
Net expenses	0.49	%		0.49	%		0.49	%		0.49	%		0.50	%
Net investment income	1.33	%		1.06	%		0.69	%		0.69	%		0.66	%
Expense waiver/reimbursement2	0.21	%		0.20	%		0.27	%		0.26	%		0.23	%
Supplemental Data:
Net assets, end of period (000 omitted)	$1,202,627		$889,064			$708,296			$564,618			$364,656
Portfolio turnover	13	%		14	%		16	%		11	%		40	%

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1 Based on net asset value, which does not reflect the sales charge, redemption fee or contingent deferred sales charge, if applicable. Total returns for periods less than one year, if any, are not annualized.

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

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated October 31, 2006, which can be obtained free of charge.

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Appendix A: Hypothetical Investment and Expense Information

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The following chart provides additional hypothetical information about the effect of the Fund’s expenses, including investment advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year period. The chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. The chart also assumes that the Fund’s annual expense ratio stays the same throughout the 10-year period and that all dividends and distributions are reinvested. The annual expense ratio used in the chart is the same as stated in the “Fees and Expenses” table of this prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the “Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

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FEDERATED MID-CAP INDEX FUND
ANNUAL EXPENSE RATIO: 0.72%
MAXIMUM FRONT-END SALES CHARGE: 0.00%

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Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$73.54	$10,428.00
2	$10,428.00	$521.40	$10,949.40	$76.69	$10,874.32
3	$10,874.32	$543.72	$11,418.04	$79.97	$11,339.74
4	$11,339.74	$566.99	$11,906.73	$83.39	$11,825.08
5	$11,825.08	$591.25	$12,416.33	$86.96	$12,331.19
6	$12,331.19	$616.56	$12,947.75	$90.68	$12,858.96
7	$12,858.96	$642.95	$13,501.91	$94.57	$13,409.32
8	$13,409.32	$670.47	$14,079.79	$98.61	$13,983.24
9	$13,983.24	$699.16	$14,682.40	$102.83	$14,581.72
10	$14,581.72	$729.09	$15,310.81	$107.24	$15,205.82
Cumulative		$6,081.59		$894.48

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A Statement of Additional Information (SAI) dated December 31, 2006, 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. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund at 1-800-341-7400.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at FederatedInvestors.com.

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 website at 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.

Federated Investors
World-Class Investment Manager

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

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2006 © Federated Investors, Inc.

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Cusip 31420E205

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2062304A (12/06)

FEDERATED MID-CAP INDEX FUND

A PORTFOLIO OF FEDERATED INDEX TRUST
STATEMENT OF ADDITIONAL INFORMATION


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DECEMBER 31, 2006

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, 2006.  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.

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                                         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................30
                                         Standard & Poor's................31
                                         Addresses..............................
                                         Appendix.............................33






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 Trust changed its name from Federated Mid-Cap Fund to Federated
Mid-Cap Index Fund on July 16, 2001.

The Fund's investment manager is Federated Equity Management Company of
Pennsylvania (Manager).



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:

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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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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 (GSE) acting under federal authority. Some GSE
securities are supported by the full faith and credit of the United States.
These include the Government National Mortgage Association, Small Business
Administration, Farm Credit System Financial Assistance Corporation, Farmer's
Home Administration, Federal Financing Bank, General Services Administration,
Department of Housing and Urban Development, Export-Import Bank, Overseas
Private Investment Corporation, and Washington Metropolitan Area Transit
Authority Bonds.

Other GSE securities receive support through federal subsidies, loans or other
benefits. For example, the U.S. Treasury is authorized to purchase specified
amounts of securities issued by (or otherwise make funds available to) the
Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, and Tennessee Valley Authority in support of such
obligations.

A few GSE securities have no explicit financial support, but are regarded as
having implied support because the federal government sponsors their activities.
These include the Farm Credit System, Financing Corporation, and Resolution
Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as
Treasury securities.

A Fund treats mortgage-backed securities guaranteed by a GSE as if issued or
guaranteed by a federal agency.

Although such a guarantee protects against credit risks, it does not reduce
market and prepayment risks.


DERIVATIVE CONTRACTS
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Derivative contracts are financial instruments that require payments based upon
changes in the values of designated securities, commodities, currencies,
indices, or other assets or instruments including other derivative contracts,
(each a "Reference Instrument" and collectively, "Reference Instruments").  Each
party to a derivative contract is referred to as a counterparty.  Some
derivative contracts require payments relating to an actual, future trade
involving the Reference Instrument.  These types of derivatives are frequently
referred to as "physically settled" derivatives.  Other derivative contracts
require payments relating to the income or returns from, or changes in the
market value of, a Reference Instrument.  These types of derivatives are known
as "cash settled" derivatives, since they require cash payments in lieu of
delivery of the Reference Instrument.

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 on how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the Reference Instrument,
derivative contracts may increase or decrease the Fund's exposure to the risks
of the Reference Instrument, 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, including
combinations thereof:

FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a Reference Instrument at a specified
price, date and time.  Entering into a contract to buy a Reference Instrument is
commonly referred to as buying a contract or holding a long position in the
asset.  Entering into a contract to sell a Reference Instrument is commonly
referred to as selling a contract or holding a short position in the Reference
Instrument  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 financial futures (such as index futures and security futures).

OPTION CONTRACTS
Option contracts (also called "options") are rights to buy or sell a Reference
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 Reference Instruments.
Options that are written on futures contracts will be subject to margin
requirements similar to those applied to futures contracts.  The Fund may buy or
sell options on a Reference Instrument if it is permitted to own, invest, or
otherwise have economic exposure to that instrument.  The Fund is not required
to own a Reference Instrument, in order to buy or write an option on that
Reference Instrument.

The Fund may buy and/or sell the following types of options:

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

{circle}Buy call options on a Reference Instrument in anticipation of an
   increase in the value of the Reference Instrument; and

{circle}Write call options on a Reference Instrument to generate income from
   premiums, and in anticipation of a decrease or only limited increase in the
   value of the Reference Instrument.  If the Fund writes a call option on a
   Reference Instrument that it owns and that call option is exercised, the Fund
   foregoes any possible profit from an increase in the market price of the
   Reference Instrument over the exercise price plus the premium received.

PUT OPTIONS
A put option gives the holder the right to sell the Reference Instrument to the
writer of the option. The Fund may use put options in the following ways:

{circle}Buy put options on a Reference Instrument in anticipation of a decrease
   in the value of the Reference Instrument; and

{circle}Write put options on a Reference Instrument to generate income from
   premiums, and in anticipation of an increase or only limited decrease in the
   value of the Reference Instrument. In writing puts, there is a risk that the
   Fund may be required to take delivery of the Reference Instrument when its
   current market price is lower than the exercise price.

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

Finally, the Fund may enter into combinations of options contracts in an attempt
to benefit from changes in the prices of those options contracts (without regard
to changes in the value of the Reference Instrument).

SWAP CONTRACTS
A swap contract (also known as a "swap") is a type of derivative contract in
which two parties agree to pay each other (swap) the returns derived from
Reference Instruments.  Most swaps do not involve the delivery of the underlying
assets by either party, and the parties might not own the Reference Instruments.
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.  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 (commonly referred to as a "notional principal amount") 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 London Interbank
Offered Rate (LIBOR) swap would require one party to pay the equivalent of the
London Interbank Offered 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 RETURN SWAPS
A total return swap is an agreement between two parties whereby one party agrees
to make payments of the total return from a Reference Instrument (or a basket of
such instruments) during the specified period, in return for payments equal to a
fixed or floating rate of interest or the total return from another Reference
Instrument.  Alternately, a total return swap can be structured so that one
party will make payments to the other party if the value of a Reference
Instrument increases, but receive payments from the other party if the value of
that instrument decreases.

CREDIT DEFAULT SWAPS
A credit default swap (CDS) is an agreement between two parties whereby one
party (the "Protection Buyer") agrees to make payments over the term of the CDS
to the other party (the "Protection Seller"), provided that no designated event
of default, restructuring or other credit related event (each a "Credit Event")
occurs with respect to Reference Instrument that is usually a particular bond or
the unsecured credit of an issuer, in general (the "Reference Obligation"). Many
CDS are physically settled, which means that if a Credit Event occurs, the
Protection Seller must pay the Protection Buyer the full notional value, or "par
value," of the Reference Obligation in exchange for delivery by the Protection
Buyer of the Reference Obligation or another similar obligation issued by the
issuer of the Reference Obligation (the "Deliverable Obligation").  The
Counterparties agree to the characteristics of the Deliverable Obligation at the
time that they enter into the CDS. Alternately, a CDS can be "cash settled,"
which means that upon the occurrence of a Credit Event, the Protection Buyer
will receive a payment from the Protection Seller equal to the difference
between the par amount of the Reference Obligation and its market value at the
time of the Credit Event.  The Fund may be either the Protection Buyer or the
Protection Seller in a CDS.  If the Fund is a Protection Buyer and no Credit
Event occurs, the Fund will lose its entire investment in the CDS (i.e., an
amount equal to the payments made to the Protection Seller over the term of the
CDS). However, if a Credit Event occurs, the Fund (as Protection Buyer) will
deliver the Deliverable Obligation and receive a payment equal to the full
notional value of the Reference Obligation, even though the Reference Obligation
may have little or no value. If the Fund is the Protection Seller and no Credit
Event occurs, the Fund will receive a fixed rate of income throughout the term
of the CDS. However, if a Credit Event occurs, the Fund (as Protection Seller)
will pay the Protection Buyer the full notional value of the Reference
Obligation and receive the Deliverable Obligation from the Protection Buyer.  A
CDS may involve greater risks than if the Fund invested directly in the
Reference Obligation. For example, a CDS may increase credit risk since the Fund
has exposure to both the issuer of the Reference Obligation and the Counterparty
to the CDS.

CURRENCY SWAPS
Currency swaps are contracts which provide for interest payments in different
currencies. The parties might agree to exchange the notional principal amounts
of the currencies as well (commonly called a "foreign exchange swap") 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.

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HYBRID INSTRUMENTS
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Hybrid instruments combine elements of two different kinds of securities or
financial instruments (such as a derivative contract). Frequently, the value of
a hybrid instrument is determined by reference to changes in the value of
designated securities, commodities, currencies, indices, or other assets or
instruments (each a, "Valuation Instrument").  Hybrid instruments can take on
many forms including, but not limited to, the following three forms: First, a
common form of a hybrid instrument combines elements of a derivative contract
with those of another security (typically a fixed-income security). In this case
all or a portion of the interest or principal payable on a hybrid security is
determined by reference to changes in the price of a Valuation Instrument.
Second, a hybrid instrument may also combine elements of a fixed-income security
and an equity security. Third, hybrid instruments may include convertible
securities with conversion terms related to a Valuation Instrument.

Depending on the type and terms of the hybrid instrument, its risks may reflect
a combination of the risks of investing in securities, currencies and derivative
contracts.  Thus, an investment in a hybrid instrument may entail significant
risks in addition to those associated with traditional securities or the
Valuation Instrument.  Hybrid instruments are also potentially more volatile
than traditional securities or the Valuation Instrument.  Moreover, depending on
the structure of the particular hybrid, it may expose the Fund to leverage risks
or carry liquidity risks.

CREDIT LINKED NOTE
A credit linked note (CLN) is a type of hybrid instrument in which a special
purpose entity issues a structured note (the "Note Issuer") with respect to
which the Valuation Instrument is a single bond, a portfolio of bonds, or the
unsecured credit of an issuer, in general (each a "Reference Credit").  The
purchaser of the CLN (the "Note Purchaser") invests a par amount and receives a
payment during the term of the CLN that equals a fixed or floating rate of
interest equivalent to a high rated funded asset (such as a bank certificate of
deposit) plus an additional premium that relates to taking on the credit risk of
the Reference Credit. Upon maturity of the CLN, the Note Purchaser will receive
a payment equal to (i) the original par amount paid to the Note Issuer, if there
is no occurrence of a designated event of default, restructuring or other credit
event (each, a "Credit Event") with respect to the issuer of the Reference
Credit or (ii) the market value of the Reference Credit, if a Credit Event has
occurred.  Depending upon the terms of the CLN, it is also possible that the
Note Purchaser may be required to take physical delivery of the Reference Credit
in the event of Credit Event. Most credit linked notes use a corporate bond (or
a portfolio of corporate bonds) as the Reference Credit. However, almost any
type of fixed-income security (including foreign government securities), index,
or derivative contract (such as a credit default swap) can be used as the
Reference Credit.

EQUITY LINKED NOTE
An equity linked note (ELN) is a type of hybrid instrument that provides the
noteholder with exposure to a single equity security, a basket of equity
securities, or an equity index (the "Reference Equity Instrument").  Typically,
an ELN pays interest at agreed rates over a specified time period and, at
maturity, either converts into shares of a Reference Equity Instrument or
returns a payment to the noteholder based on the change in value of a Reference
Equity Instrument.

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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:

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

   {circle}the principal trading market for its securities is in another
      country; or

   {circle}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.

ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN ISSUERS
American Depositary Receipts, which are traded in United States markets,
represent interests in underlying securities issued by a foreign company and 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. ADRs are also
traded in U.S. dollars, eliminating the need for foreign exchange transactions.
The Fund may also invest in securities issued directly by foreign companies and
traded in U.S. Dollars in United States markets.


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.


INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including securities of affiliated money market funds, as an efficient means of
carrying out its investment policies and managing its uninvested cash. These
other investment companies are managed independently of the Fund and incur
additional expenses. Therefore, any such investment by the Fund may be subject
to duplicate expenses. However, the Manager believes that the benefits and
efficiencies of this approach should outweigh the additional expenses.


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ASSET SEGREGATION
In accordance with SEC and SEC staff positions regarding the interpretation of
the 1940 Act, with respect to derivatives that create a future payment
obligation of the Fund, the Fund must "set aside" (referred to sometimes as
"asset segregation") liquid assets, or engage in other SEC- or staff-approved
measures, while the derivative contracts are open. For example, with respect to
forwards and futures contracts that are not contractually required to "cash-
settle," the Fund must cover its open positions by setting aside cash or readily
marketable securities equal to the contracts' full, notional value. With respect
to forwards and futures that are contractually required to "cash-settle,"
however, the Fund is permitted to set aside cash or readily marketable
securities in an amount equal to the Fund's daily marked-to-market (net)
obligations, if any (i.e., the Fund's daily net liability, if any), rather than
the notional value.

The Fund will employ another approach to segregating assets to cover options
that it sells. If the Fund sells a call option, the Fund will set aside either
the Reference Instrument subject to the option, cash or readily marketable
securities with a value that equals or exceeds the current market value of the
Reference Instrument. In no event, will the value of the cash or readily
marketable securities set aside by the Fund be less than the exercise price of
the call option. If the Fund sells a put option, the Fund will set aside cash or
readily marketable securities with a value that equals or exceeds the exercise
price of the put option.

The Fund's asset segregation approach for swap agreements varies among different
types of swaps. For example, if the Fund enters into a credit default swap as
the Protection Buyer, then it will set aside cash or readily marketable
securities necessary to meet any accrued payment obligations under the swap. By
comparison, if the Fund enters into a credit default swap as the Protection
Seller, then the Fund will set aside cash or readily marketable securities equal
to the full notional amount of the swap that must be paid upon the occurrence of
a Credit Event. For some other types of swaps, such as interest rate swaps, the
Fund will calculate the obligations of the counterparties to the swap on a net
basis. Consequently, the Fund's current obligation (or rights) under this type
of swap will equal only the net amount to be paid or received under based on the
relative values of the positions held by each counterparty to the swap (the "net
amount"). The net amount currently owed by or to the Fund will be accrued daily
and the Fund will set aside cash or readily marketable securities equal to any
accrued but unpaid net amount owed by the Fund under the swap.

The Fund may reduce the liquid assets segregated to cover obligations under a
derivative contract by entering into an offsetting derivative contract. For
example, if the Fund sells a put option for the same Reference Instrument as a
call option the Fund has sold, and the exercise price of the call option is the
same as or higher than the exercise price of the put option, then the Fund may
net its obligations under the options and set aside cash or readily marketable
securities (including any margin deposited for the options) with a value equal
to the greater of (a) the current market value of the Reference Instrument
deliverable under the call option or (b) the exercise price of the put option.

By setting aside cash or readily marketable securities equal to only its net
obligations under swaps and certain cash-settled derivative contracts, the Fund
will have the ability to employ leverage to a greater extent than if the Fund
were required to segregate cash or readily marketable securities equal to the
full notional value of such contracts. The use of leverage involves certain
risks. See "Risk Factors." Unless the Fund has other cash or readily marketable
securities to set aside, it cannot trade assets set aside in connection with
derivative contracts or special transactions 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. The Fund reserves the right to modify its
asset segregation policies in the future to comply with any changes in the
positions articulated from time to time by the SEC and its staff.

Generally, special transactions do not cash-settle on a net basis. Consequently,
with respect to special transactions, the Fund will set aside cash or readily
marketable securities with a value that equals or exceeds the Fund's
obligations.

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HEDGING
<R>

Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may also attempt to hedge by using combinations of different derivative
contracts, or derivative contracts and securities. The Fund's ability to hedge
may be limited by the costs of the derivative contracts. The Fund may attempt to
lower the cost of hedging by entering into transactions that provide only
limited protection, including transactions that (1) hedge only a portion of its
portfolio, (2) use derivative contracts that cover a narrow range of
circumstances or (3) involve the sale of derivative contracts with different
terms. Consequently, hedging transactions will not eliminate risk even if they
work as intended. In addition, hedging strategies are not always successful, and
could result in increased expenses and losses to the Fund.

</R>


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 Federated
funds, and an inter-fund loan is only made if it benefits each participating
Federated 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 Federated 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 Federated fund than market-competitive rates on overnight repurchase
agreements (Repo Rate) and more attractive to the borrowing Federated 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
   {circle}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.

   {circle}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
   {circle}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.

   {circle}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
   {circle}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 ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN ISSUERS
   {circle}Because the Fund may invest in ADRs and other domestically traded
      securities of 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.
      Foreign companies may not provide information as frequently or to as great
      an extent as companies in the United States. Foreign companies may also
      receive less coverage than U.S. companies by market analysts and the
      financial press. In addition, foreign companies 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 concerning companies in the United States.


<R>

RISKS RELATED TO COMPANY SIZE
   {circle}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.

   {circle}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
   {circle}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.

   {circle}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.

   </R>


RISKS OF FOREIGN INVESTING
   {circle}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.

   {circle}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.

   {circle}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.


LIQUIDITY RISKS
   {circle}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.

   {circle}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.

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


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

   {circle}Investments can have these same results if their returns are based on
      a multiple of a specified index, security, or other benchmark.


CREDIT RISKS
   {circle}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.


<R>

RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS
   {circle}The Fund's use of derivative contracts and hybrid instruments
      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 and
      hybrid instruments in which the Fund invests may not be correlated with
      changes in the value of the underlying Reference or Valuation Instruments
      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 derivative
      contracts and hybrid instruments may be erroneously priced or improperly
      valued and, as a result, the Fund may need to make increased cash payments
      to the counterparty.  Fourth, derivative contracts and hybrid instruments
      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. Fifth, a common provision in OTC derivative contracts
      permits the counterparty to terminate any such contract between it and the
      Fund, if the value of the Fund's total net assets declines below a
      specified level over a given time period. Factors that may contribute to
      such a decline (which usually must be substantial) include significant
      shareholder redemptions and/or a marked decrease in the market value of
      the Fund's investments. Any such termination of the Fund's OTC derivative
      contracts may adversely affect the Fund (for example, by increasing losses
      and/or costs, and/or preventing the Fund from fully implementing its
      investment strategies). Finally, derivative contracts and hybrid
      instruments may also involve other risks described herein, such as stock
      market, credit, liquidity and leverage risks.


</R>

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 will not be
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 that the
Fund cannot dispose of within 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 limitation is adhered to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value of net assets will not result in a violation of such limitation.


DETERMINING MARKET VALUE OF SECURITIES
<R>

Market values of the Fund's portfolio securities are determined as follows:

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

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

{circle}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;

   {circle}for investments in other open-end, regulated investment companies,
      based on net asset value;

   {circle}for fixed income securities, according to the 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 are
      valued at amortized cost; and

{circle}for all other securities at fair value as determined in accordance with
  procedures established by and under the general supervision of the Board.

Prices for fixed income securities furnished by a pricing service may be based
  on a valuation matrix which incorporates both dealer-supplied valuations and
  electronic data processing techniques. Such prices  are generally intended to
  be indicative of the bid prices currently offered to institutional investors
  for the securities, except that prices for corporate fixed income and asset-
  backed securities traded in the United States are generally intended to be
  indicative of the mean between such bid prices and asked prices. The Board has
  approved the use of such pricing services. A number of pricing services are
  available, and the Fund may use various pricing services or discontinue the
  use of any pricing service.

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.



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.


ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES
The Distributor may pay out of its own resources amounts (including items of
material value) to certain financial intermediaries.  In some cases, such
payments may be made by, or funded from the resources of, companies affiliated
with the Distributor (including the Manager).  While National Association of
Securities Dealers (NASD) regulations limit the sales charges that you may bear,
there are no limits with regard to the amounts that the Distributor may pay out
of its own resources.  In addition to the payments which are generally described
herein and in the prospectus, the financial intermediary also may receive
Service Fees. In connection with these payments, the financial intermediary may
elevate the prominence or profile of the Fund and/or other Federated funds
within the financial intermediary's organization by, for example, placement on a
list of preferred or recommended funds, and/or granting the Distributor
preferential or enhanced opportunities to promote the funds in various ways
within the financial intermediary's organization. You can ask your financial
intermediary for information about any payments it receives from the Distributor
or the Federated funds and any services provided.

The following examples illustrate the types of instances in which the
Distributor may make additional payments to financial intermediaries.


SUPPLEMENTAL PAYMENTS
The Distributor may make supplemental payments to certain financial
intermediaries that are holders or dealers of record for accounts in one or more
of the Federated funds.  These payments may be based on such factors as the
number or value of Shares the financial intermediary sells or may sell; the
value of client assets invested; or the type and nature of services or support
furnished by the financial intermediary.


PROCESSING SUPPORT PAYMENTS
The Distributor may make payments to financial intermediaries that sell
Federated fund shares to help offset their costs associated with client account
maintenance support, statement processing and transaction processing.  The types
of payments that the Distributor may make under this category include payment of
ticket charges on a per transaction basis; payment of networking fees; and
payment for ancillary services such as setting up funds on the financial
intermediary's mutual fund trading system.


RETIREMENT PLAN PROGRAM SERVICING PAYMENTS
The Distributor may make payments to certain financial intermediaries who sell
Federated fund shares through retirement plan programs.  A financial
intermediary may perform retirement plan program services itself or may arrange
with a third party to perform retirement plan program services.  In addition to
participant recordkeeping, reporting, or transaction processing, retirement plan
program services may include services rendered to a plan in connection with
fund/investment selection and monitoring; employee enrollment and education;
plan balance rollover or separation, or other similar services.


OTHER BENEFITS TO FINANCIAL INTERMEDIARIES
From time to time, the Distributor, at its expense, may provide additional
compensation to financial intermediaries that sell or arrange for the sale of
Shares.  Such compensation may include financial assistance to financial
intermediaries that enable the Distributor to participate in or present at
conferences or seminars, sales or training programs for invited employees,
client and investor events and other financial intermediary-sponsored events.

The Distributor also may hold or sponsor, at its expense, sales events,
conferences and programs for employees or associated persons of financial
intermediaries and may pay the travel and lodging expenses of attendees.  The
Distributor also may provide, at its expense, meals and entertainment in
conjunction with meetings with financial intermediaries.  Other compensation may
be offered to the extent not prohibited by applicable laws, regulations or the
rules of any self-regulatory agency, such as the NASD.



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 financial intermediaries 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. Financial intermediaries 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 financial intermediary 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
<R>

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.

As  of  December  1,  2006,   the  following   shareholders   owned  of  record,
beneficially,  or both, 5% or more of outstanding  Shares:  Northwestern  Mutual
Life, Milwaukee, WI, owned approximately 7,640,044 Shares (14.48)%; The Standard
Insurance,  Portland, OR, owned approximately 6,388,293 Shares (12.11)%; Charles
Schwab & Co., Inc., San Francisco,  CA, owned approximately 5,439,033 Shares
(10.31)% and Saxon & Co.,  Philadelphia,  PA, owned approximately  2,739,906
Shares (5.19)%.

</R>



TAX INFORMATION


FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code (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.


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.



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.  As of December 31, 2005, the Trust comprised three
portfolios, and the Federated Fund Complex consisted of 43 investment companies
(comprising 136 portfolios). Unless otherwise noted, each Officer is elected
annually. Unless otherwise noted, each Board member oversees all portfolios in
the Federated Fund Complex and serves for an indefinite term.

As of December 1, 2006, 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
BIRTH DATE                                                                                                AGGREGATE            TOTAL
ADDRESS                                                                                                COMPENSATION     COMPENSATION
POSITIONS        PRINCIPAL OCCUPATION(S) FOR PAST FIVE YEARS,                                             FROM FUND       FROM TRUST
HELD WITH        OTHER DIRECTORSHIPS HELD AND PREVIOUS POSITION(S)                                     (PAST FISCAL              AND
TRUST                                                                                                         YEAR)        FEDERATED
DATE SERVICE                                                                                                            FUND COMPLEX
BEGAN                                                                                                                          (PAST
                                                                                                                            CALENDAR
                                                                                                                               YEAR)
JOHN F.          PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                       $0               $0
DONAHUE*         Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund
Birth Date:      Complex's Executive Committee.
July 28,
1924             PREVIOUS POSITIONS: Chairman of the Federated Fund Complex; Trustee, Federated
TRUSTEE          Investment Management Company and Chairman and Director, Federated Investment
Began            Counseling.
serving:
January 1990

J.               PRINCIPAL OCCUPATIONS: Principal Executive Officer and President of the Federated               $0               $0
CHRISTOPHER      Fund Complex; Director or Trustee of some of the Funds in the Federated Fund
DONAHUE*         Complex; President, Chief Executive Officer and Director, Federated Investors,
Birth Date:      Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee,
April 11,        Federated Investment Counseling; Chairman and Director, Federated Global
1949             Investment Management Corp.; Chairman, Federated Equity Management Company of
PRESIDENT        Pennsylvania and Passport Research, Ltd. (Investment advisory subsidiary of
AND TRUSTEE      Federated); Trustee, Federated Shareholder Services Company; Director, Federated
Began            Services Company.
serving:
January 1990     PREVIOUS POSITIONS: President, Federated Investment Counseling; President and
                 Chief Executive Officer, Federated Investment Management Company, Federated
                 Global Investment Management Corp. and Passport Research, Ltd.

LAWRENCE D.      PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                $1,061.95         $148,500
ELLIS, M.D.*     Professor of Medicine, University of Pittsburgh; Medical Director, University of
Birth Date:      Pittsburgh Medical Center Downtown; Hematologist, Oncologist and Internist,
October 11,      University of Pittsburgh Medical Center.
1932
3471 Fifth       OTHER DIRECTORSHIPS HELD: Member, National Board of Trustees, Leukemia Society of
Avenue           America.
Suite 1111
Pittsburgh,      PREVIOUS POSITIONS: Trustee, University of Pittsburgh; Director, University of
PA               Pittsburgh Medical Center.
TRUSTEE
Began
serving:
January 1990

* 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                                                                                                                           TOTAL
BIRTH DATE                                                                                                AGGREGATE     COMPENSATION
ADDRESS                                                                                                COMPENSATION       FROM TRUST
POSITIONS        PRINCIPAL OCCUPATION(S) FOR PAST FIVE YEARS,                                             FROM FUND              AND
HELD WITH        OTHER DIRECTORSHIPS HELD AND PREVIOUS POSITION(S)                                     (PAST FISCAL        FEDERATED
TRUST                                                                                                         YEAR)     FUND COMPLEX
DATE SERVICE                                                                                                                   (PAST
BEGAN                                                                                                                       CALENDAR
                                                                                                                               YEAR)
THOMAS G.        PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                 $1,168.14         $163,350
BIGLEY
Birth Date:      OTHER DIRECTORSHIPS HELD: Director, Member of Executive Committee, Children's
February 3,      Hospital of Pittsburgh; Director, University of Pittsburgh.
1934
15 Old           PREVIOUS POSITION: Senior Partner, Ernst & Young LLP.
Timber Trail
Pittsburgh,
PA
TRUSTEE
Began
serving:
October 1995

JOHN T.          PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                $1,168.14         $163,350
CONROY, JR.      Chairman of the Board, Investment Properties Corporation; Partner or Trustee in
Birth Date:      private real estate ventures in Southwest Florida.
June 23,
1937             PREVIOUS POSITIONS: President, Investment Properties Corporation; Senior Vice
Investment       President, John R. Wood and Associates, Inc., Realtors; President, Naples
Properties       Property Management, Inc. and Northgate Village Development Corporation.
Corporation
3838 North
Tamiami
Trail
Suite 402
Naples, FL
TRUSTEE
Began
serving:
August, 1991

NICHOLAS P.      PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                 $1,168.14         $163,350
CONSTANTAKIS
Birth Date:      OTHER DIRECTORSHIPS HELD: Director and Member of the Audit Committee, Michael
September 3,     Baker Corporation (engineering and energy services worldwide).
1939
175              PREVIOUS POSITION: Partner, Andersen Worldwide SC.
Woodshire
Drive
Pittsburgh,
PA
TRUSTEE
Began
serving:
February
1998

JOHN F.          PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex;                 $1,061.95         $148,500
CUNNINGHAM       Director, WinsorTech.
Birth Date:
March 5,         OTHER DIRECTORSHIPS HELD: Chairman, President and Chief Executive Officer,
1943             Cunningham & Co., Inc. (strategic business consulting); Trustee Associate, Boston
353 El           College.
Brillo Way
Palm Beach,      PREVIOUS POSITIONS: Director, Redgate Communications and EMC Corporation
FL               (computer storage systems); Chairman of the Board and Chief Executive Officer,
TRUSTEE          Computer Consoles, Inc.; President and Chief Operating Officer, Wang
Began            Laboratories; Director, First National Bank of Boston; Director, Apollo Computer,
serving:         Inc.
January 1999

PETER E.         PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                 $1,061.95         $148,500
MADDEN
Birth Date:      OTHER DIRECTORSHIPS HELD: Board of Overseers, Babson College.
March 16,
1942             PREVIOUS POSITIONS: Representative, Commonwealth of Massachusetts General Court;
One Royal        President, State Street Bank and Trust Company and State Street Corporation
Palm Way         (retired); Director, VISA USA and VISA International; Chairman and Director,
100 Royal        Massachusetts Bankers Association; Director, Depository Trust Corporation;
Palm Way         Director, The Boston Stock Exchange.
Palm Beach,
FL
TRUSTEE
Began
serving:
August 1991

CHARLES F.       PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                $1,168.14         $163,350
MANSFIELD,       Management Consultant.
JR.
Birth Date:      PREVIOUS POSITIONS: Chief Executive Officer, PBTC International Bank; Partner,
April 10,        Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of Retail
1945             Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank USA
80 South         (formerly, Marine Midland Bank); Vice President, Citibank; Assistant Professor of
Road             Banking and Finance, Frank G. Zarb School of Business, Hofstra University;
Westhampton      Executive Vice President DVC Group, Inc.
Beach, NY
TRUSTEE
Began
serving:
January 1
1999

JOHN E.          PRINCIPAL OCCUPATIONS: Director or Trustee, and Chairman of the Board of                 $1,353.10         $178,200
MURRAY, JR.,     Directors or Trustees, of the Federated Fund Complex; Chancellor and Law
J.D., S.J.D.     Professor, Duquesne University; Partner, Murray, Hogue & Lannis.
Birth Date:
December 20,     OTHER DIRECTORSHIPS HELD: Director, Michael Baker Corp. (engineering,
1932             construction, operations and technical services).
Chancellor,
Duquesne         PREVIOUS POSITIONS: President, Duquesne University; Dean and Professor of Law,
University       University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
Pittsburgh,      University School of Law.
PA
TRUSTEE
Began
serving:
February
1995

THOMAS M.        PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                       $0               $0
O'NEILL          Managing Director and Partner, Navigator Management Company, L.P. (investment and
Birth Date:      strategic consulting).
June 14,
1951             OTHER DIRECTORSHIPS HELD: Director, Midway Pacific (lumber); Board of Overseers,
95 Standish      Children's Hospital of Boston; Visiting Committee on Athletics, Harvard College.
Street
P.O. Box         PREVIOUS POSITIONS: Chief Executive Officer and President, Managing Director and
2779             Chief Investment Officer, Fleet Investment Advisors; President and Chief
Duxbury, MA      Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman,
Trustee          Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam
Began            Companies, Boston, MA; and Credit Analyst and Lending Officer, Fleet Bank.
serving:
October 2006
MARJORIE P.      PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex; Public        $1,061.95         $148,500
SMUTS            Relations/Marketing Consultant/Conference Coordinator.
Birth Date:
June 21,         PREVIOUS POSITIONS: National Spokesperson, Aluminum Company of America;
1935             television producer; President, Marj Palmer Assoc.; Owner, Scandia Bord.
4905 Bayard
Street
Pittsburgh,
PA
TRUSTEE
Began
serving:
January 1990

JOHN S.          PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex;               $1,061.95         $148,500
WALSH            President and Director, Heat Wagon, Inc. (manufacturer of construction temporary
Birth Date:      heaters); President and Director, Manufacturers Products, Inc. (distributor of
November 28,     portable construction heaters); President, Portable Heater Parts, a division of
1957             Manufacturers Products, Inc.
2604 William
Drive            PREVIOUS POSITION: Vice President, Walsh & Kelly, Inc.
Valparaiso,
IN
TRUSTEE
Began
serving:
January 1999
JAMES F.         PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex; Vice            $590.69               $0
WILL             Chancellor and President, Saint Vincent College.
Birth Date:
October 12,      OTHER DIRECTORSHIPS HELD: Alleghany Corporation.
1938
Saint            PREVIOUS POSITIONS: Chairman, President and Chief Executive Officer, Armco, Inc.;
Vincent          President and Chief Executive Officer, Cyclops Industries; President and Chief
College          Operating Officer, Kaiser Steel Corporation.
Latrobe, PA
TRUSTEE
Began
serving:
April 2006


OFFICERS**

NAME
BIRTH DATE
POSITIONS
HELD WITH   PRINCIPAL OCCUPATION(S) AND PREVIOUS POSITION(S)
TRUST
DATE
SERVICE
BEGAN
JOHN W.     PRINCIPAL OCCUPATIONS: Executive Vice President and Secretary of the Federated Fund Complex; Vice Chairman, Executive
MCGONIGLE   Vice President, Secretary and Director, Federated Investors, Inc.
Birth Date:
October 26, PREVIOUS POSITIONS: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director,
1938        Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp.
EXECUTIVE
VICE
PRESIDENT
AND
SECRETARY
Began
serving:
February
1990

RICHARD A.  PRINCIPAL OCCUPATIONS: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President,
NOVAK       Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp., Edgewood Services,
Birth Date: Inc. and Southpointe Distribution Services, Inc.
December
25, 1963
TREASURER   PREVIOUS POSITIONS: Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company; held
Began       various financial management positions within The Mercy Hospital of Pittsburgh; Auditor, Arthur Andersen & Co.
serving:
January
2006

RICHARD B.  PRINCIPAL OCCUPATIONS: Vice Chairman or Vice President of some of the Funds in the Federated Fund Complex; Vice
FISHER      Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Birth Date:
May 17,     PREVIOUS POSITIONS: President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice
1923        President, Federated Investors, Inc. and Director and Chief Executive Officer, Federated Securities Corp.
VICE
PRESIDENT
Began
serving:
February
1990

BRIAN P.    PRINCIPAL OCCUPATIONS: Senior Vice President and Chief Compliance Officer of the Federated Fund Complex; Vice President
BOUDA       and Chief Compliance Officer of Federated Investors, Inc.; and Chief Compliance Officer of its subsidiaries. Mr. Bouda
Birth Date: joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
February
28, 1947
SENIOR VICE
PRESIDENT
Began
serving:
January
2006

STEPHEN F.  PRINCIPAL OCCUPATIONS: Chief Investment Officer of this Fund and various other Funds in the Federated Fund Complex;
AUTH        Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated
Birth Date: Equity Management Company of Pennsylvania.
September
3, 1956     PREVIOUS POSITIONS: Executive Vice President, Federated Investment Management Company, and Passport Research, Ltd.
CHIEF       (Investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division;
INVESTMENT  Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and
OFFICER     Portfolio Manager, Prudential Investments.
Began
serving:
November
2002

JOHN W.     PRINCIPAL OCCUPATIONS: John W. Harris has been the Fund's Portfolio Manager since January 2003. He is Vice President of
HARRIS      the Trust.   Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst
Birth Date: and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May
June 6,     1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior
1954        Investment Analyst and became a Portfolio Manager and an Assistant Vice President of the Fund's Adviser in December
VICE        1998.  Mr. Harris continues to be a Portfolio Manager of certain Federated Funds.  In January 2000, Mr. Harris became a
PRESIDENT   Vice President of the Fund's Adviser. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the
Began       University of Pittsburgh.
serving:
May 2004

**Officers do not receive any compensation from the Fund.

In addition, the Fund has appointed an Anti-Money Laundering Compliance Officer.


COMMITTEES OF THE BOARD
                                                                                                                           MEETINGS
BOARD          COMMITTEE                                                                                                   HELD
COMMITTEE      MEMBERS          COMMITTEE FUNCTIONS                                                                        DURING
                                                                                                                           LAST
                                                                                                                           FISCAL
                                                                                                                           YEAR
EXECUTIVE      John F.          In between meetings of the full Board, the Executive Committee generally may exercise      Two
               Donahue          all the powers of the full Board in the management and direction of the business and
               John E.          conduct of the affairs of the Trust in such manner as the Executive Committee shall
               Murray, Jr.,     deem to be in the best interests of the Trust.  However, the Executive Committee
               J.D., S.J.D.     cannot elect or remove Board members, increase or decrease the number of Trustees,
               John S.          elect or remove any Officer, declare dividends, issue shares or recommend to
               Walsh            shareholders any action requiring shareholder approval.

AUDIT          Thomas G.        The purposes of the Audit Committee are to oversee the accounting and financial            Ten
               Bigley           reporting process of the Fund, the Fund's internal control over financial reporting,
               John T.          and the quality, integrity and independent audit of the Fund's financial statements.
               Conroy, Jr.      The Committee also oversees or assists the Board with the oversight of compliance with
               Nicholas P.      legal requirements relating to those matters, approves the engagement and reviews the
               Constantakis     qualifications, independence and performance of the Fund's independent registered
               Charles F.       public accounting firm, acts as a liaison between the independent registered public
               Mansfield,       accounting firm and the Board and reviews the Fund's internal audit function.
               Jr.



NOMINATING     Thomas G.        The Nominating Committee, whose members consist of all Independent Trustees, selects       One
               Bigley           and nominates persons for election to the Fund's Board when vacancies occur. The
               John T.          Committee will consider candidates recommended by shareholders, Independent Trustees,
               Conroy, Jr.      officers or employees of any of the Fund's agents or service providers and counsel to
               Nicholas P.      the Fund. Any shareholder who desires to have an individual considered for nomination
               Constantakis     by the Committee must submit a recommendation in writing to the Secretary of the Fund,
               John F.          at the Fund's address appearing on the back cover of this Statement of Additional
               Cunningham       Information. The recommendation should include the name and address of both the
               Peter E.         shareholder and the candidate and detailed information concerning the candidate's
               Madden           qualifications and experience. In identifying and evaluating candidates for
               Charles F.       consideration, the Committee shall consider such factors as it deems appropriate.
               Mansfield,       Those factors will ordinarily include:  integrity, intelligence, collegiality,
               Jr.              judgment, diversity, skill, business and other experience, qualification as an
               John E.          "Independent Trustee," the existence of material relationships which may create the
               Murray, Jr.      appearance of a lack of independence, financial or accounting knowledge and
               Thomas M.        experience, and dedication and willingness to devote the time and attention necessary
               O'Neill          to fulfill Board responsibilities.
               Marjorie P.
               Smuts
               John S.
               Walsh
               James F.
               Will


BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE FEDERATED FAMILY OF INVESTMENT
COMPANIES AS OF DECEMBER 31, 2005

                                                                                     AGGREGATE
                                                      DOLLAR RANGE OF          DOLLAR RANGE OF
                                                         SHARES OWNED          SHARES OWNED IN
INTERESTED                            IN FEDERATED MID-CAP INDEX FUND      FEDERATED FAMILY OF
BOARD MEMBER NAME                                                         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                                                  None            Over $100,000
Charles F. Mansfield, Jr.                                        None            Over $100,000
John E. Murray, Jr., J.D., S.J.D.                                None            Over $100,000
Thomas M. O'Neill                                                None                     None
Marjorie P. Smuts                                                None            Over $100,000
John S. Walsh                                                    None            Over $100,000
James F. Will                                                    None                     None

</R>

INVESTMENT MANAGER
<R>

The Manager oversees the Subadviser. Effective the close of business on
September 29, 2006, BlackRock Investment Management, LLC (Subadviser), a
subsidiary of BlackRock, Inc., 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 Subadviser for the Fund
and thereafter monitoring and evaluating the performance of the Subadviser
through quantitative and qualitative analyses. In addition, the Manager conducts
periodic in-person, telephonic and written consultations with the Subadviser. In
initially evaluating the Subadviser, the Manager considered, among other
factors, the Subadviser'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
Subadviser'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
Subadviser; 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 Fund; discussing with the Subadviser the portfolio sampling
techniques employed by the Subadviser; and ultimately recommending to the Board
whether the Subadvisory Agreement 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 Subadviser, 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 Subadviser 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.


PORTFOLIO MANAGER INFORMATION
The following information about the Fund's Portfolio Managers is provided as of
August 31, 2006, except information regarding compensation for Jeffrey L. Russo
and Debra L. Jelilian and Potential Material Conflicts of Interest is provided
as of September 29, 2006.

OTHER ACCOUNTS MANAGED BY JOHN W. HARRIS TOTAL NUMBER OF OTHER ACCOUNTS MANAGED / TOTAL ASSETS*
Registered Investment Companies          13 funds  /  $ $3,273.75 million
Other Pooled Investment Vehicles         0
Other Accounts                           0



*  None of the Accounts has an advisory fee that is based on the performance of
the account.

Dollar value range of shares owned in the Fund:  none.


John Harris is paid a fixed base salary and a variable annual incentive.  Base
salary is determined within a market competitive position-specific salary range,
based on the portfolio manager's experience and performance.  The annual
incentive amount is determined based on multiple performance criteria using a
Balanced Scorecard methodology, and may be paid entirely in cash, or in a
combination of cash and restricted stock of Federated Investors, Inc.
(Federated).  There are Four weighted performance categories in the Balanced
Scorecard.  Investment Product Performance (IPP) is the predominant factor.  Of
lesser importance are: Leadership/Teamwork/Communication, Research Performance,
and Financial Success.  The total Balanced Scorecard "score" is applied against
an annual incentive opportunity that is competitive in the market for this
portfolio manager role to determine the annual incentive payment.


IPP is determined with regard to certain other accounts serviced by Mr. Harris,
and measured by applying two components.  The first component includes accounts
for which Mr. Harris serves as portfolio manager and assesses performance of
asset allocation decisions over rolling 1, 3 and 5 calendar years versus
performance of pre-defined allocation models.  For certain funds, 1, 3, and 5
calendar year pre-tax gross returns, or taxable equivalent returns, are measured
vs. designated peer groups of comparable accounts.  In addition, for certain
accounts, performance is measured by comparing the account's average one-year
distribution yield, or taxable equivalent, for 1, 3 and 5 calendar year periods
to those of designated peer group accounts.  The second component includes
certain additional accounts for which Mr. Harris provides quantitative
analytical support, measured on a rolling 1, 3, and 5 calendar year, pre-tax
gross return basis vs. fund benchmarks and/or on a rolling 1, 3, and 5 calendar
year, pre-tax gross return basis vs. designated peer groups of comparable
accounts.  With respect to this component, accounts are categorized according to
investment strategy, and performance of each strategy category receives equal
weighting.  Performance of each account within a strategy also receives equal
weighting.  Performance periods are adjusted if the portfolio manager has been
managing the fund for less than five years; funds with less than one year of
performance history under the portfolio manager may be excluded.  The IPP score
can be reduced based on management's assessment of the Fund's comparative risk
profile.


Leadership/Teamwork/Communication is assessed by Federated's management.


Research performance focuses on the quality and timeliness of allocation
recommendations, the quality and timeliness of quantitative support and other
qualitative factors and is assessed by the Chief Investment Officer.


The Financial Success category is designed to tie the portfolio manager's bonus,
in part, to Federated's overall financial health, and any awards are predicated
on Federated's attainment of specified financial targets.  Senior management
determines individual Financial Success scores on a discretionary basis,
considering overall contributions, including factors not fully reflected in the
other Balanced Scorecard categories.


As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a fund's investments, on the one hand, and
the investments of other accounts for which the portfolio manager is
responsible, on the other.  For example, it is possible that the various
accounts managed could have different investment strategies that, at times,
might conflict with one another to the possible detriment of the Fund.
Alternatively, to the extent that the same investment opportunities might be
desirable for more than one account, possible conflicts could arise in
determining how to allocate them.  Other potential conflicts might include
conflicts created by specific portfolio manager compensation arrangements, and
conflicts relating to selection of brokers or dealers to execute fund portfolio
trades and/or specific uses of commissions from Fund portfolio trades (for
example, research, or "soft dollars").  The Adviser has structured the portfolio
managers' compensation in a manner, and the Fund has adopted policies and
procedures, reasonably designed to safeguard the Fund from being negatively
affected as a result of any such potential conflicts.




                                         NUMBER OF OTHER ACCOUNTS MANAGED             NUMBER OF ACCOUNTS AND ASSETS FOR WHICH
 NAME OF INVESTMENT MANAGER AND             AND ASSETS BY ACCOUNT TYPE                   ADVISORY FEE IS PERFORMANCE-BASED
       PORTFOLIO MANAGER
                                   REGISTERED      OTHER POOLED                     REGISTERED      OTHER POOLED
                                   INVESTMENT       INVESTMENT                      INVESTMENT       INVESTMENT    OTHER ACCOUNTS
                                    COMPANIES        VEHICLES     OTHER ACCOUNTS     COMPANIES        VEHICLES
        JEFFREY L. RUSSO               11               26              34              1*               3*              2
                                 $5,308,387,252  $14,102,055,855  $42,406,933,220  $155,168,962    $1,204,466,504  $3,251,114,501
       DEBRA L. JELILIAN               13               15              24               0               0               0
                                 $5,538,678,934  $10,946,824,774  $35,859,990,370
* A portion of the assets in the master fund of a master-feeder structure are
subject to a performance fee.

FUND OWNERSHIP

Each portfolio manager owned no shares of the Fund as of August 31, 2006.

PORTFOLIO MANAGER COMPENSATION

The Portfolio Manager Compensation Program of BlackRock Advisors, LLC and its
affiliates, including the Subadviser, ("BlackRock Advisors") is critical to
BlackRock Advisors' ability to attract and retain the most talented asset
management professionals. This program ensures that compensation is aligned with
maximizing investment returns and it provides a competitive pay opportunity for
competitive performance.

COMPENSATION PROGRAM

The elements of total compensation for BlackRock Advisors portfolio managers are
base salary, annual performance-based cash and stock compensation (cash and
stock bonus) and other benefits. BlackRock Advisors has balanced these
components of pay to provide portfolio managers with a powerful incentive to
achieve consistently superior investment performance.  By design, portfolio
manager compensation levels fluctuate - both up and down - with the relative
investment performance of the portfolios that they manage.

   BASE SALARY

   Under the BlackRock Advisors approach, like that of many asset management
   firms, base salaries represent a relatively small portion of a portfolio
   manager's total compensation. This approach serves to enhance the
   motivational value of the performance-based (and therefore variable)
   compensation elements of the compensation program.

   PERFORMANCE-BASED COMPENSATION

   BlackRock Advisors believes that the best interests of investors are served
   by recruiting and retaining exceptional asset management talent and managing
   their compensation within a consistent and disciplined framework that
   emphasizes pay for performance in the context of an intensely competitive
   market for talent. To that end, the portfolio manager incentive compensation
   is based on a formulaic compensation program. BlackRock Advisors' formulaic
   portfolio manager compensation program includes: pre-tax investment
   performance relative to appropriate competitors or benchmarks over 1-3- and
   5-year performance periods. If a portfolio manager's tenure is less than 5
   years, performance periods will reflect time in position. In addition,
   portfolio manager's compensation can be based on BlackRock's investment
   performance, financial results of BlackRock, expense control, profit margins,
   strategic planning and implementation, quality of client service, market
   share, corporate reputation, capital allocation, compliance and risk control,
   leadership, workforce diversity, technology and innovation. All factors are
   considered collectively by BlackRock Advisors management.

   CASH BONUS

   Performance-based compensation is distributed to portfolio managers in a
   combination of cash and stock. Typically, the cash bonus, when combined with
   base salary, represents more than 60% of total compensation for portfolio
   managers.

   STOCK BONUS

   A portion of the dollar value of the total annual performance-based bonus is
   paid in restricted shares of BlackRock, Inc. (the "Company") stock.  Paying a
   portion of annual bonuses in stock puts compensation earned by a portfolio
   manager for a given year "at risk" based on the Company's ability to sustain
   and improve its performance over future periods.

   The ultimate value of stock bonuses is dependent on future Company stock
   price performance. As such, the stock bonus aligns each portfolio manager's
   financial interests with those of the Company's shareholders and encourages a
   balance between short-term goals and long-term strategic objectives.

   Management strongly believes that providing a significant portion of
   competitive performance-based compensation in stock is in the best interests
   of investors and shareholders. This approach ensures that portfolio managers
   participate as shareholders in both the "downside risk" and "upside
   opportunity" of the Company's performance.  Portfolio managers therefore have
   a direct incentive to protect Company's reputation for integrity.

   OTHER BENEFITS

   Portfolio managers are also eligible to participate in broad-based plans
   offered generally to BlackRock employees, including broad-based retirement,
   401(k), health, and other employee benefit plans.

POTENTIAL MATERIAL CONFLICTS OF INTEREST

Real, potential or apparent conflicts of interest may arise when a portfolio
manager has day-today portfolio management responsibilities with respect to more
than one fund or account, including the following:

Certain investments may be appropriate for the portfolios and also for other
clients advised by BlackRock Advisors and its affiliates (including the
Subadviser), including other client accounts managed by a portfolio's portfolio
management team.  Investment decisions for a portfolio and other clients are
made with a view to achieving their respective investment objectives and after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investments generally.  Frequently, a
particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, because clients of BlackRock Advisors and its affiliates may have
differing investment strategies, a particular security may be bought for one or
more clients when one or more other clients are selling the security. The
investment results for a portfolio may differ from the results achieved by other
clients of BlackRock Advisors and its affiliates and results among clients may
differ.  In addition, purchases or sales of the same security may be made for
two or more clients on the same day.  In such event, such transactions will be
allocated among the clients in a manner believed by BlackRock Advisors to be
equitable to each.  BlackRock Advisors will not determine allocations based on
whether it receives a performance based fee from the client.  In some cases, the
allocation procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a portfolio.  Purchase and sale orders for a
portfolio may be combined with those of other clients of BlackRock Advisors and
its affiliates in the interest of achieving the most favorable net results to
the portfolio.

To the extent that the portfolio's portfolio management team has
responsibilities for managing accounts in addition to the portfolios, a
portfolio manager will need to divide his or her time and attention among
relevant accounts.


In some cases, a real, potential or apparent conflict may also arise where (i)
BlackRock Advisors or a portfolio manager may have an incentive, such as a
performance based fee, in managing one account and not with respect to other
accounts it manages or (ii) a portfolio manager owns an interest in one fund or
account he or she manages and not another.


</R>


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.


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, as well as Shares of the Fund, 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.


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 subadviser 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 Institutional Shareholder
Services (ISS) to obtain, vote, and record proxies in accordance with the Proxy
Committee's directions.  The Proxy Committee directs ISS by means of Proxy
Voting Guidelines, and ISS 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, ISS
will provide the Proxy Committee with all information that it has obtained
regarding the proposal and the Proxy Committee will provide specific direction
to ISS.  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 adviser, 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.

PROXY VOTING REPORT
A report on "Form N-PX" of how the Fund voted any proxies during the most recent
12-month period ended June 30 is available through Federated's website.  Go to
FederatedInvestors.com; select "Products;" select the Fund; then use the link to
"Prospectuses and Regulatory Reports" to access the link to Form N-PX. Form N-PX
filings are also available at the SEC's website at www.sec.gov.


PORTFOLIO HOLDINGS INFORMATION
Information concerning the Fund's portfolio holdings is available in the
"Products" section of Federated's website at FederatedInvestors.com. A complete
listing of the Fund's portfolio holdings as of the end of each calendar quarter
is posted on the website 30 days (or the next business day) after the end of the
quarter and remains posted until replaced by the information for the succeeding
quarter. Summary portfolio composition information as of the close of each month
is posted on the website 15 days (or the next business day) after month-end and
remains until replaced by the information for the succeeding month.  The summary
portfolio composition information may include identification of the Fund's top
ten holdings and a percentage breakdown of the portfolio by sector.

To access this information from the "Products" section of the website, click on
"Portfolio Holdings" and select the appropriate link opposite the name of the
Fund, or select the name of the Fund from the menus on the "Products" section,
and from the Fund's page click on the "Portfolio Holdings" or "Composition"
link.  A user is required to register on the website the first time the user
accesses this information.

You may also access from the "Products" section of the website portfolio
information as of the end of the Fund's fiscal quarters.  The Fund's annual and
semiannual reports, which contain complete listings of the Fund's portfolio
holdings as of the end of the Fund's second and fourth fiscal quarters, may be
accessed by selecting the name of the Fund, clicking on "Prospectuses and
Regulatory Reports" and selecting the link to the appropriate PDF.  Complete
listings of the Fund's portfolio holdings as of the end of the Fund's first and
third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the
"Products" section and then selecting the appropriate link opposite the name of
the Fund.  Fiscal quarter information is made available on the website within 70
days after the end of the fiscal quarter.  This information is also available in
reports filed with the SEC at the SEC's website at www.sec.gov.

The disclosure policy of the Fund and the Manager prohibits the disclosure of
portfolio holdings information to any investor or intermediary before the same
information is made available to other investors.  Employees of the Manager or
its affiliates who have access to nonpublic information concerning the Fund's
portfolio holdings are prohibited from trading securities on the basis of this
information.  Such persons must report all personal securities trades and obtain
pre-clearance for all personal securities trades other than mutual fund shares.

Firms that provide administrative, custody, financial, accounting, legal or
other services to the Fund may receive nonpublic information about Fund
portfolio holdings for purposes relating to their services.  The Fund may also
provide portfolio holdings information to publications that rate, rank or
otherwise categorize investment companies.  Traders or portfolio managers may
provide "interest" lists to facilitate portfolio trading if the list reflects
only that subset of the portfolio for which the trader or portfolio manager is
seeking market interest.  A list of service providers, publications and other
third parties who may receive nonpublic portfolio holdings information appears
in the Appendix to this SAI.

The furnishing of nonpublic portfolio holdings information to any third party
(other than authorized governmental or regulatory personnel) requires the prior
approval of the President of the Manager and of the Chief Compliance Officer of
the Fund.  The President of the Manager and the Chief Compliance Officer will
approve the furnishing of nonpublic portfolio holdings information to a third
party only if they consider the furnishing of such information to be in the best
interests of the Fund and its shareholders.  In that regard, and to address
possible conflicts between the interests of Fund shareholders and those of the
Manager and its affiliates, the following procedures apply.  No consideration
may be received by the Fund, the Manager, any affiliate of the Manager or any of
their employees in connection with the disclosure of portfolio holdings
information.  Before information is furnished, the third party must sign a
written agreement that it will safeguard the confidentiality of the information,
will use it only for the purposes for which it is furnished and will not use it
in connection with the trading of any security.  Persons approved to receive
nonpublic portfolio holdings information will receive it as often as necessary
for the purpose for which it is provided.  Such information may be furnished as
frequently as daily and often with no time lag between the date of the
information and the date it is furnished.  The Board receives and reviews
annually a list of the persons who receive nonpublic portfolio holdings
information and the purposes for which it is furnished.


BROKERAGE TRANSACTIONS AND INVESTMENT ALLOCATION
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).  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.


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
State Street Bank and Trust Company, the Fund's registered transfer agent,
maintains all necessary shareholder records.


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm for the Fund, Ernst & Young
LLP, conducts its audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States), 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           2006           2005           2004
 Management Fee Earned             $4,406,065     $3,230,483     $2,635,452
 Management Fee Reduction          1,314,506      26,688         303,628
 Management Fee Reimbursement      0              62             3,537
 Sub-Advisory Fee                  330,455        242,286        197,739
 Brokerage Commissions             34,634         12,900         94,259
 Shareholder Services Fee          1,515,905      --             --


</R>



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.


AVERAGE ANNUAL TOTAL RETURNS AND YIELD
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Total returns are given for the one-year,  five-year and ten-year periods ended
October 31, 2006.

Yield is given for the 30-day period ended October 31, 2006.



                                                      30-DAY PERIOD     1 YEAR     5 YEARS     10 YEARS
Total Return
  Before Taxes                                        N/A               12.91%     12.40%      13.06%
  After Taxes on Distributions                        N/A               11.50%     11.74%      11.21%
  After Taxes on Distributions and Sale of Shares     N/A
                                                                        9.36%      10.62%      10.60%
Yield                                                 1.22%             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 financial intermediaries charge fees in connection with services
provided in conjunction with an investment in Shares, the Share performance is
lower for shareholders paying those fees.



WHO IS FEDERATED INVESTORS, INC.?

Federated and its subsidiaries are dedicated to providing you with world-class
investment management.  With offices in Pittsburgh, New York City and Frankfurt,
Federated is a firm with independent research, product breadth and industry
standing.

Federated seeks to achieve superior and sustainable investment performance for a
broad array of global clients through a disciplined investment process and an
information advantage created by proprietary fundamental research.  Federated is
distinctive in our disciplined process that integrates proprietary research with
trading and portfolio management.


FEDERATED FUNDS OVERVIEW

EQUITIES
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As of December 31, 2005, Federated managed 35 equity funds totaling
approximately $26.0 billion in assets across growth, value, equity income,
international, index and sector allocation styles.


TAXABLE FIXED INCOME
As of December 31, 2005, Federated managed 33 taxable bond funds including:
high-yield, multi-sector, mortgage-backed, U.S. government, U.S. corporate and
international, with assets approximating $16.0 billion.


TAX FREE FIXED INCOME
As of December 31, 2005, Federated managed 15 municipal bond funds with
approximately $3.1 billion in assets and 22 municipal money market funds with
approximately $27.6 billion in total assets.


MONEY MARKET FUNDS
As of December 31, 2005, Federated managed $145.3 billion in assets across 53
money market funds, including 18 government, 12 prime, 22 municipal and 1 euro-
denominated with assets approximating $54.9 billion, $62.6 billion, $27.6
billion and $113.8 million.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: Stephen F. Auth, CFA, for Global
Equity; Robert J. Ostrowski, CFA, for Taxable Fixed Income; Mary Jo Ochson, CFA,
for Tax Free Fixed Income; and Deborah A. Cunningham, CFA, for Money Market
Funds.

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FINANCIAL INFORMATION

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The Financial Statements for the Fund for the fiscal year ended October 31,
2006, are incorporated herein by reference to the Annual Report to Shareholders
of Federated Mid-Cap Index Fund dated October 31, 2006.

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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


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


CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072





APPENDIX

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The following is a list of persons other than the Manager and its affiliates
that may receive nonpublic portfolio holdings information concerning the Fund:


CUSTODIAN
State Street Bank and Trust Company


SECURITIES LENDING AGENT
Citigroup
Metropolitan West Securities, LLC

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP


LEGAL COUNSEL
Dickstein Shapiro LLP
Reed Smith LLP

SERVICE PROVIDERS
Bloomberg
Factset
Institutional Shareholder Services
Investor Responsibility Research Center
Wilshire Associates, Inc.

SECURITY PRICING SERVICES
Reuters
Standard & Poor's
FT Interactive Data
Bear Stearns

RATINGS AGENCIES
Standard & Poor's


PERFORMANCE REPORTING/PUBLICATIONS
Fidelity Strategic Advisors

Lipper

Morningstar

NASDAQ

Value Line

Wiesenberger/Thomson Financial


OTHER
Investment Company Institute
Astec Consulting Group, Inc.

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[Graphic Omitted]





[Graphic Omitted]
Federated Mid-Cap Index Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Contact us at FEDERATEDINVESTORS.COM
or call 1-800-341-7400.

Federated Securities Corp., Distributor

2062304B(12/06)

Federated is a registered mark
of Federated Investors, Inc.
2006 {copyright}Federated Investors, Inc.

[Graphic Omitted]

Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Mini-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

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December 31, 2006

</R>

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).

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, or otherwise.

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

CONTENTS

<R>

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?	10
What Do Shares Cost?	12
How is the Fund Sold?	14
Payments to Financial Intermediaries	14
How to Purchase Shares	16
How to Redeem and Exchange Shares	18
Account and Share Information	21
Who Manages the Fund?	24
Legal Proceedings	27
Financial Information	28
Appendix A: Hypothetical Investment and Expense Information	30

</R>

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 (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 may invest in derivative contracts to implement its investment strategies as more fully described in this prospectus.

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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 (the “Board”) 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?”

</R>

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. 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.
• 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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• Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund’s use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or in the Fund’s Statement of Additional Information (SAI), such as stock market, credit, liquidity and leverage risks.

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

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

Risk/Return Bar Chart and Table

The 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.

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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.

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The Fund’s Institutional Shares total return for the nine-month period from January 1, 2006 to September 30, 2006 was 8.13%.

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Within the period shown in the bar chart, the Fund’s Institutional Shares highest quarterly return was 22.98% (quarter ended June 30, 2003). Its lowest quarterly return was (21.52)% (quarter ended September 30, 2002).

Average Annual Total Return Table

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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 that measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 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.

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(For the periods ended December 31, 2005)

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	1 Year	5 Years	10 Years
Fund:
Return Before Taxes	3.74%	7.33%	7.88%
Return After Taxes on Distributions1	3.09%	7.09%	6.27%
Return After Taxes on Distributions and Sale of Fund Shares1	3.22%	6.28%	6.03%
RUS2	4.55%	8.22%	9.26%

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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?

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FEDERATED MINI-CAP INDEX FUND

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FEES AND EXPENSES

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

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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)	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, Reimbursement and Reduction)1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee2	0.50%
Distribution (12b-1) Fee	None
Other Expenses3	0.74%
Total Annual Fund Operating Expenses4	1.24%
1 The percentages shown are based on expenses for the entire fiscal year ended October 31, 2006. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so (except as discussed in Note 4, below), the Manager and shareholder services provider waived, reimbursed and/or elected not to charge certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2006.
Total Waivers, Reimbursement and Reduction of Fund Expenses	0.33%
Total Actual Annual Fund Operating Expenses (after waivers, reimbursement and reduction)	0.91%
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 0.30% for the fiscal year ended October 31, 2006.
3 Includes a shareholder services fee/account administration fee which is used to compensate intermediaries for shareholder services or account administrative services. Also includes a recordkeeping fee which is used to compensate intermediaries for recordkeeping services. Please see “Payments to Financial Intermediaries” herein. The shareholder services provider voluntarily waived and reimbursed a portion of its fee. Additionally, the shareholder services provider voluntarily elected not to charge, and therefore the Fund did not accrue, a portion of its fee. The shareholder services provider can terminate this voluntary waiver, reimbursement and reduction at any time. Total other expenses paid by the Fund’s Institutional Shares (after the voluntary waiver, reimbursement and reduction) were 0.61% for the fiscal year ended October 31, 2006.
4 The Manager and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses (including the distribution (12b-1) fee) so that the total operating expenses paid by the Fund’s Institutional Shares (after the voluntary waivers and reimbursements) will not exceed 0.94% for the fiscal year ending October 31, 2007. Although these actions are voluntary, the Manager and its affiliates have agreed not to terminate these waivers and/or reimbursements until after December 31, 2007.

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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.

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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, reimbursement and reduction 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:

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1 Year	$	126
3 Years	$	393
5 Years	$	681
10 Years	$	1,500

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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, 2006, the capitalization range of the issuers comprising the Index was $90 million to $2.9 billion. As of the same date, the weighted median market capitalization of the Fund was $1.1 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 Index (“tracking error”) by investing in a portfolio that seeks to replicate, as closely as possible, the composition of the Index. However, it is anticipated that the Fund may not invest in certain securities included in the Index because such securities account for a small percentage of the Index’s overall performance and the transaction costs associated with buying and selling such securities would likely outweigh any reduction in tracking error. The Fund attempts to achieve a 0.95 or better correlation between the performance of the Fund, before expenses, 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; (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.

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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.

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

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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.

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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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Derivative Contracts

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Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, currencies, indices, or other assets or instruments including other derivative contracts, (each a “Reference Instrument” and collectively, “Reference Instruments”). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as “physically settled” derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as “cash settled” derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

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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.

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.

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Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund’s exposure to the risks of the Reference Instrument, 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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Payment obligations arising in connection with derivative contracts are frequently required to be secured with collateral (in the case of OTC contracts) or margin (in the case of exchange-traded contracts, as previously noted).

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The Fund may not invest in a derivative contract if it is not permitted to own, invest in, or otherwise have economic exposure to the Reference Instrument (or, in the case of a Reference Instrument that is an index, the securities or derivatives that comprise the index). The Fund may trade in the following specific types and/or combinations of derivative contracts:

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FUTURES CONTRACTS

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. 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 financial futures (such as index futures).

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ASSET SEGREGATION

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In order to secure its obligations in connection with derivative contracts or special transactions, the Fund will either own the underlying assets, enter into offsetting transactions or set aside cash or readily marketable securities. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

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HYBRID INSTRUMENTS

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Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of designated securities, commodities, currencies, indices, or other assets or instruments (each a, “Valuation Instrument”). Hybrid instruments can take on many forms including, but not limited to, the following three forms: First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Valuation Instrument. Second, a hybrid instrument may also combine elements of a fixed-income security and an equity security. Third, hybrid instruments may include convertible securities with conversion terms related to a Valuation Instrument.

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Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in securities, currencies and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional securities or the Valuation Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Valuation Instrument. 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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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.

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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 attempt to 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.

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Securities lending activities are subject to credit and leverage risks.

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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. 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 DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

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The Fund’s use of derivative contracts and hybrid instruments 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 and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference or Valuation Instruments 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 derivative contracts and hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, derivative contracts and hybrid instruments 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. Fifth, a common provision in over-the-counter (OTC) derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described in this prospectus or in the Fund’s SAI, such as stock market, credit, liquidity and leverage risks.

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LEVERAGE RISKS

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

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Investments can have these same results if their returns are based on a multiple of a specified index, security, or other benchmark.

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What Do Shares Cost?

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).

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From time to time the Fund may purchase foreign securities that trade in foreign markets on days the NYSE is closed. The value of the Fund’s assets may change on days you cannot purchase or redeem Shares. The Fund does not charge a front-end sales charge. NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund’s current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

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The Fund generally values equity securities according to the last sale price or official closing price reported 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.

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If prices are not available from an independent pricing service, securities and derivative contracts 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 security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board of Trustees (Board). The Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Fund’s Manager determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, or based on market quotations.

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How is the Fund Sold?

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 expenses which affect their performance. Contact your financial intermediary or call 1-800-341-7400 for more information concerning the other class.

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 financial intermediaries. Under the Distributor’s Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

Payments to Financial Intermediaries

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The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

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SERVICE FEES

The Fund may pay Service Fees of up to 0.25% of average net assets to financial intermediaries 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 financial intermediaries directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial intermediaries. If a financial intermediary receives Service Fees on an account, it is not eligible to also receive Account Administration Fees on that same account.

ACCOUNT ADMINISTRATION FEES

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The Fund may pay Account Administration Fees of up to 0.25% of average net assets to banks that are not registered as broker-dealers or investment advisers for providing administrative services to the Funds and shareholders. If a financial intermediary receives Account Administration Fees on an account, it is not eligible to also receive Service Fees or Recordkeeping Fees on that same account.

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RECORDKEEPING FEES

The Fund may pay Recordkeeping Fees on an average net assets basis or on a per account per year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

NETWORKING FEES

The Fund may reimburse Networking Fees on a per account per year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Manager). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, 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.

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

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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 financial intermediaries may be subject to a smaller minimum investment amount. Keep in mind that financial intermediaries may charge you fees for their services in connection with your Share transactions.

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THROUGH A FINANCIAL INTERMEDIARY

• Establish an account with the financial intermediary; and
• Submit your purchase order to the financial intermediary 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 financial intermediary 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.

Financial intermediaries 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 State Street Bank and Trust 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 send it to:

The Federated Funds
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, send it to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. You must meet the minimum initial investment requirement for purchasing Shares and both accounts must have identical registrations.

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BY SYSTEMATIC INVESTMENT PROGRAM

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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 financial intermediary. The minimum investment amount for SIPs is $50.

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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 and Exchange Shares

You should redeem or exchange Shares:

• through a financial intermediary if you purchased Shares through a financial intermediary; or
• directly from the Fund if you purchased Shares directly from the Fund.

Shares of the Fund may be redeemed for cash or exchanged for shares of the same class of other Federated funds on days on which the Fund computes its NAV. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary 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 financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange 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 or exchange Shares by sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

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The Federated Funds
30 Dan Road
Canton, MA 02021

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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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program if:

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

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

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• a redemption is payable to someone other than the shareholder(s) of record; or

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• if exchanging (transferring) into another fund with a different shareholder registration.

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A Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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

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

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• to allow your purchase to clear (as discussed below);

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• during periods of market volatility;

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• when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets; or

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• during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

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If you request a redemption of Shares recently purchased by check (including a cashier’s check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be cancelled and you will be responsible for any losses incurred by the Fund as a result of your cancelled order.

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In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period:

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• when the NYSE is closed, other than customary weekend and holiday closings;

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• when trading on the NYSE is restricted, as determined by the SEC; or

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• in which an emergency exists, as determined by the SEC, so that disposal of the Fund’s investments or determination of its NAV is not reasonably practicable.

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

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EXCHANGE PRIVILEGE

You may exchange Shares of the Fund for shares of any Federated fund or share class that does not have a stated sales charge or contingent deferred sales charge, except Liberty U.S. Government Money Market Trust and Class K Shares. 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.

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information--Frequent Trading Policies.”

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. 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

The Fund declares and pays any dividends annually 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.

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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. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

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If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as “undeliverable,” or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution checks.

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If you purchase Shares just before the record date for 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 record date for a dividend or capital gain. Contact your financial intermediary or the Fund for information concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

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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.

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TAX INFORMATION

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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 at different rates depending on the source of dividend income. Capital gains are taxable at different rates depending upon the length of time the Fund holds its assets.

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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.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Manager may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

The Fund’s frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund’s portfolio and its performance.

The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s website at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten holdings, recent purchase and sale transactions and a percentage breakdown of the portfolio by sector.

To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

You may also access from the “Products” section of the website portfolio information as of the end of the Fund’s fiscal quarters. The Fund’s annual and semiannual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

Who Manages the Fund?

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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 the subadviser, BlackRock Investment Management, LLC (BlackRock or the “Subadviser”). BlackRock began managing the portfolio as of the close of business September 29, 2006.

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BlackRock is a wholly owned subsidiary of BlackRock, Inc. On September 29, 2006, BlackRock, Inc. consummated a transaction with Merrill Lynch & Co., Inc. whereby Merrill Lynch & Co., Inc.’s investment management business combined with that of BlackRock to create a new independent company that is one of the world’s largest asset management firms with over $1 trillion in assets under management. The combined company has over 4,500 employees in 18 countries.

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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 Subadviser and the continued review and evaluation of the Subadviser’s performance. The address of the Manager and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Manager has delegated daily management of all of the Fund assets to BlackRock, who is paid by the Manager and not by the Fund. The Subadviser has complete discretion, subject to the Manager’s oversight, to purchase and sell portfolio securities for the Fund. The Subadviser’s address is P.O. Box 9011, Princeton, NJ 08543-9011

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The Manager and other subsidiaries of Federated advise approximately 136 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $213 billion in assets as of December 31, 2005. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,305 employees. Federated provides investment products to more than 5,500 investment professionals and institutions.

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PORTFOLIO MANAGEMENT INFORMATION

John W. Harris

John W. Harris has been the Fund’s Portfolio Manager since January 2003. He is Vice President of the Trust. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Fund’s Manager in December 1998. In January 2000, Mr. Harris became a Vice President of the Fund’s Manager. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh. Mr. Harris is responsible for overseeing the subadviser. In such a capacity, Mr. Harris is involved in monitoring and evaluating the performance of the subadviser.

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Debra L. Jelilian, Jeffrey L. Russo, CFA

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Subject to the oversight of the Manager, BlackRock Investment Management’s Quantitative Index Management Team is responsible for the day-to-day management of the Fund. The Fund is managed by Debra L. Jelilian and Jeffrey L. Russo, CFA, who are members of the Quantitative Index Management Team. The team is jointly responsible for the day-to-day management of the Fund’s portfolio. Mr. Russo is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Mr. Russo was a Director of Merrill Lynch Investment Managers, L.P., (“MLIM”) from 2004 to 2006, and was a Vice President there from 1999 to 2004. He has been a member of the Funds’ management team since 2000. Mr. Russo has eleven years’ experience as a portfolio manager and trader. Ms. Jelilian is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Ms. Jelilian was a Director of MLIM from 1999 to 2006, and has been a member of the Funds’ management team since 2000. Ms. Jelilian has fourteen years’ experience in investing and in managing index investments.

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The Fund’s SAI provides additional information about the Portfolio Managers’ compensation, management of other accounts, and ownership of securities in the Fund.

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MANAGEMENT FEES

The Manager receives an annual 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.

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A discussion of the Board’s review of the Fund’s investment advisory contract is available in the Fund’s Annual Report dated October 31, 2006.

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Legal Proceedings

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Since October 2003, Federated and related entities (collectively, “Federated”), and various Federated funds (“Funds”), have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual 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. These lawsuits began to be filed shortly after Federated’s first public announcement that it had received requests for information on shareholder trading activities in the Funds from the SEC, the Office of the New York State Attorney General (“NYAG”), and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. Specifically, the SEC and NYAG settled proceedings against three Federated subsidiaries involving undisclosed market timing arrangements and late trading. The SEC made findings: that Federated Investment Management Company (“FIMC”), an SEC-registered investment adviser to various Funds, and Federated Securities Corp., an SEC-registered broker-dealer and distributor for the Funds, violated provisions of the Investment Advisers Act and Investment Company Act by approving, but not disclosing, three market timing arrangements, or the associated conflict of interest between FIMC and the funds involved in the arrangements, either to other fund shareholders or to the funds’ board; and that Federated Shareholder Services Company, formerly an SEC-registered transfer agent, failed to prevent a customer and a Federated employee from late trading in violation of provisions of the Investment Company Act. The NYAG found that such conduct violated provisions of New York State law. Federated entered into the settlements without admitting or denying the regulators’ findings. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay disgorgement and a civil money penalty in the aggregate amount of an additional $72 million and, among other things, agreed that it would not serve as investment adviser to any registered investment company unless (i) at least 75% of the fund’s directors are independent of Federated, (ii) the chairman of each such fund is independent of Federated, (iii) no action may be taken by the fund’s board or any committee thereof unless approved by a majority of the independent trustees of the fund or committee, respectively, and (iv) the fund appoints a “senior officer” who reports to the independent trustees and is responsible for monitoring compliance by the fund with applicable laws and fiduciary duties and for managing the process by which management fees charged to a fund are approved. The settlements are described in Federated’s announcement which, along with previous press releases and related communications on those matters, is available in the “About Us” section of Federated’s website at FederatedInvestors.com.

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Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees.

The board of the Funds has retained the law firm of Dickstein Shapiro LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and intend to defend this litigation. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys’ fees, and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

Financial Information

FINANCIAL HIGHLIGHTS

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.

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This information has been audited by Ernst & Young LLP, an independent registered public accounting firm, whose report, along with the Fund’s audited financial statements, is included in the Annual Report.

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Financial Highlights

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(For a Share Outstanding Throughout Each Period)

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Year Ended October 31	2006			2005			2004			2003			2002
Net Asset Value, Beginning of Period	$15.58			$14.06			$12.65			$8.95			$10.25
Income From Investment Operations:
Net investment income	0.10	1		0.06	1		0.02			0.04			0.05
Net realized and unrealized gain (loss) on investments and futures contracts	2.81			1.48			1.40			3.70			(1.30	)
TOTAL FROM INVESTMENT OPERATIONS	2.91			1.54			1.42			3.74			(1.25	)
Less Distributions:
Distributions from net investment income	(0.03	)		(0.02	)		(0.01	)		(0.04	)		(0.05	)
Distributions from net realized gain on investments and futures contracts	(0.61	)		--			--			--			--
TOTAL DISTRIBUTIONS	(0.64	)		(0.02	)		(0.01	)		(0.04	)		(0.05	)
Net Asset Value, End of Period	$17.85			$15.58			$14.06			$12.65			$8.95
Total Return2	19.24	%		10.95	%		11.20	%3		41.96	%		(12.31	)%
Ratios to Average Net Assets:
Net expenses	0.91	%		0.91	%		0.91	%		0.89	%		0.94	%
Net investment income	0.60	%		0.40	%		0.16	%		0.41	%		0.46	%
Expense waiver/reimbursement4	0.29	%		0.25	%		0.23	%		0.44	%		0.22	%
Supplemental Data:
Net assets, end of period (000 omitted)	$88,669		$79,665			$90,937			$89,785			$61,495
Portfolio turnover	22	%		20	%		27	%		48	%		75	%

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1 Per share numbers have been calculated using the average shares method.

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2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year, if any, are not annualized.

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3 During the period, the Fund was reimbursed by the Manager, which had an impact of 0.24% on the total return.

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

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Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated October 31, 2006, which can be obtained free of charge.

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Appendix A: Hypothetical Investment and Expense Information

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The following chart provides additional hypothetical information about the effect of the Fund’s expenses, including investment advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year period. The chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. The chart also assumes that the Fund’s annual expense ratio stays the same throughout the 10-year period and that all dividends and distributions are reinvested. The annual expense ratio used in the chart is the same as stated in the “Fees and Expenses” table of this prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the “Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

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FEDERATED MINI-CAP INDEX FUND: INSTITUTIONAL SHARES
ANNUAL EXPENSE RATIO: 1.24%
MAXIMUM FRONT-END SALES CHARGE: 0.00%

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Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$126.33	$10,376.00
2	$10,376.00	$518.80	$10,894.80	$131.08	$10,766.14
3	$10,766.14	$538.31	$11,304.45	$136.01	$11,170.95
4	$11,170.95	$558.55	$11,729.50	$141.12	$11,590.98
5	$11,590.98	$579.55	$12,170.53	$146.43	$12,026.80
6	$12,026.80	$601.34	$12,628.14	$151.94	$12,479.01
7	$12,479.01	$623.95	$13,102.96	$157.65	$12,948.22
8	$12,948.22	$647.41	$13,595.63	$163.58	$13,435.07
9	$13,435.07	$671.75	$14,106.82	$169.73	$13,940.23
10	$13,940.23	$697.01	$14,637.24	$176.11	$14,464.38
Cumulative		$5,936.67		$1,499.98

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A Statement of Additional Information (SAI) dated December 31, 2006, 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. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund at 1-800-341-7400.

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These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at FederatedInvestors.com.

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 website at 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.

Federated Investors
World-Class Investment Manager

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

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2006 © Federated Investors, Inc.

Cusip 31420E304

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2062305A (12/06)

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Federated Investors
World-Class Investment Manager

Federated Investors 50 Years of Growth & Innovation

Federated Mini-Cap Index Fund

A Portfolio of Federated Index Trust

PROSPECTUS

December 31, 2006

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, or otherwise.

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

CONTENTS

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?	10
What Do Shares Cost?	12
How is the Fund Sold?	16
Payments to Financial Intermediaries	17
How to Purchase Shares	19
How to Redeem and Exchange Shares	21
Account and Share Information	25
Who Manages the Fund?	28
Legal Proceedings	30
Financial Information	31
Appendix A: Hypothetical Investment and Expense Information	33

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 (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 may invest in derivative contracts to implement its investment strategies as more fully described in this prospectus.

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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 (the “Board”) 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. 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.
• 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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• Risks of Investing in Derivative Contracts and Hybrid Instruments. The Fund’s use of derivative contracts and hybrid instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Also, derivative contracts and hybrid instruments may involve other risks described in this prospectus or in the Fund’s Statement of Additional Information (SAI), such as stock market, credit, liquidity and leverage risks.

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

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

Risk/Return Bar Chart and Table

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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 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.

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The total returns 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.

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The Fund’s Class C Shares total return for the nine-month period from January 1, 2006 to September 30, 2006 was 7.52%.

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Within the period shown in the bar chart, the Fund’s Class C Shares highest quarterly return was 23.06% (quarter ended June 30, 2003). Its lowest quarterly return was (21.64)% (quarter ended September 30, 2002).

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Average Annual Total Return Table

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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 that measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 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.

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(For the periods ended December 31, 2005)

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	1 Year	5 Years	Start of Performance1
Fund: 2
Return Before Taxes	0.93%	6.22%	4.46%
Return After Taxes on Distributions3	0.34%	6.10%	3.15%
Return After Taxes on Distributions and Sale of Fund Shares3	1.40%	5.38%	3.22%
RUS2	4.55%	8.22%	13.15%

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

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2 The returns shown for the Class C Shares include the effect of a 1% front-end sales charge on Class C Shares purchased on or before January 31, 2007. Effective February 1, 2007, the front-end sales charge will be eliminated.

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3 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.

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What are the Fund’s Fees and Expenses?

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FEDERATED MINI-CAP INDEX FUND

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FEES AND EXPENSES

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

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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) through January 31, 2007*	1.00%
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) beginning February 1, 2007*	None
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 and Reduction)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%
Other Expenses3	0.74%
Total Annual Fund Operating Expenses4	1.99%
1 The percentages shown are based on expenses for the entire fiscal year ended October 31, 2006. However, the rate at which expenses are accrued during the fiscal year may not be constant and, at any particular point, may be greater or less than the stated average percentage. Although not obligated to do so (except as discussed in Note 4, below), the Manager and shareholder services provider waived and/or elected not to charge certain amounts. These are shown below along with the net expenses the Fund actually paid for the fiscal year ended October 31, 2006.
Total Waiver and Reduction of Fund Expenses	0.27%
Total Actual Annual Fund Operating Expenses (after waiver and reduction)	1.72%
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 0.30% for the fiscal year ended October 31, 2006.
3 Includes a shareholder services fee/account administration fee which is used to compensate intermediaries for shareholder services or account administrative services. Also includes a recordkeeping fee which is used to compensate intermediaries for recordkeeping services. Please see “Payments to Financial Intermediaries” herein. The shareholder services provider voluntarily elected not to charge, and therefore the Fund did not accrue, a portion of its fee. The shareholder services provider can terminate this voluntary reduction at any time. Total other expenses paid by the Fund’s Class C Shares (after the voluntary reduction) were 0.67% for the fiscal year ended October 31, 2006.
4 The Manager and its affiliates have voluntarily agreed to waive their fees and/or reimburse expenses (including the distribution (12b-1) fee) so that the total operating expenses paid by the Fund’s Class C Shares (after the voluntary waivers and reimbursements) will not exceed 1.83% for the fiscal year ending October 31, 2007. Although these actions are voluntary, the Manager and its affiliates have agreed not to terminate these waivers and/or reimbursements until after December 31, 2007.
* There is a 1.00% front-end sales charge applicable to Class C Shares on or before 1/31/2007. Effective 2/1/2007, this front-end sales charge will be eliminated.

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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.

The Example assumes that you invest $10,000 in the Fund’s 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 waiver and reduction 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:

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Through January 31, 2007:*	1 Year	3 Years	5 Years	10 Years
Expenses assuming redemption	$400	$718	$1,162	$2,394
Expenses assuming no redemption	$300	$718	$1,162	$2,394
Beginning February 1, 2007:*
Expenses assuming redemption	$302	$624	$1,073	$2,317
Expenses assuming no redemption	$202	$624	$1,073	$2,317

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* There is a 1.00% front-end sales charge applicable to Class C Shares on or before 1/31/2007. Effective 2/1/2007, this front-end sales charge will be eliminated.

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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 October 31, 2006, the capitalization range of the issuers comprising the Index was $90 million to $2.9 billion. As of the same date, the weighted median market capitalization of the Fund was $1.1 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 Index (“tracking error”) by investing in a portfolio that seeks to replicate, as closely as possible, the composition of the Index. However, it is anticipated that the Fund may not invest in certain securities included in the Index because such securities account for a small percentage of the Index’s overall performance and the transaction costs associated with buying and selling such securities would likely outweigh any reduction in tracking error. The Fund attempts to achieve a 0.95 or better correlation between the performance of the Fund, before expenses, 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; (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.

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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.

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

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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.

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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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DERIVATIVE CONTRACTS

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Derivative contracts are financial instruments that require payments based upon changes in the values of designated securities, commodities, currencies, indices, or other assets or instruments including other derivative contracts, (each a “Reference Instrument” and collectively, “Reference Instruments”). Each party to a derivative contract is referred to as a counterparty. Some derivative contracts require payments relating to an actual, future trade involving the Reference Instrument. These types of derivatives are frequently referred to as “physically settled” derivatives. Other derivative contracts require payments relating to the income or returns from, or changes in the market value of, a Reference Instrument. These types of derivatives are known as “cash settled” derivatives, since they require cash payments in lieu of delivery of the Reference Instrument.

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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.

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.

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Depending on how the Fund uses derivative contracts and the relationships between the market value of a derivative contract and the Reference Instrument, derivative contracts may increase or decrease the Fund’s exposure to the risks of the Reference Instrument, 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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Payment obligations arising in connection with derivative contracts are frequently required to be secured with collateral (in the case of OTC contracts) or margin (in the case of exchange-traded contracts, as previously noted).

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The Fund may not invest in a derivative contract if it is not permitted to own, invest in, or otherwise have economic exposure to the Reference Instrument (or, in the case of a Reference Instrument that is an index, the securities or derivatives that comprise the index). The Fund may trade in the following specific types and/or combinations of derivative contracts:

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FUTURES CONTRACTS

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Futures contracts provide for the future sale by one party and purchase by another party of a specified amount of a Reference Instrument at a specified price, date and time. Entering into a contract to buy a Reference Instrument is commonly referred to as buying a contract or holding a long position in the asset. Entering into a contract to sell a Reference Instrument is commonly referred to as selling a contract or holding a short position in the Reference Instrument. 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 financial futures (such as index futures).

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HYBRID INSTRUMENTS

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Hybrid instruments combine elements of two different kinds of securities or financial instruments (such as a derivative contract). Frequently, the value of a hybrid instrument is determined by reference to changes in the value of designated securities, commodities, currencies, indices, or other assets or instruments (each a, “Valuation Instrument”). Hybrid instruments can take on many forms including, but not limited to, the following three forms: First, a common form of a hybrid instrument combines elements of a derivative contract with those of another security (typically a fixed-income security). In this case all or a portion of the interest or principal payable on a hybrid security is determined by reference to changes in the price of a Valuation Instrument. Second, a hybrid instrument may also combine elements of a fixed-income security and an equity security. Third, hybrid instruments may include convertible securities with conversion terms related to a Valuation Instrument.

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Depending on the type and terms of the hybrid instrument, its risks may reflect a combination of the risks of investing in securities, currencies and derivative contracts. Thus, an investment in a hybrid instrument may entail significant risks in addition to those associated with traditional securities or the Valuation Instrument. Hybrid instruments are also potentially more volatile than traditional securities or the Valuation Instrument. 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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ASSET SEGREGATION

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In order to secure its obligations in connection with derivative contracts or special transactions, the Fund will either own the underlying assets, enter into offsetting transactions or set aside cash or readily marketable securities. This requirement may cause the Fund to miss favorable trading opportunities, due to a lack of sufficient cash or readily marketable securities. This requirement may also cause the Fund to realize losses on offsetting or terminated derivative contracts or special transactions.

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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.

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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 attempt to 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.

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Securities lending activities are subject to credit and leverage risks.

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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. 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 DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS

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The Fund’s use of derivative contracts and hybrid instruments 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 and hybrid instruments in which the Fund invests may not be correlated with changes in the value of the underlying Reference or Valuation Instruments 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 derivative contracts and hybrid instruments may be erroneously priced or improperly valued and, as a result, the Fund may need to make increased cash payments to the counterparty. Fourth, derivative contracts and hybrid instruments 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. Fifth, a common provision in over-the-counter (OTC) derivative contracts permits the counterparty to terminate any such contract between it and the Fund, if the value of the Fund’s total net assets declines below a specified level over a given time period. Factors that may contribute to such a decline (which usually must be substantial) include significant shareholder redemptions and/or a marked decrease in the market value of the Fund’s investments. Any such termination of the Fund’s OTC derivative contracts may adversely affect the Fund (for example, by increasing losses and/or costs, and/or preventing the Fund from fully implementing its investment strategies). Finally, derivative contracts and hybrid instruments may also involve other risks described in this prospectus or in the Fund’s SAI, such as stock market, credit, liquidity and leverage risks.

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LEVERAGE RISKS

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

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Investments can have these same results if their returns are based on a multiple of a specified index, security, or other benchmark.

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What Do Shares Cost?

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). From time to time the Fund may purchase foreign securities that trade in foreign markets on days the NYSE is closed. The value of the Fund’s assets may change on days you cannot purchase or redeem Shares. NAV is determined as of the end of regular trading on the NYSE (normally 4:00 p.m. Eastern time) each day the NYSE is open. The Fund’s current NAV and public offering price may be found in the mutual funds section of certain local newspapers under “Federated.”

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The Fund generally values equity securities according to the last sale price or official closing price reported 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.

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If prices are not available from an independent pricing service, securities and derivative contracts 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 security or contract as provided by an investment dealer or other financial institution that deals in the security or contract.

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Where a last sale price or market quotation for a portfolio security is not readily available, and no independent pricing service furnishes a price, the value of the security used in computing NAV is its fair value as determined in good faith under procedures approved by the Fund’s Board of Trustees (Board). The Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Fund’s Manager determines that the quotation or price for a portfolio security provided by a dealer or independent pricing service is inaccurate.

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Fair valuation procedures are also used where a significant event affecting the value of a portfolio security is determined to have occurred between the time as of which the price of the portfolio security is determined and the NYSE closing time as of which the Fund’s NAV is computed. An event is considered significant if there is both an affirmative expectation that the security’s value will change in response to the event and a reasonable basis for quantifying the resulting change in value. Significant events include significant general securities market movements occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE. In such cases, use of fair valuation can reduce an investor’s ability to seek to profit by estimating the Fund’s NAV in advance of the time as of which NAV is calculated.

In some cases, events affecting the issuer of a portfolio security may be considered significant events. Announcements concerning earnings, acquisitions, new products, management changes, litigation developments, a strike or natural disaster affecting the company’s operations or regulatory changes or market developments affecting the issuer’s industry occurring between the time as of which the price of the portfolio security is determined and the close of trading on the NYSE are examples of potentially significant events.

There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV. In the case of fair valued portfolio securities, lack of information and uncertainty as to the significance of information may lead to a conclusion that a prior valuation is the best indication of a portfolio security’s present value. Fair valuations generally remain unchanged until new information becomes available. Consequently, changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, or based on market quotations.

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 financial intermediaries may charge you fees for their services in connection with your Share transactions.

	Minimum Initial/Subsequent Investment Amounts1	Maximum Sales Charges
Shares Offered		Front-End Sales Charge	Contingent Deferred Sales Charge
Class C Shares purchased on or before 1/31/2007*	$1,500/$100	1.00%	1.00%
Class C Shares purchased on or after 2/1/2007*	$1,500/$100	None	1.00%

1 The minimum initial and subsequent investment amounts for retirement plans are $250 and $100, respectively. The minimum subsequent investment amounts for Systematic Investment Programs (SIP) is $50. Investment professionals may impose higher or lower minimum investment requirements on their customers than those imposed by the Fund.

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2 Front-End Sales Charge is expressed as a percentage of public offering price. See “Sales Charge When You Purchase.”

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3 See “Sales Charge When You Redeem.”

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* There is a 1.00% front-end sales charge applicable to purchases of Class C Shares on or before 1/31/2007. Effective 2/1/2007, the front-end sales charge will be eliminated.

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SALES CHARGE WHEN YOU PURCHASE

The following table lists the sales charges which will be applied to your Share purchase, subject to the breakpoint discounts indicated in the table and described below.

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Class C Shares:
Purchase Amount	Sales Charge as a Percentage of Public Offering Price	Sales Charge as a Percentage of NAV
Shares purchased on or before 1/31/2007	1.00%	1.01%
Shares purchased on or after 2/1/2007	None	None

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ELIMINATING THE SALES CHARGE (ON CLASS C SHARES PURCHASED ON OR BEFORE JANUARY 31, 2007)

Contingent upon notification to the Transfer Agent, the sales charge applicable to Class C Shares purchased on or before January 31, 2007, will be eliminated when you purchase Shares:

• within 120 days of redeeming Shares of an equal or greater amount;
• through a financial intermediary that did not receive a dealer reallowance on the purchase;
• with reinvested dividends or capital gains;
• as a shareholder that originally became a shareholder of a Federated fund pursuant to the terms of an agreement and plan of reorganization which permits shareholders to acquire Shares at NAV;
• as a Federated Life Member (Federated shareholders who originally were issued shares through the “Liberty Account,” which was an account for the Liberty Family of Funds on February 28, 1987, or who invested through an affinity group prior to August 1, 1987, into the Liberty Account) (Class A Shares only); or
• as a Trustee, employee or former employee of the Fund, the Adviser, the Distributor and their affiliates, an employee of any financial intermediary that sells Shares according to a sales agreement with the Distributor, an immediate family member of these individuals or a trust, pension or profit-sharing plan for these individuals; or
• pursuant to the exchange privilege.

The sales charge will not be eliminated if you purchase Shares of the Fund through an exchange of shares of Liberty U.S. Government Money Market Trust unless your Liberty shares were acquired through an exchange of shares on which the sales charge had previously been paid.

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).

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.

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Class C Shares

You will pay a 1.00% CDSC if you redeem Shares within 12 months of the purchase date.

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If your investment qualifies for an elimination of the CDSC, you or your financial intermediary must notify the Transfer Agent at the time of redemption. If the Transfer Agent is not notified, the CDSC will apply.

Contingent upon notification to the Transfer Agent, you will not be charged a CDSC when redeeming Shares:

• following the death of the last surviving shareholder on the account or your post-purchase disability, as defined in Section 72(m)(7) of the Internal Revenue Code of 1986 (the beneficiary on an account with a Transfer on Death registration is deemed the last surviving shareholder on the account);
• representing minimum required distributions from an Individual Retirement Account or other retirement plan to a shareholder who has attained the age of 70½;
• purchased within 120 days of a previous redemption of Shares, to the extent that the value of the Shares purchased was equal to or less than the value of the previous redemption;
• purchased by Trustees, employees of the Fund, the Adviser, the Distributor and their affiliates, by employees of a financial intermediary that sells Shares according to a sales agreement with the Distributor, by the immediate family members of the above persons, and by trusts, pension or profit-sharing plans for the above persons;
• purchased through a financial intermediary that did not receive an advance commission on the purchase;
• purchased with reinvested dividends or capital gains;

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• redeemed by the Fund when it closes an account for not meeting the minimum balance requirements; or

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• purchased pursuant to the exchange privilege if the Shares were held for the applicable CDSC holding period (the holding period on the shares purchased in the exchange will include the holding period of the shares sold in the exchange).

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 expenses which affect their performance. The additional class of Shares, which are offered by separate prospectus, may be preferable for shareholders purchasing $25,000 or more. Contact your financial intermediary or call 1-800-341-7400 for more information concerning the other class.

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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 financial intermediaries. Under the Distributor’s Contract with the Fund, the Distributor offers Shares on a continuous, best-efforts basis. The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

Payments to Financial Intermediaries

The Fund and its affiliated service providers may pay fees as described below to financial intermediaries (such as broker-dealers, banks, investment advisers or third-party administrators) whose customers are shareholders of the Fund.

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FRONT-END SALES CHARGE REALLOWANCES

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The Distributor receives a front-end sales charge on certain Share sales. The Distributor pays a portion of this charge to financial intermediaries that are eligible to receive it (the “Dealer Reallowance”) and retains any remaining portion of the front-end sales charge.

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When a financial intermediary’s customer purchases Shares, the financial intermediary may receive a Dealer Reallowance as follows:

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Class C Shares

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Purchase Amounts	Dealer Reallowance as a Percentage of Public Offering Price
Shares purchased prior to 1/31/2007	1.00%
Shares purchased after 2/1/2007	None

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ADVANCE COMMISSIONS

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When a financial intermediary’s customer purchases Shares, the financial intermediary may receive an advance commission as follows:

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

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RULE 12B-1 FEES

The Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees of up to 0.75% of average net assets to the Distributor for the sale, distribution, administration and customer servicing of the Fund’s Class C Shares. When the Distributor receives Rule 12b-1 Fees, it may pay some or all of them to financial intermediaries whose customers purchase 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.

SERVICE FEES

The Fund may pay Service Fees of up to 0.25% of average net assets to financial intermediaries 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 financial intermediaries directly, the Fund may pay Service Fees to FSSC and FSSC will use the fees to compensate financial intermediaries. If a financial intermediary receives Service Fees on an account, it is not eligible to also receive Account Administration Fees on that same account.

ACCOUNT ADMINISTRATION FEES

The Fund may pay Account Administration Fees of up to 0.25% of average net assets to banks that are not registered as broker-dealers or investment advisers for providing administrative services to the Funds and shareholders. If a financial intermediary receives Account Administration Fees on an account, it is not eligible to also receive Service Fees or Recordkeeping Fees on that same account.

RECORDKEEPING FEES

The Fund may pay Recordkeeping Fees on an average net assets basis or on a per account per year basis to financial intermediaries for providing recordkeeping services to the Funds and shareholders. If a financial intermediary receives Recordkeeping Fees on an account, it is not eligible to also receive Account Administration Fees or Networking Fees on that same account.

NETWORKING FEES

The Fund may reimburse Networking Fees on a per account per year basis to financial intermediaries for providing administrative services to the Funds and shareholders on certain non-omnibus accounts. If a financial intermediary receives Networking Fees on an account, it is not eligible to also receive Recordkeeping Fees on that same account.

ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES

The Distributor may pay out of its own resources amounts (including items of material value) to certain financial intermediaries that support the sale of Shares or provide services to Fund shareholders. The amounts of these payments could be significant, and may create an incentive for the financial intermediary or its employees or associated persons to recommend or sell Shares of the Fund to you. In some cases, such payments may be made by or funded from the resources of companies affiliated with the Distributor (including the Manager). These payments are not reflected in the fees and expenses listed in the fee table section of the Fund’s prospectus and described above because they are not paid by the Fund.

These payments are negotiated and may be based on such factors as the number or value of Shares that the financial intermediary sells or may sell; the value of client assets invested; or the type and nature of services or support furnished by the financial intermediary. These payments may be in addition to payments made by the Fund to the financial intermediary under a Rule 12b-1 Plan and/or Service Fees arrangement. In connection with these payments, the financial intermediary may elevate the prominence or profile of the Fund and/or other Federated funds within the financial intermediary’s organization by, for example, placement on a list of preferred or recommended funds, and/or granting the Distributor preferential or enhanced opportunities to promote the funds in various ways within the financial intermediary’s organization. You can ask your financial intermediary for information about any payments it receives from the Distributor or the Fund and any services provided.

How to Purchase Shares

You may purchase Shares through a financial intermediary, 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 A FINANCIAL INTERMEDIARY

• Establish an account with the financial intermediary; and
• Submit your purchase order to the financial intermediary 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 financial intermediary 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.

Financial intermediaries 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 State Street Bank and Trust 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 send it to:

The Federated Funds
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, send it to:

The Federated Funds
30 Dan Road
Canton, MA 02021

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 SIP section of the New Account Form or by contacting the Fund or your financial intermediary.

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.

RETIREMENT INVESTMENTS

You may purchase Shares as retirement investments (such as qualified plans and IRAs or transfer or rollover of assets). Call your financial intermediary 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 a financial intermediary if you purchased Shares through a financial intermediary; or
• directly from the Fund if you purchased Shares directly from the Fund.

Shares of the Fund may be redeemed for cash or exchanged for shares of the same class of other Federated funds on days on which the Fund computes its NAV. Redemption requests may be made by telephone or in writing.

THROUGH A FINANCIAL INTERMEDIARY

Submit your redemption or exchange request to your financial intermediary 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 financial intermediary.

DIRECTLY FROM THE FUND

By Telephone

You may redeem or exchange 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 or exchange Shares by sending 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:

The Federated Funds
P.O. Box 8600
Boston, MA 02266-8600

Send requests by private courier or overnight delivery service to:

The Federated Funds
30 Dan Road
Canton, MA 02021

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 financial intermediary or the Fund if you need special instructions.

Signature Guarantees

Signatures must be guaranteed by a financial institution which is a participant in a Medallion signature guarantee program 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 Medallion signature guarantee is designed to protect your account from fraud. Obtain a Medallion 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 for up to seven days:

• to allow your purchase to clear (as discussed below);
• during periods of market volatility;
• when a shareholder’s trade activity or amount adversely impacts the Fund’s ability to manage its assets; or
• during any period when the Federal Reserve wire or applicable Federal Reserve banks are closed, other than customary weekend and holiday closings.

If you request a redemption of Shares recently purchased by check (including a cashier’s check or certified check), money order, bank draft or ACH, your redemption proceeds may not be made available up to seven calendar days to allow the Fund to collect payment on the instrument used to purchase such Shares. If the purchase instrument does not clear, your purchase order will be cancelled and you will be responsible for any losses incurred by the Fund as a result of your cancelled order.

• In addition, the right of redemption may be suspended, or the payment of proceeds may be delayed, during any period: when the NYSE is closed, other than customary weekend and holiday closings;
• when trading on the NYSE is restricted, as determined by the SEC; or
• in which an emergency exists, as determined by the SEC, so that disposal of the Fund’s investments or determination of its NAV is not reasonably practicable.

You will not accrue interest or dividends on uncashed redemption 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.

The Fund may modify or terminate the exchange privilege at any time. In addition, the Fund may terminate your exchange privilege if your exchange activity is found to be excessive under the Fund’s frequent trading policies. See “Account and Share Information--Frequent Trading Policies.”

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 financial intermediary 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.

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

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.

DIVIDENDS AND CAPITAL GAINS

The Fund declares and pays any dividends annually 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. Dividends may also be reinvested without sales charges in shares of any class of any other Federated fund of which you are already a shareholder.

If you have elected to receive dividends and/or capital gain distributions in cash, and your check is returned by the postal or other delivery service as “undeliverable,” or you do not respond to mailings from Federated with regard to uncashed distribution checks, your distribution option will automatically be converted to having all dividends and capital gains reinvested in additional shares. No interest will accrue on amounts represented by uncashed distribution checks.

If you purchase Shares just before the record date for 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 record date for a dividend or capital gain. Contact your financial intermediary 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, 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

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 at different rates depending on the source of dividend 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 and exchanges are taxable sales. Please consult your tax adviser regarding your federal, state, and local tax liability.

FREQUENT TRADING POLICIES

Frequent or short-term trading into and out of the Fund can have adverse consequences for the Fund and shareholders who use the Fund as a long-term investment vehicle. Such trading in significant amounts can disrupt the Fund’s investment strategies (e.g., by requiring it to sell investments at inopportune times or maintain excessive short-term or cash positions to support redemptions), increase brokerage and administrative costs and affect the timing and amount of taxable gains distributed by the Fund. Investors engaged in such trading may also seek to profit by anticipating changes in the Fund’s NAV in advance of the time as of which NAV is calculated.

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The Fund’s Board has approved policies and procedures intended to discourage excessive frequent or short-term trading of the Fund’s Shares. The Fund monitors trading in Fund Shares in an effort to identify disruptive trading activity. The Fund monitors trades into and out of the Fund within a period of 30 days or less. The size of Share transactions subject to monitoring varies. However, where it is determined that a shareholder has exceeded the detection amounts twice within a period of twelve months, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. The Fund may also monitor trades into and out of the Fund over periods longer than 30 days, and if potentially disruptive trading activity is detected, the shareholder will be precluded from making further purchases or exchanges of Fund Shares. Whether or not the specific monitoring limits are exceeded, the Fund’s management or the Manager may determine from the amount, frequency or pattern of purchases and redemptions or exchanges that a shareholder is engaged in excessive trading that is or could be detrimental to the Fund and other shareholders and may preclude the shareholder from making further purchases or exchanges of Fund Shares. No matter how the Fund defines its limits on frequent trading of Fund Shares, other purchases and sales of Fund Shares may have adverse effects on the management of the Fund’s portfolio and its performance.

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The Fund’s frequent trading restrictions do not apply to purchases and sales of Fund Shares by other Federated funds. These funds impose the same frequent trading restrictions as the Fund at their shareholder level. In addition, allocation changes of the investing Federated fund are monitored, and the managers of the recipient fund must determine that there is no disruption to their management activity. The intent of this exception is to allow investing fund managers to accommodate cash flows that result from non-abusive trading in the investing fund, without being stopped from such trading because the aggregate of such trades exceeds the monitoring limits. Nonetheless, as with any trading in Fund Shares, purchases and redemptions of Fund Shares by other Federated funds could adversely affect the management of the Fund’s portfolio and its performance.

The Fund’s objective is that its restrictions on short-term trading should apply to all shareholders, regardless of the number or type of accounts in which Shares are held. However, the Fund anticipates that limitations on its ability to identify trading activity to specific shareholders, including where shares are held through intermediaries in multiple or omnibus accounts, will mean that these restrictions may not be able to be applied uniformly in all cases.

PORTFOLIO HOLDINGS INFORMATION

Information concerning the Fund’s portfolio holdings is available in the “Products” section of Federated’s website at FederatedInvestors.com. A complete listing of the Fund’s portfolio holdings as of the end of each calendar quarter is posted on the website 30 days (or the next business day) after the end of the quarter and remains posted until replaced by the information for the succeeding quarter. Summary portfolio composition information as of the close of each month is posted on the website 15 days (or the next business day) after month-end and remains until replaced by the information for the succeeding month. The summary portfolio composition information may include identification of the Fund’s top ten holdings, recent purchase and sale transactions and a percentage breakdown of the portfolio by sector.

To access this information from the “Products” section of the website, click on “Portfolio Holdings” and select the appropriate link opposite the name of the Fund, or select the name of the Fund from the menus on the “Products” section, and from the Fund’s page click on the “Portfolio Holdings” or “Composition” link. A user is required to register on the website the first time the user accesses this information.

You may also access from the “Products” section of the website portfolio information as of the end of the Fund’s fiscal quarters. The Fund’s annual and semiannual reports, which contain complete listings of the Fund’s portfolio holdings as of the end of the Fund’s second and fourth fiscal quarters, may be accessed by selecting the name of the Fund, clicking on “Prospectuses and Regulatory Reports” and selecting the link to the appropriate PDF. Complete listings of the Fund’s portfolio holdings as of the end of the Fund’s first and third fiscal quarters may be accessed by selecting “Portfolio Holdings” from the “Products” section and then selecting the appropriate link opposite the name of the Fund. Fiscal quarter information is made available on the website within 70 days after the end of the fiscal quarter. This information is also available in reports filed with the SEC at the SEC’s website at www.sec.gov.

Who Manages the Fund?

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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 the subadviser, BlackRock Investment Management, LLC (BlackRock or the “Subadviser”). BlackRock began managing the portfolio as of the close of business September 29, 2006.

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BlackRock is a wholly owned subsidiary of BlackRock, Inc. On September 29, 2006, BlackRock, Inc. consummated a transaction with Merrill Lynch & Co., Inc. whereby Merrill Lynch & Co., Inc.’s investment management business combined with that of BlackRock to create a new independent company that is one of the world’s largest asset management firms with over $1 trillion in assets under management. The combined company has over 4,500 employees in 18 countries.

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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 Subadviser and the continued review and evaluation of the Subadviser’s performance. The address of the Manager and FASC is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.

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The Manager has delegated daily management of all of the Fund assets to BlackRock, who is paid by the Manager and not by the Fund. The Subadviser has complete discretion, subject to the Manager’s oversight, to purchase and sell portfolio securities for the Fund. The Subadviser’s address is P.O. Box 9011, Princeton, NJ 08543-9011.

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The Manager and other subsidiaries of Federated advise approximately 136 equity, fixed-income, and money market mutual funds as well as a variety of customized separately managed accounts, which totaled approximately $213 billion in assets as of December 31, 2005. Federated was established in 1955 and is one of the largest investment managers in the United States with approximately 1,305 employees. Federated provides investment products to more than 5,500 investment professionals and institutions.

PORTFOLIO MANAGEMENT INFORMATION

John W. Harris

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John W. Harris has been the Fund’s Portfolio Manager since January 2003. He is Vice President of the Trust. Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May 1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior Investment Analyst and became a Portfolio Manager and Assistant Vice President of the Fund’s Manager in December 1998. In January 2000, Mr. Harris became a Vice President of the Fund’s Manager. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the University of Pittsburgh. Mr. Harris is responsible for overseeing the subadviser. In such a capacity, Mr. Harris is involved in monitoring and evaluating the performance of the subadviser.

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Debra L. Jelilian, Jeffrey L. Russo, CFA

Subject to the oversight of the Manager, BlackRock Investment Management’s Quantitative Index Management Team is responsible for the day-to-day management of the Fund. The Fund is managed by Debra L. Jelilian and Jeffrey L. Russo, CFA, who are members of the Quantitative Index Management Team. The team is jointly responsible for the day-to-day management of the Fund’s portfolio. Mr. Russo is a Director of and portfolio manager with BlackRock^®. Prior to joining BlackRock in 2006, Mr. Russo was a Director of Merrill Lynch Investment Managers, L.P., (“MLIM”) from 2004 to 2006, and was a Vice President there from 1999 to 2004. He has been a member of the Funds’ management team since 2000. Mr. Russo has eleven years’ experience as a portfolio manager and trader. Ms. Jelilian is a Director of and portfolio manager with BlackRock®. Prior to joining BlackRock in 2006, Ms. Jelilian was a Director of MLIM from 1999 to 2006, and has been a member of the Funds’ management team since 2000. Ms. Jelilian has fourteen years’ experience in investing and in managing index investments.

The Fund’s SAI provides additional information about the Portfolio Managers’ compensation, management of other accounts, and ownership of securities in the Fund.

MANAGEMENT FEES

The Manager receives an annual 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.

A discussion of the Board’s review of the Fund’s investment advisory contract is available in the Fund’s Annual Report dated October 31, 2006.

Legal Proceedings

Since October 2003, Federated and related entities (collectively, “Federated”), and various Federated funds (“Funds”), have been named as defendants in several class action lawsuits now pending in the United States District Court for the District of Maryland. The lawsuits were purportedly filed on behalf of people who purchased, owned and/or redeemed shares of Federated-sponsored mutual 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. These lawsuits began to be filed shortly after Federated’s first public announcement that it had received requests for information on shareholder trading activities in the Funds from the SEC, the Office of the New York State Attorney General (“NYAG”), and other authorities. In that regard, on November 28, 2005, Federated announced that it had reached final settlements with the SEC and the NYAG with respect to those matters. Specifically, the SEC and NYAG settled proceedings against three Federated subsidiaries involving undisclosed market timing arrangements and late trading. The SEC made findings: that Federated Investment Management Company (“FIMC”), an SEC-registered investment adviser to various Funds, and Federated Securities Corp., an SEC-registered broker-dealer and distributor for the Funds, violated provisions of the Investment Advisers Act and Investment Company Act by approving, but not disclosing, three market timing arrangements, or the associated conflict of interest between FIMC and the funds involved in the arrangements, either to other fund shareholders or to the funds’ board; and that Federated Shareholder Services Company, formerly an SEC-registered transfer agent, failed to prevent a customer and a Federated employee from late trading in violation of provisions of the Investment Company Act. The NYAG found that such conduct violated provisions of New York State law. Federated entered into the settlements without admitting or denying the regulators’ findings. As Federated previously reported in 2004, it has already paid approximately $8.0 million to certain funds as determined by an independent consultant. As part of these settlements, Federated agreed to pay disgorgement and a civil money penalty in the aggregate amount of an additional $72 million and, among other things, agreed that it would not serve as investment adviser to any registered investment company unless (i) at least 75% of the fund’s directors are independent of Federated, (ii) the chairman of each such fund is independent of Federated, (iii) no action may be taken by the fund’s board or any committee thereof unless approved by a majority of the independent trustees of the fund or committee, respectively, and (iv) the fund appoints a “senior officer” who reports to the independent trustees and is responsible for monitoring compliance by the fund with applicable laws and fiduciary duties and for managing the process by which management fees charged to a fund are approved. The settlements are described in Federated’s announcement which, along with previous press releases and related communications on those matters, is available in the “About Us” section of Federated’s website at FederatedInvestors.com.

Federated and various Funds have also been named as defendants in several additional lawsuits, the majority of which are now pending in the United States District Court for the Western District of Pennsylvania, alleging, among other things, excessive advisory and Rule 12b-1 fees.

The board of the Funds has retained the law firm of Dickstein Shapiro LLP to represent the Funds in these lawsuits. Federated and the Funds, and their respective counsel, are reviewing the allegations and intend to defend this litigation. Additional lawsuits based upon similar allegations may be filed in the future. The potential impact of these lawsuits, all of which seek unquantified damages, attorneys’ fees, and expenses, and future potential similar suits is uncertain. Although we do not believe that these lawsuits will have a material adverse effect on the Funds, there can be no assurance that these suits, ongoing adverse publicity and/or other developments resulting from the regulatory investigations will not result in increased Fund redemptions, reduced sales of Fund shares, or other adverse consequences for the Funds.

Financial Information

FINANCIAL HIGHLIGHTS

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.

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This information has been audited by Ernst & Young LLP, an independent registered public accounting firm, whose report, along with the Fund’s audited financial statements, is included in the Annual Report.

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Financial Highlights

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(For a Share Outstanding Throughout Each Period)

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Year Ended October 31		2006		2005			2004		2003			2002
Net Asset Value, Beginning of Period		$15.21		$13.73			$12.47		$8.85			$10.18
Income From Investment Operations:
Net investment income (loss)		(0.03	)1	(0.06	)1		(0.08	)	(0.03	)		(0.03	)
Net realized and unrealized gain (loss) on investments and futures contracts		2.71		1.45			1.34		3.65			(1.30	)
TOTAL FROM INVESTMENT OPERATIONS		2.68		1.39			1.26		3.62			(1.33	)
Less Distributions:
Distributions from net realized gain on investments and futures contracts		(0.61	)	--			--		--			--
Net Asset Value, End of Period		$17.19		$15.12			$13.73		$12.47			$8.85
Total Return2		18.23	%	10.12	%		10.10	%3	40.90	%		(13.06	)%
Ratios to Average Net Assets:
Net expenses		1.72	%	1.72	%		1.79	%	1.77	%		1.82	%
Net investment income (loss)		(0.20	)%	(0.41	)%		(0.72	)%	(0.47	)%		(0.41	)%
Expense waiver/reimbursement4		0.20	%	0.15	%		0.10	%	0.31	%		0.09	%
Supplemental Data:
Net assets, end of period (000 omitted)	$19,577			$14,232		$10,473			$8,643		$5,302
Portfolio turnover		22	%	20	%		27	%	48	%		75	%

</R>
<R>

1 Per Share numbers have been calculated using the average shares method.

</R>
<R>

2 Based on net asset value, which does not reflect the sales charge, redemption fee, or contingent deferred sales charge, if applicable. Total returns for periods of less than one year, if any, are not annualized.

</R>
<R>

3 During the period, the Fund was reimbursed by the Manager, which had an impact of 0.16% on the total return.

</R>
<R>

4 This expense decrease is reflected in both the net expense and the net investment income (loss) ratios shown above.

</R>
<R>

Further information about the Fund’s performance is contained in the Fund’s Annual Report, dated October 31, 2006, which can be obtained free of charge.

</R>
<R>

Appendix A: Hypothetical Investment and Expense Information

</R>
<R>

The following charts provide additional hypothetical information about the effect of the Fund’s expenses, including investment advisory fees and other Fund costs, on the Fund’s assumed returns over a 10-year period. Each chart shows the estimated expenses that would be incurred in respect of a hypothetical investment of $10,000, assuming a 5% return each year, and no redemption of Shares. Each chart also assumes that the Fund’s annual expense ratio stays the same throughout the 10-year period and that all dividends and distributions are reinvested. The annual expense ratio used in each chart is the same as stated in the “Fees and Expenses” table of this prospectus (and thus may not reflect any fee waiver or expense reimbursement currently in effect). The maximum amount of any sales charge that might be imposed on the purchase of Shares (and deducted from the hypothetical initial investment of $10,000; the “Front-End Sales Charge”) is reflected in the “Hypothetical Expenses” column. The hypothetical investment information does not reflect the effect of charges (if any) normally applicable to redemptions of Shares (e.g., deferred sales charges, redemption fees). Mutual fund returns, as well as fees and expenses, may fluctuate over time, and your actual investment returns and total expenses may be higher or lower than those shown below.

</R>
<R>

FEDERATED MINI-CAP INDEX FUND: CLASS C SHARES1
ANNUAL EXPENSE RATIO: 1.99%
MAXIMUM FRONT-END SALES CHARGE THROUGH
JANUARY 31, 2007: 1.00%

</R>
<R>

Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$495.00	$10,395.00	$299.98	$10,197.99
2	$10,197.99	$509.90	$10,707.89	$205.99	$10,504.95
3	$10,504.95	$525.25	$11,030.20	$212.19	$10,821.15
4	$10,821.15	$541.06	$11,362.21	$218.58	$11,146.87
5	$11,146.87	$557.34	$11,704.21	$225.16	$11,482.39
6	$11,482.39	$574.12	$12,056.51	$231.94	$11,828.01
7	$11,828.01	$591.40	$12,419.41	$238.92	$12,184.03
8	$12,184.03	$609.20	$12,793.23	$246.11	$12,550.77
9	$12,550.77	$627.54	$13,178.31	$253.52	$12,928.55
10	$12,928.55	$646.43	$13,574.98	$261.15	$13,317.70
Cumulative		$5,677.24		$2,393.54

</R>
<R>

1 There is a 1% front-end sales charge applicable to purchase of Class C Shares on or before 1/31/2007. Effective 2/1/2007, this front-end sales charge will be eliminated.

</R>
<R>

FEDERATED MINI-CAP INDEX FUND: CLASS C SHARES
ANNUAL EXPENSE RATIO: 1.99%
MAXIMUM FRONT-END SALES CHARGE BEGINNING
FEBRUARY 1, 2007: NONE

</R>
<R>

Year	Hypothetical Beginning Investment	Hypothetical Performance Earnings	Investment After Returns	Hypothetical Expenses	Hypothetical Ending Investment
1	$10,000.00	$500.00	$10,500.00	$201.99	$10,301.00
2	$10,301.00	$515.05	$10,816.05	$208.07	$10,611.06
3	$10,611.06	$530.55	$11,141.61	$214.34	$10,930.45
4	$10,930.45	$546.52	$11,476.97	$220.79	$11,259.46
5	$11,259.46	$562.97	$11,822.43	$227.44	$11,598.37
6	$11,598.37	$579.92	$12,178.29	$234.28	$11,947.48
7	$11,947.48	$597.37	$12,544.85	$241.33	$12,307.10
8	$12,307.10	$615.36	$12,922.46	$248.60	$12,677.54
9	$12,677.54	$633.88	$13,311.42	$256.08	$13,059.13
10	$13,059.13	$652.96	$13,712.09	$263.79	$13,452.21
Cumulative		$5,734.58		$2,316.71

</R>

A Statement of Additional Information (SAI) dated December 31, 2006, 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. The SAI contains a description of the Fund’s policies and procedures with respect to the disclosure of its portfolio securities. To obtain the SAI, Annual Report, Semi-Annual Report and other information without charge, and to make inquiries, call your financial intermediary or the Fund at 1-800-341-7400.

These documents, as well as additional information about the Fund (including portfolio holdings, performance and distributions), are also available on Federated’s website at FederatedInvestors.com.

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 website at 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.

Federated Investors
World-Class Investment Manager

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

Contact us at FederatedInvestors.com
or call 1-800-341-7400.

Federated Securities Corp., Distributor

Investment Company Act File No. 811-6061

Federated is a registered mark of Federated Investors, Inc.
2006 ©Federated Investors, Inc.

Cusip 31420E601

G01169-01 (12/06)

FEDERATED MINI-CAP INDEX FUND

A PORTFOLIO OF FEDERATED INDEX TRUST

STATEMENT OF ADDITIONAL INFORMATION

<R>

DECEMBER 31, 2006

</R>

INSTITUTIONAL SHARES
CLASS C SHARES

<R>

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, 2006.

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.

</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.?......
                                         Financial Information..................
                                         Investment Ratings.....................
                                         Addresses..............................
                                         Appendix...............................







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

 The Board of Trustees (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).



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.

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 (GSE) acting under federal authority. Some GSE
securities are supported by the full faith and credit of the United States.
These include the Government National Mortgage Association, Small Business
Administration, Farm Credit System Financial Assistance Corporation, Farmer's
Home Administration, Federal Financing Bank, General Services Administration,
Department of Housing and Urban Development, Export-Import Bank, Overseas
Private Investment Corporation, and Washington Metropolitan Area Transit
Authority Bonds.

Other GSE securities receive support through federal subsidies, loans or other
benefits. For example, the U.S. Treasury is authorized to purchase specified
amounts of securities issued by (or otherwise make funds available to) the
Federal Home Loan Bank System, Federal Home Loan Mortgage Corporation, Federal
National Mortgage Association, and Tennessee Valley Authority in support of such
obligations.

A few GSE securities have no explicit financial support, but are regarded as
having implied support because the federal government sponsors their activities.
These include the Farm Credit System, Financing Corporation, and Resolution
Funding Corporation.

Investors regard agency securities as having low credit risks, but not as low as
Treasury securities.

A Fund treats mortgage-backed securities guaranteed by a GSE as if issued or
guaranteed by a federal agency.

Although such a guarantee protects against credit risks, it does not reduce
market and prepayment risks.


DERIVATIVE CONTRACTS
<R>

Derivative contracts are financial instruments that require payments based upon
changes in the values of designated securities, commodities, currencies,
indices, or other assets or instruments including other derivative contracts,
(each a "Reference Instrument" and collectively, "Reference Instruments").  Each
party to a derivative contract is referred to as a counterparty.  Some
derivative contracts require payments relating to an actual, future trade
involving the Reference Instrument.  These types of derivatives are frequently
referred to as "physically settled" derivatives.  Other derivative contracts
require payments relating to the income or returns from, or changes in the
market value of, a Reference Instrument.  These types of derivatives are known
as "cash settled" derivatives, since they require cash payments in lieu of
delivery of the Reference Instrument.

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 on how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the Reference Instrument,
derivative contracts may increase or decrease the Fund's exposure to the risks
of the Reference Instrument, 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, including
combinations thereof:

FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a Reference Instrument at a specified
price, date and time.  Entering into a contract to buy a Reference Instrument is
commonly referred to as buying a contract or holding a long position in the
asset.  Entering into a contract to sell a Reference Instrument is commonly
referred to as selling a contract or holding a short position in the Reference
Instrument  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 financial futures (such as index futures and security futures).

OPTION CONTRACTS
Option contracts (also called "options") are rights to buy or sell a Reference
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 Reference Instruments.
Options that are written on futures contracts will be subject to margin
requirements similar to those applied to futures contracts.  The Fund may buy or
sell options on a Reference Instrument if it is permitted to own, invest, or
otherwise have economic exposure to that instrument.  The Fund is not required
to own a Reference Instrument, in order to buy or write an option on that
Reference Instrument.

The Fund may buy and/or sell the following types of options:

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

{circle}Buy call options on a Reference Instrument in anticipation of an
   increase in the value of the Reference Instrument; and

{circle}Write call options on a Reference Instrument to generate income from
   premiums, and in anticipation of a decrease or only limited increase in the
   value of the Reference Instrument.  If the Fund writes a call option on a
   Reference Instrument that it owns and that call option is exercised, the Fund
   foregoes any possible profit from an increase in the market price of the
   Reference Instrument over the exercise price plus the premium received.

PUT OPTIONS
A put option gives the holder the right to sell the Reference Instrument to the
writer of the option. The Fund may use put options in the following ways:

{circle}Buy put options on a Reference Instrument in anticipation of a decrease
   in the value of the Reference Instrument; and

{circle}Write put options on a Reference Instrument to generate income from
   premiums, and in anticipation of an increase or only limited decrease in the
   value of the Reference Instrument. In writing puts, there is a risk that the
   Fund may be required to take delivery of the Reference Instrument when its
   current market price is lower than the exercise price.

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

Finally, the Fund may enter into combinations of options contracts in an attempt
to benefit from changes in the prices of those options contracts (without regard
to changes in the value of the Reference Instrument).

SWAP CONTRACTS
A swap contract (also known as a "swap") is a type of derivative contract in
which two parties agree to pay each other (swap) the returns derived from
Reference Instruments.  Most swaps do not involve the delivery of the underlying
assets by either party, and the parties might not own the Reference Instruments.
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.  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 (commonly referred to as a "notional principal amount") 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 London Interbank
Offered Rate (LIBOR) swap would require one party to pay the equivalent of the
London Interbank Offered 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 RETURN SWAPS
A total return swap is an agreement between two parties whereby one party agrees
to make payments of the total return from a Reference Instrument (or a basket of
such instruments) during the specified period, in return for payments equal to a
fixed or floating rate of interest or the total return from another Reference
Instrument.  Alternately, a total return swap can be structured so that one
party will make payments to the other party if the value of a Reference
Instrument increases, but receive payments from the other party if the value of
that instrument decreases.

CREDIT DEFAULT SWAPS
A credit default swap (CDS) is an agreement between two parties whereby one
party (the "Protection Buyer") agrees to make payments over the term of the CDS
to the other party (the "Protection Seller"), provided that no designated event
of default, restructuring or other credit related event (each a "Credit Event")
occurs with respect to Reference Instrument that is usually a particular bond or
the unsecured credit of an issuer, in general (the "Reference Obligation"). Many
CDS are physically settled, which means that if a Credit Event occurs, the
Protection Seller must pay the Protection Buyer the full notional value, or "par
value," of the Reference Obligation in exchange for delivery by the Protection
Buyer of the Reference Obligation or another similar obligation issued by the
issuer of the Reference Obligation (the "Deliverable Obligation").  The
Counterparties agree to the characteristics of the Deliverable Obligation at the
time that they enter into the CDS. Alternately, a CDS can be "cash settled,"
which means that upon the occurrence of a Credit Event, the Protection Buyer
will receive a payment from the Protection Seller equal to the difference
between the par amount of the Reference Obligation and its market value at the
time of the Credit Event.  The Fund may be either the Protection Buyer or the
Protection Seller in a CDS.  If the Fund is a Protection Buyer and no Credit
Event occurs, the Fund will lose its entire investment in the CDS (i.e., an
amount equal to the payments made to the Protection Seller over the term of the
CDS). However, if a Credit Event occurs, the Fund (as Protection Buyer) will
deliver the Deliverable Obligation and receive a payment equal to the full
notional value of the Reference Obligation, even though the Reference Obligation
may have little or no value. If the Fund is the Protection Seller and no Credit
Event occurs, the Fund will receive a fixed rate of income throughout the term
of the CDS. However, if a Credit Event occurs, the Fund (as Protection Seller)
will pay the Protection Buyer the full notional value of the Reference
Obligation and receive the Deliverable Obligation from the Protection Buyer.  A
CDS may involve greater risks than if the Fund invested directly in the
Reference Obligation. For example, a CDS may increase credit risk since the Fund
has exposure to both the issuer of the Reference Obligation and the Counterparty
to the CDS.

CURRENCY SWAPS
Currency swaps are contracts which provide for interest payments in different
currencies. The parties might agree to exchange the notional principal amounts
of the currencies as well (commonly called a "foreign exchange swap") 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.

</R>


HYBRID INSTRUMENTS
<R>

Hybrid instruments combine elements of two different kinds of securities or
financial instruments (such as a derivative contract). Frequently, the value of
a hybrid instrument is determined by reference to changes in the value of
designated securities, commodities, currencies, indices, or other assets or
instruments (each a, "Valuation Instrument").  Hybrid instruments can take on
many forms including, but not limited to, the following three forms: First, a
common form of a hybrid instrument combines elements of a derivative contract
with those of another security (typically a fixed-income security). In this case
all or a portion of the interest or principal payable on a hybrid security is
determined by reference to changes in the price of a Valuation Instrument.
Second, a hybrid instrument may also combine elements of a fixed-income security
and an equity security. Third, hybrid instruments may include convertible
securities with conversion terms related to a Valuation Instrument.

Depending on the type and terms of the hybrid instrument, its risks may reflect
a combination of the risks of investing in securities, currencies and derivative
contracts.  Thus, an investment in a hybrid instrument may entail significant
risks in addition to those associated with traditional securities or the
Valuation Instrument.  Hybrid instruments are also potentially more volatile
than traditional securities or the Valuation Instrument.  Moreover, depending on
the structure of the particular hybrid, it may expose the Fund to leverage risks
or carry liquidity risks.

CREDIT LINKED NOTE
A credit linked note (CLN) is a type of hybrid instrument in which a special
purpose entity issues a structured note (the "Note Issuer") with respect to
which the Valuation Instrument is a single bond, a portfolio of bonds, or the
unsecured credit of an issuer, in general (each a "Reference Credit").  The
purchaser of the CLN (the "Note Purchaser") invests a par amount and receives a
payment during the term of the CLN that equals a fixed or floating rate of
interest equivalent to a high rated funded asset (such as a bank certificate of
deposit) plus an additional premium that relates to taking on the credit risk of
the Reference Credit. Upon maturity of the CLN, the Note Purchaser will receive
a payment equal to (i) the original par amount paid to the Note Issuer, if there
is no occurrence of a designated event of default, restructuring or other credit
event (each, a "Credit Event") with respect to the issuer of the Reference
Credit or (ii) the market value of the Reference Credit, if a Credit Event has
occurred.  Depending upon the terms of the CLN, it is also possible that the
Note Purchaser may be required to take physical delivery of the Reference Credit
in the event of Credit Event. Most credit linked notes use a corporate bond (or
a portfolio of corporate bonds) as the Reference Credit. However, almost any
type of fixed-income security (including foreign government securities), index,
or derivative contract (such as a credit default swap) can be used as the
Reference Credit.

EQUITY LINKED NOTE
An equity linked note (ELN) is a type of hybrid instrument that provides the
noteholder with exposure to a single equity security, a basket of equity
securities, or an equity index (the "Reference Equity Instrument").  Typically,
an ELN pays interest at agreed rates over a specified time period and, at
maturity, either converts into shares of a Reference Equity Instrument or
returns a payment to the noteholder based on the change in value of a Reference
Equity Instrument.

</R>


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:

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

   {circle}the principal trading market for its securities is in another
      country; or

   {circle}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.

ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN ISSUERS
American Depositary Receipts, which are traded in United States markets,
represent interests in underlying securities issued by a foreign company and 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. ADRs are also
traded in U.S. dollars, eliminating the need for foreign exchange transactions.
The Fund may also invest in securities issued directly by foreign companies and
traded in U.S. Dollars in United States markets.

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.


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.


INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund may invest its assets in securities of other investment companies,
including securities of affiliated money market funds, as an efficient means of
carrying out its investment policies and managing its uninvested cash. These
other investment companies are managed independently of the Fund and incur
additional expenses. Therefore, any such investment by the Fund may be subject
to duplicate expenses. However, the Manager believes that the benefits and
efficiencies of this approach should outweigh the additional expenses.

<R>


ASSET SEGREGATION
In accordance with SEC and SEC staff positions regarding the interpretation of
the 1940 Act, with respect to derivatives that create a future payment
obligation of the Fund, the Fund must "set aside" (referred to sometimes as
"asset segregation") liquid assets, or engage in other SEC- or staff-approved
measures, while the derivative contracts are open. For example, with respect to
forwards and futures contracts that are not contractually required to "cash-
settle," the Fund must cover its open positions by setting aside cash or readily
marketable securities equal to the contracts' full, notional value. With respect
to forwards and futures that are contractually required to "cash-settle,"
however, the Fund is permitted to set aside cash or readily marketable
securities in an amount equal to the Fund's daily marked-to-market (net)
obligations, if any (i.e., the Fund's daily net liability, if any), rather than
the notional value.

The Fund will employ another approach to segregating assets to cover options
that it sells. If the Fund sells a call option, the Fund will set aside either
the Reference Instrument subject to the option, cash or readily marketable
securities with a value that equals or exceeds the current market value of the
Reference Instrument. In no event, will the value of the cash or readily
marketable securities set aside by the Fund be less than the exercise price of
the call option. If the Fund sells a put option, the Fund will set aside cash or
readily marketable securities with a value that equals or exceeds the exercise
price of the put option.

The Fund's asset segregation approach for swap agreements varies among different
types of swaps. For example, if the Fund enters into a credit default swap as
the Protection Buyer, then it will set aside cash or readily marketable
securities necessary to meet any accrued payment obligations under the swap. By
comparison, if the Fund enters into a credit default swap as the Protection
Seller, then the Fund will set aside cash or readily marketable securities equal
to the full notional amount of the swap that must be paid upon the occurrence of
a Credit Event. For some other types of swaps, such as interest rate swaps, the
Fund will calculate the obligations of the counterparties to the swap on a net
basis. Consequently, the Fund's current obligation (or rights) under this type
of swap will equal only the net amount to be paid or received under based on the
relative values of the positions held by each counterparty to the swap (the "net
amount"). The net amount currently owed by or to the Fund will be accrued daily
and the Fund will set aside cash or readily marketable securities equal to any
accrued but unpaid net amount owed by the Fund under the swap.

The Fund may reduce the liquid assets segregated to cover obligations under a
derivative contract by entering into an offsetting derivative contract. For
example, if the Fund sells a put option for the same Reference Instrument as a
call option the Fund has sold, and the exercise price of the call option is the
same as or higher than the exercise price of the put option, then the Fund may
net its obligations under the options and set aside cash or readily marketable
securities (including any margin deposited for the options) with a value equal
to the greater of (a) the current market value of the Reference Instrument
deliverable under the call option or (b) the exercise price of the put option.

By setting aside cash or readily marketable securities equal to only its net
obligations under swaps and certain cash-settled derivative contracts, the Fund
will have the ability to employ leverage to a greater extent than if the Fund
were required to segregate cash or readily marketable securities equal to the
full notional value of such contracts. The use of leverage involves certain
risks. See "Risk Factors." Unless the Fund has other cash or readily marketable
securities to set aside, it cannot trade assets set aside in connection with
derivative contracts or special transactions 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. The Fund reserves the right to modify its
asset segregation policies in the future to comply with any changes in the
positions articulated from time to time by the SEC and its staff.

Generally, special transactions do not cash-settle on a net basis. Consequently,
with respect to special transactions, the Fund will set aside cash or readily
marketable securities with a value that equals or exceeds the Fund's
obligations.

</R>


HEDGING
<R>

Hedging transactions are intended to reduce specific risks. For example, to
protect the Fund against circumstances that would normally cause the Fund's
portfolio securities to decline in value, the Fund may buy or sell a derivative
contract that would normally increase in value under the same circumstances. The
Fund may also attempt to hedge by using combinations of different derivative
contracts, or derivative contracts and securities. The Fund's ability to hedge
may be limited by the costs of the derivative contracts. The Fund may attempt to
lower the cost of hedging by entering into transactions that provide only
limited protection, including transactions that (1) hedge only a portion of its
portfolio, (2) use derivative contracts that cover a narrow range of
circumstances or (3) involve the sale of derivative contracts with different
terms. Consequently, hedging transactions will not eliminate risk even if they
work as intended. In addition, hedging strategies are not always successful, and
could result in increased expenses and losses to the Fund.

</R>


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 Federated
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 Federated 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 Federated fund than market-competitive rates on overnight repurchase
agreements (Repo Rate) and more attractive to the borrowing Federated 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 OF INVESTING IN ADRS AND DOMESTICALLY TRADED SECURITIES OF FOREIGN
ISSUERS.
Because the Fund may invest in ADRs and other domestically traded securities of
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. Foreign companies may not provide
information as frequently or to as great an extent as companies in the United
States. Foreign companies may also receive less coverage than U.S. companies by
market analysts and the financial press. In addition, foreign companies 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
concerning companies in the United States.


RISKS OF INVESTING IN DERIVATIVE CONTRACTS AND HYBRID INSTRUMENTS
<R>

The Fund's use of derivative contracts and hybrid instruments 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 and hybrid instruments in which the Fund
invests may not be correlated with changes in the value of the underlying
Reference or Valuation Instruments 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 derivative
contracts and hybrid instruments may be erroneously priced or improperly valued
and, as a result, the Fund may need to make increased cash payments to the
counterparty.  Fourth, derivative contracts and hybrid instruments 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. Fifth, a common provision in
OTC derivative contracts permits the counterparty to terminate any such contract
between it and the Fund, if the value of the Fund's total net assets declines
below a specified level over a given time period. Factors that may contribute to
such a decline (which usually must be substantial) include significant
shareholder redemptions and/or a marked decrease in the market value of the
Fund's investments. Any such termination of the Fund's OTC derivative contracts
may adversely affect the Fund (for example, by increasing losses and/or costs,
and/or preventing the Fund from fully implementing its investment strategies).
Finally, derivative contracts and hybrid instruments may also involve other
risks described herein or in the Fund's prospectus, such as stock market,
credit, liquidity and leverage risks.

</R>


CURRENCY RISKS
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.

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.


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.

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


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

Investments can have these same results if their returns are based on a multiple
of a specified index, security, or

other benchmark.


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.


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 that the
fund cannot dispose of within 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.


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 limitation is adhered to at the time
of investment, a later increase or decrease in percentage resulting from any
change in value of net assets will not result in a violation of such limitation.


DETERMINING MARKET VALUE OF SECURITIES
<R>

Market values of the Fund's portfolio securities are determined as follows:

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

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

{circle}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;

   {circle}for investments in the open-end, regulated investment companies,
      based on net asset value;

   {circle}for fixed income securities, according to the 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 are
      valued at amortized cost; and

{circle}for all other securities at fair value as determined in accordance with
  procedures established by and under the general supervision of the Board.

Prices for fixed income securities furnished by a pricing service may be based
  on a valuation matrix which incorporates both dealer-supplied valuations and
  electronic data processing techniques. Such prices are generally intended to
  be indicative of the bid prices currently offered to institutional investors
  for the securities.  The Board has approved the use of such pricing services.
  A number of pricing services are available, and the Fund may use various
  pricing services or discontinue the use of any pricing service.

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.



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.


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
intermediaries) and providing incentives to financial intermediaries to sell
Shares.  The Plan is also designed to cover the cost of administrative services
performed in conjunction with the sale of Shares, including, but not limited to,
shareholder services, recordkeeping services and educational services, as well
as the costs of implementing and operating the Plan.  The Rule 12b-1 Plan allows
the Distributor to contract with financial intermediaries 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.

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.


ADDITIONAL PAYMENTS TO FINANCIAL INTERMEDIARIES
The Distributor may pay out of its own resources amounts (including items of
material value) to certain financial intermediaries.  In some cases, such
payments may be made by, or funded from the resources of, companies affiliated
with the Distributor (including the Manager).  While National Association of
Securities Dealers (NASD) regulations limit the sales charges that you may bear,
there are no limits with regard to the amounts that the Distributor may pay out
of its own resources.  In addition to the payments which are generally described
herein and in the prospectus, the financial intermediary also may receive
payments under the Rule 12b-1 Plan and/or Service Fees. In connection with these
payments, the financial intermediary may elevate the prominence or profile of
the Fund and/or other Federated funds within the financial intermediary's
organization by, for example, placement on a list of preferred or recommended
funds, and/or granting the Distributor preferential or enhanced opportunities to
promote the funds in various ways within the financial intermediary's
organization. You can ask your financial intermediary for information about any
payments it receives from the Distributor or the Federated funds and any
services provided.

The following examples illustrate the types of instances in which the
Distributor may make additional payments to financial intermediaries.


SUPPLEMENTAL PAYMENTS
The Distributor may make supplemental payments to certain financial
intermediaries that are holders or dealers of record for accounts in one or more
of the Federated funds.  These payments may be based on such factors as the
number or value of Shares the financial intermediary sells or may sell; the
value of client assets invested; or the type and nature of services or support
furnished by the financial intermediary.


PROCESSING SUPPORT PAYMENTS
The Distributor may make payments to financial intermediaries that sell
Federated fund shares to help offset their costs associated with client account
maintenance support, statement processing and transaction processing.  The types
of payments that the Distributor may make under this category include payment of
ticket charges on a per transaction basis; payment of networking fees; and
payment for ancillary services such as setting up funds on the financial
intermediary's mutual fund trading system.


RETIREMENT PLAN PROGRAM SERVICING PAYMENTS
The Distributor may make payments to certain financial intermediaries who sell
Federated fund shares through retirement plan programs.  A financial
intermediary may perform retirement plan program services itself or may arrange
with a third party to perform retirement plan program services.  In addition to
participant recordkeeping, reporting, or transaction processing, retirement plan
program services may include services rendered to a plan in connection with
fund/investment selection and monitoring; employee enrollment and education;
plan balance rollover or separation, or other similar services.


OTHER BENEFITS TO FINANCIAL INTERMEDIARIES
From time to time, the Distributor, at its expense, may provide additional
compensation to financial intermediaries that sell or arrange for the sale of
Shares.  Such compensation may include financial assistance to financial
intermediaries that enable the Distributor to participate in or present at
conferences or seminars, sales or training programs for invited employees,
client and investor events and other financial intermediary-sponsored events.

The Distributor also may hold or sponsor, at its expense, sales events,
conferences and programs for employees or associated persons of financial
intermediaries and may pay the travel and lodging expenses of attendees.  The
Distributor also may provide, at its expense, meals and entertainment in
conjunction with meetings with financial intermediaries.  Other compensation may
be offered to the extent not prohibited by applicable laws, regulations or the
rules of any self-regulatory agency, such as the NASD.


UNDERWRITING COMMISSIONS
<R>

The following chart reflects the total front-end sales charges and contingent
deferred sales charges paid in connection with the sale of Class C Shares of the
Fund and the amount retained by the Distributor for the last three fiscal years
ended October 31:

                                2006                                    2005                                    2004
                 TOTAL SALES                             TOTAL SALES
                 CHARGES               AMOUNT            CHARGES               AMOUNT            TOTAL SALES           AMOUNT
                                       RETAINED                                RETAINED          CHARGES               RETAINED
Class C          $1,426                $615              $1,428                $134              $9,743                $3,310
Shares


</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 financial intermediaries 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. Financial intermediaries 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 financial intermediary 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
<R>

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.

As of December 1, 2006, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Institutional Shares: Paychex
Securities Corporation, W. Henrietta, NY, owned approximately 1,492,255 Shares
(27.43)%; Emjay Corporation, Greenwood Village, CO, owned approximately 375,818
Shares (6.91)% and Charles Schwab & Co., Inc., owned approximately 305,824
Shares (5.62)%.

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

Paychex Securities Corporation is organized in the state of New York and is a
subsidiary of Paychex, Inc., organized in the state of Delaware.

</R>



TAX INFORMATION


FEDERAL INCOME TAX
The Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code (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.

The Fund is entitled to a loss carry-forward, which may reduce the taxable
income or gain that the Fund would realize, and to which the shareholder would
be subject, in the future.


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.



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.  As of December 31, 2005, the Trust comprised three
portfolios, and the Federated Fund Complex consisted of 43 investment companies
(comprising 136 portfolios). Unless otherwise noted, each Officer is elected
annually. Unless otherwise noted, each Board member oversees all portfolios in
the Federated Fund Complex and serves for an indefinite term.

As of December 1, 2006, the Fund's Board and Officers as a group owned less than
1% of each class of the Fund's outstanding Shares.


INTERESTED TRUSTEES BACKGROUND AND COMPENSATION






NAME
BIRTH DATE                                                                                                AGGREGATE            TOTAL
ADDRESS                                                                                                COMPENSATION     COMPENSATION
POSITIONS        PRINCIPAL OCCUPATION(S) FOR PAST FIVE YEARS,                                             FROM FUND       FROM TRUST
HELD WITH        OTHER DIRECTORSHIPS HELD AND PREVIOUS POSITION(S)                                     (PAST FISCAL              AND
TRUST                                                                                                         YEAR)        FEDERATED
DATE SERVICE                                                                                                            FUND COMPLEX
BEGAN                                                                                                                          (PAST
                                                                                                                            CALENDAR
                                                                                                                               YEAR)
JOHN F.          PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                       $0               $0
DONAHUE*         Chairman and Director, Federated Investors, Inc.; Chairman of the Federated Fund
Birth Date:      Complex's Executive Committee.
July 28,
1924             PREVIOUS POSITIONS: Chairman of the Federated Fund Complex; Trustee, Federated
TRUSTEE          Investment Management Company and Chairman and Director, Federated Investment
Began            Counseling.
serving:
January 1990

J.               PRINCIPAL OCCUPATIONS: Principal Executive Officer and President of the Federated               $0               $0
CHRISTOPHER      Fund Complex; Director or Trustee of some of the Funds in the Federated Fund
DONAHUE*         Complex; President, Chief Executive Officer and Director, Federated Investors,
Birth Date:      Inc.; Chairman and Trustee, Federated Investment Management Company; Trustee,
April 11,        Federated Investment Counseling; Chairman and Director, Federated Global
1949             Investment Management Corp.; Chairman, Federated Equity Management Company of
PRESIDENT        Pennsylvania and Passport Research, Ltd. (Investment advisory subsidiary of
AND TRUSTEE      Federated); Trustee, Federated Shareholder Services Company; Director, Federated
Began            Services Company.
serving:
January 1990     PREVIOUS POSITIONS: President, Federated Investment Counseling; President and
                 Chief Executive Officer, Federated Investment Management Company, Federated
                 Global Investment Management Corp. and Passport Research, Ltd.

LAWRENCE D.      PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                  $399.91         $148,500
ELLIS, M.D.*     Professor of Medicine, University of Pittsburgh; Medical Director, University of
Birth Date:      Pittsburgh Medical Center Downtown; Hematologist, Oncologist and Internist,
October 11,      University of Pittsburgh Medical Center.
1932
3471 Fifth       OTHER DIRECTORSHIPS HELD: Member, National Board of Trustees, Leukemia Society of
Avenue           America.
Suite 1111
Pittsburgh,      PREVIOUS POSITIONS: Trustee, University of Pittsburgh; Director, University of
PA               Pittsburgh Medical Center.
TRUSTEE
Began
serving:
January 1990

* 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
BIRTH DATE                                                                                                AGGREGATE            TOTAL
ADDRESS                                                                                                COMPENSATION     COMPENSATION
POSITIONS         PRINCIPAL OCCUPATION(S) FOR PAST FIVE YEARS,                                            FROM FUND       FROM TRUST
HELD WITH         OTHER DIRECTORSHIPS HELD AND PREVIOUS POSITION(S)                                    (PAST FISCAL              AND
TRUST                                                                                                         YEAR)        FEDERATED
DATE SERVICE                                                                                                            FUND COMPLEX
BEGAN                                                                                                                          (PAST
                                                                                                                            CALENDAR
                                                                                                                               YEAR)
THOMAS G.         PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                  $439.89         $163,350
BIGLEY
Birth Date:       OTHER DIRECTORSHIPS HELD: Director, Member of Executive Committee, Children's
February 3,       Hospital of Pittsburgh; Director, University of Pittsburgh.
1934
15 Old Timber     PREVIOUS POSITION: Senior Partner, Ernst & Young LLP.
Trail
Pittsburgh,
PA
TRUSTEE
Began
serving:
October 1995

JOHN T.           PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                 $439.89         $163,350
CONROY, JR.       Chairman of the Board, Investment Properties Corporation; Partner or Trustee in
Birth Date:       private real estate ventures in Southwest Florida.
June 23, 1937
Investment        PREVIOUS POSITIONS: President, Investment Properties Corporation; Senior Vice
Properties        President, John R. Wood and Associates, Inc., Realtors; President, Naples
Corporation       Property Management, Inc. and Northgate Village Development Corporation.
3838 North
Tamiami Trail
Suite 402
Naples, FL
TRUSTEE
Began
serving:
August 1991

NICHOLAS P.       PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                  $439.89         $163,350
CONSTANTAKIS
Birth Date:       OTHER DIRECTORSHIPS HELD: Director and Member of the Audit Committee, Michael
September 3,      Baker Corporation (engineering and energy services worldwide).
1939
175 Woodshire     PREVIOUS POSITION: Partner, Andersen Worldwide SC.
Drive
Pittsburgh,
PA
TRUSTEE
Began
serving:
February 1998

JOHN F.           PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex;                  $399.91         $148,500
CUNNINGHAM        Director, WinsorTech.
Birth Date:
March 5, 1943     OTHER DIRECTORSHIPS HELD: Chairman, President and Chief Executive Officer,
353 El Brillo     Cunningham & Co., Inc. (strategic business consulting); Trustee Associate,
Way               Boston College.
Palm Beach,
FL                PREVIOUS POSITIONS: Director, Redgate Communications and EMC Corporation
TRUSTEE           (computer storage systems); Chairman of the Board and Chief Executive Officer,
Began             Computer Consoles, Inc.; President and Chief Operating Officer, Wang
serving:          Laboratories; Director, First National Bank of Boston; Director, Apollo
January 1999      Computer, Inc.

PETER E.          PRINCIPAL OCCUPATION: Director or Trustee of the Federated Fund Complex.                  $399.91         $148,500
MADDEN
Birth Date:       OTHER DIRECTORSHIPS HELD: Board of Overseers, Babson College.
March 16,
1942              PREVIOUS POSITIONS: Representative, Commonwealth of Massachusetts General Court;
One Royal         President, State Street Bank and Trust Company and State Street Corporation
Palm Way          (retired); Director, VISA USA and VISA International; Chairman and Director,
100 Royal         Massachusetts Bankers Association; Director, Depository Trust Corporation;
Palm Way          Director, The Boston Stock Exchange.
Palm Beach,
FL
TRUSTEE
Began
serving:
August 1991

CHARLES F.        PRINCIPAL OCCUPATIONS: Director or Trustee of the Federated Fund Complex;                 $439.89         $163,350
MANSFIELD,        Management Consultant.
JR.
Birth Date:       PREVIOUS POSITIONS: Chief Executive Officer, PBTC International Bank; Partner,
April 10,         Arthur Young & Company (now Ernst & Young LLP); Chief Financial Officer of
1945              Retail Banking Sector, Chase Manhattan Bank; Senior Vice President, HSBC Bank
80 South Road     USA (formerly, Marine Midland Bank); Vice President, Citibank; Assistant
Westhampton       Professor of Banking and Finance, Frank G. Zarb School of Business, Hofstra
Beach, NY         University; Executive Vice President DVC Group, Inc.
TRUSTEE
Began
serving:
January 1999

JOHN E.           PRINCIPAL OCCUPATIONS: Director or Trustee, and Chairman of the Board of                  $506.79         $178,200
MURRAY, JR.,      Directors or Trustees, of the Federated Fund Complex; Chancellor and Law
J.D., S.J.D.      Professor, Duquesne University; Partner, Murray, Hogue & Lannis.
Birth Date:
December 20,      OTHER DIRECTORSHIPS HELD: Director, Michael Baker Corp. (engineering,
1932              construction, operations and technical services).
Chancellor,
Duquesne          PREVIOUS POSITIONS: President, Duquesne University; Dean and Professor of Law,
University        University of Pittsburgh School of Law; Dean and Professor of Law, Villanova
Pittsburgh,       University School of Law.
PA
TRUSTEE
Began
serving:
February 1995

THOMAS M.         </R>Principal Occupations: Director or Trustee of the Federated Fund Complex;                  $0               $0
O'NEILL<R>        Managing Director and Partner, Navigator Management Company, L.P. (investment
</R>Birth         and strategic consulting).
Date: June        <R>
14, 1951          </R>Other Directorships Held: Director, Midway Pacific (lumber); Board of
95 Standish       Overseers, Children's Hospital of Boston; Visiting Committee on Athletics,
Street            Harvard College.
P.O. Box 2779     <R>
Duxbury, MA       </R>Previous Positions: Chief Executive Officer and President, Managing Director
TRUSTEE           and Chief Investment Officer, Fleet Investment Advisors; President and Chief
Began             Executive Officer, Aeltus Investment Management, Inc.; General Partner, Hellman,
serving:          Jordan Management Co., Boston, MA; Chief Investment Officer, The Putnam
October           Companies, Boston, MA; and Credit Analyst and Lending Officer, Fleet Bank.<R>
2006<R>
</R>MARJORIE      PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex;                $399.91         $148,500
P. SMUTS          Public Relations/Marketing Consultant/Conference Coordinator.
Birth Date:
June 21, 1935     PREVIOUS POSITIONS: National Spokesperson, Aluminum Company of America;
4905 Bayard       television producer; President, Marj Palmer Assoc.; Owner, Scandia Bord.
Street
Pittsburgh,
PA
TRUSTEE
Began
serving:
January 1990

JOHN S. WALSH     PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex;                $399.91         $148,500
Birth Date:       President and Director, Heat Wagon, Inc. (manufacturer of construction temporary
November 28,      heaters); President and Director, Manufacturers Products, Inc. (distributor of
1957              portable construction heaters); President, Portable Heater Parts, a division of
2604 William      Manufacturers Products, Inc.
Drive
Valparaiso,       PREVIOUS POSITION: Vice President, Walsh & Kelly, Inc.
IN
TRUSTEE
Began
serving:
January 1999
JAMES F. WILL     PRINCIPAL OCCUPATIONS:  Director or Trustee of the Federated Fund Complex; Vice           $201.74               $0
Birth Date:       Chancellor and President, Saint Vincent College.
October 12,
1938              OTHER DIRECTORSHIPS HELD: Alleghany Corporation.
Saint Vincent
College           PREVIOUS POSITIONS: Chairman, President and Chief Executive Officer, Armco,
Latrobe, PA       Inc.; President and Chief Executive Officer, Cyclops Industries; President and
TRUSTEE           Chief Operating Officer, Kaiser Steel Corporation.
Began
serving:
April 2006


OFFICERS**

NAME
BIRTH DATE
ADDRESS
POSITIONS
HELD WITH   PRINCIPAL OCCUPATION(S) AND PREVIOUS POSITION(S)
TRUST
DATE
SERVICE
BEGAN
JOHN W.     PRINCIPAL OCCUPATIONS: Executive Vice President and Secretary of the Federated Fund Complex; Vice Chairman, Executive
MCGONIGLE   Vice President, Secretary and Director, Federated Investors, Inc.
Birth Date:
October 26, PREVIOUS POSITIONS: Trustee, Federated Investment Management Company and Federated Investment Counseling; Director,
1938        Federated Global Investment Management Corp., Federated Services Company and Federated Securities Corp.
EXECUTIVE
VICE
PRESIDENT
AND
SECRETARY
Began
serving:
February
1990

RICHARD A.  PRINCIPAL OCCUPATIONS: Principal Financial Officer and Treasurer of the Federated Fund Complex; Senior Vice President,
NOVAK       Federated Administrative Services; Financial and Operations Principal for Federated Securities Corp., Edgewood Services,
Birth Date: Inc. and Southpointe Distribution Services, Inc.
December
25, 1963
TREASURER   PREVIOUS POSITIONS: Controller of Federated Investors, Inc.; Vice President, Finance of Federated Services Company; held
Began       various financial management positions within The Mercy Hospital of Pittsburgh; Auditor, Arthur Andersen & Co.
serving:
January
2006

RICHARD B.  PRINCIPAL OCCUPATIONS: Vice Chairman or Vice President of some of the Funds in the Federated Fund Complex; Vice
FISHER      Chairman, Federated Investors, Inc.; Chairman, Federated Securities Corp.
Birth Date:
May 17,     PREVIOUS POSITIONS: President and Director or Trustee of some of the Funds in the Federated Fund Complex; Executive Vice
1923        President, Federated Investors, Inc. and Director and Chief Executive Officer, Federated Securities Corp.
VICE
PRESIDENT
Began
serving:
February
1990

BRIAN P.    PRINCIPAL OCCUPATIONS: Senior Vice President and Chief Compliance Officer of the Federated Fund Complex; Vice President
BOUDA       and Chief Compliance Officer of Federated Investors, Inc.; and Chief Compliance Officer of its subsidiaries. Mr. Bouda
Birth Date: joined Federated in 1999 and is a member of the American Bar Association and the State Bar Association of Wisconsin.
February
28, 1947
SENIOR VICE
PRESIDENT
Began
serving:
January
2006

STEPHEN F.  PRINCIPAL OCCUPATIONS: Chief Investment Officer of this Fund and various other Funds in the Federated Fund Complex;
AUTH        Executive Vice President, Federated Investment Counseling, Federated Global Investment Management Corp. and Federated
Birth Date: Equity Management Company of Pennsylvania.
September
3, 1956     PREVIOUS POSITIONS: Executive Vice President, Federated Investment Management Company, and Passport Research, Ltd.
CHIEF       (Investment advisory subsidiary of Federated); Senior Vice President, Global Portfolio Management Services Division;
INVESTMENT  Senior Vice President, Federated Investment Management Company and Passport Research, Ltd.; Senior Managing Director and
OFFICER     Portfolio Manager, Prudential Investments.
Began
serving:
November
2002

JOHN W.     PRINCIPAL OCCUPATIONS: John W. Harris has been the Fund's Portfolio Manager since January 2003. He is Vice President of
HARRIS      the Trust.   Mr. Harris initially joined Federated in 1987 as an Investment Analyst. He served as an Investment Analyst
Birth Date: and an Assistant Vice President from 1990 through 1992 and as a Senior Investment Analyst and Vice President through May
June 6,     1993. After leaving the money management field to travel extensively, he rejoined Federated in 1997 as a Senior
1954        Investment Analyst and became a Portfolio Manager and an Assistant Vice President of the Fund's Adviser in December
VICE        1998.  Mr. Harris continues to be a Portfolio Manager of certain Federated Funds.  In January 2000, Mr. Harris became a
PRESIDENT   Vice President of the Fund's Adviser. Mr. Harris is a Chartered Financial Analyst. He received his M.B.A. from the
Began       University of Pittsburgh.
serving:
May 2004

**Officers do not receive any compensation from the Fund.

In addition, the Fund has appointed an Anti-Money Laundering Compliance Officer.


COMMITTEES OF THE BOARD
                                                                                                                           MEETINGS
BOARD          COMMITTEE                                                                                                   HELD
COMMITTEE      MEMBERS          COMMITTEE FUNCTIONS                                                                        DURING
                                                                                                                           LAST
                                                                                                                           FISCAL
                                                                                                                           YEAR
EXECUTIVE      John F.          In between meetings of the full Board, the Executive Committee generally may exercise      Two
               Donahue          all the powers of the full Board in the management and direction of the business and
               John E.          conduct of the affairs of the Trust in such manner as the Executive Committee shall
               Murray, Jr.,     deem to be in the best interests of the Trust.  However, the Executive Committee
               J.D., S.J.D.     cannot elect or remove Board members, increase or decrease the number of Trustees,
               John S.          elect or remove any Officer, declare dividends, issue shares or recommend to
               Walsh            shareholders any action requiring shareholder approval.

AUDIT          Thomas G.        The purposes of the Audit Committee are to oversee the accounting and financial            Ten
               Bigley           reporting process of the Fund, the Fund's internal control over financial reporting,
               John T.          and the quality, integrity and independent audit of the Fund's financial statements.
               Conroy, Jr.      The Committee also oversees or assists the Board with the oversight of compliance with
               Nicholas P.      legal requirements relating to those matters, approves the engagement and reviews the
               Constantakis     qualifications, independence and performance of the Fund's independent registered
               Charles F.       public accounting firm, acts as a liaison between the independent registered public
               Mansfield,       accounting firm and the Board and reviews the Fund's internal audit function.
               Jr.



NOMINATING     Thomas G.        The Nominating Committee, whose members consist of all Independent Trustees, selects       One
               Bigley           and nominates persons for election to the Fund's Board when vacancies occur. The
               John T.          Committee will consider candidates recommended by shareholders, Independent Trustees,
               Conroy, Jr.      officers or employees of any of the Fund's agents or service providers and counsel to
               Nicholas P.      the Fund. Any shareholder who desires to have an individual considered for nomination
               Constantakis     by the Committee must submit a recommendation in writing to the Secretary of the Fund,
               John F.          at the Fund's address appearing on the back cover of this Statement of Additional
               Cunningham       Information. The recommendation should include the name and address of both the
               Peter E.         shareholder and the candidate and detailed information concerning the candidate's
               Madden           qualifications and experience. In identifying and evaluating candidates for
               Charles F.       consideration, the Committee shall consider such factors as it deems appropriate.
               Mansfield,       Those factors will ordinarily include:  integrity, intelligence, collegiality,
               Jr.              judgment, diversity, skill, business and other experience, qualification as an
               John E.          "Independent Trustee," the existence of material relationships which may create the
               Murray, Jr.      appearance of a lack of independence, financial or accounting knowledge and
               Thomas M.        experience, and dedication and willingness to devote the time and attention necessary
               O'Neill          to fulfill Board responsibilities.
               Marjorie P.
               Smuts
               John S.
               Walsh
               James F.
               Will


BOARD OWNERSHIP OF SHARES IN THE FUND AND IN THE FEDERATED FAMILY OF INVESTMENT
COMPANIES AS OF DECEMBER 31, 2005

                                                                                      AGGREGATE
                                                       DOLLAR RANGE OF          DOLLAR RANGE OF
                                                          SHARES OWNED          SHARES OWNED IN
INTERESTED                            IN FEDERATED MINI-CAP INDEX FUND      FEDERATED FAMILY OF
BOARD MEMBER NAME                                                          INVESTMENT 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                                          None            Over $100,000
John F. Cunningham                                                None            Over $100,000
Peter E. Madden                                                   None            Over $100,000
Charles F. Mansfield, Jr.                                         None            Over $100,000
John E. Murray, Jr., J.D., S.J.D.                                 None            Over $100,000
Thomas M. O'Neill                                                 None                     None
Marjorie P. Smuts                                                 None            Over $100,000
John S. Walsh                                          $10,001-$50,000            Over $100,000
James F. Will                                                     None                     None

</R>

INVESTMENT MANAGER
<R>

The Manager oversees the Subadviser. Effective the close of business on
September 29, 2006, BlackRock Investment Management, LLC (Subadviser), a
subsidiary of BlackRock, Inc., 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 Subadviser for the Fund
and thereafter monitoring and evaluating the performance of the Subadviser
through quantitative and qualitative analyses. In addition, the Manager conducts
periodic in-person, telephonic and written consultations with the Subadviser. In
initially evaluating the Subadviser, the Manager considered, among other
factors, the Subadviser'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
Subadviser'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
Subadviser; 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 Fund; discussing with the Subadviser the portfolio sampling
techniques employed by the Subadviser; and ultimately recommending to the Board
whether the Subadvisory Agreement 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 Subadviser, 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 Subadviser 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.


PORTFOLIO MANAGER INFORMATION
The following information about the Fund's Portfolio Managers is provided as of
August 31, 2006, except information regarding compensation for Jeffrey L. Russo
and Debra L. Jelilian and Potential Material Conflicts of Interest is provided
as of September 29, 2006.

OTHER ACCOUNTS MANAGED           TOTAL NUMBER OF OTHER ACCOUNTS MANAGED / TOTAL ASSETS*
Registered Investment Companies  13 funds / $4,369.40 million
Other Pooled Investment Vehicles 0
Other Accounts                   0

*  None of the Accounts has an advisory fee that is based on the performance of
the account.


Dollar value range of shares owned in the Fund:  none.


John Harris is paid a fixed base salary and a variable annual incentive.  Base
salary is determined within a market competitive position-specific salary range,
based on the portfolio manager's experience and performance.  The annual
incentive amount is determined based on multiple performance criteria using a
Balanced Scorecard methodology, and may be paid entirely in cash, or in a
combination of cash and restricted stock of Federated Investors, Inc.
(Federated).  There are Four weighted performance categories in the Balanced
Scorecard.  Investment Product Performance (IPP) is the predominant factor.  Of
lesser importance are: Leadership/Teamwork/Communication, Research Performance,
and Financial Success.  The total Balanced Scorecard "score" is applied against
an annual incentive opportunity that is competitive in the market for this
portfolio manager role to determine the annual incentive payment.


IPP is determined with regard to certain other accounts serviced by Mr. Harris,
and measured by applying two components.  The first component includes accounts
for which Mr. Harris serves as portfolio manager and assesses performance of
asset allocation decisions over rolling 1, 3 and 5 calendar years versus
performance of pre-defined allocation models.  For certain funds, 1, 3, and 5
calendar year pre-tax gross returns, or taxable equivalent returns, are measured
vs. designated peer groups of comparable accounts.  In addition, for certain
accounts, performance is measured by comparing the account's average one-year
distribution yield, or taxable equivalent, for 1, 3 and 5 calendar year periods
to those of designated peer group accounts.  The second component includes
certain additional accounts for which Mr. Harris provides quantitative
analytical support, measured on a rolling 1, 3, and 5 calendar year, pre-tax
gross return basis vs. fund benchmarks and/or on a rolling 1, 3, and 5 calendar
year, pre-tax gross return basis vs. designated peer groups of comparable
accounts.  With respect to this component, accounts are categorized according to
investment strategy, and performance of each strategy category receives equal
weighting.  Performance of each account within a strategy also receives equal
weighting.  Performance periods are adjusted if the portfolio manager has been
managing the fund for less than five years; funds with less than one year of
performance history under the portfolio manager may be excluded.  The IPP score
can be reduced based on management's assessment of the Fund's comparative risk
profile.


Leadership/Teamwork/Communication is assessed by Federated's management.


Research performance focuses on the quality and timeliness of allocation
recommendations, the quality and timeliness of quantitative support and other
qualitative factors and is assessed by the Chief Investment Officer.


The Financial Success category is designed to tie the portfolio manager's bonus,
in part, to Federated's overall financial health, and any awards are predicated
on Federated's attainment of specified financial targets.  Senior management
determines individual Financial Success scores on a discretionary basis,
considering overall contributions, including factors not fully reflected in the
other Balanced Scorecard categories.


As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a fund's investments, on the one hand, and
the investments of other accounts for which the portfolio manager is
responsible, on the other.  For example, it is possible that the various
accounts managed could have different investment strategies that, at times,
might conflict with one another to the possible detriment of the Fund.
Alternatively, to the extent that the same investment opportunities might be
desirable for more than one account, possible conflicts could arise in
determining how to allocate them.  Other potential conflicts might include
conflicts created by specific portfolio manager compensation arrangements, and
conflicts relating to selection of brokers or dealers to execute fund portfolio
trades and/or specific uses of commissions from Fund portfolio trades (for
example, research, or "soft dollars").  The Adviser has structured the portfolio
managers' compensation in a manner, and the Fund has adopted policies and
procedures, reasonably designed to safeguard the Fund from being negatively
affected as a result of any such potential conflicts.

                                         NUMBER OF OTHER ACCOUNTS MANAGED             NUMBER OF ACCOUNTS AND ASSETS FOR WHICH
 NAME OF INVESTMENT ADVISER AND             AND ASSETS BY ACCOUNT TYPE                   ADVISORY FEE IS PERFORMANCE-BASED
       PORTFOLIO MANAGER
                                   REGISTERED      OTHER POOLED                     REGISTERED      OTHER POOLED
                                   INVESTMENT       INVESTMENT                      INVESTMENT       INVESTMENT    OTHER ACCOUNTS
                                    COMPANIES        VEHICLES     OTHER ACCOUNTS     COMPANIES        VEHICLES
        JEFFREY L. RUSSO               11               26              34              1*               3*              2
                                 $5,308,387,252  $14,102,055,855  $42,406,933,220  $155,168,962    $1,204,466,504  $3,251,114,501
       DEBRA L. JELILIAN               13               15              24               0               0               0
                                 $5,538,678,934  $10,946,824,774  $35,859,990,370
* A portion of the assets in the master fund of a master-feeder structure are
subject to a performance fee.

FUND OWNERSHIP

Each portfolio manager owned no shares of the Fund as of August 31, 2006.

PORTFOLIO MANAGER COMPENSATION

The Portfolio Manager Compensation Program of BlackRock Advisors, LLC and its
affiliates, including the Subadviser, ("BlackRock Advisors") is critical to
BlackRock Advisors' ability to attract and retain the most talented asset
management professionals. This program ensures that compensation is aligned with
maximizing investment returns and it provides a competitive pay opportunity for
competitive performance.

COMPENSATION PROGRAM

The elements of total compensation for BlackRock Advisors portfolio managers are
base salary, annual performance-based cash and stock compensation (cash and
stock bonus) and other benefits. BlackRock Advisors has balanced these
components of pay to provide portfolio managers with a powerful incentive to
achieve consistently superior investment performance.  By design, portfolio
manager compensation levels fluctuate - both up and down - with the relative
investment performance of the portfolios that they manage.

   BASE SALARY

   Under the BlackRock Advisors approach, like that of many asset management
   firms, base salaries represent a relatively small portion of a portfolio
   manager's total compensation. This approach serves to enhance the
   motivational value of the performance-based (and therefore variable)
   compensation elements of the compensation program.

   PERFORMANCE-BASED COMPENSATION

   BlackRock Advisors believes that the best interests of investors are served
   by recruiting and retaining exceptional asset management talent and managing
   their compensation within a consistent and disciplined framework that
   emphasizes pay for performance in the context of an intensely competitive
   market for talent. To that end, the portfolio manager incentive compensation
   is based on a formulaic compensation program. BlackRock Advisors' formulaic
   portfolio manager compensation program includes: pre-tax investment
   performance relative to appropriate competitors or benchmarks over 1-3- and
   5-year performance periods. If a portfolio manager's tenure is less than 5
   years, performance periods will reflect time in position. In addition,
   portfolio manager's compensation can be based on BlackRock's investment
   performance, financial results of BlackRock, expense control, profit margins,
   strategic planning and implementation, quality of client service, market
   share, corporate reputation, capital allocation, compliance and risk control,
   leadership, workforce diversity, technology and innovation. All factors are
   considered collectively by BlackRock Advisors management.

   CASH BONUS

   Performance-based compensation is distributed to portfolio managers in a
   combination of cash and stock. Typically, the cash bonus, when combined with
   base salary, represents more than 60% of total compensation for portfolio
   managers.

   STOCK BONUS

   A portion of the dollar value of the total annual performance-based bonus is
   paid in restricted shares of BlackRock, Inc. (the "Company") stock.  Paying a
   portion of annual bonuses in stock puts compensation earned by a portfolio
   manager for a given year "at risk" based on the Company's ability to sustain
   and improve its performance over future periods.

   The ultimate value of stock bonuses is dependent on future Company stock
   price performance. As such, the stock bonus aligns each portfolio manager's
   financial interests with those of the Company's shareholders and encourages a
   balance between short-term goals and long-term strategic objectives.

   Management strongly believes that providing a significant portion of
   competitive performance-based compensation in stock is in the best interests
   of investors and shareholders. This approach ensures that portfolio managers
   participate as shareholders in both the "downside risk" and "upside
   opportunity" of the Company's performance.  Portfolio managers therefore have
   a direct incentive to protect Company's reputation for integrity.

   OTHER BENEFITS

   Portfolio managers are also eligible to participate in broad-based plans
   offered generally to BlackRock employees, including broad-based retirement,
   401(k), health, and other employee benefit plans.

POTENTIAL MATERIAL CONFLICTS OF INTEREST

Real, potential or apparent conflicts of interest may arise when a portfolio
manager has day-today portfolio management responsibilities with respect to more
than one fund or account, including the following:

Certain investments may be appropriate for the portfolios and also for other
clients advised by BlackRock Advisors and its affiliates (including the
Subadviser), including other client accounts managed by a portfolio's portfolio
management team.  Investment decisions for a portfolio and other clients are
made with a view to achieving their respective investment objectives and after
consideration of such factors as their current holdings, availability of cash
for investment and the size of their investments generally.  Frequently, a
particular security may be bought or sold for only one client or in different
amounts and at different times for more than one but less than all clients.
Likewise, because clients of BlackRock Advisors and its affiliates may have
differing investment strategies, a particular security may be bought for one or
more clients when one or more other clients are selling the security. The
investment results for a portfolio may differ from the results achieved by other
clients of BlackRock Advisors and its affiliates and results among clients may
differ.  In addition, purchases or sales of the same security may be made for
two or more clients on the same day.  In such event, such transactions will be
allocated among the clients in a manner believed by BlackRock Advisors to be
equitable to each.  BlackRock Advisors will not determine allocations based on
whether it receives a performance based fee from the client.  In some cases, the
allocation procedure could have an adverse effect on the price or amount of the
securities purchased or sold by a portfolio.  Purchase and sale orders for a
portfolio may be combined with those of other clients of BlackRock Advisors and
its affiliates in the interest of achieving the most favorable net results to
the portfolio.

To the extent that the portfolio's portfolio management team has
responsibilities for managing accounts in addition to the portfolios, a
portfolio manager will need to divide his or her time and attention among
relevant accounts. In some cases, a real, potential or apparent conflict may
also arise where (i) BlackRock Advisors or a portfolio manager may have an
incentive, such as a performance based fee, in managing one account and not with
respect to other accounts it manages or (ii) a portfolio manager owns an
interest in one fund or account he or she manages and not another.

</R>


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.


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, as well as Shares of the Fund, 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.


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 subadviser 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 Institutional Shareholder
Services (ISS) to obtain, vote, and record proxies in accordance with the Proxy
Committee's directions.  The Proxy Committee directs ISS by means of Proxy
Voting Guidelines, and ISS 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, ISS
will provide the Proxy Committee with all information that it has obtained
regarding the proposal and the Proxy Committee will provide specific direction
to ISS.  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.

PROXY VOTING REPORT
A report on "Form N-PX" of how the Fund voted any proxies during the most recent
12-month period ended June 30 is available through Federated's website.  Go to
FederatedInvestors.com; select "Products;" select the Fund; then use the link to
"Prospectuses and Regulatory Reports" to access the link to Form N-PX. Form N-PX
filings are also available at the SEC's website at www.sec.gov.


PORTFOLIO HOLDINGS INFORMATION
Information concerning the Fund's portfolio holdings is available in the
"Products" section of Federated's website at FederatedInvestors.com. A complete
listing of the Fund's portfolio holdings as of the end of each calendar quarter
is posted on the website 30 days (or the next business day) after the end of the
quarter and remains posted until replaced by the information for the succeeding
quarter. Summary portfolio composition information as of the close of each month
is posted on the website 15 days (or the next business day) after month-end and
remains until replaced by the information for the succeeding month.  The summary
portfolio composition information may include identification of the Fund's top
ten holdings, recent purchase and sale transactions and a percentage breakdown
of the portfolio by sector.

To access this information from the "Products" section of the website, click on
"Portfolio Holdings" and select the appropriate link opposite the name of the
Fund, or select the name of the Fund from the menus on the "Products" section,
and from the Fund's page click on the "Portfolio Holdings" or "Composition"
link.  A user is required to register on the website the first time the user
accesses this information.

You may also access from the "Products" section of the website portfolio
information as of the end of the Fund's fiscal quarters.  The Fund's annual and
semiannual reports, which contain complete listings of the Fund's portfolio
holdings as of the end of the Fund's second and fourth fiscal quarters, may be
accessed by selecting the name of the Fund, clicking on "Prospectuses and
Regulatory Reports" and selecting the link to the appropriate PDF.  Complete
listings of the Fund's portfolio holdings as of the end of the Fund's first and
third fiscal quarters may be accessed by selecting "Portfolio Holdings" from the
"Products" section and then selecting the appropriate link opposite the name of
the Fund.  Fiscal quarter information is made available on the website within 70
days after the end of the fiscal quarter.  This information is also available in
reports filed with the SEC at the SEC's website at www.sec.gov.

The disclosure policy of the Fund and the Manager prohibits the disclosure of
portfolio holdings information to any investor or intermediary before the same
information is made available to other investors.  Employees of the Manager or
its affiliates who have access to nonpublic information concerning the Fund's
portfolio holdings are prohibited from trading securities on the basis of this
information.  Such persons must report all personal securities trades and obtain
pre-clearance for all personal securities trades other than mutual fund shares.

Firms that provide administrative, custody, financial, accounting, legal or
other services to the Fund may receive nonpublic information about Fund
portfolio holdings for purposes relating to their services.  The Fund may also
provide portfolio holdings information to publications that rate, rank or
otherwise categorize investment companies.  Traders or portfolio managers may
provide "interest" lists to facilitate portfolio trading if the list reflects
only that subset of the portfolio for which the trader or portfolio manager is
seeking market interest.  A list of service providers, publications and other
third parties who may receive nonpublic portfolio holdings information appears
in the Appendix to this SAI.

The furnishing of nonpublic portfolio holdings information to any third party
(other than authorized governmental or regulatory personnel) requires the prior
approval of the President of the Manager and of the Chief Compliance Officer of
the Fund.  The President of the Manager and the Chief Compliance Officer will
approve the furnishing of nonpublic portfolio holdings information to a third
party only if they consider the furnishing of such information to be in the best
interests of the Fund and its shareholders.  In that regard, and to address
possible conflicts between the interests of Fund shareholders and those of the
Manager and its affiliates, the following procedures apply.  No consideration
may be received by the Fund, the Manager, any affiliate of the Manager or any of
their employees in connection with the disclosure of portfolio holdings
information.  Before information is furnished, the third party must sign a
written agreement that it will safeguard the confidentiality of the information,
will use it only for the purposes for which it is furnished and will not use it
in connection with the trading of any security.  Persons approved to receive
nonpublic portfolio holdings information will receive it as often as necessary
for the purpose for which it is provided.  Such information may be furnished as
frequently as daily and often with no time lag between the date of the
information and the date it is furnished.  The Board receives and reviews
annually a list of the persons who receive nonpublic portfolio holdings
information and the purposes for which it is furnished.


BROKERAGE TRANSACTIONS AND INVESTMENT ALLOCATION
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).  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.


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
State Street Bank and Trust Company, the Fund's registered transfer agent,
maintains all necessary shareholder records.


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The independent registered public accounting firm for the Fund, Ernst & Young
LLP, conducts its audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States), 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.

<R>


FEES PAID BY THE FUND FOR SERVICES
 FOR THE YEAR ENDED OCTOBER 31         2006       2005           2004
 Management Fee Earned             $508,980     $506,486     $523,524
 Management Fee Reduction          201,326      147,099      102,966
 Management Fee Reimbursement      0            0            74
 Sub-Advisory Fee                  30,539       30,389       31,425
 Brokerage Commissions             3,819        3,032        --
 12B-1 FEE:
  Class C Shares                   128,827      --           --
 SHAREHOLDER SERVICES FEE:
  Institutional Shares             139,653      --           --
  Class C Shares                   29,878       --           --
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.

</R>



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 and ten-year or Start of
Performance periods ended October 31, 2006.

Yield is given for the 30-day period ended October 31, 2006.



                                                      30-DAY PERIOD     1 YEAR     5 YEARS     10 YEARS
INSTITUTIONAL SHARES:
Total Return
  Before Taxes                                        N/A               19.24%     12.86%      8.48%
  After Taxes on Distributions                        N/A               18.53%     12.66%      6.90%
  After Taxes on Distributions and Sale of Shares
                                                      N/A               13.28%     11.21%      6.53%
Yield                                                 0.64%             N/A        N/A         N/A


                                                                                               START OF
                                                                                               PERFORMANCE ON
                                                      30-DAY PERIOD     1 YEAR     5 YEARS     11/10/1997
CLASS C SHARES:
Total Return
  Before Taxes                                        N/A               16.08%     11.70%      5.51%
  After Taxes on Distributions                        N/A               15.40%     11.57%      4.31%
  After Taxes on Distributions and Sale of Shares
                                                      N/A               11.21%     10.21%      4.15%
Yield                                                 0.00%             N/A        N/A         N/A
</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.


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 financial intermediaries charge fees in connection with services
provided in conjunction with an investment in Shares, the Share performance is
lower for shareholders paying those fees.



WHO IS FEDERATED INVESTORS, INC.?

Federated and its subsidiaries are dedicated to providing you with world-class
investment management.  With offices in Pittsburgh, New York City and Frankfurt,
Federated is a firm with independent research, product breadth and industry
standing.

Federated seeks to achieve superior and sustainable investment performance for a
broad array of global clients through a disciplined investment process and an
information advantage created by proprietary fundamental research.  Federated is
distinctive in our disciplined process that integrates proprietary research with
trading and portfolio management.


FEDERATED FUNDS OVERVIEW

EQUITIES
<R>

As of December 31, 2005, Federated managed 35 equity funds totaling
approximately $26.0 billion in assets across growth, value, equity income,
international, index and sector allocation styles.


TAXABLE FIXED INCOME
As of December 31, 2005, Federated managed 33 taxable bond funds including:
high-yield, multi-sector, mortgage-backed, U.S. government, U.S. corporate and
international, with assets approximating $16.0 billion.


TAX FREE FIXED INCOME
As of December 31, 2005, Federated managed 15 municipal bond funds with
approximately $3.1 billion in assets and 22 municipal money market funds with
approximately $27.6 billion in total assets.


MONEY MARKET FUNDS
As of December 31, 2005, Federated managed $145.3 billion in assets across 53
money market funds, including 18 government, 12 prime, 22 municipal and 1 euro-
denominated with assets approximating $54.9 billion, $62.6 billion, $27.6
billion and $113.8 million.

The Chief Investment Officers responsible for oversight of the various
investment sectors within Federated are: Stephen F. Auth, CFA, for Global
Equity; Robert J. Ostrowski, CFA, for Taxable Fixed Income; Mary Jo Ochson, CFA,
for Tax Free Fixed Income; and Deborah A. Cunningham, CFA, for Money Market
Funds.

</R>



FINANCIAL INFORMATION

<R>

The Financial Statements for the Fund for the fiscal year ended December 31,
2006 are incorporated herein by reference to the Annual Report to Shareholders
of Federated Mini-Cap Index Fund dated December 31, 2006.

</R>



INVESTMENT RATINGS


STANDARD AND POOR'S LONG-TERM DEBT RATING DEFINITIONS
AAA--Highest credit quality. 'AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA--Very high credit quality. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.

A--High credit quality. 'A' ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB--Good credit quality. 'BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

BB--Speculative. 'BB' ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment-grade.

B--Highly speculative. 'B' ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

CCC, CC, C--High default risk. Default is a real possibility. Capacity for
meeting financial commitments is solely reliant upon sustained, favorable
business or economic developments. A 'CC' rating indicates that default of some
kind appears probable. 'C' ratings signal imminent default.


D--In payment default. The 'D' rating category is used when payments on a
financial commitment are not made on the date due even if the applicable grace
period has not expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The 'D' rating also will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
a financial commitment are jeopardized.


MOODY'S INVESTORS SERVICE LONG-TERM DEBT RATINGS
AAA-- Bonds and preferred stock which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.

AA-- Bonds and preferred stock which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risk appear somewhat larger than
the Aaa securities.

A-- Bonds and preferred stock which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment some time in the future.

BAA-Bonds and preferred stock which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.

BA-Bonds and preferred stock which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.

B-Bonds and preferred stock which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

CAA-Bonds and preferred stock which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of danger with respect
to principal or interest.

CA-Bonds and preferred stock which are rated Ca are highly speculative and are
likely in, or very near, default, with some prospect of recovery of principal
and interest.

C-Bonds and preferred stock which are rated C are the lowest rated class of
bonds and are typically in default, with little prospect for recovery of
principal or interest.

NR--Indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.

NR(1)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AAA by S&P or Aaa by Moody's.

NR(2)--The underlying issuer/obligor/guarantor has other outstanding debt rated
AA by S&P or Aa by Moody's.

NR(3)--The underlying issuer/obligor/guarantor has other outstanding debt rated
A by S&P or Moody's.


FITCH RATINGS LONG-TERM DEBT RATING DEFINITIONS
AAA--HIGHEST CREDIT QUALITY. 'AAA' ratings denote the lowest expectation of
credit risk. They are assigned only in case of exceptionally strong capacity for
timely payment of financial commitments. This capacity is highly unlikely to be
adversely affected by foreseeable events.

AA--VERY HIGH CREDIT QUALITY. 'AA' ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.

A--HIGH CREDIT QUALITY. 'A' ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.

BBB--GOOD CREDIT QUALITY. 'BBB' ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.

BB--SPECULATIVE. 'BB' ratings indicate that there is a possibility of credit
risk developing, particularly as the result of adverse economic change over
time; however, business or financial alternatives may be available to allow
financial commitments to be met. Securities rated in this category are not
investment-grade.

B--HIGHLY SPECULATIVE. 'B' ratings indicate that significant credit risk is
present, but a limited margin of safety remains. Financial commitments are
currently being met; however, capacity for continued payment is contingent upon
a sustained, favourable business and economic environment.


MOODY'S INVESTORS SERVICE COMMERCIAL PAPER RATINGS
PRIME-1--Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well established industries, high rates of return on
funds employed, conservative capitalization structure with moderate reliance on
debt and ample asset protection, broad margins in earning coverage of fixed
financial charges and high internal cash generation, and well-established access
to a range of financial markets and assured sources of alternate liquidity.

PRIME-2--Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.


STANDARD AND POOR'S COMMERCIAL PAPER RATINGS
A-1-- A short-term obligation rated 'A-1' is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2-- A short-term obligation rated 'A-2' is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.


FITCH RATINGS COMMERCIAL PAPER RATING DEFINITIONS
F-1--Indicates the strongest capacity for timely payment of financial
commitments relative to other issuers or issues in the same country. Under their
national rating scale, this rating is assigned to the "best" credit risk
relative to all others in the same country and is normally assigned to all
financial commitments issued or guaranteed by the sovereign state. Where the
credit risk is particularly strong, a "+" is added to the assigned rating.

F-2-- Indicates a satisfactory capacity for timely payment of financial
commitments relative to other issuers or issues in the same country. However,
the margin of safety is not as great as in the case of the higher ratings.


A.M. BEST LONG-TERM DEBT RATINGS
An A.M. Best Long-Term Debt Rating (issue credit rating) is an opinion as to the
issuer's ability to meet its financial obligations to security holders when due.
These ratings are assigned to debt and preferred stock issues.

AAA-EXCEPTIONAL.  Assigned to issues where the issuer has, in A.M. Best's
opinion, an exceptional ability to meet the terms of the obligation.

AA-VERY STRONG.  Assigned to issues where the issuer has, in A.M. Best's
opinion, a very strong ability to meet the terms of the obligation.

A-STRONG.  Assigned to issues where the issuer has, in A.M. Best's opinion, a
strong ability to meet the terms of the obligation.

BBB-ADEQUATE.  Assigned to issues where the issuer has, in A.M. Best's opinion,
an adequate ability to meet the terms of the obligation; however, is more
susceptible to changes in economic or other conditions.

BB-SPECULATIVE.  Assigned to issues where the issuer has, in A.M. Best's
opinion, speculative credit characteristics, generally due to a moderate margin
of principal and interest payment protection and vulnerability to economic
changes.  .

B-VERY SPECULATIVE.  Assigned to issues where the issuer has, in A.M. Best's
opinion, very speculative credit characteristics, generally due to a modest
margin of principal and interest payment protection and extreme vulnerability to
economic changes.  .

CCC, CC, C-EXTREMELY SPECULATIVE.  Assigned to issues where the issuer has, in
A.M. Best's opinion, extremely speculative credit characteristics, generally due
to a minimal margin of principal and interest payment protection and/or limited
ability to withstand adverse changes in economic or other conditions.

D-IN DEFAULT.  In default on payment of principal, interest or other terms and
conditions.  The rating also is utilized when a bankruptcy petition, or similar
action, has been filed.

Ratings from "aa" to "ccc" may be enhanced with a "+" (plus) or "-" (minus) to
indicate whether credit quality is near the top or bottom of a category.  A
company's Long-Term Credit Rating also may be assigned an Under Review modifier
("u") that generally is event-driven (positive, negative or developing) and
indicates that the company's A.M. Best Rating opinion is under review and may be
subject to near-term change.  Ratings prefixed with an ("i") denote indicative
ratings.  Ratings may also be assigned a Public Data modifier ("pd") which
indicates that a company does not subscribe to A.M. Best's interactive rating
process.


A.M. BEST SHORT-TERM DEBT RATINGS
An A.M. Best Short-Term Debt Rating (issue credit rating) is an opinion as to
the issuer's ability to meet its obligations having maturities generally less
than one year, such as commercial paper.

AMB-1+ -STRONGEST.  Assigned to issues where the issuer has, in A.M. Best's
opinion, the strongest ability to repay short-term debt obligations.

AMB-1 -OUTSTANDING.  Assigned to issues where the issuer has, in A.M. Best's
opinion, an outstanding ability to repay short-term debt obligations.

AMB-2 -SATISFACTORY.  Assigned to issues where the issuer has, in A.M. Best's
opinion, a satisfactory ability to repay short-term debt obligations.

AMB-3 -ADEQUATE.  Assigned to issues where the issuer has, in A.M. Best's
opinion, an adequate ability to repay short-term debt obligations; however,
adverse economic conditions will likely lead to a reduced capacity to meet its
financial commitments on short-term debt obligations.

AMB-4 -SPECULATIVE.  Assigned to issues where the issuer has, in A.M. Best's
opinion, speculative credit characteristics and is vulnerable to economic or
other external changes, which could have a marked impact on the company's
ability to meet its commitments on short-term debt obligations.

D-IN DEFAULT.  In default on payment of principal, interest or other terms and
conditions.  The rating also is utilized when a bankruptcy petition, or similar
action, has been filed.

A company's Short-Term Credit Rating also may be assigned an Under Review
modifier ("u") that generally is event-driven (positive, negative or developing)
and indicates that the company's A.M. Best Rating opinion is under review and
may be subject to near-term change.  Ratings prefixed with an ("i") denote
indicative ratings.


A.M. BEST RATING OUTLOOK
A.M. Best Credit Ratings (aaa to c) are assigned a Rating Outlook that indicates
the potential direction of a company's rating for an intermediate period,
generally defined as the next 12 to 36 months.  Public Data Ratings are not
assigned an Outlook.  Ratings Outlooks are as follows:

POSITIVE-Indicates a company's financial/market trends are favorable, relative
to its current rating level, and if continued, the company has a good
possibility of having its rating upgraded.

NEGATIVE-Indicates a company is experiencing unfavorable financial/market
trends, relative to its current rating level, and if continued, the company has
a good possibility of having its rating downgraded.

STABLE-Indicates a company is experiencing stable financial/market trends and
that there is a low likelihood that its rating will change in the near term.





ADDRESSES


FEDERATED MINI-CAP INDEX FUND

Institutional Shares
Class C 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
Federated Equity Management Company of Pennsylvania
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779


SUBADVISER
BlackRock Investment Management, LLC
P.O. Box 9011
Princeton, NJ 08543-9011

CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600


INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072




APPENDIX

<R>

The following is a list of persons other than the Manager and its affiliates
that may receive nonpublic portfolio holdings information concerning the Fund:


CUSTODIAN
State Street Bank and Trust Company


SECURITIES LENDING AGENT
Citigroup
Metropolitan West Securities, LLC

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP


LEGAL COUNSEL
Dickstein Shapiro LLP
Reed Smith LLP

SERVICE PROVIDERS
Bloomberg
Factset
Institutional Shareholder Services
Investor Responsibility Research Center
Wilshire Associates, Inc.

SECURITY PRICING SERVICES
Reuters
Standard & Poor's
FT Interactive Data
Bear Stearns

RATINGS AGENCIES
Standard & Poor's


PERFORMANCE REPORTING/PUBLICATIONS
Fidelity Strategic Advisors

Lipper

Morningstar

NASDAQ

Value Line

Wiesenberger/Thomson Financial


OTHER
Investment Company Institute
Astec Consulting Group, Inc.

</R>





[Graphic Omitted]



[Graphic Omitted]
Federated Mini-Cap Index Fund
Federated Investors Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7000

Contact us at FEDERATEDINVESTORS.COM
or call 1-800-341-7400.

Federated Securities Corp., Distributor

20622305B (12/06)

Federated is a registered mark
of Federated Investors, Inc.
2006 {copyright}Federated Investors, Inc.

[Graphic Omitted]




PART C.      OTHER INFORMATION

Item 23.     Exhibits

             (a)    (i)          Conformed copy of Amended and Restated
                                 Declaration of Trust of the Registrant;
                                 (18)
                    (ii)         Conformed copy of Amendment No. 10 to
                                 the Declaration of Trust of the
                                 Registrant; (20)
                    (iii)        Conformed copy of Amendment No. 11 to
                                 the Declaration of Trust of the
                                 Registrant; (22)
                    (iv)         Conformed copy of Amendment No. 12 to
                                 the Declaration of Trust of the
                                 Registrant; (22)
                    (v)          Conformed Copy of Amendment no. 13 to
                                 the Declaration of Trust of the
                                 Registrant; (25)
                    (vi)         Conformed Copy of Amendment No. 14 to
                                 the Declaration of Trust; (25)
             (b)    (i)          Copy of By-Laws of the Registrant; (5)
                    (ii)         Copies of Amendment Nos. 1-4 to the By-
                                 Laws of the Registrant; (16)
                    (iii)        Copy of Amendment No. 5 to the By-Laws
                                 of the Registrant;(24)
                    (iv)         Copy of Amendment No. 6 to the By-Laws
                                 of the Registrant;(24)
                    (v)          Copy of Amendment No. 7 to the By-Laws
                                 of the Registrant; (26)
                    (vi)         Copy of Amendment No. 8 to the By-Laws
                                 of the Registrant (27)
                    (vii)        Copy of Amendment No. 9 to the By-Laws
                                 of the Registrant; (28)
             (c)    (i)          Copy of Specimen Certificate for Shares
                                 of Beneficial Interest of the Federated
                                 Mid-Cap Index Fund and Federated Mini-
                                 Cap Index Fund; (11)
                    (ii)         Copy of Specimen Certificates for
                                 Shares of Beneficial Interest of the
                                 Institutional Shares and Institutional
                                 Service Shares of the Federated Max-Cap
                                 Index Fund; (11)
             (d)    (i)          Conformed copy of Investment Management
                                 Contract of the Registrant; (10)
                    (ii)         Conformed copy of Exhibit A, B and C to
                                 Investment Management Contract of the
                                 Registrant; (18)
                    (iii)        Conformed copy of Amendment to
                                 Investment Management Contract between
                                 the Registrant and Federated Investment
                                 Management Company; (19)
                    (iv)         Conformed copy of Assignment of
                                 Investment Management Contract and Sub-
                                 Advisory Agreement; (25)
                    (v)          Conformed copy of Subadvisory Agreement of
                                 the Registrant;(25)
                    (vi)         Conformed copy of Subadvisory Agreement fot
                                 he Registrant; (28)
             (e)    (i)          Conformed copy of Distributor's
                                 Contract of the Registrant; (10)
                    (ii)         Conformed copy of Exhibit D to
                                 Distributor's Contract of the
                                 Registrant;(10)
                    (iii)        Conformed copies of Exhibits E and F to
                                 Distributor's Contract of the
                                 Registrant; (14)
                    (iv)         Conformed copy of Exhibit H to
                                 Distributor's Contract of the
                                 Registrant; (25)
                    (v)          The Registrant hereby incorporates the
                                 conformed copy of the specimen Mutual
                                 Funds Sales and Service Agreement;
                                 Mutual Funds Service Agreement and Plan
                                 Trustee/Mutual Funds Service Agreement
                                 from Item 24(b)(6) (ii) - (iv) of the
                                 Cash Trust Series II Registration
                                 Statement on Form N-1A, filed with the
                                 Commission on July 24, 1995. (File Nos.
                                 33-38550 and 811-6269);
                    (vi)         Conformed copy of Amendment to
                                 Distributor's Contract between the
                                 Registrant and Federated Securities
                                 Corp.; (19)
                    (vii)        Conformed copy of Amendment to
                                 Distributor's Contracts between the
                                 Federated Funds and Federated
                                 Securities Corp.; (25)
             (f)                 Not applicable;
             (g)    (i)          Conformed copy of Custodian Contract of
                                 the Registrant; (19)
                    (ii)         Conformed copy of Exhibit A and D to
                                 Custody Agreement of Registrant; (21)
             (h)    (i)          The Registrant hereby incorporates the
                                 conformed copy of the Second Amended
                                 and Restated Services Agreement with
                                 attached Schedule 1 revised 6/30/04,
                                 from Item 23(h) (vii) of the Cash Trust
                                 Series, Inc. Registration Statement on
                                 Form N-1A, filed with the Commission on
                                 July 29, 2004. (File Nos. 33-29838 and
                                 811-5843).
                    (ii)         The responses described in Item
                                 22(e)(v) are hereby incorporated by
                                 reference.
                    (iii)        The Registrant hereby incorporates the
                                 conformed copy of the Financial
                                 Administration and Accounting Services
                                 Agreement, with attached Exhibit A
                                 revised 6/30/04, from Item 23(h)(viii)
                                 of the Cash Trust Series, Inc.
                                 Registration Statement on Form N-1A,
                                 filed with the Commission on July 29,
                                 2004. (File Nos. 33-29838 and 811-5843)
                    (iv)         The Registrant hereby incorporates the
                                 conformed copy of Transfer Agency and
                                 Service Agreement between the Federated
                                 Funds and State Street Bank and Trust
                                 Company from Item 23(h)(ix)of the
                                 Federated Total Return Government Bond
                                 Fund Registration Statement on Form N-
                                 1A, filed with the Commission on April
                                 28, 2005. (File Nos. 33-60411 and 811-
                                 07309)
             (i)                 Conformed copy of the Opinion and
                                 Consent of Counsel as to legality of
                                 shares being registered; (12)
             (j)                 Conformed Copy of Consent of
                                 Independent Registered Public
                                 Accounting Firm; (+)
             (k)                 Not applicable;
             (l)                 Conformed copy of Initial Capital
                                 Understanding; (3)
             (m)    (i)          Conformed copy of Distribution Plan of
                                 the Registrant; (25)
                    (ii)         Conformed copies of Exhibits A, B and C
                                 to the Distribution Plan of the
                                 Registrant; (25)
                    (iii)        The responses described in Item
                                 22(e)(v) are hereby incorporated by
                                 reference;
             (n)                 The Registrant hereby incorporates the
                                 Copy of the Multiple Class Plan and
                                 attached Exhibits from Item (n) of the
                                 Federated Income Trust Registration
                                 Statement on Form N-1A, filed with the
                                 Commission on March 31, 2005. (File
                                 Nos. 2-75366 and 811-3352).
             (o)    (i)          Conformed copy of Power of Attorney of
                                 the Registrant; (25)
                    (ii)         Conformed copy of Power of Attorney of
                                 Stephen F. Auth, Chief Investment
                                 Officer of the Registrant; (22)
                    (iii)        Conformed copy of Power of Attorney of
                                 Richard A. Novak, Treasurer of the
                                 Registrant; (28)
                    (iv)         Conformed copy of Power of Attorney of
                                 Thomas M. O'Neill, Trustee of the
                                 Registrant;(28)
                    (v)          Conformed copy of Power of Attorney of
                                 James F. Will, Trustee of the
                                 Registrant; (28)
                    (vi)         Conformed copy of Power of Attorney of
                                 John F. Donahue, Trustee of the
                                 Registrant; +
             (p)    (i)          The Registrant hereby incorporates the
                                 conformed copy of the Federated
                                 Investors, Inc. Code of Ethics for
                                 Access Persons, effective 1/1/2005,
                                 from Item 23(p) of the Money Market
                                 Obligations Trust Registration
                                 Statement on Form N-1A, filed with the
                                 Commission on February 25, 2005.  (File
                                 Nos. 33-31602 and 811-5950).


+      All exhibits have been filed electronically.

3.     Response is incorporated by reference to Registrant's Pre-
       Effective Amendment No. 2 on Form N-1A dated June 29, 1990. (File
       Nos. 33-33852 and 811-6061)
5.     Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 2 on Form N-1A filed September 12, 1991.
       (File Nos. 33-33852 and 811-6061)
10.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 9 on Form N-1A filed December 29, 1993.
       (File Nos. 33-33852 and 811-6061)
11.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 10 on Form N-1A filed December 29, 1994.
       (File Nos. 33-33852 and 811-6061)
12.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 11 on Form N-1A filed December 28, 1995.
       (File Nos. 33-33852 and 811-6061)
14.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 13 on Form N-1A filed November 6, 1997.
       (File Nos. 33-33852 and 811-6061)
16.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 15 on Form N-1A filed October 30, 1998.
       (File Nos. 33-33852 and 811-6061)
18.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 18 on Form N-1A filed December 27, 2000.
       (File Nos. 33-33852 and 811-6061)
19.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 19 on Form N-1A filed October 23, 2001.
       (File Nos. 33-33852 and 811-6061)
20.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 20 on Form N-1A filed December 26, 2001.
       (File Nos. 33-33852 and 811-6061)
21.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 23 on Form N-1A filed February 19, 2002.
       (File Nos. 33-33852 and 811-6061)
22.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 21 on Form N-1A filed December 26, 2002.
       (File Nos. 33-33852 and 811-6061)
24.    Response is incorporated by reference to Registrant's Post-
       Effective Amendment No. 28 on Form N-1A filed December 30, 2003.
       (File Nos. 33-33852 and 811-6061)
25     Response is incorporated by reference to Registrant's Post
       Effective Amendment No. 29 on Form N-1A filed October 15, 2004.
       (File Nos. 33-33852 and 811-6061)
26.    Response is incorporated by reference to Registrant's Post
       Effective Amendment No. 30 on Form N-1A filed December 29, 2004.
       (File Nos. 33-33852 and 811-6061)
27.    Response is incorporated by reference to Registrant's Post
       Effective Amendment No. 31 on Form N-1A filed December 28, 2005.
       (File Nos. 33-33852 and 811-6061)
28.    Response is incorporated by reference to Registrant's Post
       Effective Amendment No. 32 on Form N-1A filed October 13, 2006.
       (File Nos. 33-33852 and 811-6061)


Item 24.     Persons Controlled by or Under Common Control with the
             Fund:

             None

Item 25.     Indemnification: (3)

Item 26.     Business and Other Connections of Investment Adviser:

For a description of the other business of the investment adviser, see the
section entitled "Who Manages the Fund?" in Part A. The affiliations with the
Registrant of two of the Trustees and two of the Officers of the investment
adviser are included in Part B of this Registration Statement under "Who Manages
and Provides Services to the Fund?"  The remaining Trustees of the investment
adviser and, in parentheses, their principal occupations are:  Thomas R.
Donahue, (Chief Financial Officer, Federated Investors, Inc.), 1001 Liberty
Avenue, Pittsburgh, PA, 15222-3779 and Mark D. Olson (a principal of the firm,
Mark D. Olson & Company, L.L.C. and Partner, Wilson, Halbrook & Bayard,
P.A.), 800 Delaware Avenue, P.O. Box 2305, Wilmington, DE  19899-2305.

The remaining Officers of the investment adviser are:

President/ Chief Executive Officer
and Trustee:                                         John B. Fisher

Vice Chairman:                                       William D. Dawson, III

Senior Vice Presidents:                              J. Scott Albrecht
                                                     Joseph M. Balestrino
                                                     Jonathan C. Conley
                                                     Deborah A. Cunningham
                                                     Mark E. Durbiano
                                                     Donald T. Ellenberger
                                                     Susan R. Hill
                                                     Robert M. Kowit
                                                     Jeffrey A. Kozemchak
                                                     Mary Jo Ochson
                                                     Robert J. Ostrowski
                                                     Paige Wilhelm

Vice Presidents:                                     Todd A. Abraham
                                                     Randall S. Bauer
                                                     Nancy J.Belz
                                                     G. Andrew Bonnewell
                                                     Karol Crummie
                                                     Lee R. Cunningham, II
                                                     B. Anthony Delserone,Jr.
                                                     William Ehling
                                                     Eamonn G. Folan
                                                     Richard J. Gallo
                                                     John T. Gentry
                                                     Kathyrn P. Glass
                                                     Patricia L. Heagy
                                                     William R. Jamison
                                                     Nathan H. Kehm
                                                     John C. Kerber
                                                     J. Andrew Kirschler
                                                     Marian R. Marinack
                                                     Kevin McCloskey
                                                     John W. McGonigle
                                                     Natalie F. Metz
                                                     Thomas J. Mitchell
                                                     Joseph M. Natoli
                                                     Bob Nolte
                                                     Mary Kay Pavuk
                                                     Jeffrey A. Petro
                                                     John Polinski
                                                     Ihab L. Salib
                                                     Roberto Sanchez-Dahl,Sr.
                                                     John Sidawi
                                                     Michael W. Sirianni, Jr.
                                                     Christopher Smith
                                                     Timothy G. Trebilcock
                                                     Paolo H. Valle
                                                     Stephen J. Wagner
                                                     George B. Wright

Assistant Vice Presidents:                           Hanan Callas
                                                     Jerome Conner
                                                     James R. Crea, Jr.
                                                     Richard Cumberledge
                                                     Jason DeVito
                                                     Bryan Dingle
                                                     Timothy Gannon
                                                     James Grant
                                                     Tracey L. Lusk
                                                     Ann Manley
                                                     Karl Mocharko
                                                     Joseph Mycka
                                                     Nick Navari
                                                     Gene Neavin
                                                     Liam O'Connell
                                                     Rae Ann Rice
                                                     Brian Ruffner
                                                     Kyle D. Stewart
                                                     Mary Ellen Tesla
                                                     Nichlas S. Tripodes
                                                     Mark Weiss

Secretary:                                           G. Andrew Bonnewell

Treasurer:                                           Thomas R. Donahue


Assistant Treasurer:                                 Denis McAuley, III

             The business address of each of the Officers of the investment
             adviser is Federated Investors Tower, 1001 Liberty Avenue,
             Pittsburgh, Pennsylvania 15222-3779.  These individuals are also
             officers of a majority of the investment advisers to the investment
             companies in the Federated Fund Complex described in Part B of this
             Registration Statement.

Item 27.Principal Underwriters:

             (a)    Federated Securities Corp. the Distributor for shares
                    of  the Registrant, acts as principal underwriter for
                    the   following    open-end   investment   companies,
                    including the Registrant:

                    Cash  Trust  Series,  Inc.;  Cash  Trust  Series  II;
                    Federated Adjustable Rate  Securities Fund; Federated
                    American Leaders Fund, Inc.;  Federated  Core  Trust;
                    Federated  Core  Trust  II,  L.P.;  Federated  Equity
                    Funds;  Federated Equity Income Fund, Inc.; Federated
                    Fixed Income  Securities, Inc.; Federated GNMA Trust;
                    Federated   Government   Income   Securities,   Inc.;
                    Federated High Income Bond Fund, Inc.; Federated High
                    Yield Municipal  Income  Fund;  Federated  High Yield
                    Trust;  Federated  Income Securities Trust; Federated
                    Income  Trust;  Federated   Index   Trust;  Federated
                    Institutional  Trust;  Federated  Insurance   Series;
                    Federated    Intermediate   Government   Fund,   Inc.
                    Federated  International   Series,   Inc.;  Federated
                    Investment  Series  Funds,  Inc.;  Federated  Managed
                    Allocation Portfolios; Federated Municipal High Yield
                    Advantage Fund, Inc.; Federated Managed  Pool Series;
                    Federated MDT Series;  Federated Municipal Securities
                    Fund,  Inc.;  Federated  Municipal Securities  Income
                    Trust;   Federated  Premier  Intermediate   Municipal
                    Income Fund; Federated Premier Municipal Income Fund;
                    Federated Short-Term Municipal Trust; Federated Stock
                    and Bond Fund, Inc.; Federated Stock Trust; Federated
                    Total Return  Government  Bond  Fund; Federated Total
                    Return Series, Inc.; Federated U.S.  Government  Bond
                    Fund;  Federated U.S. Government Securities Fund: 1-3
                    Years; Federated U.S. Government Securities Fund: 2-5
                    Years;  Federated   World  Investment  Series,  Inc.;
                    Intermediate  Municipal  Trust;  Edward  Jones  Money
                    Market Fund and Money Market Obligations Trust.


         (b)

          (1)                          (2)                           (3)
Positions and Offices                                      Positions and Offices
  With Distributor                     Name                    With Registrant
_____________________           _________________          _____________________

Chairman:                       Richard B. Fisher          Vice President

Executive Vice
Vice President, Assistant
Secretary and Director:         Thomas R. Donahue

President and Director:         Thomas E. Territ

Vice President and Director:    Peter J. Germain

Treasurer and Director:         Denis McAuley III

Senior Vice Presidents:         Michael Bappert
                                Richard W. Boyd
                                Laura M. Deger
                                Peter W. Eisenbrandt
                                Theodore Fadool, Jr.
                                Christopher Fives
                                James S. Hamilton
                                James M. Heaton
                                Harry J. Kennedy
                                Anne H. Kruczek
                                Amy Michaliszyn
                                Keith Nixon
                                Solon A. Person, IV
                                Colin B. Starks
                                Robert F. Tousignant
                                Paul Uhlman

Vice Presidents:                Irving Anderson
                                Dan Berry
                                John B. Bohnet
                                Edward R. Bozek
                                Jane E. Broeren-Lambesis
                                Daniel Brown
                                Bryan Burke
                                Mark Carroll
                                Dan Casey
                                Scott Charlton
                                Steven R. Cohen
                                James Conely
                                Kevin J. Crenny
                                G. Michael Cullen
                                Beth C. Dell
                                Ron Dorman
                                Donald C. Edwards
                                Lee England
                                Timothy Franklin
                                Jamie Getz
                                Scott Gundersen
                                Peter Gustini
                                Dayna C. Haferkamp
                                Raymond J. Hanley
                                Vincent L. Harper, Jr.
                                Bruce E. Hastings
                                Jeffrey S. Jones
                                Michael W. Koenig
                                Ed Koontz
                                Christopher A. Layton
                                Michael H. Liss
                                Michael R. Manning
                                Michael Marcin
                                Martin J. McCaffrey
                                Mary A. McCaffrey
                                Richard C. Mihm
                                Vincent T. Morrow
                                Doris T. Muller
                                Alec H. Neilly
                                Rebecca Nelson
                                James E. Ostrowski
                                Stephen Otto
                                Brian Paluso
                                Mark Patsy
                                Robert F. Phillips
                                Chris Randal
                                Josh Rasmussen
                                Richard A. Recker
                                Ronald Reich
                                Christopher Renwick
                                Diane M. Robinson
                                Brian S. Ronayne
                                Timothy A. Rosewicz
                                Thomas S. Schinabeck
                                Edward J. Segura
                                Peter Siconolfi
                                Edward L. Smith
                                John A. Staley
                                Mark Strubel
                                William C. Tustin
                                Michael Vahl
                                David Wasik
                                G. Walter Whalen
                                Stephen White
                                Jeff Wick
                                Patrick M. Wiethorn
                                Lewis Williams
                                Edward J. Wojnarowski
                                Michael P. Wolff
                                Erik Zettlemayer
                                Paul Zuber

Assistant Vice Presidents:      Robert W. Bauman
                                Charles L. Davis, Jr.
                                William Rose

Secretary:                      C. Todd Gibson

Assistant Treasurer:            Lori A. Hensler
                                Richard A. Novak

The business address of each of the Officers of Federated Securities
Corp. is Federated Investors Tower, 1001 Liberty Avenue, Pittsburgh,
Pennsylvania 15222-3779.

          (c)     Not applicable










Item 28.     Location of Accounts and Records:

All accounts and records required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and Rules 31a-1 through 31a-3
promugated thereunder are maintained at one of the following locations:


Registrant                       Reed Smith LLP
                                 Investment Management Group (IMG)
                                 Federated Investors Tower
                                 1001 Liberty Avenue
                                 Pittsburgh, PA 15222-3779

(Notices should be sent to the Agent for Service at above address)

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

State Street Bankd and Trust Company
("Custodian, Transfer Agent and Dividend
Disbursing Agent")                      P.O. Box 8600
                                        Boston, MA 02266-8600

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

Fund Asset Management, L.P.
d/b/a Mercury Advisors
("Sub-Manager")                         800 Scudders Mill Road
                                        Plainsboro, NJ 08536



Item 29      Management Services:  Not applicable.

Item 30      Undertakings:

       Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the 1940 Act with respect to the removal of Trustees
and the calling of special shareholder meetings by shareholders.








                               SIGNATURES

    Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, FEDERATED INDEX TRUST,
certifies that it meets all of the requirements for effectiveness of
this amendment to its Registration Statement pursuant to Rule 485(b)
under the Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Pittsburgh and Commonwealth
of Pennsylvania, on the 29th day of December, 2006.

                         FEDERATED INDEX TRUST

             BY: /s/ Todd P. Zerega
             Todd P. Zerega, Assistant Secretary
             December 29, 2006

       Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:

      NAME                                 TITLE                      DATE
By:  /s/ Todd P. Zerega               Attorney In Fact         December 29, 2006
Todd P. Zerega                        For the Persons
ASSISTANT SECRETARY                   Listed Below

NAME                                          TITLE

John F. Donahue*                     Trustee

J. Christopher Donahue*              President and Trustee
                                     (Principal Executive Officer)

Richard A. Novak*                    Treasurer
                                     (Principal Financial Officer)

Thomas G. Bigley*                    Trustee

John T. Conroy, Jr.*                 Trustee

Nicholas P. Constantakis*            Trustee

John F. Cunningham*                  Trustee

Lawrence D. Ellis, M.D.*             Trustee

Peter E. Madden*                     Trustee

Charles F. Mansfield, Jr.*           Trustee

John E. Murray, Jr.*                 Trustee

Thomas M. O'Neill*                   Trustee

Marjorie P. Smuts*                   Trustee

John S. Walsh*                       Trustee

James F. Will*                       Trustee


*By Power of Attorney