Federated Mini-Cap Fund
(A Portfolio of Federated Index Trust)
Institutional Shares
PROSPECTUS
The Institutional Shares of Federated Mini-Cap Fund (the "Fund") offered by this
prospectus represent interests in the Fund, which is an investment portfolio in
Federated Index Trust (the "Trust"), an open-end, management investment company
(a mutual fund). The investment objective of the Fund is to seek to provide
investment results generally corresponding to the aggregate price and dividend
performance of publicly traded common stocks comprising the small-stock
capitalization sector of the United States equity market.
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 BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Institutional
and Class C Shares, dated December 31, 1997, with the Securities and Exchange
Commission ("SEC"). The information contained in the Statement of Additional
Information is incorporated by reference into this prospectus. You may request a
copy of the Statement of Additional Information, or a paper copy of this
prospectus if you have received your prospectus electronically, free of charge
by calling 1-800-341-7400. To obtain other information or to make inquiries
about the Fund, contact the Fund at the address listed in the back of this
prospectus. The Statement of Additional Information, material incorporated by
reference into this document, and other information regarding the Fund, is
maintained electronically with the SEC at Internet Web site
(http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated December 31, 1997
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Calling the Fund 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Risks 5
Investment Limitations 5
Federated Index Trust Information 6
Management of the Trust 6
Distribution of Institutional Shares 8
Administration of the Fund 8
Expenses of the Fund and Institutional Shares 8
Net Asset Value 9
Investing in the Fund 9
Share Purchases 9
Minimum Investment Required 9
What Shares Cost 9
Exchanging Securities for Fund Shares 9
Confirmations and Account Statements 10
Dividends 10
Capital Gains 10
Redeeming Shares 10
Telephone Redemption 10
Written Requests 10
Accounts with Low Balances 11
Shareholder Information 11
Voting Rights 11
Tax Information 11
Federal Income Tax 11
State and Local Taxes 11
Performance Information 11
Other Classes of Shares 12
Financial Statements 13
Report of Ernst & Young LLP, Independent Auditors 78
SUMMARY OF FUND EXPENSE
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) None Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering price) None Contingent Deferred Sales Charge (as a
percentage of original purchase
price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee 0.50%
12b-1 Fee None
Total Other Expenses 0.32%
Shareholder Services Fee (after waiver)(1) 0.12%
Total Operating Expenses(2) 0.82%
</TABLE>
(1) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole
discretion. The maximum shareholder services fee is 0.25%.
(2) The total operating expenses in the table above are based on expenses
expected during the fiscal year ending October 31, 1998. The total operating
expenses were 0.76% for the fiscal year ended October 31, 1997, and would
have been 0.94% absent the voluntary waiver of a portion of the shareholder
services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Federated Index Trust Information." Wire-transferred redemptions of less
than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $ 8
3 Years $ 26
5 Years $ 46
10 Years $101
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, LLP, Independent Auditors, on
page 78.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995 1994 1993 1992(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.39 $13.33 $11.65 $12.66 $10.39 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.15 0.16 0.15 0.11 0.17 0.02
Net realized and unrealized gain on 3.51 1.78 1.74 (0.23) 2.27 0.38
investments and futures contracts
Total from investment operations 3.66 1.94 1.89 (0.12) 2.44 0.40
LESS DISTRIBUTIONS
Distributions from net investment income (0.14) (0.16) (0.14) (0.11) (0.17) (0.01)
Distributions from net realized gain (loss) on (1.23) (0.72) (0.07) (0.78) -- --
investments and futures contracts
Total distributions (1.37) (0.88) (0.21) (0.89) (0.17) (0.01)
NET ASSET VALUE, END OF PERIOD $16.68 $14.39 $13.33 $11.65 $12.66 $10.39
TOTAL RETURN(B) 27.54% 15.09% 16.44% (0.91%) 23.73% 4.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.76% 0.74% 0.75% 0.73% 0.37% 0.00%
Net investment income 0.96% 1.14% 1.23% 0.98% 1.48% 2.04%*
Expense waiver/reimbursement(c) 0.18% 0.23% 0.05% 0.11% 0.86% 0.87%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $150,470 $144,690 $132,399 $98,441 $76,139 $7,751
Average commission rate paid(d) $0.0398 $0.0277 -- -- -- --
Portfolio turnover 52% 42% 42% 32% 48% 1%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 10, 1992 (commencement of
operations) to October 31, 1992.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 30, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") has established two classes of shares of the Fund known as
Institutional Shares and Class C Shares. This prospectus relates only to the
Institutional Shares of the Fund. Institutional Shares ("Shares") are designed
primarily for institutions investing on behalf of their customers. The minimum
initial investment for Institutional Shares is $25,000 over a 90-day period.
The Fund's current net asset value and offering price may be found in the mutual
funds section of local newspapers under "Federated" and the appropriate class
designation listing.
CALLING THE FUND
Call the Fund at 1-800-341-7400.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide investment results that
generally 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 of the Fund cannot be changed without the approval of shareholders.
These stocks comprise the Russell 2000 Index (the "Index"), an index of
small capitalization stocks. While there is no assurance that the Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this prospectus.
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. RussellTM 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.
INVESTMENT POLICIES
The investment policies described below may be changed by the Board of Trustees
("Trustees") without shareholder approval. Shareholders will be notified before
any material changes in these policies become effective.
The Fund pursues its investment objective by investing primarily in a pool of
securities that will duplicate the investment characteristics of the Index.
Under normal market circumstances, the Fund will invest at least 80% of its
assets in the common stocks included in the Index.
In pursuit of its investment objective, the Fund uses a "passive" versus an
"active" investment approach. In the case of a fund using an active investment
approach, the fund would be managed by buying and selling securities based upon
economic, financial, and market analysis as well as active investment judgment.
In contrast, the Fund uses a passive approach that attempts to approximate the
investment performance of the Index. Stocks are selected for inclusion in the
Fund's portfolio in the order of their contribution to the Fund's market
capitalization, industry and fundamental characteristics. Thus, small stocks
with the highest market capitalizations will comprise the highest percentage of
the Fund's investment portfolio, and those with the lowest market
capitalizations will comprise the lowest percentage of the Fund's investment
portfolio.
The Fund will not attempt to duplicate or approximate the composition of the
Index, although at least 80% of the assets comprising the Fund's portfolio will
be invested in stocks included in the Index. It is expected that by investing in
a pool of the issues that comprise the Index, the Fund's portfolio will closely
resemble the characteristics of the small stock capitalization sector of the
United States equity market. It is also anticipated that the Fund's performance
will achieve at least a 95% correlation to the performance of the Index, even
though the Fund will not, and does not seek to, duplicate the Index's
performance precisely.
The Russell 2000 Index is reconstituted annually, through a ranking of the total
market value of public stocks, at the end of the second calendar quarter. The
Fund is also reconstituted at that time to match the Index. This annual
reconstitution significantly affects turnover and transaction costs. During the
year, the Fund is also adjusted as changes occur in the Index. Despite this
trading activity to track the Index, portfolio turnover is expected to be below
that of most actively managed small stock funds. Therefore, the accompanying
costs, including accounting costs, brokerage fees, custodial expenses, and
transfer taxes are expected to be lower as well.
In order to accommodate cash flows into and out of the Fund's portfolio, the
Fund may enter into stock index futures contracts, options, and options on
futures contracts. This will allow the Fund to simultaneously maximize the level
of the Fund assets used to track the performance of the small stock
capitalization sector of the United States equity market. The Fund can sell
futures contracts and options in order to close out a previously established
position. The Fund will not enter into stock index futures contracts, options,
and options on futures contracts for speculative purposes.
ACCEPTABLE INVESTMENTS
Under normal market circumstances, the Fund will invest 80% of its assets in
stocks that comprise the Index. In addition, the Fund may hold cash reserves
which may, for other than defensive purposes, be invested in, but not limited
to, the following:
U.S. GOVERNMENT SECURITIES
The Fund is permitted to invest in U.S. government securities which are
either issued or guaranteed by the U.S. government, its agencies, or
instrumentalities. These securities include, but are not limited to:
* direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
* notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of
the United States;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
* notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.
REPURCHASE AGREEMENTS
The U.S. government securities and other securities in which the Fund invests
may be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements pursuant to which banks, broker/dealers, and other recognized
financial institutions sell U.S. government securities or other securities to
the Fund and agree at the time of sale to repurchase them at a mutually
agreed-upon time and price. To the extent that the original seller does not
repurchase the securities from the Fund, the Fund could receive less than the
repurchase price on any sale of such securities.
MONEY MARKET INSTRUMENTS
The Fund may also invest in:
* commercial paper; and
* instruments of domestic banks and savings associations (such as
certificates of deposit and bankers' acceptances).
STOCK INDEX FUTURES AND OPTIONS
The Fund may utilize stock index futures contracts, options, and options on
futures contracts, subject to the limitation that the value of these futures
contracts and options will not exceed 20% of the Fund's total assets. Also, the
Fund will not purchase options to the extent that more than 5% of the value of
the Fund's total assets would be invested in premiums on open put option
positions. These futures contracts and options will be used to handle cash flows
into and out of the Fund and to potentially reduce transactional costs, since
transactional costs associated with futures and options contracts can be lower
than costs stemming from direct investments in stocks.
There are several risks accompanying the utilization of futures contracts to
effectively anticipate market transactions. First, positions in futures
contracts may be closed only on an exchange or board of trade that furnishes a
secondary market for such contracts. While the Fund plans to utilize futures
contracts only if there exists an active market for such contracts, there is no
guarantee that a liquid market will exist for the contracts at a specified time.
Furthermore, because, by definition, futures contracts look to projected price
levels in the future and not to current levels of valuation, market
circumstances may result in there being a discrepancy between the price of the
stock index future and the movement in the stock index. The absence of a perfect
price correlation between the futures contract and its underlying stock index
could stem from investors choosing to close futures contracts by offsetting
transactions, rather than satisfying additional margin requirements. This could
result in a distortion of the relationship between the index and futures market.
In addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of participation by
speculators in the futures market could result in price fluctuations.
In view of these considerations, the Fund will comply with the following
restrictions when purchasing and selling futures contracts. First, the Fund will
not participate in futures transactions if the sum of its initial margin
deposits on open contracts will exceed 5% of the market value of the Fund's
total assets, after taking into account the unrealized profits and losses on
those contracts into which it has entered. Second, the Fund will not enter into
these contracts for speculative purposes. Third, since the Fund does not
constitute a commodity pool, it will not market itself as such, nor serve as a
vehicle for trading in the commodities futures or commodity options markets. In
this regard, the Fund will disclose to all prospective investors the limitations
on its futures and options transactions, and will make clear that these
transactions are entered into only for bona fide hedging purposes or such other
purposes permitted under regulations promulgated by the Commodity Futures
Trading Commission ("CFTC"). Also, the Fund intends to claim an exclusion from
registration as a commodity pool operator under the regulations promulgated by
the CFTC.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities on a short-term or long-term basis up
to one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
managers have determined are creditworthy under guidelines established by the
Trustees. The Fund will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the securities
loaned.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase short-term U.S. government securities on a when-issued or
delayed delivery basis. These transactions are arrangements in which the Fund
purchases securities with payment and delivery scheduled for a future time. The
seller's failure to complete these transactions may cause the Fund to miss a
price or yield considered to be advantageous. Settlement dates may be a month or
more after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the managers deem it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTMENT RISKS
As with other mutual funds that invest primarily in equity securities, the Fund
is subject to market risks. That is, the possibility exists that common stocks
will decline over short or even extended periods of time, and the United States
equity market tends to be cyclical, experiencing both periods when stock prices
generally increase and periods when stock prices generally decrease. However,
because the Fund invests primarily in small capitalization stocks, there are
some additional risk factors associated with investments in the Fund. In
particular, stocks in the small capitalization sector of the United States
equity market have historically been more volatile in price than larger
capitalization stocks, such as those included in the Standard & Poor's 500
Composite Stock Price Index. This is because, among other things, small
companies have less certain growth prospects than larger companies; have a lower
degree of liquidity in the equity market; and tend to have a greater sensitivity
to changing economic conditions. Further, in addition to exhibiting greater
volatility, the stocks of small companies may, to some degree, fluctuate
independently of the stocks of large companies. That is, the stocks of small
companies may decline in price as the price of large company stocks rises or
vice versa. Therefore, investors should expect that the Fund will be more
volatile than, and may fluctuate independently of, broad stock market indices
such as the Standard & Poor's 500 Composite Stock Price Index.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for at
least a percentage of its cash value with an agreement to buy it back on a
set date) except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitation, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in this policy becomes effective.
The Fund will not invest more than 15% of its net assets in securities that are
illiquid.
FEDERATED INDEX TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the business affairs of the Trust and for exercising all of the powers
of the Trust except those reserved for the shareholders. The Executive Committee
of the Board of Trustees handles the Trustees' responsibilities between meetings
of the Trustees.
FUND'S MANAGER
Federated Management serves as the Fund's manager (the "Manager"). The Trust has
entered into a management contract (the "Management Contract") with the Manager,
which, in turn, has entered into a sub-management contract (the "Sub-Management
Contract") with ANB Investment Management and Trust Company ("ANB" or the
"Sub-Manager") (ANB and the Manager are collectively referred to herein as
"Managers"). It is the Manager's responsibility to select the Sub-Manager,
subject to the review and approval of the Trustees, and to review and evaluate
the Sub-Manager's continued performance. The Manager is also responsible for
providing administrative services to the Fund.
Subject to the supervision and direction of the Trustees, the Manager provides
to the Fund investment management evaluation services principally by performing
initial due diligence on the Sub-Manager for the Fund and thereafter monitoring
and evaluating the performance of the Sub-Manager through quantitative and
qualitative analyses. In addition, the Manager conducts periodic in-person,
telephonic, and written consultations with the Sub-Manager. In initially
evaluating the Sub-Manager, the Manager considered, among other factors, the
Sub-Manager's level of expertise; relative performance over a minimum period of
five years; level of efficiency; level of adherence to investment discipline or
philosophy; personnel, facilities, and financial strength; and quality of
service and client communications. On an ongoing basis, the Manager is
responsible for communicating performance expectations and evaluations to the
Sub-Manager; monitoring tracking errors; monitoring and analyzing the use of
futures contracts; monitoring the futures holdings of the Fund as a percentage
of Fund assets; monitoring market timing in the Fund; discussing with the
Sub-Manager the portfolio sampling techniques employed by the Sub-Manager;
defining with the Sub-Manager the universe of stocks that comprise the small
capitalization sector of the United States equity market; and ultimately
recommending to the Trustees whether the Sub-Management Contract should be
renewed, modified, or terminated. The Manager provides written reports to the
Trustees regarding the results of its evaluation and monitoring functions. In
addition, the Manager is responsible for providing the Fund with administrative
services, including, but not limited to, shareholder servicing and certain legal
and accounting services. The Manager is also responsible for conducting all
operations of the Fund, except those operations contracted to the Sub-Manager,
custodian, transfer agent, and dividend disbursing agent. As described below,
the Manager receives an annual fee from the Fund for performing its
responsibilities under the Management Contract.
MANAGEMENT FEES
The Fund's Manager receives an annual management fee equal to 0.50% of the
Fund's average daily net assets. Under the Management Contract, which provides
for the voluntary waiver of the management fee by the Manager, the Manager
will voluntarily waive some or all of the management fee. The Manager can
terminate this voluntary waiver of some or all of its management fee at any
time in its sole discretion.
MANAGER'S BACKGROUND
Federated Management, a Delaware business trust organized on April 11, 1989,
is a registered investment adviser under the Investment Advisers Act of 1940.
It is a subsidiary of Federated Investors. All of the Class A (voting) shares
of Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Federated Management and other subsidiaries of Federated
Investors serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $110 billion invested
across more than 300 funds under management and/or administration by its
subsidiaries, as of December 31, 1996, Federated Investors is one of the
largest mutual fund investment managers in the United States. With more than
2,000 employees, Federated continues to be led by the management who founded
the company in 1955. Federated funds are presently at work in and through
4,500 financial institutions nationwide.
Both the Trust and the Manager have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
SUB-MANAGER
Under the terms of the Sub-Management Contract between the Manager and ANB, ANB
serves as the Fund's Sub-Manager. The Sub-Manager will develop, maintain and run
the computer program designed to determine which securities will be purchased
and sold so as to replicate the composition of the Index to the extent feasible,
and, subject to the Manager's oversight has complete discretion to purchase and
sell portfolio securities for the Fund within the Fund's investment objective,
restrictions and policies.
SUB-MANAGEMENT FEES
For its services under the Sub-Management Contract, ANB receives an annual fee
from the Manager of 0.065% of the Fund's average daily net assets. This fee is
paid by the Manager out of its resources and is not an incremental Fund expense.
No performance or incentive fees are paid to the Sub-Manager.
SUB-MANAGER'S BACKGROUND
ANB, incorporated in the State of Illinois on July 1, 1988, is a registered
investment adviser under the Investment Advisers Act of 1940. ANB is a wholly
owned subsidiary of First Chicago Investment Management Company which, in turn,
is an indirect wholly owned subsidiary of First Chicago NBD Corporation. It
serves as investment adviser principally to corporate defined benefit and
defined contribution plans which have, as of June 30, 1997, placed approximately
$28.7 billion in assets with ANB. Since 1973, when American National Bank and
Trust Company of Chicago introduced its first commingled equity index fund, ANB
has developed and managed a family of equity and bond index funds in which some
200 nationwide non-financial institution clients invest. In total, ANB manages
72 commingled/common trust funds. On October 3, 1997, First Chicago NBD
Corporation announced an agreement to sell ANB to Northern Trust Corporation
("Northern Trust"). The Fund anticipates that on December 31, 1997, but no later
than January 2, 1998, First Chicago Investment Company will have closed the sale
of ANB to Northern Trust. After the closing, ANB will be a wholly owned
subsidiary of Northern Trust or one of its subsidiaries and is expected to
change its name to Northern Quantitative Advisors, Inc. The Manager has
recommended that ANB continue as Sub-Manager after the expected sale.
If the sale takes place, the subadvisory contract between the Manager and ANB
will terminate by its terms and a new contract will have to be approved by the
Trustees and the shareholders. The Board of Trustees of the Fund approved a new
contract with ANB on November 20, 1997. Shareholders will be asked to approve
the arrangement before February 28, 1998. Because the contract would terminate
prior to a shareholder meeting and vote, the Fund will pursue exemptive relief
from the Securities and Exchange Commission (the "SEC") before the closing in
order to permit ANB to continue as Sub-Manager. If the closing, SEC exemptive
relief, and shareholder approval do not occur before March 1, 1998, shareholders
will be notified, and the Manager will assume its responsibility to conduct all
advisory activities.
Northern Trust is a bank holding company and one of the country's largest trust
institutions, with subsidiaries located across the United States and in several
international locations. At the end of the third quarter of 1997, total assets
of Northern Trust were $26.9 billion and trust assets under administration were
$1 trillion.
Also, since 1990, ANB has served as Sub-Manager for the Federated Max-Cap Fund
(formerly the S&P 500 Fund), which is another portfolio of the Trust. ANB also
serves as Sub-Manager for the Federated Mid-Cap Fund, another portfolio of the
Trust.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for Shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICES
The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to 0.25% of the average daily net asset value of Shares,
computed at an annual rate, to obtain certain personal services for shareholders
and to maintain shareholder accounts. From time to time and for such periods as
deemed appropriate, the amount stated above may be reduced voluntarily. Under
the Shareholder Services Agreement, Federated Shareholder Services will either
perform shareholder services directly or will select financial institutions to
perform shareholder services. Financial institutions will receive fees based
upon Shares owned by their clients or customers. The schedules of such fees and
the basis upon which such fees will be paid will be determined from time to time
by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services Agreement,
Federated Securities Corp. and Federated Shareholder Services, from their own
assets, may pay financial institutions supplemental fees for the performance of
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational, and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of Shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's Manager or its affiliates.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors, provides the
Manager with the administrative personnel and services necessary to provide
shareholder servicing and certain legal and accounting services.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Managers look for prompt execution of the order at a favorable
price. In working with dealers, the Managers will generally utilize those who
are recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. In selecting among
firms believed to meet these criteria, the Managers may give consideration to
those firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The Managers make decisions on
portfolio transactions and select brokers and dealers, subject to review by the
Trustees.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of Shares pay their allocable portion of Trust and Fund expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to the cost of: organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; meetings of Trustees and
shareholders and proxy solitations therefore; legal fees of the Trust;
association membership dues; and such non-recurring and extraordinary items as
may arise from time to time.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the portfolio and Shares of the
portfolio; investment advisory services; taxes and commissions; custodian fees;
insurance premiums; auditors' fees; and such non-recurring and extraordinary
items as may arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Trust's Shareholder Services Agreement. However,
the Trustees reserve the right to allocate certain other expenses to holders of
Shares as they deem appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; printing and postage expenses relating to
preparing and distributing materials such as shareholder reports, prospectuses,
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and to state securitites commissions; expenses related
to administrative personnel and services as required to support holders of
Shares; and Trustees' fees incurred as a result of issues relating solely to
Shares.
NET ASSET VALUE
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 Shares
and Class C 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
shareholders of a particular class are entitled.The NAV for Shares is determined
by subtracting liabilities attributable to Institutional Shares from the value
of Fund assets attributable to Institutional Shares and dividing the remainder
by the number of Institutional Shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Shares of the Fund are sold on days on which the New York Stock Exchange is
open. Shares of the Fund may be purchased either by wire or mail. To purchase
shares of the Fund, open an account by calling Federated Securities Corp.
Information needed to establish the account will be taken over the telephone.
The Fund reserves the right to reject any purchase request.
BY WIRE
To purchase Shares of the Fund by Federal Reserve wire, call the Fund to place
an order. Shareholders have until 4:00 p.m. (Eastern time) to call the Fund for
settlement on the next business day. The order is considered received
immediately. Payment by federal funds must be received before 4:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Shareholder Services Company, c/o State Street Bank
and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to:
Federated Index Trust, Federated Mini-Cap Fund-Institutional Shares; Fund Number
(this number can be found on the account statement or by contacting the Fund);
Group Number or Order Number; Nominee or Institution Name; and ABA Number
011000028. Shares cannot be purchased by wire on holidays when wire transfers
are restricted. Questions on wire purchases should be directed to your
shareholder services representative at the telephone number listed on your
account statement.
BY MAIL
To purchase Shares of the Fund by mail, send a check made payable to Federated
Index Trust, Federated Mini-Cap Fund-Institutional Shares, to the Fund's
transfer agent, Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600. Orders by mail are considered received when payment by
check is converted into federal funds.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Shares is $25,000. However, an account may be
opened with a smaller amount as long as the $25,000 minimum is reached within 90
days. An investor's minimum investment will be calculated by combining all
accounts that the institution maintains with the Fund.
WHAT SHARES COST
Fund Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Fund Shares through a financial intermediary may be charged a service fee by
that financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00 p.m.
Eastern time) on the New York Stock Exchange, Monday through Friday, except on:
(i) days on which there are not sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no Shares are tendered for redemption and no orders to
purchase Shares are received; and (iii) the following holidays: New Year's Day,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of securities and
cash for Shares of the Fund. The securities and any cash must have a market
value of at least $25,000. The Trust reserves the right to determine the
acceptability of securities to be exchanged. On the day the securities are
accepted by the Trust, they are valued in the same manner as the Trust values
its assets.
Investors wishing to exchange securities should first contact Federated
Securities Corp.
Shares purchased by exchange of securities cannot be redeemed by telephone for
five business days to allow time for the transfer to settle.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions. In addition,
shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Fund will not issue share certificates.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing to
the Fund, dividends are automatically reinvested in additional Shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING SHARES
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Investors who redeem Shares through a financial
intermediary may be charged a service fee by that financial intermediary.
Redemptions will be made on days on which the Fund computes its net asset value.
Redemption requests must be received in proper form and can be made by telephone
request or written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern time). The proceeds will normally be wired the following business day,
but in no event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. Proceeds from
redemption requests received on holidays when wire transfers are restricted will
be wired the following business day. Questions about telephone redemptions on
days when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement. If at any time, the Fund determines it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified. An
authorization form permitting State Street Bank or the Fund to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from Federated Securities Corp. Telephone redemption
instructions may be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be considered, such as by "Written Requests."
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Fund Shares may also be redeemed by sending a written request to the Fund. Call
the Fund for specific instructions before redeeming by written request. The
shareholder will be asked to provide in the request his name, the Fund and share
class name, his account number, and the Share or dollar amount requested. All
owners of the account must sign the request exactly as the Shares are
registered. If Share certificates have been issued, they should be sent
unendorsed with the written request by registered or certified mail.
SIGNATURES
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by:
* a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation("FDIC");
* a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
* a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or
* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem Shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional Shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
or class in the Trust have equal voting rights, except that in matters affecting
only a praticular Fund or class, only Shares of that Fund class are entitled to
vote.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operations and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
all series of the Trust.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional Shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held their Shares.
STATE AND LOCAL TAXES
In the opinion of Houston, Donnelly & Meck, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time the Fund advertises its total return and yield for
Institutional Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Institutional Shares after reinvesting all income and
capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of Institutional Shares is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by Institutional Shares over a thirty-day period by the offering price per share
of each class on the last day of the period. This number is then annualized
using semi-annual compounding. The yield does not necessarily reflect income
actually earned by Institutional Shares and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
The Institutional Shares of the Fund are sold without any sales load or other
similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Shares
and Class C Shares.
From time to time, advertisements for Institutional Shares of the Fund may refer
to ratings, rankings, and other information in certain financial publications
and/or compare the performance of Institutional Shares to certain indices.
OTHER CLASSES OF SHARES
The Fund also offers another class of shares called Class C Shares.
Class C Shares are sold at net asset value to customers of financial
institutions and are subject to a minimum initial investment of $10,000, a 12b-1
Plan, and a Shareholder Services Agreement.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.
Institutional Shares and Class C Shares are subject to certain of the same
expenses, however, Class C Shares are sold subject to a contingent deferred
sales charge imposed on shares redeemed within one year of purchase. Expense
differences between Institutional Shares and Class C Shares may affect the
performance of each class.
The stated management fee is the same for both classes of shares.
To obtain more information and a prospectus for Class C Shares investors may
call 1-800-341-7400 or contact their financial intermediary.
PORTFOLIO OF INVESTMENTS
FEDERATED MINI-CAP FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--93.6%
BASIC INDUSTRY--6.1%
500 (a)AEP Industries, Inc. $ 16,000
3,700 AK Steel Holding Corp. 155,863
2,700 AMCOL International Corp. 55,688
3,000 Albany International Corp., Class A 73,125
3,600 Albemarle Corp. 87,300
7,900 (a)Amax Gold, Inc. 39,006
700 Ameron, Inc. 47,775
900 (a)Amscan Holdings, Inc. 14,400
2,900 Aptargroup, Inc. 159,319
15,400 (a)Armco, Inc. 88,550
4,500 BMC Industries, Inc. 144,844
4,900 Ball Corp. 171,500
2,400 (a)Barnett, Inc. 49,500
4,800 Birmingham Steel Corp. 79,800
3,300 Brady (W.H.) Co. 105,600
2,500 Brush Wellman, Inc. 60,156
2,300 (a)Buckeye Cellulose Corp. 95,450
10,000 (a)Burlington Industries, Inc. 149,375
3,200 CalMat Co. 80,600
5,700 Calgon Carbon Corp. 67,331
1,850 Cambrex Corp. 88,684
4,000 Caraustar Industries, Inc. 137,500
1,400 (a)Carbide/Graphite Group, Inc. 49,875
3,200 Carpenter Technology Corp. 154,800
1,800 Centex Construction Products, Inc. 55,800
3,300 Century Aluminium Co. 51,975
800 Chaparral Steel Co. 12,100
1,400 Chemed Corp. 56,700
3,400 Chesapeake Corp. 107,738
400 (a)Christiana Companies, Inc. 16,950
1,700 Cleveland Cliffs, Inc. 73,844
3,600 Coeur d'Alene Mines Corp. 37,350
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
BASIC INDUSTRY--CONTINUED
9,900 (a)Collins & Aikman Corp. $ 95,906
1,800 Columbus McKinnion Corporation 42,975
3,900 (a)Cone Mills Corp. 33,881
1,200 Culp, Inc. 22,800
4,800 Dekalb Genetics Corp., Class B 172,200
4,598 Delta & Pine Land Co. 171,276
2,000 Deltic Timber Corp. 56,375
3,800 Dexter Corp. 149,150
3,200 Donaldson Company, Inc. 162,000
1,400 Elcor Corp. 51,188
2,000 (a)Embrace Systems Corp. 1,000
700 Fab Industries, Inc. 21,000
4,200 Ferro Corp. 157,238
1,100 Florida Rock Industries, Inc. 60,500
2,300 (a)Foamex International, Inc. 26,594
2,300 Fuller (H.B.) Co. 108,675
1,500 Furon Co. 57,188
1,900 (a)Galey & Lord, Inc. 34,913
8,600 (a)Gaylord Container Corp. 56,975
1,800 General Chemical Group, Inc. 52,875
3,800 Geon Co. 82,413
5,500 Georgia Gulf Corp. 165,000
4,358 (a)Getchell Gold Corp. 156,888
1,500 (a)Giant Cement Holding, Inc. 36,375
4,200 Glatfelter (P.H.) Co. 82,950
2,300 Greif Brothers Corp., Class A 80,213
3,100 Guilford Mills, Inc. 74,013
7,300 Hanna (M.A.) Co. 187,975
9,000 (a)Hecla Mining Co. 46,125
6,900 (a)Imation Corp. 147,488
1,800 Imco Recycling, Inc. 32,738
2,700 (a)Ionics, Inc. 103,444
2,900 J&L Specialty Steel, Inc. 36,613
3,500 (a)Kaiser Aluminum Corp. 43,969
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
BASIC INDUSTRY--CONTINUED
5,100 Lawter International, Inc. $ 57,056
1,550 Learonal 37,975
3,650 Lilly Industrial, Inc., Class A 69,122
700 Liqui Box Corp. 26,075
1,800 Lone Star Industries, Inc. 98,888
3,400 (a)Lone Star Technologies, Inc. 129,838
8,400 Longview Fibre Co. 133,350
2,400 Lukens, Inc. 43,200
2,700 (a)Lydall, Inc. 55,350
1,000 MacDermid, Inc. 73,000
2,500 (a)Material Sciences Corp. 37,188
900 (a)Maxxam, Inc. 47,363
1,000 (a)McWhorter Technologies, Inc. 25,813
2,700 Medusa Corp. 114,075
600 Mine Safety Appliances Co. 42,300
3,700 Minerals Technologies, Inc. 153,088
4,569 Mississippi Chemical Corp. 83,955
2,229 Mosinee Paper Corp. 62,969
2,700 (a)Mycogen Corp. 57,375
500 NCH, Corp. 33,500
3,900 (a)NL Industries, Inc. 65,081
3,500 (a)National Steel Corp., Class B 57,750
3,550 OM Group, Inc. 134,013
3,600 Oregon Steel Mills 75,825
4,996 (a)Paxar Corp. 84,932
4,600 (a)Polymer Group, Inc. 44,563
2,200 Pope & Talbot, Inc. 36,575
700 Puerto Rican Cement Co., Inc. 27,869
2,300 Quanex Corp. 63,538
1,500 Republic Group, Inc. 28,125
5,450 Rock-Tenn Co. 109,334
1,200 (a)Rogers Corp. 49,650
1,100 Rouge Industries, Inc., Class A 17,325
5,900 Schulman (A.), Inc. 132,750
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
BASIC INDUSTRY--CONTINUED
2,400 (a)Shorewood Packaging Corp. $ 59,400
3,100 (a)Silgan Holdings, Inc. 109,275
3,600 Southdown, Inc. 199,350
2,200 Spartech Corp. 34,925
2,100 Springs Industries, Inc., Class A 97,388
6,000 (a)Steel Dynamics, Inc. 127,500
1,400 Stepen Chemical Co. 38,413
3,000 (a)Stillwater Mining Co. 62,250
1,400 (a)Synthetic Industries, Inc. 39,200
1,400 Tejon Ranch Co. 39,988
6,600 Terra Industries, Inc. 80,438
3,400 Texas Industries, Inc. 161,288
2,700 (a)Titanium Metals Corp. 84,375
700 (a)Tremont Corp. 38,194
1,800 (a)U.S. Can Corp. 29,025
2,000 Universal Forest Products, Inc. 30,000
4,575 Wausau Paper Mills Co. 92,358
4,500 Wellman, Inc. 91,406
1,700 (a)Zoltek Cos., Inc. 80,751
TOTAL 9,199,745
CONSUMER DURABLES--4.5%
6,700 (a)Acclaim Entertainment, Inc. 24,497
2,100 (a)Action Performance Cos., Inc. 53,813
1,900 (a)Activision, Inc. 27,788
2,800 (a)Aftermarket Technology Co. 56,700
1,225 (a)American Homestar Corp. 27,563
4,500 Apogee Enterprises, Inc. 107,438
3,550 Arctic Cat, Inc. 41,713
3,500 Arvin Industries, Inc. 131,031
1,100 (a)Avatar Holdings, Inc. 34,650
1,700 Barnes Group, Inc. 44,413
2,100 Bassett Furniture Industries, Inc. 58,800
2,200 Breed Technologies, Inc. 48,538
3,400 (a)Broderbund Software, Inc. 98,600
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
CONSUMER DURABLES--CONTINUED
1,300 Bush Industries, Inc., Class A $ 33,719
2,600 CLARCOR, Inc. 74,588
4,300 Carlisle Cos., Inc. 185,975
2,500 (a)Castle & Cooke, Inc. 44,531
7,872 (a)Champion Enterprises, Inc. 138,252
2,500 Coachmen Industries, Inc. 49,688
1,500 (a)Coleman Co., Inc. 22,406
1,700 Cross (A.T.) Co., Class A 17,213
4,150 (a)Culligan Water Technologies 176,894
3,254 D. R. Horton, Inc. 48,810
3,200 (a)Department 56, Inc. 96,600
4,500 Ethan Allen Interiors, Inc. 159,469
1,600 Excel Industries, Inc. 28,500
2,700 Exide Corp. 62,944
3,150 (a)Fairfield Communities, Inc. 138,403
5,000 Fedders Corp. 30,000
5,700 Federal-Mogul Corp. 241,181
4,600 Fleetwood Enterprises, Inc. 139,438
900 (a)Fossil, Inc. 17,100
8,500 (a)Furniture Brands International, Inc. 142,375
4,200 (a)GT Interactive Software 41,475
5,700 (a)Gentex Corp. 139,650
3,020 Harman International Industries, Inc. 163,080
2,100 Huffy Corp. 33,206
6,300 Jostens, Inc. 146,869
2,317 K2, Inc. 58,649
6,300 Kaufman & Broad Homes Corp. 134,269
2,600 La-Z Boy Chair Co. 97,175
4,300 Lennar Corp. 174,956
2,900 (a)Lewis Galoob Toys, Inc. 38,244
2,500 Libbey, Inc. 93,438
3,100 (a)Lo-Jack Corp. 43,013
3,300 Mascotech, Inc. 62,700
1,100 Matthews International Corp., Class A 46,750
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
CONSUMER DURABLES--CONTINUED
4,600 (a)MicroProse, Inc. $ $29,900
1,500 Mikasa, Inc. 20,813
3,500 (a)Mohawk Industries, Inc. 107,625
2,342 Myers Industries, Inc. 41,126
1,700 (a)NVR, Inc. 37,188
900 National Presto Industries, Inc. 34,819
2,400 (a)O'Sullivan Industries Holdings, Inc. 33,300
3,200 (a)Oakley, Inc. 31,600
7,500 Oakwood Homes Corp. 197,344
1,500 Oneida Ltd. 51,188
2,100 (a)Pacific Greystone Corp. 38,850
2,350 (a)Palm Harbor Homes, Inc. 62,863
3,000 (a)Panavision, Inc. 74,813
800 Pillowtex Corp. 21,800
4,300 Polaris Industries Partners, L.P., Class A 130,881
2,400 Pulte Corp. 89,700
1,500 (a)RockShox, Inc. 13,500
3,800 (a)Royal Appliance Manufacturing 29,925
1,700 Russ Berrie & Co., Inc. 46,325
2,500 Ryland Group, Inc. 44,688
2,200 SPX Corp. 143,550
2,600 (a)Samsonite Corp. 120,575
4,100 (a)Scotts Co. 109,675
2,600 Simpson Industries, Inc. 30,875
1,400 Skyline Corp. 40,600
2,100 Smith (A.O.) Corp. 87,019
4,000 (a)Sola International, Inc. 136,500
1,300 Standard Motor Products, Inc. 28,438
4,800 Standard Pacific Corp. 52,200
2,725 Standard Products Co. 73,234
2,800 Stanhome, Inc. 78,225
1,100 Starrett (L.S.) Co., Class A 40,219
3,200 Sturm Ruger & Co., Inc. 60,200
3,300 Superior Industries International, Inc. 88,069
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
CONSUMER DURABLES--CONTINUED
3,850 (a)TBC Corp. $ 39,463
700 Thor Industries, Inc. 20,256
3,600 (a)Toll Brothers, Inc. 79,650
7,600 (a)Topps Co. 23,750
2,000 Toro Co. 85,500
1,500 (a)Toy Biz, Inc., Class A 13,219
1,901 (a)U.S. Home Corp. 67,486
2,200 WD 40 Co. 63,250
1,400 Walbro Corp. 29,050
2,400 Webb (Del) Corp. 47,850
2,900 Windmere Corp. 65,613
2,400 Winnebago Industries, Inc. 18,150
2,125 Wynns International, Inc. 72,117
2,400 X-Rite, Inc. 46,500
4,613 (a)Zenith Electronics Corp. 36,327
TOTAL 6,812,912
CONSUMER NON-DURABLES--2.9%
2,600 Alberto-Culver Co., Class B 78,488
2,000 (a)American Safety Razor Co. 33,000
3,100 Authentic Fitness Corp. 54,250
1,034 Block Drug, Inc., Class A 48,081
2,900 Brown Group, Inc. 43,863
1,000 (a)Bush Boake Allen, Inc. 30,938
2,500 (a)Canandaigua Wine Co., Inc., Class A 124,063
3,300 ChemFirst, Inc. 83,325
2,900 Church and Dwight, Inc. 83,556
400 Coca-Cola Bottling Co. 23,800
1,000 (a)Consolidated Cigar Holdings, Inc. 39,250
2,900 (a)Converse, Inc. 20,663
6,100 Coors Adolph Co., Class B 215,406
600 Del Laboratories, Inc. 21,113
5,200 (a)Designer Holdings, Ltd. 44,850
6,250 Dimon, Inc. 162,109
2,100 (a)Donna Karan International, Inc. 29,138
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
CONSUMER NON-DURABLES--CONTINUED
1,800 Dreyers Grand Ice Cream, Inc. $ 74,475
3,300 Earthgrains Co. 135,713
100 Farmer Brothers Co. 14,600
6,600 First Brands Corp. 168,300
500 (a)General Cigar Holdings, Inc. 14,469
2,334 (a)General Cigar Holdings, Inc., Class B 67,531
2,700 (a)Gibson Greetings, Inc. 66,488
1,200 (a)Guess ?, Inc. 10,200
4,100 (a)Gymboree Corp. 99,425
3,900 (a)Hartmarx Corp. 34,125
2,000 Herbalife International, Inc. 50,000
3,500 Hudson Foods, Inc., Class A 65,625
2,700 International Multifoods Corp. 79,650
2,800 Justin Industries, Inc. 36,575
3,500 Kellwood Co. 120,969
1,300 (a)Kenneth Cole Productions, Inc., Class A 17,875
2,900 Lance, Inc. 61,988
2,200 (a)Martek Biosciences Corp. 24,475
2,200 Michael Foods, Inc. 56,100
600 (a)Mondavi Robert Corp., Class A 30,488
1,600 (a)Morningstar Group, Inc. 68,400
2,600 (a)NBTY, Inc. 57,038
700 (a)National Beverage Corp. 6,431
2,374 Natures Sunshine Products, Inc. 54,899
5,600 (a)Nautica Enterprise, Inc. 149,100
1,800 (a)North Face, Inc. 42,525
1,900 (a)Nu Skin Asia Pacific, Inc., Class A 35,863
1,500 OshKosh B'Gosh, Inc., Class A 45,750
1,100 Oxford Industries, Inc. 38,225
1,700 (a)Paragon Trade Brands, Inc. 32,406
4,000 Phillips Van Heusen Corp. 57,000
700 Pilgrims Pride Corp. 9,188
4,400 (a)Playtex Products, Inc. 44,000
1,100 (a)Quiksilver, Inc. 33,825
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
CONSUMER NON-DURABLES--CONTINUED
5,400 (a)Ralcorp Holdings, Inc. $ 100,238
1,200 Riviana Foods, Inc. 24,300
1,000 Sanderson Farms, Inc. 13,188
2,804 Savannah Foods & Industries, Inc. 48,368
2,600 Schweitzer-Mauduit International, Inc. 109,525
100 Seaboard Corp. 32,200
5,000 (a)Smithfield Foods, Inc. 149,375
3,900 Smucker (J.M.) Co., Class A 106,031
2,700 St. John Knits, Inc. 108,506
7,900 Stride Rite Corp. 92,825
1,900 (a)Suiza Foods Corp. 95,713
2,000 (a)The Boston Beer Co., Inc., Class A 19,875
2,300 (a)Thermolase Corp. 35,794
900 (a)Timberland Co., Class A 64,913
4,900 (a)Tultex Corp. 24,500
2,600 (a)Twinlab Corp. 49,400
1,200 (a)USA Detergents, Inc. 12,600
1,500 Unitog Co. 37,125
4,200 Universal Foods Corp. 165,638
1,200 Worthington Foods, Inc. 27,300
TOTAL 4,357,028
ENERGY MINERALS--3.5%
1,300 Arch Cola, Inc. 34,775
800 (a)Atwood Oceanics, Inc. 88,600
5,170 (a)Barrett Resources 181,919
1,400 (a)Belco Oil & Gas Corp. 30,275
5,100 (a)Benton Oil & Gas Co. 102,638
2,900 Berry Petroleum Co., Class A 54,556
4,200 (a)Brown Tom, Inc. 103,950
3,400 Cabot Oil & Gas Corp., Class A 81,600
2,400 (a)Cairn Energy USA, Inc. 33,600
7,400 Chesapeake Energy Corp. 72,613
2,500 (a)Cliffs Drilling Co. 181,719
4,200 (a)Coho Energy Resources, Inc. 49,350
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
ENERGY MINERALS--CONTINUED
3,900 (a)Comstock Resources, Inc. $ 65,325
3,650 Cross Timbers Oil Co. 97,409
500 (a)DLB Oil & Gas, Inc. 6,875
3,600 Devon Energy Corp. 161,100
2,000 (a)Forcenergy Gas Exploration, Inc. 65,250
4,500 (a)Forest Oil Corp. 84,938
1,300 Getty Petroleum Corp. 24,131
8,600 (a)Global Industries Ltd. 173,075
2,400 (a)HS Resources, Inc. 42,300
14,300 (a)Harken Energy Corp. 93,844
900 Holly Corp. 23,850
1,100 (a)Hugoton Energy Corp. 13,475
3,900 KCS Energy, Inc. 102,619
1,900 (a)Key Energy Group, Inc. 59,613
3,300 Lomak Petroleum, Inc. 61,256
2,784 (a)Louis Dreyfus Natural Gas Corp. 61,596
8,400 (a)Marine Drilling Cos., Inc. 248,850
2,600 (a)Meridian Resource Corp. 33,963
8,900 Monterey Resources, Inc. 177,444
5,200 (a)Newfield Exploration Co. 141,050
3,200 (a)Nuevo Energy Co. 132,600
1,800 (a)Ocean Energy, Inc. 111,150
3,800 (a)Oceaneering International, Inc. 94,288
3,500 (a)Offshore Logistics, Inc. 73,500
11,100 (a)Parker Drilling Co. 164,419
1,800 (a)Patterson Energy Inc. 100,800
1 (a)Pioneer Natural Resources, Inc. 45
2,700 (a)Plains Resources, Inc. 54,000
3,100 (a)Pool Energy Services Co. 105,206
5,700 Quaker State Corp. 88,350
900 RPC Energy Services, Inc. 27,000
1,000 (a)Rutherford-Moran Oil Corp. 24,500
2,300 (a)SEACOR SMIT, Inc. 149,788
1,800 (a)Seitel, Inc. 84,825
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
ENERGY MINERALS--CONTINUED
4,300 Snyder Oil Corp. $ 95,138
1,800 St. Mary Land & Exploration Co. 73,350
1,800 (a)Stone Energy Corp. 60,075
2,530 (a)Swift Energy Co. 65,622
4,400 (a)Tesoro Petroleum Corp. 71,500
1,300 (a)The Houston Exploration Co. 31,525
5,300 (a)Titan Exploration, Inc. 66,913
3,600 (a)Transmontaigne Oil Co. 62,100
2,600 (a)Trico Marine Services, Inc. 95,550
7,100 (a)Tuboscope Vetco International Corp. 225,425
3,900 (a)Unit Corp. 50,456
2,700 (a)Varco International, Inc. 164,531
5,300 Vintage Petroleum, Inc. 121,238
2,700 Zeigler Coal Holding Co. 48,263
TOTAL 5,195,715
FINANCE--21.8%
1,501 1st Source Corp. 42,028
2,000 (a)AMERCO 63,000
4,050 Aames Financial Corp. 59,231
2,500 Aaron Rents, Inc. 42,188
2,000 (a)Acceptance Insurance Cos., Inc. 46,500
1,840 Albank Financial Corp. 85,100
500 (a)Alexander's, Inc. 43,750
1,100 Alexandria Real Estate Equities, Inc. 30,181
3,100 Alfa Corp. 50,375
2,300 Allied Capital Commercial 64,113
2,400 Allied Group, Inc. 113,400
2,200 AmVestors Financial Corp. 44,275
1,500 Ambassador Apartments, Inc. 32,156
4,125 Amcore Financial, Inc. 96,938
800 AmerUs Life Holdings, Inc., Class A 24,850
400 (a)AmeriTrade Holding Corp., Class A 10,400
1,447 American Annuity Group, Inc. 29,121
2,400 American General Hospitality Corp. 65,400
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
3,500 American Health Properties, Inc. $ 84,875
1,500 American Heritage Life Investments 53,063
4,800 (a)Americredit Corp. 139,500
3,700 (a)Amerin Corp. 84,638
2,500 Amli Residential Properties Trust 58,125
5,900 (a)Amresco, Inc. 185,113
1,500 Anchor Bancorp Wisconsin, Inc. 43,500
3,800 Apartment Investment & Management Co., Class A 134,663
6,200 (a)Arcadia Financial Ltd. 56,188
5,500 Arden Realty Group, Inc. 167,750
1,200 Area Bancshares Corp. 23,700
3,100 Argonaut Group, Inc. 99,975
8,147 Associated Banc Corp. 408,369
1,900 Associated Estates Realty Corp. 43,581
4,634 Astoria Financial Corp. 242,109
5,900 Avalon Properties, Inc. 173,313
800 (a)BA Merchant Services, Inc., Class A 11,950
779 (a)BOK Financial Corp. 34,276
5,594 BRE Properties, Inc., Class A 153,485
1,350 BSB Bancorp, Inc. 38,813
980 BT Financial Corp. 44,835
2,000 Baldwin & Lyons, Inc., Class B 41,750
500 BancFirst Corp. 15,875
3,260 Bancorpsouth, Inc. 123,880
1,425 Bank Granite Corp. 45,956
3,000 (a)Bank Plus Corp. 36,000
4,600 Bank United Corp., Class A 193,200
2,200 Bankatlantic Bancorp, Inc. 30,525
1,300 Banknorth Group, Inc. 78,650
4,000 Bay Apartment Communities, Inc. 156,500
2,000 Bay View Capital Corp. 61,000
1,500 Bedford Property Investors, Inc. 30,750
3,750 Berkley, W. R. Corp. 154,219
4,200 Berkshire Realty Co., Inc. 46,725
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
1,700 Blanch, E. W. Holdings, Inc. $ 56,950
1,400 Boykin Lodging Co. 37,363
3,546 Bradley Real Estate, Inc. 69,590
951 Brenton Bank, Inc. 30,551
2,400 (a)Budget Group, Inc., Class A 84,000
3,800 Burnham Pacific Properties, Inc. 55,575
1,700 (a)CB Commercial Real Estate Services Group, Inc. 63,750
3,600 CBL & Associates Properties, Inc. 86,850
1,100 CBT Corp., KY 30,525
3,300 (a)CCC Information Service Group, Inc. 61,463
2,100 CFX Corp. 51,713
3,700 CMAC Investment Corp. 202,344
2,100 (a)CNA Surety Corp. 31,894
2,985 CNB Bancshares, Inc. 119,027
2,100 (a)CORT Business Services Corp. 76,388
800 CPB, Inc. 35,100
1,000 CVB Financial Corp. 27,813
6,000 Cali Realty Corp. 243,000
5,136 Camden Property Trust 154,080
2,100 CapMAC Holdings, Inc. 63,000
1,200 Capital Bancorp/Miami, FL 59,250
200 Capital City Bank Group, Inc. 7,000
400 (a)Capital Factors Holdings, Inc. 7,050
1,800 Capital Re Corp. 106,088
1,400 Capitol Transamerica Corp. 36,225
5,950 Capstead Mortgage Corp. 149,494
2,500 Capstone Capital Trust, Inc. 59,063
2,700 CenterPoint Properties Corp. 90,788
2,102 Charter One Financial, Inc. 122,185
1,300 Chartwell Re Corp. 42,088
4,100 Chateau Communities, Inc. 121,975
2,100 Chelsea GCA Realty, Inc. 85,838
1,693 Chemical Financial Corp. 69,399
2,025 Chittenden Corp. 85,050
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
1,450 Citfed Bancorp, Inc. $ 71,413
1,000 Citizens Bancshares, Inc. 58,500
1,700 Citizens Banking Corp. 72,463
1,100 Citizens Corp. 32,244
2,400 (a)Cityscape Financial Corporation 3,675
3,000 (a)Coast Savings Financial, Inc. 176,063
5,000 Colonial BancGroup, Inc. 148,438
3,100 Colonial Properties Trust 87,963
2,701 Commerce Bancorp, Inc. 106,352
3,300 Commerce Group, Inc. 105,600
3,500 Commercial Federal Corp. 169,750
3,800 Commercial Net Lease Realty 60,800
2,769 Commonwealth Bancorp 50,534
1,200 Community Bank System, Inc. 35,100
3,000 Community First Bankshares, Inc. 143,250
1,395 Community Trust Bancorp, Inc. 37,316
7,600 Cornerstone Properties, Inc. 140,125
5,200 Cornerstone Realty Income Trust, Inc. 58,500
1,300 Corus Bankshares, Inc. 45,500
3,700 Cousins Properties, Inc. 116,088
5,850 Crawford & Co., Class B 119,925
3,600 (a)Credit Acceptance Corp. 19,913
6,100 Criimi Mae, Inc. 96,838
4,500 Crown American Realty Trust 42,469
3,640 Cullen Frost Bankers, Inc. 183,820
2,380 (a)Delphi Financial Group, Inc., Class A 98,175
800 (a)Delta Financial Corp. 14,600
3,200 Developers Diversified Realty 126,400
3,151 Dime Bancorp, Inc. 75,624
2,100 Dime Community Bancorp, Inc. 44,363
2,400 Doral Financial Corp. 53,100
3,242 Downey Financial Corp. 85,112
6,800 Dynex Capital, Inc. 94,775
5,400 (a)E*Trade Group, Inc. 166,725
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
1,900 EastGroup Properties, Inc. $ 38,000
2,600 Eaton Vance Corp. 93,925
1,250 (a)Electro Rent Corp. 45,469
2,100 Enhance Financial Services Group, Inc. 110,906
5,300 Equity Inns, Inc. 83,475
2,000 Essex Property Trust, Inc. 68,500
3,300 Evans Withycombe Residential, Inc. 83,325
1,000 Everen Capital Corp. 37,750
3,400 Excel Realty Trust, Inc. 102,425
1,700 Executive Risk, Inc. 111,988
1,343 F & M Bancorporation, Inc. 51,034
3,155 F & M National Corp. 98,199
2,700 FBL Financial Group, Inc., Class A 106,988
3,700 (a)FIRSTPLUS Financial Group, Inc. 203,500
2,347 FNB Corp. 78,038
6,400 Federal Realty Investment Trust 162,000
5,100 FelCor Suite Hotels, Inc. 186,788
1,780 Fidelity National Financial, Inc. 38,715
1,550 (a)Financial Federal Corp. 29,450
5,043 Financial Security Assurance Holdings Ltd. 219,371
1,600 First American Financial Corp. 96,400
1,600 First Citizens Bancshares, Inc., Class A 156,800
2,743 First Colorado Bancorp, Inc. 55,889
1,800 First Commerce Bancshares, Inc., Class B 41,850
3,600 First Commmonwealth Financial Corp. 84,600
1,300 First Federal Capital Corp. 35,425
2,696 First Financial Bancorp 128,720
1,406 First Financial Bankshares, Inc. 61,337
912 First Financial Corp. 37,734
1,000 First Financial Holdings, Inc. 38,625
1,273 First Indiana Corp. 31,825
4,900 First Industrial Realty Trust 169,663
2,350 First Midwest Bancorp, Inc. 85,188
1,500 (a)First Republic Bank 42,375
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
1,700 First Savings Bank of Washington Bancorp, Inc. $ 40,375
1,300 First Savings Bank, SLA/NJ 55,250
4,400 First Union Real Estate Equity 70,125
1,100 First United Bancshares 43,175
1,803 First Western Bancorp, Inc. 48,681
2,000 FirstBank Puerto Rico 67,250
1,600 (a)FirstFed Financial Corp. 56,000
700 FirstFederal Financial Services Corp. 31,500
2,500 Firstbank Illinois Co. 79,375
800 Flagstar Bancorp, Inc. 15,100
1,200 Foremost Corp. 69,000
900 Forest City Enterprises, Inc., Class A 51,975
2,925 Fort Wayne National Corp. 106,031
6,600 Franchise Finance Corporation of America 170,363
3,665 Fremont General Corp. 170,881
4,130 Frontier Insurance Group, Inc. 139,129
6,486 Fulton Financial Corp. 188,094
1,000 Fund American Enterprises, Inc. 119,500
1,100 GBC Bancorp 59,400
3,200 Gables Residential Trust 84,600
3,102 Gainsco, Inc. 28,887
2,900 Gallagher (Arthur J.) & Co. 101,500
5,700 General Growth Properties, Inc. 196,650
3,400 Glenborough Realty Trust, Inc. 87,125
3,600 Glimcher Realty Trust 79,875
1,700 Grand Premier Financial, Inc. 22,100
2,300 Great Financial Corp. 101,200
2,100 Great Lakes REIT, Inc. 39,375
3,200 (a)Grubb & Ellis Co. 48,800
1,500 Guarantee Mutual Life Co. 41,438
421 Guaranty National Corp. 15,024
4,900 HCC Insurance Holdings, Inc. 114,538
2,800 HFNC Financial Corp. 41,300
3,200 HSB Group, Inc. 167,000
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
2,800 (a)Hambrecht & Qusit Group $ 88,200
1,200 (a)Hamilton Bancorp, Inc. 36,600
1,255 Hancock Holding Co. 68,711
800 Harbor Florida Bancorp, Inc. 51,700
2,000 Harleysville Group, Inc. 51,000
1,093 Harleysville National Corp. 41,534
400 Harris Financial, Inc. 22,800
4,200 Hartford Life, Inc., Class A 155,138
4,700 Health Care Property Investors, Inc. 180,363
3,600 Health Care REIT, Inc. 93,825
2,800 Healthcare Realty Trust, Inc. 77,875
1,700 Heritage Financial Services, Inc. 36,975
2,400 (a)Highlands Insurance Group, Inc. 55,200
5,900 Highwoods Properties, Inc. 203,550
2,100 Hilb Rogal & Hamilton Co. 38,063
1,100 Home Properties of New York, Inc. 29,975
3,700 (a)HomeSide, Inc. 99,206
2,772 Horizon Group, Inc. 36,902
3,700 Hospitality Properties Trust 131,581
3,502 Hubco, Inc. 121,913
4,895 Huntington Bancshares, Inc. 158,166
1,800 IBS Financial Corp. 27,675
4,000 (a)IMC Mortgage Co. 69,500
8,400 INMC Mortgage Holdings, Inc. 199,500
4,900 IRT Property Co. 60,025
3,752 (a)Imperial Bancorp 163,681
3,854 (a)Imperial Credit Industries, Inc. 96,832
1,400 Imperial Credit Mortgage Holdings 37,450
3,400 (a)Insignia Financial Group, Inc., Class A 73,525
1,300 InterWest Bancorp, Inc. 49,725
2,150 Interpool, Inc. 34,400
2,000 Interra Financial, Inc. 110,250
500 (a)Investment Technology Group, Inc. 14,625
1,000 Investors Financial Services Corp. 44,000
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
2,900 Irvine Apartment Communities, Inc. $ 89,175
1,000 Irwin Financial Corp. 40,500
2,500 JDN Realty Corp. 85,313
2,500 JP Realty, Inc. 60,938
1,300 JSB Financial, Inc. 62,644
1,600 Jefferies Group, Inc. 106,000
2,250 Jefferson Bankshares, Inc. 106,875
4,200 John Alden Financial Corp. 115,238
900 John Nuveen & Co., Inc., Class A 31,950
600 Kansas City Life Insurance Co. 52,800
8,423 Keystone Financial, Inc. 289,541
3,300 Kilroy Realty Corp. 87,450
1,500 Klamath First Bancorp 33,563
3,100 Koger Equity, Inc. 67,038
3,700 LTC Properties, Inc. 74,925
3,467 Legg Mason, Inc. 170,083
1,900 Liberty Corp. 81,344
6,700 Liberty Property Trust 187,600
1,600 Life Bancorp, Inc. 48,500
1,400 Life Re Corp. 77,175
2,700 (a)Life USA Holdings, Inc. 44,550
3,600 (a)Long Beach Financial Corp. 45,000
4,000 Long Island Bancorp, Inc. 178,000
2,513 MAF Bancorp, Inc. 80,730
2,200 MGI Properties, Inc. 50,600
1,800 ML Bancorp, Inc. 49,500
1,800 MMI Companies, Inc. 44,888
3,800 Macerich Co. (The) 100,700
2,200 Magna Bancorp 69,575
5,394 Magna Group, Inc. 213,063
1,900 Mainstreet Bankgroup, Inc. 54,150
3,700 Manufactured Home Communities, Inc. 92,500
700 (a)Markel Corp. 107,406
3,000 McDonald & Co. Investors, Inc. 73,313
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
1,700 McGrath Rentcorp. $ 41,438
900 Meadowbrook Insurance Group, Inc. 20,756
3,222 (a)Medical Assurance, Inc. 90,015
1 Mercantile Bancorporation, Inc. 67
1,200 Merchants New York Bancorp, Inc. 34,800
24,200 Mercury Finance Co. 27,225
2,200 Meridian Industrial Trust, Inc. 50,738
6,200 Merry Land and Investment Co. 135,238
4,019 Mid Am, Inc. 80,882
1,200 Mid American Bancorp 36,900
2,100 Mid-American Apartment Communities, Inc. 59,325
3,600 Mills Corp. 90,000
500 Mississippi Valley Bancshares, Inc. 26,000
3,762 Morgan Keegan, Inc. 66,776
2,400 NAC Re Corp. 106,800
1,500 NBT Bancorp, Inc. 37,500
1,100 (a)NHP, Inc. 31,075
2,060 (a)National Auto Credit, Inc. 15,321
600 National Bancorp Alaska, Inc. 60,563
1,479 National City Bancshares, Inc. 66,925
2,000 National Golf Properties, Inc. 64,875
3,700 National Health Investors, Inc. 144,994
1,524 National Penn Bancshares, Inc. 48,387
300 (a)National Western Life Insurance Co., Class A 30,150
600 Nationwide Financial Services, Inc., Class A 18,263
6,800 Nationwide Health Properties, Inc. 153,425
2,714 New York Bancorp, Inc. 92,955
700 Nymagic, Inc. 18,681
2,500 Oasis Residential, Inc. 55,938
1,300 Ocean Financial Corp. 48,750
3,100 Ocwen Asset Investment Corp. 61,613
2,100 (a)Ocwen Financial Corp. 115,369
4,265 Old National Bancorp 195,657
1,500 Omega Financial Corp. 52,125
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
3,139 Omega Healthcare Investors $ 113,004
2,095 Onbancorp, Inc. 136,044
4,443 One Valley Bancorp West Virginia, Inc. 177,720
2,000 Oriental Financial Group 53,125
4,512 Orion Capital Corp. 203,040
3,000 (a)PFF Bancorp, Inc. 57,750
1,963 PXRE Corp. 59,872
1,900 Pacific Gulf Properties, Inc. 42,988
1,100 Park National Corp. 94,463
900 (a)Penn Treaty American Corp. 28,913
4,400 Penncorp Financial Group, Inc. 143,275
1,200 Pennsylvania Real Estate Investment Trust 29,325
1,630 People First Corp. 51,753
4,441 Peoples Heritage Financial Group 174,864
500 (a)Philadelphia Consolidated Holding Corp. 18,438
3,600 Pioneer Group, Inc. 108,000
1,800 Piper Jaffray Cos., Inc. 45,113
1,100 Poe & Brown, Inc. 45,375
2,500 (a)Policy Management System Corp. 153,125
4,707 Post Properties, Inc. 170,335
3,700 Prentiss Properties Trust 105,219
4,000 Presidential Life Corp. 79,500
2,000 Price Enterprises, Inc. 36,500
1,700 Price REIT, Inc. 66,938
4,200 Prime Retail, Inc. 62,738
1,505 Provident Bankshares Corp. 81,270
2,048 Queens County Bancorp, Inc. 74,240
3,398 Quick & Reilly Group, Inc. 123,602
3,300 RFS Hotel Investors, Inc. 64,763
1,100 RLI Corp. 45,650
3,925 Raymond James Financial, Inc. 117,750
3,800 Realty Income Corp. 99,275
4,900 Reckson Associates Realty Corp. 128,319
2,400 Redwood Trust, Inc. 60,300
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
3,600 Regency Realty Corp. $ 92,700
6,200 Reinsurance Group of America 242,963
1,400 Reliance Bancorp, Inc. 45,150
1,400 (a)Rental Service Corp. 37,450
2,433 Republic Bancorp, Inc. 41,361
2,006 Resource Bancshares Mortgage Group, Inc. 26,830
3,200 Riggs National Corp. 73,600
2,800 (a)Risk Capital Holdings, Inc. 63,700
5,750 Rollins Truck Leasing Corp. 95,594
7,100 Roslyn Bancorp, Inc. 151,763
2,000 S & T Bancorp, Inc. 81,000
2,100 SCPIE Holdings, Inc. 59,588
1,100 Santa Barbara Bancorp 51,700
1,600 Saul Centers, Inc. 28,200
2,800 Security Capital Atlantic, Inc. 61,075
156 (a)Security Capital Group, Inc., Warrants 753
2,400 Selective Insurance Group, Inc. 129,900
2,400 (a)Signature Resorts, Inc. 62,700
1,600 (a)Silicon Valley Bancshares 87,400
4,400 Smith (Charles E.) Residential Realty, Inc. 150,150
1,300 (a)Southern Pacific Funding 17,063
1,500 (a)Southwest Bancorp. of Texas, Inc. 45,000
19,423 Sovereign Bancorp, Inc. 344,759
1,200 Sovran Self Storage, Inc. 35,250
800 St. Francis Capital Corp. 31,800
5,545 St. Paul Bancorp, Inc. 133,080
1,050 State Auto Financial Corp. 29,400
2,000 Sterling Bancshares, Inc. 39,000
2,000 Storage Trust Realty 51,125
700 Student Loan Corp. 34,431
400 Sumitomo Bank California 18,800
3,300 Summit Properties, Inc. 68,269
2,700 Sun Communities, Inc. 94,163
3,300 Sunstone Hotel Investors, Inc. 57,956
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
3,537 Susquehanna Bankshares, Inc. $ 107,436
2,500 T R Financial Corp. 81,875
1,000 Tanger Factory Outlet Centers, Inc. 28,500
5,700 Taubman Centers, Inc. 71,250
2,100 Texas Regional Bancshares, Inc., Class A 59,850
2,600 The Trust Company of New Jersey 61,100
3,200 Thornburg Mortgage Asset Co. 65,400
1,200 Titan Holdings, Inc. 24,600
2,600 Town & Country Trust 47,288
1,900 Trans Financial, Inc. 60,800
1,900 Trenwick Group, Inc. 66,263
2,200 (a)Triad Guaranty, Inc. 64,900
1,700 Triangle Bancorp, Inc. 45,475
2,900 Trinet Corporate Realty Trust, Inc. 104,944
3,846 Trustco Bank Corp. 92,294
5,300 Trustmark Corp. 163,638
1,600 (a)U.S. Rentals, Inc. 39,000
3,100 U.S. Trust Corp. 181,350
2,631 UMB Financial Corp. 135,497
4,000 UST Corp. 103,500
2,400 United Bankshares, Inc. 107,700
3,980 United Companies Financial Corp. 100,744
1,150 United Fire & Casualty Co. 46,575
1,500 Universal Health Realty Trust, Inc. 31,125
2,800 Urban Shopping Centers, Inc. 90,650
800 Usbancorp, Inc. 52,000
2,200 Vermont Financial Services Corp. 57,475
2,050 Vesta Insurance Group, Inc. 119,156
800 (a)WFS Financial, Inc. 10,400
1,700 (a)WSFS Financial Corp. 30,600
2,400 Walden Residential Properties, Inc. 58,500
1,800 Washington National Corp. 58,613
5,800 Washington Real Estate Investment Trust 94,975
2,200 Webster Financial Corp. Waterbury 135,575
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
2,900 Weeks Corp. $ 87,000
2,650 Wesbanco, Inc. 74,863
1,200 West Coast Bancorp 35,400
2,330 WestAmerica Bancorporation 205,040
1,665 Westcorp, Inc. 30,907
2,800 Western Investment Real Estate Trust 39,025
3,400 Westernbank Puerto Rico 58,650
700 (a)White River Corp. 51,100
3,425 Whitney Holding Corp. 169,538
2,600 Winston Hotels, Inc. 35,425
2,500 Xtra Corp. 126,094
1,700 Zenith National Insurance Corp. 47,600
TOTAL 32,779,299
HEALTH CARE--9.5%
2,966 (a)ADAC Laboratories 57,837
2,500 (a)ATL Ultrasound, Inc. 107,500
2,950 (a)Access Health, Inc. 102,513
3,500 (a)Acuson Corp. 65,625
5,500 (a)Advanced Tissue Sciences, Inc., Class A 76,656
3,700 (a)Affymetrix, Inc. 135,513
4,900 (a)Agouron Pharmaceuticals, Inc. 223,563
1,900 (a)Algos Pharmaceuticals Corp. 47,025
3,400 (a)Alkermes, Inc. 77,350
5,000 (a)Alliance Pharmaceutical Corp. 50,000
2,300 Alpharma, Inc., Class A 50,744
1 Alpharma, Inc., Rights 4
1,600 (a)Alternative Living Services, Inc. 39,200
4,000 (a)AmeriSource Health Corp., Class A 237,500
1,750 (a)American HomePatient, Inc. 45,063
4,600 (a)American Oncology Resources, Inc. 67,275
4,100 (a)Amylin Pharmaceuticals, Inc. 34,594
1,300 (a)Andrx Corp. 50,050
1,000 (a)Aphton Corp. 11,438
1,400 (a)Applied Analytical Industries, Inc. 23,450
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
8,400 (a)Apria Healthcare Group, Inc. $ 127,575
1,700 (a)ArQule, Inc. 36,550
900 (a)Arbor Health Care Co. 39,938
2,400 (a)Arris Pharmaceutical Corp. 28,800
2,200 Arrow International, Inc. 79,200
5,100 (a)Arterial Vascular Engineering, Inc. 270,938
1,300 (a)Atria Communities, Inc. 21,613
4,700 Ballard Medical Products 106,044
1,375 (a)Barr Laboratories, Inc. 52,164
1,400 Bindley Western Industries, Inc. 39,375
1,350 (a)Bio Rad Laboratories, Inc., Class A 33,413
7,500 (a)Bio-Technology General Corp. 91,875
1,700 (a)Biomatrix, Inc. 58,863
3,100 (a)CNS, Inc. 25,769
2,500 (a)CONMED Corp. 51,250
1,100 (a)Cadus Pharmaceutical Corp. 12,375
4,000 (a)Capstone Pharmacy Services 42,500
1,800 (a)Cardiothoracic Systems, Inc. 13,725
1,400 (a)CareMatrix Corp. 38,150
3,700 Carter Wallace, Inc. 58,044
1 (a)Cell Genesys, Inc. 5
4,000 (a)Cephalon, Inc. 46,500
4,200 (a)Cerner Corp. 101,850
2,100 (a)ClinTrials, Inc. 18,769
1,100 (a)Closure Medical Corp. 29,150
4,600 (a)Columbia Laboratories, Inc. 73,600
1,600 (a)Compdent Corp. 33,100
5,428 (a)Concentra Managed Care, Inc. 177,089
2,000 (a)Cooper Companies, Inc. 71,625
3,700 (a)Cor Therapeutics, Inc. 82,556
9,300 (a)Covance, Inc. 164,494
5,400 (a)Coventry Corp. 75,263
5,400 (a)Creative BioMolecules, Inc. 49,781
2,000 (a)Curative Technologies, Inc. 60,250
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
3,100 (a)Cygnus, Inc. $ 71,300
7,409 (a)Cytogen Corp. 23,616
2,500 (a)Cytyc Corp. 59,375
2,300 (a)Datascope Corp. 55,488
1,800 Diagnostic Products Corp. 52,650
1,600 (a)Emisphere Technologies, Inc. 31,000
3,273 (a)Enzo Biochem, Inc. 55,641
3,500 (a)FPA Medical Management, Inc. 84,438
2,100 (a)Fuisz Technologies Ltd. 21,263
2,200 (a)Geltex Pharmaceuticals, Inc. 64,900
12,100 (a)Gensia, Inc. 71,088
4,800 (a)Gilead Sciences, Inc. 163,800
3,400 (a)Graham Field Health Products, Inc. 54,613
3,862 (a)GranCare, Inc. 43,448
2,500 (a)Guilford Pharmaceuticals, Inc. 60,938
2,400 (a)Gulf South Medical Supplies, Inc. 79,200
1,900 (a)HCIA, Inc. 23,513
7,175 (a)HEALTHSOUTH Corp. 183,423
2,500 (a)HPR Inc. 60,000
3,700 (a)Haemonetics Corp. 55,963
2,091 (a)Healthdyne Technologies, Inc. 41,820
1,906 Healthplan Services Corporation 40,145
2,400 (a)Heartport, Inc. 60,300
1,700 (a)Henry Schein, Inc. 55,888
1,900 (a)Hologic, Inc. 48,688
3,600 (a)Human Genome Sciences, Inc. 147,600
1,800 (a)I-Stat Corp. 36,225
6,128 ICN Pharmaceuticals, Inc. 294,910
5,500 (a)ICOS Corp. 77,000
2,900 (a)IDEC Pharmaceuticals Corp. 110,563
5,700 (a)IDEXX Laboratories, Inc. 90,488
800 (a)IDX Systems Corp. 27,000
12,800 (a)Imatron, Inc. 39,200
3,700 (a)Immunomedics, Inc. 16,650
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
1,600 (a)Imnet Systems Inc. $ 29,200
1,500 (a)Incyte Pharmaceuticals, Inc. 120,750
2,200 (a)Inhale Therapeutic Systems 59,950
6,097 Integrated Health Services, Inc. 193,566
4,700 (a)Interneuron Pharmaceuticals 54,638
4,600 Invacare Corp. 105,800
4,300 (a)Isis Pharmaceuticals, Inc. 70,681
3,700 Jones Medical Industries, Inc. 111,463
1,100 (a)KV Pharmaceutical Co., Class B 22,275
3,300 Kinetic Concepts, Inc. 62,700
800 (a)Kos Pharmaceuticals, Inc. 28,600
400 Labone, Inc. 6,650
7,700 Laboratory Corporation of America Holdings 18,288
1,750 Life Technologies, Inc. 53,813
4,592 (a)Ligand Pharmaceuticals, Inc., Class B 67,158
6,100 (a)Liposome Co., Inc. 33,550
2,200 (a)Living Centers of America, Inc. 88,688
900 (a)Lunar Corp. 17,156
4,700 (a)Magellan Health Services, Inc. 135,419
3,700 (a)Mariner Health Group, Inc. 54,344
2,300 (a)Marquette Medical Systems, Class A 59,225
2,900 (a)Maxicare Health Plans, Inc. 40,600
11,800 (a)Medaphis Corp. 71,538
4,200 (a)Medic Computer Systems, Inc. 146,475
1,400 (a)Medical Manager Corp. 24,500
1,700 (a)Medical Resources, Inc. 30,813
2,300 (a)Medicis Pharmaceutical Corp., Class A 110,688
3,200 (a)Medimmune, Inc. 127,600
2,000 (a)Mediq, Inc. 18,250
1,750 (a)Medquist, Inc. 42,656
4,100 Mentor Corp. 149,394
6,700 (a)Mid Atlantic Medical Services, Inc. 97,569
4,400 (a)Millennium Pharmaceuticals, Inc. 87,725
1,100 (a)MiniMed, Inc. 42,900
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
1,050 (a)Miravant Medical Technologies $ 50,400
1,500 (a)Myriad Genetics, Inc. 39,000
5,300 (a)NABI, Inc. 25,175
2,800 (a)NCS HealthCare, Inc., Class A 65,450
2,550 (a)National Surgery Centers, Inc. 63,750
2,300 (a)NeoPath, Inc. 41,688
3,700 (a)Neoprobe Corp. 37,000
2,800 (a)Neurex Corp. 47,600
2,000 (a)Neurogen Corp. 40,500
5,000 (a)Neuromedical Systems, Inc. 23,125
4,300 (a)Nexstar Pharmaceuticals, Inc. 62,888
9,900 (a)NovaCare, Inc. 129,319
2,200 (a)OEC Medical Systems, Inc. 40,150
900 (a)OXiGENE, Inc. 18,900
2,925 (a)Organogenesis, Inc. 89,030
5,500 (a)Orthodontic Centers of America, Inc. 95,219
4,075 Owens & Minor, Inc. 57,050
1,000 (a)PHP Healthcare Corp. 13,688
4,100 (a)Paracelsus Healthcare Corp. 25,369
3,200 (a)Parexel International Corp. 115,600
2,600 (a)Pathogenesis Corp. 93,600
2,200 (a)Patterson Dental Co. 88,000
1,700 (a)Pediatrix Medical Group 71,825
1,000 (a)Perclose, Inc. 24,500
10,900 (a)Perrigo Co. 167,588
2,751 (a)Pharmaceutical Product Development, Inc. 48,830
2,300 (a)PhyMatrix Corp. 33,925
4,900 (a)Physician Computer Network, Inc. 26,644
3,900 (a)Physician Reliance Network, Inc. 44,850
6,200 (a)Physician Sales & Service, Inc. 151,900
4,900 (a)Physicians Resource Group, Inc. 44,100
2,800 (a)Physio-Control International Corp. 44,625
2,000 (a)Possis Corp. 24,750
2,600 (a)Prime Medical Services 34,450
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
2,500 (a)Protein Design Laboratories, Inc. $ 124,688
2,300 Psychemedics Corp. 14,088
4,900 (a)Quest Diagnostic Inc. 81,769
1,000 (a)Raptor Systems, Inc. 13,750
3,500 (a)Regeneron Pharmaceuticals, Inc. 36,531
3,650 (a)Renal Care Group, Inc. 122,275
3,600 (a)Renal Treatment Centers, Inc. 119,475
1,200 (a)Res-Care, Inc. 28,800
3,200 (a)Respironics, Inc. 90,000
1 (a)Response Technologies, Inc. 6
5,200 (a)Rexall Sundown, Inc. 113,750
600 (a)RightCHOICE Managed Care, Inc., Class A 5,963
3,300 (a)Roberts Pharmaceutical Corp. 33,000
1,500 (a)Sabratek Corp. 48,375
2,700 (a)Safeskin Corp. 122,513
2,600 (a)SangStat Medical Corp. 80,925
6,000 (a)Scios Nova, Inc. 49,125
4,500 (a)Sepracor, Inc. 161,438
5,000 (a)Sequus Pharmaceuticals, Inc. 45,000
2,400 (a)Serologicals Corp. 55,200
2,500 (a)Sierra Health Services, Inc. 92,344
900 (a)Sonus Pharmaceuticals, Inc. 34,256
1,600 (a)SpaceLabs Medical, Inc. 35,400
1,700 (a)Spine-Tech, Inc. 52,913
1,900 (a)Staar Surgical Co. 31,825
5,100 (a)Summit Technology, Inc. 42,394
7,024 (a)Sun Healthcare Group, Inc. 139,602
600 (a)Sunquest Information Systems, Inc. 5,325
1,500 (a)Sunrise Assisted Living, Inc. 55,688
2,800 (a)Sunrise Medical, Inc. 43,225
600 (a)Superior Consultant Holdings Corp. 18,600
2,900 (a)Synetic, Inc. 112,375
1,500 (a)Techne Corp. 52,500
2,700 (a)Technological Medical Products, Inc. 58,050
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
1,900 (a)Theragenics Corp. $ 82,888
2,500 (a)Theratech, Inc. 26,250
2,900 (a)Thermedics, Inc. 49,300
3,100 (a)Thermo Cardiosystems, Inc. 67,038
6,500 (a)Total Renal Care Holdings, Inc. 200,281
2,900 (a)Transitional Systems, Inc. 58,725
3,000 (a)Transkaryotic Therapies, Inc. 102,750
1,000 (a)Trex Medical Corp. 12,875
2,200 (a)Triangle Pharmaceuticals, Inc. 41,250
6,900 (a)Trigon Healthcare, Inc. 168,619
3,900 (a)U.S. Bioscience, Inc. 39,731
2,700 (a)Uniphase Corp. 181,238
1,350 United Wisconsin Services, Inc. 37,547
1,700 (a)VISX, Inc. 38,888
4,100 (a)Vertex Pharmaceuticals, Inc. 120,950
3,200 (a)Veterinary Centers of America 46,400
2,400 (a)Vical, Inc. 33,900
1,000 Vital Signs, Inc. 19,375
2,306 (a)Vitalink Pharmacy Services, Inc. 49,720
5,400 (a)Vivus, Inc. 142,425
500 (a)Wesley Jessen VisionCare, Inc. 14,625
2,100 West Co., Inc. 70,613
4,600 (a)Zila, Inc. 31,625
TOTAL 14,240,518
MISCELLANEOUS--0.0%
400 American Financial Enterprises 15,950
PRODUCER MANUFACTURING--6.1%
1,700 (a)ABT Building Products Corp. 30,600
2,100 (a)ACX Technologies, Inc. 55,256
1,000 (a)AFC Cable Systems, Inc. 28,375
1,900 (a)Acme Metals, Inc. 25,294
1,600 (a)Advanced Lighting Technologies, Inc. 32,200
600 (a)Ag-Chem Equipment Co., Inc. 9,600
1,300 Alamo Group, Inc. 27,300
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--CONTINUED
3,800 (a)Allen Telecom, Inc. $ 71,963
1,700 Allied Products 44,838
1,200 (a)Alltrista Corp. 33,600
3,000 (a)Alpine Group, Inc. 44,063
1,400 Amcast Industrial Corp. 35,525
4,800 (a)American Pad & Paper Co. 61,200
5,400 Ametek, Inc. 127,238
5,800 (a)Anixter International, Inc. 109,475
2,100 Applied Power, Inc., Class A 129,938
1,800 (a)Avondale Industries, Inc. 48,600
3,210 Baldor Electric Co. 93,893
3,900 Belden, Inc. 133,575
1,650 Blount International, Inc., Class A 86,728
1,900 (a)Brown & Sharpe Manufacturing Co., Class A 22,444
1,000 C&D Technologies, Inc. 44,000
2,700 (a)Cable Design Technologies, Class A 105,975
1,600 Cascade Corp. 28,400
1,300 Chart Industries, Inc. 27,950
1,400 (a)Chase Industries, Inc. 37,013
1,500 (a)Chicago Miniature Lamp, Inc. 48,000
5,900 Cincinnati Milacron, Inc. 163,725
1,200 (a)Citation Corp. 20,400
2,200 Commercial Intertech Corp. 35,750
2,300 Commercial Metals Corp. 74,175
2,300 Commonwealth Industries, Inc. 40,538
2,600 (a)Cuno, Inc. 44,200
1,200 DT Industries, Inc. 36,000
6,000 (a)Dal-Tile International, Inc. 66,375
1,400 (a)Detroit Diesel Corp. 28,875
1,300 (a)Encore Wire Corp. 36,725
1,800 (a)Essex International, Inc. 59,625
2,300 (a)Fairchild Corp., Class A 58,219
3,000 (a)Figgie International Holdings, Inc., Class A 40,125
6,678 Flowserve Corp. 198,671
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--CONTINUED
700 Franklin Electronics, Inc. $ 39,900
3,900 Freeport McMoRan, Inc. 133,088
1,200 (a)Gardner Denver Machy, Inc. 43,050
800 General Binding Corp. 24,200
2,800 General Cable Corp. 90,650
500 (a)Gibraltar Steel Corp. 11,813
1,400 Gleason Corp. 38,588
3,700 (a)Global Industrial Technologies, Inc. 63,131
2,075 Graco, Inc. 80,277
2,700 Greenfield Industries, Inc. 102,263
5,000 (a)Griffon Corp. 79,063
600 (a)Halter Marine Group, Inc. 31,388
1,900 Handy & Harman 48,331
4,800 (a)Hayes Wheels International, Inc. 162,000
3,000 (a)Hexcel Corporation 80,438
1,000 (a)Hirsch Intl. Corp., Class A 18,875
1,850 (a)Holophane Corp. 42,088
4,800 IDEX Corp. 161,400
900 (a)Insilco Corp. 34,425
3,400 Interface, Inc. 98,175
3,000 Intermet Corp. 57,750
7,100 JLG Industries, Inc. 90,081
3,000 Juno Lighting, Inc. 54,000
3,000 Kaman Corp., Class A 54,375
5,400 Kaydon Corp. 164,025
4,300 Kennametal, Inc. 208,550
3,000 (a)Kimball International, Inc., Class B 123,000
1,800 (a)Knoll Inc. 49,950
2,700 Kuhlman Corp. 94,163
4,100 Lincoln Electric Co., Class A 157,338
1,500 Lindsay Manufacturing Co. 65,063
3,000 (a)Littlefuse, Inc. 91,875
1,300 (a)MICROS Systems Corp. 58,500
3,500 (a)Magnetek, Inc. 71,094
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--CONTINUED
2,850 Manitowoc, Inc. $ 86,391
1,400 (a)Maverick Tube Corp. 49,350
400 (a)Mestek, Inc. 7,300
4,800 (a)Miller Industries, Inc. 48,600
3,600 Modine Manufacturing Co. 122,625
2,900 (a)MotivePower Industries, Inc. 77,213
2,900 (a)Mueller Industries, Inc. 128,144
1,129 NACCO Industries, Inc., Class A 116,287
1,100 (a)NCI Building System, Inc. 40,081
1,850 NN Ball & Roller, Inc. 16,188
2,400 Nordson Corp. 119,100
1,500 (a)Nortek, Inc. 34,031
2,900 (a)Oak Industries, Inc. 83,194
2,300 (a)OmniQuip International, Inc. 38,525
2,700 (a)Oregon Metallurgical Corp. 63,281
1,650 (a)Osmonics, Inc. 26,091
700 Penn Engineering & Manufacturing Corp. 16,888
3,400 Pittston Co. 92,438
3,400 Regal Beloit Corp. 91,375
1,350 Reliance Steel & Aluminum Co. 37,041
1,300 Robbins & Myers, Inc. 49,238
1,900 (a)Rofin-Sinar Technologies, Inc. 26,363
5,100 Roper Industries, Inc. 136,106
900 (a)Ryerson Tull, Inc., Class A 13,331
1,600 (a)SPS Technologies, Inc. 74,000
1,700 Scotsman Industries, Inc. 44,944
1,600 (a)Shaw Group, Inc. 33,400
800 (a)Shiloh Industries, Inc. 14,500
800 (a)Simpson Manufacturing Co., Inc. 28,500
600 (a)Special Metals Corp. 12,375
1,800 (a)Specialty Equipment Cos., Inc. 29,250
2,000 Standex International Corp. 70,000
5,100 Stewart & Stevenson Services 110,925
1,100 (a)Superior Telecom, Inc. 37,675
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--CONTINUED
2,500 TJ International, Inc. $ 57,500
1,400 Tennant Co. 54,425
1,800 (a)Terex Corp. 37,913
1,300 (a)Thermadyne Holdings Corp. 39,000
1,900 (a)Thermo Fibertek, Inc. 20,425
1,700 Thomas Industries, Inc. 51,000
3,000 Titan International, Inc. 62,250
2,700 (a)Tower Automotive, Inc. 113,063
1,200 Tredegar Industries, Inc. 83,850
2,400 (a)Triangle Pacific Corp. 78,600
2,940 (a)Triarc Companies, Inc., Class A 66,518
2,900 Trimas Corp. 84,825
900 (a)TurboChef, Inc. 10,125
11,900 (a)U.S. Office Products Co. 371,657
3,800 (a)UNR Industries, Inc. 19,475
3,000 (a)Valence Technology, Inc. 24,375
1,700 Valhi, Inc. 15,619
3,300 Valmont Industries, Inc. 75,488
3,250 Wabash National Corp. 97,094
5,900 (a)Walter Industries, Inc. 118,000
2,800 Watsco, Inc. 65,800
3,000 Watts Industries, Inc., Class A 76,125
2,300 Westinghouse Air Brake Co. 57,069
2,300 (a)Wolverine Tube, Inc. 71,300
1,700 Woodhead Industries, Inc. 33,150
1,400 Woodward Governor Co. 47,950
2,900 (a)Zebra Technologies Co., Class A 90,625
2,000 Zero Corp. 53,750
2,000 Zurn Industries, Inc. 67,125
TOTAL 9,188,199
RETAIL TRADE--4.1%
700 (a)99 Cents Only Stores 26,294
1,200 (a)Abercrombie & Fitch Co., Class A 31,200
900 (a)Amazon.com, Inc. 54,900
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
RETAIL TRADE--CONTINUED
3,300 (a)Ames Department Stores, Inc. $ 51,356
4,200 (a)Ann Taylor Stores Corp. 60,113
4,575 Arbor Drugs, Inc. 122,381
6,300 (a)BJ's Wholesale Club, Inc. 181,913
5,500 (a)Best Buy Co., Inc. 153,656
1,000 (a)Brylane, Inc. 43,438
600 (a)Buckle, Inc. 16,200
3,240 Burlington Coat Factory Warehouse 53,663
1,100 (a)CDW Computer Centers, Inc. 68,200
1,900 CPI Corp. 49,400
2,600 (a)Carson Pirie Scott & Co. 125,288
4,300 Casey's General Stores, Inc. 103,738
3,970 Cash America International, Inc. 46,896
3,000 (a)Central Garden & Pet Co. 78,750
17,200 (a)Charming Shoppes, Inc. 89,225
2,500 (a)Circuit City Stores, Inc. 34,688
7,375 Claire's Stores, Inc. 163,172
2,300 (a)Cole National Corp., Class A 97,463
1,400 (a)Cost Plus, Inc. 37,975
800 (a)Cross-Continent Auto Retailers, Inc. 7,900
300 Dart Group Corp., Class A 31,800
500 (a)Delia's, Inc. 10,375
1,400 (a)Discount Auto Parts, Inc. 29,313
2,100 (a)Dominick's Supermarkets, Inc. 76,650
2,700 (a)Dress Barn, Inc. 68,513
3,900 (a)Eagle Hardware & Garden, Inc. 66,300
1,500 (a)Express Scripts, Inc., Class A 84,563
2,700 (a)Fabri-Centers of America, Class A 58,388
7,500 Fingerhut Companies, Inc. 165,938
2,600 (a)Finish Line, Inc., Class A 43,875
5,000 (a)Footstar, Inc. 135,938
1,700 (a)Friedmans, Inc., Class A 30,281
1,400 (a)Gadzooks, Inc. 34,825
2,900 (a)Garden Ridge Corp. 38,788
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
RETAIL TRADE--CONTINUED
4,100 (a)Genesco, Inc. $ 52,019
1,300 Genovese Drug Stores, Inc., Class A 22,425
2,400 (a)Global DirectMail Corp. 44,100
1,100 (a)Goody's Family Clothing, Inc. 28,806
2,900 Great Atlantic & Pacific Tea Co., Inc. 88,994
2,300 (a)Guitar Center, Inc. 50,025
3,500 Hancock Fabrics, Inc. 47,469
9,300 Heilig-Meyers Co. 124,388
4,100 (a)Hollywood Entertainment Corp. 50,225
5,400 (a)Homebase, Inc. 49,613
1,100 Ingles Markets, Inc., Class A 14,438
3,675 (a)Just For Feet, Inc. 54,436
2,500 (a)Lands' End, Inc. 78,906
2,100 (a)Linens 'N Things, Inc. 75,469
5,000 Longs Drug Stores Corp. 125,313
4,000 (a)MacFrugal's Bargains CloseOuts, Inc. 136,000
2,225 (a)Mens Wearhouse, Inc. 86,219
3,900 (a)Michaels Stores, Inc. 117,244
5,600 (a)Micro Warehouse, Inc. 84,000
2,550 (a)Microage, Inc. 56,100
3,600 (a)National Media Corp. 20,925
1,900 New Engineers Business Service, Inc. 55,338
2,000 (a)O'Reilly Automotive, Inc. 48,750
2,250 (a)Pacific Sunwear of California 62,156
1,800 (a)Paul Harris Stores, Inc. 33,075
3,050 (a)Petco Animal Supplies, Inc. 93,788
11,192 Pier 1 Imports, Inc. 204,254
7,400 (a)Proffitts, Inc. 212,288
2,050 (a)Quality Food Centers, Inc. 97,631
2,600 Regis Corp. Minnesota 62,400
2,500 (a)Renters Choice, Inc. 55,625
4,600 Ruddick Corp. 71,875
16,300 (a)Service Merchandise, Inc. 66,219
2,400 Shopko Stores, Inc. 60,150
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
RETAIL TRADE--CONTINUED
1,700 Smart & Final, Inc. $ 34,319
2,600 (a)Spiegal, Inc., Class A 15,925
5,100 (a)Sports Authority, Inc. 96,581
4,400 (a)Stage Stores, Inc. 160,600
1,450 (a)Stein Mart, Inc. 42,413
2,733 (a)Sunburst Hospitality Corp. 27,675
8,900 (a)Sunglass Hut International, Inc. 71,200
1,100 (a)Syms Corp. 14,850
1,900 Talbots, Inc. 45,600
700 (a)Tractor Supply Co. 13,825
1,300 (a)Tuesday Morning Corp. 31,525
1,400 (a)Ugly Duckling Corp. 16,625
2,300 (a)United Auto Group, Inc. 46,863
1,600 (a)Urban Outfitters, Inc. 26,600
1,600 (a)Value City Department Stores, Inc. 12,600
1,300 (a)West Marine, Inc. 27,300
1,800 (a)Wet Seal, Inc., Class A 41,175
3,200 (a)Whole Foods Market, Inc. 125,600
3,200 (a)Williams-Sonoma, Inc. 128,400
5,700 (a)Zale Corp. 143,925
TOTAL 6,227,620
SERVICES--12.1%
2,700 ABM Industries, Inc. 73,238
3,800 (a)ABR Information Services, Inc. 89,300
9,300 (a)ACNielsen Corp. 212,738
4,000 (a)ADVO, Inc. 89,750
700 (a)AMC Entertainment, Inc. 14,219
2,600 (a)APAC Teleservices, Inc. 35,425
1,300 (a)Abacus Direct Corp. 47,775
1,600 Ackerley Communications, Inc. 28,200
900 (a)Administaff, Inc. 19,463
1,200 (a)All American Communications, Inc. 30,300
15,700 (a)Allied Waste Industries, Inc. 319,888
1,750 (a)American Business Information, Class A 18,375
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
1,950 (a)American Business Information, Class B $ 25,350
1,950 American Business Products, Inc. 39,122
6,800 (a)American Media, Inc. 53,975
2,990 (a)American Radio Systems Corp. 145,763
2,300 (a)American Residential Services, Inc. 33,638
1,000 (a)Anchor Gaming 78,500
4,837 Apple South, Inc. 90,089
5,100 Applebee's International, Inc. 113,156
900 (a)Applied Graphics Technologies, Inc. 48,150
3,025 Applied Industrial Technologies, Inc. 87,914
4,900 (a)Ascent Entertainment Group, Inc. 48,388
1,000 (a)Aviation Sales Co. 34,375
7,400 (a)Aztar Corp. 52,725
1,650 (a)BARRA, Inc. 42,488
1,100 (a)BET Holdings, Inc., Class A 56,031
1,600 (a)BT Office Products International, Inc. 17,400
300 (a)Bally's Grand, Inc. 15,413
1,600 (a)Banner Aerospace, Inc. 14,800
5,050 Banta Corp. 131,931
2,100 (a)Bell & Howell Group, Inc. 57,881
400 (a)Berlitz International, Inc. 10,450
2,600 (a)Big Flower Press Holdings, Inc. 57,200
2,500 (a)Billing Information Concepts 98,125
6,800 Bob Evans Farms, Inc. 128,775
2,000 (a)Borg Warner Security Corp. 33,875
3,000 Bowne & Co., Inc. 104,625
5,800 (a)Boyd Gaming Corp. 47,850
12,800 (a)Brinker International, Inc. 179,200
4,200 (a)Bristol Hotel Co. 108,150
7,425 (a)Buffets, Inc. 77,963
1,100 Butler Manufacturing Co. 37,263
1,600 (a)CDI Corp. 62,800
6,800 CKE Restaurants, Inc. 271,575
1,000 (a)CKS Group, Inc. 36,250
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
900 (a)CSS Industries, Inc. $ 31,838
2,600 (a)Cablevision Systems Corp., Class A 181,675
3,200 (a)Calpine Corp. 50,800
3,000 (a)CapStar Hotel Co. 106,313
800 Carbo Ceramics, Inc. 26,500
1,400 (a)Caribiner International, Inc. 62,388
1,600 (a)Carmike Cinemas, Inc., Class A 52,000
1,800 Castle (A.M.) & Co. 43,313
3,000 (a)Catalina Marketing Corp. 137,063
800 Central Parking Corp. 43,700
6,900 (a)Checkfree Corp. 186,300
1,700 (a)Cheesecake Factory, Inc. 53,550
8,200 (a)Choice Hotels International, Inc. 144,013
1,300 (a)Claremont Technology Group 28,763
1,600 (a)Coinmach Laundry Corp. 33,500
800 (a)Computer Learning Centers, Inc. 36,200
1,400 (a)Consolidated Graphics, Inc. 72,625
2,573 (a)Consolidated Products, Inc. 49,530
1,200 (a)Copart, Inc. 20,850
4,550 (a)Corestaff, Inc. 112,613
1,400 (a)Cox Radio, Inc., Class A 47,688
700 (a)Daisytek International Corp. 26,688
2,100 Dames & Moore, Inc. 26,119
700 (a)Data Processing Resources Corp. 15,575
1,500 (a)Data Transmission Network Corp. 41,250
900 (a)Day Runner, Inc. 36,281
4,500 (a)DeVRY, Inc. 118,688
1,000 (a)Deltek Systems, Inc. 18,750
1,000 (a)Devon Group, Inc. 39,250
600 Dover Downs Entertainment 11,850
1,400 (a)Education Management Corp. 36,400
2,100 (a)Einstein/Noah Bagel's 17,456
1,400 (a)Emmis Broadcasting Corp., Class A 61,950
4,200 (a)Employee Solutions, Inc. 26,775
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
1,500 (a)Equity Corp. International $ 30,563
800 (a)FactSet Research Systems 21,350
1,600 Fair Isaac & Co., Inc. 69,500
1,500 (a)Family Golf Centers, Inc. 40,125
1,100 (a)Fine Host Corp. 30,800
1,000 (a)Firearms Training Systems, Inc. 6,500
3,300 Fisher Scientific International, Inc. 151,800
6,200 Fleming Cos., Inc. 104,625
5,500 (a)Florida Panthers Holdings, Inc. 110,688
6,500 (a)Foodmaker, Inc. 106,844
4,100 (a)Franklin Covey Co. 91,994
3,050 G & K Services, Inc., Class A 109,800
900 (a)GC Cos., Inc. 38,700
4,300 (a)Golden Books Family Entertainment, Inc. 43,000
5,300 (a)Grand Casinos, Inc. 71,219
1,950 Granite Construction, Inc. 41,194
100 Grey Advertising, Inc. 34,350
11,600 (a)Grey Wolf, Inc. 95,700
7,500 (a)Greyhound Lines, Inc. 28,594
2,700 (a)HA-LO Industries, Inc. 75,600
5,400 (a)Handleman Co. 36,788
5,000 Harland (John H.) Co. 112,188
1,700 (a)Heftel Broadcasting Corp., Class A 113,050
2,200 (a)Hollywood Park, Inc. 41,250
2,000 (a)Homestead Village, Inc. 32,000
5,700 (a)Host Marriott Services Corp. 81,225
4,900 Houghton Mifflin Co. 173,950
2,000 Hughes Supply, Inc. 69,750
1,500 Hunt Corp. 31,875
1,500 (a)IHOP Corp. 50,625
775 (a)ITT Educational Services, Inc. 18,697
3,000 (a)Identix, Inc. 31,125
2,000 (a)Indus International, Inc. 28,250
3,600 (a)Industri-Matematik International Corp. 77,400
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
1,800 (a)Infinity Financial Technology, Inc. $ 27,675
5,200 Innkeepers USA Trust 86,775
6,600 (a)Input/Output, Inc. 176,963
6,500 Interim Services, Inc. 170,219
3,300 (a)International Alliance Services, Inc. 37,538
1,900 (a)International Dairy Queen, Inc., Class A 50,350
3,500 (a)Interstate Hotels Co. 107,625
2,200 (a)JP Foodservice, Inc. 70,263
3,500 (a)Jacobs Engineering Group, Inc. 94,500
7,300 (a)Jacor Communications, Inc., Class A 305,688
2,500 (a)Jones Intercable, Inc., Class A 31,875
7,900 (a)Journal Register Co. 137,756
2,700 Kelly Services, Inc., Class A 95,850
900 Lab Holdings, Inc. 22,500
9,700 (a)Laidlaw Environmental Services, Inc. 49,106
2,200 (a)Lamar Advertising Co. 74,525
1,400 Landauer, Inc. 35,350
3,400 (a)Landrys Seafood Restaurants, Inc. 95,200
1,000 Lawson Products, Inc. 27,688
1,400 (a)Layne Christensen Co. 27,825
1,600 (a)Learning Tree International, Inc. 55,600
5,800 (a)Lone Star Steakhouse & Saloon 134,125
3,800 Luby's Cafeterias, Inc. 75,763
1,200 (a)Mail Boxes, ETC. 33,150
2,500 (a)Mail-Well, Inc. 86,563
7,900 (a)Malibu Entertainment Worldwide 27,650
2,050 Marcus Corp. 57,400
3,300 (a)Marvel Entertainment Group 5,981
1,750 (a)Mastec, Inc. 56,766
2,100 (a)May & Speh, Inc. 26,513
2,525 McClatchy Newspapers, Inc., Class A 82,852
1,900 Media General, Inc., Class A 77,425
1,600 (a)MemberWorks, Inc. 28,000
2,200 Merrill Corp. 49,225
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
500 Metris Cos., Inc. $ 21,125
1,200 (a)Metro Networks, Inc. 37,200
2,100 (a)Metromail Corp. 41,606
6,942 (a)Metromedia International Group, Inc. 79,833
700 (a)Metzler Group, Inc. 27,038
800 (a)Midway Games, Inc. 16,750
2,400 (a)MoneyGram Payment Systems, Inc. 34,350
1,700 Morrison Health Care, Inc. 28,156
2,200 (a)Morrison Knudsen Corp. 25,850
700 (a)NCO Group, Inc. 25,200
3,300 (a)NFO Research, Inc. 59,400
3,200 (a)NOVA Corp. 86,000
1,500 (a)NPC International, Inc. 21,188
1,800 Nash Finch Co. 36,225
2,900 (a)National-Oilwell, Inc. 222,031
5,230 (a)Newpark Resources, Inc. 217,045
2,300 Norrell Corp. 66,988
1,900 (a)OHM Corp. 16,388
8,200 Ogden Corp. 207,050
1,800 (a)On Assignment, Inc. 43,875
1,900 (a)On Command Corp. 24,225
2,650 (a)Outdoor Systems, Inc. 81,488
900 (a)PEC Israel Economic Corp. 18,000
6,200 (a)PMT Services, Inc. 99,975
3,050 (a)Papa Johns International, Inc. 90,166
1 Patriot American Hospitality, Inc. 33
2,500 (a)Paxson Communications Corp. 28,125
700 (a)Pegasystems, Inc. 12,775
1,200 (a)Penn National Gaming, Inc. 19,275
900 (a)Penske Motorsports, Inc. 26,663
1,950 (a)Performance Food Group Co. 36,075
2,000 (a)Personnel Group of America, Inc. 69,375
7,200 Phoenix Duff & Phelps Corp. 50,850
1,250 (a)Pinkertons, Inc. 26,719
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
2,800 (a)Playboy Enterprises, Inc., Class B $ 38,675
800 (a)Precision Response Corp. 5,800
1,800 (a)Premier Parks, Inc. 72,000
3,600 (a)Prepaid Legal Services, Inc. 108,900
7,000 (a)Pride International, Inc. 231,000
1,200 (a)Primadonna Resorts, Inc. 21,000
4,200 (a)Primark Corp. 126,000
6,600 (a)Prime Hospitality Corp. 134,475
1,300 (a)Profit Recovery Group International, Inc. 20,313
5,400 (a)PsiNet, Inc. 45,225
1,733 Pulitzer Publishing Co. 93,383
700 (a)Quintel Entertainment, Inc. 4,714
2,600 (a)RCN Corp. 82,225
2,400 (a)Rainforest Cafe Inc. 81,900
1,400 (a)Rare Hospitality International, Inc. 13,125
4,600 (a)Red Roof Inns, Inc. 70,725
2,300 (a)Rexel, Inc. 51,463
7,700 Richfood Holdings, Inc. 185,763
2,700 (a)Rio Hotel & Casino, Inc. 59,231
3,300 Rollins, Inc. 70,538
2,800 (a)Romac International, Inc. 56,000
2,650 Ruby Tuesday, Inc. 72,047
1,900 (a)Rural/Metro Corp. 66,025
7,700 (a)Ryan's Family Steak Houses, Inc. 66,413
4,600 Rykoff Sexton, Inc. 98,900
1,900 SEI Corp. 80,869
1,100 (a)SFX Broadcasting, Inc. 81,331
1,200 (a)SPS Transaction Services, Inc. 25,425
9,500 Safety-Kleen Corp. 210,188
1,500 (a)Saga Communications, Inc., Class A 30,375
2,050 Sbarro, Inc. 54,197
2,100 (a)Scholastic Corp. 85,050
1,500 (a)Scientific Games Holdings Corp. 32,344
3,300 (a)Scopus Technology, Inc. 48,881
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
2,450 (a)Seattle Filmworks, Inc. $ 24,500
1,600 (a)Service Experts, Inc. 40,000
7,100 (a)Shoney's, Inc. 33,281
2,450 (a)ShowBiz Pizza Time, Inc. 52,063
2,600 Showboat, Inc. 51,675
4,500 Shurgard Storage Centers, Inc., Class A 127,125
1,400 (a)Sinclair Broadcast Group, Inc. 51,100
7,600 (a)Sitel Corp. 67,450
2,500 (a)Snyder Communications, Inc. 73,750
1,700 (a)Sodak Gaming, Inc. 18,275
1,950 (a)Sonic Corp. 50,213
6,700 Sothebys Holdings, Inc., Class A 125,625
1,500 (a)Source Services Corp. 42,750
2,000 (a)Speedway Motorsports, Inc. 47,875
3,600 (a)Spelling Entertainment Group, Inc. 31,050
2,200 (a)StaffMark, Inc. 68,200
2,100 Standard Register 67,988
3,400 (a)Station Casinos, Inc. 27,625
400 (a)Steck-Vaughn Publishing Corp. 5,750
1,100 Stone & Webster, Inc. 51,013
4,500 Storage USA, Inc. 170,719
600 Strayer Education, Inc. 28,650
1,700 (a)Suburban Lodges of America, Inc. 42,075
3,100 (a)Superior Services, Inc. 82,925
3,100 (a)Sylvan Learning Systems, Inc. 130,588
8,400 (a)TCI Satellite Entertainment, Inc. 60,900
1,200 (a)TMP Worldwide, Inc. 25,500
4,100 (a)TeleSpectrum Worldwide, Inc. 19,219
2,706 (a)Tetra Tech, Inc. 70,694
1,800 (a)Tetra Technologies, Inc. 41,513
700 (a)Thermo Ecotek Corp. 9,931
600 (a)Thermo Terratech, Inc. 5,550
1,775 Thomas Nelson, Inc. 20,634
1,600 (a)Ticketmaster Group, Inc. 37,000
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
700 Trigen Energy Corp. $ 16,669
3,300 True North Communications, Inc. 75,075
3,700 (a)Trump Hotels & Casino Resorts, Inc. 33,994
6,300 (a)US Satellite Broadcasting Co., Class A 51,581
3,100 (a)USCS International, Inc. 60,063
1,400 Unifirst Corp. 35,175
600 (a)United Natural Foods, Inc. 12,600
1,900 (a)United Stationers, Inc. 76,950
700 United Television, Inc. 75,425
2,600 (a)Universal Outdoor Holdings, Inc. 109,850
1,900 (a)VWR Scientific Products Corp. 41,800
4,300 (a)Vail Resorts, Inc. 119,594
300 Value Line, Inc. 11,400
7,000 (a)Vanstar Corp. 91,438
3,600 (a)Veritas DGC, Inc. 147,375
500 (a)Vincam Group, Inc. 15,688
900 (a)Vistana, Inc. 20,588
1,350 (a)Volt Information Science, Inc. 93,150
3,000 (a)WMS Industries, Inc. 72,938
2,100 Wackenhut Corp., Class A 45,150
1,600 (a)Wackenhut Corrections Corp. 46,000
400 Waverly, Inc. 10,525
3,800 (a)Westwood One, Inc. 116,613
2,100 Wiley (John) & Sons, Inc., Class A 92,138
1,700 (a)Wilmar Industries, Inc. 44,625
5,500 (a)World Color Press 139,219
1,700 (a)Wyndham Hotel Corp. 76,394
1,900 (a)Young Broadcasting, Inc., Class A 68,875
TOTAL 18,167,158
TECHNOLOGY--14.8%
2,700 AAR Corp. 96,694
600 (a)ACT Manufacturing, Inc. 9,525
1,300 (a)ATMI, Inc. 34,938
300 (a)Accugraph Corp., Class A 225
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
2,800 (a)Actel Corp. $ 41,825
5,900 (a)Acxiom Corp. 96,981
1,000 (a)Ade Corp. 27,125
3,100 (a)Adtran, Inc. 111,600
700 (a)Advanced Energy Industries, Inc. 14,525
600 (a)Advent Software, Inc. 15,300
5,900 (a)Affiliated Computer Services, Inc., Class A 148,238
4,000 (a)Alliance Semiconductor Corp. 30,000
1,500 (a)Alliant Techsystems, Inc. 89,250
2,300 (a)Alternative Resources Corp. 56,925
2,150 (a)Altron, Inc. 34,131
3,100 (a)Amati Communications Corp. 45,338
6,700 (a)American Management System, Inc. 144,888
6,500 (a)Ampex, Inc., Class A 20,719
2,900 (a)Amphenol Corp., Class A 149,350
2,350 (a)Anadigics, Inc. 86,950
1,200 Analogic Corp. 44,400
2,400 Analysts International Corp. 108,300
4,350 (a)Antec Corp. 68,513
800 (a)Apex MPC Solutions, Inc. 20,600
4,000 (a)Applied Magnetics Corp. 92,000
1,800 (a)Arbor Software Corp. 65,813
1,100 (a)Aspect Development, Inc. 51,425
8,000 (a)Aspect Telecommunications Corp. 192,000
3,400 (a)Aspen Technologies, Inc. 127,925
1,500 (a)Asyst Technologies, Inc. 43,641
4,100 (a)Auspex Systems, Inc. 47,663
3,619 (a)Avant! Corp. 94,986
2,600 (a)Aviall, Inc. 34,775
3,800 (a)Avid Technology, Inc. 108,538
2,300 (a)Aware, Inc. 27,888
4,800 (a)BDM International, Inc. 106,200
3,600 (a)BE Aerospace, Inc. 101,250
1,700 (a)BEA Systems, Inc. 22,950
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
400 BGS System, Inc. $ 13,000
900 (a)BRC Holdings, Inc. 33,750
700 (a)Bacou U.S.A., Inc. 12,338
3,479 (a)BancTec, Inc. 79,582
1,900 (a)Benchmark Electronics, Inc. 47,381
3,000 (a)Berg Electronics Corp. 70,125
4,100 (a)Bisys Group, Inc. 127,613
2,700 (a)Black Box Corp. 110,700
2,887 (a)Boole & Babbage, Inc. 83,723
6,000 (a)Borland International, Inc. 57,000
4,200 (a)Boston Technology, Inc. 113,925
3,987 (a)Brightpoint, Inc. 131,571
3,925 (a)Burr Brown Corp. 118,731
5,300 (a)C-Cube Microsystems, Inc. 125,875
1,100 (a)C/NET Inc. 26,538
1,700 (a)CACI International, Inc., Class A 30,388
900 (a)CFM Technologies, Inc. 16,425
5,100 (a)CHS Electronics, Inc. 124,631
4,200 (a)CSG Systems International, Inc. 164,588
1,028 CTS Corp. 98,688
575 (a)Cable Michigan, Inc. 12,075
2,400 (a)California Microwave 38,550
5,500 (a)CellNet Data Systems, Inc. 53,625
2,150 (a)Cellstar Corp. 72,966
3,690 (a)Cellular Technical Services, Inc. 18,335
5,500 Checkpoint System, Inc. 88,000
3,000 (a)Chips & Technologies, Inc. 47,625
1,300 (a)Ciber, Inc. 57,525
2,400 (a)Cidco, Inc. 44,700
9,700 (a)Cirrus Logic, Inc. 146,713
4,100 (a)Citrix Systems Inc. 301,094
3,400 (a)Clarify, Inc. 44,200
5,500 (a)Cognex Corp. 147,125
1,600 (a)Coherent Communications Systems Corp. 48,400
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
1,800 (a)Coherent, Inc. $ 70,200
1,500 Cohu, Inc. 56,156
500 (a)Complete Business Solutions, Inc. 17,625
3,500 (a)Compucom System, Inc. 33,031
3,000 (a)Compuserve Corp. 37,875
4,400 (a)Computer Horizons Corp. 133,650
300 (a)Computer Management Sciences 5,250
3,900 (a)Computer Products, Inc. 106,275
2,400 Computer Task Group, Inc. 67,800
10,400 (a)Computervision Corp. 29,250
4,100 (a)Comverse Technology, Inc. 169,125
7,900 (a)CopyTele, Inc. 37,525
3,550 (a)Credence Systems Corp. 104,725
900 Cubic Corp. 29,025
400 Curtiss Wright Corp. 29,650
1,400 (a)CyberMedia, Inc. 41,650
2,700 (a)Cylink Corp. 36,450
4,600 (a)Cymer, Inc. 105,225
3,200 (a)Cyrix Corp. 94,400
1,000 (a)DBT Online, Inc. 27,563
4,000 (a)DII Group, Inc. 98,500
7,300 (a)DSP Communications, Inc. 135,050
2,400 Daniel Industries, Inc. 48,300
1,500 (a)Data Dimensions, Inc. 40,500
6,100 (a)Data General Corp. 117,425
1,250 (a)Davox Corp. 44,688
1,400 (a)Dialogic Corp. 57,750
5,600 (a)Diamond Multimedia Systems, Inc. 60,200
900 (a)Digital Lightwave, Inc. 16,425
800 (a)Digital Link Corp. 17,600
3,000 (a)Digtial Microwave Corp. 108,000
1,900 (a)Dionex Corp. 94,763
1,600 (a)Documentum, Inc. 47,800
1,000 (a)Ducommun, Inc. 33,375
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
700 (a)Dupont Photomasks, Inc. $ 30,100
2,600 (a)Dynatech Corp. 88,725
7,500 EG & G, Inc. 155,156
2,400 (a)ESS Technology, Inc. 29,100
1,500 (a)Echostar Communications Corp., Class A 28,500
1,900 (a)Edify Corp. 32,656
1,400 (a)Electro Scientific Industries, Inc. 67,900
3,000 (a)Electroglas, Inc. 57,000
1,100 (a)Eltron International, Inc. 32,038
1,800 (a)Encad, Inc. 58,500
2,700 (a)Envoy Corp. 75,600
1,400 (a)Esterline Technologies Corp. 50,925
3,500 (a)Etec Systems, Inc. 156,188
1,500 (a)Evans & Sutherland Computer Co. 45,000
3,400 (a)Exabyte Corp. 35,913
1,500 (a)Exar Corp. 36,000
2,400 (a)FEI Co. 44,100
3,700 (a)FSI International, Inc. 63,825
5,000 (a)FTP Software, Inc. 15,000
2,500 (a)Filenet Corp. 56,250
400 (a)Forrester Research, Inc. 10,325
3,100 (a)Forte Software, Inc. 36,619
4,400 GenCorp, Inc. 107,525
4,400 (a)GenRad, Inc. 129,800
3,100 (a)General DataComm Industries, Inc. 18,988
1,500 (a)GeoTel Communications Corp. 25,688
9,800 (a)Geotek Industries, Inc. 35,525
3,300 Gerber Scientific, Inc. 68,475
9,800 (a)Glenayre Technologies, Inc. 127,400
1,400 (a)HADCO Corp. 77,525
6,000 (a)HMT Technology Corp. 101,250
2,600 (a)HNC Software 96,200
1,350 Hach Co. 17,213
1,050 Hach Co., Class A 10,139
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
2,950 (a)Harbinger Corp. $ 87,763
1,400 Helix Technology Corp. 63,000
1,900 Henry Jack & Associates, Inc. 48,925
3,200 (a)Hutchinson Technology, Inc. 84,400
2,900 (a)Hyperion Software Corp. 110,563
800 (a)I2 Technologies, Inc. 36,350
1,400 (a)IKOS Systems, Inc. 12,425
1,800 (a)In Focus Systems, Inc. 58,950
1,700 (a)Inacom Corp. 52,381
1,500 (a)Information Management Resources 38,625
4,600 (a)Information Resources, Inc. 75,900
2,400 Innovex, Inc. 61,950
1,500 (a)Inso Corp. 18,188
1,900 (a)Integrated Circuit System, Inc. 65,075
13,000 (a)Integrated Device Technology, Inc. 150,313
2,700 (a)Integrated Process Equipment Corp. 59,906
2,600 (a)Integrated Systems, Inc. 45,825
3,000 (a)Inter-Tel, Inc. 74,719
7,900 (a)Interdigital Communications Corp. 39,500
6,800 (a)Intergraph Corp. 73,100
3,100 (a)International Network Services 68,200
8,300 (a)International Rectifier Corp. 113,606
3,400 (a)Intersolv, Inc. 43,350
2,600 (a)Intervoice, Inc. 24,375
500 (a)Intevac, Inc. 6,469
900 (a)Iron Mountain, Inc. 34,594
1,900 (a)Itron, Inc. 38,950
1,400 (a)JDA Software Group, Inc. 43,750
500 (a)JPM Co. 10,375
2,200 John Fluke Manufacturing, Co. 52,938
6,400 (a)Kemet Corp. 139,200
4,500 (a)Kent Electronics Corp. 157,219
1,300 (a)Kronos, Inc. 37,700
3,700 (a)Kulicke & Soffa Industries 95,275
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
1,000 (a)LHS Group, Inc. $ 48,000
5,800 (a)LTX Corp. 31,175
900 (a)LeCroy Corp. 33,075
2,800 (a)Legato Systems, Inc. 119,700
3,350 (a)Level One Communications, Inc. 150,750
2,200 (a)Lycos, Inc. 57,475
1,200 (a)MOOG Inc., Class A 45,000
3,100 (a)MRV Communications, Inc. 90,675
1,500 MTS Systems Corp. 57,000
5,100 (a)Macromedia, Inc. 52,913
2,700 (a)Manugistics Group, Inc. 96,188
2,800 (a)Marshall Industries 98,175
900 (a)Mastech Corp. 29,813
9,700 (a)Mentor Graphics Corp. 106,094
2,700 (a)Mercury Interactive Corp. 60,750
4,600 Methode Electronics, Inc., Class A 90,850
800 (a)Metro Information Services, Inc. 19,900
1,900 (a)Micrel, Inc. 68,163
1,900 (a)Micro Linear Corp. 15,438
1,300 (a)MicroTouch Systems, Inc. 31,363
3,500 (a)Mylex Corp. 30,188
2,200 National Computer Systems, Inc. 83,600
1,500 (a)National Instruments Corp. 68,250
1,100 (a)National Processing, Inc. 11,206
2,600 (a)National TechTeam, Inc. 31,200
1,700 (a)Natural Microsystems Corp. 81,175
1,600 (a)NeoMagic Corp. 23,400
2,300 (a)Network Appliance, Inc. 115,575
2,500 (a)Network Computing Devices 21,563
3,500 (a)Network Equipment Technologies, Inc. 59,500
7,000 (a)Network General Corp. 141,750
5,700 NewPort News Shipbuilding, Inc. 122,550
1,600 (a)Nichols Research Corp. 39,200
2,200 (a)Nimbus CD International, Inc. 20,075
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
900 OAO Technology Solutions, Inc., Rights $ 3,600
1,600 (a)ODS Networks, Inc. 16,600
2,700 OEA, Inc. 108,675
3,000 (a)OIS Optical Imaging Systems, Inc. 5,531
5,900 (a)Oak Technology, Inc. 56,788
3,800 (a)Object Design, Inc. 41,325
1,500 (a)Objective Systems Integrator 18,656
4,800 (a)Omnipoint Corporation 111,300
2,900 (a)Open Market, Inc. 32,625
400 (a)Optical Cable Corp. 3,975
5,300 (a)Orbital Sciences Corp. 129,188
6,000 (a)P-COM, Inc. 120,750
4,800 (a)PMC-Sierra, Inc. 126,600
2,000 (a)PRI Automation, Inc. 76,500
1,600 Park Electrochemical Corp. 45,400
1,300 (a)Perceptron, Inc. 31,363
2,200 (a)Periphonics Corp. 21,175
2,600 (a)Phoenix Technology, Ltd. 39,975
1,400 (a)Photronic Labs, Inc. 60,025
5,600 (a)PictureTel Corp. 51,800
4,225 Pioneer Standard Electronics, Inc. 69,184
1,500 (a)Pixar, Inc. 36,000
2,900 (a)Plantronics, Inc. 106,938
10,098 (a)Platinum Technology, Inc. 244,877
2,400 (a)Plexus Corp. 71,400
700 (a)Powerwave Technologies, Inc. 21,613
4,100 (a)Premisys Communications, Inc. 111,725
1,900 (a)Progress Software Corp. 40,613
1,600 (a)Project Software & Development, Inc. 37,000
1,600 (a)Proxim, Inc. 17,200
1,200 (a)Quickresponse Services, Inc. 39,000
1,700 (a)REMEC, Inc. 43,138
2,300 (a)RMI Titanium Co. 54,625
1,000 (a)RadiSys Corp. 46,500
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
1,000 (a)Radiant Systems, Inc. $ 18,125
2,000 (a)Rambus, Inc. 99,500
4,900 (a)Ramtron International Corp. 32,463
12,552 (a)Rational Software Corp. 114,537
7,200 (a)Read-Rite Corp. 143,100
1,160 (a)Registry, Inc. 48,140
3,400 (a)Remedy Corp. 159,800
3,200 (a)Robotic Vision Systems, Inc. 44,000
3,600 (a)Rohr, Inc. 109,125
8,100 (a)S3, Inc. 71,888
2,100 (a)SDL, Inc. 37,800
1,000 (a)SPSS, Inc. 22,500
3,800 (a)Sabre Group Holdings, Inc. 100,700
4,500 (a)Safeguard Scientifics, Inc. 139,500
2,600 (a)Sandisk Corp. 62,075
2,800 (a)Sanmina Corp. 209,300
3,100 (a)Santa Cruz Operation, Inc. 18,988
500 (a)Sapient Corp. 26,625
1,100 (a)Sawtek, Inc. 37,400
900 (a)SeaChange International, Inc. 9,113
700 (a)Semtech Corp. 32,594
1,300 (a)Sequa Corp., Class A 74,588
6,500 (a)Sequent Computer System, Inc. 136,094
1,500 (a)Sheldahl, Inc. 29,063
4,500 (a)Shiva Corp. 46,969
3,300 (a)Siebel Systems, Inc. 133,238
5,100 (a)Silicon Valley Group, Inc. 146,625
1,600 (a)Siliconix, Inc. 73,900
1,100 (a)Sipex Corp. 36,163
2,000 (a)Smart Modular Technologies, Inc. 99,500
1,700 (a)Spectrian Corp. 39,950
1,100 (a)Speedfam International, Inc. 40,838
1,900 (a)Splash Technology Holdings, Inc. 79,088
1,700 (a)Stanford Telcommunications, Inc. 41,225
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
4,400 (a)Stratus Computer, Inc. $ 155,650
5,500 (a)Structural Dynamics Research Corp. 105,188
2,000 (a)Supertex, Inc. 30,000
1,500 (a)Sykes Enterprises, Inc. 37,313
9,100 (a)Symantec Corp. 199,063
2,600 (a)Symmetricom, Inc. 39,813
4,850 (a)System Software Association 56,988
2,700 (a)Systems & Computer Technology Corp. 116,438
3,400 (a)Systemsoft Corp. 26,988
1,000 (a)Tech-Sym Corp. 31,750
2,300 Technitrol, Inc. 71,013
4,000 (a)Technology Solutions Corp. 126,000
1,600 (a)Tekelec, Inc. 67,000
2,500 (a)Telxon Corp. 64,375
6,100 (a)The Learning Co., Inc. 115,138
500 (a)Thermedics Detection, Inc. 5,250
600 (a)Thermo Optek Corp. 10,163
600 (a)ThermoSpectra Corp. 6,225
600 (a)Thermoquest Corp. 10,725
1,550 (a)Thermotrex Corp. 35,650
2,700 (a)Tracor, Inc. 72,225
1,900 (a)Trident Microsystems, Inc. 23,988
3,600 (a)Trimble Navigation Ltd. 72,900
1,300 (a)Triquint Semiconductor, Inc. 31,850
1,600 (a)Triumph Group, Inc. 52,000
3,000 (a)Ultratech Stepper, Inc. 81,750
3,800 (a)Unitrode Corp. 101,888
1,500 (a)Vantive Corp. 37,875
1,300 (a)Veeco Instruments, Inc. 51,513
4,300 (a)Veritas Software Corp. 178,988
3,100 (a)Viasoft, Inc. 127,100
5,200 (a)Vicor Corp. 167,700
2,100 (a)VideoServer, Inc. 26,513
2,700 (a)Viewlogic Systems, Inc. 65,475
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
3,800 (a)Visio Corp. $ 141,313
2,200 (a)Walker Interactive Systems 31,075
1,500 (a)Wall Data, Inc. 24,563
6,000 (a)Wang Laboratories, Inc. 138,750
4,100 (a)Waters Corp. 180,400
1,300 Watkins Johnson Co. 40,300
2,500 (a)Westell Technologies, Inc., Class A 44,063
1,500 (a)Whitmann-Hart, Inc. 43,500
3,150 (a)Wind River Systems, Inc. 120,881
2,800 Wireless Telecom Group, Inc. 21,875
2,300 (a)Wonderware Corp. 41,544
3,100 (a)World Access, Inc. 82,150
3,200 (a)Wyman Gordon Co. 77,200
3,700 (a)Xircom, Inc. 37,000
5,300 (a)Xylan Corp. 84,800
3,750 (a)Yahoo, Inc. 164,414
1,000 (a)Yurie Systems, Inc. 30,313
3,300 (a)Zilog, Inc. 62,906
2,500 (a)Zitel Corp. 35,469
1,500 (a)Zoran Corp. 25,125
1,500 (a)Zygo Corp. 40,875
1,000 (a)Zytec Corp. 35,688
2,400 (a)fonix Corp. 15,150
TOTAL 22,248,488
TRANSPORTATION--1.8%
4,000 APL, Ltd. 131,500
3,600 ASA Holdings Ltd. 100,350
3,500 Airborne Freight Corp. 221,813
5,000 Airlines Express International Corp. 153,125
1,300 (a)Airnet Systems, Inc. 26,650
2,400 (a)Alaska Air Group, Inc. 80,100
6,502 (a)America West Holdings Corp., Class B 96,311
3,400 (a)American Freightways Corp. 52,700
3,300 Arnold Industries, Inc. 70,125
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
TRANSPORTATION--CONTINUED
1,400 (a)Atlas Air, Inc. $ 38,850
2,000 Circle International Group, Inc. 50,250
2,500 (a)Coach USA, Inc. 74,375
3,600 (a)Consolidated Freightways Corp. 50,850
1,700 (a)Covenant Transport, Inc., Class A 28,050
1,200 (a)Eagle USA Airfreight, Inc. 36,300
4,000 Expeditors International Washington, Inc. 147,000
400 Florida East Coast, Inc. 43,375
3,500 (a)Fritz Companies, Inc. 48,344
2,545 (a)Heartland Express, Inc. 69,988
3,600 Hunt (J.B.) Transportation Services, Inc. 55,350
1,900 (a)Hvide Marine, Inc., Class A 62,700
4,000 (a)Kirby Corp. 79,000
600 (a)Kitty Hawk, Inc. 12,225
600 (a)Knight Transportation, Inc. 17,138
2,100 (a)Landstar System, Inc. 52,500
1,500 (a)M.S. Carriers, Inc. 38,016
1,200 (a)Mesaba Holdings, Inc. 24,750
1,500 (a)Midwest Express Holdings, Inc. 48,188
6,300 (a)OMI Corp. 75,206
4,400 Overseas Shipholding Group, Inc. 108,900
2,000 Roadway Express, Inc. 55,500
2,200 (a)Swift Transportation Co. 70,400
8,000 (a)Trans World Airlines, Inc. 59,500
4,250 USFreightways Corp. 137,594
6,100 (a)ValuJet, Inc. 35,838
3,500 Werner Enterprises, Inc. 84,875
4,300 (a)Yellow Corp. 117,981
TOTAL 2,655,717
UTILITIES--6.5%
2,700 (a)ACC Corp. 106,988
9,200 AGL Resources, Inc. 166,750
900 (a)Aerial Communications, Inc. 7,650
5,900 Aliant Communications, Inc. 151,188
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
2,600 (a)American Mobile Satellite Corp. $ 23,400
1,200 Aquarion Co. 33,900
900 Aquila Gas Pipeline Co. 11,700
2,400 (a)Associated Group, Inc., Class A 88,200
8,600 Atlantic Energy, Inc. NJ 158,563
4,750 Atmos Energy Corp. 119,938
2,200 Bay State Gas Co. 63,113
2,400 Black Hills Corp. 72,300
4,600 (a)Brooks Fiber Properties, Inc. 257,025
2,100 CFW Communications Co. 40,950
1,700 CTG Resources, Inc. 41,225
900 California Water Service Corp. 44,606
1,700 (a)Cellular Communications International, Inc. 68,000
2,705 (a)Centennial Cellular Corp., Class A 54,100
2,900 Central Hudson Gas & Electric Service 102,769
3,700 Central LA Electric Co. 97,356
5,300 Central Maine Power Co. 70,225
5,300 (a)Century Communications, Corp., Class A 40,744
2,200 Cilcorp, Inc. 89,925
451 (a)Citizens Utilities Co., Class B 4,481
1,400 Colonial Gas Co. 33,425
3,000 Commonwealth Energy System 85,875
1,833 (a)Commonwealth Telephone Enterprises, Inc. 40,792
2,200 (a)Comnet Cellular, Inc. 76,175
8,000 Comsat Corp. 183,000
1,500 Connecticut Energy Corp. 36,281
2,100 (a)Corecomm, Inc. 30,713
10,000 Delmarva Power and Light Co. 198,125
1,300 E Town 44,769
3,100 Eastern Enterprises 121,481
3,300 Eastern Utilities Association 69,713
9,800 (a)El Paso Electric Co. 61,863
2,700 Empire Distribution Electric Co. 49,106
2,100 Energen Corp. 75,994
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
5,800 Equitable Resources, Inc. $ 184,513
1,747 (a)Excel Communications, Inc. 41,269
1,600 (a)General Communications, Inc., Class A 12,000
5,000 Hawaiian Electric Industries, Inc. 189,063
4,000 (a)HighwayMaster Communications, Inc. 36,500
4,900 IES Industries, Inc. 158,025
2,700 (a)IXC Communications, Inc. 89,100
3,650 Indiana Energy, Inc. 104,253
2,700 (a)Intermedia Communications of Florida, Inc. 122,513
1,600 Interstate Power Co. 50,600
16,000 Kelley Oil & Gas Corp. 56,000
2,900 Laclede Gas Co. 72,319
4,650 MDU Resources Group, Inc. 131,944
2,600 Madison Gas & Electric Co. 52,325
4,500 (a)McLeod, Inc., Class A 167,063
5,400 Minnesota Power And Light Co. 196,425
8,100 (a)Mobile Telecommunication Technologies Corp. 134,663
4,733 (a)NTL, Inc. 128,383
1,600 NUI Corp. 36,100
8,100 Nevada Power Co. 174,150
2,900 New Jersey Resources Corp. 93,888
1,100 North Carolina Natural Gas 35,819
2,400 North Pittsburgh Systems, Inc. 41,100
3,700 Northwest Natural Gas Co. 91,113
2,900 Northwestern Public Service Co. 58,000
3,900 Oneok, Inc. 133,819
2,200 Orange & Rockland Utilities, Inc. 78,788
1,900 Otter Tail Power Co. 62,225
1,300 (a)Pacific Gateway Exchange, Inc. 49,725
5,600 (a)PageMart Wireless, Inc., Class A 54,600
16,800 (a)Paging Network, Inc. 207,900
1,600 Pennsylvania Enterprises 42,400
2,750 Philadelphia Suburban Corp. 62,047
4,900 Piedmont Natural Gas, Inc. 137,200
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
2,400 (a)Powertel, Inc. $ 43,650
3,500 (a)Premiere Technologies, Inc. 119,000
2,288 (a)PriceCellular Corp., Class A 24,882
2,200 (a)Primus Telecommunications Group, Inc. 26,125
6,800 Public Service Co. New Mexico 132,175
3,200 Public Service Co. North Carolina, Inc. 64,600
6,300 Rochester Gas & Electric Corp 158,681
3,900 SIG Corp., Inc. 101,888
2,137 Semco Energy, Inc. 38,194
5,000 Sierra Pacific Resources 152,188
1,500 (a)SmarTalk Teleservices, Inc. 32,344
1,224 South Jersey Industries, Inc. 30,753
1,500 Southern CA Water Co. 32,906
1,320 (a)Southern Union Co. 30,773
4,400 Southwest Gas Corp. 82,775
4,000 Southwestern Energy Co. 48,500
2,700 TCA Cable TV, Inc. 111,375
1,700 TNP Enterprises, Inc. 43,138
2,740 (a)Tejas Gas Corp. 164,229
5,500 (a)Tel-Save Holdings, Inc. 118,250
1,350 (a)Transaction Network Services, Inc. 22,444
5,260 (a)Tucson Electric Power Co. 87,119
5,400 UGI Corp. 145,125
2,500 (a)USLD Communications Corp. 49,531
2,300 United Illuminating Co. 89,700
4,300 (a)United International Holdings, Inc., Class A 53,213
1,900 (a)United Video Satellite Group, Inc., Class A 51,538
4,336 United Water Resources, Inc. 71,815
5,900 (a)Vanguard Cellular Systems, Inc., Class A 81,494
3,000 WICOR, Inc. 129,375
5,000 WPL Holdings, Inc. 145,938
3,900 WPS Resources Corp. 112,856
7,100 Washington Gas Light Co. 182,381
9,100 Washington Water Power Co. 181,431
</TABLE>
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
*COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
2,900 (a)West TeleServices Corp. $ 41,325
3,400 Western Gas Resources, Inc. 83,938
11,400 (a)Western Wireless Corporation, Class A 203,775
5,400 (a)WinStar Communications, Inc. 123,525
1,700 Yankee Energy Systems, Inc. 40,375
TOTAL 9,761,564
TOTAL COMMON STOCKS (IDENTIFIED COST $109,326,730) 140,849,913
(B)SHORT-TERM U.S. GOVERNMENT OBLIGATION--0.3%
$ 500,000 United States Treasury Bill, 12/18/1997 (identified cost $496,863) 497,066
(C)REPURCHASE AGREEMENT--6.1%
9,225,000 BT Securities Corp., 5.71%, dated 10/31/1997, due 11/3/1997 9,225,000
(at amortized cost)
TOTAL INVESTMENTS (IDENTIFIED COST $119,048,593)(D) $ 150,571,979
</TABLE>
* The Fund purchases Index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividend and capital
gain payments to shareholders and corporate actions while maintaining exposure
to the Index and minimizing trading costs. The underlying face amount, at
value of open Index futures contracts is $12,673,000 at October 31, 1997,
which represents 8.4% of net assets. Taking into consideration these open
Index futures contracts, the Fund's effective total exposure to the Index is
102.0%.
(a) Non-income producing security.
(b) Represents a security held as collateral which is used to ensure the Fund is
able to satisfy the obligations of its outstanding long futures contracts.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) The cost of investments for federal tax purposes amounts to $119,520,332.
The net unrealized appreciation of investments on a federal tax basis
amounts to $31,051,647 which is comprised of $36,943,657 appreciation and
$5,892,010 depreciation at October 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($150,469,913) at October 31, 1997.
The following acronym is used throughout this portfolio:
REIT --Real Estate Investment Trust
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MINI-CAP FUND
OCTOBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $119,048,593 $ 150,571,979
and tax cost $119,520,332)
Income receivable 95,964
Receivable for investments sold 11,380
Receivable for shares sold 622,645
Receivable for daily variation margin 348,450
Deferred expenses 1,938
Total assets 151,652,356
LIABILITIES:
Payable for investments purchased $ 9,563
Payable for shares redeemed 996,001
Payable to Bank 107,979
Accrued expenses 68,900
Total liabilities 1,182,443
Net Assets for 9,021,142 shares outstanding $ 150,469,913
NET ASSETS CONSIST OF:
Paid in capital $ 106,844,493
Net unrealized appreciation of investments and futures contracts 31,192,086
Accumulated net realized gain on investments and futures contracts 12,234,599
Undistributed net investment income 198,735
Total Net Assets $ 150,469,913
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER SHARE:
$150,469,913 / 9,021,142 shares outstanding $16.68
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MINI-CAP FUND
YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,813,763
Interest 574,341
Total income 2,388,104
EXPENSES:
Investment advisory fee $ 695,438
Custodian fees 58,188
Transfer and dividend disbursing agent fees and expenses 47,599
Directors'/Trustees' fees 5,719
Auditing fees 14,106
Legal fees 3,112
Portfolio accounting fees 59,638
Shareholder services fee 347,719
Share registration costs 13,560
Printing and postage 46,442
Insurance premiums 2,087
Taxes 8,702
Miscellaneous 8,670
Total expenses 1,310,980
Waivers--
Waiver of shareholder services fee (254,663)
Net expenses 1,056,317
Net investment income 1,331,787
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FUTURES CONTRACTS:
Net realized gain on investments and futures contracts 12,898,401
Net change in unrealized appreciation (depreciation) of 17,302,166
investments and futures contracts
Net realized and unrealized gain on investments and 30,200,567
futures contracts
Change in net assets resulting from operations $ 31,532,354
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MINI-CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 1,331,787 $ 1,683,178
Net realized gain on investments and futures contracts 12,898,401 11,326,674
($12,354,400 and $12,836,707, respectively, as computed for
federal tax purposes)
Net change in unrealized appreciation on investments and 17,302,166 5,852,231
futures contracts
Change in net assets resulting from operations 31,532,354 18,862,083
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (1,249,969) (1,673,293)
Distributions from net realized gains and futures contracts (12,838,180) (7,105,514)
Change in net assets resulting from distributions to (14,088,149) (8,778,807)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 164,053,525 151,332,868
Net asset value of shares issued to shareholders in payment of 6,372,039 3,949,341
distributions declared
Cost of shares redeemed (182,089,956) (153,074,545)
Change in net assets resulting from share transactions (11,664,392) 2,207,664
Change in net assets 5,779,813 12,290,940
NET ASSETS:
Beginning of period 144,690,100 132,399,160
End of period (including undistributed net investment income of $ 150,469,913 $ 144,690,100
$198,735 and $116,917, respectively)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MINI-CAP FUND
OCTOBER 31, 1997
ORGANIZATION
Federated Index Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of three portfolios. The financial statements
included herein are only those of Federated Mini-Cap Fund (the "Fund"), a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held.
Effective November 3, 1997, the Board of Trustees established a new class of
shares named Class C Shares, in addition to the Institutional Shares already
offered. The investment objective of the Fund is to provide investment results
that generally correspond to the aggregate price and dividend performance of
publicly traded common stocks comprising the small capitalization sector of the
United States equity market.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sales price reported on a
national securities exchange. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's adviser to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Trustees. Risks may arise from the
potential inability of counterparties to honor the terms of the repurchase
agreement. Accordingly, the Fund could receive less than the repurchase price on
the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES
The costs incurred by the Fund with respect to registration of its shares in its
first fiscal year, excluding the initial expense of registering its shares, have
been deferred and are being amortized over a period not to exceed five years
from the Fund's commencement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
For the period ended October 31, 1997, the Fund had realized gains on future
contracts of $2,188,370.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities.
At October 31, 1997, the Fund had outstanding futures contracts as set forth
below:
UNREALIZED
CONTRACTS TO APPRECIATION
EXPIRATION DATE DELIVER/RECEIVE POSITION (DEPRECIATION)
December 1997 55 Russell 2000 Long $(331,300)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996
<S> <C> <C>
Shares sold 10,866,696 10,678,931
Shares issued to shareholders in payment of distributions declared 466,620 295,486
Shares redeemed (12,365,954) (10,852,665)
Net change resulting from share transactions (1,032,638) 121,752
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE
Federated Management, the Fund's investment adviser (the "Manager"), receives
for its services an annual management fee equal to 0.50% of the Fund's average
daily net assets. The Manager may voluntarily choose to waive any portion of its
fee. The Manager can modify or terminate this voluntary waiver at any time at
its sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund shares for the period. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
Federated Services Company ("FServ"), through its subsidiary, Federated
Shareholder Services Company ("FSSC") serves as transfer and dividend disbursing
agent for the Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL
Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1997, were as follows:
PURCHASES $66,861,679
SALES $91,828,314
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of FEDERATED INDEX TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Mini-Cap Fund (a portfolio of
Federated Index Trust) as of October 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Mini-Cap Fund of Federated Index Trust at October 31, 1997, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the financial highlights
for each of the periods presented, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 12, 1997
NOTES
NOTES
[Graphic]Federated Investors
Federated Mini-Cap Fund
(A Portfolio of Federated Index Trust)
Institutional Shares
PROSPECTUS
DECEMBER 31, 1997
A No-Load, Open-End, Diversified Management Investment Company
FEDERATED MINI-CAP FUND
INSTITUTIONAL 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
MANAGER
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
SUB-MANAGER
ANB Investment Management and Trust Co.
One North LaSalle Street
Chicago, IL 60690
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 31420E304
2062305A (12/97)
[Graphic]
FEDERATED MINI-CAP FUND
(A PORTFOLIO OF FEDERATED INDEX TRUST)
CLASS C SHARES
INSTITUTIONAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
The Class C Shares and Institutional Shares of Federated Mini-Cap Fund (the
"Fund") (a portfolio of Federated Index Trust) represent interests in a
diversified portfolio of securities. This Statement of Additional Information
should be read with the prospectus for Class C Shares dated November 10, 1997,
and the prospectus for Institutional Shares dated December 31, 1997. This
Statement is not a prospectus itself. You may request a copy of a prospectus or
a paper copy of this Statement of Additional Information, if you have received
it electronically, free of charge by calling 1-800-341-7400.
FEDERATED MINI-CAP FUND
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000
Statement dated December 31, 1997
[Graphic]
Cusip 31420E304
Cusip 31420E601
2062305B (12/97)
[Graphic]
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE FUND 1 INVESTMENT OBJECTIVE AND POLICIES 1 Types
of Investments 1 When-Issued and Delayed Delivery Transactions 3 Lending of
Portfolio Securities 3 Reverse Repurchase Agreements 3 Portfolio Turnover 3
INVESTMENT LIMITATIONS 3 Investing in Commodities 4 Selling Short and Buying on
Margin 4 Lending Cash or Securities 4 Underwriting 4 Issuing Senior Securities
and Borrowing Money 4 Pledging Assets 4 Diversification of Investments 4
Concentration of Investments 4 Investing in Real Estate 4 Investing in
Restricted Securities 5 Writing Covered Call Options 5 Investing in Put Options
5 Acquiring Securitiess 5 Investing in Illiquid Securities 5 FEDERATED INDEX
TRUST MANAGEMENT 6 Fund Ownership 9 Trustees Compensation 10 Trustee Liability
10 MANAGEMENT SERVICES 10 Managers to the Fund 10 Management Fees 11 Other
Related Services 11 BROKERAGE TRANSACTIONS 11 OTHER SERVICES 11 Custodian and
Portfolio Accountant 11 Transfer Agent 12 Independent Auditors 12 PURCHASING
SHARES 12 Reinvestment Privilege (Class C Shares) 12 DISTRIBUTION PLAN AND
SHAREHOLDER SERVICES 12 Conversion to Federal Funds 12 Exchanging Securities
for Fund Shares 13 DETERMINING NET ASSET VALUE 13 Determining Market Value of
Securities 13 REDEEMING SHARES 14 Redemption in Kind 14 Contingent Deferred
Sales Charge (Class C Shares) 14 MASSACHUSETTS PARTNERSHIP LAW 14 TAX STATUS 14
The Fund's Tax Status 14 Shareholders' Tax Status 14 TOTAL RETURN 15 YIELD 15
PERFORMANCE COMPARISONS 15 Economic and Market Information 16 ABOUT FEDERATED
INVESTORS 16 Mutual Fund Market 17 Institutional Clients 17 Trust Organizations
17 Broker/Dealers and Bank Broker/Dealers Subsidiaries17 FRANK RUSSELL COMPANY
17
GENERAL INFORMATION ABOUT THE FUND
Federated Mini-Cap Fund (the "Fund") is a portfolio of Federated Index Trust
(the "Trust"), which was established as a Massachusetts business trust under a
Declaration of Trust dated January 30, 1990. On December 5, 1994, the Trustees
changed the name of the Fund from the Mini-Cap Fund to Federated Mini-Cap Fund.
Shares of the Fund are offered in two classes, known as Class C Shares and
Institutional Shares (individually and collectively referred to as "Shares").
This Statement of Additional Information relates to the Shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
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. These stocks are included in the Russell
2000 Small Stock Index (the "Index"), an index of small capitalization stocks.
The Fund is neither affiliated with nor sponsored 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 investment objective cannot be changed without the approval of shareholders.
The policies described below may be changed by the Board of Trustees
("Trustees") without shareholder approval. Shareholders will be notified before
any material change in these policies becomes effective.
TYPES OF INVESTMENTS
In addition to the common stocks described in the prospectus, the Fund may also
invest in money market instruments and U.S. government obligations and
securities in such proportions as, in the judgment of the sub-manager,
prevailing market conditions warrant.
MONEY MARKET INSTRUMENTS
The Fund may invest in the following money market instruments:
* instruments of domestic banks and savings associations having capital,
surplus, and undivided profits of over $100,000,000, or if the principal
amount of the instrument is insured in full by the Federal Deposit
Insurance Corporation; and
* prime commercial paper (rated A-1 by Standard and Poor's, Prime-1 by
Moody's Investors Service, Inc., or F-1 by Fitch Investors Service).
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller files for bankruptcy or
becomes insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/ dealers which are deemed by the Fund's sub-manager
to be creditworthy pursuant to guidelines established by the Trustees.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
* the full faith and credit of the U.S. Treasury;
* the issuer's right to borrow from the U.S. Treasury;
* the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
* the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
* The Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks, and Banks for Cooperatives;
* Federal Home Loan Banks;
* Farmers Home Administration; and
* Federal National Mortgage Association.
STOCK INDEX FUTURES AND OPTIONS
The Fund may utilize stock index futures contracts and options on stocks, stock
indices and stock index futures contracts for the purposes of managing cash
flows into and out of the Fund's portfolio and potentially reducing
transactional costs. The Fund may not use stock index futures contracts and
options for speculative purposes.
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolio through
the purchase of listed put options on stocks, stock indices, and stock index
futures contracts. These options will be used as a form of forward pricing to
protect portfolio securities against decreases in value resulting from market
factors such as an anticipated increase in interest rates. A put option gives
the Fund, in return for a premium, the right to sell the underlying security to
the writer (seller) at a specified price during the term of the option. Put
options on stock indices are similar to put options on stocks except for the
delivery requirements. Instead of giving the Fund the right to make delivery of
stock at a specified price, a put option on a stock index gives the Fund, as
holder, the right to receive an amount of cash upon exercise of the option.
The Fund may also write covered call options. As the writer of a call option,
the Fund has the obligation upon exercise of the option during the option period
to deliver the underlying security upon payment of the exercise price.
The Fund may only: (1) buy listed put options on stock indices and stock index
futures contracts; (2) buy listed put options on securities held in its
portfolio; and (3) sell listed call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment of
further consideration (or has segregated cash in the amount of any such
additional consideration). The Fund will maintain its positions in securities,
option rights, and segregated cash subject to puts and calls until the options
are exercised, closed, or expired.
The Fund may also enter into stock index futures contracts. A stock index
futures contract is a bilateral agreement which obligates the seller to deliver
(and the purchaser to take delivery of) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific stock index
at the close of trading of the contract and the price at which the agreement is
originally made. There is no physical delivery of the stocks constituting the
index, and no price is paid upon entering into a futures contract. In general,
contracts are closed out prior to their expiration. The Fund, when purchasing or
selling a futures contract, will initially be required to deposit in a
segregated account in the broker's name with the Fund's custodian an amount of
cash or U.S. government securities approximately equal to 5%-10% of the contract
value. This amount is known as "initial margin," and it is subject to change by
the exchange or board of trade on which the contract is traded. Subsequent
payments to and from the broker are made on a daily basis as the price of the
index or the securities underlying the futures contract fluctuates.
These payments are known as "variation margins," and the fluctuation in value of
the long and short positions in the futures contract is a process referred to as
"marking to market." The Fund may decide to close its position on a contract at
any time prior to the contract's expiration. This is accomplished by the Fund
taking an opposite position at the then prevailing price, thereby terminating
its existing position in the contract. Because the initial margin resembles a
performance bond or good faith deposit on the contract, it is returned to the
Fund upon the termination of the contract, assuming that all contractual
obligations have been satisfied. Therefore, the margin utilized in futures
contracts is readily distinguishable from the margin employed in security
transactions, since the margin employed in futures contracts does not involve
the borrowing of funds to finance the transaction.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS
The Fund will not enter into futures contracts to the extent that, immediately
thereafter, the sum of its initial margin deposits on open contracts exceeds 5%
of the market value of the Fund's total assets. Further, the Fund will enter
into stock index futures contracts only for bona fide hedging purposes or such
other purposes permitted under Part 4 of the regulations promulgated by the
Commodity Futures Trading Commission ("CFTC"). Also, the Fund may not enter into
stock index futures contracts and options to the extent that the value of such
contracts would exceed 20% of the Fund's total net assets and may not purchase
put options to the extent that more than 5% of the value of the Fund's total
assets would be invested in premiums on open put option positions.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities up to one-third of the value of its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the sub-manager has determined are
creditworthy under guidelines established by the Trustees and will receive
collateral equal to at least 100% of the value of the securities loaned.
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. A reverse repurchase
transaction is similar to borrowing cash. In a reverse repurchase agreement the
Fund transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed-upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These securities are marked to market daily
and are maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. For the fiscal years ended October 31, 1997,
and October 31, 1996, the portfolio turnover rates for the Fund were 52% and
42%, respectively.
INVESTMENT LIMITATIONS
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities. However, the Fund may purchase
stock index futures contracts and put options on stock indices and stock index
futures contracts to the extent that not more than 5% of the Fund's total assets
are required as initial margin deposit for futures contracts and not more than
20% of the Fund's total net assets are invested in futures and options at any
time.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, other than in connection with buying stock index futures contracts and
put options on stock index futures contracts, but may obtain such short-term
credits as are necessary for the clearance of transactions.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the Fund from
purchasing or holding U.S. government obligations, money market instruments,
bonds, debentures, notes, certificates of indebtedness or other debt securities,
entering into repurchase agreements, or engaging in other transactions where
permitted by the Fund's investment objective and policies and the Declaration of
Trust of the Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of restricted securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may borrow money
and engage in reverse repurchase agreements in amounts up to one-third of the
value of its total assets, including the amounts borrowed. The Fund will not
borrow money or engage in reverse repurchase agreements for investment leverage,
but rather as a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption requests
when the liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of its total assets are outstanding. During the period any reverse
repurchase agreements are outstanding, but only to the extent necessary to
assure completion of the reverse repurchase agreements, the Fund will restrict
the purchase of portfolio instruments to money market instruments maturing on or
before the expiration date of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 10% of the value of
total assets at the time of the borrowing.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of the value of its total assets in the
securities of any one issuer, except U.S. government securities, or invest in
more than 10% of the voting securities of any one issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
securities of companies in any one industry. However, investing in U.S.
government obligations shall not be considered investing in any one industry.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, including partnership interests in
real estate, although it may invest in securities of companies whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
INVESTING IN RESTRICTED SECURITIES
The Fund will limit its investment in restricted securities to 5% of the value
of its total assets in securities subject to restrictions on resale under the
Securities Act of 1933.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the amount
of any further payment.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, other than put options on
stock, stock indices and stock index futures contracts, unless the securities
are held in the Fund's portfolio and not more than 5% of the value of the Fund's
total assets would be invested in premiums on open put option positions and not
more than 20% of the Fund's total net assets are invested in put options and
future contracts at any time.
ACQUIRING SECURITIES
The Fund will not purchase securities of other investment companies except to
the extent permitted by the Investment Company Act of 1940, or except as part of
a merger, consolidation, or other acquisition. It will not invest in securities
for the purpose of exercising control or management.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in securities which are
illiquid, including repurchase agreements providing for settlement more than
seven days after notice.
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
restriction.
The Fund does not expect to borrow money or pledge securities in excess of 5% of
the value of its net assets during the coming fiscal year.
For purposes of its policies and 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."
FEDERATED INDEX TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Index Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President and Trustee of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary, and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some of
the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc.--1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of December 9, 1997, the following shareholders of record owned 5% or more of
the outstanding Institutional Shares of the Fund: Charles Schwab & Co. Inc., San
Francisco, CA, owned approximately 714,909 shares (8.29%).
As of December 9, 1997, no shareholders of record owned 5% or more of the
outstanding Class C Shares of the Fund.
TRUSTEES COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <S>
John F. Donahue $0 $0 for the Trust and
Trustee 56 other investment companies in the Fund Complex
J. Christopher Donahue $0 $0 for the Trust and
Executive Vice President 18 other investment companies in the Fund Complex
and Trustee
Thomas G. Bigley $459.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $505.00 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
William J. Copeland $505.00 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
James E. Dowd $505.00 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $459.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $505.00 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Peter E. Madden $459.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr. $459.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar $459.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts $459.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
</TABLE>
* Information is furnished for the fiscal year ended October 31, 1997.
# The aggregate compensation is provided for the Trust which is comprised of
three portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
MANAGEMENT SERVICES
MANAGERS TO THE FUND
The Fund's Manager is Federated Management. It is a subsidiary of Federated
Investors. All the voting securities of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, his wife, and his son, J.
Christopher Donahue.
The Fund's Sub-Manager is ANB Investment Management and Trust Company
("ANB"). It is a wholly-owned subsidiary of First Chicago Investment Management
Company ("First Chicago"). First Chicago is a wholly-owned subsidiary of First
National Bank of Chicago, which in turn, is a wholly-owned subsidiary of First
Chicago NBD Corporation. The Sub-Manager's directors are J. Stephen Baine, Susan
O. Jones, Nick G. Preda, J. Dirk Vos, Richard W. Wade, Thomas P. Micheals and
Neil R. Wright. The officers of ANB are J. Stephen Baine, Chairman and
President; Susan O. Jones, Chief Operating Officer; Neil R. Wright, Chief
Investment Officer; and Thomas P. Micheals, Secretary and Treasurer. As
described in the prospectus, it is anticipated that First Chicago will sell ANB
to Northern Trust Corporation. After the sale, the directors are anticipated to
be James M. Snyder, Barry G. Hastings, Perry R. Pero, Sheila A. Penrose and
Jeffrey H. Wessel. After the sale, the officers are anticipated to be James M.
Snyder, Chief Executive Officer and Jeffrey H. Wessel, President.
Neither the Manager nor the Sub-Manager shall be liable to the Trust, the Fund,
or any shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or omitted by
the Manager or Sub-Manager, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon either of them by their respective management contracts.
MANAGEMENT FEES
For their management services, Federated Management receives an annual fee as
described in the prospectus. ANB receives an annual fee for its services, which
will be paid by the manager, as described in the prospectus.
For the fiscal years ended October 31, 1997, 1996, and 1995, the Manager earned
$695,438, $736,307, and $540,284, respectively, of which $0, $22,506, and
$56,620, respectively, was voluntarily waived.
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 shares of funds offered by Federated Securities Corp.
BROKERAGE TRANSACTIONS
The Managers may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Managers and 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 provided by brokers and dealers may be used by the Managers or their
affiliates in advising the Fund and other accounts. To the extent that receipt
of these services may supplant services for which the Managers or their
affiliates might otherwise have paid, it would tend to reduce their expenses.
The Managers and their affiliates exercise reasonable business judgment in
selecting 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. During the fiscal years ended October 31, 1997,
1996, and 1995, the Fund paid total brokerage commissions of $153,319, $146,470,
and $165,266, respectively.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Managers, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Managers are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Managers to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Trust/Fund. Federated Services Company, Pittsburgh, PA, provides
certain accounting and recordkeeping services with respect to the Trust's/Fund's
portfolio investments. The fee paid for this service is based upon the level of
the Trust's/Fund's average net assets for the period plus out-of-pocket
expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type, and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Fund is explained in the respective prospectuses under "Investing in the
Fund."
REINVESTMENT PRIVILEGE (CLASS C SHARES)
The reinvestment privilege is available for all Class C Shares of the Fund.
Class C Shares may be reinvested in the same Share class within 120 days but
would not be entitled to a reimbursement of the contingent deferred sales charge
if paid at the time of redemption. However, such reinvested shares would not be
subject to a contingent deferred sales charge upon later redemption. In
addition, if the Class C Shares were reinvested through a financial
intermediary, the financial intermediary would not be entitled to an advanced
payment from Federated Securities Corp. on the reinvested Shares. Federated
Securities Corp. must be notified by the shareholder in writing or by his
financial intermediary of the reinvestment in order to eliminate a sales charge
or a contingent deferred sales charge. If the shareholder redeems Shares in the
Fund, there may be tax consequences.
DISTRIBUTION PLAN (CLASS C SHARES) AND SHAREHOLDER SERVICES
With respect to Class C Shares, the Fund has adopted a Distribution Plan in
accordance with Investment Company Act Rule 12b-1. Additionally, the Fund has
adopted a Shareholder Services Agreement with respect to all classes of Shares.
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Plan (Class C Shares only), the Trustees expect that the Fund
will be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist the Fund in pursuing its investment objectives. By
identifying potential investors whose needs are served by the Fund's objectives,
and properly servicing these accounts, the Fund may be able to curb sharp
fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal year ended October 31, 1997, the Fund's Institutional Shares paid
shareholder service fees in the amount of $347,719, of which $254,663 were
waived.
The Fund's Class C Shares did not exist prior to November 10, 1997.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
EXCHANGING SECURITIES FOR SHARES
Investors may exchange convertible securities they already own for Shares, or
they may exchange a combination of convertible securities and cash for Shares.
Any securities to be exchanged must meet the investment objective and policies
of the Fund, must have a readily ascertainable market value, must be liquid, and
must not be subject to restrictions on resale.
The Fund will prepare a list of securities which are eligible for acceptance and
furnish this list to brokers upon request. The Fund reserves the right to reject
any security, even though it appears on the list, and the right to amend the
list of acceptable securities at any time without notice to brokers or
investors.
An investor or investment broker acting for an investor should forward the
securities in negotiable form with an authorized letter of transmittal to
Federated Securities Corp. Federated Securities Corp. will determine that
transmittal papers are in good order and forward to the Fund's custodian, State
Street Bank and Trust Company. The Fund will notify the investor or broker of
its acceptance and valuation of the securities within five business days of
their receipt by State Street Bank.
The Fund values such securities in the same manner as the Fund values its
portfolio securities. The basis of the exchange will depend upon the net asset
value of Shares on the day the securities are valued. One Share will be issued
for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription, conversion, or
other rights attached to the securities become the property of the Fund, along
with the securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Fund
shares, a gain or loss may be realized by the investor.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset value
for each class of shares is calculated by the Fund are described in the
prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
* for equity securities, according to the last sale price on a national
securities exchange, if available;
* in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
* for bonds and other fixed-income securities, at the last sale price on a
national securities exchange if available, otherwise as determined by an
independent pricing service;
* for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost; or
* for all other securities, at fair value as determined in good faith by
the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
The Fund will value stock index futures contracts and options on stocks, stock
indices and stock index futures contracts at their market values established by
the exchanges at the close of option trading on such exchanges unless the
Trustees determine in good faith that another method of valuing option positions
is necessary to appraise their fair value.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after State Street
Bank receives the redemption request. Redemption procedures are explained in the
respective prospectuses under "Redeeming Shares" or "Redeeming and Exchanging
Shares" (Class C Shares).
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part with
securities from the Fund's portfolio.
Such securities will be valued with the same valuation techniques employed in
determining net asset value, and the securities will be selected in a manner the
Trustees determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund will redeem Shares for any one shareholder in cash
up to the lesser of $250,000 or 1% of the Fund's net asset value during any
90-day period.
CONTINGENT DEFERRED SALES CHARGE (CLASS C SHARES)
In computing the amount of the applicable Contingent Deferred Sales Charge,
redemptions are deemed to have occurred in the following order: (1) Class C
Shares acquired through the reinvestment of dividends and long-term capital
gains; (2) Class C Shares held for more than one full year from the date of
purchase; (3) Class C Shares held for for less than one full year from the date
of purchase on a first-in, first-out basis.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust on behalf
of the Fund. To protect shareholders of the Fund, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders of the Fund for such acts or obligations of the Trust. These
documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument that the Trust enters into or its Trustees enter into
or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required to use the
property of the Fund 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 on behalf of the Fund. Therefore, financial
loss resulting from liability as a shareholder of the Fund will occur only if
the Trust itself cannot meet its obligations to indemnify shareholders and pay
judgments against them from the assets of the Fund.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because the Fund expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* invest in securities within certain statutory limits; and * distribute to
its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term capital
gains distributed to them regardless of how long they have held the Fund shares.
TOTAL RETURN
The Fund's average annual total return for Institutional Shares for the one-year
and five-year periods ended October 31, 1997, and for the period from August 11,
1992 (Start of Performance) to October 31, 1997 was 27.54%, 15.95%, and 16.09%,
respectively. The Fund's Class C Shares did not exist prior to November 10,
1997.
The average annual total return for the Trust is the average compounded rate of
return for a given period that would equate a $1,000 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 offering price 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 $1,000, adjusted over the period by any additional
shares, assuming the quarterly reinvestment of all dividends and distributions.
YIELD
The Fund's SEC yield for Institutional Shares for the thirty-day period ended
October 31, 1997 was 0.50%. The Fund's Class C Shares did not exist prior to
November 10, 1997.
The yield for the Institutional Shares and Class C Shares is determined each day
by dividing the net investment income per share (as defined by the Securities
and Exchange Commission) earned by the Fund over a thirty-day period by the
offering price per share of the Fund on the last day of the period. This value
is annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated each
month over a twelve-month period and is reinvested every six months. The yield
does not necessarily reflect income actually earned by the Fund because of
certain adjustments required by the Securities and Exchange Commission and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes in
interest rates and market value of portfolio securities;
* changes in Fund or class expenses;
* the relative amount of Fund cash flow; and * various other factors.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
* LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in offering price over a specific period
of time. From time to time, the Fund will quote its Lipper ranking in the
"index funds" category in advertising and sales literature.
* RUSSELL 2000 INDEX--is a broadly diversified index consisting of
approximately 2,000 small capitalization common stocks that can be used to
compare to the total returns of funds whose portfolios are invested
primarily in small capitalization common stocks.
* STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS--is a
composite index of common stocks in industry, transportation, and financial
and public utility companies that can be used to compare to the total
returns of funds whose portfolios are invested primarily in common stocks.
In addition, the Standard & Poor's index assumes reinvestments of all
dividends paid by stocks listed on its index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees calculated
in Standard & Poor's figures.
* WILSHIRE 5000 EQUITY INDEXES--consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available, and can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks.
* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on nonstandardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
quarterly reinvestment of dividends over a specified period of time.
Advertising and other promotional literature may include charts, graphs and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making--structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. The traders handle trillions of dollars in
annual trading volume.
In the equity sector, Federated Investors has more than 26 years' experience. As
of December 31, 1996, Federated Investors managed 31 equity funds totaling
approximately $7.6 billion in assets across growth, value, equity income,
international, index and sector (i.e. utility) styles. Federated Investor's
value-oriented management style combines quantitative and qualitative analysis
and features a structured, computer-assisted composite modeling system that was
developed in the 1970s.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high-yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed-income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global
portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.
FRANK RUSSELL COMPANY
Frank Russell Company reserves the right, at any time and without notice, to
alter, amend, terminate or in any way change its Index. Frank Russell Company
has no obligation to take the needs of any particular fund or its participants
or any other product or person into consideration in determining, composing or
calculating the index.
Frank Russell Company's publication of the Index in no way suggests or implies
an opinion by Frank Russell Company as to the attractiveness or appropriateness
of investment in any or all securities upon which the Index is based. Frank
Russell Company makes no representation, warranty, or guarantee as to the
accuracy, completeness, reliability, or otherwise of the Index or any data
included in the Index. Frank Russell Company makes no representation or warranty
regarding the use or the results of use, of the Index or any data included
therein, or any security (or combination thereof) comprising the Index. Frank
Russell Company makes no other express or implied warranty, and expressly
disclaims any warranty, of any kind, including, without means of limitation, any
warranty of merchantability or fitness for a particular purpose with respect to
the Index or any data or any security (or combination thereof) included therein.
* Source: Investment Company Institute
Federated Mini-Cap Fund
Institutional Shares
Annual Report for 12 Months Ended October 31, 1997
MANAGEMENT DISCUSSION AND ANALYSIS
Institutional Shares' total return for the 12 months ended October 31, 1997 was
27.54%.* The target Index (Russell 2000**) had a total return of 29.33% during
the period. Institutional Shares' performance varied from the Index due to
transaction costs, administrative expenses, and holdings of stock index futures
contracts, which are held to enhance fund liquidity.*** It is important to note
that transactions costs for small company stocks are much higher than that for
large company stocks due to illiquidity factors, i.e., there are sometimes very
few buyers and sellers of small company stocks.+
The U.S. stock market continued its strong climb in the last year despite
increasing volatility from concerns over 1) interest rate increases, 2)
corporate earnings shortfalls, and 3) foreign market troubles.
In December 1996, Federal Reserve Chairman's comment that the U.S. stock market
was fueled by "irrational exuberance" sent the market lower as investors
interpreted the comment as a signal of a likely hike in interest rates. In March
1997, the Fed slightly raised its target rate for fed funds, triggering another
downturn.
In late summer, the stocks of some "bellwether" companies (e.g., Coca Cola,
Gillette) were pummeled when they announced earnings shortfalls. This showed the
market's sensitivity to bad earnings news and that large company stocks may be
nearing the end of their relatively strong performance over the last few years.
In late October, the U.S. stock market suffered its most recent setback from the
"Asian Flu," a downturn in many Asian financial markets, triggered by currency
problems. Investors fear that ripple effects from weakening Asian economies may
affect the profitability of U.S.-based firms.
However, most investors in U.S. stocks apparently believe the market is still
attractive, bidding prices back up in a short period of time after each
downturn.
During the last year consumer staples, producer durables, and transportation
were among the strongest performing sectors while technology, oil, and materials
processing were among the worst performing sectors in the Index.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will flucuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
** This index is unmanaged.
*** Redemption is at the then-current net asset value, which may be more or less
than the original cost.
+ Small cap stocks have historically experienced greater volatility than
average.
Federated Mini-Cap Fund
Institutional Shares
GROWTH OF $25,000 INVESTED IN INSTITUTIONAL SHARES OF FEDERATED MINI-CAP
FUND
The graph below illustrates the hypothetical investment of $25,000 in the
Institutional Shares of Federated Mini-Cap Fund (the "Fund") from August 11,
1992 (start of performance) to October 31, 1997 compared to the Russell 2000
Index (RUS2).+
[Graphic] See attached Appendix 1
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Institutional Shares'
prospectus dated December 31, 1997, and, together with financial statements
contained therein, constitutes the Institutional Shares' annual report.
* The Institutional Shares' performance assumes the reinvestment of all
dividends and distributions. The RUS2 has been adjusted to reflect
reinvestment of dividends on securities in the index.
+ The RUS2 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Institutional Shares'
performance. This index is unmanaged.
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 31420E304
006683 (12/97)
[Graphic]
Federated Mid-Cap Fund
(A Portfolio of Federated Index Trust)
PROSPECTUS
Federated Index Trust (the "Trust") is an open-end, management investment
company (a mutual fund). Federated Mid-Cap Fund (the "Fund"), a portfolio of the
Trust, seeks to provide investment results generally corresponding to the
aggregate price and dividend performance of publicly traded common stocks that
comprise the Standard & Poor's MidCap 400 Index (the "Index"). The Fund is
neither sponsored by nor affiliated with Standard & Poor's.
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 BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information, dated December
31, 1997, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information, or a paper copy of this prospectus if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated December 31, 1997
TABLE OF CONTENTS
Summary of Fund Expenses 1
Financial Highlights 2
General Information 3
Investment Information 3
Investment Objective 3
Investment Policies 3
Investment Risks 5
Investment Limitations 6
Federated Index Trust Information 6
Management of the Trust 6
Distribution of Fund Shares 8
Fund Administration 8
Net Asset Value 8
Investing in the Fund 8
Share Purchases 8
Minimum Investment Required 9
What Shares Cost 9
Exchanging Securities for Fund Shares 9
Confirmations and Account Statements 9
Dividends 9
Capital Gains 9
Redeeming Shares 9
Telephone Redemption 10
Written Requests 10
Accounts with Low Balances 10
Shareholder Information 10
Voting Rights 10
Tax Information 11
Federal Income Tax 11
State and Local Taxes 11
Performance Information 11
Financial Statements 12
Report of Ernst & Young LLP, Independent Auditors 31
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) None Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering price) None Contingent Deferred Sales Charge (as a
percentage of original purchase
price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C>
Management Fee (after waiver)(1) 0.31%
12b-1 Fee None
Total Other Expenses 0.29%
Shareholder Services Fee (after waiver)(2) 0.03%
Total Operating Expenses(3) 0.60%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.40%.
(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole discretion.
The maximum shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.91% absent the voluntary
waivers of portions of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Federated Index Trust Information." Wire-transferred redemptions of less
than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $ 6
3 Years $20
5 Years $34
10 Years $76
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors, on
page 31.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995 1994 1993 1992(A)
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.75 $12.78 $11.02 $11.57 $9.99 $10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.18 0.18 0.22 0.21 0.25 0.080
Net realized and unrealized gain (loss) on 4.00 1.73 1.93 (0.07) 1.56 (0.086)
investments and futures contracts
Total from investment operations 4.18 1.91 2.15 0.14 1.81 (0.006)
LESS DISTRIBUTIONS
Distributions from net investment income (0.17) (0.20) (0.20) (0.19) (0.23) (0.004)
Distributions from net realized gain on (0.59) (0.74) (0.19) (0.50) -- --
investments and futures contracts
Total distributions (0.76) (0.94) (0.39) (0.69) (0.23) (0.004)
NET ASSET VALUE, END OF PERIOD $17.17 $13.75 $12.78 $11.02 $11.57 $9.99
TOTAL RETURN(B) 31.83% 15.80% 20.12% 1.25% 17.33% 0.00%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.60% 0.60% 0.60% 0.54% 0.00% 0.00%
Net investment income 1.19% 1.31% 1.89% 1.84% 2.33% 0.93%*
Expense waiver/reimbursement(c) 0.31% 0.34% 0.41% 0.59% 1.75% 0.40%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $73,874 $59,948 $62,580 $44,012$16,192 $3
Average commission rate paid(d) $0.0520 $0.0432 -- -- -- --
Portfolio turnover 19% 17% 26% 30% 59% 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from September 3, 1992 (date of initial
public investment) to October 31, 1992.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 30, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. This prospectus relates only to the Fund. The Fund
is designed primarily for institutions investing on behalf of their customers. A
minimum initial investment of $25,000 over a 90-day period is required.
Fund shares are currently sold and redeemed at net asset value without a
sales charge or redemption fee being imposed by the Fund. The Fund's net
asset value per share fluctuates.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund 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. The investment objective of the Fund cannot be
changed without the approval of shareholders. While there is no assurance that
the Fund will achieve its investment objective, it endeavors to do so by
following the investment policies described in this prospectus.
INVESTMENT POLICIES
The investment policies described below may be changed by the Board of Trustees
("Trustees") without shareholder approval. Shareholders will be notified before
any material changes in these policies become effective.
The Fund pursues its investment objective by investing primarily in the 400
common stocks that comprise the Index. These 400 common stocks are issued by
medium-sized domestic companies whose market capitalizations generally range
from $200 million to $5 billion. The stocks are selected for inclusion in the
Index by Standard & Poor's ("S&P") on the basis of the issuer's market size,
liquidity and industry group representation. A particular stock's weighting in
the Index is based on its relative total market value, that is, the stock's
market price per share times the number of shares outstanding. From time to
time, S&P may add or delete stocks from the Index. The inclusion of a stock in
the Index in no way implies an opinion by S&P as to its attractiveness as an
investment, nor is S&P a sponsor or in any way affiliated with the Fund.
The Fund will not attempt to actively manage the Fund's portfolio. Rather, the
Fund will utilize a passive approach in pursuit of its investment objective,
meaning that the Fund will not employ the traditional management functions of
economic, financial and market analysis associated with actively managed funds.
Thus, unless an issuer's stock is removed from the Index by S&P, an issuer's
adverse financial circumstance will not cause its stock to be eliminated from
the Fund's portfolio.
In keeping with the passive management approach, the Fund will be managed using
a computer program to determine which securities are to be purchased or sold so
as to replicate the composition of the Index to the extent feasible. Stocks will
be included in the Fund's portfolio on the basis of each stock's weighting in
the Index, starting with the heaviest-weighted stock in the Index. As a result,
the proportion of Fund assets invested in a particular stock will be nearly
identical to the percentage of such stock represented in the Index. From time to
time, adjustments will be made in the Fund's portfolio so as to respond to
changes in the Index's composition, as well as corporate reorganizations and
other circumstances. The Fund will attempt to be fully invested in the common
stocks comprising the Index, and, in any event, at least 80% of the Fund's
assets will be invested in stocks represented in the Index. It is expected that
adjustments to the Fund's portfolio will occur infrequently and that
transactional costs and other expenses will be minimized. Because portfolio
turnover is expected to be well below that encountered in actively managed
investment company portfolios, the Fund anticipates that accompanying costs,
including accounting costs, brokerage fees, custodial expenses and transfer
taxes, will be relatively low. While the cash flows into and out of the Fund
will have an impact upon the Fund's portfolio turnover rate and its ability to
replicate and track the performance of the Index, investment adjustments will be
made, as practicably as possible, to account for these circumstances.
The Fund believes that the indexing approach described above constitutes an
effective and reasonable method of substantially duplicating percentage changes
in the Index. While the Fund will not duplicate the Index's performance
precisely, it is anticipated that there will be a close correlation between the
Fund's performance and that of the Index in both rising and falling markets. The
Fund will attempt to achieve a correlation between the performance of its
portfolio and that of the Index of at least 95%, without taking into account
expenses of the Fund. A perfect correlation would be indicated by a figure of
100%, which would be achieved when the Fund's net asset value, including the
value of its dividends and capital gains distributions, increases or decreases
in exact proportion to changes in the Index. The Fund's ability to correlate its
performance with that of the Index may be affected by, among other things,
changes in the securities markets, the manner in which S&P calculates the Index
and the size and timing of cash flows into and out of the Fund.
In order to accommodate cash flows into and out of the Fund's portfolio, the
Fund may enter into stock index futures contracts, options and options on stock
index futures contracts. This will allow the Fund to simultaneously maximize the
level of the Fund assets used to track the movements of the Index. The Fund can
sell futures contracts and options in order to close out a previously
established position. The Fund will not enter into stock index futures
contracts, options and options on stock index futures contracts for speculative
purposes.
ACCEPTABLE INVESTMENTS
Under normal market circumstances, the Fund will invest at least 80% of its
assets in common stocks that are represented in the Index. In addition, the Fund
may hold cash reserves which may, for other than defensive purposes, be invested
in, but are not limited to, the following:
U.S. GOVERNMENT SECURITIES
The Fund is permitted to invest in U.S. government securities which are
either issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These securities include, but are not limited to:
* direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
* notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
* notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.
REPURCHASE AGREEMENTS
The U.S. government securities and other securities in which the Fund invests
may be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements pursuant to which banks, broker/dealers and other recognized
financial institutions sell U.S. government securities or other securities to
the Fund and agree at the time of sale to repurchase them at a mutually agreed
upon time and price. To the extent that the original seller does not repurchase
the securities from the Fund, the Fund could receive less than the repurchase
price on any sale of such securities.
MONEY MARKET INSTRUMENTS
The Fund may also invest in:
* commercial paper; and
* instruments of domestic banks and savings associations (such as
certificates of deposit and bankers' acceptances).
STOCK INDEX FUTURES AND OPTIONS
The Fund may utilize stock index futures contracts, options and options on stock
index futures contracts, subject to the limitation that the value of these
futures contracts and options will not exceed 20% of the Fund's total assets.
Also, the Fund will not purchase options to the extent that more than 5% of the
value of the Fund's total assets would be invested in premiums on open put
option positions. These futures contracts and options will be used to handle
cash flows into and out of the Fund and to potentially reduce transactional
costs, since transactional costs associated with futures and options contracts
can be lower than costs stemming from direct investments in stocks.
There are several risks accompanying the utilization of futures contracts to
effectively anticipate market transactions. First, positions in futures
contracts may be closed only on an exchange or board of trade that furnishes a
secondary market for such contracts. While the Fund plans to utilize futures
contracts only if there exists an active market for such contracts, there is no
guarantee that a liquid market will exist for the contracts at a specified time.
Furthermore, because, by definition, futures contracts look to projected price
levels in the future and not to current levels of valuation, market
circumstances may result in there being a discrepancy between the price of the
stock index future and the movement in the stock index. The absence of a perfect
price correlation between the futures contract and its underlying stock index
could stem from investors choosing to close futures contracts by offsetting
transactions, rather than satisfying additional margin requirements. This could
result in a distortion of the relationship between the index and futures market.
In addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of participation by
speculators in the futures market could result in price fluctuations.
In view of these considerations, the Fund will comply with the following
restrictions when purchasing and selling futures contracts. First, the Fund will
not participate in futures transactions if the sum of its initial margin
deposits on open contracts will exceed 5% of the market value of the Fund's
total assets, after taking into account the unrealized profits and losses on
those contracts into which it has entered. Second, the Fund will not enter into
these contracts for speculative purposes. Third, since the Fund does not
constitute a commodity pool, it will not market itself as such, nor serve as a
vehicle for trading in the commodities futures or commodity options markets. In
this regard, the Fund will disclose to all prospective investors the limitations
on its futures and options transactions, and will make clear that these
transactions are entered into only for bona fide hedging purposes or such other
purposes permitted under regulations promulgated by the Commodity Futures
Trading Commission ("CFTC"). Also, the Fund intends to claim an exclusion from
registration as a commodity pool operator under the regulations promulgated by
the CFTC.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities on a short-term basis or long-term
basis up to one-third of the value of its total assets to broker/dealers, banks,
or other institutional borrowers of securities. The Fund will only enter into
loan arrangements with broker/dealers, banks or other institutions which the
managers have determined are creditworthy under guidelines established by the
Trustees. The Fund will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the securities
loaned.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase short-term U.S. government securities on a when-issued or
delayed delivery basis. These transactions are arrangements in which the Fund
purchases securities with payment and delivery scheduled for a future time. The
seller's failure to complete these transactions may cause the Fund to miss a
price or yield considered to be advantageous. Settlement dates may be a month or
more after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the managers deem it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTMENT RISKS
As with other mutual funds that invest primarily in equity securities, the Fund
is subject to market risks. That is, the possibility exists that common stocks
will decline over short or even extended periods of time, and the United States
equity market tends to be cyclical, experiencing both periods when stock prices
generally increase and periods when stock prices generally decrease. However,
because the Fund invests primarily in medium capitalization stocks, there are
some additional risk factors associated with investments in the Fund. In
particular, stocks in the medium capitalization sector of the United States
equity market tend to be slightly more volatile in price than larger
capitalization stocks, such as those included in the Standard & Poor's 500
Composite Stock Price Index. This is because, among other things, medium-sized
companies have less certain growth prospects than larger companies; have a lower
degree of liquidity in the equity market; and tend to have a greater sensitivity
to changing economic conditions. Further, in addition to exhibiting slightly
higher volatility, the stocks of medium-sized companies may, to some degree,
fluctuate independently of the stocks of large companies. That is, the stocks of
medium-sized companies may decline in price as the price of large company stocks
rises or vice versa. Therefore, investors should expect that the Fund will be
more volatile than, and may fluctuate independently of, broad stock market
indices such as the Standard & Poor's 500 Composite Stock Price Index.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for at
least a percentage of its cash value with an agreement to buy it back on a
set date) except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitation, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in this policy becomes effective.
The Fund will not invest more than 15% of its net assets in securities that are
illiquid.
FEDERATED INDEX TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by the Trustees. The Trustees are responsible for managing
the business affairs of the Trust and for exercising all of the powers of the
Trust except those reserved for the shareholders. The Executive Committee of the
Board of Trustees handles the Trustees' responsibilities between meetings of the
Trustees.
FUND'S MANAGER
Federated Management serves as the Fund's manager (the "Manager"). The Trust has
entered into a management contract (the "Management Contract") with the Manager,
which, in turn, has entered into a sub-management contract (the "Sub-Management
Contract") with ANB Investment Management and Trust Company ("ANB" or the
"Sub-Manager") (ANB and the Manager are collectively referred to herein as
"Managers"). It is the Manager's responsibility to select the SubManager,
subject to the review and approval of the Trustees and to review and evaluate
the Sub-Manager's continued performance. The Manager is also responsible for
providing administrative services to the Fund.
Subject to the supervision and direction of the Trustees, the Manager provides
to the Fund investment management evaluation services principally by performing
initial due diligence on the Sub-Manager for the Fund and thereafter monitoring
and evaluating the performance of the Fund's Sub-Manager through quantitative
and qualitative analyses. In addition, the Manager conducts periodic in-person,
telephonic and written consultations with the Sub-Manager. In initially
evaluating the Sub-Manager, the Manager considered, among other factors, the
Sub-Manager's level of expertise; relative performance over a minimum period of
five years; level of efficiency; level of adherence to investment discipline or
philosophy; personnel, facilities and financial strength; and quality of service
and client communications. On an ongoing basis, the Manager is responsible for
communicating performance expectations and evaluations to the Sub-Manager;
monitoring tracking errors; monitoring and analyzing the appropriate futures
contracts to purchase and the futures holdings of the Fund as a percentage of
Fund assets; monitoring market timing in the Fund; discussing with the
Sub-Manager which method of indexing to use; and ultimately recommending to the
Trustees whether the Sub-Management Contract should be renewed, modified or
terminated. The Manager provides written reports to the Trustees regarding the
results of its evaluation and monitoring functions. In addition, the Manager is
responsible for providing the Fund with administrative services, including, but
not limited to, shareholder servicing and certain legal and accounting services.
The Manager is also responsible for conducting all operations of the Fund,
except those operations contracted to the Sub-Manager, custodian, transfer agent
and dividend disbursing agent. As described below, the Manager receives an
annual fee from the Fund for performing its responsibilities under the
Management Contract.
MANAGEMENT FEES
The Fund's Manager receives an annual management fee equal to 0.40% of the
Fund's average daily net assets. Under the Management Contract, which provides
for the voluntary waiver of the management fee by the Manager, the Manager will
voluntarily waive some or all of the management fee. The Manager can terminate
this voluntary waiver of some or all of its management fee at any time in its
sole discretion.
MANAGER'S BACKGROUND
Federated Management, a Delaware business trust organized on April 11, 1989, is
a registered investment adviser under the Investment Advisers Act of 1940. It is
a subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Federated Management and other subsidiaries of Federated
Investors serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $110 billion invested
across over 300 funds under management and/or administration by its
subsidiaries, as of December 31, 1996, Federated Investors is one of the largest
mutual fund investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,500
financial institutions nationwide.
Both the Trust and the Manager have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
SUB-MANAGER
Under the terms of the Sub-Management Contract between the Manager and ANB, ANB
serves as the Fund's Sub-Manager. The Sub-Manager will develop, maintain and run
the computer program designed to determine which securities will be purchased
and sold so as to replicate the composition of the Index to the extent feasible,
and, subject to the Manager's oversight, has complete discretion to purchase and
sell portfolio securities for the Fund within the Fund's investment objective,
restrictions and policies.
SUB-MANAGEMENT FEES
For its services under the Sub-Management Contract, ANB receives an annual fee
from the Manager of 0.035% of the Fund's average daily net assets. This fee is
paid by the Manager out of its resources and is not an incremental Fund expense.
No performance or incentive fees are paid to the Sub-Manager.
SUB-MANAGER'S BACKGROUND
ANB, incorporated in the State of Illinois on July 1, 1988, is a registered
investment adviser under the Investment Advisers Act of 1940. ANB is a
wholly-owned subsidiary of First Chicago Investment Management Company which, in
turn, is an indirect wholly-owned subsidiary of First Chicago NBD Corporation.
It serves as investment adviser principally to corporate defined benefit and
defined contribution plans which have, as of June 30, 1997, placed approximately
$28.7 billion in assets with ANB. Since 1973, when American National Bank and
Trust Company of Chicago introduced its first commingled equity index fund, ANB
has developed and managed a family of equity and bond index funds in which some
200 nationwide non-financial institution clients invest. In total, ANB manages
72 commingled/common trust funds. On October 3, 1997, First Chicago NBD
Corporation announced an agreement to sell ANB to Northern Trust Corporation
("Northern Trust"). The Fund anticipates that on December 31, 1997, but no later
than January 2, 1998, First Chicago Investment Company will have closed the sale
of ANB to Northern Trust. After the closing, ANB will be a wholly-owned
subsidiary of Northern Trust or one of its subsidiaries and is expected to
change its name to Northern Trust Quantitative Advisors, Inc. The Manager has
recommended that ANB continue as Sub-Manager after the expected sale.
If the sale takes place, the subadvisory contract between the Manager and ANB
will terminate by its terms and a new contract will have to be approved by the
Trustees and the shareholders. The Board of Trustees of the Fund approved a new
contract with ANB on November 20, 1997. Shareholders will be asked to approve
the arrangement before February 28, 1998. Because the contract would terminate
prior to a shareholder meeting and vote, the Fund will pursue exemptive relief
from the Securities and Exchange Commission (the "SEC") before the closing in
order to permit ANB to continue as Sub-Manager. If the closing, SEC exemptive
relief, and shareholder approval do not occur before March 1, 1998, shareholders
will be notified, and the Manager will assume its responsibility to conduct all
advisory activities.
Northern Trust is a bank holding company and one of the country's largest trust
institutions, with subsidiaries located across the United States and in several
international locations. At the end of the third quarter of 1997, total assets
of Northern Trust were $26.9 billion and trust assets under administration were
$1 trillion.
Also, since 1990, ANB has served as Sub-Manager for the Federated Max-Cap Fund
(formerly the S&P 500 Fund), which is another portfolio of the Trust. ANB also
serves as Sub-Manager for the Federated Mini-Cap Fund, another portfolio of the
Trust.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the principal distributor for shares of the
Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors. Federated
Securities Corp. pays a licensing fee to S&P for the right to use the Index
in connection with the management activities for the Fund. Federated
Securities Corp. is not affiliated with S&P.
SHAREHOLDER SERVICES
The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to 0.25% of the average daily net asset value of its
shares, computed at an annual rate, to obtain certain personal services for
shareholders and to maintain shareholder accounts. From time to time and for
such periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services Agreement,
Federated Securities Corp. and Federated Shareholder Services, from their own
assets, may pay financial institutions supplemental fees for the performance of
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's Manager or its affiliates.
FUND ADMINISTRATION
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors, provides the
Manager with the administrative personnel and services necessary to provide
shareholder servicing and certain legal and accounting services.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Managers look for prompt execution of the order at a favorable
price. In working with dealers, the Managers will generally utilize those who
are recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. In selecting among
firms believed to meet these criteria, the Managers may give consideration to
those firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The Managers make decisions on
portfolio transactions and select brokers and dealers, subject to review by the
Trustees.
NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange is open.
Shares of the Fund may be purchased either by wire or mail. To purchase shares
of the Fund, open an account by calling Federated Securities Corp. Information
needed to establish the account will be taken over the telephone. The Fund
reserves the right to reject any purchase request.
BY WIRE
To purchase shares of the Fund by Federal Reserve wire, call the Fund to place
an order. Shareholders have until 4:00 p.m. (Eastern time) to call the Fund for
settlement on the next business day. The order is considered received
immediately. Payment by federal funds must be received before 4:00 p.m. (Eastern
time) on the next business day following the order. Federal funds should be
wired as follows: Federated Shareholder Services Company, c/o State Street Bank
and Trust Company, Boston, Massachusetts; Attention: EDGEWIRE; For Credit to:
Federated Index Trust, Federated Mid-Cap Fund; Fund Number (this number can be
found on the account statement or by contacting the Fund); Group Number or Order
Number; Nominee or Institution Name; and ABA Number 011000028. Shares cannot be
purchased by wire on holidays when wire transfers are restricted. Questions on
wire purchases should be directed to your shareholder services representative at
the telephone number listed on your account statement.
BY MAIL
To purchase shares of the Fund by mail, send a check made payable to Federated
Index Trust, Federated Mid-Cap Fund, to the Fund's transfer agent, Federated
Shareholder Services Company, P.O. Box 8600, Boston, Massachusetts 02266-8600.
Orders by mail are considered received when payment by check is converted into
federal funds. This is generally the next business day after the check is
received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An investor's minimum investment will be calculated by combining all
accounts that the investor maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Fund shares through a financial intermediary may be charged a service fee by
that financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; and (iii) the following holidays: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange certain securities or a combination of certain securities
and cash for shares of the Fund. The securities and any cash must have a market
value of at least $25,000. The Trust reserves the right to determine the
acceptability of securities to be exchanged. On the day securities are accepted
by the Trust, they are valued in the same manner as the Trust values its assets.
Investors wishing to exchange securities should first contact Federated
Securities Corp.
Shares purchased by exchange of securities cannot be redeemed by telephone for
five business days to allow time for the transfer to settle.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions. In addition,
shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Fund will not issue share certificates.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing to
the Fund, dividends are automatically reinvested in additional shares of the
Fund on payment dates at the ex-dividend date net asset value without a sales
charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Investors who redeem shares through a financial
intermediary may be charged a service fee by that financial intermediary.
Redemptions will be made on days on which the Fund computes its net asset value.
Redemption requests must be received in proper form and can be made by telephone
request or written request.
TELEPHONE REDEMPTION
Shareholders may redeem their shares by telephoning the Fund before 4:00 p.m.
(Eastern time). The proceeds will normally be wired the following business day,
but in no event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. Proceeds from
redemption requests received on holidays when wire transfers are restricted will
be wired the following business day. Questions about telephone redemptions on
days when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement. If at any time, the Fund determines it necessary to terminate or
modify this method of redemption, shareholders will be promptly notified. An
authorization form permitting State Street Bank or the Fund to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from Federated Securities Corp. Telephone redemption
instructions may be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption should be considered, such as by "Written Requests."
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Fund shares may also be redeemed by sending a written request to the Fund. Call
the Fund for specific instructions before redeeming by written request. The
shareholder will be asked to provide in the request his name, the Fund name, his
account number, and the share or dollar amount requested. All owners of the
account must sign the request exactly as the shares are registered. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail.
SIGNATURES
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by:
* a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
* a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
* a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or
* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in the Trust have equal voting rights except that only shares of the Fund are
entitled to vote on matters affecting only the Fund. As a Massachusetts business
trust, the Trust is not required to hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operations and for the election of Trustees under certain
circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
all series of the Trust.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held their shares.
STATE AND LOCAL TAXES
In the opinion of Houston, Donnelly & Meck, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the last
day of the period. This number is then annualized using semi-annual compounding.
The yield does not necessarily reflect income actually earned by the Fund and,
therefore, may not correlate to the dividends or other distributions paid to
shareholders.
The Fund is sold without any sales load or other similar non-recurring charges.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
Fund's performance to certain indices.
PORTFOLIO OF INVESTMENTS
FEDERATED MID-CAP FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--85.3%
BASIC INDUSTRY--6.3%
2,000 AK Steel Holding Corp. $ 84,250
5,100 (b)Airgas, Inc. 79,369
2,300 Albany International Corp., Class A 56,062
4,100 Albemarle Corp. 99,425
3,400 (b)Alumax, Inc. 110,500
2,100 Betz Laboratories, Inc. 134,662
3,100 Bowater, Inc. 129,619
1,200 Brush Wellman, Inc. 28,875
4,700 (b)Burlington Industries, Inc. 70,206
5,300 Cabot Corp. 130,181
1,700 CalMat Co. 42,819
3,000 Calgon Carbon Corp. 35,437
1,200 Carpenter Technology Corp. 58,050
1,700 Chesapeake Corp. 53,869
900 Cleveland Cliffs, Inc. 39,094
3,300 Consolidated Papers, Inc. 171,394
5,400 Crompton and Knowles Corp. 136,350
3,500 (b)Cytec Industries, Inc. 170,625
1,800 Dexter Corp. 70,650
1,900 Donaldson Company, Inc. 96,187
6,200 Ethyl Corp. 53,475
1,900 Ferro Corp. 71,131
1,100 Fuller (H.B.) Co. 51,975
2,600 Georgia Gulf Corp. 78,000
3,200 Glatfelter (P.H.) Co. 63,200
3,900 Hanna (M.A.) Co. 100,425
6,900 IMC Global, Inc. 232,444
3,200 (b)Imation Corp. 68,400
3,400 Lawter International, Inc. 38,037
3,900 Longview Fibre Co. 61,912
4,500 Lubrizol Corp. 173,250
1,100 Lukens, Inc. 19,800
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
BASIC INDUSTRY--CONTINUED
700 (b)Maxxam, Inc. $ 36,837
1,700 Minerals Technologies, Inc. 70,337
600 NCH, Corp. 40,200
1,900 Oregon Steel Mills 40,019
5,800 RPM, Inc. 108,750
2,200 Rayonier, Inc. 96,113
2,825 Schulman (A.), Inc. 63,563
3,200 (b)Sealed Air Corp. 165,000
8,700 (b)Solutia, Inc. 192,488
6,685 Sonoco Products Co. 215,173
1,600 Southdown, Inc. 88,600
4,800 Unifi, Inc. 184,500
2,600 Vulcan Materials Co. 230,913
2,768 Wausau Paper Mills Co. 55,869
2,300 Wellman, Inc. 46,719
4,200 Witco Corp. 182,700
TOTAL 4,627,454
CONSUMER DURABLES--2.7%
1,700 Arvin Industries, Inc. 63,644
1,800 Borg-Warner Automotive, Inc. 98,100
5,400 Callaway Golf Co. 174,150
2,300 Carlisle Cos., Inc. 99,475
8,876 Clayton Homes, Inc. 145,899
4,000 (b)Electronic Arts, Inc. 135,500
2,600 Federal-Mogul Corp. 110,012
11,400 Harley Davidson, Inc. 316,350
9,400 International Game Technology 240,287
6,800 Leggett and Platt, Inc. 283,900
3,400 Martin Marietta Materials 118,575
10,100 Shaw Industries, Inc. 122,463
1,300 Stanhome, Inc. 36,319
2,100 Superior Industries International, Inc. 56,044
TOTAL 2,000,718
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
CONSUMER NON-DURABLES--4.3%
1,500 Church and Dwight, Inc. $ 43,219
28,200 Coca Cola Enterprises, Inc. 793,125
3,000 Dean Foods Co. 141,937
4,500 Dole Food, Inc. 199,406
1,000 Dreyers Grand Ice Cream, Inc. 41,375
3,100 First Brands Corp. 79,050
6,525 Flowers Industries, Inc. 123,975
1,200 (b)Gibson Greetings, Inc. 29,550
5,700 Hormel Foods Corp. 171,356
7,200 IBP, Inc. 166,950
1,300 International Multifoods Corp. 38,350
2,800 Interstate Bakeries Corp. 178,850
3,900 (b)Jones Apparel Group, Inc. 198,412
2,200 Lance, Inc. 47,025
6,000 McCormick & Co., Inc. 150,000
2,200 Smucker (J.M.) Co., Class A 59,813
16,300 Tyson Foods, Inc., Class A 307,663
3,500 (b)UCAR International, Inc. 131,250
2,600 Universal Corp. 99,938
1,900 Universal Foods Corp. 74,931
3,900 Warnaco Group, Inc., Class A 110,175
TOTAL 3,186,350
ENERGY MINERALS--6.0%
2,800 (b)BJ Services Co. 237,300
10,600 ENSCO International, Inc. 445,862
12,700 (b)Global Marine, Inc. 395,287
6,000 Lyondell Petrochemical Co. 153,750
4,200 Mapco, Inc. 138,600
3,400 Murphy Oil Corp. 196,988
7,400 (b)Nabors Industries, Inc. 304,325
4,200 Noble Affiliates, Inc. 172,463
9,800 (b)Noble Drilling Corp. 348,513
4,900 (b)Parker Drilling Co. 72,581
5,400 Pioneer Natural Resources, Inc. 216,338
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
ENERGY MINERALS--CONTINUED
2,700 Quaker State Corp. $ 41,850
7,400 Ranger Oil Ltd. 63,825
3,000 (b)Smith International, Inc. 228,750
11,700 Tosco Corp. 386,100
7,800 Transocean Offshore, Inc. 421,200
6,450 Ultramar Diamond Shamrock Corp. 199,144
3,300 Valero Energy Corp. 99,413
2,400 (b)Varco International, Inc. 146,250
3,881 (b)Weatherford Enterra, Inc. 198,174
TOTAL 4,466,713
FINANCE--15.0%
5,200 AMBAC 219,700
10,375 Aflac, Inc. 527,828
2,600 Allstate Corp. 157,138
3,700 Associated Banc Corp. 185,462
9,130 Bear Stearns Cos., Inc. 362,347
5,000 Capital One Financial Corp. 228,125
4,425 Central Fidelity Banks, Inc. 205,762
4,570 Charter One Financial, Inc. 265,631
3,300 City National Corp. 99,206
5,625 Comdisco, Inc. 177,539
8,200 Crestar Financial Corp. 387,962
9,200 Dime Bancorp, Inc. 220,800
7,088 Edwards (AG), Inc. 232,558
4,000 Finova Group, Inc. 175,750
8,550 First Security Corp. 247,950
5,000 First Tennessee National Corp. 288,125
3,600 First Virginia Bank, Inc. 167,175
6,750 First of America Bank Corp. 376,312
11,300 Firstar Corp. 408,212
9,100 Franklin Resources, Inc. 817,862
1,500 GATX Corp. 96,844
1,500 HSB Group, Inc. 78,281
9,600 Hibernia Corp., Class A 171,000
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
7,400 Marshall & Ilsley Corp. $ 383,875
9,625 Mercantile Bancorporation, Inc. 467,414
5,250 Mercantile Bankshares Corp. 187,031
8,400 Northern Trust Corp. 491,400
3,600 Old Kent Financial Corp. 227,250
6,500 Old Republic International Corp. 232,375
3,050 Pacific Century Financial Corp. 153,644
6,900 PaineWebber Group, Inc. 304,894
1,400 (b)Policy Management System Corp. 85,750
10,000 Provident Cos., Inc. 333,750
9,460 Regions Financial Corp. 347,655
7,200 SouthTrust Corp. 345,600
13,200 Summit Bancorp 563,475
4,300 T. Rowe Price Associates 284,875
2,550 Transatlantic Holdings, Inc. 176,428
4,800 Union Planters Corp. 284,700
2,500 Wilmington Trust Corp. 139,375
TOTAL 11,107,060
HEALTH CARE--6.6%
1,100 (b)ATL Ultrasound, Inc. 47,300
2,100 (b)Acuson Corp. 39,375
4,100 Allegiance Corp. 113,775
3,800 (b)Apria Healthcare Group, Inc. 57,712
3,706 Bergen Brunswig Corp., Class A 148,472
5,400 (b)Biogen, Inc. 180,900
3,500 Carter Wallace, Inc. 54,906
5,200 (b)Centocor, Inc. 228,800
12,724 (b)Chiron Corp. 244,937
2,800 (b)Concentra Managed Care, Inc. 91,350
4,300 (b)Covance, Inc. 76,056
1,200 (b)Datascope Corp. 28,950
4,000 Dentsply International, Inc. 113,500
1,000 Diagnostic Products Corp. 29,250
3,100 (b)Forest Labratories, Inc., Class A 143,375
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
9,240 (b)Foundation Health Systems, Inc., Class A $ 265,650
5,400 (b)Genzyme Corp. 147,825
12,150 (b)Health Management Association, Class A 296,156
2,500 (b)HealthCare COMPARE Corp. 134,375
3,400 (b)Healthcare & Retirement Corp. 128,562
9,100 (b)Ivax Corp. 68,819
9,200 (b)Laboratory Corporation of America Holdings 21,850
3,400 McKesson Corp. 364,862
5,400 (b)Medaphis Corp. 32,737
9,100 Mylan Laboratories, Inc. 199,631
4,500 (b)NovaCare, Inc. 58,781
5,900 Omnicare, Inc. 164,094
5,700 (b)Oxford Health Plans, Inc. 147,131
2,998 (b)PacifiCare Health Systems, Inc., Class B 194,121
5,700 (b)Perrigo Co. 87,638
5,500 (b)Quorum Health Group, Inc. 133,375
1,800 (b)Scherer (R.P.) Corp. 105,975
7,200 Stryker Corp. 267,750
3,800 (b)Sybron International Corp. 152,475
5,200 (b)Vencor, Inc. 140,400
5,600 (b)Watson Pharmaceuticals, Inc. 177,800
TOTAL 4,888,665
PRODUCER MANUFACTURING--6.0%
4,600 AGCO Corp. 133,400
4,600 American Financial Group, Inc. 175,087
7,100 (b)American Power Conversion Corp. 193,475
2,400 Ametek, Inc. 56,550
4,400 Danaher Corp. 241,175
7,100 Dial Corp. 119,812
5,194 Diebold, Inc. 228,850
3,400 Federal Signal Corp. 82,237
3,200 Flowserve Corp. 95,200
2,300 HON Industries, Inc. 118,737
3,700 Harsco Corp. 153,550
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--CONTINUED
4,980 Hubbell, Inc., Class B $ 219,431
2,400 Kaydon Corp. 72,900
2,000 Kennametal, Inc. 97,000
2,233 Lancaster Colony Corp. 110,533
5,500 (b)Lexmark Intl. Group, Class A 168,094
1,900 (b)Magnetek, Inc. 38,594
4,950 Mark IV Industries, Inc. 120,037
5,200 (b)Meritor Automotive, Inc. 116,025
3,600 Miller Herman, Inc. 175,950
2,200 Modine Manufacturing Co. 74,937
1,300 Nordson Corp. 64,513
3,700 Olin Corp. 168,119
2,800 Pentair, Inc. 108,150
3,100 Pittston Brink's Group 111,988
1,750 Precision Castparts Corp. 102,922
2,500 Stewart & Stevenson Services 54,375
1,600 Tecumseh Products Co., Class A 83,000
2,800 Teleflex, Inc. 104,300
3,250 Trinity Industries, Inc. 145,438
5,300 (b)U.S. Filter Corp. 212,663
5,400 (b)U.S. Office Products Co. 168,750
7,100 Viad Corp. 129,575
2,000 Watts Industries, Inc., Class A 50,750
3,200 York International Corp. 146,000
TOTAL 4,442,117
RETAIL TRADE--5.7%
1,900 (b)Ann Taylor Stores Corp. 27,194
2,400 (b)BJ's Wholesale Club, Inc. 69,300
5,000 (b)Barnes & Noble, Inc. 127,812
5,100 (b)Bed Bath & Beyond, Inc. 161,925
3,200 (b)Best Buy Co., Inc. 89,400
3,550 Claire's Stores, Inc. 78,544
6,900 (b)CompUSA, Inc. 225,975
6,281 (b)Consolidated Stores Corp. 250,455
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
RETAIL TRADE--CONTINUED
8,426 Dollar General Corp. $ 278,585
6,450 Family Dollar Stores, Inc. 151,575
2,800 Fastenal Co. 137,200
3,500 Fingerhut Companies, Inc. 77,437
6,000 (b)General Nutrition Cos., Inc. 189,000
3,200 Hannaford Brothers Co. 121,000
3,950 Heilig-Meyers Co. 52,831
5,500 (b)Kohl's Corp. 369,187
2,500 (b)Lands' End, Inc. 78,906
1,900 (b)MacFrugal's Bargains CloseOuts, Inc. 64,600
6,400 (b)Meyer (Fred), Inc. 182,800
2,600 (b)Micro Warehouse, Inc. 39,000
2,700 (b)Nine West Group, Inc. 95,344
11,725 (b)Office Depot, Inc. 241,828
9,250 (b)Officemax Inc. 123,719
3,000 (b)Payless ShoeSource, Inc. 167,250
4,700 Premark International, Inc. 127,194
3,500 Ruddick Corp. 54,688
7,500 (b)Service Merchandise, Inc. 30,469
12,075 (b)Staples, Inc. 316,969
2,600 Tiffany & Co. 102,700
6,300 (b)Viking Office Products, Inc. 150,806
TOTAL 4,183,693
SERVICES--8.4%
4,300 (b)ACNielsen Corp. 98,362
12,818 (b)AES Corp. 507,913
1 (b)Ascent Entertainment Group, Inc. 7
2,350 Banta Corp. 61,394
4,600 Belo (A.H.) Corp., Series A 217,350
3,200 Bob Evans Farms, Inc. 60,600
5,775 (b)Brinker International, Inc. 80,850
3,400 (b)Buffets, Inc. 35,700
2,362 (b)Chris Craft Industries, Inc. 122,086
3,500 Cintas Corp. 252,875
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
7,400 (b)Circus Circus Enterprises, Inc. $ 164,650
5,700 (b)Corrections Corp. America 173,850
4,550 Cracker Barrel Old Country Store 134,225
1,400 Granite Construction, Inc. 29,575
3,200 (b)Gtech Holdings Corp. 103,200
2,200 Houghton Mifflin Co. 78,100
1,700 (b)International Dairy Queen, Inc., Class A 45,050
1,900 (b)Jacobs Engineering Group, Inc. 51,300
2,875 Kelly Services, Inc., Class A 102,062
900 Lawson Products, Inc. 24,919
3,500 Lee Enterprises, Inc. 92,969
3,000 (b)Lone Star Steakhouse & Saloon 69,375
6,100 Manpower, Inc. 234,087
2,000 Media General, Inc., Class A 81,500
3,700 Ogden Corp. 93,425
6,000 Olsten Corp. 91,500
6,000 Omnicom Group, Inc. 423,750
3,600 (b)Outback Steakhouse, Inc. 97,425
8,062 Paychex, Inc. 307,364
3,800 (b)Promus Hotel Corp. 149,150
6,100 Reynolds & Reynolds Co., Class A 104,463
6,750 (b)Robert Half International, Inc. 276,328
2,700 Rollins, Inc. 57,713
1,500 Sbarro, Inc. 39,656
1,200 (b)Scholastic Corp. 48,600
5,500 Sensormatic Electronics Corp. 82,156
4,200 Sothebys Holdings, Inc., Class A 78,750
2,100 Standard Register 67,988
5,800 (b)Starbucks Corp. 191,400
3,200 Stewart Enterprises, Inc., Class A 132,800
14,900 (b)USA Waste Services, Inc. 551,300
4,900 Unisource Worldwide, Inc. 79,931
3,300 Wallace Computer, Inc. 126,844
800 Washington Post Co., Class B 347,200
TOTAL 6,169,742
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
TECHNOLOGY--11.9%
9,700 (b)ADC Telecommunications, Inc. $ 321,312
6,500 (b)Altera Corp. 288,437
7,000 (b)America Online, Inc. 539,000
11,866 (b)Analog Devices, Inc. 362,655
7,550 (b)Arrow Electronics, Inc. 214,231
7,400 (b)Atmel Corp. 191,475
3,300 Avnet, Inc. 207,694
7,600 (b)BMC Software, Inc. 458,850
2,200 Beckman Instruments, Inc. 86,625
7,200 (b)Cadence Design Systems, Inc. 383,400
4,900 (b)Cirrus Logic, Inc. 74,112
6,400 (b)Compuware Corp. 423,200
6,000 (b)Cypress Semiconductor Corp. 67,500
1,700 (b)Exabyte Corp. 17,956
3,400 (b)FIserv, Inc. 152,150
2,500 GenCorp, Inc. 61,094
5,100 Hillenbrand Industries, Inc. 218,025
2,100 (b)Information Resources, Inc. 34,650
11,200 (b)Informix Corp. 76,300
5,900 (b)Integrated Device Technology, Inc. 68,219
5,600 Linear Technology Corp. 352,100
3,500 (b)Litton Industries, Inc. 177,625
4,600 (b)Maxim Integrated Products, Inc. 304,750
4,800 (b)Mentor Graphics Corp. 52,500
9,175 Molex, Inc. 344,063
7,600 (b)NCR Corp. 230,375
2,600 NewPort News Shipbuilding, Inc. 55,900
1,500 OEA, Inc. 60,375
9,600 (b)Quantum Corp. 303,600
1,900 (b)Rohr, Inc. 57,594
4,600 (b)SCI Systems, Inc. 202,400
700 (b)Sequa Corp., Class A 40,163
2,500 (b)Sequent Computer System, Inc. 52,344
8,400 (b)Solectron Corp. 329,700
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
6,537 (b)Sterling Commerce, Inc. $ 216,949
4,580 (b)Storage Technology Corp. 268,789
1,800 (b)Stratus Computer, Inc. 63,675
2,500 (b)Structural Dynamics Research Corp. 47,813
6,200 (b)SunGuard Data Systems, Inc. 146,475
4,500 Sundstrand Corp. 244,688
4,100 (b)Symantec Corp. 89,688
2,850 Symbol Technologies, Inc. 113,288
6,200 (b)Teradyne, Inc. 232,113
1,400 Thiokol Corp. 128,188
2,300 Varian Association, Inc. 134,550
4,772 (b)Vishay Intertechnology, Inc. 114,230
5,500 (b)Xilinx, Inc. 187,688
TOTAL 8,798,508
TRANSPORTATION--1.9%
1,900 APL, Ltd. 62,462
2,300 ASA Holdings Ltd. 64,112
1,600 Airborne Freight Corp. 101,400
1,100 (b)Alaska Air Group, Inc. 36,712
3,400 Alexander and Baldwin, Inc. 93,500
2,000 Arnold Industries, Inc. 42,500
3,300 CNF Transportation, Inc. 147,262
2,800 Hunt (J.B.) Transportation Services, Inc. 43,050
4,550 Illinois Central Corp. 162,094
8,400 Kansas City Southern Industries, Inc. 256,200
2,700 Overseas Shipholding Group, Inc. 66,825
4,600 Tidewater, Inc. 302,163
TOTAL 1,378,280
UTILITIES--10.5%
9,200 (b)360 Communications Co. 194,350
4,200 AGL Resources, Inc. 76,125
2,700 Aliant Communications, Inc. 69,187
9,100 Allegheny Energy, Inc. 257,075
5,900 American Water Works Co., Inc. 133,487
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
3,900 Atlantic Energy, Inc. NJ $ 71,906
1,100 Black Hills Corp. 33,137
6,900 CMS Energy Corp. 251,850
6,000 (b)CalEnergy Co., Inc. 205,500
1,700 Central LA Electric Co. 44,731
2,400 Central Maine Power Co. 31,800
4,500 Century Telephone Enterprises, Inc. 190,969
3,600 Comsat Corp. 82,350
4,500 Delmarva Power and Light Co. 89,156
4,100 El Paso Natural Gas 245,744
7,300 Florida Progress Corp. 237,706
2,300 Hawaiian Electric Industries, Inc. 86,969
2,800 Idaho Power Co. 89,250
5,700 Illinova Corp. 126,825
1,650 Indiana Energy, Inc. 47,128
3,400 Ipalco Enterprises, Inc. 119,000
4,600 Kansas City Power And Light Co. 134,837
3,700 Keyspan Energy Corp. 114,931
5,000 (b)LCI International, Inc. 129,375
5,000 LG&E Energy Corp. 106,250
5,000 MCN Corp. 173,125
7,522 MidAmerican Energy Holdings Co. 134,456
2,400 Minnesota Power And Light Co. 87,300
4,100 Montana Power Co. 103,781
18,900 (b)NEXTEL Communications, Inc., Class A 496,125
4,500 NIPSCO Industries, Inc. 197,719
2,800 National Fuel Gas Co. 123,550
3,600 Nevada Power Co. 77,400
7,745 New Century Energies, Inc. 323,354
4,900 New England Electric System 192,019
5,200 New York State Electric and Gas Corp. 138,775
9,600 Northeast Utilities Co. 110,400
3,000 OGE Energy Corp. 145,313
6,500 Pinnacle West Capital Corp. 226,281
</TABLE>
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
8,900 Potomac Electric Power Co. $ 199,694
3,100 Public Service Co. New Mexico 60,256
6,300 Puget Sound Energy, Inc. 167,738
3,100 Questar Corp. 119,738
7,900 SCANA Corp. 199,475
4,700 (b)Seagull Energy Corp. 114,856
4,900 Southern New England Telecommunications 210,088
1,900 TCA Cable TV, Inc. 78,375
8,800 TECO Energy, Inc. 210,100
4,600 Telephone and Data System, Inc. 195,500
3,900 Utilicorp United, Inc. 123,094
3,100 (b)Vanguard Cellular Systems, Inc., Class A 42,819
2,300 WPL Holdings, Inc. 67,131
3,300 Washington Gas Light Co. 84,769
8,300 Wisconsin Energy Corp. 210,094
TOTAL 7,782,963
TOTAL COMMON STOCKS (IDENTIFIED COST $42,351,895) 63,032,263
(D)U.S. GOVERNMENT OBLIGATION--0.3%
$ 200,000 United States Treasury Bill, 12/18/1997 (identified cost
$198,745) 198,826
(C)REPURCHASE AGREEMENT--12.8%
9,450,000 BT Securities Corporation, 5.71%, dated 10/31/1997, due 9,945,000
11/3/1997 (at amortized cost)
TOTAL INVESTMENTS (IDENTIFIED COST $52,495,640)(E) $ 73,176,089
</TABLE>
(a) The Fund purchases Index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividend and capital gain
payments to shareholders and corporate actions while maintaining exposure to the
Index and minimizing trading costs. The underlying face amount, at value, of
open Index futures contracts is $10,576,500 at October 31, 1997, which
represents 14.3% of net assets. Taking into consideration these open Index
futures contracts, the Fund's effective total exposure to the Index is 99.6%.
(b) Non-income producing security.
(c) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(d) Represents a security held as collateral which is used to ensure the Fund is
able to satisfy the obligations of its outstanding long futures contracts.
(e) The cost of investments for federal tax purposes amounts to $52,495,640. The
net unrealized appreciation of investments on a federal tax basis amounts to
$20,680,448 which is comprised of $22,994,603 appreciation and $2,314,155
depreciation at October 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($73,874,203) at October 31, 1997.
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MID-CAP FUND
OCTOBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Investments in securities $ 63,231,089
Investments in repurchase agreements 9,945,000
Total investments in securities at amortized cost and value 73,176,089
(identified and tax cost $52,495,640)
Cash 4,947
Income receivable 60,218
Receivable for investments sold 106,147
Receivable for shares sold 534,361
Receivable for daily variation margin 262,740
Deferred expenses 11,117
Total assets 74,155,619
LIABILITIES:
Payable for investments purchased $ 251,757
Payable for shares redeemed 23,376
Accrued expenses 6,283
Total liabilities 281,416
Net Assets for 4,303,637 shares outstanding $ 73,874,203
NET ASSETS CONSIST OF:
Paid in capital $ 47,075,261
Net unrealized appreciation of investments and futures contracts 20,235,545
Accumulated net realized gain on investments and futures 6,462,652
contracts
Undistributed net investment income 100,745
Total Net Assets $ 73,874,203
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
$73,874,203 / 4,303,637 shares outstanding $17.17
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MID-CAP FUND
YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 829,155
Interest 303,968
Total income 1,133,123
EXPENSES:
Investment advisory fee $ 252,801
Custodian fees 12,096
Transfer and dividend disbursing agent fees and expenses 24,606
Directors'/Trustees' fees 1,737
Auditing fees 14,294
Legal fees 2,937
Portfolio accounting fees 49,126
Shareholder services fee 158,001
Share registration costs 14,200
Printing and postage 15,138
Insurance premiums 5,614
Taxes 2,288
Miscellaneous 23,385
Total expenses 576,223
Waivers
Waiver of investment advisory fee $ (55,019)
Waiver of shareholder services fee (139,041)
Total waivers (194,060)
Net expenses 382,163
Net investment income 750,960
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FUTURES CONTRACTS:
Net realized gain on investments and futures contracts 6,609,158
Net change in unrealized appreciation of investments and 9,715,619
futures contracts
Net realized and unrealized gain on investments and 16,324,777
futures contracts
Change in net assets resulting from operations $ 17,075,737
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MID-CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 750,960 $ 740,093
Net realized gain (loss) on investments and futures contracts 6,609,158 2,211,765
($6,019,168 and $2,561,538, respectively, as computed for federal
tax purposes)
Net change in unrealized appreciation of investments and futures 9,715,619 5,352,243
contracts
Change in net assets resulting from operations 17,075,737 8,304,101
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (690,737) (846,844)
Distributions from net realized gains and futures contracts (2,561,934) (3,414,624)
Change in net assets resulting from distributions to (3,252,671) (4,261,468)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 42,261,338 52,748,566
Net asset value of shares issued to shareholders in payment of 1,989,434 2,549,965
distributions declared
Cost of shares redeemed (44,147,633) (61,972,769)
Change in net assets resulting from share transactions 103,139 (6,674,238)
Change in net assets 13,926,205 (2,631,605)
NET ASSETS:
Beginning of period 59,947,998 62,579,603
End of period (including undistributed net investment income of $ 73,874,203 $ 59,947,998
$100,745 and $40,522, respectively)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MID-CAP FUND
OCTOBER 31, 1997
ORGANIZATION
Federated Index Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act"), as an open-end, management investment
company. The Trust consists of three portfolios. The financial statements
included herein are only those of Federated Mid-Cap Fund (the "Fund"), a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund 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.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank to take possession,
to have legally segregated in the Federal Reserve Book Entry System, or to have
segregated within the custodian bank's vault, all securities held as collateral
under repurchase agreement transactions. Additionally, procedures have been
established by the Fund to monitor, on a daily basis, the market value of each
repurchase agreement's collateral to ensure that the value of collateral at
least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed by
the Fund's manager to be creditworthy pursuant to the guidelines and/or
standards reviewed or established by the Board of Trustees (the "Trustees").
Risks may arise from the potential inability of counterparties to honor the
terms of the repurchase agreement. Accordingly, the Fund could receive less than
the repurchase price on the sale of collateral securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSE
The costs incurred by the Fund with respect to registration of its shares in its
first fiscal year, excluding the initial expense of registering its shares, have
been deferred and are being amortized over a period not to exceed five years
from the Fund's commencement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Trust is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
For the period ended October 31, 1997, the Fund had realized gains of
$1,627,202.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities.
At October 31, 1997, the Trust had outstanding futures contracts as set forth
below:
CONTRACTS TO UNREALIZED
EXPIRATION DATE DELIVER/RECEIVE POSITION (DEPRECIATION)
December 1997 64 S&P 400 Index Futures Long $(444,904)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1997 1996
<S> <C> <C>
Shares sold 2,703,076 4,023,215
Shares issued to shareholders in payment of distributions 145,409 206,046
declared
Shares redeemed (2,903,198) (4,766,402)
Net change resulting from share transactions (54,713) (537,141)
</TABLE>
MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
MANAGEMENT FEE
Federated Management, the Fund's manager, (the "Manager"), receives for its
services an annual management fee equal to 0.40% of the Fund's average daily net
assets. Under the terms of a sub-advisory agreement between the Manager and the
Trust Division of ANB Investment Management and Trust Company ("Sub-Manager"),
the Sub-Manager receives an annual fee from the Manager equal to 0.035% of the
Fund's average daily net assets. In addition, Sub-Manager may voluntarily choose
to reduce its compensation. The Manager may voluntarily choose to waive any
portion of its fee. The Manager can modify or terminate this voluntary waiver at
any time at its sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund for the period. The fee paid to FSS is used to finance certain
services for shareholders and to maintain shareholder accounts FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
Federated Services Company ("FServ"), through its subsidiary, Federated
Shareholder Services Company ("FSSC") serves as transfer and dividend disbursing
agent for the Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL
Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1997, were as follows:
PURCHASES $11,083,051
SALES $17,698,230
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of FEDERATED INDEX TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Mid-Cap Fund (a portfolio of
Federated Index Trust) as of October 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers or other
appropriate procedures where replies from brokers were not received. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Mid-Cap Fund of Federated Index Trust at October 31, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended and the financial highlights for
each of the periods presented, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 12, 1997
[Graphic]
Federated Investors
Federated Mid-Cap Fund
(A Portfolio of Federated Index Trust)
PROSPECTUS
DECEMBER 31, 1997
A No-Load, Open-End, Diversified Management Investment Company
FEDERATED MID-CAP 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
MANAGER
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
SUB-MANAGER
ANB Investment Management and Trust Co.
One North LaSalle Street
Chicago, IL 60690
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder
Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
Federated Securities Corp., Distributor
1-800-341-7400
www.federatedinvestors.com
Cusip 31420E205
2062304A (12/97)
[Graphic]
FEDERATED MID-CAP FUND
(A PORTFOLIO OF FEDERATED INDEX TRUST)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
the Fund dated December 31, 1997. This Statement is not a prospectus itself. You
may request a copy of a prospectus or a paper copy of this Statement of
Additional Information, if you have received it electronically, free of charge
by calling 1-800-341-7400.
FEDERATED MID-CAP FUND
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000
Statement dated December 31, 1997
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 31420E205
2062304B (12/97)
[Graphic]
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE FUND 1 INVESTMENT OBJECTIVE AND POLICIES 1 Types
of Investments 1 When-Issued and Delayed Delivery Transactions 3 Lending of
Portfolio Securities 3 Reverse Repurchase Agreements 3 Portfolio Turnover 3
INVESTMENT LIMITATIONS 3 Investing in Commodities 3 Selling Short and Buying on
Margin 3 Lending Cash or Securities 4 Underwriting 4 Issuing Senior Securities
and Borrowing Money 4 Pledging Assets 4 Diversification of Investments 4
Concentration of Investments 4 Investing in Real Estate 4 Investing in
Restricted Securities 4 Writing Covered Call Options 4 Investing in Put Options
5 Acquiring Securities 5 Investing in Illiquid Securities 5 FEDERATED INDEX
TRUST MANAGEMENT 5 Fund Ownership 9 Trustees Compensation 9 Trustee Liability
10 MANAGEMENT SERVICES 10 Managers to the Fund 10 Management Fees 10 Other
Related Services 10 BROKERAGE TRANSACTIONS 10 OTHER SERVICES 11 Custodian and
Portfolio Accountant 11 Transfer Agent 11 Independent Auditors 11 SHAREHOLDER
SERVICES 11 PURCHASING SHARES 11 Conversion to Federal Funds 11 Exchanging
Securities for Fund Shares 11 DETERMINING NET ASSET VALUE 12 Determining Market
Value of Securities 12 REDEEMING SHARES 12 Redemption in Kind 12 MASSACHUSETTS
PARTNERSHIP LAW 13 TAX STATUS 13 The Fund's Tax Status 13 Shareholders' Tax
Status 13 TOTAL RETURN 13 YIELD 13 PERFORMANCE COMPARISONS 14 Economic and
Market Information 15 ABOUT FEDERATED INVESTORS 15 Mutual Fund Market 15
STANDARD & POOR'S 16
GENERAL INFORMATION ABOUT THE FUND
Federated Mid-Cap Fund (the "Fund") is a portfolio of Federated Index Trust (the
"Trust"), which was established as a Massachusetts business trust under a
Declaration of Trust dated January 30, 1990. On December 5, 1994, the Trustees
changed the name of the Fund from the Mid-Cap Fund to the Federated Mid-Cap
Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund 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. The investment objective cannot be changed
without the approval of shareholders. The policies described below may be
changed by the Board of Trustees ("Trustees") without shareholder approval.
Shareholders will be notified before any material change in these policies
becomes effective.
TYPES OF INVESTMENTS
In addition to the common stocks described in the prospectus, the Fund may also
invest in money market instruments and U.S. government obligations and
securities in such proportions as, in the judgment of the sub-manager,
prevailing market conditions warrant.
MONEY MARKET INSTRUMENTS
The Fund may invest in the following money market instruments:
* instruments of domestic banks and savings associations having capital,
surplus, and undivided profits of over $100,000,000, or if the principal
amount of the instrument is insured in full by the Federal Deposit
Insurance Corporation; and
* prime commercial paper (rated A-1 by Standard and Poor's Ratings Group,
Prime-1 by Moody's Investors Service, Inc., or F-1 by Fitch Investors
Service).
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller files for bankruptcy or
becomes insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's sub-manager
to be creditworthy pursuant to guidelines established by the Trustees.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
* the full faith and credit of the U.S. Treasury;
* the issuer's right to borrow from the U.S. Treasury;
* the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
* the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
* The Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks, and Banks for Cooperatives;
* Federal Home Loan Banks;
* Farmers Home Administration; and
* Federal National Mortgage Association.
STOCK INDEX FUTURES AND OPTIONS
The Fund may utilize stock index futures contracts and options on stocks, stock
indices, and stock index futures contracts for the purposes of managing cash
flows into and out of the Fund's portfolio and potentially reducing
transactional costs. The Fund may not use stock index futures contracts and
options for speculative purposes. As a means of reducing fluctuations in the net
asset value of shares of the Fund, the Fund may attempt to hedge all or a
portion of its portfolio through the purchase of listed put options on stocks,
stock indices, and stock index futures contracts. These options will be used
only as a form of forward pricing to protect portfolio securities against
decreases in value resulting from market factors such as an anticipated increase
in interest rates. A put option gives the Fund, in return for a premium, the
right to sell the underlying security to the writer (seller) at a specified
price during the term of the option. Put options on stock indices are similar to
put options on stocks except for the delivery requirements. Instead of giving
the Fund the right to make delivery of stock at a specified price, a put option
on a stock index gives the Fund, as holder, the right to receive an amount of
cash upon exercise of the option.
The Fund may also write covered call options. As the writer of a call option,
the Fund has the obligation upon exercise of the option during the option period
to deliver the underlying security upon payment of the exercise price.
The Fund may only: (1) buy listed put options on stock indices and stock index
futures contracts; (2) buy listed put options on securities held in its
portfolio; and (3) sell listed call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment of
further consideration (or has segregated cash in the amount of any such
additional consideration). The Fund will maintain its positions in securities,
option rights, and segregated cash subject to puts and calls until the options
are exercised, closed, or expired.
The Fund may also enter into stock index futures contracts. A stock index
futures contract is a bilateral agreement which obligates the seller to deliver
(and the purchaser to take delivery of) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific stock index
at the close of trading of the contract and the price at which the agreement is
originally made. There is no physical delivery of the stocks constituting the
index, and no price is paid upon entering into a futures contract. In general,
contracts are closed out prior to their expiration. The Fund, when purchasing or
selling a futures contract, will initially be required to deposit in a
segregated account in the broker's name with the Fund's custodian an amount of
cash or U.S. government securities approximately equal to 5%-10% of the contract
value. This amount is known as "initial margin," and it is subject to change by
the exchange or board of trade on which the contract is traded. Subsequent
payments to and from the broker are made on a daily basis as the price of the
index or the securities underlying the futures contract fluctuates. These
payments are known as "variation margins," and the fluctuation in value of the
long and short positions in the futures contract is a process referred to as
"marking to market." The Fund may decide to close its position on a contract at
any time prior to the contract's expiration. This is accomplished by the Fund
taking an opposite position at the then prevailing price, thereby terminating
its existing position in the contract. Because the initial margin resembles a
performance bond or good faith deposit on the contract, it is returned to the
Fund upon the termination of the contract, assuming that all contractual
obligations have been satisfied. Therefore, the margin utilized in futures
contracts is readily distinguishable from the margin employed in security
transactions, since the margin employed in futures contracts does not involve
the borrowing of funds to finance the transaction.
RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS
The Fund will not enter into stock index futures contracts to the extent that,
immediately thereafter, the sum of its initial margin deposits on open contracts
exceeds 5% of the market value of the Fund's total assets. Further, the Fund
will enter into stock index futures contracts only for bona fide hedging
purposes or such other purposes permitted under Part 4 of the regulations
promulgated by the Commodity Futures Trading Commission ("CFTC"). Also, the Fund
may not enter into stock index futures contracts and options to the extent that
the value of such contracts and options would exceed 20% of the Fund's total net
assets and may not purchase put options to the extent that more than 5% of the
value of the Fund's total assets would be invested in premiums on open put
option positions.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities up to one-third of the value of its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the sub-manager has determined are
creditworthy under guidelines established by the Trustees and will receive
collateral equal to at least 100% of the value of the securities loaned.
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. A reverse repurchase
transaction is similar to borrowing cash. In a reverse repurchase agreement the
Fund transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed-upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time. When
effecting reverse repurchase agreements, liquid assets of the Fund, in a dollar
amount sufficient to make payment for the obligations to be purchased, are
segregated at the trade date. These securities are marked to market daily and
are maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. For the fiscal years ended October 31, 1997,
and October 31, 1996, the portfolio turnover rates for the Fund were 19% and
17%, respectively.
INVESTMENT LIMITATIONS
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities. However, the Fund may purchase
stock index futures contracts and put options on stock indices and stock index
futures contracts to the extent that not more than 5% of the Fund's total assets
are required as initial margin deposit for futures contracts and not more than
20% of the Fund's total net assets are invested in futures contracts and options
at any time.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, other than in connection with buying stock index futures contracts and
put options on stock index futures contracts, but may obtain such short-term
credits as are necessary for the clearance of transactions.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets, except portfolio securities up to
one-third of the value of its total assets. This shall not prevent the Fund from
purchasing or holding U.S. government obligations, money market instruments,
bonds, debentures, notes, certificates of indebtedness, or other debt
securities; entering into repurchase agreements; or engaging in other
transactions where permitted by the Fund's investment objective and policies and
the Declaration of Trust of the Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of restricted securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may borrow money
and engage in reverse repurchase agreements in amounts up to one-third of the
value of its total assets, including the amounts borrowed. The Fund will not
borrow money or engage in reverse repurchase agreements for investment leverage,
but rather as a temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption requests
when the liquidation of portfolio securities is deemed to be inconvenient or
disadvantageous. The Fund will not purchase any securities while borrowings in
excess of 5% of its total assets are outstanding. During the period any reverse
repurchase agreements are outstanding, but only to the extent necessary to
assure completion of the reverse repurchase agreements, the Fund will restrict
the purchase of portfolio instruments to money market instruments maturing on or
before the expiration date of the reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may pledge assets having a market value
not exceeding the lesser of the dollar amounts borrowed or 10% of the value of
total assets at the time of the borrowing.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of the value of its total assets in the
securities of any one issuer, except U.S. government securities, or invest in
more than 10% of the voting securities of any one issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
securities of companies in any one industry. However, investing in U.S.
government obligations shall not be considered investing in any one industry.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, including partnership interests in
real estate, although it may invest in securities of companies whose business
involves the purchase or sale of real estate or in securities which are secured
by real estate or interests in real estate.
INVESTING IN RESTRICTED SECURITIES
The Fund will limit its investment in restricted securities to 5% of the value
of its total assets in securities subject to restrictions on resale under the
Securities Act of 1933.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the amount
of any further payment.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, other than put options on
stock, stock indices and stock index futures contracts, unless the securities
are held in the Fund's portfolio and not more than 5% of the value of the Fund's
total assets would be invested in premiums on open put option positions and not
more than 20% of the Fund's total net assets are invested in put options and
futures contracts at any time.
ACQUIRING SECURITIES
The Fund will not purchase securities of other investment companies except to
the extent permitted by the Investment Company Act of 1940, or except as part of
a merger, consolidation, or other acquisition. It will not invest in securities
for the purpose of exercising control or management.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in securities which are
illiquid, including certain restricted securities not determined by the Trustees
to be liquid and repurchase agreements providing for settlement more than seven
days after notice.
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
restriction.
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the past fiscal year and does not expect to do so
during the coming fiscal year.
For purposes of its policies and 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."
FEDERATED INDEX TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Index Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President and Trustee of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice-President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center--Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp., and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President, and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some of
the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc.--1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares. As of
December 9, 1997, the following shareholders of record owned 5% or more of the
outstanding shares of the Fund: Charles Schwab & Co. Inc., San Francisco, CA,
owned approximately 585,128 shares (13.45%); Covie & Co., Chicago, IL, owned
approximately 389,679 shares (8.96%); FIRNATICIA, Iowa City, IA, owned
approximately 248,306 shares, (5.71%).
TRUSTEE COMPENSATION
<TABLE>
<CAPTION>
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
<S> <C> <C>
John F. Donahue $0 $0 for the Trust and
Trustee 56 other investment companies in the Fund Complex
J. Christopher Donahue $0 $0 for the Trust and
Executive Vice President 18 other investment companies in the Fund Complex
and Trustee
Thomas G. Bigley $382.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John T. Conroy, Jr. $421.00 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
William J. Copeland $421.00 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
James E. Dowd $421.00 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Lawrence D. Ellis, M.D. $382.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Edward L. Flaherty, Jr. $421.00 $119,615 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Peter E. Madden $382.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
John E. Murray, Jr. $382.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Wesley W. Posvar $382.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
Marjorie P. Smuts $382.00 $108,725 for the Trust and
Trustee 56 other investment companies in the Fund Complex
</TABLE>
* Information is furnished for the fiscal year ended October 31, 1997.
# The aggregate compensation is provided for the Trust which is comprised of
three portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
MANAGEMENT SERVICES
MANAGERS TO THE FUND
The Fund's Manager is Federated Management. It is a subsidiary of Federated
Investors. All the voting securities of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, his wife, and his son, J.
Christopher Donahue.
The Fund's Sub-Manager is ANB Investment Management and Trust Company
("ANB"). Currently, it is a wholly owned subsidiary of First Chicago Investment
Management Company ("First Chicago"). First Chicago is a wholly owned subsidiary
of First National Bank of Chicago, which in turn, is a wholly-owned subsidiary
of First Chicago NBD Corporation. The Sub-Manager's directors are The
Sub-Manager's directors are J. Stephen Baine, Susan O. Jones, Nick G. Preda, J.
Dirk Vos, Richard W. Wade, Thomas P. Micheals and Neil R. Wright. The officers
of ANB are J. Stephen Baine, Chairman and President; Susan O. Jones, Chief
Operating Officer; Neil R. Wright, Chief Investment Officer; and Thomas P.
Micheals, Secretary and Treasurer. As described in the prospectus, it is
anticipated that First Chicago will sell ANB to Northern Trust Corporation.
After the sale, the directors are anticipated to be James M. Snyder, Barry G.
Hastings, Perry R. Pero, Sheila A. Penrose and Jeffrey H. Wessel. After the
sale, the officers are anticipated to be James M. Snyder, Chief Executive
Officer, and Jeffrey H. Wessel, President.
Neither the Manager nor the Sub-Manager shall be liable to the Trust, the Fund,
or any shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or omitted by
the Manager or Sub-Manager, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon either of them by their respective management contracts.
MANAGEMENT FEES
For its management services, Federated Management receives an annual fee as
described in the prospectus. ANB receives an annual fee for its services, which
will be paid by the Manager, as described in the prospectus. For the fiscal
years ended October 31, 1997, 1996, and 1995, the Manager earned $252,801,
$225,754, and $208,809, respectively, of which $55,019, $79,194, and $106,606
was voluntarily waived in 1997, 1996, and 1995, respectively, because of
undertakings to limit the Fund's expenses.
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 shares of funds offered by Federated Securities Corp.
BROKERAGE TRANSACTIONS
The Managers may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Managers and 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 provided by brokers and dealers may be used by the Managers or their
affiliates in advising the Fund and other accounts. To the extent that receipt
of these services may supplant services for which the Managers or their
affiliates might otherwise have paid, it would tend to reduce their expenses.
The Managers and their affiliates exercise reasonable business judgment in
selecting 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. During the fiscal years ended October 31, 1997,
1996, and 1995, the Fund paid total brokerage commissions of $19,222, $23,672,
and $45,385, respectively.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Managers, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Managers are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Managers to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, Massachusetts, is custodian for the
securities and cash of the Fund. Federated Services Company, Pittsburgh,
Pennsylvania, provides certain accounting and recordkeeping services with
respect to the Fund's portfolio investments. The fee paid for this service is
based upon the level of the Fund's average net assets for the period plus
out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type, and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
SHAREHOLDER SERVICES
This arrangement permits the payment of fees to Federated Shareholder Services
to cause services to be provided which are necessary for the maintenance of
shareholder accounts and to encourage personal services to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to:
providing office space, equipment, telephone facilities, and various clerical,
supervisory, computer, and other personnel as necessary or beneficial to
establish and maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in changing
dividend options, account designations, and addresses.
By adopting the Shareholder Services Agreement, the Trustees expect that the
Fund will benefit by: (1) providing personal services to shareholders; (2)
investing shareholder assets with a minimum of delay and administrative detail;
(3) enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts. For the fiscal
year ended October 31, 1997, the Fund paid shareholder service fees in the
amount of $158,001, of which $139,041 was waived.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing shares of
the Fund is explained in the prospectus under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
EXCHANGING SECURITIES FOR FUND SHARES
Investors may exchange securities they already own for Fund shares, or they may
exchange a combination of securities and cash for Fund shares. Any securities to
be exchanged must meet the investment objective and policies of the Fund, must
have a readily ascertainable market value and must not be subject to
restrictions on resale. An investor should forward the securities in negotiable
form with an authorized letter of transmittal to Federated Securities Corp. The
Fund will notify the investor of its acceptance and valuation of the securities
within five business days of their receipt by State Street Bank.
The Fund values such securities in the same manner as the Fund values its
assets. The basis of the exchange will depend upon the net asset value of Fund
shares on the day the securities are valued. One share of the Fund will be
issued for each equivalent amount of securities accepted. Any interest earned on
the securities prior to the exchange will be considered in valuing the
securities. All interest, dividends, subscription, conversion, or other rights
attached to the securities become the property of the Fund, along with the
securities.
TAX CONSEQUENCES
Exercise of this exchange privilege is treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Fund
shares, a gain or loss may be realized by the investor.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
* for equity securities, according to the last sale price on a national
securities exchange, if available;
* in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
* for bonds and other fixed-income securities, at the last sale price on a
national securities exchange if available, otherwise as determined by an
independent pricing service;
* for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service or for short-term
obligations with remaining maturities of 60 days or less at the time of
purchase, at amortized cost; or
* for all other securities, at fair value as determined in good faith by
the Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
The Fund will value stock index futures contracts and options on stocks, stock
indices, and stock index futures contracts at their market values established by
the exchanges at the close of option trading on such exchanges unless the
Trustees determine in good faith that another method of valuing option positions
is necessary to appraise their fair value.
REDEEMING SHARES
The Fund redeems shares at the next computed net asset value after State Street
Bank receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part with
securities from the Fund's portfolio.
Such securities will be valued with the same valuation techniques employed in
determining net asset value, and the securities will be selected in a manner the
Trustees determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund will redeem shares for any one shareholder in cash
up to the lesser of $250,000 or 1% of the Fund's net asset value during any
90-day period.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust on behalf
of the Fund. To protect shareholders of the Fund, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders of the Fund for such acts or obligations of the Trust. These
documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument that the Trust enters into or its Trustees enter into
or sign on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required to use the
property of the Fund 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 on behalf of the Fund. Therefore, financial
loss resulting from liability as a shareholder of the Fund will occur only if
the Trust itself cannot meet its obligations to indemnify shareholders and pay
judgments against them from the assets of the Fund.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because the Fund expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* invest in securities within certain statutory limits; and * distribute to
its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends-received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Shareholders will pay federal tax at capital gains rates on long-term capital
gains distributed to them regardless of how long they have held the Fund shares.
TOTAL RETURN
The Fund's average annual total returns for the one-year period ended October
31, 1997, and for the period from November 5, 1992 (start of performance) to
October 31, 1997, were 31.83% and 17.10%, respectively. The average annual total
return for the Trust is the average compounded rate of return for a given period
that would equate a $1,000 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 offering price 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
$1,000, adjusted over the period by any additional shares, assuming the
quarterly reinvestment of all dividends and distributions.
YIELD
The Fund's SEC yield for the thirty-day period ended October 31, 1997, was
0.87%. The yield for the Fund is determined each day by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the offering price
per share of the Fund on the last day of the period. This value is annualized
using semi-annual compounding. This means that the amount of income generated
during the thirty-day period is assumed to be generated each month over a
twelve-month period and is reinvested every six months. The yield does not
necessarily reflect income actually earned by the Fund because of certain
adjustments required by the Securities and Exchange Commission and, therefore,
may not correlate to the dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested; * changes in
interest rates and market value of portfolio securities; * changes in Fund
expenses; * the relative amount of Fund cash flow; and * various other
factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
* LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes
the reinvestment of all capital gains distributions and income dividends
and takes into account any change in offering price over a specific period
of time. From time to time, the Fund will quote its Lipper ranking in the
"index funds" category in advertising and sales literature.
* RUSSELL 2000 SMALL STOCK INDEX is a broadly diversified index consisting of
approximately 2,000 small capitalization common stocks that can be used to
compare to the total returns of funds whose portfolios are invested
primarily in small capitalization common stocks.
* STANDARD & POOR'S DAILY STOCK PRICE INDEXES OF 500 AND 400 COMMON STOCKS
are composite indexes of common stocks in industry, transportation, and
financial and public utility companies that can be used to compare to the
total returns of funds whose portfolios are invested primarily in common
stocks. In addition, the Standard & Poor's indexes assume reinvestments of
all dividends paid by stocks listed on its indexes. Taxes due on any of
these distributions are not included, nor are brokerage or other fees
calculated in Standard & Poor's figures.
* WILSHIRE 5000 EQUITY INDEXES consists of nearly 5,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available, and can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks.
* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for
two weeks.
Advertisements and other sales literature for each class of shares may quote
total returns which are calculated on nonstandardized base periods. These total
returns also represent the historic change in the value of an investment in
either class of shares based on quarterly reinvestment of dividends over a
specified period of time.
Advertising and other promotional literature may include charts, graphs, and
other illustrations using the Fund's returns, or returns in general, that
demonstrate basic investment concepts such as tax-deferred compounding,
dollar-cost averaging, and systematic investment. In addition, the Fund can
compare its performance, or performance for the types of securities in which it
invests, to a variety of other investments, such as bank savings accounts,
certificates of deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial, and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision-making--structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. Traders handle trillions of dollars in
annual trading volume.
In the equity sector, Federated Investors has more than 26 years of experience.
As of December 31, 1996, Federated Investors managed 31 equity funds totaling
approximately $7.6 billion in assets across growth, value, equity income,
international, index, and sector (i.e. utility) styles. Federated Investor's
value-oriented management style combines quantitative and qualitative analysis
and features a structured, computer-assisted composite modeling system that was
developed in the 1970s.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high-yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed-income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global
portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
BANK MARKETING
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--including 200 New York Stock Exchange firms--supported by more
wholesalers than any other mutual fund distributor. Federated's service to
financial professionals and institutions has earned it high ratings in several
surveys performed by DALBAR, Inc. DALBAR is recognized as the industry benchmark
for service-quality measurement. The marketing effort to these firms is headed
by James F. Getz, President, Broker/Dealer Division.
STANDARD & POOR'S
"Standard and Poor's," "S&P," "S&P MidCap 400 Index," and "Standard & 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 S&P, and S&P makes no representation regarding
the advisability of investing in the Fund.
* Source: Investment Company Institute
Federated Mini-Cap Fund
Institutional Shares
Annual Report for 12 Months Ended October 31, 1997
MANAGEMENT DISCUSSION AND ANALYSIS
Institutional Shares' total return for the 12 months ended October 31, 1997 was
27.54%.* The target Index (Russell 2000**) had a total return of 29.33% during
the period. Institutional Shares' performance varied from the Index due to
transaction costs, administrative expenses, and holdings of stock index futures
contracts, which are held to enhance fund liquidity.*** It is important to note
that transactions costs for small company stocks are much higher than that for
large company stocks due to illiquidity factors, i.e., there are sometimes very
few buyers and sellers of small company stocks.+
The U.S. stock market continued its strong climb in the last year despite
increasing volatility from concerns over 1) interest rate increases, 2)
corporate earnings shortfalls, and 3) foreign market troubles.
In December 1996, Federal Reserve Chairman's comment that the U.S. stock market
was fueled by "irrational exuberance" sent the market lower as investors
interpreted the comment as a signal of a likely hike in interest rates. In March
1997, the Fed slightly raised its target rate for fed funds, triggering another
downturn.
In late summer, the stocks of some "bellwether" companies (e.g., Coca Cola,
Gillette) were pummeled when they announced earnings shortfalls. This showed the
market's sensitivity to bad earnings news and that large company stocks may be
nearing the end of their relatively strong performance over the last few years.
In late October, the U.S. stock market suffered its most recent setback from the
"Asian Flu," a downturn in many Asian financial markets, triggered by currency
problems. Investors fear that ripple effects from weakening Asian economies may
affect the profitability of U.S.-based firms.
However, most investors in U.S. stocks apparently believe the market is still
attractive, bidding prices back up in a short period of time after each
downturn.
During the last year consumer staples, producer durables, and transportation
were among the strongest performing sectors while technology, oil, and materials
processing were among the worst performing sectors in the Index.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will flucuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
** This index is unmanaged.
*** Redemption is at the then-current net asset value, which may be more or less
than the original cost.
+ Small cap stocks have historically experienced greater volatility than
average.
Federated Mini-Cap Fund
Institutional Shares
GROWTH OF $25,000 INVESTED IN INSTITUTIONAL SHARES OF FEDERATED MINI-CAP
FUND
The graph below illustrates the hypothetical investment of $25,000 in the
Institutional Shares of Federated Mini-Cap Fund (the "Fund") from August 11,
1992 (start of performance) to October 31, 1997 compared to the Russell 2000
Index (RUS2).+
[Graphic] See attached Appendix 1
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Institutional Shares'
prospectus dated December 31, 1997, and, together with financial statements
contained therein, constitutes the Institutional Shares' annual report.
* The Institutional Shares' performance assumes the reinvestment of all
dividends and distributions. The RUS2 has been adjusted to reflect
reinvestment of dividends on securities in the index.
+ The RUS2 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Institutional Shares'
performance. This index is unmanaged.
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
Cusip 31420E304
006683 (12/97)
[Graphic]
FEDERATED MAX-CAP FUND
(A Portfolio of Federated Index Trust)
Institutional Shares
PROSPECTUS
The Institutional Shares of Federated Max-Cap Fund (the "Fund") offered by this
prospectus represent interests in the Fund, which is an investment portfolio in
Federated Index Trust (the "Trust"), an open-end, management investment company
(a mutual fund). The investment objective of the Fund is to seek to provide
investment results that correspond to the aggregate price and dividend
performance of publicly traded common stocks as represented by the Standard &
Poor's 500 Composite Stock Price Index (the "Index"). The Fund is neither
affiliated with nor sponsored by Standard & Poor's.
THE INSTITUTIONAL 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 BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Class C
Shares, Institutional Shares and Institutional Service Shares dated December 31,
1997, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information, or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated December 31, 1997
TABLE OF CONTENTS
<TABLE>
<S> <C> Summary of Fund Expenses 1 Financial Highlights--Institutional Shares 2
General Information 3 Investment Information 3 Investment Objective 3
Investment Policies 3 Investment Limitations 6 Federated Index Trust
Information 6 Management of the Trust 6 Distribution of Institutional Shares 8
Fund Administration 8 Expenses of the Fund and Institutional Shares 8 Net Asset
Value 9 Investing in the Institutional Shares 9 Share Purchases 9 Minimum
Investment Required 9 What Shares Cost 9 Confirmations and Account Statements
10 Dividends 10 Capital Gains 10 Redeeming Institutional Shares 10 Telephone
Redemption 10 Written Requests 10 Accounts with Low Balances 11 Shareholder
Information 11 Voting Rights 11 Tax Information 11 Federal Income Tax 11 State
and Local Taxes 11 Performance Information 12 Other Classes of Shares 12
Financial Highlights--Institutional Service Shares 13 Financial Statements 14
Report of Ernst & Young LLP, Independent Auditors 38
</TABLE>
SUMMARY OF FUND EXPENSES
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C>
Management Fee (after waiver)(1) 0.25%
12b-1 Fee None
Total Other Expenses 0.06%
Shareholder Services Fee (after waiver)(2) 0.00%
Total Operating Expenses(3) 0.31%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.30%.
(2) The shareholder services fee has been reduced to reflect the voluntary
waiver of the shareholder services fee. The shareholder service provider can
terminate this voluntary waiver at any time at its sole discretion. The maximum
shareholder services fee is 0.25%.
(3) The total operating expenses would have been 0.61% absent the voluntary
waivers of a portion of the management fee and the shareholder services fee.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "Federated Index Trust Information." Wire-transferred redemptions of less
than $5,000 may be subject to additional fees.
<TABLE>
<CAPTION>
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $ 3
3 Years $10
5 Years $17
10 Years $39
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 38.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995 1994 1993 1992 1991 1990(A)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $15.49 $14.74 $12.02 $12.24 $11.64 $11.07 $8.60 $10.00
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.31 0.34 0.38 0.32 0.30 0.32 0.37 0.12
Net realized and
unrealized gain (loss) on
investments and futures
contracts 4.47 2.80 2.70 0.10 1.29 0.71 2.46 (1.43)
Total from investment 4.78 3.14 3.08 0.42 1.59 1.03 2.83 (1.31)
operations
LESS DISTRIBUTIONS
Distributions from net (0.33) (0.36) (0.34) (0.30) (0.30) (0.34) (0.36) (0.09)
investment income
Distributions from net (0.24) (2.03) (0.02) (0.34) (0.69) (0.12) -- --
realized gain on
investments and futures
contracts
Total distributions (0.57) (2.39) (0.36) (0.64) (0.99) (0.46) (0.36) (0.09)
NET ASSET VALUE, END OF
PERIOD $19.70 $15.49 $14.74 $12.02 $12.24 $11.64 $11.07 $ 8.60
TOTAL RETURN(B) 31.51% 23.71% 26.00% 3.59% 14.35% 9.51% 33.31% (14.46%)
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.31% 0.31% 0.31% 0.32% 0.31% 0.30% 0.24% 0.00%
Net investment income 1.70% 2.29% 2.91% 2.70% 2.60% 2.92% 3.74% 5.19%*
Expense
waiver/reimbursement(c) 0.30% 0.31% 0.33% 0.07% 0.09% 0.18% 0.45% 0.94%*
SUPPLEMENTAL DATA
Net assets, end of
period (000 omitted) $1,142,081 $900,131 $679,237 $443,815 $407,246 $309,614 $144,528 $25,129
Average commission rate
paid(d) $0.0224 $0.0153 -- -- -- -- -- --
Portfolio turnover 16% 3% 57% 2% 13% 46% 6% 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 5, 1990 (date of initial public
offering) to October 31, 1990. For the period from the start of business June
26, 1990 to July 4, 1990, net investment income per share aggregating $0.02 per
share ($155) was distributed to the Fund's manager. Such distribution
represented the net income of the Fund prior to initial public offering of Fund
shares which commenced July 5, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 30, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") has established three classes of shares of the Fund, known
as Institutional Shares ("Shares"), Institutional Service Shares and Class C
Shares. This prospectus relates only to Institutional Shares of the Fund.
Institutional Shares are designed primarily for institutions investing on behalf
of their customers. A minimum initial investment of $25,000 over a 90-day period
is required.
Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide investment results that
correspond to the aggregate price and dividend performance of publicly-traded
common stocks, by duplicating the composition of the Index. The investment
objective cannot be changed without approval of shareholders. The Fund's ability
to duplicate the Index will depend partly on the size and timing of cash flows
into and out of the Fund. The Fund's performance is expected to closely mirror
the performance of the Index. An investment in the Fund presents risks similar
to those of investing in a portfolio comprised of the securities of the
companies in the Index. While there is no assurance that the Fund will achieve
its investment objective, it endeavor to do so by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
in these policies become effective.
The Fund pursues its investment objective by attempting to duplicate the
investment results of the Index, while minimizing transaction costs and other
expenses. The Fund will attempt to achieve a correlation between the performance
of its portfolio and that of the Index of at least 0.95 of 1% or better; a
figure of 1.00 would represent perfect correlation. The Fund will normally be
invested in substantially all of the stocks that comprise the Index. Under
normal circumstances, at least 80% of the value of the Fund's total assets will
be invested in stocks represented in the Index. However, the Fund is not
required to sell securities if the 80% investment level changes due to increases
or decreases in the market value of portfolio securities.
The Index consists of 500 selected common stocks, most of which are listed on
the New York Stock Exchange. Standard & Poor's ("S&P") designates the stocks to
be included in the Index on a statistical basis. A particular stock's weighting
in the Index is based on its relative total market value; that is, its market
price per share times the number of shares outstanding. From time to time, S&P
may add or delete stocks from the Index. Inclusion of a particular stock in the
Index in no way implies an opinion by S&P as to its investment attractiveness,
nor is S&P a sponsor or in any way affiliated with the Fund. The Fund utilizes
the Index as the standard performance benchmark because it represents
approximately 70% of the total market value of all common stocks. In addition,
it is familiar to investors, and is recognized as a barometer of common stock
investment returns.
The Fund will be managed passively, in that the traditional management functions
of economic, financial, and market analysis will not be undertaken. Furthermore,
a company's adverse financial circumstance will not trigger its elimination from
the Fund's portfolio, unless the company's stock is removed from the Index by
S&P. The Fund is managed by utilizing a computer program that identifies which
stocks should be purchased or sold in order to duplicate, as much as possible,
the composition of the Index. The Fund will include a stock in its investment
portfolio in the order of the stock's weighting in the Index, starting with the
heaviest-weighted stock. Thus, the proportion of Fund assets invested in such
stock is nearly identical to the percentage of the particular stock represented
in the Index. On occasion, so as to respond to changes in the Index's
composition, as well as corporate mergers, tender offers, and other
circumstances, adjustments will be made in the Fund's portfolio. However, it is
anticipated that these adjustments will occur infrequently, and the costs will
be minimized. As a result, portfolio turnover is expected to be well below that
encountered in other investment company portfolios. Therefore, the accompanying
costs, including accounting costs, brokerage fees, custodial expenses, and
transfer taxes, are expected to be relatively low. While the cash flows into and
out of the Fund will impact the Fund's portfolio turnover rate and the Fund's
ability to replicate the Index's performance, investment adjustments will be
made, as practicably as possible, to account for these circumstances.
The Fund believes that indexing, as described above, constitutes a reasonable
and effective method of replicating percentage changes in the Index. While the
Fund will not duplicate the Index's performance precisely, it is anticipated
that the Fund's performance will closely resemble the performance of the Index.
Factors such as the size of the Fund's portfolio, the size and timing of cash
flows into and out of the Fund, and changes in the securities markets and the
Index itself, will account for the difference.
In order to accommodate cash flows, the Fund may enter into stock index futures
contracts and options. The Fund may purchase futures contracts and options
solely to maintain adequate liquidity to meet its redemption demands. This will
allow the Fund to simultaneously maximize the level of the Fund assets which are
tracking the performance of the Index. The Fund can sell futures contracts and
options in order to close out a previously established position. The Fund will
not enter into any stock index futures contract for the purpose of speculation.
ACCEPTABLE INVESTMENTS
The Fund will invest primarily in common stocks comprising the Index. In
addition, the Fund may hold cash reserves which may be invested in the
following:
U.S. GOVERNMENT SECURITIES
The Fund is permitted to invest in U.S. government securities which are
either issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These securities include, but are not limited to:
* direct obligations of the U.S. Treasury, such as U.S. Treasury bills, notes,
and bonds; * notes, bonds, and discount notes issued or guaranteed by U.S.
government agencies and instrumentalities supported by the full faith and credit
of the United States; * notes, bonds, and discount notes of U.S. government
agencies or instrumentalities which receive or have access to federal funding;
and * notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.
REPURCHASE AGREEMENTS
The U.S. government securities and other securities in which the Fund invests
may be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed-upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Fund may purchase carry
variable interest rates. These securities have a rate of interest subject to
adjustment at least annually. This adjusted interest rate is ordinarily tied to
some objective standard, such as a published interest rate or interest rate
index.
CASH ITEMS
The Fund may also invest in cash items.
The Fund may also invest in commercial paper rated A-1 by S&P, Prime-1 by
Moody's Investors Service, Inc., or F-1 by Fitch Investors Service, Inc.
STOCK INDEX FUTURES AND OPTIONS
The Fund may utilize stock index futures contracts, options, and options on
futures contracts, subject to the limitation that the value of these futures
contracts and options will not exceed 20% of the Fund's total assets. Also, the
Fund will not purchase options to the extent that more than 5% of the value of
the Fund's total assets would be invested in premiums on open put option
positions. These futures contracts and options will be used to handle cash flows
into and out of the Fund and to potentially reduce transactional costs, since
transactional costs associated with futures and options contracts can be lower
than costs stemming from direct investments in stocks.
There are several risks accompanying the utilization of futures contracts to
effectively anticipate market transactions. First, positions in futures
contracts may be closed only on an exchange or board of trade that furnishes a
secondary market for such contracts. While the Fund plans to utilize futures
contracts only if there exists an active market for such contracts, there is no
guarantee that a liquid market will exist for the contracts at a specified time.
Furthermore, because, by definition, futures contracts look to projected price
levels in the future and not to current levels of valuation, market
circumstances may result in there being a discrepancy between the price of the
stock index future and the movement in the stock index. The absence of a perfect
price correlation between the futures contract and its underlying stock index
could stem from investors choosing to close futures contracts by offsetting
transactions, rather than satisfying additional margin requirements. This could
result in a distortion of the relationship between the index and futures market.
In addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of participation by
speculators in the futures market could result in price fluctuations.
In view of these considerations, the Fund will comply with the following
restrictions when purchasing and selling futures contracts. First, the Fund will
not participate in futures transactions if the sum of its initial margin
deposits on open contracts will exceed 5% of the market value of the Fund's
total assets, after taking into account the unrealized profits and losses on
those contracts into which it has entered. Second, the Fund will not enter into
these contracts for speculative purposes. Third, since the Fund does not
constitute a commodity pool, it will not market itself as such, nor serve as a
vehicle for trading in the commodities futures or commodity options markets. In
this regard, the Fund will disclose to all prospective investors the limitations
on its futures and options transactions, and will make clear that these
transactions are entered into only for bona fide hedging purposes or such other
purposes permitted under regulations promulgated by the Commodity Futures
Trading Commission ("CFTC"). Also, the Fund intends to claim an exclusion from
registration as a commodity pool operator under the regulations promulgated by
the CFTC.
INDEX PARTICIPATION CONTRACTS
In addition to investing in stock index futures contracts, options and options
on futures contracts, the Fund may also participate in the purchasing and
selling of index participation contracts based on the Index. The Fund will
utilize index participation contracts to aid in the management of cash flows
into and out of the Fund and not for speculative purposes. These contracts
provide the equivalent of a position in the stocks of the Index, where each
stock is represented in the same proportion as it is represented in the Index.
Unlike futures contracts, positions in these instruments may last indefinitely,
with no expiration date and will pay dividends implied by the underlying stocks
in the Index. Generally, the value of an index participation contract will rise
and fall as the value of the Index rises and falls. Index participation
contracts have lower transaction costs than those associated with the purchase
and sale of individual stocks. The Fund will invest in index participation
contracts only if there exists an active market for such contracts.
The value of these contracts, together with the value of the Fund's investment
in stock index futures contracts, options and options on futures contracts will
not exceed 20% of the Fund's total assets. The Fund's use of these investments
will be to maintain adequate liquidity to meet redemption requests, while
simultaneously maximizing the level of Fund assets which are tracking the
performance of the Index.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities on a short-term or long-term basis,
up to one-third of the value of its total assets to broker/dealers, banks, or
other institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks or other institutions which the managers
have determined are creditworthy under guidelines established by the Trustees.
The Fund will receive collateral in the form of cash or U.S. government
securities equal to at least 100% of the value of the securities loaned.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase short-term U.S. government securities on a when-issued or
delayed delivery basis. These transactions are arrangements in which the Fund
purchases securities with payment and delivery scheduled for a future time. The
seller's failure to complete these transactions may cause the Fund to miss a
price or yield considered to be advantageous. Settlement dates may be a month or
more after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the managers deem it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for at
least a percentage of its cash value with an agreement to buy it back on a
set date) except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitation, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in this policy becomes effective.
The Fund will not invest more than 15% of its net assets in securities that are
illiquid.
FEDERATED INDEX TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by the Trustees. The Trustees are responsible for managing
the business affairs of the Trust and for exercising all of the powers of the
Trust except those reserved for the shareholders. The Executive Committee of the
Trustees handles the Trustees' responsibilities between meetings of the
Trustees.
FUND'S MANAGER
Federated Management serves as the Fund's manager (the "Manager"). The Trust has
entered into a management contract (the "Management Contract") with the Manager,
which, in turn, has entered into a sub-management contract (the "Sub-Management
Contract") with ANB Investment Management and Trust Company ("ANB" or the
"Sub-Manager") (ANB and the Manager are collectively referred to herein as
"Managers"). It is the Manager's responsibility to select the Sub-Manager,
subject to the review and approval of the Trustees and to review and evaluate
the Sub-Manager's continued performance. The Manager is also responsible for
providing administrative services to the Fund.
Subject to the supervision and direction of the Trustees, the Manager provides
to the Fund investment management evaluation services principally by performing
initial due diligence on the Sub-Manager for the Fund and thereafter monitoring
and evaluating the performance of the Fund's Sub-Manager through quantitative
and qualitative analyses. In addition, the Manager conducts periodic in-person,
telephonic and written consultations with the Sub-Manager. In initially
evaluating the Sub-Manager, the Manager considered, among other factors, the
Sub-Manager's level of expertise; relative performance over a minimum period of
five years; level of efficiency; level of adherence to investment discipline or
philosophy; personnel, facilities and financial strength; and quality of service
and client communications. On an ongoing basis, the Manager is responsible for
communicating performance expectations and evaluations to the Sub-Manager;
monitoring tracking errors; monitoring and analyzing the appropriate futures
contracts to purchase and the futures holdings of the Fund as a percentage of
Fund assets; monitoring market timing in the Fund; discussing with the
Sub-Manager which method of indexing to use; and ultimately recommending to the
Trustees whether the Sub-Management Contract should be renewed, modified or
terminated. The Manager provides written reports to the Trustees regarding the
results of its evaluation and monitoring functions. In addition, the Manager is
responsible for providing the Fund with administrative services, including, but
not limited to, shareholder servicing and certain legal and accounting services.
The Manager is also responsible for conducting all operations of the Fund,
except those operations contracted to the Sub-Manager, custodian, transfer agent
and dividend disbursing agent. As described below, the Manager receives an
annual fee from the Fund for performing its responsibilities under the
Management Contract.
MANAGEMENT FEES
The Fund's Manager receives an annual management fee equal to 0.30% of the
Fund's average daily net assets. Under the Management Contract, which provides
for the voluntary waiver of the management fee by the Manager, the Manager will
voluntarily waive some or all of the management fee. The Manager can terminate
this voluntary waiver of some or all of its management fee at any time in its
sole discretion.
MANAGER'S BACKGROUND
Federated Management, a Delaware business trust organized on April 11, 1989, is
a registered investment adviser under the Investment Advisers Act of 1940. It is
a subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr. Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Federated Management and other subsidiaries of Federated
Investors serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $110 billion invested
across more than 300 funds under management and/or administration by its
subsidiaries, as of December 31, 1996, Federated Investors is one of the largest
mutual fund investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,500
financial institutions nationwide.
Both the Trust and the Manager have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
SUB-MANAGER
Under the terms of the Sub-Management Contract between the Manager and ANB, ANB
serves as the Fund's Sub-Manager. The Sub-Manager will develop, maintain and run
the computer program designed to determine which securities will be purchased
and sold so as to replicate the composition of the Index to the extent feasible,
and, subject to the Manager's oversight, has complete discretion to purchase and
sell portfolio securities for the Fund within the Fund's investment objective,
restrictions and policies.
SUB-MANAGEMENT FEES
For its services under the Sub-Management Contract, ANB receives an annual fee
from the Manager equal to 0.05% of the first $100 million of net assets under
management, 0.02% over $100 million but less than $200 million, and 0.01% of net
assets over and above $200 million, on an annualized basis. This fee is paid by
the Manager out of its resources and is not an incremental Fund expense. No
performance or incentive fees are paid to the Sub-Manager.
SUB-MANAGER'S BACKGROUND
ANB, incorporated in the State of Illinois on July 1, 1988, is a registered
investment adviser under the Investment Advisers Act of 1940. ANB is a
wholly-owned subsidiary of First Chicago Investment Management Company which, in
turn, is an indirect wholly-owned subsidiary of First Chicago NBD Corporation.
It serves as investment adviser principally to corporate defined benefit and
defined contribution plans which have, as of June 30, 1997, placed approximately
$28.7 billion in assets with ANB. Since 1973, when American National Bank and
Trust Company of Chicago introduced its first commingled equity index fund, ANB
has developed and managed a family of equity and bond index funds in which some
200 nationwide non-financial institution clients invest. In total, ANB manages
72 commingled/common trust funds. On October 3, 1997, First Chicago NBD
Corporation announced an agreement to sell ANB to Northern Trust Corporation
("Northern Trust"). The Fund anticipates that on December 31, 1997, but no later
than January 2, 1998, First Chicago Investment Company will have closed the sale
of ANB to Northern Trust. After the closing, ANB will be a wholly-owned
subsidiary of Northern Trust or one of its subsidiaries and is expected to
change its name to Northern Trust Quantitative Advisors, Inc. The Manager has
recommended that ANB continue as Sub-Manager after the expected sale.
If the sale takes place, the subadvisory contract between the Manager and ANB
will terminate by its terms and a new contract will have to be approved by the
Trustees and the shareholders. The Board of Trustees of the Fund approved a new
contract with ANB on November 20, 1997. Shareholders will be asked to approve
the arrangement before February 28, 1998. Because the contract would terminate
prior to a shareholder meeting and vote, the Fund will pursue exemptive relief
from the Securities and Exchange Commission (the "SEC") before the closing in
order to permit ANB to continue as Sub-Manager. If the closing, SEC exemptive
relief, and shareholder approval do not occur before March 1, 1998, shareholders
will be notified, and the Manager will assume its responsibility to conduct all
advisory activities.
Northern Trust is a bank holding company and one of the country's largest trust
institutions, with subsidiaries located across the United States and in several
international locations. At the end of the third quarter of 1997, total assets
of Northern Trust were $26.9 billion and trust assets under administration were
$1 trillion.
Also, since 1992, ANB has served as Sub-Manager for the Federated Mini-Cap Fund
and for the Federated Mid-Cap Fund, which are also portfolios of the Trust.
DISTRIBUTION OF INSTITUTIONAL SHARES
Federated Securities Corp. is the principal distributor for the Fund. It is
a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors. Federated
Securities Corp. pays a licensing fee to S&P for the right to use the Index
in connection with the sub-management activities for the Fund. Federated
Securities Corp. is not affiliated with S&P.
SHAREHOLDER SERVICES
The Fund has entered into a Shareholder Services Agreement with Federated
Shareholder Services, a subsidiary of Federated Investors, under which the Fund
may make payments up to 0.25% of the average daily net asset value of its
shares, computed at an annual rate, to obtain certain personal services for
shareholders and to maintain shareholder accounts. From time to time and for
such periods as deemed appropriate, the amount stated above may be reduced
voluntarily. Under the Shareholder Services Agreement, Federated Shareholder
Services will either perform shareholder services directly or will select
financial institutions to perform shareholder services. Financial institutions
will receive fees based upon shares owned by their clients or customers. The
schedules of such fees and the basis upon which such fees will be paid will be
determined from time to time by the Fund and Federated Shareholder Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Shareholder Services Agreement,
Federated Securities Corp. and Federated Shareholder Services, from their own
assets, may pay financial institutions supplemental fees for the performance of
substantial sales services, distribution-related support services, or
shareholder services. The support may include sponsoring sales, educational and
training seminars for their employees, providing sales literature, and
engineering computer software programs that emphasize the attributes of the
Fund. Such assistance will be predicated upon the amount of shares the financial
institution sells or may sell, and/or upon the type and nature of sales or
marketing support furnished by the financial institution. Any payments made by
the distributor may be reimbursed by the Fund's Manager or its affiliates.
FUND ADMINISTRATION
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors, provides the
Manager with the administrative personnel and services necessary to provide
shareholder servicing and certain legal and accounting services.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Managers look for prompt execution of the order at a favorable
price. In working with dealers, the Managers will generally utilize those who
are recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. In selecting among
firms believed to meet these criteria, the Managers may give consideration to
those firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The Managers make decisions on
portfolio transactions and select brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND AND INSTITUTIONAL SHARES
Holders of Shares pay their allocable portion of Trust and Fund expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to the cost of: organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; meetings of Trustees and
shareholders and proxy solitations therefor; legal fees of the Trust;
association membership dues; and such non-recurring and extraordinary items as
may arise from time to time.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the portfolio and Shares of the
portfolio; investment advisory services; taxes and commissions; custodian fees;
insurance premiums; auditors' fees; and such non-recurring and extraordinary
items as may arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Trust's Shareholder Services Agreement. However,
the Trustees reserve the right to allocate certain other expenses to holders of
Shares as they deem appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; printing and postage expenses relating to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
and Trustees' fees incurred as a result of issues relating solely to Shares.
NET ASSET VALUE
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 Shares,
Institutional Service Shares and Class C 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 shareholders of a particular class are entitled. The
NAV for Shares is determined by subtracting liabilities attributable to
Institutional Shares from the value of Fund assets attributable to Institutional
Shares and dividing the remainder by the number of Institutional Shares
outstanding.
INVESTING IN INSTITUTIONAL SHARES
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares of
the Fund may be purchased either by wire or mail. To purchase Shares of the
Fund, open an account by calling Federated Securities Corp. Information needed
to establish the account will be taken over the telephone. The Fund reserves the
right to reject any purchase request.
BY WIRE
To purchase Shares of the Fund by Federal Reserve wire, call the Fund to place
an order. Shareholders have until 4:00 p.m. (Eastern time) to call the Fund for
settlement on the next business day. However, in order to maximize the Fund's
ability to track the Index, shareholders are urged to transmit purchase requests
prior to 2:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 4:00 p.m. (Eastern time) on the
next business day following the order. Federal funds should be wired as follows:
Federated Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated Index
Trust, Federated Max-Cap Fund--Institutional Shares; Fund Number (this number
can be found on the account statement or by contacting the Fund); Group Number
or Order Number; Nominee or Institution Name; and ABA Number 011000028. Shares
cannot be purchased by wire on holidays when wire transfers are restricted.
Questions on wire purchases should be directed to your shareholder services
representative at the telephone number listed on your account statement.
BY MAIL
To purchase Shares of the Fund by mail, send a check made payable to Federated
Index Trust, Federated Max-Cap Fund--Institutional Shares to the Fund's transfer
agent, Federated Shareholder Services Company, P.O. Box 8600, Boston,
Massachusetts 02266-8600. Orders by mail are considered received when payment by
check is converted into federal funds. This is normally the next business day
after the check is received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000. However, an account may
be opened with a smaller amount as long as the $25,000 minimum is reached within
90 days. An investor's minimum investment will be calculated by combining all
accounts that the institution maintains with the Fund.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a financial intermediary may be charged a service fee by that
financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no Shares are tendered for redemption and no
orders to purchase Shares are received; and (iii) the following holidays: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions. In addition,
shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Fund will not issue share certificates.
DIVIDENDS
Dividends are declared and paid quarterly. Unless shareholders request cash
payments by writing to the Fund, dividends are automatically reinvested in
additional Shares on payment dates at the ex-dividend date net asset value
without a sale charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL SHARES
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern time). However, in order to maximize the Fund's ability to track the
Index, shareholders are urged to telephone the Fund prior to 2:00 p.m. (Eastern
time). The proceeds will normally be wired the following business day, but in no
event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. Proceeds from
redemption requests received on holidays when wire transfers are restricted will
be wired the following business day. Questions about telephone redemptions on
days when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified. An
authorization form permitting State Street Bank or the Fund to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from Federated Securities Corp. Telephone redemption
instructions may be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "Written Requests," should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund and share class name, his
account number, and the Share or dollar amount requested. All owners of the
account must sign the request exactly as the shares are registered. If share
certificates have been issued, they should be sent unendorsed with the written
request by registered or certified mail.
SIGNATURES
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by:
* a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
* a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
* a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or
* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in 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.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
all series of the Trust.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held their Shares.
STATE AND LOCAL TAXES
In the opinion of Houston, Donnelly & Meck, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time the Fund advertises its total return and yield for
Institutional Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in Institutional Shares after reinvesting all income and
capital gain distributions. It is calculated by dividing that change by the
initial investment and is expressed as a percentage.
The yield of Institutional Shares is calculated by dividing the net investment
income per share (as defined by the Securities and Exchange Commission) earned
by the Institutional Shares over a thirty-day period by the offering price per
share of each class on the last day of the period. This number is then
annualized using semi-annual compounding. The yield does not necessarily reflect
income actually earned by the Institutional Shares and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.
The Institutional Shares of the Fund are sold without any sales load or other
similar non-recurring charges.
Total return and yield will be calculated separately for Institutional Shares,
Institutional Service Shares and Class C Shares.
From time to time, advertisements for Institutional Shares of the Fund may refer
to ratings, rankings, and other information in certain financial publications
and/or compare the performance of Institutional Shares to certain indices.
OTHER CLASSES OF SHARES
The Fund also offers other classes of shares called Institutional Service Shares
and Class C Shares.
Institutional Service Shares are sold at net asset value to retail or private
banking customers of financial institutions and are subject to a minimum initial
investment of $25,000 over a 90-day period, a 12b-1 Plan and a Shareholder
Services Agreement.
Class C Shares are sold at net asset value to customers of financial
institutions and are subject to a minimum initial investment of $10,000, a 12b-1
Plan, and a Shareholder Services Agreement.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.
Institutional Shares, Institutional Service Shares and Class C Shares are
subject to certain of the same expenses, however, Class C Shares are sold
subject to a contingent deferred sales charge imposed on shares redeemed within
one year of purchase. Expense differences between Institutional Shares,
Institutional Service Shares and Class C Shares may affect the performance of
each class.
The stated management fee is the same for all classes of shares.
To obtain more information and a prospectus for Institutional Service Shares and
Class C Shares, investors may call 1-800-341-7400 or contact their financial
intermediary.
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 38.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.47 $14.72 $12.02 $12.24 $12.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.26 0.30 0.33 0.28(b) 0.07
Net realized and unrealized gain
(loss) on investments and futures
contracts 4.45 2.79 2.69 0.11 0.12
Total from investment operations 4.71 3.09 3.02 0.39 0.19
LESS DISTRIBUTIONS
Distributions from net investment
income (0.28) (0.31) (0.30) (0.27) (0.07)
Distributions from net realized
gain on investments and futures
contracts (0.24) (2.03) (0.02) (0.34) --
Total distributions (0.52) (2.34) (0.32) (0.61) (0.07)
NET ASSET VALUE, END OF PERIOD $19.66 $15.47 $14.72 $12.02 $12.24
TOTAL RETURN(C) 31.07% 23.39% 25.52% 3.30% 1.70%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.62% 0.61% 0.61% 0.62% 0.61%*
Net investment income 1.36% 1.97% 2.55% 2.35% 1.52%*
Expense waiver/reimbursement(d) 0.30% 0.31% 0.33% 0.26% 0.09%*
SUPPLEMENTAL DATA
Net assets, end of period (000
omitted) $245,986 $58,741 $35,195 $8,617 $2,493
Average commission rate paid(e) $0.0224 $0.0153 -- -- --
Portfolio turnover 16% 3% 57% 2% 13%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 30, 1993 (date of initial
public investment) to October 31, 1993.
(b) Per share information presented is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
PORTFOLIO OF INVESTMENTS
FEDERATED MAX-CAP FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--97.5%
BASIC INDUSTRY--5.3%
7,900 ASARCO, Inc. $ 216,263
20,800 Air Products & Chemicals, Inc. 1,580,800
43,500 Alcan Aluminum, Ltd. 1,242,468
33,692 Allegheny Teledyne, Inc. 886,520
33,300 Aluminum Co. of America 2,430,900
107,293 Archer-Daniels-Midland Co. 2,387,269
19,700 (b)Armco, Inc. 113,275
19,500 Avery Dennison Corp. 776,344
5,600 Ball Corp. 196,000
71,400 Barrick Gold Corp. 1,468,163
41,700 Battle Mountain Gold Co. 255,413
9,800 Bemis Co., Inc. 373,625
20,700 (b)Bethlehem Steel Corp. 207,000
10,700 Boise Cascade Corp. 370,488
18,400 Champion International Corp. 1,015,450
44,200 Corning, Inc. 1,994,525
24,600 Crown Cork & Seal Co., Inc. 1,108,537
17,250 Cyprus Amax Minerals 361,172
43,700 Dow Chemical Co. 3,965,775
216,700 Du Pont (E.I.) de Nemours & Co. 12,324,812
15,025 Eastman Chemical Co. 895,865
25,900 Echo Bay Mines Ltd. 105,218
12,440 Ecolab, Inc. 591,677
26,862 Engelhard Corp. 466,727
36,200 Fort James Corp. 1,436,687
38,100 Freeport-McMoRan Copper & Gold, Inc., 909,637
Class B
17,500 Georgia-Pacific Corp. 1,484,219
10,000 Goodrich (B.F.) Co. 445,625
13,900 Grace (W.R.) & Co. 945,200
11,900 Great Lakes Chemical Corp. 559,300
19,800 Hercules, Inc. 908,325
27,200 Homestake Mining Co. 336,600
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
BASIC INDUSTRY--CONTINUED
31,400 Inco Ltd. $ 647,625
9,000 Inland Steel Industries, Inc. 176,625
57,976 International Paper Co. 2,608,920
20,200 Louisiana-Pacific Corp. 424,200
9,800 Mead Corp. 592,900
8,000 Millipore Corp. 313,000
113,000 Monsanto Co. 4,830,750
26,400 Morton International, Inc. 871,200
12,500 Nalco Chemical Co. 500,000
29,957 Newmont Mining Corp. 1,048,495
16,800 Nucor Corporation 877,800
10,200 Owens Corning 349,350
26,900 (b)Owens-Illinois, Inc. 928,050
34,600 PPG Industries, Inc. 1,959,225
24,333 Pall Corp. 503,389
12,100 Phelps Dodge Corp. 899,938
12,640 Pioneer Hi-Bred International 1,158,140
45,900 Placer Dome, Inc. 711,450
5,400 Potlatch Corp. 269,325
30,300 Praxair, Inc. 1,319,944
14,100 Reynolds Metals Co. 859,219
12,000 Rohm & Haas Co. 999,750
33,100 Sherwin-Williams Co. 918,525
19,200 Sigma-Aldrich Corp. 674,400
3,700 Springs Industries, Inc., Class A 171,588
18,508 Stone Container Corp. 223,253
10,900 Temple-Inland, Inc. 625,388
11,500 Tupperware Corp. 288,219
16,420 USX-U.S. Steel Group, Inc. 558,280
13,300 Union Camp Corp. 720,694
24,100 Union Carbide Corp. 1,101,069
19,550 Westvaco Corp. 641,484
38,200 Weyerhaeuser Co. 1,824,050
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
BASIC INDUSTRY--CONTINUED
21,300 Willamette Industries, Inc. $ 704,231
18,550 Worthington Industries, Inc. 383,753
TOTAL 74,044,108
CONSUMER DURABLES--3.2%
18,100 Black & Decker Corp. 688,931
4,900 Briggs & Stratton Corp. 243,775
19,000 Brunswick Corp. 641,250
5,300 Centex Corp. 310,050
129,268 Chrysler Corp. 4,556,697
15,700 Cooper Tire & Rubber Co. 332,643
20,000 Dana Corp. 936,250
62,600 Eastman Kodak Co. 3,748,175
14,800 Eaton Corp. 1,430,050
12,100 Echlin, Inc. 396,275
6,500 Fleetwood Enterprises, Inc. 197,031
228,900 Ford Motor Co. 10,000,068
140,300 General Motors Corp. 9,005,506
34,550 Genuine Parts Co. 1,081,847
29,900 Goodyear Tire & Rubber Co. 1,872,488
24,000 Hasbro, Inc. 696,000
7,253 Jostens, Inc. 169,086
7,300 Kaufman & Broad Homes Corp. 155,581
55,625 Mattel, Inc. 2,162,422
18,800 Maytag Corp. 627,450
30,500 Newell Co. 1,170,438
8,400 Polaroid Corp. 377,475
4,400 Pulte Corp. 164,450
28,700 Rubbermaid, Inc. 690,594
11,400 Snap-On Tools Corp. 490,200
17,100 Stanley Works 722,475
23,900 TRW, Inc. 1,368,275
14,300 Whirlpool Corp. 866,938
TOTAL 45,102,420
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
CONSUMER NON-DURABLES--10.7%
10,200 Alberto-Culver Co., Class B $ 307,912
13,900 American Greetings Corp., Class A 482,156
94,200 Anheuser-Busch Cos., Inc. 3,762,113
25,400 Avon Products, Inc. 1,663,700
13,000 Brown-Forman Corp., Class B 639,438
27,500 CPC International, Inc. 2,722,500
88,100 Campbell Soup Co. 4,542,656
19,800 Clorox Co. 1,386,000
475,300 Coca-Cola Co. 26,854,450
56,700 Colgate-Palmolive Co. 3,671,325
90,600 ConAgra, Inc. 2,729,325
7,100 Coors Adolph Co., Class B 250,718
32,800 Fortune Brands, Inc. 1,084,450
14,100 (b)Fruit of the Loom, Inc., Class A 367,481
30,600 General Mills, Inc. 2,019,600
107,300 Gillette Co. 9,556,406
70,800 Heinz (H.J.) Co. 3,287,775
27,400 Hershey Foods Corp. 1,513,850
20,900 International Flavors & Fragrances, Inc. 1,011,038
78,800 Kellogg Co. 3,393,325
106,648 Kimberly-Clark Corp. 5,539,031
13,600 Liz Claiborne, Inc. 689,350
55,300 Nike, Inc., Class B 2,599,100
293,300 PepsiCo, Inc. 10,797,106
464,300 Philip Morris Cos., Inc. 18,397,888
258,900 Procter & Gamble Co. 17,605,200
26,300 Quaker Oats Co. 1,259,113
20,400 Ralston Purina Co. 1,830,900
10,800 (b)Reebok International Ltd. 398,250
7,200 Russell Corp. 211,500
92,000 Sara Lee Corp. 4,703,500
71,100 Seagram Co. Ltd. 2,395,181
34,900 UST, Inc. 1,044,819
122,800 Unilever N.V., ADR 6,554,450
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
CONSUMER NON-DURABLES--CONTINUED
12,000 V.F. Corp. $ 1,072,500
22,300 Wrigley (Wm.), Jr. Co. 1,613,963
&NBSP;&NBSP;&NBSP;&NBSP;TOTAL 147,958,069
ENERGY MINERALS--8.9%
17,300 Amerada-Hess Corp. 1,062,868
94,100 Amoco Corp. 8,627,793
11,400 Anadarko Petroleum Corp. 835,050
17,300 Apache Corp. 726,600
14,300 Ashland, Inc. 681,931
61,500 Atlantic Richfield Co. 5,062,219
32,300 Baker Hughes, Inc. 1,483,781
33,765 Burlington Resources, Inc. 1,652,375
125,500 Chevron Corp. 10,408,656
474,200 Exxon Corp. 29,133,662
48,600 Halliburton Co. 2,897,775
4,600 Helmerich & Payne, Inc. 371,163
9,100 Kerr-McGee Corp. 614,819
150,600 Mobil Corp. 10,965,563
63,500 Occidental Petroleum Corp. 1,770,063
20,200 (b)Oryx Energy Co. 556,763
9,000 Pennzoil Co. 666,000
50,500 Phillips Petroleum Co. 2,442,938
16,600 (b)Rowan Companies, Inc. 645,325
410,900 Royal Dutch Petroleum Co., ADR 21,623,613
94,900 Schlumberger Ltd. 8,303,750
13,937 Sun Co., Inc. 558,351
101,200 Texaco, Inc. 5,762,075
55,200 USX Corp. 1,973,400
48,594 Union Pacific Resources Group, Inc. 1,196,627
47,300 Unocal Corp. 1,951,125
10,300 (b)Western Atlas, Inc. 887,731
TOTAL 122,862,016
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
FINANCE--15.5%
32,050 AON Corp. $ 1,728,697
19,700 Ahmanson (H.F.) & Co. 1,162,300
83,405 Allstate Corp. 6,917,402
89,800 American Express Co. 7,004,400
47,630 American General Corp. 2,429,130
134,389 American International Group, Inc. 13,716,077
111,727 Banc One Corp. 5,823,770
72,700 Bank of New York Co., Inc. 3,421,444
133,652 BankAmerica Corp. 9,556,118
28,300 BankBoston Corp. 2,294,069
19,100 Bankers Trust New York Corp. 2,253,800
38,100 Barnett Banks, Inc. 2,628,900
10,000 Beneficial Corp. 766,875
19,900 Block (H&R), Inc. 736,300
14,100 CIGNA Corp. 2,189,025
81,070 Chase Manhattan Corp. 9,353,451
33,100 Chubb Corp. 2,192,875
87,800 Citicorp 10,980,487
20,200 Comerica, Inc. 1,597,062
36,000 Conseco, Inc. 1,570,500
38,800 Corestates Financial Corp. 2,822,700
20,500 Countrywide Credit Industries, Inc. 703,406
133,100 Federal Home Loan Mortgage Corp. 5,041,162
203,300 Federal National Mortgage Association 9,847,343
29,300 Fifth Third Bancorp 1,878,862
107,610 First Union Corp. 5,279,615
48,810 Fleet Financial Group, Inc. 3,139,093
15,300 General RE Corp. 3,016,968
10,700 Golden West Financial Corp. 928,225
26,000 Green Tree Financial Corp. 1,095,250
22,600 Hartford Financial Services Group, Inc. 1,830,600
20,500 Household International, Inc. 2,321,625
30,500 Huntington Bancshares, Inc. 985,531
34,700 J.P. Morgan & Co., Inc. 3,808,325
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
13,325 Jefferson-Pilot Corp. $ 1,030,189
42,600 KeyCorp 2,606,588
19,400 Lincoln National Corp. 1,333,750
17,200 MBIA Insurance Corporation 1,027,700
96,018 MBNA Corp. 2,526,474
22,000 MGIC Investment Corp. 1,326,875
32,300 Marsh & McLennan Cos., Inc. 2,293,300
48,500 Mellon Bank Corp. 2,500,781
63,500 Merrill Lynch & Co., Inc. 4,294,188
112,457 Morgan Stanley, Dean Witter, Discover & 5,510,393
Co.
41,200 National City Corp. 2,461,700
136,240 NationsBank Corp. 8,157,370
143,600 Norwest Corp. 4,604,175
58,800 PNC Bank Corp. 2,793,000
13,800 Progressive Corp. Ohio 1,438,650
18,000 Providian Financial Corp. 666,000
10,500 Republic New York Corp. 1,111,031
24,200 SAFECO Corp. 1,152,525
50,750 Schwab (Charles) Corp. 1,731,844
16,100 St. Paul Cos., Inc. 1,286,994
31,500 State Street Corp. 1,756,125
37,350 SunAmerica, Inc. 1,342,266
41,400 SunTrust Banks, Inc. 2,683,238
26,900 Torchmark Corp. 1,072,638
12,300 Transamerica Corp. 1,241,531
122,889 Travelers Group, Inc. 8,602,230
46,855 U.S. Bancorp, Inc. 4,764,568
27,100 UNUM Corp. 1,321,125
21,700 USF&G Corp. 439,425
30,900 Wachovia Corp. 2,327,156
48,000 Washington Mutual, Inc. 3,285,000
16,866 Wells Fargo & Co. 4,914,331
TOTAL 214,624,547
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
HEALTH CARE--11.0%
147,500 Abbott Laboratories $ 9,043,594
28,755 Aetna Services, Inc. 2,043,402
268 (b)Allergan Ligand Retinoid Therapeutics, 5,427
Inc.
12,000 Allergan, Inc. 395,250
15,700 (b)Alza Corp. 409,181
124,300 American Home Products Corp. 9,213,737
50,800 (b)Amgen, Inc. 2,501,900
10,500 Bard (C.R.), Inc. 291,375
10,500 Bausch & Lomb, Inc. 412,125
53,600 Baxter International, Inc. 2,479,000
23,200 Becton, Dickinson & Co. 1,068,650
21,100 (b)Beverly Enterprises, Inc. 315,181
21,500 Biomet, Inc. 536,156
37,200 (b)Boston Scientific Corp. 1,692,600
191,000 Bristol-Myers Squibb Co. 16,760,250
20,800 Cardinal Health, Inc. 1,544,400
124,807 Columbia/HCA Healthcare Corp. 3,525,797
785 (b)Crescendo Pharmaceuticals Corp. 8,880
28,400 Guidant Corp. 1,633,000
37,900 HBO & Co. 1,648,650
65,800 (b)HEALTHSOUTH Corp. 1,682,013
31,400 (b)Humana, Inc. 659,400
255,000 Johnson & Johnson 14,630,625
536 (b)Ligand Pharmaceuticals, Inc., Warrants 5,360
213,200 Lilly (Eli) & Co. 14,257,750
12,150 Manor Care, Inc. 416,897
89,600 Medtronic, Inc. 3,897,600
231,500 Merck & Co., Inc. 20,661,375
247,700 Pfizer, Inc. 17,524,775
97,255 Pharmacia & Upjohn, Inc. 3,087,846
140,400 Schering Plough Corp. 7,871,175
4,800 Shared Medical Systems Corp. 262,800
17,550 (b)St. Jude Medical, Inc. 531,984
58,000 (b)Tenet Healthcare Corp. 1,772,625
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
14,100 U.S. Surgical Corp. $ 379,819
35,900 United Healthcare Corp. 1,662,619
52,000 Warner-Lambert Co. 7,445,750
TOTAL 152,278,968
PRODUCER MANUFACTURING--7.6%
5,300 Aeroquip-Vickers, Inc. 275,931
108,500 Allied-Signal, Inc. 3,906,000
7,800 Armstrong World Industries, Inc. 519,188
14,300 Case Corp. 855,319
72,100 Caterpillar, Inc. 3,695,125
7,400 Cincinnati Milacron, Inc. 205,350
23,400 Cooper Industries, Inc. 1,219,725
8,750 Crane Co. 363,671
7,400 Cummins Engine Co., Inc. 450,937
48,000 Deere & Co. 2,526,000
21,200 Dover Corp. 1,431,000
33,200 Dresser Industries, Inc. 1,398,550
85,000 Emerson Electric Co. 4,457,187
7,000 (b)FMC Corp. 565,687
627,400 General Electric Co. 40,506,513
9,600 General Signal Corp. 385,200
9,478 Harnischfeger Industries, Inc. 373,196
24,400 Honeywell, Inc. 1,660,725
22,700 ITT Industries, Inc. 716,469
47,800 Illinois Tool Works, Inc. 2,351,163
31,800 Ingersoll-Rand Co. 1,238,213
16,100 Johnson Controls, Inc. 722,488
22,000 Loews Corp. 2,457,125
31,600 Masco Corp. 1,386,450
10,200 McDermott International, Inc. 370,388
13,500 (b)Meritor Automotive, Inc. 301,219
79,600 Minnesota Mining & Manufacturing Co. 7,283,400
1,548 NACCO Industries, Inc., Class A 159,444
8,800 National Service Industries, Inc. 389,400
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--CONTINUED
13,970 (b)Navistar International Corp. $ 323,929
14,880 PACCAR, Inc. 670,530
21,400 Parker-Hannifin Corp. 894,788
27,700 Pitney Bowes, Inc. 2,196,956
8,300 Raychem Corp. 751,669
32,600 Tenneco, Inc. 1,464,963
31,600 Textron, Inc. 1,826,875
28,800 (b)Thermo Electron Corp. 1,074,600
10,500 Thomas & Betts Corp. 522,375
11,700 Timken Co. 391,950
102,200 Tyco International, Ltd. 3,858,050
124,000 Westinghouse Electric Corp. 3,278,250
19,500 Whitman Corp. 511,875
62,300 Xerox Corp. 4,941,169
TOTAL 104,879,042
RETAIL TRADE--4.7%
46,900 Albertsons, Inc. 1,729,437
54,100 American Stores Co. 1,389,693
28,900 (b)AutoZone, Inc. 854,356
33,000 CVS Corp. 2,023,313
19,300 (b)Charming Shoppes, Inc. 100,118
18,900 Circuit City Stores, Inc. 753,637
40,750 (b)Costco Cos., Inc. 1,568,875
41,700 Dayton-Hudson Corp. 2,619,281
21,100 Dillards, Inc., Class A 809,712
40,100 (b)Federated Department Stores, Inc. 1,764,400
51,400 Gap (The), Inc. 2,733,837
11,200 Giant Foods, Inc., Class A 343,000
7,200 Great Atlantic & Pacific Tea Co., Inc. 220,950
13,500 Harcourt General, Inc. 675,844
139,850 Home Depot, Inc. 7,779,156
93,300 (b)K Mart Corp. 1,230,394
48,700 (b)Kroger Co., Inc. 1,588,838
52,064 Limited, Inc. 1,226,758
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
RETAIL TRADE--CONTINUED
7,500 Longs Drug Stores Corp. $ 187,969
33,300 Lowe's Cos., Inc. 1,386,113
44,600 May Department Stores Co. 2,402,825
6,800 Mercantile Stores Co., Inc. 400,775
15,300 Nordstrom, Inc. 937,125
47,700 Penney (J.C.) Co., Inc. 2,799,394
11,600 Pep Boys-Manny Moe & Jack 292,175
23,600 Rite Aid Corp. 1,401,250
75,000 Sears, Roebuck & Co. 3,140,625
31,300 TJX Cos., Inc. 927,263
20,330 Tandy Corp. 698,844
54,700 (b)Toys 'R' Us, Inc. 1,863,219
434,000 Wal-Mart Stores, Inc. 15,244,250
94,300 Walgreen Co. 2,652,188
28,100 Winn-Dixie Stores, Inc. 1,043,213
25,900 (b)Woolworth (F.W.) Co. 492,100
TOTAL 65,280,927
SERVICES--4.9%
39,035 Browning-Ferris Industries, Inc. 1,268,638
78,475 (b)CUC International, Inc. 2,315,013
18,800 (b)Clear Channel Communications, Inc. 1,240,800
31,600 Cognizant Corp. 1,238,325
29,200 Darden Restaurants, Inc. 332,150
15,400 Deluxe Corp. 504,350
129,400 Disney (Walt) Co. 10,643,150
28,300 Donnelley (R.R.) & Sons Co. 923,287
18,400 Dow Jones & Co. 855,600
32,700 Dun & Bradstreet Corp. 933,993
28,900 Equifax, Inc. 897,706
7,100 Fleming Cos., Inc. 119,812
16,100 Fluor Corp. 662,112
7,600 Foster Wheeler Corp. 249,375
54,400 Gannett Co., Inc. 2,859,400
9,500 Grainger (W.W.), Inc. 830,656
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
30,400 (b)HFS, Inc. $ 2,143,200
5,700 Harland (John H.) Co. 127,894
19,150 (b)Harrah's Entertainment, Inc. 377,016
47,900 Hilton Hotels Corp. 1,475,919
22,300 (b)ITT Corp. 1,665,531
25,500 Ikon Office Solutions, Inc. 721,969
23,850 Interpublic Group Cos., Inc. 1,132,875
7,050 King World Productions, Inc. 333,113
17,700 Knight-Ridder, Inc. 924,825
63,000 Laidlaw, Inc. 889,875
24,400 Marriott Corp. 1,701,900
131,800 McDonald's Corp. 5,906,288
19,000 McGraw-Hill Cos., Inc. 1,242,125
10,200 Meredith Corp. 347,438
34,300 (b)Mirage Resorts, Inc. 857,500
16,416 Moore Corp. Ltd. 265,734
18,100 New York Times Co., Class A 990,975
10,850 Safety-Kleen Corp. 240,056
48,200 Service Corp. International 1,467,088
12,500 Super Valu Stores, Inc. 457,813
33,800 Sysco Corp. 1,352,000
107,240 Time Warner, Inc. 6,186,408
19,200 Times Mirror Co., Class A 1,039,200
23,500 Tribune Co. 1,295,438
29,330 (b)Tricon Global Restaurants, Inc. 889,066
115,800 (b)U.S. West Media Group 2,923,950
67,668 (b)Viacom, Inc., Class B 2,046,957
86,857 Waste Management, Inc. 2,030,282
25,200 Wendy's International, Inc. 529,200
TOTAL 67,436,002
TECHNOLOGY--14.9%
66,000 (b)3Com Corp. 2,734,875
42,080 AMP, Inc. 1,893,600
14,000 Adobe System, Inc. 668,500
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
27,000 (b)Advanced Micro Devices, Inc. $ 621,000
16,762 (b)Andrew Corp. 388,669
24,400 (b)Apple Computer, Inc. 415,563
69,800 (b)Applied Materials, Inc. 2,329,575
9,200 Autodesk, Inc. 340,400
56,100 Automatic Data Processing, Inc. 2,868,113
38,100 (b)Bay Networks, Inc. 1,204,913
191,908 Boeing Co. 9,187,596
30,200 (b)Cabletron Systems, Inc. 875,800
15,500 (b)Ceridian Corp. 605,468
128,200 (b)Cisco Systems, Inc. 10,516,406
144,847 (b)Compaq Computer Corp. 9,233,996
69,775 Computer Associates International, Inc. 5,202,598
14,800 (b)Computer Sciences Corp. 1,049,875
22,500 (b)DSC Communications Corp. 548,437
9,200 (b)Data General Corp. 177,100
63,400 (b)Dell Computer Corp. 5,079,925
28,900 (b)Digital Equipment Corp. 1,446,806
8,700 EG & G, Inc. 179,981
47,300 (b)EMC Corp. Mass 2,648,800
85,000 First Data Corp., Class 2,470,312
12,020 General Dynamics Corp. 975,874
15,200 Harris Corp. 663,100
199,300 Hewlett-Packard Co. 12,294,319
312,900 Intel Corp. 24,093,300
188,200 International Business Machines Corp. 18,455,363
16,000 (b)KLA-Tencor Corp. 703,000
27,200 (b)LSI Logic Corp. 593,300
37,088 Lockheed Martin Corp. 3,525,678
122,967 Lucent Technologies, Inc. 10,137,092
13,800 Mallinckrodt, Inc. 517,500
40,400 Micron Technology, Inc. 1,083,225
229,600 (b)Microsoft Corp. 29,848,000
114,100 Motorola, Inc. 7,045,675
27,800 (b)National Semiconductor Corp. 1,000,800
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
125 (b)Netscape Communications $ 4,109
28,200 (b)NextLevel Systems, Inc. 380,700
50,200 Northern Telecom Ltd. 4,502,313
12,800 Northrop Corp. 1,398,400
65,600 (b)Novell, Inc. 553,500
187,775 (b)Oracle Corp. 6,718,824
25,000 (b)Parametric Technology Corp. 1,103,125
8,400 Perkin-Elmer Corp. 525,000
45,300 Raytheon Co. 2,457,525
40,500 Rockwell International Corp. 1,984,500
14,200 Scientific-Atlanta, Inc. 263,588
46,600 (b)Seagate Technology, Inc. 1,264,025
47 (b)Siebel Systems, Inc. 1,884
33,900 (b)Silicon Graphics, Inc. 497,906
70,700 (b)Sun Microsystems, Inc. 2,421,475
6,400 Tektronix, Inc. 378,400
34,700 (b)Tellabs, Inc. 1,873,800
36,700 Texas Instruments, Inc. 3,915,431
32,300 (b)Unisys Corp. 429,994
45,200 United Technologies Corp. 3,164,000
TOTAL 207,463,033
TRANSPORTATION--1.3%
17,600 (b)AMR Corp. 2,049,300
29,811 Burlington Northern Santa Fe 2,832,045
41,700 CSX Corp. 2,280,469
7,300 Caliber System, Inc. 380,513
14,600 Delta Air Lines, Inc. 1,470,950
22,000 (b)Federal Express Corp. 1,468,500
72,300 Norfolk Southern Corp. 2,322,638
15,000 Ryder Systems, Inc. 525,000
28,000 Southwest Airlines Co. 913,500
15,100 (b)USAir Group, Inc. 707,813
47,300 Union Pacific Corp. 2,897,125
&NBSP;&NBSP;&NBSP;&NBSP;TOTAL 17,847,853
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
UTILITIES--9.7%
311,278 AT&T Corp. $ 15,233,167
96,500 (b)Airtouch Communications, Inc. 3,727,312
35,300 Alltel Corp. 1,248,737
36,300 American Electric Power Co., Inc. 1,715,175
105,400 Ameritech Corp. 6,851,000
28,250 Baltimore Gas & Electric Co. 775,109
148,792 Bell Atlantic Corp. 11,884,761
190,000 BellSouth Corp. 8,989,375
29,000 Carolina Power & Light Co. 1,036,750
40,700 Central & SouthWest Corp. 877,593
30,240 Cinergy Corp. 997,920
20,300 Coastal Corp. 1,220,537
10,600 Columbia Gas System, Inc. 765,850
66,850 Comcast Corp., Class A 1,838,375
45,000 Consolidated Edison Co. 1,541,250
18,300 Consolidated Natural Gas Co. 989,343
27,800 DTE Energy Co. 854,850
35,650 Dominion Resources, Inc. 1,325,734
68,972 Duke Energy Corp. 3,327,899
3,700 Eastern Enterprises 144,993
76,100 Edison International 1,950,062
58,600 Enron Corp. 2,226,800
46,200 Entergy Corp. 1,129,012
34,900 FPL Group, Inc. 1,803,894
31,500 Frontier Corp. 681,187
23,100 GPU, Inc. 835,931
183,200 GTE Corp. 7,774,550
40,451 Houston Industries, Inc. 879,808
132,600 MCI Communications Corp. 4,707,300
9,300 NICOR, Inc. 358,631
26,800 Niagara Mohawk Power Corp. 259,625
14,100 Northern States Power Co. 710,288
29,200 Ohio Edison Co. 722,700
5,100 Oneok, Inc. 174,994
84,000 P G & E Corp. 2,147,250
31,600 P P & L Resources, Inc. 683,350
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
15,800 Pacific Enterprises $ 516,463
56,800 Pacificorp 1,231,850
42,600 Peco Energy Co. 966,488
6,400 Peoples Energy Corp. 228,800
45,200 Public Service Enterprises Group, Inc. 1,172,375
175,123 SBC Communications, Inc. 11,142,201
20,600 Salomon, Inc. 1,600,363
16,400 Sonat, Inc. 753,375
131,200 Southern Co. 3,009,400
82,500 Sprint Corp. 4,290,000
97,000 (b)Tele-Communications, Inc., Class A 2,224,938
46,125 Texas Utilities Co. 1,654,734
91,900 U.S. West, Inc. 3,658,769
41,400 Unicom Corp. 1,159,200
19,600 Union Electric Co. 738,675
30,500 Williams Cos., Inc. (The) 1,553,594
172,900 (b)WorldCom, Inc. 5,813,763
TOTAL 134,106,100
TOTAL COMMON STOCKS (IDENTIFIED
COST $927,747,662) 1,353,883,085
(C)SHORT-TERM U.S. GOVERNMENT OBLIGATION--0.2%
$ 3,000,000 United States Treasury Bill, 12/18/1997
(identified cost $2,981,180) 2,982,390
(D)REPURCHASE AGREEMENT--2.5%
34,490,000 BT Securities Corp., 5.71%, dated 34,490,000
10/31/1997, due 11/3/1997 (at amortized cost)
TOTAL INVESTMENTS (IDENTIFIED COST
$965,218,842)(E) $ 1,391,355,475
</TABLE>
(a) The Fund purchases Index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividend and capital gain
payments to shareholders and corporate actions while maintaining exposure to the
Index and minimizing trading costs. The underlying face amount, at value, of
open Index futures contracts is $33,726,000 at October 31, 1997, which
represents 2.4% of net assets. Taking into consideration these open Index
futures contracts, the Fund's effective total exposure to the Index is 100.0%.
(b) Non-income producing security.
(c) Represents a security held as collateral which is used to ensure the Fund is
able to satisfy the obligations of its outstanding long futures contracts.
(d) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(e) The cost of investments for federal tax purposes amounts to $968,538,573.
The net unrealized appreciation of investments on a federal tax basis amounts to
$422,816,902 which is comprised of $550,383,690 appreciation and $127,566,788
depreciation at October 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($1,388,067,266) at October 31, 1997.
The following acronyms are used throughout this portfolio: ADR --American
Depository Receipt
MBIA --Municipal Bond Investors Assurance
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MAX-CAP FUND
OCTOBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $ 1,391,355,475
$965,218,842 and tax cost $968,538,573)
Income receivable 1,596,975
Receivable for investments sold 302,684
Receivable for shares sold 5,378,711
Receivable for daily variation margin 2,272,440
Deferred expenses 250
Total assets 1,400,906,535
LIABILITIES:
Payable for investments purchased $ 292,051
Payable for shares redeemed 9,507,861
Payable to Bank 2,743,338
Accrued expenses 296,019
Total liabilities 12,839,269
Net Assets for 70,486,376 shares outstanding $ 1,388,067,266
NET ASSETS CONSIST OF:
Paid in capital $ 918,706,526
Net unrealized appreciation of investments and futures 425,113,970
contracts
Accumulated net realized gain on investments and futures 43,086,633
contracts
Undistributed net investment income 1,160,137
Total Net Assets $ 1,388,067,266
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS
PER SHARE:
INSTITUTIONAL SHARES:
$1,142,081,302 / 57,977,259 shares outstanding $19.70
INSTITUTIONAL SERVICE SHARES:
$245,985,964 / 12,509,117 shares outstanding $19.66
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MAX-CAP FUND
YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 20,904,146
Interest 3,424,184
Total income 24,328,330
EXPENSES:
Investment advisory fee $ 3,606,538
Custodian fees 107,138
Transfer and dividend disbursing agent fees and 246,738
expenses
Directors'/Trustees' fees 14,405
Auditing fees 14,355
Legal fees 5,146
Portfolio accounting fees 153,444
Distribution services fee--Institutional Service 429,722
Shares
Shareholder services fee--Institutional Shares 2,668,873
Shareholder services fee--Institutional Service 358,102
Shares
Share registration costs 178,972
Printing and postage 18,479
Insurance premiums 9,848
Taxes 16,654
Miscellaneous 8,413
Total expenses 7,836,827
Waivers and reimbursements--
Waiver of investment advisory fee $ (573,407)
Waiver of distribution services fee--Institutional (315,130)
Service Shares
Waiver of shareholder services fee--Institutional (2,668,873)
Shares
Waiver of shareholder services fee--Institutional (42,972)
Service Shares
Total waivers (3,600,382)
Net expenses 4,236,445
Net investment income 20,091,885
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS:
Net realized gain on investments and futures 47,684,197
contracts
Net change in unrealized appreciation (depreciation) 237,223,689
of investments and futures contracts
Net realized and unrealized gain on investments 284,907,886
and futures contracts
Change in net assets resulting from operations $ 304,999,771
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 20,091,885 $ 17,495,782
Net realized gain (loss) on investments and futures contracts 47,684,197 13,947,611
($45,104,576 and $14,649,222, respectively, as computed for
federal tax purposes)
Net change in unrealized appreciation/depreciation of 237,223,689 134,550,523
investments and futures contracts
Change in net assets resulting from operations 304,999,771 165,993,916
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (19,400,997) (17,109,255)
Institutional Service Shares (2,132,811) (847,955)
Distributions from net realized gains on investments and
futures contracts
Institutional Shares (13,509,884) (98,597,371)
Institutional Service Shares (1,138,590) (4,696,377)
Change in net assets resulting from distributions to (36,182,282) (121,250,958)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 751,612,116 680,420,450
Net asset value of shares issued to shareholders in payment of 17,547,453 65,168,316
distributions declared
Cost of shares redeemed (608,777,760) (545,896,207)
Change in net assets resulting from share transactions 160,381,809 199,692,559
Change in net assets 429,199,298 244,435,517
NET ASSETS:
Beginning of period 958,867,968 714,432,451
End of period (including undistributed net investment income of $ 1,388,067,266 $ 958,867,968
$1,160,137 and $2,602,260, respectively)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MAX-CAP FUND
OCTOBER 31, 1997
ORGANIZATION
Federated Index Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of three portfolios. The financial statements
included herein are only those of Federated Max-Cap Fund (the "Fund"), a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. At
October 31, 1997, the Fund offered two classes of shares: Institutional Shares
and Institutional Service Shares. Effective November 3, 1997, the Trustees
established a new class of shares named Class C Shares. The investment objective
of the Fund is to provide investment results that correspond to the aggregate
price and dividend performance of publicly-traded common stocks, by duplicating
the composition of the Index.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank or broker to take
possession, to have legally segregated in the Federal Reserve Book Entry System,
or to have segregated within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally, procedures
have been established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of collateral
at least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines and/or standards
reviewed or established by the Trustees. Risks may arise from the potential
inability of counterparties to honor the terms of these agreements. Accordingly,
the Fund could receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES
The costs incurred by the Fund with respect to registration of its shares in its
first fiscal year, excluding the initial expense of registering its shares, have
been deferred and are being amortized over a period not to exceed five years
from the Fund's commencement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
For the period ended October 31, 1997, the Fund had net realized gains of
$16,029,370 on futures contracts.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities. At October 31, 1997, the Fund had outstanding futures
contracts as set forth below:
<TABLE>
<CAPTION>
CONTRACTS TO UNREALIZED APPRECIATION
EXPIRATION DATE DELIVER/RECEIVE POSITION (DEPRECIATION)
<S> <C> <C> <C>
December 1997 146 S&P 500 Index Futures Long ($1,022,663)
</TABLE>
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 30,235,597 $ 544,279,687 42,819,916 $ 622,123,488
Shares issued to shareholders in 873,354 14,693,792 4,444,520 60,563,340
payment of distributions declared
Shares redeemed (31,244,017) (559,167,698) (35,228,936) (503,599,044)
Net change resulting from
Institutional Shares transactions (135,066) $ (194,219) 12,035,500 $ 179,087,784
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 11,212,771 $ 207,332,429 4,027,604 $ 58,296,962
Shares issued to shareholders in
payment of distributions declared 165,190 2,853,661 337,876 4,604,976
Shares redeemed (2,667,078) (49,610,062) (2,957,950) (42,297,163)
Net change resulting from
Institutional Service Share
transactions 8,710,883 $ 160,576,028 1,407,530 $ 20,604,775
Net change resulting from share
transactions 8,575,817 $ 160,381,809 13,443,030 $ 199,692,559
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's manager (the "Manager"), receives for its
services an annual investment advisory fee equal to 0.30% of the Fund's average
daily net assets.
The Manager has entered into a sub-management contract with ANB Investment
Management and Trust Company ("Sub-Manager"). The Manager shall pay the
Sub-Manager a management advisory fee based on the average daily net assets of
the Fund as follows: 0.05% on the first $100 million, 0.02% on the next $100
million, and 0.01% thereafter. The Manager may voluntarily choose to waive any
portion of its fee. The Manager can modify or terminate this voluntary waiver at
any time at its sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund shares for the period. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion. For the fiscal year
ended October 31, 1997, Institutional Shares fully waived its shareholder
services fee.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to 0.30% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC. FSC may voluntarily
choose to waive a portion of its fee. FSC can modify or terminate this voluntary
waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
Federated Services Company ("FServ"), through its subsidiary, Federated
Shareholder Services Company ("FSSC") serves as transfer and dividend disbursing
agent for the Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL
Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1997, were as follows:
PURCHASES $352,664,111 SALES $179,077,537 REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
To the Trustees and Shareholders of FEDERATED INDEX TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Max-Cap Fund (a portfolio of
Federated Index Trust), as of October 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Max-Cap Fund of Federated Index Trust at October 31, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and its financial highlights for
the periods presented, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 12, 1997
[Graphic]
FEDERATED MAX-CAP FUND
(A Portfolio of Federated Index Trust)
Institutional Shares
PROSPECTUS
DECEMBER 31, 1997
An Open-End, Diversified Management Investment Company
FEDERATED MAX-CAP FUND
INSTITUTIONAL 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
MANAGER
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
SUB-MANAGER
ANB Investment Management and Trust Co.
One North LaSalle Street
Chicago, IL 60690
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600
INDEPENDENT AUDITORS
Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
Cusip 31420E106
0032104A-IS (12/97)
[Graphic]
Federated Max-Cap Fund
(A Portfolio of Federated Index Trust)
Institutional Service Shares
PROSPECTUS
The Institutional Service Shares of Federated Max-Cap Fund (the "Fund") offered
by this prospectus represent interests in the Fund, which is an investment
portfolio in Federated Index Trust (the "Trust"), an open-end, management
investment company (a mutual fund). The investment objective of the Fund is to
seek to provide investment results that correspond to the aggregate price and
dividend performance of publicly traded common stocks as represented by the
Standard & Poor's 500 Composite Stock Price Index (the "Index"). The Fund is
neither affiliated with nor sponsored by Standard & Poor's.
THE INSTITUTIONAL SERVICE 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 BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD,
OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT
RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information for Class C
Shares, Institutional Service Shares, and Institutional Shares dated December
31, 1997, with the Securities and Exchange Commission ("SEC"). The information
contained in the Statement of Additional Information is incorporated by
reference into this prospectus. You may request a copy of the Statement of
Additional Information, or a paper copy of this prospectus, if you have received
your prospectus electronically, free of charge by calling 1-800-341-7400. To
obtain other information or to make inquiries about the Fund, contact the Fund
at the address listed in the back of this prospectus. The Statement of
Additional Information, material incorporated by reference into this document,
and other information regarding the Fund is maintained electronically with the
SEC at Internet Web site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
Prospectus dated December 31, 1997
TABLE OF CONTENTS
Summary of Fund Expenses 1 Financial Highlights--Institutional Service Shares 2
General Information 3 Investment Information 3 Investment Objective 3
Investment Policies 3 Investment Limitations 6 Federated Index Trust
Information 6 Management of the Trust 6 Distribution of Institutional Service
Shares 8 Fund Administration 8 Expenses of the Fund and Institutional Service
Shares 9 Net Asset Value 9 Investing in the Institutional Service Shares 9
Share Purchases 9 Minimum Investment Required 10 What Shares Cost 10
Confirmations and Account Statements 10 Dividends 10 Capital Gains 10 Redeeming
Institutional Service Shares 10 Telephone Redemption 10 Written Requests 10
Accounts with Low Balances 11 Shareholder Information 11 Voting Rights 11 Tax
Information 11 Federal Income Tax 11 State and Local Taxes 12 Performance
Information 12 Other Classes of Shares 12 Financial Highlights--Institutional
Shares 13 Financial Statements 14 Report of Ernst & Young LLP, Independent
Auditors 38
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
INSTITUTIONAL SERVICE SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> Maximum Sales Charge Imposed on Purchases (as a percentage of offering
price) None Maximum Sales Charge Imposed on Reinvested Dividends (as a
percentage of offering price) None Contingent Deferred Sales Charge (as a
percentage of original
purchase price or redemption proceeds, as applicable) None
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver)(1) 0.25%
12b-1 Fee (after waiver)(2) 0.08%
Total Other Expenses 0.29%
Shareholder Services Fee (after waiver)(3) 0.22%
Total Operating Expenses(4) 0.62%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver of a
portion of the management fee. The adviser can terminate this voluntary waiver
at any time at its sole discretion. The maximum management fee is 0.30%.
(2) The 12b-1 fee has been reduced to reflect the voluntary waiver of a portion
of the 12b-1 fee. The distributor can terminate the voluntary waiver at any time
at its sole discretion. The maximum 12b-1 fee is 0.30%.
(3) The shareholder services fee has been reduced to reflect the voluntary
waiver of a portion of the shareholder services fee. The shareholder service
provider can terminate this voluntary waiver at any time at its sole discretion.
The maximum shareholder services fee is 0.25%.
(4) The total operating expenses would have been 0.92% absent the voluntary
waivers of portions of the management fee, shareholder services fee, and 12b-1
fee.
LONG-TERM SHAREHOLDERS MAY PAY MORE THAN THE ECONOMIC EQUIVALENT OF THE
MAXIMUM FRONT-END SALES CHARGES PERMITTED UNDER THE RULES OF THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS, INC.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of Institutional Service Shares of the
Fund will bear, either directly or indirectly. For more complete descriptions of
the various costs and expenses, see "Federated Index Trust Information."
Wire-transferred redemptions of less than $5,000 may be subject to additional
fees.
<TABLE>
<CAPTION>
EXAMPLE
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return and (2) redemption at the end of each time period.
<S> <C>
1 Year $ 6
3 Years $20
5 Years $34
10 Years $76
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SERVICE SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 38.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995 1994 1993(A)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $15.47 $14.72 $12.02 $12.24 $12.12
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.26 0.30 0.33 0.28(b) 0.07
Net realized and unrealized gain (loss) on investments 4.45 2.79 2.69 0.11 0.12
and futures contracts
Total from investment operations 4.71 3.09 3.02 0.39 0.19
LESS DISTRIBUTIONS
Distributions from net investment income (0.28) (0.31) (0.30) (0.27) (0.07)
Distributions from net realized gain on investments and (0.24) (2.03) (0.02) (0.34) --
futures contracts
Total distributions (0.52) (2.34) (0.32) (0.61) (0.07)
NET ASSET VALUE, END OF PERIOD $19.66 $15.47 $14.72 $12.02 $12.24
TOTAL RETURN(C) 31.07% 23.39% 25.52% 3.30% 1.70%
RATIOS TO AVERAGE NET ASSETS
Expenses 0.62% 0.61% 0.61% 0.62% 0.61%*
Net investment income 1.36% 1.97% 2.55% 2.35% 1.52%*
Expense waiver/reimbursement(d) 0.30% 0.31% 0.33% 0.26% 0.09%*
SUPPLEMENTAL DATA
Net assets, end of period (000 omitted) $245,986 $58,741 $35,195 $8,617 $2,493
Average commission rate paid(e) $0.0224 $0.0153 -- -- --
Portfolio turnover 16% 3% 57% 2% 13%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from August 30, 1993 (date of initial
public investment) to October 31, 1993.
(b) Per share information presented is based upon the monthly average number of
shares outstanding due to large fluctuations in the number of shares outstanding
during the period.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
The Trust was established as a Massachusetts business trust under a Declaration
of Trust dated January 30, 1990. The Declaration of Trust permits the Trust to
offer separate series of shares of beneficial interest representing interests in
separate portfolios of securities. The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") has established three classes of shares of the Fund known
as Institutional Service Shares ("Shares"), Institutional Shares and Class C
Shares. This prospectus relates only to the Institutional Service Shares of the
Fund. Institutional Service Shares are designed primarily for retail and private
banking customers of financial institutions. A minimum initial investment of
$25,000 over a 90-day period is required.
Shares are currently sold and redeemed at net asset value without a sales charge
imposed by the Fund.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide investment results that
correspond to the aggregate price and dividend performance of publicly-traded
common stocks, by duplicating the composition of the Index. The investment
objective cannot be changed without approval of shareholders. The Fund's ability
to duplicate the Index will depend partly on the size and timing of cash flows
into and out of the Fund. The Fund's performance is expected to closely mirror
the performance of the Index. An investment in the Fund presents risks similar
to those of investing in a portfolio comprised of the securities of the
companies in the Index. While there is no assurance that the Fund will achieve
its investment objective, it endeavors to do so by following the investment
policies described in this prospectus.
INVESTMENT POLICIES
The investment policies described below may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material changes
in these policies become effective.
The Fund pursues its investment objective by attempting to duplicate the
investment results of the Index, while minimizing transaction costs and other
expenses. The Fund will attempt to achieve a correlation between the performance
of its portfolio and that of the Index of at lease 0.95 of 1% or better; a
figure of 1.00 would represent perfect correlation. The Fund will normally be
invested in substantially all of the stocks that comprise the Index. Under
normal circumstances, at least 80% of the value of the Fund's total assets will
be invested in stocks represented in the Index. However, the Fund is not
required to sell securities if the 80% investment level changes due to increases
or decreases in the market value of portfolio securities.
The Index consists of 500 selected common stocks, most of which are listed on
the New York Stock Exchange. Standard & Poor's ("S&P") designates the stocks to
be included in the Index on a statistical basis. A particular stock's weighting
in the Index is based on its relative total market value; that is, its market
price per share times the number of shares outstanding. From time to time, S&P
may add or delete stocks from the Index. Inclusion of a particular stock in the
Index in no way implies an opinion by S&P as to its investment attractiveness,
nor is S&P a sponsor or in any way affiliated with the Fund. The Fund utilizes
the Index as the standard performance benchmark because it represents
approximately 70% of the total market value of all common stocks. In addition,
it is familiar to investors, and is recognized as a barometer of common stock
investment returns.
The Fund will be managed passively, in that the traditional management functions
of economic, financial, and market analysis will not be undertaken. Furthermore,
a company's adverse financial circumstance will not trigger its elimination from
the Fund's portfolio, unless the company's stock is removed from the Index by
S&P. The Fund is managed by utilizing a computer program that identifies which
stocks should be purchased or sold in order to duplicate, as much as possible,
the composition of the Index. The Fund will include a stock in its investment
portfolio in the order of the stock's weighting in the Index, starting with the
heaviest-weighted stock. Thus, the proportion of Fund assets invested in such
stock is nearly identical to the percentage of the particular stock represented
in the Index. On occasion, so as to respond to changes in the Index's
composition, as well as corporate mergers, tender offers, and other
circumstances, adjustments will be made in the Fund's portfolio. However, it is
anticipated that these adjustments will occur infrequently, and the costs will
be minimized. As a result, portfolio turnover is expected to be well below that
encountered in other investment company portfolios. Therefore, the accompanying
costs, including accounting costs, brokerage fees, custodial expenses, and
transfer taxes, are expected to be relatively low. While the cash flows into and
out of the Fund will impact the Fund's portfolio turnover rate and the Fund's
ability to replicate the Index's performance, investment adjustments will be
made, as practicably as possible, to account for these circumstances.
The Fund believes that indexing, as described above, constitutes a reasonable
and effective method of replicating percentage changes in the Index. While the
Fund will not duplicate the Index's performance precisely, it is anticipated
that the Fund's performance will closely resemble the performance of the Index.
Factors such as the size of the Fund's portfolio, the size and timing of cash
flows into and out of the Fund, and changes in the securities markets and the
Index itself, will account for the difference.
In order to accommodate cash flows, the Fund may enter into stock index futures
contracts and options. The Fund may purchase futures contracts and options
solely to maintain adequate liquidity to meet its redemption demands. This will
allow the Fund to simultaneously maximize the level of the Fund assets which are
tracking the performance of the Index. The Fund can sell futures contracts and
options in order to close out a previously established position. The Fund will
not enter into any stock index futures contract for the purpose of speculation.
ACCEPTABLE INVESTMENTS
The Fund will invest primarily in common stocks comprising the Index. In
addition, the Fund may hold cash reserves which may be invested in the
following:
U.S. GOVERNMENT SECURITIES
The Fund is permitted to invest in U.S. government securities which are
either issued or guaranteed by the U.S. government, its agencies or
instrumentalities. These securities include, but are not limited to:
* direct obligations of the U.S. Treasury, such as U.S. Treasury bills,
notes, and bonds;
* notes, bonds, and discount notes issued or guaranteed by U.S. government
agencies and instrumentalities supported by the full faith and credit of the
United States;
* notes, bonds, and discount notes of U.S. government agencies or
instrumentalities which receive or have access to federal funding; and
* notes, bonds, and discount notes of other U.S. government
instrumentalities supported only by the credit of the instrumentalities.
REPURCHASE AGREEMENTS
The U.S. government securities and other securities in which the Fund invests
may be purchased pursuant to repurchase agreements. Repurchase agreements are
arrangements in which banks, broker/dealers, and other recognized financial
institutions sell U.S. government securities or other securities to the Fund and
agree at the time of sale to repurchase them at a mutually agreed-upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities.
VARIABLE RATE U.S. GOVERNMENT SECURITIES
Some of the short-term U.S. government securities the Fund may purchase carry
variable interest rates. These securities have a rate of interest subject to
adjustment at least annually. This adjusted interest rate is ordinarily tied to
some objective standard, such as a published interest rate or interest rate
index.
CASH ITEMS
The Fund may also invest in cash items.
The Fund may also invest in commercial paper rated A-1 by S&P, Prime-1 by
Moody's Investors Service, Inc., or F-1 by Fitch Investors Service, Inc.
STOCK INDEX FUTURES AND OPTIONS
The Fund may utilize stock index futures contracts, options, and options on
futures contracts, subject to the limitation that the value of these futures
contracts and options will not exceed 20% of the Fund's total assets. Also, the
Fund will not purchase options to the extent that more than 5% of the value of
the Fund's total assets would be invested in premiums on open put option
positions. These futures contracts and options will be used to handle cash flows
into and out of the Fund and to potentially reduce transactional costs, since
transactional costs associated with futures and options contracts can be lower
than costs stemming from direct investments in stocks.
There are several risks accompanying the utilization of futures contracts to
effectively anticipate market transactions. First, positions in futures
contracts may be closed only on an exchange or board of trade that furnishes a
secondary market for such contracts. While the Fund plans to utilize futures
contracts only if there exists an active market for such contracts, there is no
guarantee that a liquid market will exist for the contracts at a specified time.
Furthermore, because, by definition, futures contracts look to projected price
levels in the future and not to current levels of valuation, market
circumstances may result in there being a discrepancy between the price of the
stock index future and the movement in the stock index. The absence of a perfect
price correlation between the futures contract and its underlying stock index
could stem from investors choosing to close futures contracts by offsetting
transactions, rather than satisfying additional margin requirements. This could
result in a distortion of the relationship between the index and futures market.
In addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of participation by
speculators in the futures market could result in price fluctuations.
In view of these considerations, the Fund will comply with the following
restrictions when purchasing and selling futures contracts. First, the Fund will
not participate in futures transactions if the sum of its initial margin
deposits on open contracts will exceed 5% of the market value of the Fund's
total assets, after taking into account the unrealized profits and losses on
those contracts into which it has entered. Second, the Fund will not enter into
these contracts for speculative purposes. Third, since the Fund does not
constitute a commodity pool, it will not market itself as such, nor serve as a
vehicle for trading in the commodities futures or commodity options markets. In
this regard, the Fund will disclose to all prospective investors the limitations
on its futures and options transactions, and will make clear that these
transactions are entered into only for bona fide hedging purposes or such other
purposes permitted under regulations promulgated by the Commodity Futures
Trading Commission ("CFTC"). Also, the Fund intends to claim an exclusion from
registration as a commodity pool operator under the regulations promulgated by
the CFTC.
INDEX PARTICIPATION CONTRACTS
In addition to investing in stock index futures contracts, options and options
on futures contracts, the Fund may also participate in the purchasing and
selling of index participation contracts based on the Index. The Fund will
utilize index participation contracts to aid in the management of cash flows
into and out of the Fund and not for speculative purposes. These contracts
provide the equivalent of a position in the stocks of the Index, where each
stock is represented in the same proportion as it is represented in the Index.
Unlike futures contracts, positions in these instruments may last indefinitely,
with no expiration date and will pay dividends implied by the underlying stocks
in the Index. Generally, the value of an index participation contract will rise
and fall as the value of the Index rises and falls. Index participation
contracts have lower transaction costs than those associated with the purchase
and sale of individual stocks. The Fund will invest in index participation
contracts only if there exists an active market for such contracts.
The value of these contracts, together with the value of the Fund's investment
in stock index futures contracts, options and options on futures contracts will
not exceed 20% of the Fund's total assets. The Fund's use of these investments
will be to maintain adequate liquidity to meet redemption requests, while
simultaneously maximizing the level of Fund assets which are tracking the
performance of the Index.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities on a short-term basis or long-term
basis up to one-third of the value of its total assets to broker/dealers, banks,
or other institutional borrowers of securities. The Fund will only enter into
loan arrangements with broker/dealers, banks or other institutions which the
managers have determined are creditworthy under guidelines established by the
Trustees. The Fund will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the securities
loaned.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may purchase short-term U.S. government securities on a when-issued or
delayed delivery basis. These transactions are arrangements in which the Fund
purchases securities with payment and delivery scheduled for a future time. The
seller's failure to complete these transactions may cause the Fund to miss a
price or yield considered to be advantageous. Settlement dates may be a month or
more after entering into these transactions, and the market values of the
securities purchased may vary from the purchase prices.
The Fund may dispose of a commitment prior to settlement if the managers deem it
appropriate to do so. In addition, the Fund may enter in transactions to sell
its purchase commitments to third parties at current market values and
simultaneously acquire other commitments to purchase similar securities at later
dates. The Fund may realize short-term profits or losses upon the sale of such
commitments.
INVESTMENT LIMITATIONS
The Fund will not:
* borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a money market instrument for at
least a percentage of its cash value with an agreement to buy it back on a
set date) except, under certain circumstances, the Fund may borrow up to
one-third of the value of its total assets and pledge up to 10% of the
value of those assets to secure such borrowings.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitation, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
The Fund will not invest more than 15% of its net assets in securities that are
illiquid.
FEDERATED INDEX TRUST INFORMATION
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
The Trust is managed by the Trustees. The Trustees are responsible for managing
the business affairs of the Trust and for exercising all of the powers of the
Trust except those reserved for the shareholders. The Executive Committee of the
Trustees handles the Trustees' responsibilities between meetings of the
Trustees.
FUND'S MANAGER
Federated Management serves as the Fund's manager (the "Manager"). The Trust has
entered into a management contract (the "Management Contract") with the Manager,
which, in turn, has entered into a sub-management contract (the "Sub-Management
Contract") with ANB Investment Management and Trust Company ("ANB" or the
"Sub-Manager") (ANB and the Manager are collectively referred to herein as
"Managers"). It is the Manager's responsibility to select the Sub-Manager,
subject to the review and approval of the Trustees and to review and evaluate
the Sub-Manager's continued performance. The Manager is also responsible for
providing administrative services to the Fund.
Subject to the supervision and direction of the Trustees, the Manager provides
to the Fund investment management evaluation services principally by performing
initial due diligence on the Sub-Manager for the Fund and thereafter monitoring
and evaluating the performance of the Fund's Sub-Manager through quantitative
and qualitative analyses. In addition, the Manager conducts periodic in-person,
telephonic and written consultations with the Sub-Manager. In initially
evaluating the Sub-Manager, the Manager considered, among other factors, the
Sub-Manager's level of expertise; relative performance over a minimum period of
five years; level of efficiency; level of adherence to investment discipline or
philosophy; personnel, facilities and financial strength; and quality of service
and client communications. On an ongoing basis, the Manager is responsible for
communicating performance expectations and evaluations to the Sub-Manager;
monitoring tracking errors; monitoring and analyzing the appropriate futures
contracts to purchase and the futures holdings of the Fund as a percentage of
Fund assets; monitoring market timing in the Fund; discussing with the
Sub-Manager which method of indexing to use; and ultimately recommending to the
Trustees whether the Sub-Management Contract should be renewed, modified or
terminated. The Manager provides written reports to the Trustees regarding the
results of its evaluation and monitoring functions. In addition, the Manager is
responsible for providing the Fund with administrative services, including, but
not limited to, shareholder servicing and certain legal and accounting services.
The Manager is also responsible for conducting all operations of the Fund,
except those operations contracted to the Sub-Manager, custodian, transfer agent
and dividend disbursing agent. As described below, the Manager receives an
annual fee from the Fund for performing its responsibilities under the
Management Contract.
MANAGEMENT FEES
The Fund's Manager receives an annual management fee equal to 0.30% of the
Fund's average daily net assets. Under the Management Contract, which provides
for the voluntary waiver of the management fee by the Manager, the Manager will
voluntarily waive some or all of the management fee. The Manager can terminate
this voluntary waiver of some or all of its management fee at any time in its
sole discretion.
MANAGER'S BACKGROUND
Federated Management, a Delaware business trust organized on April 11, 1989, is
a registered investment adviser under the Investment Advisers Act of 1940. It is
a subsidiary of Federated Investors. All of the Class A (voting) shares of
Federated Investors are owned by a trust, the trustees of which are John F.
Donahue, Chairman and Trustee of Federated Investors, Mr. Donahue's wife, and
Mr.Donahue's son, J. Christopher Donahue, who is President and Trustee of
Federated Investors. Federated Management and other subsidiaries of Federated
Investors serve as investment advisers to a number of investment companies and
private accounts. Certain other subsidiaries also provide administrative
services to a number of investment companies. With over $110 billion invested
across more than 300 funds under management and/or administration by its
subsidiaries, as of December 31, 1996, Federated Investors is one of the largest
mutual fund investment managers in the United States. With more than 2,000
employees, Federated continues to be led by the management who founded the
company in 1955. Federated funds are presently at work in and through 4,500
financial institutions nationwide.
Both the Trust and the Manager have adopted strict codes of ethics governing the
conduct of all employees who manage the Fund and its portfolio securities. These
codes recognize that such persons owe a fiduciary duty to the Fund's
shareholders and must place the interests of shareholders ahead of the
employees' own interests. Among other things, the codes: require preclearance
and periodic reporting of personal securities transactions; prohibit personal
transactions in securities being purchased or sold, or being considered for
purchase or sale, by the Fund; prohibit purchasing securities in initial public
offerings; and prohibit taking profits on securities held for less than sixty
days. Violations of the codes are subject to review by the Trustees, and could
result in severe penalties.
SUB-MANAGER
Under the terms of the Sub-Management Contract between the Manager and ANB, ANB
serves as the Fund's Sub-Manager. The Sub-Manager will develop, maintain and run
the computer program designed to determine which securities will be purchased
and sold so as to replicate the composition of the Index to the extent feasible,
and, subject to the Manager's oversight, has complete discretion to purchase and
sell portfolio securities for the Fund within the Fund's investment objective,
restrictions and policies.
SUB MANAGEMENT FEES
For its services under the Sub-Management Contract, ANB receives an annual fee
from the Manager equal to 0.05% of the first $100 million of net assets under
management, 0.02% over $100 million but less than $200 million, and 0.01% of net
assets over and above $200 million, on an annualized basis. This fee is paid by
the Manager out of its resources and is not an incremental Fund expense. No
performance or incentive fees are paid to the Sub-Manager.
SUB-MANAGER'S BACKGROUND
ANB, incorporated in the State of Illinois on July 1, 1988, is a registered
investment adviser under the Investment Advisers Act of 1940. ANB is a
wholly-owned subsidiary of First Chicago Investment Management Company which, in
turn, is an indirect wholly-owned subsidiary of First Chicago NBD Corporation.
It serves as investment adviser principally to corporate defined benefit and
defined contribution plans which have, as of June 30, 1997, placed approximately
$28.7 billion in assets with ANB. Since 1973, when American National Bank and
Trust Company of Chicago introduced its first commingled equity index fund, ANB
has developed and managed a family of equity and bond index funds in which some
200 nationwide non-financial institution clients invest. In total, ANB manages
72 commingled/common trust funds. On October 3, 1997, First Chicago NBD
Corporation announced an agreement to sell ANB to Northern Trust Corporation
("Northern Trust"). The Fund anticipates that on December 31, 1997, but no later
than January 2, 1998, First Chicago Investment Company will have closed the sale
of ANB to Northern Trust. After the closing, ANB will be a wholly-owned
subsidiary of Northern Trust or one of its subsidiaries and is expected to
change its name to Northern Trust Quantitative Advisers, Inc. The Manager has
recommended that ANB continue as Sub-Manager after the expected sale.
If the sale takes place, the subadvisory contract between the Manager and ANB
will terminate by its terms and a new contract will have to be approved by the
Trustees and the shareholders. The Board of Trustees of the Fund approved a new
contract with ANB on November 20, 1997. Shareholders will be asked to approve
the arrangement before the shareholders. February 28, 1998. Because the contract
would terminate prior to a shareholder meeting and vote, the Fund will pursue
exemptive relief from the Securities and Exchange Commission (the "SEC") before
the closing in order to permit ANB to continue as Sub-Manager. If the closing,
SEC exemptive relief, and shareholder approval do not occur before March 1,
1998, shareholders will be notified, and the Manager will assume its
responsibility to conduct all advisory activities.
Northern Trust is a bank holding company and one of the country's largest trust
institutions, with subsidiaries located across the United States and in several
international locations. At the end of the third quarter of 1997, total assets
of Northern Trust were $26.9 billion and trust assets under administration were
$1 trillion.
Also, since 1992, ANB has served as Sub-Manager for the Federated Mini-Cap Fund
and for the Federated Mid-Cap Fund, which are also portfolios of the Trust.
DISTRIBUTION OF INSTITUTIONAL SERVICE SHARES
Federated Securities Corp. is the principal distributor for the Fund. It is
a Pennsylvania corporation organized on November 14, 1969, and is the
principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors. Federated
Securities Corp. pays a licensing fee to S&P for the right to use the Index
in connection with the management activities for the Fund. Federated
Securities Corp. is not affiliated with S&P.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES
Under a distribution plan adopted in accordance with Rule 12b-1 under the
Investment Company Act of 1940 (the "Plan"), the distributor may be paid by the
Fund in an amount computed at an annual rate of 0.30% of the average daily net
asset value of Shares. The distributor may select financial institutions such as
banks, fiduciaries, custodians for public funds, investment advisers and
broker/dealers to provide sales services or distribution-related support
services as agents for their clients or customers.
The Plan is a compensation-type plan. As such, the Fund makes no payments to the
distributor except as described above. Therefore, the Fund does not pay for
unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Fund, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Fund
under the Plan.
In addition, the Fund has entered into a Shareholder Services Agreement with
Federated Shareholder Services, a subsidiary of Federated Investors, under which
the Fund may make payments up to 0.25% of the average daily net asset value of
Shares to obtain certain personal services for shareholders and to maintain
shareholder accounts. Under the Shareholder Services Agreement, Federated
Shareholder Services will either perform shareholder services directly or will
select financial institutions to perform shareholder services. Financial
institutions will receive fees based upon Shares owned by their clients or
customers. The schedules of such fees and the basis upon which such fees will be
paid will be determined from time to time by the Fund and Federated Shareholder
Services.
SUPPLEMENTAL PAYMENTS TO FINANCIAL INSTITUTIONS
In addition to payments made pursuant to the Distribution Plan and Shareholder
Services Agreement, Federated Securities Corp. and Federated Shareholder
Services, from their own assets, may pay financial institutions supplemental
fees for the performance of substantial sales services, distribution-related
support services, or shareholder services. The support may include sponsoring
sales, educational and training seminars for their employees, providing sales
literature, and engineering computer software programs that emphasize the
attributes of the Fund. Such assistance will be predicated upon the amount of
shares the financial institution sells or may sell, and/or upon the type and
nature of sales or marketing support furnished by the financial institution. Any
payments made by the distributor may be reimbursed by the Fund's Manager or its
affiliates.
FUND ADMINISTRATION
ADMINISTRATIVE SERVICES
Federated Services Company, a subsidiary of Federated Investors, provides the
Manager with the administrative personnel and services necessary to provide
shareholder servicing and certain legal and accounting services.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Managers look for prompt execution of the order at a favorable
price. In working with dealers, the Managers will generally utilize those who
are recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. In selecting among
firms believed to meet these criteria, the Managers may give consideration to
those firms which have sold or are selling Shares of the Fund and other funds
distributed by Federated Securities Corp. The Managers make decisions on
portfolio transactions and select brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND AND INSTITUTIONAL SERVICE SHARES
Holders of Shares pay their allocable portion of Trust and Fund expenses.
The Trust expenses for which holders of Shares pay their allocable portion
include, but are not limited to the cost of: organizing the Trust and continuing
its existence; registering the Trust with federal and state securities
authorities; Trustees' fees; auditors' fees; meetings of Trustees and
shareholders and proxy solitations therefor; legal fees of the Trust;
association membership dues; and such non-recurring and extraordinary items as
may arise from time to time.
The Fund expenses for which holders of Shares pay their allocable portion
include, but are not limited to: registering the portfolio and Shares of the
portfolio; investment advisory services; taxes and commissions; custodian fees;
insurance premiums; auditors' fees; and such non-recurring and extraordinary
items as may arise from time to time.
At present, the only expenses which are allocated specifically to Shares as a
class are expenses under the Trust's Shareholder Services Agreement. However,
the Trustees reserve the right to allocate certain other expenses to holders of
Shares as they deem appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: transfer agent fees as identified by the transfer agent as
attributable to holders of Shares; printing and postage expenses relating to
preparing and distributing materials such as shareholder reports, prospectuses
and proxies to current shareholders; registration fees paid to the Securities
and Exchange Commission and to state securities commissions; expenses related to
administrative personnel and services as required to support holders of Shares;
and Trustees' fees incurred as a result of issues relating solely to Shares.
NET ASSET VALUE
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 Shares,
Institutional Shares and Class C 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 shareholders of a particular class are entitled. The NAV for
Shares is determined by subtracting liabilities attributable to Institutional
Service Shares from the value of Fund assets attributable to Institutional
Service Shares and dividing the remainder by the number of Institutional Service
Shares outstanding.
INVESTING IN INSTITUTIONAL SERVICE SHARES
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange is open. Shares of
the Fund may be purchased either by wire or mail. To purchase Shares of the
Fund, open an account by calling Federated Securities Corp. Information needed
to establish the account will be taken over the telephone. The Fund reserves the
right to reject any purchase request.
BY WIRE
To purchase Shares of the Fund by Federal Reserve wire, call the Fund to place
an order. Shareholders have until 4:00 p.m. (Eastern time) to call the Fund for
settlement on the next business day. However, in order to maximize the Fund's
ability to track the Index, shareholders are urged to transmit purchase requests
prior to 2:00 p.m. (Eastern time). The order is considered received immediately.
Payment by federal funds must be received before 4:00 p.m. (Eastern time) on the
next business day following the order. Federal funds should be wired as follows:
Federated Shareholder Services Company, c/o State Street Bank and Trust Company,
Boston, Massachusetts; Attention: EDGEWIRE; For Credit to: Federated Index
Trust, Federated Max-Cap Fund--Institutional Service Shares; Fund Number (this
number can be found on the account statement or by contacting the Fund); Group
Number or Order Number; Nominee or Institution Name; and ABA Number 011000028.
Shares cannot be purchased by wire on holidays when wire transfers are
restricted. Questions on wire purchases should be directed to your shareholder
services representative at the telephone number listed on your account
statement.
BY MAIL
To purchase Shares of the Fund by mail, send a check made payable to Federated
Index Trust, Federated Max-Cap Fund--Institutional Service Shares to the Fund's
transfer agent, Federated Shareholder Services Company, P.O.
Box 8600, Boston, Massachusetts 02266-8600.
Orders by mail are considered received when payment by check is converted into
federal funds. This is normally the next business day after the check is
received.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund is $25,000. However, 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 will be calculated by
combining all accounts that it maintains with the Fund.
WHAT SHARES COST
Shares are sold at their net asset value next determined after an order is
received. There is no sales charge imposed by the Fund. Investors who purchase
Shares through a financial intermediary may be charged a service fee by that
financial intermediary.
The net asset value is determined as of the close of trading (normally 4:00
p.m., Eastern time) on the New York Stock Exchange, Monday through Friday,
except on: (i) days on which there are not sufficient changes in the value of
the Fund's portfolio securities that its net asset value might be materially
affected; (ii) days during which no shares are tendered for redemption and no
orders to purchase shares are received; and (iii) the following holidays: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
CONFIRMATIONS AND ACCOUNT STATEMENTS
Shareholders will receive detailed confirmations of transactions. In addition,
shareholders will receive periodic statements reporting all account activity,
including dividends paid. The Fund will not issue share certificates.
DIVIDENDS
Dividends are declared and paid quarterly. Unless shareholders request cash
payments by writing to the Fund, dividends are automatically reinvested in
additional Shares on payment dates at the ex-dividend date net asset value
without a sales charge.
CAPITAL GAINS
Capital gains realized by the Fund, if any, will be distributed at least once
every 12 months.
REDEEMING INSTITUTIONAL SERVICE SHARES
The Fund redeems Shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Redemption requests must be received in
proper form and can be made by telephone request or written request.
TELEPHONE REDEMPTION
Shareholders may redeem their Shares by telephoning the Fund before 4:00 p.m.
(Eastern time). However, in order to maximize the Fund's ability to track the
Index, shareholders are urged to telephone the Fund prior to 2:00 p.m. (Eastern
time). The proceeds will normally be wired the following business day, but in no
event more than seven days, to the shareholder's account at a domestic
commercial bank that is a member of the Federal Reserve System. Proceeds from
redemption requests received on holidays when wire transfers are restricted will
be wired the following business day. Questions about telephone redemptions on
days when wire transfers are restricted should be directed to your shareholder
services representative at the telephone number listed on your account
statement. If at any time the Fund shall determine it necessary to terminate or
modify this method of redemption, shareholders would be promptly notified. An
authorization form permitting State Street Bank or the Fund to accept telephone
requests must first be completed. Authorization forms and information on this
service are available from Federated Securities Corp. Telephone redemption
instructions may be recorded.
In the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as "Written Requests," should be considered.
If reasonable procedures are not followed by the Fund, it may be liable for
losses due to unauthorized or fraudulent telephone instructions.
WRITTEN REQUESTS
Shares may also be redeemed by sending a written request to the Fund. Call the
Fund for specific instructions before redeeming by letter. The shareholder will
be asked to provide in the request his name, the Fund name, his account number,
and the share or dollar amount requested. All owners of the account must sign
the request exactly as the shares are registered. If share certificates have
been issued, they should be sent unendorsed with the written request by
registered or certified mail.
SIGNATURES
Shareholders requesting a redemption of any amount to be sent to an address
other than that on record with the Fund, or a redemption payable other than to
the shareholder of record must have their signatures guaranteed by:
* a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation("FDIC");
* a member of the New York, American, Boston, Midwest, or Pacific Stock
Exchange;
* a savings bank or savings association whose deposits are insured by the
Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or
* any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
RECEIVING PAYMENT
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below a required minimum value of $25,000. This
requirement does not apply, however, if the balance falls below $25,000 because
of changes in the Fund's net asset value.
Before Shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
VOTING RIGHTS
Each Share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of all classes of
each portfolio in 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.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust's or the Fund's operation and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the outstanding shares of
all series of the Trust.
TAX INFORMATION
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios, if any, will not be combined for tax purposes with
those realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. Distributions representing long-term capital gains, if
any, will be taxable to shareholders as long-term capital gains no matter how
long the shareholders have held their shares.
STATE AND LOCAL TAXES
In the opinion of Houston, Donnelly & Meck, counsel to the Trust, Fund shares
may be subject to personal property taxes imposed by counties, municipalities,
and school districts in Pennsylvania to the extent that the portfolio securities
in the Fund would be subject to such taxes if owned directly by residents of
those jurisdictions.
Shareholders are urged to consult their own tax advisers regarding the status of
their accounts under state and local tax laws.
PERFORMANCE INFORMATION
From time to time the Fund advertises its total return and yield for
Institutional Service Shares.
Total return represents the change, over a specified period of time, in the
value of an investment in the Institutional Service Shares of the Fund after
reinvesting all income and capital gain distributions. It is calculated by
dividing that change by the initial investment and is expressed as a percentage.
The yield of Institutional Service Shares of the Fund is calculated by dividing
the net investment income per share (as defined by the Securities and Exchange
Commission) earned by the Institutional Service Shares over a thirty-day period
by the offering price per share of each class on the last day of the period.
This number is then annualized using semi-annual compounding. The yield does not
necessarily reflect income actually earned by the Institutional Service Shares
and, therefore, may not correlate to the dividends or other distributions paid
to shareholders.
Institutional Service Shares of the Fund are sold without any sales load or
other similar non-recurring charges. Total return and yield will be calculated
separately for Institutional Service Shares, Institutional Shares
and Class C Shares.
From time to time, advertisements for the Fund may refer to ratings, rankings,
and other information in certain financial publications and/or compare the
performance of Institutional Service Shares to certain indices.
OTHER CLASSES OF SHARES
The Fund also offers other classes of shares called Institutional Shares and
Class C Shares.
Institutional Shares are sold at net asset value to accounts for which financial
institutions act in a fiduciary or agency capacity and are subject to a minimum
initial investment of $10,000, a 12b-1 Plan and a Shareholder Services
Agreement.
Class C Shares are sold at net asset value to customers of financial
institutions and are subject to a minimum initial investment of $10,000, a 12b-1
Plan, and a Shareholder Services Agreement.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation depending upon which class of shares
of the Fund is sold.
Institutional Service Shares, Institutional Shares and Class C Shares are
subject to certain of the same expenses, however, Class C Shares are sold
subject to a contingent deferred sales charge imposed on shares redeemed within
one year of purchase. Expense differences between Institutional Service Shares,
Institutional Shares and Class C Shares may affect the performance of each
class.
The stated management fee is the same for all classes of shares.
To obtain more information and a prospectus for Institutional Shares and Class C
Shares, investors may call 1-800-341-7400 or contact their financial
intermediary.
FINANCIAL HIGHLIGHTS--INSTITUTIONAL SHARES
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young LLP, Independent Auditors on
page 38.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996 1995 1994 1993 1992 1991 1990(A)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING $15.49 $14.74 $12.02 $12.24 $11.64 $11.07 $8.60 $10.00
OF PERIOD
INCOME FROM INVESTMENT
OPERATIONS
Net investment income 0.31 0.34 0.38 0.32 0.30 0.32 0.37 0.12
Net realized and 4.47 2.80 2.70 0.10 1.29 0.71 2.46 (1.43)
unrealized gain (loss) on
investments and futures
contracts
Total from investment 4.78 3.14 3.08 0.42 1.59 1.03 2.83 (1.31)
operations
LESS DISTRIBUTIONS
Distributions from net (0.33) (0.36) (0.34) (0.30) (0.30) (0.34) (0.36) (0.09)
investment income
Distributions from net (0.24) (2.03) (0.02) (0.34) (0.69) (0.12) -- --
realized gain on
investments and futures
contracts
Total distributions (0.57) (2.39) (0.36) (0.64) (0.99) (0.46) (0.36) (0.09)
NET ASSET VALUE, END OF $19.70 $15.49 $14.74 $12.02 $12.24 $11.64 $11.07 $ 8.60
PERIOD
TOTAL RETURN(B) 31.51% 23.71% 26.00% 3.59% 14.35% 9.51% 33.31% (14.46%)
RATIOS TO AVERAGE NET
ASSETS
Expenses 0.31% 0.31% 0.31% 0.32% 0.31% 0.30% 0.24% 0.00%
Net investment income 1.70% 2.29% 2.91% 2.70% 2.60% 2.92% 3.74% 5.19%*
Expense 0.30% 0.31% 0.33% 0.07% 0.09% 0.18% 0.45% 0.94%*
waiver/reimbursement(c)
SUPPLEMENTAL DATA
Net assets, end of $1,142,081 $900,131$679,237 $443,815 $407,246 $309,614$144,528 $25,129
period (000 omitted)
Average commission rate $0.0224 $0.0153 -- -- -- -- -- --
paid(d)
Portfolio turnover 16% 3% 57% 2% 13% 46% 6% 0%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from July 5, 1990 (date of initial public
offering) to October 31, 1990. For the period from the start of business June
26, 1990 to July 4, 1990, net investment income per share aggregating $0.02 per
share ($155) was distributed to the Fund's manager. Such distribution
represented the net income of the Fund prior to initial public offering of Fund
shares which commenced July 5, 1990.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Represents total commissions paid on portfolio securities divided by total
portfolio shares purchased or sold on which commissions were charged.
(See Notes which are an integral part of the Financial Statements)
PORTFOLIO OF INVESTMENTS
FEDERATED MAX-CAP FUND
OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--97.5%
BASIC INDUSTRY--5.3%
7,900 ASARCO, Inc. $ 216,263
20,800 Air Products & Chemicals, Inc. 1,580,800
43,500 Alcan Aluminum, Ltd. 1,242,468
33,692 Allegheny Teledyne, Inc. 886,520
33,300 Aluminum Co. of America 2,430,900
107,293 Archer-Daniels-Midland Co. 2,387,269
19,700 (b)Armco, Inc. 113,275
19,500 Avery Dennison Corp. 776,344
5,600 Ball Corp. 196,000
71,400 Barrick Gold Corp. 1,468,163
41,700 Battle Mountain Gold Co. 255,413
9,800 Bemis Co., Inc. 373,625
20,700 (b)Bethlehem Steel Corp. 207,000
10,700 Boise Cascade Corp. 370,488
18,400 Champion International Corp. 1,015,450
44,200 Corning, Inc. 1,994,525
24,600 Crown Cork & Seal Co., Inc. 1,108,537
17,250 Cyprus Amax Minerals 361,172
43,700 Dow Chemical Co. 3,965,775
216,700 Du Pont (E.I.) de Nemours & Co. 12,324,812
15,025 Eastman Chemical Co. 895,865
25,900 Echo Bay Mines Ltd. 105,218
12,440 Ecolab, Inc. 591,677
26,862 Engelhard Corp. 466,727
36,200 Fort James Corp. 1,436,687
38,100 Freeport-McMoRan Copper & Gold, Inc., Class B 909,637
17,500 Georgia-Pacific Corp. 1,484,219
10,000 Goodrich (B.F.) Co. 445,625
13,900 Grace (W.R.) & Co. 945,200
11,900 Great Lakes Chemical Corp. 559,300
19,800 Hercules, Inc. 908,325
27,200 Homestake Mining Co. 336,600
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
BASIC INDUSTRY--CONTINUED
31,400 Inco Ltd. $ 647,625
9,000 Inland Steel Industries, Inc. 176,625
57,976 International Paper Co. 2,608,920
20,200 Louisiana-Pacific Corp. 424,200
9,800 Mead Corp. 592,900
8,000 Millipore Corp. 313,000
113,000 Monsanto Co. 4,830,750
26,400 Morton International, Inc. 871,200
12,500 Nalco Chemical Co. 500,000
29,957 Newmont Mining Corp. 1,048,495
16,800 Nucor Corporation 877,800
10,200 Owens Corning 349,350
26,900 (b)Owens-Illinois, Inc. 928,050
34,600 PPG Industries, Inc. 1,959,225
24,333 Pall Corp. 503,389
12,100 Phelps Dodge Corp. 899,938
12,640 Pioneer Hi-Bred International 1,158,140
45,900 Placer Dome, Inc. 711,450
5,400 Potlatch Corp. 269,325
30,300 Praxair, Inc. 1,319,944
14,100 Reynolds Metals Co. 859,219
12,000 Rohm & Haas Co. 999,750
33,100 Sherwin-Williams Co. 918,525
19,200 Sigma-Aldrich Corp. 674,400
3,700 Springs Industries, Inc., Class A 171,588
18,508 Stone Container Corp. 223,253
10,900 Temple-Inland, Inc. 625,388
11,500 Tupperware Corp. 288,219
16,420 USX-U.S. Steel Group, Inc. 558,280
13,300 Union Camp Corp. 720,694
24,100 Union Carbide Corp. 1,101,069
19,550 Westvaco Corp. 641,484
38,200 Weyerhaeuser Co. 1,824,050
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
BASIC INDUSTRY--CONTINUED
21,300 Willamette Industries, Inc. $ 704,231
18,550 Worthington Industries, Inc. 383,753
TOTAL 74,044,108
CONSUMER DURABLES--3.2%
18,100 Black & Decker Corp. 688,931
4,900 Briggs & Stratton Corp. 243,775
19,000 Brunswick Corp. 641,250
5,300 Centex Corp. 310,050
129,268 Chrysler Corp. 4,556,697
15,700 Cooper Tire & Rubber Co. 332,643
20,000 Dana Corp. 936,250
62,600 Eastman Kodak Co. 3,748,175
14,800 Eaton Corp. 1,430,050
12,100 Echlin, Inc. 396,275
6,500 Fleetwood Enterprises, Inc. 197,031
228,900 Ford Motor Co. 10,000,068
140,300 General Motors Corp. 9,005,506
34,550 Genuine Parts Co. 1,081,847
29,900 Goodyear Tire & Rubber Co. 1,872,488
24,000 Hasbro, Inc. 696,000
7,253 Jostens, Inc. 169,086
7,300 Kaufman & Broad Homes Corp. 155,581
55,625 Mattel, Inc. 2,162,422
18,800 Maytag Corp. 627,450
30,500 Newell Co. 1,170,438
8,400 Polaroid Corp. 377,475
4,400 Pulte Corp. 164,450
28,700 Rubbermaid, Inc. 690,594
11,400 Snap-On Tools Corp. 490,200
17,100 Stanley Works 722,475
23,900 TRW, Inc. 1,368,275
14,300 Whirlpool Corp. 866,938
TOTAL 45,102,420
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
CONSUMER NON-DURABLES--10.7%
10,200 Alberto-Culver Co., Class B $ 307,912
13,900 American Greetings Corp., Class A 482,156
94,200 Anheuser-Busch Cos., Inc. 3,762,113
25,400 Avon Products, Inc. 1,663,700
13,000 Brown-Forman Corp., Class B 639,438
27,500 CPC International, Inc. 2,722,500
88,100 Campbell Soup Co. 4,542,656
19,800 Clorox Co. 1,386,000
475,300 Coca-Cola Co. 26,854,450
56,700 Colgate-Palmolive Co. 3,671,325
90,600 ConAgra, Inc. 2,729,325
7,100 Coors Adolph Co., Class B 250,718
32,800 Fortune Brands, Inc. 1,084,450
14,100 (b)Fruit of the Loom, Inc., Class A 367,481
30,600 General Mills, Inc. 2,019,600
107,300 Gillette Co. 9,556,406
70,800 Heinz (H.J.) Co. 3,287,775
27,400 Hershey Foods Corp. 1,513,850
20,900 International Flavors & Fragrances, Inc. 1,011,038
78,800 Kellogg Co. 3,393,325
106,648 Kimberly-Clark Corp. 5,539,031
13,600 Liz Claiborne, Inc. 689,350
55,300 Nike, Inc., Class B 2,599,100
293,300 PepsiCo, Inc. 10,797,106
464,300 Philip Morris Cos., Inc. 18,397,888
258,900 Procter & Gamble Co. 17,605,200
26,300 Quaker Oats Co. 1,259,113
20,400 Ralston Purina Co. 1,830,900
10,800 (b)Reebok International Ltd. 398,250
7,200 Russell Corp. 211,500
92,000 Sara Lee Corp. 4,703,500
71,100 Seagram Co. Ltd. 2,395,181
34,900 UST, Inc. 1,044,819
122,800 Unilever N.V., ADR 6,554,450
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
CONSUMER NON-DURABLES--CONTINUED
12,000 V.F. Corp. $ 1,072,500
22,300 Wrigley (Wm.), Jr. Co. 1,613,963
TOTAL 147,958,069
ENERGY MINERALS--8.9%
17,300 Amerada-Hess Corp. 1,062,868
94,100 Amoco Corp. 8,627,793
11,400 Anadarko Petroleum Corp. 835,050
17,300 Apache Corp. 726,600
14,300 Ashland, Inc. 681,931
61,500 Atlantic Richfield Co. 5,062,219
32,300 Baker Hughes, Inc. 1,483,781
33,765 Burlington Resources, Inc. 1,652,375
125,500 Chevron Corp. 10,408,656
474,200 Exxon Corp. 29,133,662
48,600 Halliburton Co. 2,897,775
4,600 Helmerich & Payne, Inc. 371,163
9,100 Kerr-McGee Corp. 614,819
150,600 Mobil Corp. 10,965,563
63,500 Occidental Petroleum Corp. 1,770,063
20,200 (b)Oryx Energy Co. 556,763
9,000 Pennzoil Co. 666,000
50,500 Phillips Petroleum Co. 2,442,938
16,600 (b)Rowan Companies, Inc. 645,325
410,900 Royal Dutch Petroleum Co., ADR 21,623,613
94,900 Schlumberger Ltd. 8,303,750
13,937 Sun Co., Inc. 558,351
101,200 Texaco, Inc. 5,762,075
55,200 USX Corp. 1,973,400
48,594 Union Pacific Resources Group, Inc. 1,196,627
47,300 Unocal Corp. 1,951,125
10,300 (b)Western Atlas, Inc. 887,731
TOTAL 122,862,016
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
FINANCE--15.5%
32,050 AON Corp. $ 1,728,697
19,700 Ahmanson (H.F.) & Co. 1,162,300
83,405 Allstate Corp. 6,917,402
89,800 American Express Co. 7,004,400
47,630 American General Corp. 2,429,130
134,389 American International Group, Inc. 13,716,077
111,727 Banc One Corp. 5,823,770
72,700 Bank of New York Co., Inc. 3,421,444
133,652 BankAmerica Corp. 9,556,118
28,300 BankBoston Corp. 2,294,069
19,100 Bankers Trust New York Corp. 2,253,800
38,100 Barnett Banks, Inc. 2,628,900
10,000 Beneficial Corp. 766,875
19,900 Block (H&R), Inc. 736,300
14,100 CIGNA Corp. 2,189,025
81,070 Chase Manhattan Corp. 9,353,451
33,100 Chubb Corp. 2,192,875
87,800 Citicorp 10,980,487
20,200 Comerica, Inc. 1,597,062
36,000 Conseco, Inc. 1,570,500
38,800 Corestates Financial Corp. 2,822,700
20,500 Countrywide Credit Industries, Inc. 703,406
133,100 Federal Home Loan Mortgage Corp. 5,041,162
203,300 Federal National Mortgage Association 9,847,343
29,300 Fifth Third Bancorp 1,878,862
107,610 First Union Corp. 5,279,615
48,810 Fleet Financial Group, Inc. 3,139,093
15,300 General RE Corp. 3,016,968
10,700 Golden West Financial Corp. 928,225
26,000 Green Tree Financial Corp. 1,095,250
22,600 Hartford Financial Services Group, Inc. 1,830,600
20,500 Household International, Inc. 2,321,625
30,500 Huntington Bancshares, Inc. 985,531
34,700 J.P. Morgan & Co., Inc. 3,808,325
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
FINANCE--CONTINUED
13,325 Jefferson-Pilot Corp. $ 1,030,189
42,600 KeyCorp 2,606,588
19,400 Lincoln National Corp. 1,333,750
17,200 MBIA Insurance Corporation 1,027,700
96,018 MBNA Corp. 2,526,474
22,000 MGIC Investment Corp. 1,326,875
32,300 Marsh & McLennan Cos., Inc. 2,293,300
48,500 Mellon Bank Corp. 2,500,781
63,500 Merrill Lynch & Co., Inc. 4,294,188
112,457 Morgan Stanley, Dean Witter, Discover & Co. 5,510,393
41,200 National City Corp. 2,461,700
136,240 NationsBank Corp. 8,157,370
143,600 Norwest Corp. 4,604,175
58,800 PNC Bank Corp. 2,793,000
13,800 Progressive Corp. Ohio 1,438,650
18,000 Providian Financial Corp. 666,000
10,500 Republic New York Corp. 1,111,031
24,200 SAFECO Corp. 1,152,525
50,750 Schwab (Charles) Corp. 1,731,844
16,100 St. Paul Cos., Inc. 1,286,994
31,500 State Street Corp. 1,756,125
37,350 SunAmerica, Inc. 1,342,266
41,400 SunTrust Banks, Inc. 2,683,238
26,900 Torchmark Corp. 1,072,638
12,300 Transamerica Corp. 1,241,531
122,889 Travelers Group, Inc. 8,602,230
46,855 U.S. Bancorp, Inc. 4,764,568
27,100 UNUM Corp. 1,321,125
21,700 USF&G Corp. 439,425
30,900 Wachovia Corp. 2,327,156
48,000 Washington Mutual, Inc. 3,285,000
16,866 Wells Fargo & Co. 4,914,331
TOTAL 214,624,547
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
HEALTH CARE--11.0%
147,500 Abbott Laboratories $ 9,043,594
28,755 Aetna Services, Inc. 2,043,402
268 (b)Allergan Ligand Retinoid Therapeutics, Inc. 5,427
12,000 Allergan, Inc. 395,250
15,700 (b)Alza Corp. 409,181
124,300 American Home Products Corp. 9,213,737
50,800 (b)Amgen, Inc. 2,501,900
10,500 Bard (C.R.), Inc. 291,375
10,500 Bausch & Lomb, Inc. 412,125
53,600 Baxter International, Inc. 2,479,000
23,200 Becton, Dickinson & Co. 1,068,650
21,100 (b)Beverly Enterprises, Inc. 315,181
21,500 Biomet, Inc. 536,156
37,200 (b)Boston Scientific Corp. 1,692,600
191,000 Bristol-Myers Squibb Co. 16,760,250
20,800 Cardinal Health, Inc. 1,544,400
124,807 Columbia/HCA Healthcare Corp. 3,525,797
785 (b)Crescendo Pharmaceuticals Corp. 8,880
28,400 Guidant Corp. 1,633,000
37,900 HBO & Co. 1,648,650
65,800 (b)HEALTHSOUTH Corp. 1,682,013
31,400 (b)Humana, Inc. 659,400
255,000 Johnson & Johnson 14,630,625
536 (b)Ligand Pharmaceuticals, Inc., Warrants 5,360
213,200 Lilly (Eli) & Co. 14,257,750
12,150 Manor Care, Inc. 416,897
89,600 Medtronic, Inc. 3,897,600
231,500 Merck & Co., Inc. 20,661,375
247,700 Pfizer, Inc. 17,524,775
97,255 Pharmacia & Upjohn, Inc. 3,087,846
140,400 Schering Plough Corp. 7,871,175
4,800 Shared Medical Systems Corp. 262,800
17,550 (b)St. Jude Medical, Inc. 531,984
58,000 (b)Tenet Healthcare Corp. 1,772,625
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
HEALTH CARE--CONTINUED
14,100 U.S. Surgical Corp. $ 379,819
35,900 United Healthcare Corp. 1,662,619
52,000 Warner-Lambert Co. 7,445,750
TOTAL 152,278,968
PRODUCER MANUFACTURING--7.6%
5,300 Aeroquip-Vickers, Inc. 275,931
108,500 Allied-Signal, Inc. 3,906,000
7,800 Armstrong World Industries, Inc. 519,188
14,300 Case Corp. 855,319
72,100 Caterpillar, Inc. 3,695,125
7,400 Cincinnati Milacron, Inc. 205,350
23,400 Cooper Industries, Inc. 1,219,725
8,750 Crane Co. 363,671
7,400 Cummins Engine Co., Inc. 450,937
48,000 Deere & Co. 2,526,000
21,200 Dover Corp. 1,431,000
33,200 Dresser Industries, Inc. 1,398,550
85,000 Emerson Electric Co. 4,457,187
7,000 (b)FMC Corp. 565,687
627,400 General Electric Co. 40,506,513
9,600 General Signal Corp. 385,200
9,478 Harnischfeger Industries, Inc. 373,196
24,400 Honeywell, Inc. 1,660,725
22,700 ITT Industries, Inc. 716,469
47,800 Illinois Tool Works, Inc. 2,351,163
31,800 Ingersoll-Rand Co. 1,238,213
16,100 Johnson Controls, Inc. 722,488
22,000 Loews Corp. 2,457,125
31,600 Masco Corp. 1,386,450
10,200 McDermott International, Inc. 370,388
13,500 (b)Meritor Automotive, Inc. 301,219
79,600 Minnesota Mining & Manufacturing Co. 7,283,400
1,548 NACCO Industries, Inc., Class A 159,444
8,800 National Service Industries, Inc. 389,400
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
PRODUCER MANUFACTURING--CONTINUED
13,970 (b)Navistar International Corp. $ 323,929
14,880 PACCAR, Inc. 670,530
21,400 Parker-Hannifin Corp. 894,788
27,700 Pitney Bowes, Inc. 2,196,956
8,300 Raychem Corp. 751,669
32,600 Tenneco, Inc. 1,464,963
31,600 Textron, Inc. 1,826,875
28,800 (b)Thermo Electron Corp. 1,074,600
10,500 Thomas & Betts Corp. 522,375
11,700 Timken Co. 391,950
102,200 Tyco International, Ltd. 3,858,050
124,000 Westinghouse Electric Corp. 3,278,250
19,500 Whitman Corp. 511,875
62,300 Xerox Corp. 4,941,169
TOTAL 104,879,042
RETAIL TRADE--4.7%
46,900 Albertsons, Inc. 1,729,437
54,100 American Stores Co. 1,389,693
28,900 (b)AutoZone, Inc. 854,356
33,000 CVS Corp. 2,023,313
19,300 (b)Charming Shoppes, Inc. 100,118
18,900 Circuit City Stores, Inc. 753,637
40,750 (b)Costco Cos., Inc. 1,568,875
41,700 Dayton-Hudson Corp. 2,619,281
21,100 Dillards, Inc., Class A 809,712
40,100 (b)Federated Department Stores, Inc. 1,764,400
51,400 Gap (The), Inc. 2,733,837
11,200 Giant Foods, Inc., Class A 343,000
7,200 Great Atlantic & Pacific Tea Co., Inc. 220,950
13,500 Harcourt General, Inc. 675,844
139,850 Home Depot, Inc. 7,779,156
93,300 (b)K Mart Corp. 1,230,394
48,700 (b)Kroger Co., Inc. 1,588,838
52,064 Limited, Inc. 1,226,758
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
RETAIL TRADE--CONTINUED
7,500 Longs Drug Stores Corp. $ 187,969
33,300 Lowe's Cos., Inc. 1,386,113
44,600 May Department Stores Co. 2,402,825
6,800 Mercantile Stores Co., Inc. 400,775
15,300 Nordstrom, Inc. 937,125
47,700 Penney (J.C.) Co., Inc. 2,799,394
11,600 Pep Boys-Manny Moe & Jack 292,175
23,600 Rite Aid Corp. 1,401,250
75,000 Sears, Roebuck & Co. 3,140,625
31,300 TJX Cos., Inc. 927,263
20,330 Tandy Corp. 698,844
54,700 (b)Toys 'R' Us, Inc. 1,863,219
434,000 Wal-Mart Stores, Inc. 15,244,250
94,300 Walgreen Co. 2,652,188
28,100 Winn-Dixie Stores, Inc. 1,043,213
25,900 (b)Woolworth (F.W.) Co. 492,100
TOTAL 65,280,927
SERVICES--4.9%
39,035 Browning-Ferris Industries, Inc. 1,268,638
78,475 (b)CUC International, Inc. 2,315,013
18,800 (b)Clear Channel Communications, Inc. 1,240,800
31,600 Cognizant Corp. 1,238,325
29,200 Darden Restaurants, Inc. 332,150
15,400 Deluxe Corp. 504,350
129,400 Disney (Walt) Co. 10,643,150
28,300 Donnelley (R.R.) & Sons Co. 923,287
18,400 Dow Jones & Co. 855,600
32,700 Dun & Bradstreet Corp. 933,993
28,900 Equifax, Inc. 897,706
7,100 Fleming Cos., Inc. 119,812
16,100 Fluor Corp. 662,112
7,600 Foster Wheeler Corp. 249,375
54,400 Gannett Co., Inc. 2,859,400
9,500 Grainger (W.W.), Inc. 830,656
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
SERVICES--CONTINUED
30,400 (b)HFS, Inc. $ 2,143,200
5,700 Harland (John H.) Co. 127,894
19,150 (b)Harrah's Entertainment, Inc. 377,016
47,900 Hilton Hotels Corp. 1,475,919
22,300 (b)ITT Corp. 1,665,531
25,500 Ikon Office Solutions, Inc. 721,969
23,850 Interpublic Group Cos., Inc. 1,132,875
7,050 King World Productions, Inc. 333,113
17,700 Knight-Ridder, Inc. 924,825
63,000 Laidlaw, Inc. 889,875
24,400 Marriott Corp. 1,701,900
131,800 McDonald's Corp. 5,906,288
19,000 McGraw-Hill Cos., Inc. 1,242,125
10,200 Meredith Corp. 347,438
34,300 (b)Mirage Resorts, Inc. 857,500
16,416 Moore Corp. Ltd. 265,734
18,100 New York Times Co., Class A 990,975
10,850 Safety-Kleen Corp. 240,056
48,200 Service Corp. International 1,467,088
12,500 Super Valu Stores, Inc. 457,813
33,800 Sysco Corp. 1,352,000
107,240 Time Warner, Inc. 6,186,408
19,200 Times Mirror Co., Class A 1,039,200
23,500 Tribune Co. 1,295,438
29,330 (b)Tricon Global Restaurants, Inc. 889,066
115,800 (b)U.S. West Media Group 2,923,950
67,668 (b)Viacom, Inc., Class B 2,046,957
86,857 Waste Management, Inc. 2,030,282
25,200 Wendy's International, Inc. 529,200
TOTAL 67,436,002
TECHNOLOGY--14.9%
66,000 (b)3Com Corp. 2,734,875
42,080 AMP, Inc. 1,893,600
14,000 Adobe System, Inc. 668,500
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
27,000 (b)Advanced Micro Devices, Inc. $ 621,000
16,762 (b)Andrew Corp. 388,669
24,400 (b)Apple Computer, Inc. 415,563
69,800 (b)Applied Materials, Inc. 2,329,575
9,200 Autodesk, Inc. 340,400
56,100 Automatic Data Processing, Inc. 2,868,113
38,100 (b)Bay Networks, Inc. 1,204,913
191,908 Boeing Co. 9,187,596
30,200 (b)Cabletron Systems, Inc. 875,800
15,500 (b)Ceridian Corp. 605,468
128,200 (b)Cisco Systems, Inc. 10,516,406
144,847 (b)Compaq Computer Corp. 9,233,996
69,775 Computer Associates International, Inc. 5,202,598
14,800 (b)Computer Sciences Corp. 1,049,875
22,500 (b)DSC Communications Corp. 548,437
9,200 (b)Data General Corp. 177,100
63,400 (b)Dell Computer Corp. 5,079,925
28,900 (b)Digital Equipment Corp. 1,446,806
8,700 EG & G, Inc. 179,981
47,300 (b)EMC Corp. Mass 2,648,800
85,000 First Data Corp., Class 2,470,312
12,020 General Dynamics Corp. 975,874
15,200 Harris Corp. 663,100
199,300 Hewlett-Packard Co. 12,294,319
312,900 Intel Corp. 24,093,300
188,200 International Business Machines Corp. 18,455,363
16,000 (b)KLA-Tencor Corp. 703,000
27,200 (b)LSI Logic Corp. 593,300
37,088 Lockheed Martin Corp. 3,525,678
122,967 Lucent Technologies, Inc. 10,137,092
13,800 Mallinckrodt, Inc. 517,500
40,400 Micron Technology, Inc. 1,083,225
229,600 (b)Microsoft Corp. 29,848,000
114,100 Motorola, Inc. 7,045,675
27,800 (b)National Semiconductor Corp. 1,000,800
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
TECHNOLOGY--CONTINUED
125 (b)Netscape Communications $ 4,109
28,200 (b)NextLevel Systems, Inc. 380,700
50,200 Northern Telecom Ltd. 4,502,313
12,800 Northrop Corp. 1,398,400
65,600 (b)Novell, Inc. 553,500
187,775 (b)Oracle Corp. 6,718,824
25,000 (b)Parametric Technology Corp. 1,103,125
8,400 Perkin-Elmer Corp. 525,000
45,300 Raytheon Co. 2,457,525
40,500 Rockwell International Corp. 1,984,500
14,200 Scientific-Atlanta, Inc. 263,588
46,600 (b)Seagate Technology, Inc. 1,264,025
47 (b)Siebel Systems, Inc. 1,884
33,900 (b)Silicon Graphics, Inc. 497,906
70,700 (b)Sun Microsystems, Inc. 2,421,475
6,400 Tektronix, Inc. 378,400
34,700 (b)Tellabs, Inc. 1,873,800
36,700 Texas Instruments, Inc. 3,915,431
32,300 (b)Unisys Corp. 429,994
45,200 United Technologies Corp. 3,164,000
TOTAL 207,463,033
TRANSPORTATION--1.3%
17,600 (b)AMR Corp. 2,049,300
29,811 Burlington Northern Santa Fe 2,832,045
41,700 CSX Corp. 2,280,469
7,300 Caliber System, Inc. 380,513
14,600 Delta Air Lines, Inc. 1,470,950
22,000 (b)Federal Express Corp. 1,468,500
72,300 Norfolk Southern Corp. 2,322,638
15,000 Ryder Systems, Inc. 525,000
28,000 Southwest Airlines Co. 913,500
15,100 (b)USAir Group, Inc. 707,813
47,300 Union Pacific Corp. 2,897,125
TOTAL 17,847,853
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
UTILITIES--9.7%
311,278 AT&T Corp. $ 15,233,167
96,500 (b)Airtouch Communications, Inc. 3,727,312
35,300 Alltel Corp. 1,248,737
36,300 American Electric Power Co., Inc. 1,715,175
105,400 Ameritech Corp. 6,851,000
28,250 Baltimore Gas & Electric Co. 775,109
148,792 Bell Atlantic Corp. 11,884,761
190,000 BellSouth Corp. 8,989,375
29,000 Carolina Power & Light Co. 1,036,750
40,700 Central & SouthWest Corp. 877,593
30,240 Cinergy Corp. 997,920
20,300 Coastal Corp. 1,220,537
10,600 Columbia Gas System, Inc. 765,850
66,850 Comcast Corp., Class A 1,838,375
45,000 Consolidated Edison Co. 1,541,250
18,300 Consolidated Natural Gas Co. 989,343
27,800 DTE Energy Co. 854,850
35,650 Dominion Resources, Inc. 1,325,734
68,972 Duke Energy Corp. 3,327,899
3,700 Eastern Enterprises 144,993
76,100 Edison International 1,950,062
58,600 Enron Corp. 2,226,800
46,200 Entergy Corp. 1,129,012
34,900 FPL Group, Inc. 1,803,894
31,500 Frontier Corp. 681,187
23,100 GPU, Inc. 835,931
183,200 GTE Corp. 7,774,550
40,451 Houston Industries, Inc. 879,808
132,600 MCI Communications Corp. 4,707,300
9,300 NICOR, Inc. 358,631
26,800 Niagara Mohawk Power Corp. 259,625
14,100 Northern States Power Co. 710,288
29,200 Ohio Edison Co. 722,700
5,100 Oneok, Inc. 174,994
84,000 P G & E Corp. 2,147,250
31,600 P P & L Resources, Inc. 683,350
</TABLE>
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
SHARES OR
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
(A)COMMON STOCKS--CONTINUED
UTILITIES--CONTINUED
15,800 Pacific Enterprises $ 516,463
56,800 Pacificorp 1,231,850
42,600 Peco Energy Co. 966,488
6,400 Peoples Energy Corp. 228,800
45,200 Public Service Enterprises Group, Inc. 1,172,375
175,123 SBC Communications, Inc. 11,142,201
20,600 Salomon, Inc. 1,600,363
16,400 Sonat, Inc. 753,375
131,200 Southern Co. 3,009,400
82,500 Sprint Corp. 4,290,000
97,000 (b)Tele-Communications, Inc., Class A 2,224,938
46,125 Texas Utilities Co. 1,654,734
91,900 U.S. West, Inc. 3,658,769
41,400 Unicom Corp. 1,159,200
19,600 Union Electric Co. 738,675
30,500 Williams Cos., Inc. (The) 1,553,594
172,900 (b)WorldCom, Inc. 5,813,763
TOTAL 134,106,100
TOTAL COMMON STOCKS 1,353,883,085
(IDENTIFIED COST $927,747,662)
(C)SHORT-TERM U.S. GOVERNMENT OBLIGATION--0.2%
$ 3,000,000 United States Treasury Bill, 12/18/1997 (identified 2,982,390
cost $2,981,180)
(D)REPURCHASE AGREEMENT--2.5%
34,490,000BT Securities Corp., 5.71%, dated 10/31/1997, due 34,490,000
11/3/1997 (at amortized cost)
TOTAL INVESTMENTS $ 1,391,355,475
(IDENTIFIED COST $965,218,842)(E)
</TABLE>
(a) The Fund purchases Index futures contracts to efficiently manage cash flows
resulting from shareholder purchases and redemptions, dividend and capital gain
payments to shareholders and corporate actions while maintaining exposure to the
Index and minimizing trading costs. The underlying face amount, at value, of
open Index futures contracts is $33,726,000 at October 31, 1997, which
represents 2.4% of net assets. Taking into consideration these open Index
futures contracts, the Fund's effective total exposure to the Index is 100.0%.
(b) Non-income producing security.
(c) Represents a security held as collateral which is used to ensure the Fund is
able to satisfy the obligations of its outstanding long futures contracts.
(d) The repurchase agreement is fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio. The
investment in the repurchase agreement is through participation in a joint
account with other Federated funds.
(e) The cost of investments for federal tax purposes amounts to $968,538,573.
The net unrealized appreciation of investments on a federal tax basis amounts to
$422,816,902 which is comprised of $550,383,690 appreciation and $127,566,788
depreciation at October 31, 1997.
Note: The categories of investments are shown as a percentage of net assets
($1,388,067,266) at October 31, 1997.
The following acronyms are used throughout this portfolio: ADR --American
Depository Receipt
MBIA --Municipal Bond Investors Assurance
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF ASSETS AND LIABILITIES
FEDERATED MAX-CAP FUND
OCTOBER 31, 1997
<TABLE>
<S> <C> <C>
ASSETS:
Total investments in securities, at value (identified cost $ 1,391,355,475
$965,218,842 and tax cost $968,538,573)
Income receivable 1,596,975
Receivable for investments sold 302,684
Receivable for shares sold 5,378,711
Receivable for daily variation margin 2,272,440
Deferred expenses 250
Total assets 1,400,906,535
LIABILITIES:
Payable for investments purchased $ 292,051
Payable for shares redeemed 9,507,861
Payable to Bank 2,743,338
Accrued expenses 296,019
Total liabilities 12,839,269
Net Assets for 70,486,376 shares outstanding $ 1,388,067,266
NET ASSETS CONSIST OF:
Paid in capital $ 918,706,526
Net unrealized appreciation of investments and futures contracts 425,113,970
Accumulated net realized gain on investments and futures contracts 43,086,633
Undistributed net investment income 1,160,137
Total Net Assets $ 1,388,067,266
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PROCEEDS PER SHARE:
INSTITUTIONAL SHARES:
$1,142,081,302 / 57,977,259 shares outstanding $19.70
INSTITUTIONAL SERVICE SHARES:
$245,985,964 / 12,509,117 shares outstanding $19.66
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF OPERATIONS
FEDERATED MAX-CAP FUND
YEAR ENDED OCTOBER 31, 1997
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 20,904,146
Interest 3,424,184
Total income 24,328,330
EXPENSES:
Investment advisory fee $ 3,606,538
Custodian fees 107,138
Transfer and dividend disbursing agent fees and 246,738
expenses
Directors'/Trustees' fees 14,405
Auditing fees 14,355
Legal fees 5,146
Portfolio accounting fees 153,444
Distribution services fee--Institutional Service 429,722
Shares
Shareholder services fee--Institutional Shares 2,668,873
Shareholder services fee--Institutional Service 358,102
Shares
Share registration costs 178,972
Printing and postage 18,479
Insurance premiums 9,848
Taxes 16,654
Miscellaneous 8,413
Total expenses 7,836,827
Waivers and reimbursements--
Waiver of investment advisory fee $ (573,407)
Waiver of distribution services fee--Institutional (315,130)
Service Shares
Waiver of shareholder services fee--Institutional (2,668,873)
Shares
Waiver of shareholder services fee--Institutional (42,972)
Service Shares
Total waivers (3,600,382)
Net expenses 4,236,445
Net investment income 20,091,885
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
AND FUTURES CONTRACTS:
Net realized gain on investments and futures 47,684,197
contracts
Net change in unrealized appreciation (depreciation) 237,223,689
of investments and futures contracts
Net realized and unrealized gain on investments 284,907,886
and futures contracts
Change in net assets resulting from operations $ 304,999,771
</TABLE>
(See Notes which are an integral part of the Financial Statements)
STATEMENT OF CHANGES IN NET ASSETS
FEDERATED MAX-CAP FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS--
Net investment income $ 20,091,885 $ 17,495,782
Net realized gain (loss) on investments and futures contracts 47,684,197 13,947,611
($45,104,576 and $14,649,222, respectively, as computed for
federal tax purposes)
Net change in unrealized appreciation/depreciation of 237,223,689 134,550,523
investments and futures contracts
Change in net assets resulting from operations 304,999,771 165,993,916
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income
Institutional Shares (19,400,997) (17,109,255)
Institutional Service Shares (2,132,811) (847,955)
Distributions from net realized gains on investments and
futures contracts
Institutional Shares (13,509,884) (98,597,371)
Institutional Service Shares (1,138,590) (4,696,377)
Change in net assets resulting from distributions to (36,182,282) (121,250,958)
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 751,612,116 680,420,450
Net asset value of shares issued to shareholders in payment of 17,547,453 65,168,316
distributions declared
Cost of shares redeemed (608,777,760) (545,896,207)
Change in net assets resulting from share transactions 160,381,809 199,692,559
Change in net assets 429,199,298 244,435,517
NET ASSETS:
Beginning of period 958,867,968 714,432,451
End of period (including undistributed net investment income of $ 1,388,067,266 $ 958,867,968
$1,160,137 and $2,602,260, respectively)
</TABLE>
(See Notes which are an integral part of the Financial Statements)
NOTES TO FINANCIAL STATEMENTS
FEDERATED MAX-CAP FUND
OCTOBER 31, 1997
ORGANIZATION
Federated Index Trust (the "Trust") is registered under the Investment Company
Act of 1940, as amended (the "Act") as an open-end, management investment
company. The Trust consists of three portfolios. The financial statements
included herein are only those of Federated Max-Cap Fund (the "Fund"), a
diversified portfolio. The financial statements of the other portfolios are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. At
October 31, 1997, the Fund offered two classes of shares: Institutional Shares
and Institutional Service Shares. Effective November 3, 1997, the Trustees
established a new class of shares named Class C Shares. The investment objective
of the Fund is to provide investment results that correspond to the aggregate
price and dividend performance of publicly-traded common stocks, by duplicating
the composition of the Index.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS
Listed equity securities are valued at the last sale price reported on a
national securities exchange. Short-term securities are valued at the prices
provided by an independent pricing service. However, short-term securities with
remaining maturities of sixty days or less at the time of purchase may be valued
at amortized cost, which approximates fair market value.
REPURCHASE AND REVERSE REPURCHASE AGREEMENTS
It is the policy of the Fund to require the custodian bank or broker to take
possession, to have legally segregated in the Federal Reserve Book Entry System,
or to have segregated within the custodian bank's vault, all securities held as
collateral under repurchase agreement transactions. Additionally, procedures
have been established by the Fund to monitor, on a daily basis, the market value
of each repurchase agreement's collateral to ensure that the value of collateral
at least equals the repurchase price to be paid under the repurchase agreement
transaction.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions such as broker/dealers which are deemed by the
Fund's adviser to be creditworthy pursuant to guidelines and/or standards
reviewed or established by the Trustees. Risks may arise from the potential
inability of counterparties to honor the terms of these agreements. Accordingly,
the Fund could receive less than the repurchase price on the sale of collateral
securities.
INVESTMENT INCOME, EXPENSES, AND DISTRIBUTIONS
Interest income and expenses are accrued daily. Bond premium and discount, if
applicable, are amortized as required by the Internal Revenue Code, as amended
(the "Code"). Dividend income and distributions to shareholders are recorded on
the ex-dividend date.
FEDERAL TAXES
It is the Fund's policy to comply with the provisions of the Code applicable to
regulated investment companies and to distribute to shareholders each year
substantially all of its income. Accordingly, no provisions for federal tax are
necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund may engage in when-issued or delayed delivery transactions. The Fund
records when-issued securities on the trade date and maintains security
positions such that sufficient liquid assets will be available to make payment
for the securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES
The costs incurred by the Fund with respect to registration of its shares in its
first fiscal year, excluding the initial expense of registering its shares, have
been deferred and are being amortized over a period not to exceed five years
from the Fund's commencement date.
FUTURES CONTRACTS
The Fund purchases stock index futures contracts to manage cashflows, enhance
yield, and to potentially reduce transaction costs. Upon entering into a stock
index futures contract with a broker, the Fund is required to deposit in a
segregated account a specified amount of cash or U.S. government securities.
Futures contracts are valued daily and unrealized gains or losses are recorded
in a "variation margin" account. Daily, the Fund receives from or pays to the
broker a specified amount of cash based upon changes in the variation margin
account. When a contract is closed, the Fund recognizes a realized gain or loss.
For the period ended October 31, 1997, the Fund had net realized gains of
$16,029,370 on future contracts.
Futures contracts have market risks, including the risk that the change in the
value of the contract may not correlate with changes in the value of the
underlying securities. At October 31, 1997, the Fund had outstanding futures
contracts as set forth below:
UNREALIZED
CONTRACTS TO APPRECIATION
EXPIRATION DATE DELIVER/RECEIVE POSITION (DEPRECIATION)
December 1997 146 S&P 500 Index Long ($1,022,663)
Futures
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts of assets, liabilities, expenses, and revenues reported in
the financial statements. Actual results could differ from those estimated.
OTHER
Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares.
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
INSTITUTIONAL SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 30,235,597 $ 544,279,687 42,819,916 $ 622,123,488
Shares issued to shareholders in 873,354 14,693,792 4,444,520 60,563,340
payment of distributions declared
Shares redeemed (31,244,017) (559,167,698) (35,228,936) (503,599,044)
Net change resulting from (135,066) $ (194,219) 12,035,500 $ 179,087,784
Institutional Share transactions
<CAPTION>
YEAR ENDED OCTOBER 31,
1997 1996
INSTITUTIONAL SERVICE SHARES SHARES AMOUNT SHARES AMOUNT
<S> <C> <C> <C> <C>
Shares sold 11,212,771 $ 207,332,429 4,027,604 $ 58,296,962
Shares issued to shareholders in payment
of distributions declared 165,190 2,853,661 337,876 4,604,976
Shares redeemed (2,667,078) (49,610,062) (2,957,950) (42,297,163)
Net change resulting from Institutional
Service Share transactions 8,710,883 $ 160,576,028 1,407,530 $ 20,604,775
Net change resulting from share
transactions 8,575,817 $ 160,381,809 13,443,030 $ 199,692,559
</TABLE>
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE
Federated Management, the Fund's manager (the "Manager"), receives for its
services an annual investment advisory fee equal to 0.30% of the Fund's average
daily net assets.
The Manager has entered into a sub-management contract with ANB Investment
Management and Trust Company ("Sub-Manager"). The Manager shall pay the
Sub-Manager a management advisory fee based on the average daily net assets of
the Fund as follows: 0.05% on the first $100 million, 0.02% on the next $100
million, and 0.01% thereafter. The Manager may voluntarily choose to waive any
portion of its fee. The Manager can modify or terminate this voluntary waiver at
any time at its sole discretion.
SHAREHOLDER SERVICES FEE
Under the terms of a Shareholder Services Agreement with Federated Shareholder
Services ("FSS"), the Fund will pay FSS up to 0.25% of average daily net assets
of the Fund shares for the period. The fee paid to FSS is used to finance
certain services for shareholders and to maintain shareholder accounts. FSS may
voluntarily choose to waive any portion of its fee. FSS can modify or terminate
this voluntary waiver at any time at its sole discretion. For the fiscal year
ended October 31, 1997, Institutional Shares fully waived its shareholder
services fee.
DISTRIBUTION SERVICES FEE
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Act. Under the terms of the Plan, the Fund will compensate Federated
Securities Corp. ("FSC"), the principal distributor, from the net assets of the
Fund to finance activities intended to result in the sale of the Fund's
Institutional Service Shares. The Plan provides that the Fund may incur
distribution expenses up to 0.30% of the average daily net assets of the
Institutional Service Shares, annually, to compensate FSC. FSC may voluntarily
choose to waive a portion of its fee. FSC can modify or terminate this voluntary
waiver at any time at its sole discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES
Federated Services Company ("FServ"), through its subsidiary, Federated
Shareholder Services Company ("FSSC") serves as transfer and dividend disbursing
agent for the Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES
FServ maintains the Fund's accounting records for which it receives a fee. The
fee is based on the level of the Fund's average daily net assets for the period,
plus out-of-pocket expenses.
GENERAL
Certain Officers and Trustees of the Trust are Officers and Directors or
Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended October 31, 1997, were as follows:
PURCHASES $352,664,111
SALES $179,077,537
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of FEDERATED INDEX TRUST:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Federated Max-Cap Fund (a portfolio of
Federated Index Trust), as of October 31, 1997, and the related statement of
operations for the year then ended, the statement of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997, by correspondence with the custodian and brokers or other
appropriate auditing procedures where replies from brokers were not received. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Federated Max-Cap Fund of Federated Index Trust at October 31, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and its financial highlights for
the periods presented, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
December 12, 1997
NOTES
NOTES
[Graphic]
Federated Investors
Federated Max-Cap Fund
(A Portfolio of Federated Index Trust)
Institutional Service Shares
PROSPECTUS
DECEMBER 31, 1997
An Open-End, Diversified Management Investment Company
FEDERATED MAX-CAP FUND INSTITUTIONAL SERVICE 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
MANAGER
Federated Management
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
SUB-MANAGER
ANB Investment Management and Trust Co.
One North LaSalle Street Chicago, IL 60690
CUSTODIAN
State Street Bank and Trust Company
P.O. Box 8600
Boston, MA 02266-8600
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Shareholder Services Company
P.O. Box 8600
Boston, MA 02266-8600 INDEPENDENT AUDITORS Ernst & Young LLP One Oxford Centre
Pittsburgh, PA 15219
[Graphic]
Federated Securities Corp., Distributor
1-800-245-7400
www.federatedinvestors.com
Cusip 31420E403
0032104A-SS (12/97)
[Graphic]
FEDERATED MAX-CAP FUND
(A PORTFOLIO OF FEDERATED INDEX TRUST)
CLASS C SHARES
INSTITUTIONAL SHARES
INSTITUTIONAL SERVICE SHARES
STATEMENT OF ADDITIONAL INFORMATION
The Class C Shares, Institutional Shares and Institutional Service Shares of
Federated Max-Cap Fund (the "Fund") (a portfolio of Federated Index Trust)
represent interests in a diversified portfolio of securities. This Statement of
Additional Information should be read with the prospectus for Class C Shares
dated November 10, 1997, and the respective prospectuses for Institutional
Shares and Institutional Service Shares dated December 31, 1997. This Statement
is not a prospectus itself. You may request a copy of a prospectus or a paper
copy of this Statement of Additional Information, if you have received it
electronically, free of charge by calling 1-800-341-7400.
FEDERATED MAX-CAP FUND
FEDERATED INVESTORS FUNDS
5800 CORPORATE DRIVE
PITTSBURGH, PENNSYLVANIA 15237-7000
Statement dated December 31, 1997
[Graphic]
Federated Investors
Federated Securities Corp., Distributor
Federated Investors Tower
Pittsburgh, PA 15222-3779
1-800-245-7400
www.federatedinvestors.com
Cusip 31420E106
Cusip 31420E403
Cusip 31420E502
0032104B (12/97)
[Graphic]
TABLE OF CONTENTS
GENERAL INFORMATION ABOUT THE FUND 1 INVESTMENT OBJECTIVE AND POLICIES 1 Types
of Investments 1 When-Issued and Delayed Delivery Transactions 3 Lending of
Portfolio Securities 3 Reverse Repurchase Agreements 3 Portfolio Turnover 3
INVESTMENT LIMITATIONS 3 Investing in Commodities 3 Selling Short and Buying on
Margin 3 Lending Cash or Securities 3 Underwriting 4 Investing in Issuers Whose
Securities are Owned by Officers and Trustees of the Trust 4 Issusing Senior
Securities and Borrowing Money 4 Pledging Assets 4 Diversification of
Investments 4 Concentration of Investments 4 Investing in Real Estate 4
Investing in Restricted Securities 4 Writing Covered Call Options 4 Investing
in Put Options 4 Acquiring Securities 5 Investing in Illiquid Securities 5
FEDERATED INDEX TRUST MANAGEMENT 5 Fund Ownership 9 Trustees Compensation 9
Trustee Liability 10 MANAGEMENT SERVICES 10 Managers to the Fund 10 Management
Fees 10 Other Related Services 10 BROKERAGE TRANSACTIONS 10 OTHER SERVICES 11
Custodian and Portfolio Accountant 11 Transfer Agent 11 Independent Auditors 11
PURCHASING SHARES 11 Reinvestment Privilege (Class C Shares) 11 DISTRIBUTION
PLAN (CLASS C SHARES) AND SHAREHOLDER SERVICES 11 Conversion to Federal Funds
12 DETERMINING NET ASSET VALUE 12 Determining Market Value of Securities 12
REDEEMING SHARES 12 Redemption in Kind 12 Contingent Deferred Sales Charge
(Class C Shares) 13 MASSACHUSETTS PARTNERSHIP LAW 13 TAX STATUS 13 The Fund's
Tax Status 13 Shareholders' Tax Status 13 Capital Gains 13 TOTAL RETURN 13
YIELD 14 PERFORMANCE COMPARISONS 15 Economic and Market Information 15 ABOUT
FEDERATED INVESTORS 15 Mutual Fund Market 15 Institutional Clients 15 Trust
Organizations 16 Broker/Dealers and Bank Broker/Dealers Subsidiaries 16
STANDARD & POOR'S 16
GENERAL INFORMATION ABOUT THE FUND
Federated Max-Cap Fund (the "Fund") is a portfolio of Federated Index Trust (the
"Trust"), which was established as a Massachusetts business trust under a
Declaration of Trust dated January 30, 1990. On December 5, 1994, the Trustees
changed the name of the Fund from the Max-Cap Fund to Federated Max-Cap Fund.
Shares of the Fund are offered in three classes, known as Class C Shares,
Institutional Shares and Institutional Service Shares (individually and
collectively referred to as "Shares"). This Statement of Additional Information
relates to the Shares of the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide investment results that correspond
to the aggregate price and dividend performance of publicly-traded common
stocks, by duplicating the composition of the Standard & Poor's 500 Composite
Stock Price Index. The investment objective cannot be changed without approval
of shareholders. The policies described below may be changed by the Board of
Trustees ("Trustees") without shareholder approval. Shareholders will be
notified before any material change in these policies becomes effective.
TYPES OF INVESTMENTS
In addition to the common stocks described in the prospectus, the Fund may also
invest in money market instruments and U.S. government obligations and
securities in such proportions as, in the judgment of the managers, prevailing
market conditions warrant.
MONEY MARKET INSTRUMENTS
The Fund may invest in the following money market instruments:
* instruments of domestic and foreign banks and savings associations having
capital, surplus, and undivided profits of over $100,000,000, or if the
principal amount of the instrument is insured in full by the Federal
Deposit Insurance Corporation; and
* prime commercial paper (rated A-1 by Standard and Poor's, Prime-1 by
Moody's Investors Service, Inc., or F-1 by Fitch Investors Service).
REPURCHASE AGREEMENTS
When purchasing U.S. government securities pursuant to repurchase agreements, in
the event that a defaulting seller of the securities filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions such as broker/dealers which are deemed by the Fund's managers to
be creditworthy pursuant to guidelines established by the Trustees. The Fund or
its custodian will take possession of the securities subject to repurchase
agreements and these securities will be marked to market daily.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the Fund may invest
generally include direct obligations of the U.S. Treasury (such as U.S.
Treasury bills, notes, and bonds) and obligations issued or guaranteed by
U.S. government agencies or instrumentalities. These securities are backed
by:
* the full faith and credit of the U.S. Treasury;
* the issuer's right to borrow from the U.S. Treasury;
* the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
* the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
* The Farm Credit System, including the National Bank for Cooperatives,
Farm Credit Banks, and Banks for Cooperatives;
* Federal Home Loan Banks;
* Farmers Home Administration; and
* Federal National Mortgage Association
VARIABLE RATE U.S. GOVERNMENT SECURITIES
In the case of certain U.S. government securities purchased by the Fund that
carry variable interest rates, these rates will reduce the changes in the market
value of such securities from their original purchase prices.
Accordingly, the potential for capital appreciation or capital depreciation
should not be greater than the potential for capital appreciation or capital
depreciation of fixed interest rate U.S. government securities having maturities
equal to the interest rate adjustment dates of the variable rate U.S. government
securities.
STOCK INDEX FUTURES AND OPTIONS
The Fund may utilize stock index futures contracts and options on stocks, stock
indices and stock index futures contracts for the purposes of managing cash
flows into and out of the Fund's portfolio and potentially reducing
transactional costs. The Fund may not use stock index futures contracts and
options for speculative purposes.
As a means of reducing fluctuations in the net asset value of shares of the
Fund, the Fund may attempt to hedge all or a portion of its portfolio through
the purchase of listed put options on stocks, stock indices, and stock index
futures contracts. These options will be used only as a form of forward pricing
to protect portfolio securities against decreases in value resulting from market
factors such as an anticipated increase in interest rates. A put option gives
the Fund, in return for a premium, the right to sell the underlying security to
the writer (seller) at a specified price during the term of the option. Put
options on stock indices are similar to put options on stocks except for the
delivery requirements. Instead of giving the Fund the right to make delivery of
stock at a specified price, a put option on a stock index gives the Fund, as
holder, the right to receive an amount of cash upon exercise of the option.
The Fund may also write covered call options. As the writer of a call option,
the Fund has the obligation upon exercise of the option during the option period
to deliver the underlying security upon payment of the exercise price.
The Fund may only: (1) buy listed put options on stock indices and stock index
futures contracts; (2) buy listed put options on securities held in its
portfolio; and (3) sell listed call options either on securities held in its
portfolio or on securities which it has the right to obtain without payment of
further consideration (or has segregated cash in the amount of any such
additional consideration). The Fund will maintain its positions in securities,
option rights, and segregated cash subject to puts and calls until the options
are exercised, closed, or expired.
The Fund may also enter into stock index futures contracts. A stock index
futures contract is a bilateral agreement which obligates the seller to deliver
(and the purchaser to take delivery of) an amount of cash equal to a specific
dollar amount times the difference between the value of a specific stock index
at the close of trading of the contract and the price at which the agreement is
originally made. There is no physical delivery of the stocks constituting the
index, and no price is paid upon entering into a futures contract. In general,
contracts are closed out prior to their expiration. The Fund, when purchasing or
selling a futures contract, will initially be required to deposit in a
segregated account in the broker's name with the Fund's custodian an amount of
cash or U.S. government securities approximately equal to 5-10% of the contract
value. This amount is known as "initial margin," and it is subject to change by
the exchange or board of trade on which the contract is traded. Subsequent
payments to and from the broker are made on a daily basis as the price of the
index or the securities underlying the futures contract fluctuates. These
payments are known as "variation margins," and the fluctuation in value of the
long and short positions in the futures contract is a process referred to as
"marking to market." The Fund may decide to close its position on a contract at
any time prior to the contract's expiration. This is accomplished by the Fund
taking an opposite position at the then prevailing price, thereby terminating
its existing position in the contract. Because both the initial and variation
margin resemble a performance bond or good faith deposit on the contract, they
are returned to the Fund upon the termination of the contract, assuming that all
contractual obligations have been satisfied. Therefore, the margin utilized in
futures contracts is readily distinguishable from the margin employed in
security transactions, since futures contracts margin does not involve the
borrowing of funds to finance the transaction.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price or yield for the Fund. No fees or other expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and are
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend its portfolio securities up to one-third of the value of its
total assets to broker/dealers, banks, or other institutional borrowers of
securities. The Fund will only enter into loan arrangements with broker/dealers,
banks, or other institutions which the sub-manager has determined are
creditworthy under guidelines established by the Trustees and will receive
collateral equal to at least 100% of the value of the securities loaned.
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker. The Fund does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. A reverse repurchase
transaction is similar to borrowing cash. In a reverse repurchase agreement the
Fund transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed-upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These assets are marked to market daily and
maintained until the transaction is settled.
PORTFOLIO TURNOVER
The Fund will not attempt to set or meet a portfolio turnover rate since any
turnover would be incidental to transactions undertaken in an attempt to achieve
the Fund's investment objective. For the fiscal years ended October 31, 1997 and
October 31, 1996, the portfolio turnover rates for the Fund were 16% and 3%,
respectively.
INVESTMENT LIMITATIONS
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities. However, the Fund may purchase
put options on stock index futures, put options on financial futures, and stock
index futures contracts.
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, other than in connection with buying stock index futures contracts, put
options on stock index futures and put options on financial futures, but may
obtain such short-term credits as are necessary for the clearance of
transactions.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities, the market
value of which does not exceed one-third of the total value of the Fund's
assets. This shall not prevent the purchase or holding of corporate or
government bonds, debentures, notes, certificates of indebtedness or other debt
securities of an issuer, repurchase agreements, or other transactions which are
permitted by the Fund's investment objective and policies or the Declaration of
Trust of the Trust.
UNDERWRITING
The Fund will not underwrite any issue of securities except as it may be deemed
to be an underwriter under the Securities Act of 1933 in connection with the
sale of restricted securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer in which the
Officers and Trustees of the Trust or the Fund's investment adviser own a
substantial financial interest.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except as permitted by its investment
objective and policies, and except that the Fund may enter into reverse
repurchase agreements and otherwise borrow up to one-third of the value of its
total assets, including the amount borrowed, as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by enabling the
Fund to meet redemption requests when the liquidation of portfolio instruments
would be inconvenient or disadvantageous. The Fund will not purchase any
securities while any borrowings in excess of 5% of its total assets are
outstanding. During the period any reverse repurchase agreements are outstanding
the Fund will restrict the purchase of portfolio securities to money market
instruments maturing on or before the expiration date of the reverse repurchase
agreements, but only to the extent necessary to assure the completion of the
reverse repurchase agreements.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, it may mortgage, pledge, or hypothecate
assets having a market value not exceeding the lesser of the dollar amounts
borrowed or 10% of the value of the total assets at the time of the borrowing.
DIVERSIFICATION OF INVESTMENTS
The Fund will not invest more than 5% of the value of its total assets in the
securities of any one issuer, except U.S. government securities, or invest in
more than 10% of the voting securities of one issuer.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
securities of companies in any one industry. However, investing in U.S.
government obligations shall not be considered investing in any one industry.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, although it may invest in the
marketable securities of companies whose business involves the purchase or sale
of real estate or in marketable securities which are secured by real estate or
interests in real estate.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest in securities subject to restrictions on resale under
the federal securities laws, unless the securities are determined by the Fund's
manager to be liquid under criteria established by the Fund's Trustees. The Fund
will not invest more than 5% of its total assets in restricted securities.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these policies becomes effective.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities are
held in the Fund's portfolio or unless the Fund is entitled to them in
deliverable form without further payment or after segregating cash in the amount
of any further payment.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities, other than put options on
stock indices, unless the securities are held in the Fund's portfolio and not
more than 5% of the value of the Fund's total assets would be invested in
premiums on open put option positions.
ACQUIRING SECURITIES
The Fund will not purchase securities of other investment companies except to
the extent permitted by the Investment Company Act of 1940, or except as part of
a merger, consolidation, or other acquisition. It will not invest in securities
for the purpose of exercising control or management.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in securities which are
illiquid, including certain restricted securities not determined by the Trustees
to be liquid and repurchase agreements providing for settlement more than seven
days after notice.
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
restriction.
The Fund did not borrow money or pledge securities in excess of 5% of the value
of its net assets during the past fiscal year and does not expect to do so
during the coming fiscal year.
For purposes of its policies and 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."
FEDERATED INDEX TRUST MANAGEMENT
Officers and Trustees are listed with their addresses, birthdates, present
positions with Federated Index Trust, and principal occupations.
John F. Donahue@*
Federated Investors Tower
Pittsburgh, PA
Birthdate: July 28, 1924
Chairman and Trustee
Chairman and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; Chairman and Director, Federated
Research Corp. and Federated Global Research Corp.; Chairman, Passport
Research, Ltd.; Chief Executive Officer and Director or Trustee of the
Funds. Mr. Donahue is the father of J. Christopher Donahue, Executive Vice
President and Trustee of the Company.
Thomas G. Bigley
15 Old Timber Trail
Pittsburgh, PA
Birthdate: February 3, 1934
Trustee
Chairman of the Board, Children's Hospital of Pittsburgh; formerly, Senior
Partner, Ernst & Young LLP; Director, MED 3000 Group, Inc.; Director, Member of
Executive Committee, University of Pittsburgh; Director or Trustee of the Funds.
John T. Conroy, Jr.
Wood/IPC Commercial Department
John R. Wood and Associates, Inc., Realtors
3255 Tamiami Trail North
Naples, FL
Birthdate: June 23, 1937
Trustee
President, Investment Properties Corporation; Senior Vice President, John R.
Wood and Associates, Inc., Realtors; Partner or Trustee in private real
estate ventures in Southwest Florida; formerly, President, Naples Property
Management, Inc. and Northgate Village Development Corporation; Director or
Trustee of the Funds.
William J. Copeland
One PNC Plaza - 23rd Floor
Pittsburgh, PA
Birthdate: July 4, 1918
Trustee
Director and Member of the Executive Committee, Michael Baker, Inc.; formerly,
Vice Chairman and Director, PNC Bank, N.A., and PNC Bank Corp.; Director, Ryan
Homes, Inc.; Director or Trustee of the Funds.
J. Christopher Donahue*
Federated Investors Tower
Pittsburgh, PA
Birthdate: April 11, 1949
Executive Vice President and Trustee
President and Trustee, Federated Investors, Federated Advisers, Federated
Management, and Federated Research; President and Director, Federated
Research Corp. and Federated Global Research Corp.; President, Passport
Research, Ltd.; Trustee, Federated Shareholder Services Company, and
Federated Shareholder Services; Director, Federated Services Company;
President or Executive Vice President of the Funds; Director or Trustee of
some of the Funds. Mr. Donahue is the son of John F. Donahue, Chairman and
Trustee of the Company.
James E. Dowd
571 Hayward Mill Road
Concord, MA
Birthdate: May 18, 1922
Trustee
Attorney-at-law; Director, The Emerging Germany Fund, Inc.; Director or
Trustee of the Funds.
Lawrence D. Ellis, M.D.*
3471 Fifth Avenue, Suite 1111
Pittsburgh, PA
Birthdate: October 11, 1932
Trustee
Professor of Medicine, University of Pittsburgh; Medical Director, University of
Pittsburgh Medical Center - Downtown; Member, Board of Directors, University of
Pittsburgh Medical Center; formerly, Hematologist, Oncologist, and Internist,
Presbyterian and Montefiore Hospitals; Director or Trustee of the Funds.
Edward L. Flaherty, Jr.@
Miller, Ament, Henny & Kochuba
205 Ross Street
Pittsburgh, PA
Birthdate: June 18, 1924
Trustee
Attorney of Counsel, Miller, Ament, Henny & Kochuba; Director, Eat'N Park
Restaurants, Inc.; formerly, Counsel, Horizon Financial, F.A., Western
Region; Director or Trustee of the Funds.
Peter E. Madden
One Royal Palm Way
100 Royal Palm Way
Palm Beach, FL
Birthdate: March 16, 1942
Trustee
Consultant; Former State Representative, Commonwealth of Massachusetts;
formerly, President, State Street Bank and Trust Company and State Street Boston
Corporation; Director or Trustee of the Funds.
John E. Murray, Jr., J.D., S.J.D.
President, Duquesne University
Pittsburgh, PA
Birthdate: December 20, 1932
Trustee
President, Law Professor, Duquesne University; Consulting Partner, Mollica &
Murray; Director or Trustee of the Funds.
Wesley W. Posvar
1202 Cathedral of Learning
University of Pittsburgh
Pittsburgh, PA
Birthdate: September 14, 1925
Trustee
Professor, International Politics; Management Consultant; Trustee, Carnegie
Endowment for International Peace, RAND Corporation, Online Computer Library
Center, Inc., National Defense University and U.S. Space Foundation; President
Emeritus, University of Pittsburgh; Founding Chairman, National Advisory Council
for Environmental Policy and Technology, Federal Emergency Management Advisory
Board and Czech Management Center, Prague; Director or Trustee of the Funds.
Marjorie P. Smuts
4905 Bayard Street
Pittsburgh, PA
Birthdate: June 21, 1935
Trustee
Public Relations/Marketing/Conference Planning; Director or Trustee of the
Funds.
Glen R. Johnson
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 2, 1929
President
Trustee, Federated Investors; President and/or Trustee of some of the Funds;
staff member, Federated Securities Corp.
Edward C. Gonzales
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 22, 1930
Executive Vice President
Vice Chairman, Treasurer, and Trustee, Federated Investors; Vice President,
Federated Advisers, Federated Management, Federated Research, Federated Research
Corp., Federated Global Research Corp. and Passport Research, Ltd.; Executive
Vice President and Director, Federated Securities Corp.; Trustee, Federated
Shareholder Services Company; Trustee or Director of some of the Funds;
President, Executive Vice President and Treasurer of some of the Funds.
John W. McGonigle
Federated Investors Tower
Pittsburgh, PA
Birthdate: October 26, 1938
Executive Vice President, Secretary, and Treasurer
Executive Vice President, Secretary, and Trustee, Federated Investors; Trustee,
Federated Advisers, Federated Management, and Federated Research; Director,
Federated Research Corp. and Federated Global Research Corp.; Trustee, Federated
Shareholder Services Company; Director, Federated Services Company; President
and Trustee, Federated Shareholder Services; Director, Federated Securities
Corp.; Executive Vice President and Secretary of the Funds; Treasurer of some of
the Funds.
Richard B. Fisher
Federated Investors Tower
Pittsburgh, PA
Birthdate: May 17, 1923
Vice President
Executive Vice President and Trustee, Federated Investors; Chairman and
Director, Federated Securities Corp.; President or Vice President of some of
the Funds; Director or Trustee of some of the Funds.
* This Trustee is deemed to be an "interested person" as defined in the
Investment Company Act of 1940.
@ Member of the Executive Committee. The Executive Committee of the Board of
Trustees handles the responsibilities of the Board between meetings of the
Board.
As used in the table above, "The Funds" and "Funds" mean the following
investment companies: 111 Corcoran Funds; Automated Government Money Trust;
Blanchard Funds; Blanchard Precious Metals Fund, Inc.; Cash Trust Series II;
Cash Trust Series, Inc.; DG Investor Series; Edward D. Jones & Co. Daily
Passport Cash Trust; Federated Adjustable Rate U.S. Government Fund, Inc.;
Federated American Leaders Fund, Inc.; Federated ARMs Fund; Federated Equity
Funds; Federated Equity Income Fund, Inc.; Federated Fund for U.S. Government
Securities, Inc.; Federated GNMA Trust; Federated Government Income Securities,
Inc.; Federated Government Trust; Federated High Income Bond Fund, Inc.;
Federated High Yield Trust; Federated Income Securities Trust; Federated Income
Trust; Federated Index Trust; Federated Institutional Trust; Federated Insurance
Series; Federated Investment Portfolios; Federated Investment Trust; Federated
Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term Municipal
Trust; Federated Short-Term U.S. Government Trust; Federated Stock and Bond
Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated Total
Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; First Priority Funds; Fixed Income Securities,
Inc.; High Yield Cash Trust; Intermediate Municipal Trust; International Series,
Inc.; Investment Series Funds, Inc.; Investment Series Trust; Liberty Term
Trust, Inc.--1999; Liberty U.S. Government Money Market Trust; Liquid Cash
Trust; Managed Series Trust; Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Obligations Trust II; Money Market Trust;
Municipal Securities Income Trust; Newpoint Funds; RIMCO Monument Funds;
Targeted Duration Trust; Tax-Free Instruments Trust; The Planters Funds; The
Virtus Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Wesmark Funds; WCT Funds; and World Investment Series,
Inc.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
As of December 9, 1997, the following shareholders of record owned 5% or more of
the outstanding Institutional Shares of the Fund: Mitra & Co., Milwaukee, WI,
owned approximately 6,093,722 shares (10.30%).
As of December 9, 1997, the following shareholders of record owned 5% or more of
the Institutional Service Shares of the Fund: Texas Commerce Bank as Trustee for
Defined Contribution Plans, Houston, TX, owned approximately 732,371 shares
(5.54%); and Fort Wayne National Bank, Fort Wayne, IN, owned approximately
1,140,934 shares (8.62%).
As of December 9, 1997, no shareholders of record owned 5% or more of the Fund's
Class C Shares.
TRUSTEES COMPENSATION
AGGREGATE
NAME, COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX+
John F. Donahue $0 $0 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
J. Christopher Donahue $0 $0 for the Trust and
Executive Vice 18 other investment companies in the
President Fund Complex and Trustee
Thomas G. Bigley $1,137.00 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John T. Conroy, Jr. $1,251.00 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
William J. Copeland $1,251.00 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
James E. Dowd $1,251.00 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Lawrence D. Ellis,
M.D. $1,137.00 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Edward L. Flaherty,
Jr. $1,251.00 $119,615 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Peter E. Madden $1,137.00 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
John E. Murray, Jr. $1,137.00 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Wesley W. Posvar $1,137.00 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
Marjorie P. Smuts $1,137.00 $108,725 for the Trust and
Trustee 56 other investment companies in the
Fund Complex
* Information is furnished for the fiscal year ended October 31, 1997.
# The aggregate compensation is provided for the Trust which is comprised of
three portfolios.
+ The information is provided for the last calendar year.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, they are not
protected against any liability to which they would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of their office.
MANAGEMENT SERVICES
MANAGERS TO THE FUND
The Fund's Manager is Federated Management. It is a subsidiary of Federated
Investors. All the voting securities of Federated Investors are owned by a
trust, the trustees of which are John F. Donahue, his wife, and his son, J.
Christopher Donahue.
The Fund's Sub-Manager is ANB Investment Management and Trust Company
("ANB"). Currently, it is a wholly-owned subsidiary of First Chicago Investment
Management Company ("First Chicago"). First Chicago is a wholly-owned subsidiary
of First National Bank of Chicago, which in turn, is a wholly-owned subsidiary
of First Chicago NBD Corporation. The Sub-Manager's directors are J. Stephen
Baine, Susan O. Jones, Nick G. Preda, J. Dirk Vos, Richard W. Wade, Thomas P.
Micheals and Neil R. Wright. The officers of ANB are J. Stephen Baine, Chairman
and President; Susan O. Jones, Chief Operating Officer; Neil R. Wright, Chief
Investment Officer; and Thomas P. Micheals, Secretary and Treasurer. As
described in the prospectus, it is anticipated that First Chicago will sell ANB
to Northern Trust Corporation. After the sale, the directors are anticipated to
be James M. Snyder, Barry G. Hastings, Perry R. Pero, Sheila A. Penrose and
Jeffrey H. Wessel. After the sale, the officers are anticipated to be James M.
Snyder, Chief Executive Officer and Jeffrey H. Wessel, President.
Neither the Manager nor the Sub-Manager shall be liable to the Trust, the Fund,
or any shareholder of the Fund for any losses that may be sustained in the
purchase, holding, or sale of any security or for anything done or omitted by
the Manager or Sub-Manager, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
imposed upon either of them by their respective management contracts.
MANAGEMENT FEES
For its management services, Federated Management receives an annual fee as
described in the prospectus. ANB receives an annual fee for its services as
described in the prospectus, which will be paid by the Manager, based on the
Fund's average daily net assets.
For the fiscal years ended October 31, 1997, 1996, and 1995, the Manager earned
$3,606,538, $2,312,405, and $1,727,669, respectively, of which $573,407,
$490,571, and $433,282, respectively, was voluntarily waived due to undertakings
to limit the Fund's expenses.
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 shares of funds offered by Federated Securities Corp.
BROKERAGE TRANSACTIONS
The Managers may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the
Managers and 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 provided by brokers and dealers may be used by the Managers or their
affiliates in advising the Fund and other accounts. To the extent that receipt
of these services may supplant services for which the Managers or their
affiliates might otherwise have paid, it would tend to reduce their expenses.
The Managers and their affiliates exercise reasonable business judgment in
selecting 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. During the fiscal years ended October 31, 1997,
1996, and 1995, the Fund paid total brokerage commissions of $37,996, $48,476,
and $35,334, respectively.
Although investment decisions for the Fund are made independently from those of
the other accounts managed by the Managers, investments of the type the Fund may
make may also be made by those other accounts. When the Fund and one or more
other accounts managed by the Managers are prepared to invest in, or desire to
dispose of, the same security, available investments or opportunities for sales
will be allocated in a manner believed by the Managers to be equitable to each.
In some cases, this procedure may adversely affect the price paid or received by
the Fund or the size of the position obtained or disposed of by the Fund. In
other cases, however, it is believed that coordination and the ability to
participate in volume transactions will be to the benefit of the Fund.
OTHER SERVICES
CUSTODIAN AND PORTFOLIO ACCOUNTANT
State Street Bank and Trust Company, Boston, MA, is custodian for the securities
and cash of the Trust/Fund. Federated Services Company, Pittsburgh,
Pennsylvania, provides certain accounting and recordkeeping services with
respect to the Trust's/Fund's portfolio investments. The fee paid for this
service is based upon the level of the Trust's/Fund's average net assets for the
period plus out-of-pocket expenses.
TRANSFER AGENT
Federated Services Company, through its registered transfer agent Federated
Shareholder Services Company, maintains all necessary shareholder records. For
its services, the transfer agent receives a fee based on the size, type and
number of accounts and transactions made by shareholders.
INDEPENDENT AUDITORS
The independent auditors for the Fund are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
PURCHASING SHARES
Shares are sold at their net asset value without a sales charge on days the New
York Stock Exchange is open for business. The procedure for purchasing Shares is
explained in the respective prospectuses under "Investing in Institutional
Shares," "Investing in Institutional Service Shares" or
"Investing in the Fund" (Class C Shares).
REINVESTMENT PRIVILEGE (CLASS C SHARES)
The reinvestment privilege is available for all Class C Shares of the Fund.
Class C Shares may be reinvested in the same Share class within 120 days but
would not be entitled to a reimbursement of the contingent deferred sales charge
if paid at the time of redemption. However, such reinvested shares would not be
subject to a contingent deferred sales charge upon later redemption. In
addition, if the Class C Shares were reinvested through a financial
intermediary, the financial intermediary would not be entitled to an advanced
payment from Federated Securities Corp. on the reinvested Shares. Federated
Securities Corp. must be notified by the shareholder in writing or by his
financial intermediary of the reinvestment in order to eliminate a sales charge
or a contingent deferred sales charge. If the shareholder redeems Shares in the
Fund, there may be tax consequences.
DISTRIBUTION PLAN (CLASS C SHARES) AND SHAREHOLDER SERVICES
With respect to Institutional Service Shares and Class C Shares, the Fund has
adopted a Distribution Plan in accordance with Investment Company Act Rule
12b-1. Additionally, the Fund has adopted a Shareholder Services Agreement with
respect to all classes of Shares.
These arrangements permit the payment of fees to financial institutions, the
distributor, and Federated Shareholder Services, to stimulate distribution
activities and to cause services to be provided to shareholders by a
representative who has knowledge of the shareholder's particular circumstances
and goals. These activities and services may include, but are not limited to,
marketing efforts; providing office space, equipment, telephone facilities, and
various clerical, supervisory, computer, and other personnel as necessary or
beneficial to establish and maintain shareholder accounts and records;
processing purchase and redemption transactions and automatic investments of
client account cash balances; answering routine client inquiries; and assisting
clients in changing dividend options, account designations, and addresses.
By adopting the Plan (Institutional Service Shares and Class C Shares only), the
Trustees expect that the Fund will be able to achieve a more predictable flow of
cash for investment purposes and to meet redemptions. This will facilitate more
efficient portfolio management and assist the Fund in pursuing its investment
objectives. By identifying potential investors whose needs are served by the
Fund's objectives, and properly servicing these accounts, the Fund may be able
to curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may include: (1)
providing personal services to shareholders; (2) investing shareholder assets
with a minimum of delay and administrative detail; (3) enhancing shareholder
recordkeeping systems; and (4) responding promptly to shareholders' requests and
inquiries concerning their accounts.
For the fiscal year ended October 31, 1997, the Fund paid shareholder services
fees in the amount of $2,668,873, all of which was waived, for Institutional
Shares.
For the fiscal year ended October 31, 1997, payment in the amount of $429,722,
of which $315,130 was waived, pursuant to the Plan for Institutional Service
Shares. In addition, the Fund paid shareholder services fees in the amount of
$358,102, of which $42,972 was waived for Institutional Service Shares.
The Fund's Class C Shares did not exist prior to November 10, 1997.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. State Street Bank acts as the
shareholder's agent in depositing checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset value
for each class of Shares is calculated by the Fund are described in the
respective prospectus.
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Fund's portfolio securities are determined as follows:
* for equity securities, according to the last sale price on a national
securities exchange, if available;
* in the absence of recorded sales for equity securities, according to the
mean between the last closing bid and asked prices;
* for bonds and other fixed income securities, at the last sale price on a
national securities exchange if available, otherwise as determined by an
independent pricing service;
* for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service or for short-term obligations
with remaining maturities of 60 days or less at the time of purchase, at
amortized cost; or
* for all other securities, at fair value as determined in good faith by the
Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
The Fund will value stock index futures contracts, options on stock and stock
indices and put options on stock index futures and financial futures at their
market values established by the exchanges at the close of option trading on
such exchanges unless the Trustees determine in good faith that another method
of valuing option positions is necessary to appraise their fair value.
REDEEMING SHARES
The Fund redeems Shares at the next computed net asset value after State Street
Bank receives the redemption request. Redemption procedures are explained in the
respective prospectuses under "Redeeming Institutional Shares," "Redeeming
Institutional Service Shares," or "Redeeming and
Exchanging Shares" (Class C Shares).
REDEMPTION IN KIND
Although the Fund intends to redeem Shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
The Fund has elected to be governed by Rule 18f-1 of the Investment Company Act
of 1940 under which the Fund is obligated to redeem Shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
CONTINGENT DEFERRED SALES CHARGE (CLASS C SHARES)
In computing the amount of the applicable Contingent Deferred Sales Charge,
redemptions are deemed to have occurred in the following order: (1) Class C
Shares acquired through the reinvestment of dividends and long-term capital
gains; (2) Class C Shares held for more than one full year from the date of
purchase; (3) Class C Shares held for less than one full year from the date of
purchase on a first-in, first-out basis.
MASSACHUSETTS PARTNERSHIP LAW
Under certain circumstances, shareholders may be held personally liable as
partners under Massachusetts law for acts or obligations of the Trust on behalf
of the Fund. To protect shareholders of the Fund, the Trust has filed legal
documents with Massachusetts that expressly disclaim the liability of
shareholders of the Fund for such acts or obligations of the Trust. These
documents require notice of this disclaimer to be given in each agreement,
obligation, or instrument that the Trust enters into on behalf of the Fund.
In the unlikely event a shareholder of the Fund is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required to use the
property of the Fund 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 on behalf of the Fund. Therefore, financial
loss resulting from liability as a shareholder of the Fund will occur only if
the Trust cannot meet its obligations to indemnify shareholders and pay
judgments against them from the assets of the Fund.
TAX STATUS
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because the Fund expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
* derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
* invest in securities within certain statutory limits; and
* distribute to its shareholders at least 90% of its net income earned
during the year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. No portion of any income dividend paid by the Fund is
eligible for the dividends received deduction available to corporations. These
dividends, and any short-term capital gains, are taxable as ordinary income.
CAPITAL GAINS
Capital gains experienced by the Fund could result in an increase in dividends.
Capital losses could result in a decrease in dividends. If the Fund realizes net
long-term capital gains, it will distribute them at least once every 12 months.
TOTAL RETURN
The Fund's average annual total return for Institutional Shares for the
one-year, five-year periods ended October 31, 1997, and for the period from July
2, 1990 (date of initial public investment) to October 31, 1997, was 31.51%,
19.42% and 16.60%, respectively.
The Fund's average annual total return for Institutional Service Shares for the
one-year period ended October 31, 1997, and for the period from September 6,
1993 (date of initial public investment) to October 31, 1997, was 31.07% and
20.02%, respectively.
The Fund's Class C Shares did not exist prior to November 10, 1997.
The average annual total return for each class of the Fund is the average
compounded rate of return for a given period that would equate a $1,000 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 offering price 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 $1,000, adjusted over the period
by any additional shares, assuming the quarterly reinvestment of all dividends
and distributions.
YIELD
The SEC yields for Institutional Shares and for Institutional Service Shares of
the Fund for the thirty-day period ended October 31, 1997, were 1.27% and 0.96%,
respectively. The Fund's Class C Shares did not exist prior to November 10,
1997.
The yield for Institutional Shares, Institutional Service Shares, and Class C
Shares of the Fund is determined by dividing the net investment income per share
(as defined by the Securities and Exchange Commission) earned by the Fund over a
thirty-day period by the offering price per share of the Fund on the last day of
the period. This value is annualized using semi-annual compounding. This means
that the amount of income generated during the thirty-day period is assumed to
be generated each month over a twelve month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by the
Fund because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
The Fund's performance depends upon such variables as:
* portfolio quality;
* average portfolio maturity;
* type of instruments in which the portfolio is invested;
* changes in interest rates and market value of portfolio securities;
* changes in Fund or class expenses;
* the relative amount of Fund cash flow; and
* various other factors.
The performance of each class of Shares fluctuates on a daily basis largely
because net earnings and offering price per share fluctuate daily. Both net
earnings and offering price per share are factors in the computation of yield
and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute offering price. The financial
publications and/or indices which the Fund uses in advertising may include:
* LIPPER ANALYTICAL SERVICES, INC., ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in offering price over a specific period of time. From
time to time, the Fund will quote its Lipper ranking in the "index funds"
category in advertising and sales literature.
* DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of selected
blue-chip industrial corporations as well as public utility and transportation
companies. The DJIA indicates daily changes in the average price of stocks in
any of its categories. It also reports total sales for each group of industries.
Because it represents the top corporations of America, the DJIA's index
movements are leading economic indicators for the stock market as a whole.
* STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS, a composite
index of common stocks in industry, transportation, and financial and public
utility companies can be used to compare to the total returns of funds whose
portfolios are invested primarily in common stocks. In addition, the Standard &
Poor's index assumes reinvestments of all dividends paid by stocks listed on its
index. Taxes due on any of these distributions are not included, nor are
brokerage or other fees calculated in Standard & Poor's figures.
* MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for each class of shares may quote
total returns which are calculated on nonstandardized base periods. These total
returns also represent the historic change in the value of an investment in
either class of shares based on quarterly reinvestment of dividends over a
specified period of time.
Advertising and other promotional literature may include charts, graphs or other
illustrations using the Fund's returns, or returns in general, that demonstrate
basic investment concepts such as tax-deferred compounding, dollar-cost
averaging and systematic investment. In addition, the Fund can compare its
performance, or performance for the types of securities in which it invests, to
a variety of other investments, such as bank savings accounts, certificates of
deposit, and Treasury bills.
ECONOMIC AND MARKET INFORMATION
Advertising and sales literature for the Fund may include discussions of
economic, financial and political developments and their effect on the
securities market. Such discussions may take the form of commentary on these
developments by Fund portfolio managers and their views and analysis on how such
developments could affect the Funds. In addition, advertising and sales
literature may quote statistics and give general information about the mutual
fund industry, including the growth of the industry, from sources such as the
Investment Company Institute.
ABOUT FEDERATED INVESTORS
Federated Investors is dedicated to meeting investor needs which is reflected in
its investment decision making--structured, straightforward, and consistent.
This has resulted in a history of competitive performance with a range of
competitive investment products that have gained the confidence of thousands of
clients and their customers.
The company's disciplined security selection process is firmly rooted in sound
methodologies backed by fundamental and technical research. Investment decisions
are made and executed by teams of portfolio managers, analysts, and traders
dedicated to specific market sectors. The traders handle trillions of dollars in
annual trading volume.
In the equity sector, Federated Investors has more than 26 years' experience. As
of December 31, 1996, Federated Investors managed 31 equity funds totaling
approximately $7.6 billion in assets across growth, value, equity income,
international, index and sector (i.e. utility) styles. Federated Investor's
value-oriented management style combines quantitative and qualitative analysis
and features a structured, computer-assisted composite modeling system that was
developed in the 1970s.
J. Thomas Madden, Executive Vice President, oversees Federated Investors' equity
and high-yield corporate bond management while William D. Dawson, Executive Vice
President, oversees Federated Investors' domestic fixed income management. Henry
A. Frantzen, Executive Vice President, oversees the management of Federated
Investors' international and global portfolios.
MUTUAL FUND MARKET
Thirty-seven percent of American households are pursuing their financial goals
through mutual funds. These investors, as well as businesses and institutions,
have entrusted over $3.5 trillion to the more than 6,000 funds available.*
Federated Investors, through its subsidiaries, distributes mutual funds for a
variety of investment applications. Specific markets include:
INSTITUTIONAL CLIENTS
Federated Investors meets the needs of more than 4,000 institutional clients
nationwide by managing and servicing separate accounts and mutual funds for a
variety of applications, including defined benefit and defined contribution
programs, cash management, and asset/liability management. Institutional clients
include corporations, pension funds, tax-exempt entities,
foundations/endowments, insurance companies, and investment and financial
advisors. The marketing effort to these institutional clients is headed by John
B. Fisher, President, Institutional Sales Division.
TRUST ORGANIZATIONS
Other institutional clients include close relationships with more than 1,600
banks and trust organizations. Virtually all of the trust divisions of the top
100 bank holding companies use Federated funds in their clients' portfolios. The
marketing effort to trust clients is headed by Timothy C. Pillion, Senior Vice
President, Bank Marketing & Sales.
BROKER/DEALERS AND BANK BROKER/DEALER SUBSIDIARIES
Federated funds are available to consumers through major brokerage firms
nationwide--we have over 2,200 broker/dealer and bank broker/dealer
relationships across the country--supported by more wholesalers than any other
mutual fund distributor. Federated's service to financial professionals and
institutions has earned it high ratings in several surveys performed by DALBAR,
Inc. DALBAR is recognized as the industry benchmark for service quality
measurement. The marketing effort to these firms is headed by James F. Getz,
President, Federated Securities Corp.
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.
* Source: Investment Company Institute
Federated Max-Cap Fund
Institutional Shares and Institutional Service Shares
Annual Report for 12 Months Ended October 31, 1997
MANAGEMENT DISCUSSION AND ANALYSIS
The fund's total returns for Institutional Shares and Institutional Service
Shares for the 12 months ended October 31, 1997, were 31.51% and 31.07%
respectively.*
The target Index (S&P 500**) had a total return of 32.11% during the period.
Share class performance varied from the Index due to transaction costs,
administrative expenses, and holdings of stock index futures contracts, which
are held to enhance fund liquidity.***
The U.S. stock market continued its strong climb in the last year despite
increasing volatility from concerns over 1) interest rate increases, 2)
corporate earnings shortfalls, and 3) foreign market troubles.
In December 1996, Federal Reserve Chairman's comment that the U.S. stock market
was fueled by "irrational exuberance" sent the market lower as investors
interpreted the comment as a signal of a likely hike in interest rates. In March
1997, the Fed slightly raised its target rate for fed funds, triggering another
downturn.
In late summer, the stocks of some "bellwether" companies (e.g., Coca Cola,
Gillette) were pummeled when they announced earnings shortfalls. This showed the
market's sensitivity to bad earnings news and that large company stocks may be
nearing the end of their relatively strong performance over the last few years.
In late October, the U.S. stock market suffered its most recent setback from the
"Asian Flu," a downturn in many Asian financial markets, triggered by currency
problems. Investors fear that ripple effects from weakening Asian economies may
affect the profitability of U.S.-based firms.
However, most investors in U.S. stocks apparently believe the market is still
attractive, bidding prices back up in a short period of time after each
downturn.
During the last year trucking, financial, and home-building were among the
strongest performing sectors while engineering and construction, metals, and
photographic equipment were among the worst performing sectors in the Index.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will flucuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
** This index is unmanaged.
*** Redemption is at the then-current net asset value, which may be more or less
than the original cost.
Federated Max-Cap Fund
(Institutional Shares)
GROWTH OF $25,000 INVESTED IN FEDERATED MAX-CAP FUND (INSTITUTIONAL SHARES)
The graph below illustrates the hypothetical investment of $25,000 in the
Federated Max-Cap Fund (Institutional Shares) (the "Fund") from July 11, 1990
(start of performance) to October 31, 1997, compared to the Standard and Poor's
500 Index (S&P 500).+
[Graphic] See attached Appendix 3
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Fund's prospectus dated
December 31, 1997, and, together with financial statements contained therein,
constitutes the Fund's annual report.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 has been adjusted to reflect reinvestment of
dividends on securities in the index.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.
Federated Max-Cap Fund
(Institutional Service Shares)
GROWTH OF $25,000 INVESTED IN FEDERATED MAX-CAP FUND (INSTITUTIONAL SERVICE
SHARES)
The graph below illustrates the hypothetical investment of $25,000 in the
Federated Max-Cap Fund (Institutional Service Shares) (the "Fund") from
September 7, 1993 (start of performance) to October 31, 1997, compared to the
Standard and Poor's 500 Index (S&P 500).+
[Graphic] See attached Appendix 3
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
This report must be preceded or accompanied by the Fund's prospectus dated
December 31, 1997, and, together with financial statements contained therein,
constitutes the Fund's annual report.
* The Fund's performance assumes the reinvestment of all dividends and
distributions. The S&P 500 has been adjusted to reflect reinvestment of
dividends on securities in the index.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other
fees that the SEC requires to be reflected in the Fund's performance. This
index is unmanaged.
[Graphic]
Federated Securities Corp., Distributor
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
1-800-341-7400
www.federatedinvestors.com
0032104A-IS
0032104A-SS
006685-A (12/97)
[Graphic]
APPENDIX 1
A-1. The graphic presentation here displayed consists of a line graph titled
"Growth of $25,000 Invested in Institutional Shares of Federated Mini-Cap Fund
(Institutional Shares)". The corresponding components of the line graph are
listed underneath. The Federated Mini-Cap Fund (Institutional Shares) (the
"Fund") is represented by a solid line. The Russell 2000 Index (the "RUS2") is
represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $25,000 investment in the Fund,
and the RUS2. The "x" axis reflects computation periods from the start of
performance (August 11, 1992) to October 31, 1997. The "y" axis reflects the
cost of the investment, ranging from $24,000 to $64,000. The right margin
reflects the ending value of the hypothetical investment in the Fund as compared
to the RUS2. The ending values are $54,499, and $60,387, respectively.
APPENDIX 2
A-1. The graphic presentation here displayed consists of a line graph titled
"Growth of $25,000 Invested in Federated Mid-Cap Fund ". The corresponding
components of the line graph are listed underneath. The Federated Mid-Cap Fund
(the "Fund") is represented by a solid line. The Standard and Poor's Mid-Cap 400
Index (the "S&P 400") is represented by a dotted line. The line graph is a
visual representation of a comparison of change in value of a hypothetical
$25,000 investment in the Fund, and the S&P 400. The "x" axis reflects
computation periods from the start of performance (November 5, 1992) to October
31, 1997. The "y" axis reflects the cost of the investment, ranging from $20,000
to $60,000. The right margin reflects the ending value of the hypothetical
investment in the Fund as compared to the S&P 400. The ending values are
$54,948, and $58,439, respectively.
APPENDIX 3
A-1. The graphic presentation here displayed consists of a line graph titled
"Growth of $25,000 Invested in Federated Max-Cap Fund (Institutional Service
Shares)". The corresponding components of the line graph are listed underneath.
The Federated Max-Cap Fund (Institutional Service Shares) (the "Fund") is
represented by a solid line. The Standard and Poor's 500 Index (the "S&P 500")
is represented by a dotted line. The line graph is a visual representation of a
comparison of change in value of a hypothetical $25,000 investment in the Fund
and the S&P 500. The "x" axis reflects computation periods from the start of
performance (September 7, 1993) to October 31, 1997. The "y" axis reflects the
cost of the investment, ranging from $20,000 to $60,000. The right margin
reflects the ending value of the hypothetical investment in the Fund as compared
to the S&P 500. The ending values are $53,316 and $55,084, respectively.
A-2. The graphic presentation here displayed consists of a line graph titled
"Growth of $25,000 Invested in Federated Max-Cap Fund (Institutional Shares)".
The corresponding components of the line graph are listed underneath. The
Federated Max-Cap Fund (Institutional Shares) (the "Fund") is represented by a
solid line. The Standard and Poor's 500 Index (the "S&P 500") is represented by
a dotted line. The line graph is a visual representation of a comparison of
change in value of a hypothetical $25,000 investment in the Fund and the S&P
500. The "x" axis reflects computation periods from the start of performance
(July 11, 1990) to October 31, 1997. The "y" axis reflects the cost of the
investment, ranging from $20,000 to $80,000. The right margin reflects the
ending value of the hypothetical investment in the Fund as compared to the S&P
500. The ending values are $76,783 and $78,272, respectively.
